The Financial Impact of the NFL Lockout

NFL Lockout
At the beginning of this month, the collective bargaining agreement between NFL players and owners expired without renewal, which forced the NFL into a lockout. Some might be wondering, what does a lockout mean for the NFL? And what are NFL players and owners disputing? Well, there are no simple answers to these questions, but it ultimately all boils down to money. I will answer these questions and explore the financial implications a lockout entails-not for the players and owners-but for teams, fans, and businesses across the country because they will likely feel the biggest impact but given the least notice.

NFL Lockout Background Information
What is a "Lockout"? And what changes has the NFL made?

  • Basically it postpones, or cancels, all league activity till a new collective bargaining agreement is reached. Meaning, the 2011 NFL season may be cancelled if the owners and players cannot reach an agreement. Most teams start their training camps at the end of July-early August, so even if they reach an agreement in the late-summer the season may have to be shortened to accommodate the late return to training camp.
  • As soon as the NCAA football season ends, the biggest news stories are about which players have declared for the NFL draft. This year was no different as a record-setting 56 players have opted to forgo their remaining years of collegiate eligibility to enter the 2011 NFL  Draft. It appears that these athletes were unfazed by the looming lockout. The lockout has pushed back the draft to end of April. As a result of the lockout, the teams cannot: trade players for draft selections, sign or even contact undrafted players. 
Why are players and owners disputing?
  • The amount of money owners take as "credit" from the revenue pool. The owners want to increase the amount of money they take from this pool. Previously, owners received $1 billion from a $9 billion pool, but now they are looking to increase their amount to $2.4 billion citing "the economic realities of the era." As a result, players would take an 18% cut in their share of the revenue.
  • They cannot agree on the split of the overall revenue. The players are fighting for a 50-50 split, but have been countered with a 51-49 split for the owners that the players have rejected. 
NFL Lockout Financial Impact

  • The cancellation of the NFL season will likely have a positive economic for NFL fans. Without the opportunity to attend games, watch it on TV, or even read about it fans will likely realize the the true cost of being a fan when they notice the extra money in their bank account. In the March 7th issue of ESPN The Magazine, they broke down the costs an average NFL fan will save if the season is cancelled.
    • Tickets for 8 home games: $611.76
    • Price of parking for 8 home games: $207.36
    • Concessions at 8 home games: $251.04
    • Money spent on tailgating for 8 home games: $480
    • Cost of DirecTV "Sunday Ticket": $334.95
    • Fantasy football league buy-in: $75
    • Money spent at bar during your teams 8 away games: $280.72
    • Season preview magazines and insider subscription: $55.34
      • Total: $2,296.17
  • Although fans will likely save money, most will probably tell you they'd much rather spend the money and have the season go on. The NFL has never had a season cancelled before, so this would be quite a shock for many fans.
Businesses and communities
  • Training camps begin in late July-early August and are typically held in smaller venues with a much more laid-back atmosphere. Not only is it much cheaper to attend training camp games, but it provides fans the opportunity to interact with their favorite players that is unavailable once the season begins. Not surprisingly training camps have quite the appeal for any football fan. The camps are usually located in nearby smaller towns at local colleges and universities and attract fans from all over to visit. Tourism to these towns increases, and the communities gladly accept their visiting dollars. The lockout could shorten, or even cancel, training camps and negatively affect the businesses and communities that benefit from the increased tourism. The decline in revenue could force businesses and communities to make some very difficult decisions.
  • Sports apparel companies and stores could see a huge decline in their revenue due to the lockout. Without a season, most people won't bother buying new game-day apparel. 
  • Businesses near stadiums will likely suffer a decline in revenue due to the cancellation of games. Lots of these businesses attract a customers merely because of their proximity to the stadium, so without a game there are a lot less people stopping by.
  • A decline in a business's or community's revenue can ultimately mean layoffs for a lot of people.
  • Each team has a stadium that is fully staffed by hundreds of employees. However, without a season there is no reason for the teams to keep these employees. Lots of people will likely lose their jobs if the season is cancelled.
  • ESPN's Bill Williamson breaks down the costs of a lockout by each team here.

This is only a brief examination of the vast repercussions of an NFL lockout. It is shocking to see that it affects not just football fans, but we must recognize that the NFL is a business which can affect us all.



1 comment:

  1. Interesting and detailed research about the financial impact of the NFL Lockout. As with any large scale sporting event (or entertainment event for that matter) the local economic impact is huge. That is why states have entire departments and tax incentives to help entice entertainment executives to the local area. The economic impact of a single game can be in the billions.

    Nevertheless, outstanding post with useful and convincing facts.