Why NFL's Push for Playoff Volatility Makes Business Senseby
The National Football League has accomplished something miraculous: perfecting a playoff system that results in almost completely random outcomes.
Through a combination of gradual tweaks to its format, professional football now has a scheme where every playoff game is winnable by either team almost down to a 50/50 rate. And this is exactly what the league wants, because more volatility is good for business. Unpredictability brings eyeballs to TV, and volatility matters more to the bottom line than any system that might make more sense.
This is not unique to the NFL. The same phenomenon drives ratings for financially oriented cable-TV networks. Low-volatility stock markets (as measured by the VIX, for example) lead to lower ratings for CNBC. Calmer, saner, more predictable markets are bad for eyeballs. Randomness, volatility, and unpredictability on Wall Street—that’s what moves the needle. (Bloomberg LP, the parent of Bloomberg Businessweek, competes with CNBC and other financial TV networks.)
In the NFL’s case, one tweak has been the expansion of playoff participants from eight to 10, and now, since 1990, 12 teams (with recent talk of expanding to 14 competitors). More teams create more randomness, just purely as a function of math: It’s much easier to be the winner in a group of eight than in a pool of 12.
And in an even more twisted tweak, the NFL also reformatted its divisions. Instead of three division winners and three wild cards making the playoffs per conference, the past decade has seen four division winners and two wildcards. This means the second-best team in a conference, if the same division had the two top teams, would be seeded fifth, with fourth seed reserved for worst-performing division winners. That makes for volatility-enhancing scenarios such as the games this weekend, in which bad division winners (10-6 Philadelphia and 8-7-1 Green Bay) get home-field advantage against wild card teams with better records (11-5 New Orleans and 12-4 San Francisco). The worse team is at home; the better team is on the road. This is what creates randomness and unpredictability. Twisted scenarios. It doesn’t have to make sense to be good for business.
As pointed out by football statistician Scott Kacsmar, ever since the four-division lineup began in 2002, the total winning percentage of No. 4 seeds has dropped from 56 percent to 49 percent. This makes sense because the quality of teams at that seed has dropped. At the same time, teams seeded fifth and sixth have experienced huge increases in winning percentage: No. 5 seeds now win 41 percent of all their playoff games, up from 25 percent, while No. 6 seeds are an even 50 percent, up dramatically from 23 percent.
The overall playoff records now are almost irrelevant to their seeds. The least-successful seed (No. 5) wins a total of 41 percent of its games, and the most successful seed (No. 1) wins only 56 percent of its games—notice that every seed has a winning percentage clustered in the 40s and 50s. Compare that with the previous decade under the old three-division format, in which the top seeds won a striking 69 percent of all their games, while the bottom seeds won a measly 23 percent.
Volatility is exactly what the NFL wants. By changing the playoff format, the league has been able to narrow the range of winning percentages from a wide 23-to-69 percentage spectrum to a much tighter 41-to-56 zone. Every team is now about a 50/50 coin flip. While this leads some observers to get stunned when top seeds lose or complain that the league needs to make a change, this is not in the best interest of the NFL’s business.
What is in the best interest of doing business is creating utter playoff uncertainty so nothing can be taken for granted. If bad division lineups, bizarre home-field advantages, and oddly ordered seedings are what it takes, that’s fine for football. Want to see something random? In the last seven years, each of the six different seeds has won a Super Bowl: 3-5-2-1-6-4-4. For the NFL, randomness is the champ.