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Understanding the Economic Impact of an NFL Lockout

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As if the politics of the NFL labor dispute aren't difficult enough for fans to follow, the economics of the matter are even more daunting.

In part that's because we really don't know the full economic picture -- nor are we likely to. NFL owners have resisted repeated calls by the players (and fans) to open up their financial books and share the particulars. The onus is on the owners to provide this economic data because they are saying that they are trying to avoid a future "car wreck" by demanding more money to "grow the game" now.

Maury Brown, president of The Business of Sports Network, summed up the frustration felt by fans and players over the lack of hard economic proof of impending doom in a tweet yesterday to the NFL owners: "If you have information -- financial info that can make a case why you're willing to lockout the players -- please show it."

Brown was plugging a blog post he wrote for Forbes.com yesterday titled "Numbers Show NFL's 'Economic Realities' for Lockout Unwarranted."

From Brown's post:

According to Kurt Badenhausen of Forbes SportsMoney, "The NFL has never been more profitable by our count with the average team earning $33 million in 2009 in operating profit (earnings before interest, taxes, depreciation and amortization) thanks to huge incomes for teams like theCowboysPatriots and Redskins."

The most recent Forbes NFL franchise valuations show 19 of 32 clubs being worth at least $1 billion. In Major League Baseball, where talk of a labor stoppage at the end of 2011 is nearly non-existent, only the Yankees have a valuation of over $1 billion, as ranked by Forbes

On the other side, the NFLPA has been playing up the "all politics is local" angle, telling civic and business leaders in various NFL cities that a lockout would be "devastating" to their local economies. These claims -- displayed prominently on their website, NFLLockout.com -- include: "If there is a lockout, an estimated $140 million would be lost in each NFL city" and "It is estimated that over 150,000 jobs would be effected [sic]."

The NFLPA's strategy has gained some traction. Local leaders and local media have parroted the NFLPA's talking points without examining whether they are legitimate.

Problem is -- they don't seem to be.

PolitiFact.com, a prominent fact-checking website, examined the NFLPA's claim in a November 22 letter to Atlanta's mayor that "[t]he conservative estimate is that every team city will lose over $160 million in lost jobs and revenue in the event of a lockout by NFL owners." You can read PolitiFact's analysis of the claim, but here's their conclusion:

Each independent expert we talked to believed there will be little economic impact if there is no NFL action next season, since they believe people will find other ways to spend their money. We rate the NFL Players Association's claim as False.

Basically, if people aren't spending money on football, they'll find some other interest.

Now, to be clear, there will certainly be economic losers if NFL games are missed. People who work in and around NFL stadiums will be out of work. These sorts of jobs were promised when communities were convinced by wealthy NFL owners to subsidize their stadiums.

Sports bars will suffer as it's unlikely any sport will immediately fill the void on Sundays. "It would be a killer, straight up. It would probably put us out of business," Mike Pressley, manager of the Cheyenne Grill and Sports Bar in Atlanta told AdAge.com. Pressley said that football Sundays account for 20% of his weekly sales and is 35% more than the next-closest day.

Las Vegas sports books are looking at an $850 million loss, Wynn Las Vegas Hotel sports book and race director Johnny Avello told AdAge.com.

"And that's nothing in the grand scheme of things," Mr. Avello said. "You start counting up the online betting, betting in other countries and, of course, illegal sports books, and it could be as much as $500 billion worldwide wagered on pro football. We might as well just go and spend more time at church on Sundays."

Other businesses likely to be affected: Fantasy football sites, sports blogs, StubHub and ticket sellers, beer wholesalers, hotels, etc.

But there's a larger group that stands to lose -- fans and taxpayers in NFL cities who have already spent billions on stadiums with the implicit assumption that there would be games. Fans have spent at least $6.5 billion in the last 20 years and $4.5 billion in just the last 10 years. These fans and taxpayers must demand that the owners and the players guarantee the games will go on or return some taxpayer funds.

Thus far, NFL owners are guilty of hiding their numbers and the NFLPA is guilty of exaggerating their numbers.

Meanwhile, fans are left without a seat at the bargaining table even though they've spent billions and billions already to build the game into America's favorite sport. Even the most skilled economist could not calculate how much the game means to its fans -- and how much will be lost if there's a lockout.

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Brian Frederick is the Executive Director of Sports Fans Coalition. He holds a Ph.D. in Communication and lives in Washington, D.C. Email him at brian@sportsfans.org.

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