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Labor concerns widespread
Published March 22, 2010
Major League Soccer Commissioner Don Garber, often one of the more visible executives in the sports industry, missed last week’s IMG World Congress of Sports to continue labor negotiations with the sport’s players union and try to avert a strike.
Much like Garber’s absence was labor related, the conference, too, was consumed by concerns over quickly mounting labor struggles in the NFL, NBA and MLS — divisive issues that could bring hesitant signs of recovery across many sectors of the sports industry to a grinding halt.
More immediately, the fractious environment has compromised operational planning by every sector of the industry that works with these leagues, from media and marketing to finance and facilities.
“Our biggest issue is that our sponsors and our broadcasters have planned 12, 18, 24 months out, so the worst thing for them is the ambiguity,” said Mark Waller, NFL chief marketing officer. The league will play the 2010 season without a salary cap, and a work stoppage in 2011 is widely expected.
The ongoing disputes are tightly intertwined, executives said, as fans have a tendency to lump multiple labor issues together in their mind, similar to criminal conduct by athletes.
“It’s almost an attitude out there among fans of ‘a pox on all your houses,’” said NBA Deputy Commissioner Adam Silver. “Fans are not concerned about the details of these situations. But they obviously do want to see their teams playing, and it’s our responsibility to make that happen.”
Prior sports labor history has already shown the devastating effects of work stoppages, particularly in baseball, which lost the 1994 World Series, and the NHL, which canceled the entire 2004-05 season. And executives are now clinging to any hope that those lessons will not be learned too late. “These guys that are there now were not there in ’99 when [the NBA] lost half a season,” said Dave Checketts, chairman of Real Salt Lake ownership group SCP Worldwide, who said the impact of an MLS work stoppage would be devastating. “They weren’t there in the ’80s when we were at the table with the players. They don’t understand yet, in my view, how damaging [a work stoppage] can be.”
The tenuous American sports labor environment is also troubling would-be team owners. General Sports and Entertainment, a Michigan investment group that owns British Champions League soccer team Derby County FC that is exploring a potential bid for the Detroit Pistons, is deeply concerned over the NBA’s wide ideological divides over maximum salaries, guaranteed contracts and several other issues.
“This is a major issue. Labor’s right up there on the list of concerns you have along with price and whether it makes sense,” said Andy Appleby, General Sports founder, of his exploration into a Pistons bid. “You have to make sure the thing works.”
Beyond the team and league management levels, the labor concerns have quickly rippled through related service and support sectors of the industry, such as facility management, architecture and licensing — and the impacts there could be equally severe.
Sports architects, for example, say they anticipate that a work stoppage in the short term would disrupt potential major league projects like the planned renovation of Miami’s Sun Life Stadium or postpone the quest for a new facility by a team such as the Sacramento Kings. That, in turn, would force sports architecture firms to lay off more staff, adding to deep cuts already made in recent months within several firms. And some, but nowhere near all, of the lost big league revenue would be replaced with lower-paying collegiate and minor league facility projects.
“A major league project can not only carry a staff, but a whole firm,” said Chris Lamberth, 360 Architecture’s business development manager. “There are a lot of projects out there pushing forward, but if they put a project on hold because of [a labor disruption], the ripple effect will be we have to lay off more architects.”
Long term, though, Lamberth said the labor negotiations could benefit architecture firms by providing owners with the type of cost certainty that will encourage banks to begin financing facility development again. He added, “Right now the mega, mega financing deals are tough to pull off. This could help change that.”
Several marketing partners and licensees, however, were making plans to keep developing products and activation plans, even if play on the field stops.
“When it does happen, we certainly have to be prepared for it, but at the same time, our season continues all year long,” said Glenn Chin, EA Sports vice president of global brand management. The video game giant’s licenses with the NFL, NBA and NHL all expire after their 2012 seasons. “So if there is a stoppage, people are playing our games. They are engaged with the sport.”
For more traditional corporate sponsors, labor unrest creates legitimate challenges as they plan marketing strategies for 2011. The possibility of a work stoppage means sponsors will have to make contingency plans and develop ways to activate sponsorships creatively or shift marketing money from one property to another.
“You prepare for it by identifying other opportunities, other ways you can shift,” said Mike Belcher, a vice president at T-Mobile, which is an NBA sponsor.
Corporate marketers will be in regular contact with league partners as they prepare those contingency plans, but that doesn’t mean they will be pushing their league partners to resolve labor disputes without a work stoppage. “We like to say, ‘We don’t ask our partners how to sell beer or make beer, and we don’t tell them how to make sports or sell sports,’” said Jackie Woodward, vice president of marketing services for MillerCoors. “Certainly, everyone has to be aware of and cognizant of the situation. You can’t stick your head in the sand. But we have a lot of confidence in our partners.”
Media companies also have “zero” influence on negotiations, said Randy Freer, Fox Sports Net president. But that doesn’t stop them from expecting leagues and unions to work out their differences and make contingency plans if a work stoppage occurs.
“The pie is just too big to not be able to figure out how to split it up in a way that makes sense,” Freer said. “If something happens on the other side, we’re diversified so we have some other product, plus we’ll put as much cricket on as we can,” he added to a good amount of laughter.
Correspondent Peter Simones contributed to this story.