Lockouts (NFL and NBA)

St. Louis Rams linebacker Bryan Kehl  had time to stop by a Chamber of Commerce golf outing a couple of weeks ago because of the NFL lockout. 

 

The NFL owners have voted to approve a new labor deal with the players, and it appears things are progressing so that we will have professional football this season.  While this will have significantly more financial impact on a company like News Corp than their troubles across the pond, I believe there are two additional lessons from the NFL experience.

 

First, even when progress appears to be excruciatingly slow, deals can come together very quickly at the very moment when pain is about to set in.  In the NFL case, both the owners and the players didn't have enough incentive to find agreement until now.  It appears that a deal only came together once there was a real threat that regular season games would be lost.  Several months ago, politicians in Washington finally agreed to a budget deal in a similar fashion on the eve of a partial government shutdown.  Personally, I believe history will be repeated, and Washington will find a solution to the current debt ceiling debate.

 

Second, I'm afraid the economics suggest the NBA lockout will be more protracted.  The NBA television contracts are guaranteed for 365 days following a work stoppage.  That is approximately $29.4 Million of revenue for each NBA team this season regardless of whether games are actually played.  That's a lot of flexibility for the owners.  The players are trying to find some of their own staying power by agreeing to play in Europe, etc.  In other words, pressure isn't even building yet for everyone in the NBA to come together to get a deal done.

One last thought on the NBA television contracts.  The NBA must negotiate fair value with the networks if payments are made for canceled games.  However, the payments are made according to the contractual schedule, and then any fair value negotiations are made once play resumes.  In the event that the NBA lockout continues until the end of 2011, Disney is on the hook for $120.47 Million and Time Warner is responsible for $133.67 Million.  That is, these two companies will pay $250 Million with a promise to negotiate value once play resumes!  Obviously, there would be additional payments if the lockout headed into 2012. 

Thoughts on Charitable Giving

Giving USA recently released their 56th annual report on philanthropy.  They do a terrific job of estimating the amount of charitable giving in America and tracking it on an annual basis.  I think it's always a fascinating report to review, and this year was no exception.  For me, there are three main lessons this year:

1. "Revised" numbers confirm 2009 was a difficult year for non-profits, and the pain still isn't over.

The original estimate of charitable giving for 2009 was $303.75 Billion.  However, that number was revised down by 8% to $280.31 Billion.  While the reported number for 2010 "increased" $10.5 Billion to $290.89 Billion, this is still 4% lower than the original number reported for 2009.  The vast majority  of this revision was not allocated out to individual areas, but there were minor negative revisions in the religion, education, and human services categories.

2. Life for the upper class is getting back to normal while the lower class continues to struggle.

I know I'm generalizing here, but charitable giving continues to grow in areas attractive to some in the upper class.  International affairs, the arts, and gifts to private foundations all increased from 2009 levels.  On the other end of the spectrum, giving to Human Services was revised down by 2% from the original 2009 estimate.  In addition, the 2010 number in this category includes $1.07 Billion for relief in Haiti.  If this is taken out, 2010 giving in the Human Services category declined by 6.2% from the original 2009 estimate.  In other words, fewer private resources appear to be available to meet basic human needs of those among us who have the least.

3. Religion continues to be big business.

Giving to religious organizations continues to be very stable at approximately $100 Billion a year.  This is the single largest category, and is roughly the size of the next three categories (education, private foundations, and human services) combined.  Hopefully, this is the mitigating factor to the second point above as many religious organizations spend significant resources to help meet basic human needs.

One other quick thought on the subject of religious giving.  I like football as much as the next person (I'm a long suffering Minnesota Vikings fan), but I've started thinking about that $100 Billion a year Americans "spend" directly on religion every time I read an article on the NFL lockout and their difficulties as a $9 Billion a year business.  It just helps to understand what our priorities really are.

I find great hope that most charitable giving is still done by individuals rather than corporations or foundations.  Most people do not give to charity because of a marketing campaign.  They give money to ease suffering, provide opportunities to others, and create a better society.  While most charitable giving is not specifically noticed, I love reading the summary each year.