If one were to apply the language of football to the ad sales market, deploying the martially inflected argot sportswriters toss around like small bills—the bombs, the blitzes, the controlled bursts of aerial assault, the overheated paeans to firepower—it would be safe to say that this is the year that the NFL went thermonuclear. But with just hours to go before the Collective Bargaining Agreement is set to expire, the threat of a lockout could silence the artillery altogether.
While both sides remain entrenched in their respective positions, the NFL and the players union are now talking about taking a time-out in order to continue mediation. Stopping the clock would (at least temporarily) stay the league’s hand while also setting aside talk of NFLPA decertification.
As of Thursday afternoon, an extension looks like a last-second Hail Mary pass.
Should the deadline pass without an extension, the lockout would effectively prevent any communication between active NFL players and their respective franchises. Extend the stalemate far enough into training camp and preseason, and games will be struck from the schedule. In a worst case scenario, the entire 2011-12 campaign would be scuttled.
A work stoppage would also paralyze free agency, as no player contracts can be negotiated or signed during a lockout.
The players’ only viable gambit may be to vote for decertification, which would in turn allow them to seek an injunction against a lockout in a Minneapolis federal court. It’s a risky play, to be sure. By dissolving the union, players would waive their rights to collective bargaining although they could file individual antitrust claims against the NFL and the 32 team owners.
The NFLPA decertified once before in 1989. A subsequent settlement with the league four years later led to reformation of the union and the adoption of free agency.
Should this game of chicken between management and labor take a turn for the absolute worst, the NFL broadcast partners would sustain losses of hundreds of millions of dollars in advertising revenue. Indeed, the NFL plays such a critical role in the TV marketplace as a whole that even the loss of a handful of games could have a catastrophic impact on the spring upfront.
While both parties are said to be inching toward an agreement that would at the very least give them some breathing room, a player’s union rep earlier today said it was unlikely that a lockout can be avoided altogether.
Noted Chicago Bears fan President Barack Obama weighed in this afternoon, saying the NFL and the players “should be able to work it out without the president of the United States intervening.” In a press conference held earlier today at the White House, the president appealed to the participants’ better instincts. “I’m a big football fan, but I also think that for an industry that’s making $9 billion a year in revenue, they can figure out how to divide it up in a sensible way—and be true to their fans, who are the ones who, obviously, allow for all the money that they’re making.”Unknown Object
President Obama joked that a resolution had better be reached without his intervention, as “it turns out I’ve got a lot of other stuff to do.”
Understandably, the league’s broadcast partners (CBS, NBC, Fox, ESPN) are assessing the specter of a work stoppage with all the enthusiasm of someone being asked to handle a radioactive dog turd. A few weeks ago, when asked to comment on the fact that Super Bowl XLV may prove to be the final NFL broadcast of 2011, Fox Sports Media Group chairman and executive producer David Hill could offer little in the way of reassurance.
“It would be a great tragedy,” Hill said. “We all know what happens after a strike or a lockout; fans turn away and it takes a while for them to come back. . . .I fervently hope that an agreement is possible, that there is no lockout, no industry dispute and the games go on as scheduled next September.”
In the short term, the loss of the NFL will wipe as much as $3 billion in ad revenue off the books at the four networks. Fox has the most skin in the game, having generated north of $975 million in ad dollars with its Sunday NFC package. Per industry estimates, NBC hauled in some $850 million courtesy of its Sunday Night Football juggernaut, while CBS’ AFC coverage churned up around $825 million. Per terms of its rights deal, ESPN’s Monday Night Football carries the lightest spot load, with ad sales adding up to around $175 million.
A more drastic punishment seems to have been averted, however. U.S. District Court Justice David Doty on Tuesday ruled that the NFL was not acting in the best interest of its players when it won an earlier ruling that would have allowed it to collect $4 billion in rights fees from the networks even if no football is played this season.
In a bid to secure itself some lockout insurance, the league had renegotiated its rights agreements with the networks. Essentially, owners would continue to pocket the $4 billion in rights fees even in the absence of any viable NFL product. Doty’s ruling put the kibosh on the arrangement; the judge has yet to rule on possible damages or if he’ll order the money to be put in escrow. In any event, the league no longer has access to that hoard.
ESPN, which is in the midst of negotiating a renewal, pays the NFL an annual sum of $1.1 billion, while Fox pays $720 million per season to carry its slate of Sunday games. CBS plunks down $620 million for its package, while NBC kicks in north of $600 million.
The three broadcast deals expire in 2013; ESPN’s pact runs out the following year.
While the NFL’s last labor war was brought on by markedly different circumstances, the 1987 season may be a good model for what to expect this time around. “The players opted to strike, and as a result there was one missed week followed by three games with replacement personnel,” said Magna vp, director of audience analysis, Brian Hughes. “A lockout is something altogether different. It would preclude staging replacement games, leaving nothing for the networks to air except coverage of the negotiations.”
One sports sales veteran who was active during the strike years said the hard-won lessons of 1987 and 1982 were not likely to be forgotten. “As was proven in the past, replacement programming doesn’t work. It became a landscape of illegitimate sports,” the former sales boss said. “College football would be the first to benefit.” This would put ESPN in the catbird seat, given that it and broadcast sibling ABC control roughly 90 percent of NCAA football regular-season GRPs and carry 33 of the 35 bowl games.
In a full-on apocalypse scenario, the broadcasters would stand to lose between 25 percent-30 percent of their fourth-quarter 18-49 ratings points. And while football-targeted dollars would likely fall to college games, the NHL and baseball, sponsors with a marked NFL presence would need to shift money to prime-time entertainment.
“There are still a few reach vehicles out there, the American Idols, the stuff on CBS,” said one national TV buyer. “It will call for some big upstream shifts in thinking, and the usual suspects, the beer guys, aren’t going to be happy. But the momentum behind auto dollars is real, and the scatter market just keeps building. Losing football would suck, but it’s not an end-game scenario.”