The Looming NFL Lockout & the Shrinking Pie


AP Photo/Haraz N. Ghanbari

Back on October 12, 2010, the owners of the 32 NFL franchises met behind closed doors in Chicago. Dominating the news with respect to this meeting is the looming 2011 work stoppage predicted by many NFL reporters and insiders. I'll leave it to them to keep breaking down the minutiae of the various back and forth barrages between the owners and the players' union (the "NFLPA"). Where I think this dispute gets really interesting is breaking down what is at stake and doing a little negotiation analysis.

The NFL is a money-making machine. It just prints money. It is estimated that the NFL revenue for the 2009 season is in the ballpark of $8 billion. One estimate from the Wall Street Journal (article here) is that even if a new deal is reached with the NFLPA in time to save the season, losses from merchandising licensees and sponsorships could total as much as $1 billion (OUCH!). If the lockout continues through regular season games, the NFL stands to lose as much as $8 million per game canceled.

The real down-side here for both players and owners is that for both players and owners, the negotiation situation gets worse - especially after March 1, 2011. As the revenue pie starts shrinking, the proposals will begin to shrink as well. Additionally, owners want to take a bigger piece of the NFL revenue set aside for player salaries and use that extra cash (roughly $1 billion) to reinvest in a host of projects aimed at long-term revenue growth for the teams and, ultimately, players as well.

Pushing the owners and the "NFL" is the large amount of debt carried by the league and its teams on which they have to make interest payments on whether games are played or not. In addition, costs are always increasing, new stadiums / box seats are being built each year, coach and staff salaries, etc.

On the other side of the coin is the NFLPA representing the players interests. According to the NFLPA the average length of an NFL career is about 3.5 seasons. A lockout is devastating to an NFL prospect trying to make an NFL roster in a lockout year. There will be a whole crop of younger NFL prospects in next year's college class for teams to choose from. Striking while the iron is hot can be key, especially for the "lesser-knowns" in the league. For every Randy Moss, Tom Brady or Chris Johnson in the league there are many others who's future is much less certain.

Still, the owners, and the NFL for that matter, don't have much of a product without the players and one of the primary issues players have with shrinking salaries is the feeling that while they define the NFL product, they are being treated more or less like interchangeable parts while the owners reap huge profits. Much of the early wrangling between the NFLPA and owners has been the NFLPA asking to see the books. Basically as "show us why we shouldn't be making more money" request. 

Taking into account the added wildcards of the Supreme Court American Needle Inc. v. NFL and the NFL's hiring of Robert Batterman - the NY Lawyer who led NHL owners through the season-long lockout of 2004-05, you have all the makings for an epic and acrimonious negotiation. Once again, the NFL lives up to its reputation for being the best soap opera on TV!