SBJ/Jan. 31-Feb. 6, 2011/In DepthPrint All
After Sunday's big game, 25 days remain before the NFL's collective-bargaining agreement expires, setting up a make or break deadline.
Or is it?
Perhaps the least-appreciated aspect of the long-running and vitriolic public battle between the NFL and the players union is the significance of March 4, appearing to be the first day the NFL will operate without a labor pact in 18 years, assuming an unexpected breakthrough doesn't occur in coming weeks, or the deadline isn't temporarily extended.
Empty stadiums loom if labor issues are not resolved.
But the union has not appeared as certain that moving past the date without a deal is a massive leap. After all, no games are lost on March 4, most players do not receive checks until the summer (some players are due bonus money in April), and a deal could just as easily be struck in early April as early March.
In fact, the internal financial clocks of each side are wound differently, which may explain why the union's executive director, DeMaurice Smith, said last year that the NFLPA had already passed key internal deadlines. For the league, March is the time when sponsor, suite and season-ticket contracts are renewed. But for the players, with some exceptions like the option bonus money due in April, the big dollars do not flow until games start. For them, a bigger deadline may have been March 5, 2010, when the salary cap went away.
The difference is critical because in almost all labor disputes, agreements are struck while pressed against a deadline. But here, the deadline is uncertain. Is it March 4? The opening of the preseason in early August? Or in September when players lose their first game checks?
"The history of labor discussions of this magnitude has shown us that real movement of some kind (either closer to an agreement or further away) does not occur until some real deadlines are established in the process," said David Abrutyn, IMG's managing director, senior vice president and head of global consulting.
This is a well-established labor-negotiating maxim. The NFL and NFLPA struck their last labor agreement in March 2006 against the deadline of pending free agency, an event both sides agreed carried meaning.
The goal of both sides is to reach a new labor deal, but owners stand to feel the financial pinch first.
Nevertheless, sources within the league say that is why the union is not as jumpy about March 4, and helps explain league officials' increasingly frustrated pronouncements that the NFL needs a serious negotiating partner, underscoring the word "serious."
"The parties could always extend the current contract, the union would have some interest in that, but I don't know if the owners do or not," said Bill Gould, a Stanford law professor and former head of the National Labor Relations Board.
In other words, the union sees no reason why the two sides shouldn't just extend past March 4, while the NFL, seeking to dramatically reorder its economic universe, doesn't want to wait.
The union and league declined to comment for this story, though they have been quite public in where they stand. The NFL, with sponsorship and season tickets to renew soon, has said it will be even tougher post-March 4 to strike a deal. Much of this month's six-hour owners meeting in Atlanta was spent reviewing post-March 4 strategy.
» RAMPING UP THE RHETORIC GETTY IMAGES
"We are at war! Nobody gets strong without fighting. Nobody stays strong without fighting. Nobody negotiates their way to strength. Nobody talks their way to a good deal. Nobody sits down and just has miraculous things happen."
— DeMaurice Smith, NFLPA executive director, as quoted by The New York Times
"I don't look at it that way. This is a business dispute and negotiations. We've been partners and we should continue to be partners. … This is not anywhere near a war. This is a business dispute that we've got to get resolved."
— NFL Commissioner Roger Goodell, as told to NFL Network
"You got our head union rep acting like an a-hole. They got their guys acting like a-holes. So they just need to get their sh-- together and just get it done."
— New York Jets cornerback Antonio Cromartie, as quoted by NYDailyNews.com
"I just think the negotiators should get it together and start doing what they should do, and get a deal. If they sit down and work things out, I think they could have a deal rather quickly."
— Pittsburgh Steelers Chairman Emeritus Dan Rooney, as quoted by the Los Angeles Times
The union, by contrast, is beating two drums: insisting the league open its financial books to prove profit margins have shrunk as the owners claim; and to urge that the players not be locked out. One of the union's first offers was to extend the CBA another year, which the league rebuffed.
"I proposed early on, instead of having talk about lockouts, let's do a lock-in," NFLPA President Kevin Mawae told reporters on a conference call earlier this month, suggesting the idea of shutting the two sides in a room together.
Gould, who writes on sports law, said, "It's like a train hurtling down the tracks. The initiative is coming from the owners' side, and my sense is a lot of people on the union side view this as beyond their control if in fact the owners won't negotiate a contract extension."
If Gould is wrong, and most don't think he is, and a deal can get done before March 4, the critical dates in coming weeks are Feb. 15 when the owners meet in Philadelphia; the NFL combine in Indianapolis Feb. 23 to March 1 when both sides will have a chance to meet; and the owners meeting in Fort Lauderdale March 1-3.
If a deal is not struck by March 4, the subsequent deadlines will then depend on the course of action. At that point, the NFL has two options: lock out the players and continue bargaining, or declare an impasse and enforce work rules, likely to comprise the league's last offer.
If the players are locked out, the NFLPA could then decertify and thus sue the owners under antitrust rules. At that point, the owners could then impose work rules on its newly nonunion work force, while the legal case would wind its way though the courts, like 25 years ago when the union decertified.
That union won a hard-fought victory that resulted in the 1993 CBA, giving players free agency and the owners a salary cap. But it took several years and left many players competing for seasons without a labor agreement.
If the league decided not to lockout, it could declare an impasse and impose work rules right away. The NFLPA would then almost surely bring a complaint to the National Labor Relations Board arguing an impasse had not been reached and the NFL is not within its rights to create the rules unilaterally. The union could also strike at that point.
A lockout is a more efficient way, though, Gould said. "The virtue of a lockout is it puts maximum pressure on everybody in the negotiating units," he said.
Marc Ganis, a sports consultant who is friendly with management, said the problem for the league is that its economic pain has already started, while the players won't begin to feel it until September. That disconnect, he said, is making a deal tough to get done right now.
Several league sources earlier this month at the Atlanta owners meeting complained that if the players were paid like most employees, with paychecks coming every few weeks, the league would be in a better position.
All experts agree that after March 4, absent a deal, the process moves into far more risky, complicated terrain. Right now there is only negotiating to be done, but on the fourth day of March, if there is no deal, the legal process will commence at some point soon after, whether it is an antitrust lawsuit, NLRB complaint or some other type of action.
"For the NFL," said one source familiar with both sides, "the objective before March 4 is to get a deal to live by. Afterwards," this source added, it is to enforce its will on the union through a lockout or mandating work rules.
NFL: Complains that the cost of building stadiums and investing in other football-related business has driven team profit margins down to the low single digits, notwithstanding more than $9 billion in league revenue. Proposes shaving 18 percent off the pool of money calculated for the salary cap.
NFLPA: Wants the audited financial statements of the league to prove expenses are rising faster than revenue, and to show that those expenses truly are revenue generators. Points to continued record revenue deals for the league.
NFL: Wants to eliminate two preseason games and replace them with two regular-season games. Contends its research shows that injuries would not rise significantly with the extra meaningful games. Says the added revenue could also help solve the core economic issue.
NFLPA: Believes injuries already are a major concern, as the league is cracking down on dangerous hits and treating concussions seriously. So it asks why the league wants to add games.
ROOKIE WAGE SCALE
NFL: Says paying tens of millions of dollars to unproven rookies makes no sense, and like in the NBA, calls for a slotted system so each pick already knows what he gets.
NFLPA: Under DeMaurice Smith, has switched its position from the old leadership, which opposed rookie pay restraints. However, in return proposes that maximum rookie contracts be three years, while the league wants to stick to a minimum of five.
NFL: Commissioner Roger Goodell has made his name in part for enforcing penalties for off-field behavior, and recently for on-field behavior. The current CBA gives him great authority to do so.
NFLPA: Believes the commissioner has too much power under the current system.
NFL: Believes that federal supervision of the labor deal since 1993 is no longer necessary and that the two sides can resolve their differences without federal judicial interference.
NFLPA: Says federal judicial oversight remains necessary and has proved effective at settling disputes between the two sides that they otherwise could not.
NFL: Five years ago the union made supplemental revenue sharing a requirement of a new deal, the theory being that low-revenue clubs need the extra cash to afford the higher labor costs. Now the league says the issue is none of the union’s business.
NFLPA: Confronted with a steep pay cut proposal from the league, the union has not specifically made an issue of insisting supplemental revenue sharing be part of the new system. But it’s no secret it believes the real issue is not how much is paid the players, but the divide between high- and low-revenue clubs.— Compiled by Daniel Kaplan
For NFL sponsors used to planning their marketing calendars six to 18 months in advance, the uncertainty of when and if the next season will start is about as comfortable as pebbles in a dress shoe.
“I have no doubt they will play at some point. When seems to be the big question,” said Woody Thompson, executive vice president at Octagon, which is implementing Castrol’s new NFL league sponsorship. Octagon also has clients with multiple NFL team deals, including Bank Of America, Sprint and MasterCard.
“In these situations, leagues rarely blink first, and these guys have guaranteed TV money coming in,” Thompson said. “Sponsors are secondary to TV money, and as long as that is taken care of, they can wait for this thing to shake itself out. What we can do is be prepared with plans A, B and C, stay close, and read the tea leaves as closely as possible.”
Sponsors are trying to hedge their marketing bets as the labor situation unfolds.
“You try to plan, but planning is the hardest thing, because the only certainty is uncertainty,” said Kern Egan, principal at Richards Sports & Entertainment, which handles Bridgestone’s title sponsorship of the Super Bowl Halftime Show. “The good news for us is that our activation is focused later in the season, so it isn’t as big of an issue for us as it will be for some others.”
Genesco Sports Enterprises’ roster of consulting clients with NFL league sponsorships includes stalwarts like Pepsi/Frito-Lay, Motorola and Verizon. “I am confident there will be football sometime next season,” said Genesco co-founder and CEO John Tatum. “I just wouldn’t front-load the programs or do anything behind draft or preseason. You need to hedge your [NFL sponsorship] investment, so I wouldn’t go all in until there is some certainty.”
Packaged-goods marketers typically plan their marketing calendars out the farthest. Consequently, Gillette filmed ads for its recently expanded “Young Guns” campaign late last year with NFL players Matt Ryan and Ray Rice.
“We [Procter & Gamble] know how to use the NFL now, our brands are doing a really nice job with it, and it has proved to be a very valuable asset,’’ said Greg Via, global director of sports marketing at Gillette. “But if this goes down and our brands get hurt by it, then it’s going to be a different conversation next year.”
“Media buys and digital programs move more quickly, but you need maybe six months of lead time to sell in an NFL retail program, and someone like Wal-Mart wants to know a year out,” said Mike Boykin, executive vice president of sports marketing at GMR, which consults with NFL league and team sponsors Visa, MillerCoors and P&G. “So if this isn’t solved by April or May, you’re in a terrible spot.”
If the NFL misses regular-season games, do other sports stand to gain?
“The obvious winner in an NFL stoppage is college football,” Egan said. “Our media group has been keenly focused on securing whatever college football inventory they would need in that eventuality, because there won’t be any when we do want it if there are issues with the NFL. I don’t know anyone who is buying college instead of NFL. But if you are in college football already, you need to be buying it now, because it might not be available later.”
IBM uses its NFL rights as a hospitality and technology demonstration and platform, since it provides some of the league’s IT infrastructure. “Those things are still critical whether or not there is football,” said Rick Singer, who heads IBM’s sponsorships as vice president of client executive marketing. “Our exposure isn’t as big as those who use NFL rights for consumer marketing, but we’re starting to think how to redeploy those dollars just in case. It could be in college, but it may not even be sports.”
While you might think the answer is obvious, there are divergent opinions on whether marketers can or should leverage the NFL during a work stoppage. Assuming they were so inclined, brands could market their products using NFL indicia and players — just not in tandem.
“If any actual work stoppage were to occur, the opportunity remains for proactive league partners to still leverage their rights fee investment by activating in a targeted way that enables fans to stay connected to their passion, even if official play isn’t happening,” said Bryce Townsend, executive vice president and general manager of GroupM ESP, which helped negotiate Castrol’s recent NFL sponsorship. “Through content and engagement, a brand can help fill the void, creating an even deeper connection with consumers.”
Said Octagon’s Thompson, “There will be real damage to an NFL team’s brand if there’s a work stoppage, but there are still some teams we deal with that don’t necessarily want to believe that. They believe it’s OK for us to be in the marketplace with marketing programs even if they aren’t playing on Sundays. I’m pretty sure that Brand X doesn’t want to run an NFL promotion when there are no NFL games being played.”
Here’s what could happen at key dates if no labor agreement is reached and owners declare a lockout:
March 4: Free agency
None would be allowed. However, the league could impose work rules on players instead of locking them out, which would allow free agency to proceed. But the union could counter by asking the National Labor Relations Board to stop it.
March 20-23: League annual meeting, New Orleans
Would still be held, but would lose some of its pizzazz. Coaches and general managers attend these meetings and talk with reporters about their teams and planning for the upcoming season. Whether the coaches and general managers would attend this one is unclear.
The arrival of training camp could bring a greater urgency to get a deal completed.
Would not be paid to players due bonuses at this time.
April 28-30: NFL draft, New York City
Would be held according to terms of the current CBA, but teams could not sign the players.
Late April-early May: Rookie and veteran mini camps
Would not be held.
Mid-May: Organized team activities (OTAs)
Would not be held.
May 24-25: NFL spring owners meeting
Would still occur.
June 26-July 2: Rookie symposium
Would not be held.
Mid-July: Training camps
Would not be held.
Aug. 6: Pro Football Hall of Fame Game, Class of 2011 Enshrinement, Canton, Ohio
First game of the preseason, as with other preseason games, would not be held. However, enshrinement would still occur as the Hall of Fame is a separate entity from the NFL.
Sept. 8: Regular-season start
No games would occur. Also, this date would mark the first game checks that would not be sent to players.— Compiled by Daniel Kaplan
Editor's note: This story is revised from the print edition.
The Houston Texans created a CBA response team. Several teams have furloughs lined up starting March 4 when the league may be operating without a labor deal, while most teams wrote into coaches contracts reduced pay for 2011 if games are lost.
As the prospects of a lockout or work stoppage grow larger, teams are moving quickly to prepare for a radically changed landscape.
Teams have been given guidelines for reimbursing fans for tickets for any missed games.
No club contacted by SportsBusiness Journal would openly discuss its plans. But anonymously, team executives talked about issues with sponsors, premium seats and suites, just to name a few.
The league has already required that general tickets to any canceled games be reimbursed 30 days after the end of a work stoppage, with interest as determined by each team. But it left premium seating to the teams, and that's because many of those are governed by contracts.
SPORTS BUSINESS EXECUTIVES WERE ASKED:
» Will the NFL and its players sign a new labor deal to avoid disruption of the 2011 regular season?
Source: Turnkey Sports Poll, December 2010. The survey, conducted by Turnkey Sports & Entertainment in conjunction with SportsBusiness Journal, covers more than 1,100 senior-level sports industry executives spanning professional andcollege sports.
Sponsorships can be trickier because while it may seem easy to simply prorate the value based on games lost, many sponsors activate year round. So it is not as easy as making games lost the factor in determining reimbursement. There is no cookie cutter approach to sponsorships, team sources said. Some deals have provisions requiring payment during a lockout, while others do not. Signing new deals is obviously a far tougher task.
Then there is the issue of staffing. How many people are kept if there is little business to conduct, and how do you ramp back up in a heartbeat if a deal is suddenly signed? One team said it would have one-week furloughs every month for every employee.
The Texans' response team is essentially composed of top executives whose responsibilities are to communicate with key stakeholders, from the community and elected officials to seat holders and sponsors.
An NFL lockout would deliver a financial punch to the gut for stadiums, taking away their chief source of revenue.
Depending on the deals in place between teams and municipalities, both public and privately managed facilities would feel substantial pain from the absence of 10 pro football games, resulting in game-day employees losing their jobs and forcing stadiums to cut operational budgets and defer capital improvement projects.
GREEN BAY PACKERS
The Green Bay Packers say lockout threat or not, they continually look for events they could add at Lambeau Field, such as the Frozen Hockey Classic held in 2006.
In Baltimore, Indianapolis, New Orleans, St. Louis and Tampa, five NFL markets where teams play in publicly owned facilities, the clubs capture 100 percent of game-day revenue.
“It won’t be business as usual, that’s for sure,” said Roy Sommerhof, the Baltimore Ravens’ vice president of stadium operations. “We are watching budgets closely and pulling back. Everyone with the Ravens knows what the situation is.”
The Ravens play at M&T Bank Stadium, a public facility owned by the Maryland Stadium Authority. The team and the authority, partners for maintaining and upgrading the facility, shared the $7 million cost to install two new end zone video boards before the 2010 season. In addition, the Ravens invested $1 million on their own to put down a new Sportexe artificial field in May 2010.
The Ravens and the authority most likely would not have pulled the trigger on those expenses this year in the event of a lockout, knowing there would be no game-day-related revenue to help pay for those projects, according to Sommerhof.
“With no capital to spend, we would do what we need to do … at a bare minimum … to maintain the building,” he said.
The tricky part with the labor negotiations is that a resolution could come at any time, said Doug Thornton, SMG’s senior vice president at the Louisiana Superdome. SMG operates the Superdome and four other NFL facilities.
“If there is a lockout and staff is laid off, you have to be ready to quickly ramp back up,” Thornton said. “You don’t want to reduce in those areas when you can’t rebuild on demand. The issue is how to operate efficiently if there is a work stoppage.”
In St. Louis, the Rams are a tenant at the Edward Jones Dome at America’s Center, an NFL stadium attached to a convention center. Considering the league’s labor situation, the timing could not have been better for the St. Louis Convention and Visitors Commission, the team’s landlord, to spend $2.5 million last year for new Magic Carpet AstroTurf and a changeover system that allows stadium officials to quickly remove the artificial surface used for Rams games and store it in a pit behind one end zone.
The new system provides greater flexibility for concerts and trade shows and other non-NFL events, said Nick Langella, the dome’s senior vice president and general manager for facilities. The speedier process for conversion could come in handy to fill the need for more dates and on shorter notice if a lockout occurs, Langella said.
In Indianapolis, Lucas Oil Stadium sits next to a downtown bar and restaurant district. The local Capital Improvement Board owns and operates the facility, but its lease with the Colts has the team collecting all game-day revenue, said Mike Fox, stadium director.
“Big picture, the city loses money from not having 65,000 people coming downtown,” Fox said. “We employ 3,000 people on game day, including 1,500 volunteer concessions workers — the Boy Scout troops and high school bands. They’re working for free but their group receives the benefit” of sales commissions.
A few teams and facilities have adjusted their business model to pursue stadium concerts to offset the potential loss of game-day income from a lockout, said Jeff Apregan, a consultant for the Gridiron Stadium Network, a group of nine NFL stadiums and one MLS venue that works together to bring events to its buildings. Some are taking financial risk to buy a touring act and gain a greater share of the overall revenue compared with handing the event to a traditional third-party promoter and restricting its share of event-related income to parking and concessions.
“This would be the year clubs [and facility operators] are less risk-averse at a time when we all need content,” said Mark Donovan, president of the Kansas City Chiefs. The Chiefs are partnering with tour producer Louis Messina to bring Kenny Chesney and Taylor Swift to Arrowhead Stadium, the facility’s first summer concerts in 10 years.
The Tampa Sports Authority weighed the benefits of booking non-NFL events with a lockout in mind. In Florida, it’s also a matter of generating revenue in a still-wavering economy without affecting taxpayers, said Eric Hart, the authority’s executive director. His group runs the stadium and invested more than $3 million to bring Chesney to Tampa for a March 19 performance.
As of mid-January, more than 35,000 tickets were sold and the authority feels comfortable the numbers will result in a profitable venture on its end. “Our break-even point was 32,000 and it is still selling very well,” Hart said.
In Green Bay, Lambeau Field plays host to Chesney on June 11, the stadium’s first concert since Survivor played a small show in 1985. PMI Entertainment Group, the private firm that runs Resch Center, a 10,000-seat arena down the street from Lambeau, bought the Chesney date from AEG Live/The Messina Group, said Jason Wied, the Packers’ vice president of administration and general counsel. The team will pay its normal game-day employees to work the concert and will receive a share of revenue from concessions and parking.
For the Packers, the concert is not tied to the lockout. The issue was having enough time to get the playing field back in shape for football after a concert, Wied said. In the past, the Packers passed on a few concerts because they cut too close to the NFL season. For later in the year, the team would like to book more outdoor hockey games after the success of the Ohio State-Wisconsin match in 2006, as well as a college football game, an event the Packers have not had to date in Lambeau’s 54-year history.
“We were going to do what was good for the community and good for the Packers regardless of a labor situation, so for us we considered it a nonfactor,” Wied said. “We think this is good practice for the Packers to go through, to understand other events that we can host here long term.”
Both the league and the NFLPA are active on Capitol Hill.
Smith, a former lawyer with Patton Boggs, has stayed true to his word, organizing delegations of players to Capitol Hill, threatening to make an issue of the NFL’s antitrust exemption for broadcast contracts and getting the AFL-CIO to lobby NFL owners.
But will it matter?
“I don’t understand it,” said Bill Gould, a former National Labor Relations Board chairman under President Bill Clinton and currently a Stanford law professor. “I just don’t see where it’s going.”
The two congressional-mandated possibilities to help settle the labor impasse, Gould said, would be to remove the antitrust exemption or impose compulsory arbitration. That seems highly unlikely given the new Republican majority in the House.
New House Judiciary Chairman Lamar Smith (R-Texas) said earlier this month as players were visiting Capitol Hill, “That is a business dispute. The owners and players are both literally and figuratively big boys and do not need Congress to referee every dispute for them.”
Jeff Miller, the NFL’s senior vice president for government affairs, agreed that Congress should not be involved, though the league remains active on the Hill. He said the league would meet with all members of Congress visited by the NFLPA, and described the league’s role as reactive.
The NFLPA could not be reached for this story, but has cited publicly the NFL’s political action committee and campaign contributions as evidence that the union needs a stronger presence on Capitol Hill.— Daniel Kaplan
The fantasy football business, which has soared in popularity in recent years to an estimated market size of more than 27 million adults, stands to lose a significant chunk of its audience and revenue if a lengthy NFL work stoppage occurs.
With gross revenue from fantasy football in the U.S. and Canada estimated at more than $1 billion per year, nearly every sector of the booming industry will suffer if there is no 2011 NFL season. Specific segments under threat include operators of both paid and free leagues, magazine and fantasy content publishers, high-stakes event producers, fantasy product vendors, and even bars and restaurants that cater heavily to fantasy players.
Games that don’t rely on real-world events and statistics, such as CBS’s Franchise Football on Facebook, could be positioned to grow further in the event of an NFL lockout.
“You can see the landscape changing already. People are definitely under increasing pressure with what’s going on,” said Greg Ambrosius, past president of the Fantasy Sports Association and founder of the National Fantasy Football Championships. “If a lockout happens and you don’t have that income coming in, some people in the space simply are not going to survive. I’m very, very concerned.”
The first wave of direct impacts will occur in the early spring, when magazine publishers are actively selling advertising for preview titles that typically hit newsstands beginning in May. Those publishers will likely look to push back their deadlines as much as possible, but following the NFL draft in late April, publishing of fantasy preview content and league registrations typically begin in earnest — key events that will be blunted heavily without a labor deal in place.
“There is a ton of selling to advertisers, marketing, registration and so forth that all occurs in that February-March to late May time period, and without a deal, the impacts could definitely be significant,” said Paul Charchian, president of the Fantasy Sports Trade Association and owner of LeagueSafe.com. “And if there’s no season at all, we’re definitely looking at companies scaling back and job loss.”
To stem against these potential losses, many operators are looking to fantasy games based around college football. CBS Sports first introduced player-based college fantasy football in 2008, and college fantasy games have since been introduced by many other companies as well and grown markedly in popularity. Both players of NFL fantasy football and advertisers will be noticeably directed toward college fantasy if an NFL work stoppage extends into the summer and fall.
“A lot of people will definitely play college fantasy as sort of a backup, and it makes a ton of sense,” Charchian said. “College fantasy is already drastically underrepresented in the industry given the popularity of the sport at large.”
Also poised to grow further in the event of an NFL work stoppage are various football-themed games on Facebook, such as CBS’s Franchise Football, which are not reliant on real-world events and statistics to play.
Another labor-related pressure point on the industry is one of technology. Fantasy football is already an activity that taxes computer servers to extreme degrees. But an altered or abbreviated NFL schedule would force commensurate adjustments to millions of fantasy leagues and the software and hardware that supports all of that play.
“All of us have this situation in our minds constantly,” said Jason Waram, ESPN vice president of fantasy games and customer management. “We’ve already begun to walk through all sorts of different potential scenarios. We’re obviously based now on a 16-game schedule with a bye week for our traditional, commissioner-style leagues. But what would a 14-game schedule look like, for instance? A 12-game schedule? We’ll be playing very close attention to all the various scenarios as this evolves.”
Regardless of the NFL’s labor landscape, EA Sports in August will release “Madden NFL 12,” the latest version of its iconic football video game, just as it does each year. But what the game will include specifically, and how it will be marketed, each stand as significant unknowns.
More than 20 years after its first release, “Madden” remains a dominant force in sports video gaming, with sales of “Madden NFL 11” last year surpassing 5 million units. The total was tops among all sports titles in the U.S. for 2010 and second-best in the entire video game industry behind only first-person shooter game “Call Of Duty: Black Ops.”
The August release each year of “Madden” is also heralded with a major promotional event, such as last summer’s “MaddenGras” festival in New Orleans that tied in with the Saints’ Super Bowl XLIV victory and quarterback Drew Brees’ turn as the game’s cover athlete.
This time around, EA Sports, the NFL and NFLPA have stayed tight-lipped about what their contingency plans are, if any, for the game if a lockout is in place come August. The video game publisher holds licenses with both the league and union to make Madden with a full suite of player, logo and uniform rights that remain intact and extend through the 2012 season.
But it is unknown whether EA Sports will attempt another aggressive blitz of promotional activity this summer. Also unknown are the exact play features of the forthcoming game and how roster updates will be handled in the absence of real NFL contests.
“Fans of ‘Madden NFL’ will not have their seasons interrupted regardless of when the labor issues are resolved,” EA Sports said in a statement. “EA Sports will release ‘Madden NFL’ in August, complete with exciting new features and product innovation that will allow NFL fans to fill their desire for football.”
There is precedent for leagues and their video game licensee partners to release games into a turbulent labor environment. In September 2004, with the NHL locking players out, video game partners ESPN Video Games and EA Sports released “NHL 2K5” and “NHL05,” respectively. The hockey game sales, however, were and still are a mere fraction compared with what “Madden” posts each year.
“This is a completely fluid situation, so I’m going to give you a completely fluid projection: If there are no NFL games lost, the impact on ‘Madden’ is likely infinitesimal, probably no impact on sales. But if the season is lost, you’re probably looking at a huge impact, probably at least a 50 percent drop in sales,” said Michael Pachter, video game industry analyst for Wedbush Morgan Securities and one of the most prominent voices in the industry.
Pachter added that EA Sports’ licensing fees to the NFL and NFLPA, estimated at well into eight figures each year, would likely be lessened in the event of a lost season or other significant reduction to the 2011 NFL season.
NBC didn’t air an NFL game on Dec. 26 — the first Sunday night of the football season when it didn’t show a game.
A nor’easter predicted to bring more than a foot of snow to Philadelphia caused the league to postpone the Sunday night game for two days.
NBC scrambled, putting “Minute to Win It” and “Law & Order: SVU” on its schedule in place of the NFL.
NBC faced a Sunday without football when a December game was delayed by weather.
Those TV numbers could be reality for networks this fall if the labor dispute causes the NFL to miss games. In the meantime, none of the NFL’s TV partners have yet developed contingency plans in the event they lose TV’s highest-rated programming next fall.
“We know the parameters if there is a lockout. We understand our obligations. We haven’t made any alternate programming plans right now,” said Sean McManus, president of CBS News and CBS Sports. “When presented with whatever scenario develops, we will adjust. But right now, we’re not making any contingency plans or any thoughts of next season without football. We’re hoping that in early September, we’re once again carrying the NFL on CBS.”
The problem is that the NFL has been a ratings gold mine. Each of the NFL’s network partners set viewership records this past season. If the networks go into the fall without NFL games, they will see huge drop-offs in ratings and ad sales — even while still paying out a rights fee that network sources have described as a loan. The networks typically begin selling ad time for NFL games around the spring upfront selling season.
“If they don’t play games, you’re going to see a ratings drop-off regardless of how the networks schedule,” said Brad Adgate, senior vice president of research for Horizon Media. “There’s a lot of sports out there the networks could put on in the NFL’s place. The problem is that none of it is the NFL.”
Adgate speculated that some of the networks — ESPN or Fox — could conceivably roll out college football games on Sundays in place of the NFL. “Sunday seems to be the only day they don’t play.”
He also speculated that a lockout could help other sports, particularly the MLB postseason, both from an ad sales and a ratings standpoint.
“My feeling is that they’re going to come to some sort of resolution,” Adgate said. “There’s just too much money involved.”
In light of the current labor negotiations,
how do you see the 2011 NFL season
— BILL GLENN, senior VP, managing director,
The Marketing Arm
— RICK DUDLEY, president, CEO, Octagon
— ALAN ROTHENBERG, chairman, Premier Partnerships
— MIKE KERNS, CEO, Citizen Sports Network
— BARRY FRANK, executive vice president, media sports programming, IMG
— LOU IMBRIANO, president and CEO, TrinityOne
— DAVID ABRUTYN, managing director, senior VP and head of global consulting, IMG
— CHRIS BREARTON, partner, O’Melveny & Myers LLP
— MAX MUHLEMAN, principal, Private Sports Consulting
— DAVID GRANT, principal, Velocity/Team Epic8;— Compiled by Ryan Baucom