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Standard & Poor’s optimism on league’s ability to withstand lockout needs to be revisited

CowboysStadiumatNight

On Monday, the folks at Standard & Poor’s concluded that “some teams” would be able to withstand a two-year lockout.  (Of course, this implies that “some teams” wouldn’t.)  The well-known rating agency also predicted that NFL teams would continue to generate much of their revenue in 2011, according to CNNMoney.com.

Some are pointing to the assessment in the aftermath of the adverse “lockout insurance” ruling from Judge David Doty, which could keep the league from collecting a penny under network deals that otherwise would pay out billions during a lockout.  But here’s the catch — the S&P projection assumes that the league will collect the TV money.

Indeed, S&P calls the TV money “an important source of funds that would help the owners avoid any default on their own obligations.”  If that source of funds is blocked, the owners would have to come up with other funds to avoid a default on their obligations, such as the mortgage on Cowboys Stadium.

Thus, the folks at S&P should update their work with a new assumption:  the owners not getting any money from the networks during a work stoppage.

We’re no financial analysts, but we think the revised predictions will be slightly less rosy for the owners.

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33 Responses to “Standard & Poor’s optimism on league’s ability to withstand lockout needs to be revisited”
  1. waitingguilty says: Mar 1, 2011 9:55 PM

    M.F. is going STROKE OUT if this lockout happens.

    He’s losing the plot!

  2. adamarkm says: Mar 1, 2011 10:00 PM

    I’m sure S&P is right, because rating agencies have never been wrong before (see, CDO Ratings Failures, Enron Ratings Failures, Sovereign Debt Ratings Controversies, and so on and so forth)

  3. bchampeau says: Mar 1, 2011 10:04 PM

    I have a great idea in this whole ordeal…how about the owners and players decide collectively to SHRINK the pie and pass some of the savings on to the fans. Every year the owners make more, the players make more, and now they’re both fighting for ways to continue to make more in the future. What do the fans get in all of this? We get higher ticket prices every year. We get higher concession costs every year. I remember buying jerseys 10 years ago for $40, now a replica is $75. For the most part fans will continue paying higher prices because we just want to watch football every fall, but I’m pretty sick and tired of hearing how owners and players are agonizing over how to share $9,000,000,000 of revenue. That’s a nine with nine zeros after it. How about giving something back to the people that make this “problem” even exist for both the fans and the players. Listening to a bunch of billionaires argue with a bunch of millionaires on how to divide more money than 99.9% of the population can even fathom is sickening, and despite all this we’ll still show up every Sunday next fall and cheer on both of these groups. I hope they really keep this in mind while they figure things out.

  4. 3octaveFart says: Mar 1, 2011 10:05 PM

    Looks like ol’ Jerry is gonna have to book a few extra events like monster trucks, punkin chunkin & tractor pulls to keep up his payments.

  5. Uncle Leo says: Mar 1, 2011 10:10 PM

    Standard & Poors still have a AAA rating on Lehman Bros.

  6. chatham10 says: Mar 1, 2011 10:10 PM

    Mike, why don’t you and your buddy Peter King sit down and solve this mess and also include your insider from ESPN Adam. I believe you guys have the answer for everything as long as you hear the rumor somewhere.

  7. 2011to2020lions says: Mar 1, 2011 10:16 PM

    If that’s what it takes then so be it

  8. sdboltaction says: Mar 1, 2011 10:18 PM

    You’re not financial analysts? Hot dang, alert the media.

  9. jc1958cool says: Mar 1, 2011 10:25 PM

    that would be great,level the playing field, no pun intended!! no football no $$$, playesr or turd owners!!

  10. Deb says: Mar 1, 2011 10:34 PM

    Does S&P factor in how a potential public backlash could impact future earnings? The writers’ strike a couple of years ago did take a bite out of network television revenues because people found other entertainment options, and not all of them returned when programming resumed.

    We’ve been locked in a global economic crisis that’s left many unemployed or underemployed. The public won’t be sympathetic to either owners or players in the event of a strike. This isn’t 1987. In 2011, fans have many other sports programming options. Even the NFL can take a hit. How much of a loss is a greedy son of a gun like, say, Mike Brown willing to risk?

  11. hobartbaker says: Mar 1, 2011 11:03 PM

    Myeehhh….the owners are drinking cognac and smoking cigars in the clubhouse over on the other side of town. With their buddies from Gold Standard & Rich, Inc.

  12. hobartbaker says: Mar 1, 2011 11:04 PM

    If they get in a bind maybe Carson Palmer will bail them out. 10 million here, 10 million there, can go a long ways.

  13. the1vito says: Mar 1, 2011 11:37 PM

    S&P should update the rating from a financial perspective because some owners may plan on using the ratings to borrow money in the case of a lockout in order to pay the bills. Thus I’m sure S&P would update the rating, it might not be as publicized though, since it may be at the request of commercial lenders or team owners directly.

  14. islandjag says: Mar 1, 2011 11:42 PM

    A. The TV nets have already said they are going to pay even of there is a lock out. While that money will then be “paid back” when seasons resume the league will not have break in revenue either way.

    And

    2. Am I really to assume the speculation of some Internet hack over a “well known rating agency”. I mean come on. That’s just a little understated don’tcha think?

  15. johnnyoclock says: Mar 1, 2011 11:44 PM

    It’s funny how unless some report is horribly negative to the ownership (owndership that if didn’t exist half of these guys would be in jail without a league) side you guys do everything you can to trash or shoot it down. Man. It’s kinda funny at this point in it’s predictability.

  16. benh999 says: Mar 2, 2011 12:07 AM

    Largely irrelevant. Their biggest assets are contract rights to the best employees (players, coaches, and management) in the business (sport). While a season or more of missing TV revenues would put a strain on the less financially viable clubs, they could easily renogiate or refinance their debts to allow them to stay solvent for at least several years.

    Problems would only start if a competitor (CFL or UFL) first gained an edge in personnel, then fanbase. This would severely impact the credit-worthiness of NFL teams. It would take a long time before top caliber NFL players signed contracts with competing leagues, risking their ability to return to the NFL when the lockout ends. Similarly, top college prospects would not want to jeopardize their ability to play in the NFL.

  17. dldavidlong says: Mar 2, 2011 12:35 AM

    the real question is how long can pft last if there in no football in 2011.

  18. dvnelson72 says: Mar 2, 2011 1:13 AM

    Can’t they go with replacements and collect the networ money?

  19. kd75 says: Mar 2, 2011 1:22 AM

    S&P rates only for default probablity.

    Moody’s rates for loss severity in the event of default.

  20. kd75 says: Mar 2, 2011 1:28 AM

    My point is that all rating agencies can only analyze based on current contracts and the information provided by clients (debt issuers paying for the rating).

    As long as the current TV deal stands, all rating agencies have to assume the payments will continue. Until, of course, the contractual obligations are changed by a court of law.

    And yes, I am a financial analyst.

  21. pftequalsgreatjournalism says: Mar 2, 2011 1:43 AM

    hampeau says:
    Mar 1, 2011 10:04 PM
    I have a great idea in this whole ordeal…how about the owners and players decide collectively to SHRINK the pie and pass some of the savings on to the fans. Every year the owners make more, the players make more, and now they’re both fighting for ways to continue to make more in the future. What do the fans get in all of this? We get higher ticket prices every year. We get higher concession costs every year.

    ——————————-

    Simple solution – stay home and watch the game on a 55″ LED TV in HD with cheap beer and good food.

    Problem solved…

    I am not sure why people willingly get raped by professional sporting events beyond the fact that they can tell everyone that they went to the game.

  22. paulnoga says: Mar 2, 2011 2:05 AM

    Don’t read anything into what Doty does anymore. In less than 48 hours, he will be a non factor, earlier if the NFLPA decertifies. As of Friday midnight (ET) the CBA will be ended and a Judge favorable to the Owners will rule on the original contract with the Networks and they will get the money thru contract law.

  23. heavyj39 says: Mar 2, 2011 2:11 AM

    Deb,

    Mike Brown isnt greedy. He is just an idiot who thinks he is as smart as his father.

  24. norfva says: Mar 2, 2011 3:35 AM

    If they do have a lockout can we get the women in the lingire league to be the replacement players.

  25. scudbot says: Mar 2, 2011 6:02 AM

    S&P? S&P is just another gangster PR company running a protection racket. They get 10% of the TV pay-to-not-play take right off the top for this one. They’re set to appear at one of the “halftimes” to reveal their next projection during the Jerry Jones Monster Megabowl I car crushing lingerie football death match concert extravaganza along with Lady Gaga, Cam Newton and the Biebs. I know I’m going. Rumor has it that Snooki’s going to squat down and pick up Tony Romo’s helmet on the Jerryvision screen.

  26. thereisalwaysnextyear says: Mar 2, 2011 6:28 AM

    I think throwing darts would be more accurate than listening to S&P. As a previous poster pointed out, if they thought all those CDO’s and various synthetic mortgage products were AAA rated then I’m SURE they can predict which teams could survive a lock-out. LOL

  27. realitypolice says: Mar 2, 2011 8:26 AM

    @Deb:

    Good argument and one I wish I could buy into, but I just can’t.

    No need to compare it to 1987- the owners have far more recent indicators that point to fan support returning after a lockout.

    Fact is, virtually every financial decision the league ever makes is a direct kick in the teeth to the fan, and the fan takes every single shot without blinking an eye.

    From PSLs to ticket price increases to $200 jerseys, to suing bars that host Super Bowl parties, to the black out rule to putting regular season games on their own network which tens of millions of Americans don’t get, to extorting cities for public money to build stadiums, it goes on and on.

    Their is simply no basis in fact to believe that there is anything that can drive fans away, and while it would be nice to believe this could be the proverbial straw that breaks the camel’s back, I doubt it.

    Besides, no matter how long the lockout, the TV contracts kick back in at their current values when an agreement is reached, and that is where the league gets the lion share of their revenues anyway.

  28. hank10 says: Mar 2, 2011 8:44 AM

    Why would anyone trust a financial institution with the name Poor in the title anyway?

  29. biggerballz says: Mar 2, 2011 8:44 AM

    the owners can still borrow money from the bank with low interest loans because they have billions in assets. The players can’t because the ones that need the money are the ones who’s assets are 100k bar tabs. This won’t end until half the season is gone and the players will fold, and then strike in a few years.

  30. realitypolice says: Mar 2, 2011 10:00 AM

    biggerballz says:
    Mar 2, 2011 8:44 AM
    the owners can still borrow money from the bank with low interest loans because they have billions in assets. The players can’t because the ones that need the money are the ones who’s assets are 100k bar tabs. This won’t end until half the season is gone and the players will fold, and then strike in a few years.
    =========================

    I agree with everything in this post except for the players folding with half the season gone..

    I believe they will fold long before that.

  31. Deb says: Mar 2, 2011 1:20 PM

    @realitypolice …

    You’re right, and I hate it. Especially if Goodell stays in place, the NFL will keep banking on its luck and keep pushing the envelope. And one day the league will finally go too far and murder the sport. I don’t know what the breaking point will be, but suspect it could involve adding a UK or European franchise to an American division. I love my team, the game, and the history of the NFL. But I so despise Roger Goodell and the owners who are driving these moves.

    @heavyj39 …

    Brown just seems like a guy who’d rather make money than win games.

    @norfva …

    Lingerie League as replacement players? That’s great for you. What about female viewers? Can they at least offer some Victoria’s Secret coupons?

  32. marthisdil says: Mar 2, 2011 4:00 PM

    Good! Hopefully a few teams will go bankrupt!

    Then those players on those teams will be without jobs.

    Then we can thank the greedy players and their stupid paychecks causing ticket prices to be insane for the problem.

  33. Deb says: Mar 3, 2011 2:09 PM

    @marthisdil …

    You’d be thanking the wrong people. A CBA is in place and has another two years to run, but the owners have decided to breach the contract because they don’t like the agreement they made. They want the players to take an 18-percent pay cut while increasing the length of their season by more than 12 percent without additional pay.

    I can just imagine how you’d react if asked to work 12 percent more while taking an 18-percent pay cut. :roll: Next time try learning the facts before mouthing off.

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