The NFL Meltdown: A Case Study in Customer Mismanagement


The National Football League is unique as a supplier for its ability to heap scorn and abuse on its customer base while sponging it for all it is worth.

Ordinarily, an organization that is genuine about its commitment to the customer actively promotes and enforces an ethical standard that, above all else, celebrates and rewards employees for satisfying customer needs and for always acting with integrity.

The NFL’s fixation with bottom line profits, however, flouts this ethical standard to a fare-thee-well. As a result, the League is ferocious in its defense of the money-making juggernaut it has created: neither incidents of domestic abuse perpetrated by its players, nor the indecent disrespect visited on the American flag by a recalcitrant bunch can get in its way.

It should come as no surprise, then, that NFL team owners, coaches, and league officials shy away from enforcing the League’s own standard of personal conduct. Thatpolicyclearly states that “everyone who is part of the league must refrain from conduct detrimental to the integrity of and public confidence in the NFL.” Unfortunately, the League has decided that enforcement of such a common-sense policy might provoke an adverse reaction from its players. The League has therefore reasoned that it is better to take its chances offending a compliant fan base addicted to its gladiatorial sport.

Whereas in other industries disaffected customers change suppliers when confronted with subpar service, the government financed and protected cartel run by the NFL does not allow its customers to vote with their feet.

A SPORT PROTECTED BY CRONY CAPITALISM

The NFL took in $14 billion in revenues during 2016. This allowed the league to pay each of its players, on average, salaries in the range of $2 million. To be sure, this pales in comparison to what top earning players make. For example, the Detroit Lions’ quarterback Matthew Stafford recently signed a contract worth $135 million over five years. And, Pittsburgh Steeler quarterback Ben Roethlisberger, who apparently couldn’t find his way out of the locker room to stand for the anthem during a recent game, rakes in over $18 million a year. This largesse is born of the loyalty of millions of fans but more importantly by the monopolistic protection afforded the sport.

The NFL enjoys a unique antitrust exemption granted to it by Congress that allows it to fix prices in a way that few other industries enjoy. In practice, this allows NFL teams to pool their resources as they negotiate national media contracts. At the end of the year, all teams participate equally in the distribution of revenues. In 2016, each of thirty-two teams took in $244 million from league-negotiated media contracts. That means that media revenues, alone, amounted to $7.8 billion for the year. If you’ve ever wondered why ticket prices have climbed over 50% during the last ten years it is largely due to the League’s monopoly protection. The average NFL ticket now fetches $93 while the most expensive comes in at $122 courtesy of the New England Patriots. The antitrust exemption of the sport simply precludes any competitive pressures be brought to bear that might bend the cost curve downward for the benefit of fans.

Another perquisite afforded the plutocrats of the NFL until recently was its tax-exempt status. This was small potatoes in the scheme of things as it only applied to revenues earned by the League Office and not the individual teams which have always been taxed on their earnings. Still, granting any tax exemption to such a lucrative enterprise for decades grated on many including some members of Congress. The tax exemption was voluntarily relinquished in 2015 for the optics it afforded and to shield the public from learning the pay of the bureaucrats in the NFL Commissioner’s Office the most notable of whom was the Commissioner himself, Roger Goodell, who has taken down over $200 million in salary and bonuses since he took office in 2006.

THE NFL IS FINANCED ON THE BACKS OF TAXPAYERS

Billionaire NFL owners have also found a way to have the IRS tax code finance their megalomania. This has allowed the owners to soak local, state, and federal taxpayers for over $7 billion to build and renovate stadiums over the last twenty years. Tax-exempt municipal bonds, the original purpose of which was to finance public-use projects such as bridges, and roads are being used to finance private-use stadiums. That the Congress permits the indiscriminate use of this loophole in the tax code is indicative of the lawmakers’ complicity in the NFL’s abuse of its fan base.

And, the abuse is stunning: the Dallas Cowboys’ AT&T stadium carried a tab of $1.15 billion which was aided by city sales tax revenues of $315 million. A more egregious example is that of the Atlanta Falcons’ Mercedes-Benz stadium whose total cost of $1.6 billion was facilitated by a sleight-of-hand contract provision that will cost taxpayers a minimum of $700 million. This trend is probably a harbinger of what is to come as team owners race to outdo each other by building glitzier and glitzier stadiums not so much to please their fan base as to line their own pockets.

CORPORATE SPONSORS HAVE THEIR OWN ETHICAL DILEMMAS TO RESOLVE

Corporate sponsors of the NFL spent $1.25 billion during the 2016 season to market everything from Snickers (Mars) to Insurance (USAA). Clearly, corporate sponsorships are an important source of revenues for the NFL and it remains to be seen if these corporations will abide their own code of conduct. Mars, for example, states in its Principles of Responsibility that it disapproves of “disrespectful behavior of any kind.” Apparently, that does not include taking a knee for the anthem. Especially galling in this context, however, is USAA Insurance which markets exclusively to military personnel and their families. The company must certainly be aware that the first stanza of the Military Code of Conduct reads: “I am an American, fighting in the armed forces which guard my country and our way of life. I am prepared to give my life in their defense.”  When aservice member does give up his life, the surviving spouse is entitled to a whopping maximum burial allowance of $2,000 and usually much less. USAA’s muted response to the disrespect shown our flag and our troops speaks tomes about whether it cares more about the military family or the almighty dollar. I think we all know the answer.

The greatest hypocrisy in this connection comes courtesy of Nike. The company, an NFL sponsor through 2028, featured Colin Kaepernick, the begetter of the move to kneel before the flag, in its 30th anniversary “Just Do It” campaign. The NFL, for its part, agrees with Nike’s decision to hire the histrionic Mr. Kaepernick by stating that “…we embrace the role and responsibility of everyone involved with this game to promote meaningful, positive change in our communities.” Needless to say, the NFL seems to believe that showing disdain anddisrespect for the flag promotes “positive change in our communities.”

When an NFL corporate sponsor does speak up there is hell to pay. Papa John’s, the NFL pizza sponsor since 2010, blamed the pizza chain’s declining sales on the players’ anthem protests. “The NFL has hurt Papa John’s shareholders,” said John Schnatter, the firm’s CEO and founder. Mr. Schnatter eventually stepped down as CEO and Chairman of the company in the wake of the firestorm and after uttering a racial slur during a conference call. Papa John’s also lost its NFL sponsorship although it will apparently sponsor individual league teams. Pizza Hut, a company with no apparent scruples to call its own will become the new NFL pizza sponsor for the next four years.

A FINAL INDIGNITY

The American Veterans organization, AMVETS, 250,000 members strong and dedicated to serving the needs of veterans was asked by the NFL to place an ad in the Super Bowl game program. When it submitted an ad featuring soldiers carrying an American flag with the words “Please Stand,” it was summarily rejected. NFL spokesman, Brian McCarthy, rationalized the League’s decision by stating that, “…the game day program has never been a place for advertising that could be considered by some as political statement.” Clearly, the disdain shown by brutes on game day who kneel for the anthem is not a political statement according to Roger Goodell and his unpatriotic minions.

IT’S TIME TO MOVE THE GOALPOSTS

The disrespect shown our flag, our anthem, and our troops by those who would rather grandstand their grievances in public rather than play football calls for a response on the part of the Congress, corporate sponsors, and fans who, in the end, pay all the bills. For one, Congress needs to revoke the NFL’s antitrust exemption. Billionaire team owners must learn to operate, as most businesses do, in a truly free market environment for the benefit of their customer base if not their bank accounts. Congress also needs to step in and disallow the use of tax-exempt municipal bonds to finance any private use stadiums or facilities. Third, corporate sponsors who are conflicted about whether market share or respect for the flag carries the day need to be met by a heady response on the part of consumers. Let’s face it, the market is chock-a-block with candy bar makers, insurance policy suppliers, and pizza joints. Finally, the proposed “compromise” by the NFL to allow disaffected players to remain in the locker room during the playing of the national anthem while fining teams – and not the individual players who disrespect the flag on the field – is further evidence that this league doesn’t give a tinker’s damn about the American flag. My compromise would be that if players are allowed to remain in the locker room during the playing of the anthem they might as well stay home.

As far as I’m concerned, until such time as the flag, the anthem, and our troops get the respect they deserve we are probably better off reading a good book – or maybe even a bad book – on game day.

Management Advisor

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