Posted by John Vrooman on Thursday, September 18, 2014 in National Football League.

Interview with Bloomberg.

Is the current controversy swirling around the NFL likely to do any real economic damage to the league either in the short or long term?

The NFL is economically bulletproof from political scandal and misconduct from players to owners. NFL players have zero power individually and collectively. After losing every bargaining confrontation with owners the NFLPA achieved free agency in the 1993 CBA only after decertifying and suing the owners in court. In the same CBA the players were then  hit with a hard salary cap to protect the owners and squash the economic consequences of free agency. So threats of political and social scandal concerning players in the NFL can easily be deflected by owners and the League by first ignoring the problem, doing nothing and then reacting selectively and apologetically to any social blowback. 

Ray Rice was dismissed from the Ravens at really no additional out of pocket cost to the Club because the remainder his contact was not guaranteed. Rice was entering the 3^rd year of his five year contract has already been paid $25 million of the $35 million contact. $15 million came up front in a signing bonus and $7 million came last year in a roster bonus and the remaining $3 million was drawn as his salary for the last 2 seasons. This leaves just under $10 million yet to have been paid and none of it was guaranteed, and some of which may be recovered by the Ravens for breach of contract. The only adverse consequence is that they will inherit about $14.25 million in dead salary cap space from prorating the bonus money for the next three seasons.

So in economic reality, NFL players are not guilty until proven guilty in the court of public opinion after which they are punished arbitrarily by an owner-elected Commissioner without recourse to arbitration. Meanwhile NFL owners remain untouched and almost untouchable, protected by the NFL Shield and their $44 million per year Commissioner, strongly endorsed by controversial owners like Washington’s Dan Snyder, Indy’s Jim Irsay and Dallas’ Jerry Jones.

The bullet-proof shield is the new 9-year $59 billion TV deal through 2022 and the 10-year labor deal that caps the players’ share of revenue at less than 50 percent through 2020. Compare the current 2014 salary cap of $133 million to the annual average of $205 million TV revenue over the TV mega deal. Under these conditions the NFL will be sharing almost 75 percent of their revenues projected to top $25 billion by 2027. The NFL is a well-oiled perfectly diversified recession(bullet)-proof money machine.

Table 1. National Football League TV Right Fees
Term	Years	Clubs	Total Rights	Annual Rights	Broadcast				Cable		Satellite DirecTV
					ABC	CBS	NBC	FOX	ESPN	TBS
American Football League
1960-64	5	8	10.6	2.1	2.1	…	…	…	…	…	…
1964-69	5	10	42.5	8.5	…	…	8.5	…	…	…	…
National Football League
1960-61	2	14	.6	.3		.3	…	…	…	…	…
1962-63	2	14	10.5	5.3	…	4.7	.6	…	…	…	…
1964-65	2	14	32	16	…	16	…	…	…	…	…
1966-69	4	16	98	24.5	…	24.5	…	…	…	…	…
1970-73	4	26	188	47	8	22	17	…	…	…	…
1974-77	4	28	218	55	13	24	18	…	…	…	…
1978-78	4	28	646	162	60	54	48	…	…	…	…
1982-86	5	28	2,100	420	115	120	107	…	…	…	…
1987-89	3	28	1,428	476	125	165	135	…	51	…	…
1990-93	4	28	3,600	900	225	265	188	…	111	111	…
1994-97	4	30	4,388	1,097	230	…	217	395	131	124	…
1998-05	8	31	19,600	2,600	550	500	…	550	600	…	400
2006-11	6	32	22,410	3,735	…	623	600	713	1,100	…	700
2012-13	2	32	8,130	4,065	…	620	603	743	1,100	…	1,000
2014-22	9*	32	58,820	6,580	…	1,080	1,050	1,150	1,900	…	1,400
DirecTV “Sunday Ticket” extended at $4 billion four years 2011-14, and expected $1.4 billion 2015-2022; ESPN 8 years $15.2 billion 2014-21.

What are the greatest risks for the NFL in the current crisis?

The NFL economic shield seems to be impenetrable with respect to political scandal but this current crisis somehow seems different two important and obvious respects.  Violence against women permeates the very fabric of our society in many covert ways, but when the left-cross evidence is overtly repeatedly shown in our face and the most powerful sports League in the world is more concerned about protecting its shield more than the rights or even simple safety of women, then this is where we draw the line.  Not only are women 44 percent of the NFL fan base but they are our mothers, wives, girlfriends, sisters and daughters. Ray Rice clearly has a violence problem and the League has a violence problem that is now compounded by its credibility and ultimate integrity problem.

Second, the Ray Rice affair is the tip of an ice-berg that can possibly sink the titanic NFL. Ray Rice obviously has a spousal abuse problem, and according to most women’s groups (NOW) the NFL has a violence against women problem. But the iceberg in this particular case is the cold indifference in the manner that the League owners (and Commissioner Roger Goodell) have handled the Ray Rice dilemma for the League and its blindly faithful family of sponsors.

The sponsors of course will be gauging and weighing the fantasy inflated ratings which have long ago stopped reflecting the quality of the game, because ultimately the only economic boycott that works is a fan-based movement. But this case is again somehow different because the mistrust has now extended to Roger Goodell and ultimately will find the strangely silent NFL owners hiding behind the NFL Shield. A mass boycott is not likely but there now exists a scenario where some economic blowback could happen. All it would take would be for one major sponsor to bail and several of the rest would be competitively forced to follow. The boycott futility problem is that the League is economically bullet-proof from political scandal.

Sponsors ultimately seek the integrity of the world’s most powerful sports league whose credibility is being called into question. NFL and their sponsors form exclusive gentleman’s club with very membership where the Super Bowl is virtually their post season gala. The sponsors get 25 percent of the SB tickets and the 2 participating teams only get 17.5 percent each.

In the recent case of the LA Clippers the sponsors pre-emptively and independently dropped Donald Sterling like a bad habit even before the fans could mobilize their disgust . Ironically the real threat to the NBA was the reverse threat of collective action by the players against an owner scandal. Justice was swift and decisive in the Clippers case, because the other owners and new-Commissioner pre-emptively threw Sterling under the public relations bus and sold the Clippers for a quick, easy and somewhat inflated $2 billion.

Ultimately In this NFL case the governance and credibility of the entire League could be under indictment. Violence against women problem is not new to the NFL, nor is the League’s ambivalence. This unique in-our-face episode is perhaps the beginning of a deeper accountability. Commissioner Goodell is just the messenger who carries a message of the hubris and unassailable arrogance that hides behind the NFL shield.

There’s been a lot of sportswriters and nonprofits etc. calling for Goodell’s resignation. How would Goodell’s resignation  hurt or benefit the league’s owners?

It is important to realize of course that Roger Goodell is not Kenesaw Mountain Landis who was hired to protect the integrity of the game after baseball’s Black Sox scandal in 1920, nor is Goodell even Pete Rozelle or Lamar Hunt former (NFL & AFL) League Commissioners who saved their respective Leagues. Goodell is the high paid employee of the 32 owners, but he is still an expendable employee and he  will resign if it is in the owners best  interest to do so. If Goodell is lying or covering up for his employers then he will also be thrown under the magic bus. Firing Goodell (or resigning) will not solve the PR problem developing for the League, but similar to the ongoing  “objective” internal investigation, it will give them time and distance from the current crisis.

In the basic economics of sports leagues there or two optimum conditions. The internal optimum concerns what is best for league cartel profit and the second external optimum concerns what is best for the fans, owners, players and ultimately the integrity of the game itself. Unfortunately almost all decisions are made by owners to max the internal optimum that comes at the expense of the external optimum. This now seems to be the emerging verdict of the Court of public opinion.

V