NFL’s Referee Spat: Everyone’s Screwed

by Marc Bastow | September 25, 2012 1:55 pm

When my wife comes in from an early-morning Starbucks run and asks me if I saw the controversial end to the Monday Night Football game between the Green Bay Packers and the Seattle Seahawks (I did not), it’s time to sit up and take notice.

It’s particularly shocking when she lets me know it was all the talk in the coffee line, and she wants my “take” on the replacement-referee situation that is dogging the NFL and its legions of fans.

It’s hard to find a starting place for all this, so let’s begin at the ending:

The Play

Monday night’s game ended with a Hail Mary throw[1] by Seattle’s Russell Wilson that resulted in Green Bay defender M.D. Jennings and Seattle receiver Golden Tate seemingly both coming down with the ball.

While the fan/talking head consensus is that Jennings possessed the ball first (and thus intercepted it) — and that Golden Tate appears to have committed a pass interference penalty — the referees ruled that Tate made the reception, awarding the Seahawks the touchdown and a 14-12 victory.

This ended what was one of the most contentious, frustrating and bizarre weekends in the history of America’s favorite sport.

The culprit: Replacement referees, who have struggled to officiate games that, while still “football,” are leaps and bounds beyond the small-college or high school level to which they are accustomed.

And it doesn’t appear the situation will be remedied anytime soon.

The Lockout

The collective bargaining agreement between the NFL and the NFL Referees Association expired in June, and with no agreement in place, the owners “locked out” the refs. In other words, the referees could not work NFL games.

In advance of the 2012 season, the league hired replacement referees, none of whom had officiated anything at or above the NCAA’s Division I level.

Before we move on, understand that the NFL is a booming league[2] that’s projected to generate $9.5 billion in revenue this year through lucrative broadcasting rights agreements with numerous television and cable networks in the U.S., including CBS (NYSE:CBS[3]), News Corp‘s (NASDAQ:NWSA[4]) Fox, Disney‘s (NYSE:DIS[5]) ESPN and Comcast‘s (NASDAQ:CMCSA[6]) NBC; merchandising agreements[7] with Nike (NYSE:NKE[8]); and sponsorship agreements with every beer, pop, food, telephone, TV, insurance … oh, you get the point.

The dispute with the NFLRA revolves around three main issues:

1. The NFL wants to change how NFLRA members receive retirement benefits[9], going from a defined-pension plan in which the NFL contributes a set amount each year that provides a fixed, stable retirement revenue source, to a defined-contribution 401k plan. Current full-time NFL employees (the league considers the referees part-time employees) are all on a combined defined/401k plan. This issue appears to be the main sticking point.
2. The salary pool for all 121 union referees is $18 million, or roughly $149,000 per referee. The NFL has offered to add $1 million per year to the pool. (Because I am not a referee, I have no idea how much any of that means relative to time invested in the profession. But I do know the job is difficult.) The majority of referees have “primary” jobs that announcers love to tout when they talk about officiating crews, however, so it’s likely this point can get worked out since the refs are making money elsewhere.
3. The 121 referees are broken up into 17 crews that work the games (which means there is one extra crew). The NFL wants to add another three crews to increase the pool to 140 referees. Needless to say, the referees feel that would imperil their job security since they could be — you know, replaced — if they did not perform.

In monetary terms, those issues come out to a difference of around $4 million per year[10], according to a league memo from the NFL’s chief attorney, Jeff Pash.

The math says that is 0.04% of league revenues.

Losers and Losers

That brings us to Tuesday, reeling from a Monday night in which the officiating crew missed (or made, depending on your rooting or betting interest) the right call.

Either way, this situation is a mess, and that’s a call nobody can dispute.

The NFL is dug in, believing it has nothing to lose here — except, of course, the integrity of the game, which it espouses at every opportunity. And if you think that integrity isn’t in jeopardy, search #nflreferee[11] on Twitter and soak in the fireworks.

As for the referees … well, at first, most felt they had everything to lose. After all, the NFL was expected to keep on playing Thursday, Sunday and Monday no matter what, and it has.

InvestorPlace colleague Dan Burrows rightly pointed out the economics of elasticity of demand, which basically means that as a Baltimore Ravens season-ticket holder and fan, if my wife were the back judge, my daughter’s Sheltie Sadie the field judge and Ryan Seacrest the umpire, I still would go to Thursday night’s game against the Cleveland Browns.

But with every game, the replacements refs are showing they are (through no fault of their own) incapable of officiating games at this level. Period.

Meanwhile, teams and their fans are being screwed over a meager sliver of NFL pie.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he did not hold a position in any of the aforementioned securities.

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