Surprisingly, at least in the short run, the biggest losers would not be the most obvious parties -- the NFL, its broadcast partners or even the players. Each has some form of temporary financial insulation, which is why each side is seriously thinking about going to the mat over a lockout. But a critical constituency of advertisers, sponsors and third-party media platforms that each needs the NFL to deliver audience to their products or services has been overlooked.
The NFL's biggest bargaining chip is that its TV contracts are all guaranteed in the case of a lockout. This means the league and its teams would still make around $6 billion from a total expected revenue of $8.5 billion to $9 billion in 2011 without having to even play a game. If the league locks out its players, it would also likely be off the hook from having to pay them, making such a strategy even more appealing to ownership. Meanwhile, the players' union has a strike fund. The league's broadcast partners (CBS, NBC, Fox, ESPN and DirecTV) are widely believed to have purchased work-stoppage insurance to make up for lost ad revenue, and since most actually lose money on a dollar-for-dollar cost basis in broadcasting the league's games, they would simply roll out other programming and enjoy a respite from the expense of putting games on the air.
Even sports-content-dependent ESPN, which would likely focus more on college football, original programming and, ironically enough, NFL labor coverage (at least for a while), would emerge relatively unscathed. Only DirecTV, which depends on its exclusive NFL Sunday Ticket relationship to differentiate itself from its competition, stands out as a potential loser unless it comes up with a backup plan.
With the NFL producing ratings that match pre-internet, quarter-century-old highs and pricing their advertising and sponsor packages to match, most companies are now forced to make one of two equally unattractive choices in the face of a looming work stoppage. The first is to go "all in," meaning being with the NFL is worth the risk of a work stoppage. The other is to opt out, saying that labor uncertainty combined with the high cost of the platform makes the NFL too risky. And for some brands, good luck with finding a replacement -- if one exists. Coors did the latter, opting out of its decade-long NFL sponsorship citing uncertainty surrounding a work stoppage as the reason. (But that didn't stop Anheuser-Busch InBev from outbidding MillerCoors for the right to be the league's official beer sponsor starting next year.)
So while the main stakeholders -- the NFL teams, broadcasters and players -- have managed their risk, businesses with no control and high dependence on the league are exposed. These include internet search-engine giants Google and Yahoo that use NFL news and fantasy content to keep fans on their sites longer; newspapers, which will likely lose or have to discount advertising that goes into bigger circulation for Friday, Saturday, Sunday and Monday sports sections; sports talk radio, regional sports networks ... you name it, all stand to lose without NFL games in 2011. There is almost no media entity from mega agencies on down that won't in some way be affected by a lockout. And perhaps worst of all, none of this can be quantified. The NFL has used 23 years of labor peace to stretch its advantage over other leagues and no other sports league enjoys anywhere near the attention the NFL gets. A year-long hockey lockout doesn't come close to providing an analogy to what a year without the NFL would be like.
As the NFL owners meet in war council on Park Avenue and the National Football League Players Association hunkers down in Washington, each planning battle strategy with some measure of temporary security, what is looming is an advertising crisis, a tsunami, driven by uncertainty and made worse by a lack of control and viable alternatives. Perhaps none of the parties sees it all whipsawing back on them, because they are too focused on each other and their impending labor battle. But for a league that has used a generation of labor peace to cultivate a nearly flawless relationship with its advertisers and sponsors into being the biggest sports entertainment business in the U.S., and possibly the world, the risk of ruining those relationships may be the single best argument against a lockout. It just requires the vision to look up from the battle lines and see this.
|ABOUT THE AUTHOR|
Robert A. Boland is professor of sports business at New York University's Preston Robert Tisch Center for Hospitality, Tourism and Sports Management. A noted expert on sports law, economics and collective bargaining issues, Mr. Boland was an NFL certified agent for more than a decade. You can follow him on Twitter @RobertbolandESQ