SBJ/Jan. 10-16, 2011/Opinion

Economic uncertainty likely to intensify impact of work stoppage

Rich Luker
All four major sports league collective-bargaining agreements expire in the next 21 months. There are three trends to consider before thinking this round will have little or no impact on the sports landscape.

TREND ONE: We are in rare territory as we consider the possibility of two or more professional sports leagues experiencing labor stoppages in the next two years. The only time three leagues stopped play within an 18-month period was more than 15 years ago, in 1994-95.

Putting it in perspective: It was before 9/11. We were not at war. There were no crises in home foreclosures or unemployment. The average MLB player salary was just above the $1 million mark in 1994, roughly one-third the 2010 average. The SportsBusiness Daily had just begun, but there was no SportsBusiness Journal, so there was barely a forum for monitoring and discussing the business of sport.

What it all means is that anything can happen. We have no history to lean on here. Whatever this period will bring, it will NOT be business as usual. For that reason alone, we should invest more thought into the potential ramifications of any work stoppage.

TREND TWO: A work stoppage can be a game changer. I will stop short of suggesting a lockout or strike caused anything, but perhaps a significant stoppage can be part of a tipping point for a sport. Here are three examples:

• 1994 MLB strike: At some point in time, the NFL overtook MLB as the top sport in America. There is powerful evidence from the ESPN Sports Poll in 1994 to suggest the final breakaway was at the moment the season was canceled (see chart). For the first seven months of 1994, roughly the same number of Americans were fans of MLB as were fans of NFL. From August 1994 to today, MLB has trailed by at least 10 percentage points. The strike didn’t cause the flip, but it may have cemented it.

• 1998 NBA lockout: The size of both the overall NBA fan base and the avid fan base has never returned to their standings just before the lockout, not in 12 years. I am in the camp that says Michael Jordan’s retirement had more to do with it than the lockout, but is it possible that, without the lockout, Kobe Bryant or LeBron James or some of the others might have held or brought back the fans by now?

• 2004 NHL lockout: This one goes the other way. The NHL canceled an entire season, and yet the fan base has grown significantly since the lockout to levels beyond what they were before. I believe the significant difference in this lockout was the investment the league made in preparing the fans, teams, sponsors and media — 18 to 24 months in advance of the lockout — so they knew what was coming, could make alternate plans, and never got caught short in discussions having to say “I don’t know what to think or do about this.”
lockout
GETTY IMAGES
Pedestrians pass the locked gate of a parking area at the back of the United Center, home of the Chicago Blackhawks, during the 2004-05 lockout.

The NHL paid attention and made the action far more than a negotiation between management and the players. Labor actions now far transcend a debate between players and management. More is at stake for more people. And we have resources like SportsBusiness Journal and the Internet to keep the issues open and in front of everyone. I think the leagues that use the NHL’s approach of 2004 as a model will come out much stronger than those that do not.

TREND THREE: It’s a new economy. If previous strikes/lockouts embittered fans 15 years ago when times were good, we should expect the impact of stoppages to be far more powerful and prolonged this time around. Back then, the salaries of players weren’t emotionally linked to the financial well-being of everyday Americans. This is no longer true. We have seen declines in sports spending and attendance. Americans are much more conscientious about how they spend declining discretionary dollars and time. Much more is likely at stake for a league facing a work stoppage than the mere disenfranchisement of fans who continue to suffer in the worst economy since the Great Depression.

And it isn’t just dollars at risk. We can no longer assume Americans are that focused on the issues in sports. The October national study of Luker on Trends surveyed 1,000 American adults ages 18 and older and asked them to identify which sports were facing potential work stoppages in 2011. One in 5 (21.9 percent) knew the NFL was facing a stoppage, 13.4 percent said the NHL — though its CBA doesn’t expire until 2012 — 8.7 percent said MLB and 5.8 percent said the NBA. Less than 2 percent knew that both the NFL and NBA were at risk, and they are the two most publicized and first to act this year. When asked about the likely impact of a stoppage, two-thirds said it was not likely to change their level of interest. But put in context, a significant decline in interest, activity and spending by one-third of the fan base would be catastrophic for any league.

So, what now? Can any league, players association, sports sponsor or media company afford not to focus more time, energy and attention on the likely fallout from a work stoppage this time around? It is clear that previous stoppages are strongly linked to changes in subsequent fan interest, both good and bad. We are approaching only the second time when multiple leagues face labor actions at the same time — and it couldn’t happen at a worse time economically as Americans continue to grapple with the economy.

Rich Luker (rich@lukerco.com) is a consultant with The Luker Co.

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