Mendoza School of Business

Professor: NFL Brand at Risk

Published: September 26, 2012 / Author: Mendoza College

The following article appeared in Inside Indiana Business and quotes Finance Professor Richard Sheehan about the NFL and the replacement officials. To read the entire article and listen to the interview visit: Professor: NFL Brand at Risk

As the NFL referee lockout approaches its fourth month, the league continues using replacement officials while anger mounts over allegedly blown calls, including a controversial call Monday resulting in a Green Bay Packers loss to the Seattle Seahawks.

University of Notre Dame Finance Professor Richard Sheehan, who specializes in the economics of sports, says the NFL is wasting money and time.

“Estimated NFL profits in 2011 were $1 billion,” he says. “The estimated value of the NFL brand is $1.5 billion. The estimated total compensation of NFL referees is $18 million. The difference between the costs of NFL and referee proposals is less than $3.5 million. So, the NFL is willing to risk a substantial part of $1 billion to save a few million? I would like to arrange a poker game with the person who made that decision.”

The author of “Keeping Score: The Economics of Big-Time Sports,” Sheehan says problems with the replacement officials were widely predicted in advance, leading to preseason conventional wisdom that the lockout would be short lived.

“You would have to be incredibly stupid, amazingly fool-hardy or simply and marvelously arrogant to think that you can bet even a small fraction of your brand equity on the proposition that you can save money by locking out the referees and come out ahead in the end,” Sheehan says. “Suppose you figured the worst-case scenario would be some bad calls and bad PR and maybe a $10 million ‘hit’ on your brand equity— less than 1 percent. You are risking $10 million to possibly gain $3.5, and the odds of winning have to be better than three to one to make that a sound wager.”

When assessing who is likely to win in a lockout or strike, Sheehan says one critical determinant of success is bargaining power.


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