20 years doing marketing, with a broad base of experience in agencies, as well as corporate environments. My experience is centered around consumer package goods - such as beverages and household products - retail – promotions and sports marketing Kraft, Reckitt Benckiser, Mead Johnson, Texaco, Seagram's, Pennzoil, Clorox, FMC, Exxon, Proctor & Gamble and Reebok.My sports marketing includes extensive sponsorship and promotional activation for clients such Coca-Cola, Anheuser-Busch, Texaco, Pennzoil and Reebok with for MLB, NCAA, motorsports (NASCAR, IRL, CART, and NHRA) and the OlympicsWork with the NFL has encompassed marketing programs and sponsorships with ABC’s Monday Night Football, The NFL Players Alumni Association and a number of teams surrounding activation of sponsorships at the retail level (grocery, mass, c-Store, etc.).
Let’s take a brief look at the NFL labor history1982 Strike - lasted 57 days - No NFL games were playedEssential cause was dispute over the percentage of gross revenues that the league gave to playersNFLPA wanted the percentage increased to 55 percent (They now get 60%)1987 Strike and DecertificationReplacement and some NFL regular players crossed picket line - Back to work without a CBAOfficially decertified in 1989 and reformed as a union in 1993Return to Collective Bargainingtheir 1993 agreement has been extended five times, In May 2008 owners “opted out” of this agreement and chose to play the 2010 season without a CBA in place.2010 season was played without a salary cap (or floor), and with a looming possibility of a lockout
The owners have two key demands: extra billion dollars offthe top of a $9 billion revenue pie – need for expensesand want an additional two regular season gameslimit pay to unproven rookies – union is willing to concede this, to an extent. But the average NFL career lasts only 3.5 years, meaning the owners want to take a big chunk from nearly a third of a player's typical career.The owners want to replace two of four preseason games with regular-season games, which players oppose: They say two more games will increase injuries at a time when player safety is ostensibly a paramount concern of the league's.
Here are a few scenarios, although it is impossible to know if these are the only ones:We have a dealOf course, if there is a deal agreed to in the next day, it will not be memorialized into writing for several weeks, if not months. But while the lawyers rack up their billable hours writing the new CBA, NFL business can proceed under the terms established.2. We have an extensionThis is the second-most hopeful outcome. Everything is negotiable at this point, including the time of the deadline. Midnight on March 11th can easily turn into midnight on March 18th, etc. 3. DecertificationThe union could decide to pursue the strategy of dissolving as a union and becoming, in essence, a “trade association” for legal purposes. This would also – in theory – empower the players to (stop) a lockout and file individual antitrust lawsuits against the NFL.must Wait six months pass before the filing of an antitrust suitDecertification is a high risk, high reward strategy by the union. The potential reward is to block a lockout and, under threat of antitrust claims, push the NFL into negotiating a more player-friendly CBA than what has been discussed.The risks are several. The NFL will fight the strategy both through its existing claim with the NLRB and in delaying the hearing of any antitrust claims. Through delaying adjudication of claims into the fall, the NFL will hope for union solidarity to slip in the face of game checks being lost, resulting in a backfire to the union.4. LockoutThe NFL has tactfully avoided any mention that it would take this stepA lockout would cease all operations between the management (NFL teams) and labor (NFL players). There would be no access to the facilities for training, rehabilitation or workouts; there would be no contact with coaches; there would be no payment of offseason roster and workout bonuses; there would be no signings, trades or negotiations of contracts. Simply, the business of the NFL would cease.The reason for this is, like the union option of decertification, simple: leverage. The NFL is trying to forge a new economic system by shutting down its business to its labor force, theoretically causing enough angst on their side to work out a more owner-friendly deal than the expiring CBA.5. ImpasseUpon declaration of impasse by the NFL, the NLRB would first have to resolve the NFL's prior unfair labor practice claim -- asserting that the NFLPA's decertification efforts demonstrate their lack of good faith in bargaining. A ruling in the NFL's favor on that issue would tilt towards recognizing an impasse (as well as possibility of sanctions on NFLPA for failure to bargain in good faith).6. Continue to operate under terms from 20102010 was not a good year for the players. – spending was down, contracts were hard to do, and free agency became diluted and difficult with six years required as opposed to the previous four.Owners are too competitive and ego-driven to resist the temptation of buying up players without restriction.The players decertified in 1989 as a way of fighting the owners before reforming the union in 1993 with the rise of free agency. Risk - If the players keep abandoning the union when it is not convenient to have one, then there is no reason for the federal mediators and judges to side with the players.
As Yogi Berra would say…
Lets look at 2004-05 NHL lockout as a reference point. According to Forbes - NHL teams actually saw a growth in value following the lockout Same may happen if NFL owners get their way and shave a few percentage points of the current 60 percent figure NHL attendance did not suffer - too much - from the NHL lockout. In 2006, the year immediately following the lockout, attendance actually grew and has grown gradually since the lockout.Despite emerging relatively unscathed in the areas of team value and attendance -- The NHL television revenue/ratings got hammered after the lockoutSince the lockoutNHL games now air on NBC, but are relegated to just a Saturday afternoon slotThe contract with NBC also stipulates that NBC pays no rights fees; instead the network and the NHL have 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.
We can also draw parallels from the 1994 MLB -- Pre strike average attendance was above 30,000 / game. According to ESPN -- MLB attendance dropped 20% and did not get back above 30,000 until 6 years later. Operating revenue dropped almost 36% (from $1.87 billion in 1993 to $1.2 billion in 1994) and didn’t reach its former levels until 1997.”For MLB, unlike the NHL, team value and attendance DID suffer. TV revenue for MLB was much harder to quantify – but it did drop after the lockout. It’s a long story and I won’t go into details here, but the end result was that Fox paid was substantially less in 1995 -- the first year they ever broadcast baseball -- than CBS paid in the early 1990s.
Who Loses without Football???I think we all would agree the fans do by far… But we’re here to talk about the business and financial implications of a lockoutAnd we might even find a few winners or entities that could gain an advantage from all this.
Lets start with the broadcasters and the fees they pay for the right to air NFL gamesCurrently, CBS – NBC -Fox and ESPN are paying a combined total of $20.4 billion based on multi year contracts to broadcast NFL games CBS, Fox, and NBC have contracts through the 2011 season -- and ESPN through 2013. Total rights fees for 2011 are about $4 BillionStarting in 2014, ESPN will pay the NFL between $1.8 to $1.9 billion / year for the rights to broadcast league games. This represents an increase in the annual rights fee of 65 to 70 percent, according to a report by Sports Business Daily. How would you like to be on the hook for that amount if fan backlash decimates viewers and their loyalty
Here are the top NFL advertisersWhile these Advertisers will - probably - continue to spend, they will re-shuffle the deck and allocate money differently, so individual network slices of the media pie my grow or shrink accordinglyIf there is a lockout, when games return - depending on how upset fans are - any ratings drop will impact ad $$
Last season, the NFL generated nearly $3 billion in ad revenue among CBS, ESPN, Fox and NBC, according to estimates provided by Kantar Media. Fox generated the most for the 2009 season at $944 million, followed by NBC ($817 million), CBS ($804 million) and ESPN ($144 million).CNBC reported that in 2010 CBS had the highest % of their revenue derived from football.
in general TV rating for the NFL have been superViewership is up 13%, they’ve seen solid - Back to back - increases in Super Bowl ratingsAnd with 20 million average viewers that 2X’s what networks achieve for their primetime averages
Direct TV has lured subscribers by offering exclusive television access to the NFL Sunday Ticket packageIf you’re not familiar with NFL Sunday Ticket, it offers viewers access to out-of-market games, fantasy stats and the Red Zone channel where you never miss a scoring opportunity all for 335 dollars!If there is an extended lockout, Analysts forecast that DirecTV could lose as much as 10% to 20% of its 2.2 million subscribers to its NFL Sunday Ticket service Still, that is a small fraction of DirecTV's total subscriber base of more than 19 million across the U.S.Dish network has already taken some missteps with NFL fans. Moved broadcasts to higher “premium tier” and it cost the network 4 Million subscribers!
Missing Games Could Actually Boost Networks' Revenue according to Fitch Because CBS, NBC, Fox and ESPN pay such huge sums for rights to show the games, and a judge ruled last week that broadcasters don't have to pay during any lockout, missing games would actually improve the networks' bottom lines. Without games, broadcasters would have to air replacement content (likely re-runs to avoid incremental production costs) resulting in fewer eyeballs, lower advertising rates and less revenueHigh license fees generally result in sports programming being only minimally profitable to the broadcasters, and replacement content would be more profitable." That’s all well and god for the network, but it certainly won’t help your local broadcasts – coaches shows, NY Giants post game show, etc. where the local station sells the ad time
Here’s a little background on fantasy football - in case you have been locked in a closet for the last 5 yearsBusiness Week terms Fantasy Football: The New Internet Porn30M + players make it an estimated $5 billion businessThe Fantasy football players spend money - lots of time online - and advertisers want to reach their DemographicPrimarily men - and a great way to reach younger menAbove average Household Income On average they spends $150/yr on league fees, premium websites, magazines and other ‘necessities.’
Traffic Jumps on Sports Sites Hike as NFL Season BeginsWith the start of the NFL season, traffic to Sports sites picks up reaching 123.5 million visitors in 2010The top ten fantasy football sites average: 3 million monthly Unique Visitors274 million avg. monthly page views, with 57 minutes avg./userHere in this chart - Yahoo! Sports - one of the top 5 sites for fantasy football, ranked #1 last September with 48.2 million visitors and over 6 Million Unique VisitorsIf there is a work stoppage – there are no Fantasy Football drafts or draft parties, No fantasy football magazine subscriptions, no fantasy football water cooler smack talk and a whole lot fewer minutes spent onlineOn the other hand, a potential winner here might be office productivity
For broadcasters and content providers, it’s all about delivering audiences or “eyeballs” With no games, advertisers could shuffle their ad budgets to other "marquee" programming "marquee" programming is limited for broadcastersAnd nothing delivers eyeballs online like fantasy sports. Some advertisers might also choose simply not to spendAny media planner will tell you, without NFL games most brand advertisersjust won’t get the reach (eyeballs)they need to cost effectively target their audience
SPONSORSHIPOften very large and real numbers, but also contractual obligations, so they’ll still be paidA lockout could damage the NFL’s tremendous popularity And diminish the high premiums The NFL and teams have been receiving for their sponsorships going forwardAt the team level, sponsorships and corporate suites could be greatly impacted if buyersfeel that fan appeal has dropped due to a work stoppage
For beverages, Stadium Pour Rights make the difference in Sponsorship ROIBud Light’s new contract is estimated at $1.2BPreviously Coors was official sponsor. They spent $500M from 2005 -2010 for the right to advertise as Official Sponsor and use the NFL logo They couldn’t advertise on the Super Bowl or use individual team logos based on that deal. Team sponsorships and pouring rights are done individually - often on a non exclusive basisA-B has pouring rights with 28 teams and up until this year had been the exclusive beer sponsor of the Super Bowl for yearsMiller Coors =Vikings, Bears, Packers and Cowboys
The Cola Wars Extend to the GridironPepsi IS the Official Sponsor and in 2004 ,Pepsi agreed to pay $560 million over eight years to be able to use the NFL shield and other properties.
but… these charts show the overall market share for sports venue/stadium beverages. Pepsi’s share has steadily grown but in 2008 Coca-Cola still maintained a lead. On line two of the grid chart you’ll see the NFL share where Coke held a 10 point lead in 2008. Most of these pouring rights deals are multi year contracts and while the final numbers are not out for 2010, several NFL stadiums were up for renewal last year. Unlike beer, these deals are often exclusive. Key milestones here were Jones Soda taking over at Seattle SeahawksQwest Field – 2007Dr. Pepper holding joint rights at Cowboys Stadium with Pepsi
Stadium employees lose big time with a lockout. Thousands of employees who keep the stadiums clean, keep food and beer in your hands, and provide a secure experience for you as fans will be out of work if the lockout happens. Other “On Field” personnel also lose such as - referees, coaches, trainers, Front Officestaff, marketing, tickets sales personnel will also hit the unemployment line
Food Service and Event Staff will certainly lose…There are 3 or 4 major players in the world of food concessions for the NFL teams…Centerplate =10Aramark = 8Levy Restaurants = 6 Delaware North = 3 (Jets and Giants)Star Concessions = Cowboys Stadium
Of course the lack of broadcast will effect the broadcast production crews and staffcorrespondents, analysts, and hosts that will no longer have NFL games to produce or analyze.Every game has a 40-45 person localproduction team , plus 6 or 7 who travel for the networks.MNF or SNF is a traveling circus, 20 trucks with drivers and engineers. There are a few companies that specialize in sports production, but most are independently owned such as PMTV. Anheuser-Busch which used to own the St. Louis Cardinals had a division for TV and radio sports production
Whether you chose to watch games at home, in a bar or restaurant or at the stadium and number of industries will be effected by a work stoppageBecause we are talking about an average of 67,000 at each stadium, 20M viewers on TV and according to Arbitron almost a quarter of those TV viewers watch out of their home in a bar, restaurant or hotel.
So if you can’t watch at home or tailgate what does it mean for Supermarkets — Lots of entertaining occurs during the season – in homes and stadium parking lots across the country A lockout will affects sales for groceries, beer, snacks and even ice. Now it would be impossible to guess which retailers have the best football sales, but here is a list of the top 10 for North America. Loblaws – Canada and Delhaize Group you might know them better as Food LionC&S Wholesale distributes food to supermarkets – such as Stop & Shop, Shaw's, A&P, Safeway and Target
Now the effects of On premise sales are a lot easier to measure. If you serve chicken wings and beer, every football game is really important to your business. Pick you chain location - Hooters, Applebee’s, Blondie’s or Brother Jimmy’sHere is a list of average prices for a casual dinning restaurant in the US. Now think about on Super Bowl Sunday - 1 billion: chicken wings consumed and 325.5 million: Gallons of beer drank by Americans that day
While the chains and independent bars and restaurants will be hit the hardest - it will also have and effect on the food service companies that manufacture and supply the chicken wings, ribs, burgers and fries Great article a few years back as to whether to buy Direct TV NFL Ticket or watch it in a bar. You can do the math but at $335 for the package / 16 games ~$21 and at a bar -- I don’t have to clean up after my friends leave…
Lets look at On-Premise BeerSalesApproximately three-quarters of the volume of beer marketed in the United States are for off-premise consumptionBut the quarter that is consumed on-premisecontributes nearly half of all retail dollar sales.Beer outsellsWine by 3.5-to-1Liquor by nearly 1.5-to-1While contributing almost 50% of the dollar sales for Total Beverage Alcohol
As you can se there are only a few companies represented by the top 10 brands by penetration, so the pain will be wide spread, But with a new $1.2B sponsorship deal and the leading beer volume, A-B has a lot to lose if there is a lockout
They haven’t published exact numbers for NFL fans, teams, production crews, or media personnel – that travel for games or stay in hotels. I know in motorsports it was a number we tracked closely around race track venues.But with an average of 67,000 in attendance per game - and the popularity around the country, you can bet the people that fly or drive hours to go to see the Cowboys, Packers or Steelers all have to stay somewhere
(Harrah's, Las Vegas Sands, MGM Mirage)Wynn Las Vegas Hotel sports book and race director says Las Vegas sports books are looking at an $850 million loss without NFL games – while that may be a bit inflated and I’m not sure where he got his numbers, I do know when you look at the next slide
Casinos tyicallykeep less than 1% of their football handle. So at a total of $56.4 Million for football in 2010, their handle was somewhere around 5.7 Billion and with that kind of revenue - you can bet the Nevada Gaming Broad pays close attentionThe Nevada Gaming Control Board said that $87.5 million were wagered on the NFL's championship game in 183 sports books across the state and Nevada casinos won $6.9 million in Super Bowl bets
Retail sales of NFL-licensed merchandise in the U.S. and Canada topped $3.2 billion in 2007, according to EPM Communications Inc. in New York. Its big business in the licensed products industry.You can buy just about anything with your favorite team logo online and in retail stores all over the country - With a work stoppageFans Stop Buying - Retail sales fall (Modell’s, Amazon, NFL.com)Warehouses stop shipping and Manufacturers stop makingMin 16 week lead time to get stuff produced overseas
With the new uniform an on field apparel contracts going into effect in 2012, licensing from NFL Properties is a huge business. For Reebok, who is on their way out, roughly 60% of their sales are generated from the NFL contract
Here is the Starting line up for the NFL apparel licensees in 2012Nike takes over Uniforms - The NFL splits out caps in 2012 - so they could get a bigger licensing fee from New Era vs rolling it up with Nike. The five-year multimillion-dollar combined deal is rumored to be about $1B. By contrast Reeboks deal in 2001 was estimated to be $250 Million for 10 yearsRevenue 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 Sports One Source.If there is a lockout and fans revolt, I’d hate to be on the line for these licensing fees, typically up 60-70% from the previous years.Not familiar with 1947 brand = Twins Enterprise, Inc. the cap and t-shirt guys behind the Red Sox
December and January TV sales are often purchased in consideration of the NFL Playoffs and Super Bowl That makes holiday and Super Bowl sales period #’s 1 and 2 for TV volumeAll that sales volume drives up home entertainment system installs for reach their #1 sales period.TV sales were predicted to go up 25% in advance of this years Super Bowl, the same as the two years before
City and State hosts could get hit hard too. Lost tax revenue from sales tax, road tolls, parking, etc.Although studies have shown not as hard as the economic impacts reported when a team needs to build a stadium to keep or attract a team
Since we’re a little more than a month away from April 15th, let’s talk about taxes…State income tax is withheld depending on the location it is earned. Texas, Washington, Florida and Tennessee currently have no state income tax. Other states tax income on rates as low as 3% (Illinois) to as high as 10.3% (California). Road games require state withholding based upon two days of earnings in that particular state.City and local income tax: a number of cities and localities also require a limited amount of income tax withholding, based upon income earned in that particular location.With Payrolls topping $3.4 Billion, Government is always going to get it’s chunk Medicare for 86 Million with state and federal taxes at about $154 and $762 Million each
Potential winners??? - How about Anti depressants!!!Other sports could definitely win. For the big picture, think about what happens to other sports if they can backfill the void left by the NFL Remember how -NASCAR grew in the wake of the CART/Indy split, - Orhow the NFL grabbed an opportunity after the MLB strike in ’95, and then again after the NHL strike in ’04NCAA could surely be a short term winner with other sports fighting to take a bigger portion of broadcast ad dollars in what used to be call “counter Programming”, Plus ticket sales, merchandising revenue and fan loyalty.
What about Equity? League and teams risk losing fans and you’ve just seen the potential impact over a wide variety of segments.Teams could have permanent - long term revenue issues as they work to restore fan interest after a lockout. Maybe not so much for teams like Green Bay or Pittsburgh, where loyalty is inbred, but for teams like Carolina, Jacksonville, Miami, Minnesota - where fan interest is finicky, the impact will go well beyond the work stoppage.
We get an agreement before the end of MarchThe NFL’s wealth depends so much on its current television contracts and the ruling by the judge to eliminate the owner war chest of almost $4 Billion is a huge blow to their bargaining power. Neither side will get all that it wants, but the fans will be better off avoiding a work stoppage - but don’t kid yourselves, this has nothing to do with what the fans want…