Lockout Looming: Too Many Revenue Streams

Although the players and owners have spent a lot of time at the negotiating table the past two weeks, a number of key issues exist that will lead to a lockout in 2011. Brad Keller breaks down these issues.

Editor's note: this is the second in a multi-part series examining the issues the NFL and its players are facing as they negotiate a new collective bargaining agreement. For Part One, click here.

The NFL faces the same issues regarding Internet and multimedia revenue streams that Hollywood producers and writers faced in 2007 and 2008. The owners, like Hollywood producers, would like nothing more than to make as much money as possible without having to pay the players/actors. It's cheaper now to CGI something than to actually pay someone to do it.

The NFL — through the NFL Network and online content — are able to re-purpose content that they've already paid players for to make more money. Would a diehard Colts fan pay for an online archive of every Colts game from the past 50 years? Would they watch an NFL Network marathon of "Top 5 Manning-Brady Matchups?"

The NFL owns NFL Films and the owners, essentially, own the NFL. How much could they make off of that if there was a lockout and there was no live option? They have extensive archives and unlimited possibilities. They may have to pay the players something, but it would be a small portion of what they make overall.

In general, television revenue is making up a smaller percentage of overall media revenue.  Streaming services such as Netflix and Hulu have made it difficult for TV-only revenue streams to survive and flourish.  The revenues from TV contracts are still the biggest contributors to league coffers and will be for some time, but those revenue streams will not be as lucrative forever.

At issue is also the fact that the players are now asking for a percentage of total revenue, not just revenue from ticket sales, merchandising, and television contracts.  As other revenue streams continue to grow, a piece of the total pie will be larger and will force the owners to share more revenue with the players.

The NFL Network already runs 24/7/365 coverage of a sport that only plays two days out of the week five months a year. How difficult would it be for them to run content throughout the year without that 48 hours a week for five months a year to talk about? What if they were able to pay players that are struggling to make ends meet to make appearances? Some individual teams may suffer, but the collective would prosper and the players — the most important part of this equation — would continue to suffer.

Clouding all this is the fact that the television networks have "guaranteed" the owners revenues from 2011 games, even if those games are not played, in the form of loans.  If the games are never played, the owners will need to repay the networks for any lost programming, but the fact remains that those loans give the owners an additional buffer and a very powerful ace in the hole when it comes to negotiations.  They will be able to wait the players out in the event that the lockout stretches into the start of the regular season.

In addition, the NFL Network has signed deals with the AFL and CFL to broadcast those games to their audience. That will give football fans a way to watch live football action, even if it isn't NFL action.

The central point here is that the owners have more options than the players at this point. The players have one option: Pay for play. The stars and superstars will still have sponsorships to fall back on, but that's less than five percent of the league.


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