Collective Bargaining and Colts and Professional Athletes and Pro Sports and NFL and Sports Business

NFL owners start planning for possible lockout

December 11, 2010

 

Hylton Hylton of the Colts says giving refunds for canceled games is only fair.

The Indianapolis Colts—and the team’s National Football League brethren—this month laid out plans for how teams would refund money to season-ticket buyers in the event owners lock out players and games are canceled next season, a scenario league insiders say looks increasingly likely.

“This is the clearest sign yet from the league that a work stoppage could happen,” said Mike Florio, editor of ProFootballTalk.com, a leading NFL news website.

The current collective bargaining agreement between players and owners, which determines players’ pay and benefits, expires March 3. If a new agreement isn’t signed by then, owners have promised to lock out players, effectively putting next season on hold.

Negotiations between the two sides have stalled while the war of words has intensified in recent weeks. Owners are demanding a double-digit percentage pay reduction for players in addition to expanding the regular season from 16 to 18 games.

Terms of the current collective bargaining agreement stipulate 59.6 percent of all football-related revenue goes toward player salaries, but owners say players need to reduce their pay to help deal with the impact of the swooning economy and the cost of building new stadiums.

NFL Players Association officials, in a memo sent to players Dec. 1, told members to save their last three game checks this season in preparation for a season-long lockout next season.

If games are canceled, the Colts are promising to offer cash back, rather than account credits, for canceled games. That would amount to a giant outlay.

NFL Vice President of Communications Brian McCarthy said if there’s a lockout, each team could be forced to refund $7 million to $8 million—in ticket revenue alone—for each canceled game.

“In terms of ticket holders, we feel the only fair thing to do is to offer refunds for games missed,” said Greg Hylton, Colts vice president of premium seating and ticket sales. “There’s still a question of if interest on payments will be offered, and if so, how much.”

Much of the plan was hammered out at recent meetings among NFL sales and marketing executives in Dallas.

Colts officials are to unveil the week of Dec. 13 their plan to make club-seat owners, suite holders and sponsors whole in case of a lockout.

“This is an administrative step owners have to take to prepare for a possible lockout, but doing this in such a public manner is also the owners’ way of signaling to players they’re serious,” said Richard Sheehan, a University of Notre Dame economist and author of “Keeping Score: The Economics of Big-Time Sports.” “I don’t think anyone can say this is just saber rattling anymore.”

Colts officials said season-ticket buyers, club-seat owners, suite holders and sponsors will be contacted individually this month to be apprised of the refund plan. The Colts typically start their sales renewal campaign in February, with payments for season tickets due in March and club-seat and suite holders due in March and May installments.

It’s difficult to gauge how big a headache the lockout could be administratively, Hylton said, because, “this is something most of us have never been through.”

The NFL has not missed games due to labor strife since 1987, when players unhappy about their pay and other elements of the collective bargaining agreement went on strike. Owners that year eventually responded by continuing the season with replacement players.

Long, hard fight

Fears of a lost 2011-2012 season have intensified since a May 2008 meeting at which owners opted out of the current collective bargaining agreement with players, and began threatening a lockout unless players agreed to stiff pay cuts. Ironically, that’s the same meeting at which Indianapolis was awarded the Super Bowl in 2012.

Gary Roberts, dean of the Indiana University School of Law at Indianapolis, thinks the two sides are dug in for a long, hard fight.

“It is inconceivable to me that a new labor agreement will be reached before the start of training camps next summer,” said Roberts, who worked with former NFL Commissioner Paul Tagliabue at a Washington, D.C., law firm representing the NFL from 1976 to 1983. “Both the commissioner and the new executive director of the union got their jobs by appealing to the extreme elements in their constituent bases. Neither [NFL Commissioner] Roger Goodell nor [NFL Players Association Executive Director] DeMaurice Smith can politically afford to make any serious compromises or appear to be soft until their constituents start to recognize the real pain they could be facing.”

Roberts thinks the labor war could stretch into the regular season, but he is confident differences will get ironed out before the 2012 Super Bowl, slated to be played in Lucas Oil Stadium, is canceled.

“It’s my bet the season will be salvaged at the last moment, although not a minute before,” Roberts said. “It’s possible that insanity will prevail and the entire season lost. The hockey folks shot themselves like this a few years ago.”

Indy could take $610 million hit

This much is clear; it will be a major financial pain for NFL cities as well as players and teams if games are canceled.

Using many of the same studies the league relies on when seeking public subsidies for new stadiums, an economist commissioned by the NFL Players Association estimated an average of $160 million in local spending and 3,000 jobs will be lost in each city that has an NFL team if the full 2011 season is canceled.

“That’s about a $10 [million] to $15 million loss per game,” Sheehan said. “That estimate might be a bit high, but it’s not a trivial loss. The hit will be felt especially hard by downtown business, including hotels and restaurants that depend on game day visitors for their business.”

Indianapolis, which is set to host its first Super Bowl next season, has even more at stake. NFL officials have estimated the Super Bowl’s economic impact on the host city between $350 million and $450 million.

A lockout next season couldn’t come at a worse time for Indianapolis, said Indianapolis Convention and Visitors Association spokesman Chris Gahl.

“At a time when the tourism and convention business is so competitive and with Indianapolis preparing to open its convention center expansion, losing any event, particularly a Colts home game, is a serious concern,” Gahl said. “Those Colts home games are economic drivers, no doubt. Not only financially, but the media coverage of those games means invaluable exposure for our city’s tourism and convention business. Needless to say, the significance of the Super Bowl’s impact on this city is tremendous.”

Super Bowl contingency plans

The NFL has asked Indianapolis’ 2012 Super Bowl Host Committee to hold an additional weekend—Feb. 11 and 12—along with the original weekend one week earlier in case a lockout delays the championship game.

The NFL has not handed down further lockout contingency plans for the local host committee, and league officials said they probably wouldn’t until the postponement or loss of regular-season games is imminent.

NFL officials have said regular-season game postponements or cancellations are likely if the lockout extends into August.

The Super Bowl has already been granted to other host cities in 2013 and 2014, so it is unclear when Indianapolis would get to host the big game if the entire season is scrubbed.

“We are staying focused on what we need to do to host the 2012 Super Bowl as scheduled,” said 2012 Super Bowl Host Committee spokeswoman Dianna Boyce. “We can’t focus on issues outside of our control.”

NFLPA’s Smith said negotiations can’t begin in earnest until team owners provide financial information showing that a salary reduction is warranted.

Smith said current negotiations are at a standstill.•

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