NFL Labour dispute: How is $9 billion not enough?
Growth is the key to any successful business. A business can make billions of dollars but if it is stagnant, then it becomes a cause for concern. That is fundamentally what is wrong with National Football League (NFL). It is as much a business as it is a
sport. Over the past decade both the sport and business have gone through a period of unparalleled growth.
Football is now unquestionably the most popular sport in the US. An unbelievable 111 million people tuned in to watch Super Bowl XLV, breaking the previous viewership record also held by the NFL. Almost half of all Canadians watched the event. A total of
nearly 160 million people worldwide watched the event which is testimony to football’s growing popularity. During the regular season the Denver Broncos played against the San Francisco 49ers at a sold out Wembley Stadium in London.
There is a problem though for the NFL. Economic growth is not in step with the growing popularity of the game. The value of an NFL franchise increases only if it continues to grow. Nearly a decade ago the New York Jets were bought for $635 million. Just
nine years later, in 2009 Stephen Ross paid over a billion dollars for the Miami Dolphins. If the NFL cannot grow, neither will the value of any of the franchises.
The NFL grew stupendously between the 90’s and the 2000’s because of many different factors that all worked for the NFL. Revenue from tickets sales during that period nearly doubled. Last year the NFL signed a $4 billion TV deal, which was such a bargain
that the Players Association (NFLPA) brought charges against league for failing to maximize revenues, as required by the collective bargaining agreement (CBA). Imagine that.
The NFL bubbled out of control in the past, not that it isn’t still growing. Even during the financial crisis the NFL continued to be highly profitable and continued to grow. It just didn’t grow as fast as it used to. Ticket revenues, which nearly doubled
between ‘95 and ‘05, flattened out. No matter how popular the NFL is, there is only so much that fans will pay to watch games. The NFL has pushed that envelope to the limit. Most clubs have not raised ticket prices by any significant amount in the past few
years. The average ticket cost right now is an estimated 76 dollars.
The NFL has also squeezed out as much as it could from fans and broadcasters. In the last five years revenue from TV deals rose by almost 46 percent. The NFL made $3.8 billion in 2010. Even with another record setting season, TV deals cannot just keep growing.
While revenue continued to rise, costs fell. The popularity of football and its potential to support and boost local businesses encouraged taxpayers to dump money into the construction of NFL stadiums. From 1995 until 2005, an average of $500 million of
taxpayers’ money has gone into NFL stadiums every year. That number has dropped to zero since 2005.
The NFL’s lead negotiator in the current labour dispute, Jeff Pash has pointed out that after 2006 - the year when the current labour agreement was signed - no new stadium deals were signed. Pash insinuated that it was because of the unfavourable financial
terms of that CBA that the NFL couldn’t sign new deals, but we can say with a fair bit of certainty that the complete absence of public funds was also an important factor.
The NFL is now addicted to the kind of growth it saw in the last decade or so. There are no more revenue streams to exploit, except one; the players. NFL owners can still pull off a billion dollar jump in revenue if they can get the players to take a billion
dollar pay cut. Well, Good luck with that.
Disclaimer: The views expressed in the article are the writer's own and do not necessarily reflect bettor.com's editorial policy.
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