National Football League Case NFL Lockout BUS 4360

National Football League Case: NFL Lockout BUS 4360 – Strategy and Policy Dr. David Boggs Farjad Yousaf Rob Flores Eric Nitz

Introduction • Preview – Background – Organization – Market Dominance – Impact on Economy – Current Labor Dispute • Implications for Businesses • Implications for Consumers

Background • Founded on August 20, 1920 as the American Professional Football Association • By the end of the year, the APFA consisted of 11 teams • Goal of this organization – To bring teams together under one set of rules in order to control three major problems facing teams at the time: 1. Dramatically rising prices 2. Players jumping around teams following the highest offers 3. Use of players still enrolled in college

NFL Milestones • 1922 – League changed name from American Professional Football Association (APFA) to the National Football League (NFL) • 1936 – Implementation of the NFL Draft to regulate how new talent would be brought into the league from colleges • 1939 – First televised NFL game by NBC to approximately 1, 000 television sets in New York Jim Thorpe – APFA’s first president and player for Canton Bulldogs

NFL Milestones • 1956 – NFL Players Association founded • 1959 – American Football League, NFL’s first major rival, is formed • 1966 – The two major leagues merge along with the addition of several new franchises to create the National Football League we know of today

History of NFL Collective Bargaining Agreement • 1977 – Ratification of the first Collective Bargaining Agreement • Issues covered from the agreement: – College Draft – No-strike, no-suit clause – 43 -man active player limit – Reduced pension vesting to four years – Minimum salaries – Insurance, medical, and dental benefits – Commissioner’s disciplinary authority • 1982 – Collective Bargaining Agreement expires

Post CBA expiration • Players on strike • Season shortened to 12 games • Formation of new CBA expired in 1986 which led to more strikes NFL players picketing during the work stoppage in 1987

Collective Bargaining Agreement • 1993 – first CBA since 1986 • Players signed a 7 -year agreement guarantying $1 billion in pension, health, and post-career benefits • Agreement extended in 1997 through 2003 – Amended to include $100 million fund for youth football • Agreement extended again in 2003 and 2006 • CBA expired in 2011

CBA (2000 – 2009) http: //www. youtube. com/watch? v=Gs. Xk. Ycihaac

Organization • NFL is not a single entity • Consists of 32 teams operating collectively as profit maximizing businesses • League coordinates, governs, sets standards, and mediates disputes among owners

Management • Consists of three elected officers – Commissioner – Secretary – Treasurer • Officers elected by franchise owners • Commissioner’s responsibilities: – League operations – Mediating disputes – Applying discipline Roger Goodell – Current Commissioner of the NFL

Entry into the League • Leagues rules of Eligibility: – No corporation, association, partnership, or other entity not operated for profit is eligible to join. – No charitable organization or entity not presently a member of the league is eligible to join. • If such organization is a stakeholder in a club, that club must be held as a separate corporation • Exception: Green Bay Packers – Publicly held corporation before the by-laws written

Admission of a new Club • Requires support from three-quarters of existing clubs • New clubs must submit: – List of owners – Detailed financials – Names and addresses of all officers and directors – Articles of Incorporation or organization agreement (if a corporation or partnership)

NFL Franchises • Bound by the rules collectively set forth in the Constitution and Bylaws of the league • Each franchise is self-governing and selfmanaging • Typical commonalities between franchises: – Owner will appoint or hire a president – President will hire a general manager – General manager will hire a coach – Previous positions hire own staff to manage scouting, medical care, conditioning, player management, etc.

NFL’s Market Dominance • Unrivaled among major sports organizations in the United States due to the collective business plan • Two competitors for professional football – Arena Football League – Canadian Football League – Both rivals hold a much smaller market share compared to the NFL • Competitors for other sports – Rivals were crippled due to the costly labor strikes in the 1990 s

Increased Success • NFL has leveraged its success and expanded – – NFL Films NFL Network NFL Shop, online store Licensing exclusive rights for items such as jerseys, hats, footballs, etc. using NFL and team trademarks • Currently, market rights to televise NFL games are most lucrative and expensive of any sport – NFL programming packages exceeding $3 billion per year

Financial Performance • Unrivaled in financial success compared to other sports leagues • 16 of 32 NFL franchises with net worth over $1 billion in 2010 • Average operating income for NFL franchises approximately $33 million

Lockout’s Impact on Economy • Loss of seasonal jobs • Decrease in income • Estimated amount of lost local revenue at $12 million • Local businesses related to football hit hardest • Potential benefit of discretionary income

Current Labor Dispute • Division of $9 billion in revenue • 16 vs. 18 game schedule • Rookie Salary Scale • Health Care for Retired Players

Porters Analysis Potential Entrants Other Stakeholders Relative Power of Unions, Governments, Special Interest Groups, etc. Threat of New Entrants Industry Competitors Bargaining Power of Buyers Rivalry Among Existing Firms Suppliers Bargaining Power of Suppliers Threat of Substitute Products or Services Substitutes Buyers

SWOT Analysis Strengths Weaknesses Opportunities Threats Effective communication Online Growth Strong Market Share Likeability of the Sport Innovation Global Market Online Innovation Bad pricing Too many commercials Competition Economic slowdown Product substitution

Conclusion • Review – Background – Organization – Market Dominance – Impact on Economy – Current Labor Dispute • Implications for Businesses • Implications for Consumer

QUESTIONS ?