Game Changer: Mega-Lawsuit May Upend Football
Scattered complaints are gathered into a class action lawsuit. Will this be the blitz that changes the game?
MINYANVILLE ORIGINAL This summer, just as hundreds of fans are starting practice at fantasy football camps, thousands of football pros are heading to courts where an entirely different game will be played. And this one might fundamentally change the sport.
Last week, some 2,000 former National Football League (or NFL) players sued the league, alleging it concealed from players the risk of brain injuries while touting the brutality of the sport to the public. The 86-page suit filed at US District Court for the Eastern District of Pennsylvania also names official NFL helmet maker Riddell and its parent company Easton-Bell Sports. Easton-Bell is a subsidiary of RBG Holdings, which is owned by EB Sports. None of these are public companies although Easton-Bell has filed with the SEC regarding revolving credit administered by JPMorgan (JPM) among other banks.
Called a "master complaint," the suit joins more than 80 other lawsuits previously filed by former players and remains open for other players to join. This pro-level shot across the bow follows extensive public debate earlier this year about whether or not college football should be banned. (See also: Ban College Football? The Debate Is On and Wrap-up: Ban College Football? How the Debate Went Down.)
A key complaint in both this mega-suit and the call for banning college football centers around the physical damage that players suffer, and in particular, damage due to concussions.
According to Malcolm Gladwell, whose article in The New Yorker entitled "Football, Dogfighting, and Brain Damage" started the recent debate about college ball, the impact an average football player receives to the head is comparable to being rammed into a brick wall at 25 mph. Furthermore, players can expect to do this 4,000 times over the course of their college careers.
The traditional argument against this point pretty much boils down to, "We're American, and if want to ram our heads against a brick wall, metaphorically or not, no one should stop us."
Yet in a society where the mayor of New York succeeded in banning smoking in public (and has now proposed a ban on soda pop served in containers larger than 20 ounces for fear the general public is consuming too many calories), it's pretty easy to shred this argument.
The other argument is proving more difficult to unhinge: Money. Billion of dollars. With the teams plus the NFL together worth over $40 billion, it's not a stretch to peg the entire football industry at $50 billion plus.
Each NFL team's value averages just over $1 billion. With 32 teams, that's $32 billion. The NFL is estimated to be a $9 billion per year industry supported by at least 25 official sponsors, according to The Biz of Football, including Pepsi (PEP), Coca-Coal (KO), General Motors (GM), and Anheuser-Busch (BUD). Technically, the NFL is a nonprofit organization. But as Atlanta Falcons wide receiver Roddy White noted, "It's a nonprofit organization that makes a lot of profit." Altogether, that's over $40 billion and that figure doesn't even take into consideration TV ad revenues or college football.
Nike (NKE) is the official provider of NFL uniforms. Like a lot of sponsors, Nike is not just involved at the pro-level but at the collegiate level. Nike sponsors almost 100 college football teams and profits from the production and sales of fan merchandise.
Like their pro counterparts, the college teams are valuable in their own right. In 2007 Forbes magazine reported that the University of Texas Longhorns were worth $92 million and had earned $46.2 million. Official sponsors of the Longhorns included Coca-Cola, AT&T (T), and Time Warner Cable (TWC).
The University of Tennessee Volunteers football team is sponsored by Dish Network (DISH), Ford (F), Verizon (VZ), Adidas (ADDYY), and Coca-Cola. Each company pays an estimated $750,000 per year to the team.
And at the college level, the various bowls have corporate sponsorships. When the 2012 AT&T Cotton Bowl aired in January, 7.86 million viewers tuned in to FOX (NWSA).
While the sponsorships are exposure sponsors are willing to pay for, the injuries sustained by players is less flattering.
On May 2, 2011 the New York Times reported that Chicago Bears star Dave Duerson had developed Chronic Traumatic Encephalopathy, a progressive degenerative disease of the brain, before shooting himself in the chest. He famously requested that his brain be donated to science for research. Exactly one year after the Times released this information, NFL Pro Bowl linebacker Junior Seau was found dead in his apartment, also shot in the chest. The police suspect suicide.
May 24, Easton-Bell announced that each Riddell football helmet would include a "concussion awareness handtag." In its SEC filings, the company notes that its entities are named in 14 suits by groups of retired NFL players. In the event that Easton-Bell is determined to have liability, the company believes its insurance would cover any losses. The SEC filing doesn't detail the previous coverage but notes that it has current primary, secondary, and tertiary policies that combined cover a total of $53,000 per product.
In response to the recent mega-lawsuit, the NFL said on on June 7, "Any allegation that the NFL has sought to mislead players has no merit. It stands in contrast to the League's many actions to protect players and advance the science and medical understanding of the management and treatment of concussions."
Next, the League faces the US court system. Meanwhile, it was reported the New Orleans Saints used bounty incentives to pay 22-27 defensive players to injure opposing players in 2009, 2010, and 2011. Knockouts were reportedly worth $1,500 and "cart-offs" $1,000, with payments doubled or tripled for the playoffs.
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