The Business of Sports

NFL's Silent Stakeholders


From start to finish, the National Football League‘s lockout lasted 136 days. All that was missed over those four-and-a-half months of collective bargaining negotiations were minicamps, organized team activities, and one preseason game. Judging by the unprecedented interest in this upcoming NFL season, you would think the league was ending a multiyear hiatus. Therein lies the amazing power of the NFL. A work stoppage that did not exactly result in any lost work is single-handedly responsible for increasing the league’s popularity. Maybe NFL Commissioner Roger Goodell and National Football League Player Assn. Executive Director De Smith should take their negotiating talents to Washington, where the pair can help solve our nation’s debt ceiling crisis.

Of course, players and owners are happy to be getting back to work. The new 10-year deal guarantees labor peace through 2020. The deal calls for players to reduce their share of league revenue to 47 percent, from roughly 53 percent under the previous contract, in return for promises to double that revenue during the life of the agreement. Under the collective bargaining agreement, the NFL’s salary cap drops to $120.375 million per team this season, down from $128 million in 2009, but teams are required to commit more to player salaries in a given season. That commitment sees the salary floor rise from 85 percent to 89 percent. Players also get lifetime medical coverage, better benefits for retirees, and a reduction in their offseason workload.

Lost in the post-lockout hysteria are the lesser-known winners from the new collective bargaining agreement (CBA). While not nearly as prominent or vocal as players and owners, these stakeholders had billions of dollars on the line. They include:

Bars and Restaurants

For bars and restaurants across the country, the NFL is a big moneymaker on Sunday, Monday, and some Thursday nights. Football game days bring in five to 10 times more revenue than traditional nights, according to the owner of Village Pourhouse in New York City. And the impact would not have been limited to markets with NFL teams. Tailgators, a Fargo (N.D.) bar, stood to lose $80,000 in gross sales if the NFL punted on its season. In honor of the new labor deal, Buffalo Wild Wings is giving six free wings to the 45,000 fans who signed up for the company’s "Save Our Season Facebook Petition."

Fantasy Football Companies

Fantasy football is an $800 million industry with more than 25 million players annually. In the absence of a season, the companies running leagues, publishing draft guides, and providing on-going analysis would have been out millions of dollars. Now, as fans flock to their favorite fantasy football websites, advertising and sponsorship revenue and user subscriptions will start flowing back in. That is good new for CBSSports.com, which will not have to make good on its promise to offer refunds based on the number of games played. Restaurants also are capitalizing on the fantasy frenzy. Applebee’s and Buffalo Wild Wings are giving fans $100 gift certificates to host their drafts.

Indianapolis

The NFL held off awarding a host city with the 2015 Super Bowl in case the lockout cost Indianapolis the 2012 game. As soon as the NFL announced the new CBA, Indianapolis’ Super Bowl host committee told hoteliers to start booking rooms. Central Indiana Corporate Partnership President Mark Miles said 140 Indy-area hotels had been holding 18,300 rooms, not knowing when, or if, the lockout would end. Now Indianapolis can expect 150,000 fans to spend a week in the city for the Super Bowl, bringing with them up to $400 million in local economic impact. There are not many other reasons people would descend on Indianapolis in frigid February.

NFL Sponsors

The reason major companies spend hundreds of millions of dollars annually aligning with the NFL: Nothing moves products as football does. That is why NFL sponsors could not be happier to have the league back. Anheuser-Busch InBev (BUD) is beginning its first year as an NFL partner. The company agreed to spend $1.2 billion over six years to have its Bud Light brand replace Coors Light as the NFL’s official sponsor in the beer category. The deal is one of the most lucrative sponsorships in sports history. While sponsors would have recouped most of their money if NFL games were cancelled, it is not as if A-B InBev would have found a better place to spend its marketing dollars.

Non-Player Employees

With U.S. unemployment above 9 percent, non-player employees are just happy to have jobs. But when the fate of the 2011-12 NFL season hung in the balance, several teams took cost-cutting measures, mandating employees to take furloughs and salary reductions. Now that football is back, those employees are getting their money back, too. The Atlanta Falcons, Kansas City Chiefs, Miami Dolphins and New York Jets have informed employees that they are refunding any pay withheld during the lockout. Although not directly affected by the refunds, temporary game-day employees must be happy knowing their jobs as parking attendants, ticket takers, and concession vendors are safe.

Ticket Brokers

The NFL ticket market had little action over the summer. Aside from fans needing to renew their season ticket packages, no one was spending money on games that might not be played. Once owners approved a new CBA last Thursday, team phone lines and secondary ticket websites nearly exploded. Dolphins Chief Executive Mike Dee said the team sold more than 300 new season tickets last week alone. The Detroit Lions on Monday received four to five times the number of ticket calls the team normally receives. Ticketmaster, which runs the NFL’s Ticket Exchange, said sales were up 332 percent the day the lockout ended. Ticket aggregation service TiqIQ says secondary market NFL tickets are averaging $186.62, up 22 percent from last season.

TV Partners

Thanks to the unprecedented interest in the NFL this season, TV ad sales across all networks have hit record levels, according to John Ourand of SportsBusiness Journal. NFL broadcasters have sold 80 percent to 90 percent of available inventory for the regular season, getting double-digit price increases over last year. Some advertisers have already committed $3.2 million for 30-second spots during February’s Super Bowl. On the media side, the biggest sigh of relief comes from DirecTV[/ticket]. The satellite-TV provider could have lost the $750 million it generates annually from its wildly popular NFL Sunday Ticket package. Making matters substantially direr, 42 percent of DirecTV’s $1.1 billion NFL rights fee was nonrefundable. Unfortunately, one TV partner did not come out unscathed. HBO’s award-winning series Hard Knocks was planning to tape its seventh season this summer, but the lockout and a lack of interest from teams ultimately killed production.

The State of Stadiums

Whether momentum from the new CBA will roll over into NFL stadium deals remains to be seen.

The City of Los Angeles and AEG reached a tentative agreement to build a new $1.2 billion football stadium and events center. Still, the deal cannot be finalized until an environmental impact report is completed next spring. If the stadium timeline continues as anticipated, construction could begin next June, with the stadium opening in September 2016. With neither the commitment of a NFL team nor a shovel in the ground, Farmers Insurance signed the largest facility naming rights deal in history—a 30-year, $700 million contract for the proposed downtown L.A. stadium. The agreement tops the previous record set in 2006 by Citi Field’s $400 million naming-rights deal.

Up the road in San Francisco, the 49ers have sold $138 million worth of luxury boxes at the team’s proposed Santa Clara stadium. The suite revenue more than doubles the amount committed to the $987 million project thus far. The facility is expected to begin construction in January 2013.

Meanwhile, the Minnesota Vikings must continue its wait for a new stadium. The stadium issue did not make the agenda during a recent special session at the state legislature. Another special session could be called later this fall to discuss the Vikings stadium proposal in Arden Hills.

Rick_horrow
Rick Horrow is a leading expert in the business of sports. As chief executive officer of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (2010). Horrow is also the host of Sportfolio, a new program on Bloomberg TV that airs Wednesday nights at 9 pm ET.

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