The Business Winners & Losers of an NFL Lockout
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A potential NFL lockout threatens significant losses for various stakeholders including fans, advertising, and sponsors while presenting challenges around revenue sharing and player benefits. Historical precedents like the NHL and MLB strikes suggest that the NFL could face long-term impacts on team revenues and fan interest. Key issues include the revenue split between owners and players, potential extensions of the regular season, and the status of collective bargaining agreements.
The Business Winners & Losers of an NFL Lockout
- 1. Who Loses in an NFL Lockout? Corporate Interests Intrinsically Tied to the League Call Date: Wednesday, March 9, 2011, 11:00 AM ET CRG Host: CRG Expert: Michael Cohen Scott V. Steer Coleman Research Group Consultant, Branding, Strategy, Ad & Promo Steering IMC 280 Park Avenue, 12th Floor East Director, Partnerships & Business Development New York, NY 10017 The Miller Group 1
- 2. Background and History The Losers: Fans Advertising Employment Travel and Hospitality Sponsors Licensed Products Host Cities and States Potential Winners 2
- 4. By the Numbers 2010 Revenue $9.3B Avg. Player Salary $1.87M Rookie Minimum $320K Avg. Team Payroll $127M Avg. Franchise Value $1.02B Source: CNBC 4
- 5. Labor History 1982 Strike Began on 9/21/1982 and lasted 57 days until 11/16/1982 No NFL games were played Essential cause was dispute over the percentage of gross revenues that the league gave to players NFLPA wanted the percentage increased to 55 percent 1987 Strike and Decertification Replacement and some NFL regular players crossed picket line Back to work on 10/15/1987 without a collective bargaining agreement (CBA) Officially decertified in 1989 and reformed as a union in 1993 Return to Collective Bargaining The NFLPA and the league have extended their 1993 agreement five times, most recently in March 2006 when it was extended through the 2011 season. May 2008 owners decided to opt out of this agreement and play the 2010 season without a CBA in place. 2010 season was played without a salary cap (or floor), and there is the looming possibility of no play at all in 2011 if an agreement cannot be reached. 5
- 6. The Key Issues 1. Revenue Split Owners wanting an additional $1 billion credit skimmed off the top before sharing with the players (despite resisting the opening of their books) 2. Extend regular season to 18 games 3. Rookie Wage Scale / Salary Cap 4. Benefits for Current and Former Players 5. Repeal of Bonuses for "Breach Of Contract 6
- 7. Possible Options 1. A Deal or Another Extension New Deadline Friday 3/11, 11:59 PM 2. Union Decertification The union could decide to pursue the strategy of dissolving as a union for legal purposes 3. Lockout 4. Impasse A legal concept, exists after good-faith negotiations fail to reach a conclusion The NFL could declare impasse at any time and force the players to: Accept its last best offer, strike, or (as they did 20 years ago) decertify 5. Continue to operate under 2010 terms Not a great option for players The clock is ticking Options outlined by Andrew Brandt, President, National Football Post and Lecturer on Sports Business @ The Wharton School 7
- 8. d辿j vu all over again 8
- 9. 2004-05 NHL Lockout NHL teams actually saw a growth in value following the lockout because the fixed number guaranteed for player wages out of league revenue fell from about 66 percent to 54 percent 1 Same may happen if NFL owners get their way and shave a few percentage points of the current 60 percent figure of player payroll to revenue NHL attendance did not suffer too much from the lockout 2 2004 avg. attendance = 16,719 2006 avg. attendance actually grew to 17,025 The NHL television revenue/ratings got hammered after the lockout Since the lockout NHL games air on NBC, but only Saturday afternoons NBC pays no rights fees, but has a revenue-sharing agreement Cable broadcasts now hidden on the Versus Channel. A huge step down from 2004 five-year, $600 million deal with ABC/ESPN. Source: 1. Forbes, 2. Attendance figures from ESPN 9
- 10. 1994 MLB Strike ESPN reported average MLB attendance was down 20% after the strike Attendance did not return to pre strike levels until 2000 ESPN also noted operating revenue dropped 35.8% in 1994 and didnt reach its former mark until 1997 For MLB, unlike the NHL, team value and attendance did take hits MLB television revenue dropped after the lockout with Fox paying substantially less in 1995 that CBS did in the early 1990s 10
- 11. Who Are the potential winners and Loser without Football??? 11
- 12. Broadcasters $3.6B $8.8B $3.73B $4.27B ??? $20.4 billion Source: Sports Business Daily 12
- 13. Top 10 NFL Advertisers (2009) Millions Anheuser-Busch (A-B inBEV) $134 The US Government (including General Motors) $127 Toyota $108 Ford $97 The NFL $97 Miller Coors $88 Sprint Nextel $82 Southwest Airlines $66 Verizon Wireless $64 AT&T $64 Source: Media Post 13
- 14. NFL Ad Revenue Nearly $3 Billion Fox ($944 million) NBC ($817 million) CBS ($804 million) ESPN ($144 million) Source: CNBC and Kantar Media 14
- 15. NFL TV Ratings Viewership up 13 percent over last year Games on CBS, Fox and NBC averaged 20 million viewers 20M Viewers = more than twice what networks get for their prime-time programming!! Source: Nielsen 15
- 16. Pay Per View / Satellite Packages DIRECT TV ESPN $1B per year In 2008, Dish Network moved for exclusive NFL Sunday Ticket the NFL Network from its and Red Zone Channels "America's Top 100" package to Could affect DIRECTV's positive the higher premium "America's momentum Top 200" package Double digit gains in Q3 and Q4 The move cost the network 2010 to $6.03 billion four million subscribers Analysts forecast DirecTV could lose as much as 10% to 20% of its 2.2 million subscribers of its Sunday Ticket package Source: Multichannel News 16
- 17. Missed Games Actually Boost Networks' Bottom Lines? - Maybe - Judge blocked broadcasters from having to pay rights fees during any player lockout Missing games might actually improve the networks' bottom lines, according to FitchRatings lower revenue for any aired replacement content, but with lower production costs too Certainly wont help all the local NFL based programming around the country 17
- 18. 30M + players For an estimated $5 billion business Demo Men: 79%, Men 18-34: 31% annual HHI is $92,750 Median Age 30.4 yrs, Avg. fantasy football player spends $150/yr league fees, premium websites, magazines and other necessities. Source: Fantasy Sports Trade Association Source: Business Week and Fantasy Sports Trade Association 18
- 19. Top 10 Fantasy Sports Sites: September 2010 Unique Monthly Yearly Rank Site Visitors Change Change 1 fantasysports.yahoo.com 6,115,530 47.77% -14.22% 2 games.espn.go.com 5,461,712 48.91% -0.64% 3 fantasy.nfl.com 2,709,801 60.83% No Data 4 football.cbssports.com 1,940,999 68.89% -26.14% 5 fantasynews.cbssports.com 896,204 25.71% -12.83% 6 rotoworld.com 651,002 16.41% -1.17% 7 streak.espn.go.com 588,362 15.46% -24.93% 8 fftoolbox.com 567,552 -10.88% 17.63% 9 fantasy.foxsports.com 389,254 31.57% -17.56% 10 baseball.cbssports.com 347,416 -11.74% -36.01% 19,667,832 Source: ComScore 19
- 20. broadcasters and content providers Its all about Lost Eyeballs Broadcast advertisers could move their dollars to other "marquee" programming College Football Golf Prime-time Dramas or Sit-coms Is there enough ad inventory to absorb that money? Internet advertisers Lots of inventory, but nothing that delivers that quantity of very passionate eyeballs Some advertisers might also choose simply not to spend 20
- 21. SPONSORSHIP Real numbers, but these are contractual obligations NFL is riding a wave of tremendous popularity Could diminish the premiums they have been receiving for sponsorships going forward 21
- 22. Other NFL Sponsors Include: Papa Johns ($15M) - also the "Official Pizza" of 10 Teams Gatorade ($45M) Verizon - replaced Sprint ($720M) IBM Visa FedEx Bank of America The Home Depot Canon P&G (Gillette, Old Spice, Prilosec OTC, Febreze, Head & Shoulders, Tide, Charmin) 22
- 23. The Game and a Bud Bud Light takes over official sponsor in 2011, Est. at $1.2B Coors was official sponsor from 2005 -2010 for $500M Team sponsorships and pouring rights are done individually - often on a non exclusive basis A-B has pouring rights with 28 teams Source: Denver Business Journal 23
- 24. The Cola Wars Extend to the Gridiron Pepsi IS the Official Sponsor, but 24
- 25. and Across All Sports Venues Sport Venue Coca-Cola Pepsi Other Source: Sports Business Daily 25
- 26. Stadium parking, security, souvenirs On Field referees, coaches, trainers, Front Office staff, marketing, tickets 26
- 27. Food Service and Event Staff 27
- 28. broadcast production crews Generally Freelance/1099 contractors 45 person crews, most are within an hour commute to venue < 20% travel for networks MNF and SNF are traveling circuses for 16 weeks 20+ trucks with drivers and engineers Local broadcasts - pre and post game shows, etc 28
- 29. Travel + Hospitality or Entertaining at Home? Game Stats Avg. NFL Broadcast Viewers 20 Million Viewers who watch at a restaurant or bar 23.8% Source: Arbitron 29
- 30. Cant Watch at Home or Tailgate? Top 10 Grocery Retailers & Wholesalers Source: Supermarket News 30
- 31. On-Premise Sales If you serve chicken wings and beer, football season is really important to your business! Hooters Average Price 2009 2010 Houlihan's Lunch Entr辿e $7.14 $8.07 Applebees Dinner Entr辿e $12.98 $13.88 Buffalo Wild Domestic Draft $3.66 $3.58 Wings Import Draft $4.74 $4.64 Brick House Domestic Bottle $3.69 $3.73 Tavern Domestic Draft $3.66 $3.58 Source: Intellaprice 31
- 32. On-Premise Sales: Food Service 32
- 33. On-Premise Sales: Beer Outsells wine 3.5-to-1 Outsells liquor by nearly 1.5-to-1 Source: 2007 IRI On-Premise Study 33
- 34. Top 10 Distributed Brands Source: IRI Syndicated On-Premise Survey Fall 2007 34
- 35. Hotels + Lodging Attendance Avg. Stadium Attendance 67,000 / game Total Attendance 17 Million Source: ESPN 35
- 36. Vegas Sports Books Rank Company Name Casino sq. ft. Sports book sq. ft. 1 MGM Mirage 1.1 million 59,235 2 Station Casinos 1.1 million 82,796 3 Harrahs 634,616 37,169 4 Boyd Gaming 579,588 29,138 5 Las Vegas Sands 243,684 6,430 Source: In Business Las Vegas -Ranked by casino square footage as of June 30, 2009 36
- 37. Casinos keep less than 1% of their handle Source: State Of Nevada Gaming Control Board 37
- 38. Licensed Products Topped $3.2 billion in U.S. & Canada (2007) Fans Stop Buying Retail sales fall (Modells, Amazon, NFL.com) Manufacturers stop making Min 16 week lead time to get stuff produced overseas 38
- 39. NFL Properties LLC Reebok out as NFL uniform supplier (April 2012) Citigroup estimate $350 million of Reeboks $565 million annual US sales comes from the contract with the NFL 39
- 40. 2012 Starting Line Up Nike - Uniforms New Era will handle on-field headwear Under Armour will be sponsor of the NFL Scouting Combine Gill will manufacture fan gear, as will VF. Outerstuff will continue as the league's youth apparel provider '47 Brand will do headwear for fans Revenue for NFL-licensed apparel at retail in the United States totaled about $1.9 billion in 2009, but had fallen at a mid-teen percentage rate so far this year, according to SportsOneSource. 40
- 41. Home Electronics: Stores and Installers The weeks before the Super Bowl are second only to the holiday shopping season for TV sales. Football Playoffs and Super Bowl push custom installs of home entertainment systems up 25% Consumers were predicted to purchase nearly 4.8 million televisions up 25 percent in advance of the 2011 game Up from 3.6 million last year and 2.7 million in 2009 Source: IBISWorld 41
- 42. City and State Hosts Lost tax revenue from sales tax, road tolls, parking, etc. Game Stats Avg. Cost to take a family of four to an NFL 2 $413 game (2009) Avg. Stadium Attendance 3 ~ 67,000 / game Source: 1. Arbitron, 2. USA Today 3. ESPN 42
- 43. City and State Hosts Payroll Taxes Total Team Payrolls $3,401,549,790 Average Payroll = $127M Medicare Withholding $86,075,948 States w/ tax avg. 6.5% (CA 10.9 , NY 8.97, NJ 8.97, MN 7.85 are all in the top 10) Est. State Income Taxes $154,343,080 Est. Federal Income Taxes $761,947,152 43
- 44. Potential Winners NCAA Broadcasts might be short-term winner Merchandise, Attendance MLB, NBA and NHL could all be a longer term winners Broadcasting, Merchandise, Attendance Soccer Arena Football CFL Office Productivity 44
- 45. Summary Teams could end up with permanent/long term revenue issues as they work to restore fan interest after a lockout. This won't be true for teams like Green Bay or Pittsburgh, where loyalty is inbred, but for teams like Carolina, Jacksonville, Miami, Minnesota, etc where fan interest is finicky, the impact will go well beyond the work stoppage. Throw in the pending lockout of NBA players and fan/consumer sentiment towards professional athletes is an interesting topic. 45
- 46. Important Dates Friday March 11th April 28-30 -- NFL Draft, New York City Aug. 6 -- Pro Football Hall of Fame, Class of 2011 Enshrinement, Canton, Ohio Mini Camp - Clubs are permitted to hold a rookie minicamp on one of the first two weekends after the NFL Draft and conduct one mandatory minicamp for veteran players. 46
- 47. So how does it end? For more information contact Scott V. Steer Director, Partnerships & Business Development The Miller Group Scott@MillerGroupMarketing.com Consultant, Branding, Strategy, Ad & Promo Steering IMC Scott.Steer@SteeringIMC.com 47