Why Fans Should Want a Lockout (1 Viewer)

[jackdubl]

w

I think the owners understand that they are getting dangerously close to pricing fans out of the stadium, and while the NFL games on tv are excellent entertainment, a lot of that atmosphere and excitments comes from the fans in the stand. Start watching games played in half-full stadiums and you'll immediately notice a difference. I paid $35 for Ravens season tickets in 1998. Four tickets for 10 games cost me $1,400. Not a small amount, but not to big a bite out of my budget. Flash forward 12 years and those same tickets are $90 for a total of $3,600. While my income has gone up, it's not kept anywhere near the pace of ticket increases. How much will my tickets be in 10 more years? Let's say they're $150, that'll be $6,000 per year and will end my ticket buying. The prospect of less than capacity stadiums is something the owners have to be aware of.

This is a good point, and would backup what the OP is saying. My only comment is that, if this is the case that stadiums are pricing out of the business model and it's endangering the product, and that cost savings would go to lower ticket prices, then that seems like something you could easily show by opening up your books. Which the owners refuse to do.Edit: Frankly, without seeing any of the books, all of the OP's suggestions are nothing more than an educated guess on what the situation even is.

 

[Orange Crush]

w

I think the owners understand that they are getting dangerously close to pricing fans out of the stadium, and while the NFL games on tv are excellent entertainment, a lot of that atmosphere and excitments comes from the fans in the stand. Start watching games played in half-full stadiums and you'll immediately notice a difference. I paid $35 for Ravens season tickets in 1998. Four tickets for 10 games cost me $1,400. Not a small amount, but not to big a bite out of my budget. Flash forward 12 years and those same tickets are $90 for a total of $3,600. While my income has gone up, it's not kept anywhere near the pace of ticket increases. How much will my tickets be in 10 more years? Let's say they're $150, that'll be $6,000 per year and will end my ticket buying. The prospect of less than capacity stadiums is something the owners have to be aware of.

This is a good point, and would backup what the OP is saying. My only comment is that, if this is the case that stadiums are pricing out of the business model and it's endangering the product, and that cost savings would go to lower ticket prices, then that seems like something you could easily show by opening up your books. Which the owners refuse to do.Edit: Frankly, without seeing any of the books, all of the OP's suggestions are nothing more than an educated guess on what the situation even is.

Regarding opening up the books -- labor law is very specific about this. If one side's bargaining position is "we are making this proposal because we are losing money and we will go out of business otherwise then they have to present evidence to support that argument (i.e. they have to open up their books). However, if one side's position is "we aren't making as much money as we want", then they don't have to open their books, because all businesses want to make more money so there's nothing special about their position that requires supportive evidence. The NFL team owners are taking the latter of the two positions. While some small market teams may be losing money, their official position is that they aren't making as much money as they'd like to make. Similarly the players' position is that they want to keep making the same amount of money. If they argued that they weren't making enough money to feed all of Cromartie's kids, then they'd have to produce documentary evidence regarding child support payments.

 

[Ksquared]

The reason no one opens up their books is two fold. 1) Accounting is a lot like statistics, how you "organize" them will make your profit. loss, health of your company look very different. In most labor negotiations - the goals can be very different for the two sides. The owner may want to put 15% into R&D every year, where labor would argue they should only put 10%, etc for a multitude of business decision issues - advertising, training... 2) The focus changes to "how" the money the company brings in is getting spent, which is similar to the example I mentioned. The goals are different and it just creates a whole new list of issues to negotiate/argue over. You never see the employees or labor leaders open their books and have management analyze how they spent their money. Management could find all kinds of ways for employees to save more money if they are negotiating from a position of "I am not making enough", just like labor representatives would be able to do the same to management. It is always easy to tell others how to spend/not spend their money.

In reality, the "open the books crowd" would find the negotiations get completely off track and bog down due to the analysis of the other sides spending.

 

[Orange Crush]

The reason no one opens up their books is two fold. 1) Accounting is a lot like statistics, how you "organize" them will make your profit. loss, health of your company look very different. In most labor negotiations - the goals can be very different for the two sides. The owner may want to put 15% into R&D every year, where labor would argue they should only put 10%, etc for a multitude of business decision issues - advertising, training... 2) The focus changes to "how" the money the company brings in is getting spent, which is similar to the example I mentioned. The goals are different and it just creates a whole new list of issues to negotiate/argue over. You never see the employees or labor leaders open their books and have management analyze how they spent their money. Management could find all kinds of ways for employees to save more money if they are negotiating from a position of "I am not making enough", just like labor representatives would be able to do the same to management. It is always easy to tell others how to spend/not spend their money.

In reality, the "open the books crowd" would find the negotiations get completely off track and bog down due to the analysis of the other sides spending.

It's already part of the negotiations. The owners want to exempt a certain amount of money from their revenue from sharing it with the players due to the amount they spend on new stadiums. Whether to exempt and how much is at the very heart of the negotiations. The reason why the owners blew up the last CBA was because they were self-financing stadiums more than than they used to and the debt obligations were eating up their profits. That's one of the reasons why I tend to support the players over the owners here, because I think the owners who made bad business decisions should be stuck with them rather than try to push the pain off onto other teams, the fans, and the players.For example, Jerry Jones agreed to pay half of the estimated $650M for his new stadium and for any cost overruns while Arlington footed the rest. But those cost overruns soared, and Jones' bill for his stadium went from $325M to $825M! Meanwhile, the last CBA had the 15 highest revenue teams pay into a fund of money to be shared amongst the lowest revenue teams. The Cowboys always rank in the top 3 in revenue, but Jones needs that money to pay off the stadium debt. Meanwhile, the recession hit late in Texas, allowing a lot of fans and businesses to buy those suites. But once the recession did hit, it wiped out a good chunk of the Cowboys revenue. They were expecting to receive around $1 BILLION for the stadium's naming rights, but that market shriveled up over night and they haven't signed a deal with anyone. Meanwhile, they are currently suing a number of businesses for $120M that are owed but unpaid on stadium suite leases. And fans are desperately trying to get rid of those outrageously expensive PSLs.

And so Jones went from being the primary supporter of the last CBA to its primary opponent. He doesn't want to share his earnings with small market teams. Other teams with high debt loads from stadiums include the Giants & Jets, the Patriots, the Redskins, the Dolphins (still), and the Lions.

 

[omahabrad]

The reason no one opens up their books is two fold. 1) Accounting is a lot like statistics, how you "organize" them will make your profit. loss, health of your company look very different. In most labor negotiations - the goals can be very different for the two sides. The owner may want to put 15% into R&D every year, where labor would argue they should only put 10%, etc for a multitude of business decision issues - advertising, training... 2) The focus changes to "how" the money the company brings in is getting spent, which is similar to the example I mentioned. The goals are different and it just creates a whole new list of issues to negotiate/argue over. You never see the employees or labor leaders open their books and have management analyze how they spent their money. Management could find all kinds of ways for employees to save more money if they are negotiating from a position of "I am not making enough", just like labor representatives would be able to do the same to management. It is always easy to tell others how to spend/not spend their money. In reality, the "open the books crowd" would find the negotiations get completely off track and bog down due to the analysis of the other sides spending.

This is probably true and makes sense but .... You can't expect the Union to say "ok" to a pay cut because the owners say they aren't making enough. The Union (i hope) would want to see some sort of proof.

 

[BigJim®]

I agree with the responses that a good labor deal by the NFL will have ZERO impact on "increasing commercial interruptions, sponsor mentions, and product placements." The expectation that it could completely wipes out this guy's credibility. It was already pretty questionable when he complains he can't afford "tickets, parking, seat licenses" on a teacher's salary, as if any of that would ever change as long as there are 60,000 people who can afford it. What color is the sky in this guy's world?

This is an interesting comment, but I don't think one that is consistent with the facts.The question I would ask is why do we have increased "commercial interruptions, sponsor mentions, and product placements" in the first place? If these are inherently good or necessary, why weren't these around in 1970 (even if the amount of money they would raise is much smaller)? Owners wouldn't leave free money on the table, and these means of raising money were used elsewhere already. Clearly the cost of doing so outweighed the benefits.

So these things bring costs (i.e., aren't inherently good for the overall product of the sport), didn't see them before, but we see them in huge quantities today. Why?

Ignoring for the moment cost considerations [raised by the lawyer], one reason, if obvious, may be that the product on the field is simply higher than it was in 1970 (or whatever period we're comparing). Maybe our tastes have changed. Maybe other "competitors" have fallen away [baseball, as an example] and the market size has increased. In any case, one can think of our "demand" for football is higher now and that we are willing to pay a higher price (in the form of these inconveniences) for the privilege of watching.

[Note: sponsors may find that the NFL is now a good avenue to advertise to reach a large audience. But, given that the price they pay for advertising is commensurate with the audience, a trend towards more sponsoring and the higher demand for football, are one and the same.]

But this still doesn't answer the question. After all, it seems the more efficient way of capturing this higher demand is simply raising the price of tickets [i.e., involve less hassle than with contract negotiation, costs of changing sponsors, training staff to implement these changes, etc that are associated with sponsoring].

While ticket prices have gone up, why don't they just go up a little higher? Owners have resorted to this form of revenue generation for some reason. If not higher costs, what? Maybe with the growing demand/fanbase there is simply a greater share of fans who now prefer (for whatever reason) to watch from home, and now its more feasible (due to the higher demand) to tap into this revenue stream. Well that's market segmentation -- just as the lawyer describes.

Maybe at some point, if prices are high enough, some people just don't go to the game anymore [and partly empty stadiums suggests this is happening in some locations]. In this case, instead of them paying at the gate, the owners can now get them to pay at home (even if its a lot less) in terms of time through these inconveniences. But this implies that people have different preferences for the sport, and that they are willing to pay different prices. Again, this is consistent with the market being segmented.

So the market is segmented. Big deal. What does a new labor deal mean for fans? Would there be an impact?

Clearly, if games are lost as a result, then fans lose out to some degree. In the long-run however, a few missed games may be a small upfront cost for any long term benefits that might accrue.

What could be the benefits?

Well, the prices at the gate (or in one's home) may fall in the short run (or long-run) for a couple reasons:

- If there is a drawn out battle, and overall interest for the NFL dwindles (i.e. demand falls), the remaining football fans may see lower prices [for the precise, but opposite reasons we discussed above] both at the gate, and at home. So a labor deal might actually reduce these "inconveniences." But what if it's resolved quickly and demand remains unchanged?

- Lower labor costs. Price is determined not entirely by demand [unless one approaches the matter from an Austrian perspective, but I digress]. It does not matter if demand is large if there is no way to feasibly provide the good or service. But costs don't drive price entirely. If production costs were negligible there could still be high demand, and thus a high price (just think of toner cartridges, razors, etc). So neither cost nor demand work on their own in determining prices - its these factors together. It stands to reason that a lower cost structure, would reduce prices, all else equal. The real question is - by how much? Part of this is tied to market structure -- the less competitive the industry, the less the price would fall. Even if one were a monopolist, though, the price would still fall by some. This idea that a monopolist will "pocket the difference" doesn't recognize that more money can actually be made by lowering prices when costs fall. A monopolist just can't charge anything he wants - with lower costs, he benefits on the margin for more consumers using his product [whether it be more watchers on TV, or at the gate, in the case of teams struggling with blackouts].

There may be other benefits for fans too- perhaps most value an 18-game season more than a 16-game season. Maybe lower rookie salaries will prevent teams from clinging to bad draft choices [and thus improve team outcomes].

In any case, the NFL is a very complicated market structure. It is at once a very competitive market, as well as an oligopolistic one. How sponsoring and various other contracts affect different teams, the degree of central authority vs. franchise autonomy, etc... there are a lot of factors at work. I won't say I'm an expert on modeling it.

But as an economist I hope to a least add a certain perspective, focusing on broad trends, which both supports and contrasts with this lawyer's positions.

I'm not going to belittle your response... you obviously put a lot of time into it and it is well delivered. In a nutshell, I just simply disagree with your take that lack of taking advantage of revenue streams in the 1970's was because "Clearly the cost of doing so outweighed the benefits." I just don't buy that, any more than I'd believe that pop ads didn't appear on my computer in the 1990s because there was some business determination that risk of marketing was outweighed by risks. More likely it was just a less sophisitcated era. Obviously there is a point of marketing excess, but the NFL is without question flourishing even with the abundant commercialization of the sport. This is a business relationship involving many companies, each of whom is going to continue to try to make more money. Regardless of what happens in the NFL-NFLPA negotiations, we're a lot closer to players wearing Coca-Cola patches on their uniforms than enabling a teacher to attend games due to reduced ticket costs.

 

[Ksquared]

I agree with the responses to my earlier statements, that labor is going to want to see the "books". But if that happens, I think you will immediately see a major drop in progress towards an agreement. Having been a lead negotiator twice where the "books" were partially opened (govt/teacher labor strife), it creates a whole ton more issues that really get in the way of an agreement. The focus becomes about how the $$ should be spent "you could save here, you should not spend that much there, ..." - which can always be argued about but does not bring any resolution to the big issues that are trying to be solved. Instead it devolves into hundreds of tiny arguments.