Posted by John Vrooman on Friday, March 23, 2018 in National Football League.

Interview with Charlotte Observer.

— How much of a concern are the upcoming CBA and TV contracts for a possible buyer of an NFL franchise?

 The strength of sports union varies inversely with the length of the CBA. Largely because of the relatively short careers of its players (3.3 years), the NFLPA is by far the weakest of all sports unions with a ten year CBA set to expire in 2020 (3 times average NFL career). Since the 1970 merger, the NFLPA has lost every negotiation with the owners except in 1987-92 when the union actually shut itself down (decertified) and sued the owners in McNeil v. NFL 1992. (Unions can’t sue management in Court)

 The players finally achieved modified free agency in 1993, but the owners crushed potential salary gains with an unavoidable hard salary cap at less than 50 percent of league revenues in 1994. The cost side of the value equation is locked down and relatively certain, because of the absolute monopsony power of the League.

 The certainty of revenues from TV rights fees is positively related to the length of the media rights deal. The NFL makes about two-thirds of its total $13 billion revenues from media rights, which are fully guaranteed and shared equally among all clubs in a nine-year deal that extends through 2022. The revenue side of the valuation equation is on auto-pilot because of the absolute monopoly power of the League over the media outlets and the (PSL) season-ticket base

 The traditional networks (cable and satellite) are literally being driven to live sports content for survival by the unplugged technological threat of streaming. This has led all networks and cable to overpay for media rights fees to all sports leagues including the NFL.

This is particularly true for ESPNs overextension. The negotiations for the next TV deal could reveal the demand-side weakness of the networks and cable, but the League is usually one or two steps ahead in horizontal and vertical integration of media platforms and production. The League will probably outlast the traditional networks, and the new media will most certainly follow.

— Will health concerns and declining ratings hurt the sales prices for franchises?

The most powerful sports League in the world has virtually become a political football. The NFL shield is taking heavy hits from both the left and right of a political spectrum that reflects the deeply disabling polarization of our failed political discourse.

 The failed internal governance of the most powerful sports league in the world seems to be reeling out of control in the face of epidemic if not endemic scandals that reflect the current cultural collisions of race, gender, domestic violence and long-term player health.

 In spite of all of its self-inflicted wounds, this League of Very Ordinary Gentlemen (and wives and daughters through inheritance) still seems bulletproof. As an unregulated cartel the NFL wields heavy-handed monopoly power over their fans in erstwhile home markets, media monopolies and big-time monopsony power over their players.

 These cultural, ethical, political and governance challenges will continue to plague the NFL and the League will survive, but certainly not because of its ethical superiority, moral responsibility, managerial efficiency, collective wisdom or quality of its game produced between the lines. The League’s true protective shield is ultimately its socially inefficient unbridled monopoly power over fans, cities, government at all levels, media and players.

— Could the NFL market be at its peak? Should new owners be concerned about the return they will get when they sell in the future?

The NFL is a fully-automatic perfectly-diversified stone-cold money machine collectively valued at $80 billion, over 6 times $13 billion in guaranteed gate, venue and media revenues.

During the salary cap era since the early 1990s the value of the average NFL franchise has increased at an exponential rate of 11.6 percent. This is about twice the growth rate of the S&P 500 (as the best competitive market rate) and it serves as prima facie evidence of the monopoly power of the closed League as a seemingly invincible cartel.

 Given the fact that league ownership is rapidly aging, as much as one fourth of the NFL could currently be up for sale, but probably only 2 or 3 clubs that are estate/family owned are realistically close to being on the block: Titans, Bucs and Saints.

 The Titans, Bucs and Saints are probably all currently worth about $2 billion compared to the Panthers estimated value of $2.4 billion. In a true monopoly sellers auction these clubs would all probably go for a 25 percent premium, which would put the winners curse premium price at $2.4 for the Titans, Bucs and $3 bills for the Panthers. Given the softness of the “buyers” NFL franchise market the monopoly power of the League/Panthers upward bias could modestly drop to the zero to one-sixth range.  This would still put the winning bid for the Panthers in the $2.4 billion to $2.8 billion range.

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