News leaked out this week, via Tim Twentyman of the Detroit News, that the Detroit Lions are placing their employees, from head coach Jim Schwartz down through the rest of the staff, on two week furloughs. Several other teams have taken a variety of approaches, from saying they weren’t going to cut salaries, to reductions in salary while employees continue to pay, to things like the forced furloughs. (Pro Football Talk has a summary of those organizations). The Detroit news, though, comes less than three weeks after team president Tom Lewand said that ticket sales were on the rise in 2011 despite the lockout.
I think these moves are short-sighted and do not endear the owners in this lockout situation. I understand that they are a business, and just like any business, you can’t pay people when you don’t have income coming in or don’t have work going out. At this point, though, these moves seem premature, or if you are cynical, a pretextual way to squeeze a few extra bucks of profit in the short term by claiming poor with the lockout.
We don’t know what these teams make and spend in detail. Green Bay is the only public entity and they do put out a profit and loss statement. Blogging the Boys, an excellent Dallas Cowboys’ team blog, did a breakdown of the profit categories. The largest single source of income is the network television rights fees. Those are the subject of dispute right now in litigation, but the teams got all the rights fees for 2010, and they haven’t missed any payments for 2011 as of yet. The second largest was ticket revenue. Teams keep the majority of ticket sale income individually, but do profit share. I would imagine most of this source comes in during the spring. Some teams are down, but we also know that Detroit claimed to be ahead of previous years. After that, it is NFL Properties income (NFL merchandise, NFL Network, DirecTV and Comcast fees), Pro Shop/Marketing (local merchandising and sponsorships), plus parking, concessions, and luxury box income.
On the other hand, the major expense is player costs, which includes things beyond salary. The owners have arguably saved outlaying lots of cash that they would have normally spent on free agency and retaining players through bonuses–an expense they normally would have had. They aren’t paying player salaries right now. Combine that with team expenses and game expenses, and most of what they spend money on isn’t happening or hasn’t kicked in yet.
So they are planning ahead, trying to save money now for potential slowdowns in income stream, but I think it’s short-sighted. Let’s face it. If the television rights fee litigation doesn’t go in the owner’s favor, and they still choose to lockout, risk missing their debt obligations on some of the new stadiums and have to refund tickets and miss out on television money, then 1 million that they may save now by having employees rotate through 2-week unpaid vacations will be a drop in the bucket.
The owners have known that they wanted to go this route–it was their choice. They didn’t plan on it and allocate? This isn’t like the case of a small business owner having to layoff employees because the work just isn’t coming in, or not providing health insurance because it is too cost prohibitive. The light is very much at the end of the tunnel and nobody’s going bankrupt (unless they are bigger fools than I think).
The NFL owners hold the means of addressing this. They could resolve the labor stoppage tomorrow. They want even more money in the future though (that’s their right), but you would think as a business, if you are taking a position to make substantially more money, you would want to bring your quality employees through it with you without affecting corporate morale or risk losing your good employees to other companies. You would think you recognize that, in order to make that money, you might need to realize a little less profit in the short term in May, June, July. It would be like a company making an investment that ties up immediate cash to make more money: should you alienate the people so that you, the decisionmaker, gets a steady stream while targeting greater profit?
I realize I just spent too many words on this. I’m not one for ad hominem attacks, but if I wanted to go the easier route, I could have just said that the Bidwells and Fords have opted for the furlough route. I like to ask myself WWBFD? And then do the opposite.
[photo via Getty]