Standard & Poor’s revisits NFL’s situation after “lockout insurance” ruling


Earlier this week, the folks at Standard & Poor’s suggested that the NFL could withstand a two-year lockout, based in part on the ongoing flow of TV money in 2011.  We suggested in the wake of Judge David Doty’s ruling that the league violated the CBA by finagling so-called “lockout insurance” that S&P should revisit its assessment.

And it did.

In a press release sent to us by S&P, the rating agency concludes that, without the ongoing network payments in a work stoppage the league has “sufficient resources to fund its fixed obligations for up to one year if there are no games played in the 2011 season.”  The bills would be paid, in S&P’s estimation, by “accumulated cash reserves, available lines of credit, or other forms of liquidity.”

S&P points to the fact that “income from suites, club seats, and advertising accounts for 50% to 80% of stadium revenues,” and that the contracts “typically require payment even if football games are not played,” even though the suite/seat holders may be subject to credit once games resume.  S&P also says that the league has been “building a strategic reserve . . . on behalf of each team.”

Either way, S&P has slashed its assessment of the league’s viability during a lockout in half.

Also, the prediction glosses over the fact that, to keep the doors open, the league will be mortgaging future profits — and also potentially alienating those who purchased suites, club seats, and/or advertising.  The networks apparently were well aware that they were agreeing to contractual terms requiring ongoing payment in the event of a work stoppage; we’ve got a feeling that the folks who purchased suites and club seats weren’t as keenly focused on the possibility of a money-for-nothing scenario.

The assessment also omits any acknowledgment of Judge Doty’s finding that the closure of the TV money valve could trigger a default under some of the league’s loans, regardless of whether money is otherwise available to pay the debts.

Bottom line?  No matter what anyone says or how anyone spins it, $4.3 billion that the league lined up for a lockout likely won’t be available, which puts a major crimp in the NFL’s plans in the event a lockout launches.

18 responses to “Standard & Poor’s revisits NFL’s situation after “lockout insurance” ruling

  1. We should know something by 4:00 PM today. That is the time the players have to file for desertification I believe. Let us pray for at least an extension, and who knows maybe even an agreement. We really don’t know what is going on behind closed doors, but we can always hope since they are still meeting that it’s something good not something VERY BAD!!!!

  2. The only way this will ever end, and end forever, is if one side gets the upper hand and maintains it. With this much money on the line, there are no true partnerships. Each side will always feel they aren’t getting enough.

    So which side? Well for my money, the owners pay the bills, hire the coaches, get the stadiums, etc. They are the producers of the show. The players? They are the actors. Actors come and go. So do players.

    Yeah it’s billionaires versus millionaire, but it’s the billionairs that endure the risk and provide the all of the amenities and arenas.

    I’m hoping for a lockout. I’m hoping the players cave, decertify, whatever. And we get the employer-employee relationship we should have so we don’t have to hear about this for a long, long time.

    Let this thing go for a full year. Close down 2011 and let’s see who’s still standing. It’ll be a long time before we have the tail trying to wag the dog.

  3. Hopefully the owners will win the appeal. Imagine all of the stadium workers who will be unemployed and the fiscal hits to local economies. The unions will destroy something else if this stands.

  4. Yes, they can survive one year without the TV money, but do the owners really want to deplete their savings accounts, take on loans, give out credit to ticketholders for the next round of ticket sales? NO

    The TV money was the only big hammer the owners had over the player’s union and that is gone. It’s now a more level playing field where both side lose big money over small potatoes.

    Now it’s time for the owners (and players too) to think about things being penny wise or pound foolish.

  5. “we’ve got a feeling that the folks who purchased suites and club seats weren’t as keenly focused on the possibility of a money-for-nothing scenario.” You can be sure that those citizens and Corporate Sponsers of Suites are going to be VERY upset about shelling out hundreds of thousands of dollars and getting nothing in return ! One year is a Lifetime in the business world and these people are going to remember how they were treated.What makes it even worse is that it now looks like this was planned long before these folks payed for their suites.{ Judge Doty ruling]As a long time NFL fan, I am going to remember this and NOT support the NFL if we lose next season to Greed !

  6. I want the owners to win this struggle, not because they are virtuous underdogs, but simply to maintain a semblance of property rights. I may not like the way they run their business, but it is their business, not mine.

    Unions had a worthwhile purpose 100 years ago. Today they are good for nothing except wiping out once profitable businesses.

  7. 8man makes an interesting comment, that the owner’s take all the risks. This is clearly not true. If nothing else the owner’s are getting an above market return on an appreciating property with the public building or helping with many of the stadiums. In fact the NFL is allowed to maintain a monopoly with non-guaranteed contracts in the most dangerous major sport.
    So who bears the risks of this arrangement? Certainly owners have a huge amount of capital tied up in this venture. But players, who’s bodies are necessarily at risk, are the ones who bring in the revenue and literally take years of their lives.
    I don’t think this is the case where one side is totally right and one side is totally wrong. But god damn it the owners have lied about player safety (concussions), apparently violated the last bargaining agreement by taking less money to ensure a payout from TV channels in the event of a lockout, and have the commissioner consistently acting like a jackass.

  8. S&P is off base on this one. As was pointed out, in the event of a lockout, the league has the ability to supplement current income with future income paid in advance(essentially). So what they’d be doing is taking money from those with the most up front. Then when the doors re-open, those people get in without paying again, while the rest of us help line the pockets of the league for the current year. Well what happens when the rest of us say “shove it” and don’t show up?

    Owners know what’s going to happen if they lock us out. Yes, I said US. Locking the players out results in the fans being locked out as well, and unlike the players who will be paid millions to return, we the fans have far less of an incentive. If the owners lockout for a whole season, they better be prepared for massive future losses across the board. Advertising, network contracts, sponsorships, ticket sales, merchandise sales will all take a big enough hit that I would guess it would take close to 10 years to reach current heights again.

    And these lovely little tax-payer funded stadiums? How many years do you think it would be before ANY citizen would want one in their home town or before a politician would even consider pushing a bill like that onto his constituents?

    Go ahead NFL, lock US out. Just remember, the average person tells 2-3 people about a product or service they like. They tell closer to 12 people about a product or service they dislike, so for every American you piss off, 12 of their friends will hear all about it…. How do like those odds?

  9. “Actors come and go. So do players.”

    Really, and producers don’t? Owners don’t? And, not sure you noticed, but some of them are great and some suck.

    Harrison Ford, who hasn’t been able to act for about 15 years, gets as much money as he does because HE guarantees a HUGE box office. His very presence.

    Replace him with Javier Bardem and that same movie makes less. Replace him with Casey Affleck and that same film is considered a disappointment.

    Regardless of the strength of the actual film. “Gone Baby Gone” was far better than a lot of “big” films of its time of release (and I believe won Best Supporting Actress), but movie goers aren’t interested in Casey Affleck as a lead.

    It’s ALL about the talent. Do you really care what studio produced the Beatles records? Can you even name the producers involved in their hits?

    And what, exactly, would you consider a “employer-employee relationship we should” [have]?

  10. I am a business owner, in my industry I make money when my employees are happy and produce. Much like the NFL. I don’t make money when they’re miserable and ‘mailing it in’. In fact, I get FAR more out of them when they are working to get promoted and make more money (which, BTW, is capitalism). And I can’t easily replace them as they are skilled labor with unique skill sets.

    We aren’t talking about firing the overnight shift at WalMart, or even the air traffic controllers.

    The NFL is not losing money. This model is sustainable. Everyone is getting rich. What’s broken?

    The rookie wage scale? Well, no one makes the owners pay that out. Don’t have the cash to pay the 1st overall pick? Then trade it to a team that does! That’s capitalism!

    Small market teams? Well, no one says they have a right to a team. If it doesn’t make money, move it to LA or contract it. Survival of the fittest. That’s capitalism!

  11. The owners should stand firm and let the players cool their heels in “scrip clubs” for a year. If they cave, eventually the league will go the way of Detroit, the steel industry and every other industry which unions have destroyed.

  12. chapnastier says:
    Mar 3, 2011 8:09 AM
    Hopefully the owners will win the appeal. Imagine all of the stadium workers who will be unemployed and the fiscal hits to local economies. The unions will destroy something else if this stands

    Apparently you must not be aware of the Jets (amoung others) already laying off workers and instituting pay cuts. They could care less about the stadium workers. The Union is not at fault here. They did not threaten to strike or stop playing. This is all on the owners. To blame the union is being disingenuous.

  13. Owners lay off workers…it’s the union’s fault.

    Owners charge me for meaningless pre-season games…it’s the players’ fault, make them work 12.5% more.

    Owners charge $25 for parking, make me pay for a PSL…wouldn’t happen if the players made less.

    Owners hold gun to head of city, make us fund their stadium with taxpayer dollars or else they’ll leave…too bad they can’t cut costs by decreasing payroll and build it themselves.

    Guys…the owners have directed all of those things. It isn’t the players. But A LOT of money has been spent convincing you that the ridiculous statements above are true.

    Why not blame the teacher’s union for high NFL ticket prices? It would make about as much sense.

    Americans love capitalism, except when they get priced out of good seats at the game, or when gas gets expensive. Then they want a right of entry regardless of their economic situation. Unreal.

  14. I did not say the owners take all of the risks. Just that there is risk involved with their positions. More so than the players. Financially speaking, of course.

    As for the players, just like today’s military, they have a choice. They can choose either of those professions with the inherent risk and the rewards or chose safer professions with less risk. No one has to go into the military and no one has to play pro football. It’s a choice. That being said, I’m glad that people chose to do it. But don’t ask me to shed a tear for college graduates who eschew safer professions for the NFL and it’s big money potential and then cry about the risks of the game. Shut up and play. Or don’t play. But shut up.

    As for who actually plays the game, Montana retired and got replaced. Bradshaw, Fouts, Sanders, Staubach, Starr, etc. all left the game and someone else stepped in. How long have the Rooneys owned the Steelers. Eight Super Bowl appearances with three different coaches and three different QBs. The Rooneys have proven they can get there without any particular person. Ultimately, its the ownership that really matters. If you have a lousy owner you will have a lousy team. If you have a great owner, you will have a great team. Period.

    And by employer-employee relationship, I mean one where the employees are compensated for their contribution to the effort and have access to a benefits package commensurate with their risk and contribution. But not one, where an employee can dictate what an owner does or doesn’t do with the business. Employees can always leave if the employment is not to their liking.

  15. “And by employer-employee relationship, I mean one where the employees are compensated for their contribution to the effort and have access to a benefits package commensurate with their risk and contribution.

    So the league makes more and they make less…why, exactly? You contradict yourself as the league is making more money than ever.

    Who forced Al Davis to give Jemarcus Russel that money?

    Who made the owners fight with one another for years to overpay for marginal talent?

    Can’t afford good players? Sell the team?

    Can’t sell out the stadium? Move it to LA.

    Can’t buck up for a high draft pick? Deal it.

    Is that not the capitalist way? Why should my team be supporting a broke-ass Jacksonville or Carolina franchise?

    Owners can spend what they want. They CHOOSE to spend the way they do.

    You want to protect owners from themselves. We know such efforts fail – as they did in the NBA and MLB.

    End of story. If the current system stinks, it’s because they created it. And they’ll screw up again if you make conditions more favorable for them – remember, the Knicks were let off the hook with the “Allen Houston Rule”. AND THEY DIDN”T USE IT ON ALLEN HOUSTON!

    Talk to me about the NBA, I agree with the need for reform. But the NFL…it ain’t broke.

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