An NFL Lockout May Have Longlasting Effect on Several Business Sectors
The start of National Football League (NFL) season is an exciting time for fans, but with the current collective bargaining disagreement, many fans are worried that there might not be another season come next year. As the likelihood of a labor stalemate increases, IBISWorld identifies just who stands to lose the most from a potential lockout next season.
The NFL is expected to account for 40 percent of the $20.3 billion sports franchising industry in 2010, reaching $8.2 billion. Having experienced tremendous growth over the past five years, increasing at an average annual rate of 7.5 percent since 2005, the league would suffer a colossal revenue loss of roughly $7.6 billion if a lockout occurred; however, IBISWorld projects that long-term repercussions would be minimal.
“The MLB and NBA suffered considerable lags in recovering attendance following their lockouts, dropping 20 percent and 2.5 percent, respectively in subsequent years,” explained Dmitry Kopylovsky, sports franchise analyst with IBISWorld. “The NFL, however, would have minimal, if any, effect from viewership recovery because of the sport’s vast popularity with Americans.”
The players on the other hand stand to lose an estimated 30 percent of their potential NFL careers, considering that the average career length for this sport is only 3.3 years with a median salary of $770,000 (2009). Furthermore, the player pool will increase considerably next season as another class of NCAA players turns pro, severely intensifying player competition for a spot on a team.
“Fans have grown accustomed to player holdouts and similar compensation standoffs across all sports leagues,” said Kopylovsky. “The business aspect of sports has become increasingly branded into the minds and hearts of most sports fans, which is why the league would be less damaged than the individual players if a lockout occurred.”
The league and its players are not the only ones who would be negatively impacted by a NFL lockout, however. Such an occurrence would result in revenue losses for a myriad of industries:
- Television Broadcasting – The NFL has long-term contracts in place with major networks, totaling roughly $4 billion per year. NBC stands to lose the most since it is scheduled to host the Super Bowl in February 2012, an event that typically generates more than $200 million in ad revenue for the network. IBISWorld estimates that an NFL lockout would decrease total industry revenue by 0.4 percent or $145 million.
- Celebrity and Sports Agents – Agents of NFL players could lose more than $100 million or about 1.6 percent of total industry revenue in 2011.
- Live Music, Sports and Event Promotion – The NFL has contracts with companies like Ticketmaster and Stubhub. In the event of a lockout, IBISWorld estimates that this industry stands to lose about $50 million or 0.2 percent of total revenue in 2011.
- Food Service Contractors - Companies that serve professional sports stadiums, such as Centerplate, Aramark, Levy Restaurants and Legends Hospitality Management LLC, are sure to see a decline without the NFL’s 256 regular season games and 11 playoff games.
- Sporting Goods Stores - Retailers of these items, such as Sports Authority and Dick’s Sporting Goods, stand to lose a small chunk of their revenue in the event of a lockout.
- Advertising Agencies - The NFL generates $860 million per year in advertising revenue. Companies that paid or were in line to purchase these advertisements in 2011 would be largely exempt or withdraw. As a result, ad agencies would experience a loss.
- Drinking Establishments – Sundays, Mondays and some Thursdays, are popular times for fans to patron local sports bars to watch NFL games. Without a 2011 season, the bar crowd would largely cease, dropping revenue for the industry as a whole.