Since their last work stoppage in 1987, the NFL has enjoyed great prosperity turning itself into a $9B dollar juggernaut and making millionaires out of its players. None of this growth would have been possible without the money generated from the sales of television rights, advertising dollars and a host of other, closely aligned commercial interests. The business of football extends well beyond the field. Of course while fans will be broken-hearted, it is the companies and industries with the greatest exposure to the NFL which may have the most at stake in this fight.

1. Who Loses in an NFL Lockout?
Corporate Interests Intrinsically Tied to the League
Call Date: Wednesday, March 9,
2011, 11:00 AM ET
CRG Host: CRG Expert:
Michael Cohen Scott V. Steer
Coleman Research Group Consultant, Branding, Strategy, Ad & Promo
Steering IMC
280 Park Avenue, 12th Floor East
Director, Partnerships & Business Development
New York, NY 10017 The Miller Group
1

2. Background and
History
The Losers:
• Fans
• Advertising
• Employment
• Travel and Hospitality
• Sponsors
• Licensed Products
• Host Cities and States
Potential Winners
2

3. Billionaires VS Millionaires
3

4. By the Numbers
• 2010 Revenue $9.3B
• Avg. Player Salary $1.87M
• Rookie Minimum $320K
• Avg. Team Payroll $127M
• Avg. Franchise Value $1.02B
Source: CNBC 4

5. Labor History
1982 Strike
• Began on 9/21/1982 and lasted 57 days until 11/16/1982
• No NFL games were played
• Essential cause was dispute over the percentage of gross revenues that the
league gave to players
• NFLPA wanted the percentage increased to 55 percent
1987 Strike and Decertification
• Replacement and some NFL regular players crossed picket line
• Back to work on 10/15/1987 without a collective bargaining agreement (CBA)
• Officially decertified in 1989 and reformed as a union in 1993
Return to Collective Bargaining
• The NFLPA and the league have extended their 1993 agreement five times, most
recently in March 2006 when it was extended through the 2011 season.
• May 2008 owners decided to opt out of this agreement and play the 2010 season
without a CBA in place.
• 2010 season was played without a salary cap (or floor), and there is the looming
possibility of no play at all in 2011 if an agreement cannot be reached.
5

6. The Key Issues
1. Revenue Split
– Owners wanting an additional $1 billion credit
skimmed off the top before sharing with the
players (despite resisting the opening of their
books)
2. Extend regular season to 18 games
3. Rookie Wage Scale / Salary Cap
4. Benefits for Current and Former Players
5. Repeal of Bonuses for "Breach Of Contract”
6

7. Possible Options
1. A Deal or Another Extension New Deadline Friday 3/11, 11:59 PM
2. Union Decertification
– The union could decide to pursue the strategy of dissolving as a union
for legal purposes
3. Lockout
4. Impasse
– A legal concept, exists after good-faith negotiations fail to reach a
conclusion
– The NFL could declare impasse at any time and force the players to:
• Accept its last best offer, strike, or (as they did 20 years ago) decertify
5. Continue to operate under 2010 terms
– Not a great option for players
The clock is ticking…
Options outlined by Andrew Brandt, President, National Football Post and Lecturer on Sports Business @ The Wharton School 7

8. “déjà vu – all over again”
8

9. 2004-05 NHL Lockout
• NHL teams actually saw a growth in value following the lockout because
the fixed number guaranteed for player wages out of league revenue fell
from about 66 percent to 54 percent 1
– Same may happen if NFL owners get their way and shave a few percentage
points of the current 60 percent figure of player payroll to revenue
• NHL attendance did not suffer too much from the lockout 2
– 2004 avg. attendance = 16,719
– 2006 avg. attendance actually grew to 17,025
• The NHL television revenue/ratings got hammered after the lockout
• Since the lockout
– NHL games air on NBC, but only Saturday afternoons
– NBC pays no rights fees, but has a revenue-sharing agreement
• Cable broadcasts now hidden on the Versus Channel. A huge step down
from 2004 five-year, $600 million deal with ABC/ESPN.
Source: 1. Forbes, 2. Attendance figures from ESPN 9

10. 1994 MLB Strike
• ESPN reported average MLB attendance was down 20%
after the strike
• Attendance did not return to pre strike levels until 2000
• ESPN also noted operating revenue dropped 35.8% in
1994 and didn’t reach its former mark until 1997
• For MLB, unlike the NHL, team value and attendance
did take hits
• MLB television revenue dropped after the lockout with
Fox paying substantially less in 1995 that CBS did in the
early 1990s
10

11. Who Are the potential
winners and Loser without
Football???
11

12. Broadcasters
$3.6B $8.8B $3.73B $4.27B ???
$20.4 billion
Source: Sports Business Daily 12

13. Top 10 NFL Advertisers (2009) Millions
Anheuser-Busch (A-B inBEV) $134
The US Government (including General Motors) $127
Toyota $108
Ford $97
The NFL $97
Miller Coors $88
Sprint Nextel $82
Southwest Airlines $66
Verizon Wireless $64
AT&T $64
Source: Media Post 13

14. NFL Ad Revenue Nearly $3 Billion
Fox ($944 million)
NBC ($817 million)
CBS ($804 million)
ESPN ($144 million)
Source: CNBC and Kantar Media 14

15. NFL TV Ratings
• Viewership up 13 percent over last year
• Games on CBS, Fox and NBC averaged 20
million viewers
20M Viewers =
more than twice what networks get for
their prime-time programming!!
Source: Nielsen 15

16. Pay Per View / Satellite Packages
• DIRECT TV ESPN $1B per year • In 2008, Dish Network moved
for exclusive NFL Sunday Ticket the NFL Network from its
and Red Zone Channels "America's Top 100" package to
• Could affect DIRECTV's positive the higher premium "America's
momentum Top 200" package
– Double digit gains in Q3 and Q4 • The move cost the network
2010 to $6.03 billion four million subscribers
– Analysts forecast DirecTV could
lose as much as 10% to 20% of
its 2.2 million subscribers of its
Sunday Ticket package
Source: Multichannel News
16

17. Missed Games Actually Boost
Networks' Bottom Lines?
- Maybe -
• Judge blocked broadcasters from having to pay
rights fees during any player lockout
• Missing games might actually improve the
networks' bottom lines, according to FitchRatings
– lower revenue for any aired replacement content, but
with lower production costs too
• Certainly won’t help all the local NFL based
programming around the country
17

18. • 30M + players
• For an estimated $5 billion business
• Demo
– Men: 79%, Men 18-34: 31%
– annual HHI is $92,750
– Median Age 30.4 yrs,
• Avg. fantasy football player spends $150/yr
– league fees, premium websites, magazines and
other ‘necessities.’
Source: Fantasy Sports Trade Association
Source: Business Week and Fantasy Sports Trade Association 18

19. Top 10 Fantasy Sports Sites:
September 2010
Unique Monthly Yearly
Rank Site Visitors Change Change
1 fantasysports.yahoo.com 6,115,530 47.77% -14.22%
2 games.espn.go.com 5,461,712 48.91% -0.64%
3 fantasy.nfl.com 2,709,801 60.83% No Data
4 football.cbssports.com 1,940,999 68.89% -26.14%
5 fantasynews.cbssports.com 896,204 25.71% -12.83%
6 rotoworld.com 651,002 16.41% -1.17%
7 streak.espn.go.com 588,362 15.46% -24.93%
8 fftoolbox.com 567,552 -10.88% 17.63%
9 fantasy.foxsports.com 389,254 31.57% -17.56%
10 baseball.cbssports.com 347,416 -11.74% -36.01%
19,667,832
Source: ComScore 19

20. broadcasters and
content providers
It’s all about Lost Eyeballs
• Broadcast advertisers could move their dollars to other
"marquee" programming
– College Football
– Golf
– Prime-time Dramas or Sit-coms
• Is there enough ad inventory to absorb that money?
• Internet advertisers Lots of inventory, but nothing that
delivers that quantity of very passionate eyeballs
• Some advertisers might also choose simply not to spend
20

21. SPONSORSHIP
• Real numbers, but these are contractual
obligations
• NFL is riding a wave of tremendous
popularity
– Could diminish the premiums they have
been receiving for sponsorships going
forward
21

22. Other NFL Sponsors Include:
• Papa John’s ($15M) - also the "Official
Pizza" of 10 Teams
• Gatorade ($45M)
• Verizon - replaced Sprint ($720M)
• IBM
• Visa
• FedEx
• Bank of America
• The Home Depot
• Canon
• P&G (Gillette, Old Spice, Prilosec OTC,
Febreze, Head & Shoulders, Tide, Charmin)
22

23. The Game
and a Bud
• Bud Light takes over official sponsor in 2011,
Est. at $1.2B
• Coors was official sponsor from 2005 -2010 for
$500M
• Team sponsorships and pouring rights are done
individually - often on a non exclusive basis
• A-B has pouring rights with 28 teams
Source: Denver Business Journal
23

24. The Cola Wars Extend to the Gridiron
Pepsi IS the Official Sponsor, but…
24

25. and Across All Sports Venues
Sport Venue Coca-Cola Pepsi Other
Source: Sports Business Daily 25

26. • Stadium
– parking, security, souvenirs
• On Field
– referees, coaches, trainers,
• Front Office
– staff, marketing, tickets
26

27. Food Service and Event Staff
27

28. broadcast production crews
• Generally Freelance/1099 contractors
– 45 person crews, most are within an
hour commute to venue
– < 20% travel for networks
• MNF and SNF are traveling circuses
for 16 weeks
– 20+ trucks with drivers and engineers
• Local broadcasts - pre and post game
shows, etc
28

29. Travel + Hospitality
or
Entertaining at Home?
Game Stats
Avg. NFL Broadcast Viewers 20 Million
Viewers who watch at a restaurant or bar 23.8%
Source: Arbitron
29

30. Can’t Watch at Home
or Tailgate?
Top 10 Grocery Retailers & Wholesalers
Source: Supermarket News
30

31. On-Premise Sales
If you serve chicken wings and
beer, football season is really
important to your business!
• Hooters Average Price 2009 2010
• Houlihan's Lunch Entrée $7.14 $8.07
• Applebee’s Dinner Entrée $12.98 $13.88
• Buffalo Wild Domestic – Draft $3.66 $3.58
Wings Import – Draft $4.74 $4.64
• Brick House Domestic – Bottle $3.69 $3.73
Tavern Domestic – Draft $3.66 $3.58
Source: Intellaprice
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32. On-Premise Sales: Food Service
32

33. On-Premise Sales: Beer
• Outsells wine 3.5-to-1
• Outsells liquor by nearly
1.5-to-1
Source: 2007 IRI On-Premise Study
33

34. Top 10 Distributed Brands
Source: IRI Syndicated On-Premise Survey – Fall 2007
34

35. Hotels + Lodging
Attendance
Avg. Stadium Attendance 67,000 / game
Total Attendance 17 Million
Source: ESPN
35

36. Vegas Sports Books
Rank Company Name Casino sq. ft. Sports book sq. ft.
1 MGM Mirage 1.1 million 59,235
2 Station Casinos 1.1 million 82,796
3 Harrah‘s 634,616 37,169
4 Boyd Gaming 579,588 29,138
5 Las Vegas Sands 243,684 6,430
Source: In Business Las Vegas -Ranked by casino square footage as of June 30, 2009
36

37. Casinos keep less than 1% of their
handle
Source: State Of Nevada Gaming Control Board
37

38. Licensed Products
• Topped $3.2 billion in U.S. & Canada (2007)
– Fans Stop Buying
– Retail sales fall (Modell’s, Amazon, NFL.com)
– Manufacturers stop making
– Min 16 week lead time to get stuff produced
overseas
38

39. NFL Properties LLC
• Reebok out as NFL uniform supplier (April 2012)
• Citigroup estimate $350 million of Reebok’s $565
million annual US sales comes from the contract with
the NFL
39

40. 2012 Starting Line Up
• Nike - Uniforms
• New Era will handle on-field headwear
• Under Armour will be sponsor of the NFL Scouting Combine
• Gill will manufacture fan gear, as will VF.
• Outerstuff will continue as the league's youth apparel provider
• '47 Brand will do headwear for fans
• Revenue for NFL-licensed apparel at retail in the United States
totaled about $1.9 billion in 2009, but had fallen at a mid-teen
percentage rate so far this year, according to SportsOneSource.
40

41. Home Electronics:
Stores and Installers
• The weeks before the Super Bowl are second only
to the holiday shopping season for TV sales.
• Football Playoffs and Super Bowl push custom
installs of home entertainment systems up 25%
• Consumers were predicted to purchase nearly 4.8
million televisions up 25 percent in advance of
the 2011 game
– Up from 3.6 million last year and 2.7 million in 2009
Source: IBISWorld
41

42. City and State Hosts
• Lost tax revenue from sales tax, road tolls, parking, etc.
Game Stats
Avg. Cost to take a family of four to an NFL 2
$413
game (2009)
Avg. Stadium Attendance 3 ~ 67,000 / game
Source: 1. Arbitron, 2. USA Today 3. ESPN
42

43. City and State Hosts
Payroll Taxes
Total Team Payrolls $3,401,549,790
Average Payroll = $127M
Medicare Withholding $86,075,948
States w/ tax avg. 6.5%
(CA 10.9 , NY 8.97, NJ 8.97, MN 7.85 are all in the top 10)
Est. State Income Taxes $154,343,080
Est. Federal Income Taxes $761,947,152
43

44. Potential Winners
• NCAA
– Broadcasts might be short-term winner
– Merchandise, Attendance
• MLB, NBA and NHL
– could all be a longer term winners Broadcasting,
Merchandise, Attendance
• Soccer
• Arena Football
• CFL
• Office Productivity
44

45. Summary
• Teams could end up with permanent/long term
revenue issues as they work to restore fan
interest after a lockout.
• This won't be true for teams like Green Bay or
Pittsburgh, where loyalty is inbred, but for teams
like Carolina, Jacksonville, Miami, Minnesota, etc
where fan interest is finicky, the impact will go
well beyond the work stoppage.
• Throw in the pending lockout of NBA players and
fan/consumer sentiment towards professional
athletes is an interesting topic.
45

46. Important Dates
• Friday March 11th
• April 28-30 -- NFL Draft, New York City
• Aug. 6 -- Pro Football Hall of Fame, Class of
2011 Enshrinement, Canton, Ohio
• Mini Camp - Clubs are permitted to hold a
rookie minicamp on one of the first two
weekends after the NFL Draft and conduct one
mandatory minicamp for veteran players.
46

47. So how does it end?
For more information contact
Scott V. Steer
Director, Partnerships & Business Development
The Miller Group
Scott@MillerGroupMarketing.com
Consultant, Branding, Strategy, Ad & Promo
Steering IMC
Scott.Steer@SteeringIMC.com
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