View Full Version : Wall Street Journal - The NFL's $1 Billion Game of Chicken

Atlanta Dan
02-17-2011, 04:23 PM
Interesting take in The Wall Street Journal on the NFL labor dispute not being the usual sports labor dispute where owners need a new deal to make a profit - here it is the need to continue to grow the revenue stream to increase franchise values

The NFL's $1 Billion Game of Chicken
As Revenue Flattens, the Labor Talks Hinge on One Question—Do Modern Sports Leagues Have to Grow to Survive?

The labor strife now threatening the NFL comes down to something rather simple: The league has run out of new ways to make another quick $1 billion, so it's turning its focus to the biggest piggy bank of all: its own players. ...

The labor strife now threatening the NFL comes down to something rather simple: The league has run out of new ways to make another quick $1 billion, so it's turning its focus to the biggest piggy bank of all: its own players. ...

Today's NFL, which earned a record $9 billion in revenues this season, bears no resemblance to other major U.S. sports leagues that have faced labor Armageddon. Every NFL franchise is, by most accounts, profitable and competitive. The league and the players created a salary cap and solved free agency nearly 20 years ago. As much as NFL team owners want to crush their colleagues on the field, they share nearly 80 cents of every dollar.

As a private business with no publicly traded shares, the NFL isn't judged by its ability to show annual growth. And yet in some ways, its owners may have more riding on annual revenue totals. The one thing NFL owners care most about—the market value of their franchises—can only increase if revenues do. Increased revenues also give prospective NFL owners more confidence that they're making a solid investment as opposed to a vanity purchase....

To hit these revenue jumps, the NFL has had an enviable (and arguably serendipitous) run of good luck. Ticket revenues doubled from 1997 to 2007. Television and satellite rights fees blew through the roof, and as the cost of new stadiums grew, taxpayers stepped in to provide nearly $500 million a year, on average, from 1993 to 2005.

Today, ticket revenues have been essentially flat for the past three seasons and given the economy, owners sense they've hit a ceiling (the average ticket costs about $76). With governments at every level facing deficits, the subsidy well is all but dry. (Just one project, Kansas City's Arrowhead Stadium renovation, has received taxpayer support since 2006).

Another season of record NFL ratings should boost revenues from the broadcast networks and satellite provider DirecTV, but not as dramatically. Revenues from media rights increased to $3.8 billion for 2010 from $2.6 billion in 2005—a 46% increase. But between now and 2013, the final year of the new broadcast contracts, fees will only increase $350 million, or about 9%.

Add it all up and the owners are about $1 billion short of the growth in real dollars they were projecting the last time labor negotiations came down to the wire in 2006.

Meanwhile, newer forms of business, like digital media, don't show the obvious potential for huge returns....


tony hipchest
02-18-2011, 12:26 PM
great article.

lots of interesting interviews today on sirius.

right now im listening to ed garvey (former executive director of NFLPA) is talking about him and dan rooney hammering out an initial labor agreement in about 24 hours with no help from pete rozell, taken to the owners, voted on and passed. it pretty much is consensus that the owners are crazy and all of them should be listening to mr. rooney.

right before him was an interview with marvin miller [" Miller was the legendary head of the Major League Baseball Players Association, which has been the model for labor unions everywhere since his leadership from 1966-82."] talking about an article with him in AOL fanhouse which is very much related to the one in wall street jounal, and pretty much echos what garvey said-


You've had the Evil Owners in baseball.

They spent decades using their version of legalized slavery called the reserve clause. They were so ruthless that they refused to make ticket adjustments the season after the Great Depression. They took forever to integrate the game. They triggered the Mother of All Strikes that obliterated the 1994 season along with the World Series.

Well, forget all of that.

These NFL owners are more insufferable, and so are these NFL players for allowing their bosses to sit on the verge of stiff-arming professional football fans with the threat of a lockout.

"If the (NFL players') union doesn't react better, it's going to unfold with the owners getting bolder and bolder," said Marvin Miller, 93, who knows what he's talking about. "The owners already are saying and doing what they want, and nobody is calling them to task. They are making these stupid demands. And I say 'stupid,' because even if they think they can get away with all of this, the risks that they're running of disrupting a very financially successful industry is crazy."

To paraphrase Miller: When it comes to greed, neither baseball owners at their worst nor any other entity since the beginning of earth topped these current NFL owners. Despite operating one of the most profitable businesses ever at $9 billion in revenue per year, NFL owners are within weeks of staging a lockout of the players.

You know, because NFL owners want more money.


"Oh, listen. These (NFL) guys are way past the greed of the baseball owners. Way past," Miller said, chuckling again. "You've got to give credit where credit is due. I think baseball owners took some crazy positions, but nothing to this extreme.

"Greed? (NFL owners) reek of it. I mean, really. It's amazing. There's such a difference between an industry that is struggling to stay alive and needs concessions of some kind and a football industry which is the exact reverse of that. It needs nothing, but they're willing to risk it all.

"I call that, not just crass and not just greedy.

"I call that stupid."

For one, no professional sports league has ever been more popular or profitable.


According to USA Today, an economist associated with the NFL Players Association estimates that a year-long lockout would cost each of the league's 32 cities about 3,000 jobs and $160 million.

These NFL owners shrug, because they say they don't believe those figures, or maybe they just don't care.

Instead, they care are about two things, and neither is good.

They want the players to agree to increase the regular season from 16 to 18 games. And, in addition to the $1 billion that they already get up front each year from total revenue as so-called "cost credits," they want to pocket another $1 billion.

"Essentially, the owners are telling the players that 'We want you to give up even more money than you already are giving up, and in return, we'll work you two extra games,' " Miller said, chuckling more. "It's just absurd, and nobody seems to be as astounded about all of this as I am. Certainly the media isn't, and I'm sure fans who don't know much about labor negotiations aren't putting this together.

"But on the one side, you have the football owners who are by far the wealthiest of all the professional team sports owners in terms of the revenue they clear every year. On the player side, they are the lowest paid of any professional team sport.

"They have the lowest pensions. They have the shortest careers of any of the team sports. They have the worst disability and injury rates. It's so one-sided. There ought to be fans and the media climbing all over the owners. You never saw such a setup."

Atlanta Dan
02-19-2011, 08:32 AM
g[/I]"] talking about an article with him in AOL fanhouse which is very much related to the one in wall street jounal, and pretty much echos what garvey said-


The Miller interview was interesting - I came across it through a link in this New York Times Fifth Down blog article on whether Gene Upshaw was the management stooge he often was portrayed to be

Gene Upshaw, the longtime leader of the N.F.L. players union, who died in 2008 at age 63 , was often derided as being a lapdog of Commissioner Paul Tagliabue. Upshaw won free agency for the players but at the steep cost of a hard salary cap. And N.F.L. contracts still seem virtually disposable.

But how bad could Upshaw have been if owners voted unanimously in 2008 to opt out of the latest collective bargaining agreement — leading us to where we are today? N.F.L. owners clearly feel Upshaw cleaned their clocks.


In the linked fanhouse interview, Marvin Miller takes this shot at Upshaw and tips his hand that Miller regards collective bargaining as a zero sum game between labor and management with no concern for the third parties that buy the product

Miller blames NFL players for serving as willing punching bags. He said they ruined their economic potential by agreeing to a salary cap in the early 1990s. He said it was partly because NFL players never had a real union when compared to that of baseball players whose union either has whipped baseball owners or drawn even during labor battles over the past 40 years.

Look, Gene Upshaw was a friend of mine, but he was no labor leader, and he wasn't going to be one if he lived to be 3,000," Miller said. "He just wasn't. Unfortunately, the players have done this time and again. They have looked for leadership among ex-players like Upshaw and never into the regular trade-union movement.

Miller's strategy as a negotiator with the U.S. Steelworkers (I am a former card carrying member for 2 summers at the old J&L Pittsburgh Works coke ovens) and for the baseball players maximized their wages. Of course, non-competitive wages negotiated through collective bargaining agreements were a big factor in the American steel industry collpasing in the late 1970s.. And with baseball not having a salary cap, which Miller obviously regards as essential to maximizing the interests of players, you only have a few franchises that can afford to compete for top players (even a great and profitable franchise such as the St. Louis Cardinals apparently cannot afford to resign Albert Pujols). That leads to a lot of former baseball fans having given up on the game because their team cannot compete and the World Series now drawing lower ratings than the Pro Bowl. Miler may think having the Jets, Giants, Redskins, Cowboys, and Patriots buying up the best players every year without a salary cap would be great, but fans of the 2 small market teams that played in the Super Bowl 2 weeks ago would disagree.

So I do not think the answer is for the players to hire someone with Marvin Miller's approach to labor negotiations in pro sports..

02-19-2011, 11:15 AM
I could not be more on the players side on this. I just think Demaurice Smith is a moron.