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Economic impact of the NFL lockout

The National Football League (NFL) recently locked out the players after their collective bargaining agreement expired, putting the upcoming football season in jeopardy. A court hearing has been scheduled for April 6, on the players’ request to block the owners’ lockout. John E. Kwoka, Neal F. Finnegan distinguished professor of economics at Northeastern University, teaches a course on the economics of sports. In this Q&A, Kwoka discusses the economic and financial fallout of the lockout.

What kind of economic impact would a season long lockout have on the league?

Past experience with lockouts and strikes should be a caution to both sides.  The NHL lost the entire 2004-2005 season due to a lockout, and major league baseball cancelled the last part of the 1994 season, including the playoffs and World Series, due to a player strike.  In each case it took some years after play resumed for fan interest and attendance to recover.  Fans want to see games, not newspaper stories about strikes and litigation.  And when there are no games to be seen, some fans turn to other sports or to minor league teams or to something else entirely.  In fact Major League Baseball had such a hard time regaining fans after the 1994 season that some think that steroid use did not get the attention it should have had, because it fueled the home run surge that brought fans back to the stadiums.  So there can be risks to the sports product down this path.

How substantial are the concessions the players and owners are arguing over? Do they really make a big difference in the overall financial scheme of things?

The NFL is a big business, and the last collective bargaining agreement provided for a division of the revenue pie between owners and players.  But the pie has grown a lot in the past few years, and the sides are arguing over how it should now be split.  Should the same percent division continue to apply?  Should the owners get fair compensation and the rest go to the players?  Or should the owners get somewhat more in order to fund stadium and other improvements?  The sides have disagreed on an amount that began at about $1 billion dollars, but by the end it was more like $300-500 million.  Still, for 32 team owners, that’s $10 million in profit each—although for each of 1,700 players, it’s more like $200,000 in salaries and benefits.

What is your take on the NFL Players Association becoming a trade association and no longer identifying itself as a union?

By “decertifying” their own Players Association from being a union, the players turn the league back into 32 separate businesses that cannot really act in unison without violating the antitrust laws. So the players have set the stage for arguing that the owners’ lockout is an illegal restraint of trade. This is the case that will be heard early next month in Minnesota.  Interestingly, the Players Association did pretty much the same thing in 1987.  The players got a court ruling that forced the owners back to the bargaining table, where they won free agency.  That was a big deal, and it may have encouraged the Players Association to think this will work again.

– By Samantha Fodrowski

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