Market Overview

Future of NFL Football: Scandals, Injuries Raising Concerns

While football fans may be excited about the start of the 2012 NFL Draft on April 26, 2012, recent scandals and talk regarding football injuries may be raising concerns regarding the sport going forward.

ESPN's John Barr recently reported that the New Orleans Saints general manager Mickey Loomis allegedly "had an electronic device in his Superdome suite that had been secretly re-wired to enable him to eavesdrop on visiting coaching staffs for nearly three NFL seasons." According to the article, "Loomis, who faces an eight-game suspension from the NFL for his role in the recent bounty scandal, had the ability to secretly listen for most of the 2002 season ... and all of the 2003 and 2004 seasons."

Barr noted that the alleged actions "could be both a violation of NFL rules and potentially a federal crime" in light of the federal Electronic Communications Privacy Act of 1986, which prohibits any person from intercepting communications from another person using an electronic or mechanical device.

According to the article, the listening device was first installed in the general manager's suite in 2000 under Randy Mueller, the Saint's general manager prior to Loomis, and was to be used to monitor communications of the Saints' coaching staff. The device was later "re-wired to listen only to opposing coaches and could no longer be used to listen to any game-day communications between members of the Saints' coaching staff." Per the article, it is unclear whether Loomis ever used the device.

This recent scandal involving Loomis and eavesdropping on visiting teams hearkens back to the "Spygate" scandal in 2007 when the New England Patriots were disciplined for using video equipment during a game to tape New York Jets' defensive signals. After the scandal came to light, the NFL fined the Patriots head coach Bill Belichick $500,000, fined the Patriots $250,000, and imposed limitations on the Patriots' ability to draft in 2008. At that time, NFL Commissioner Roger Goodell said in a letter to the Patriots, "This episode represents a calculated and deliberate attempt to avoid longstanding rules designed to encourage fair play and promote honest competition on the playing field."

This recent scandal involving Loomis also comes in the aftermath of "Bountygate" where it was discovered that the Saints operated a slush fund that would pay out bonuses for in-game performance. According to Yahoo! News' Steve Silverman's commentary on March 4, 2012 discussing Bountygate, "It's going to get worse in New Orleans before it gets better. A lot worse." Silverman: "Loomis will almost certainly have to deal with the fallout from the bounty program... As this mess continues to unfold, it's going to get much uglier." In light of allegations of eavesdropping on visiting coaches, the situation does appear to be getting uglier.

Commissioner Goodell has previously said that his role involves "protecting the shield" of the NFL. Goodell: "My job is to protect the integrity of the NFL and to make sure the game is as safe as possible." From my perspective, Goodell has done well in the addressing various scandals and maintaining honor in the NFL. That being said, one cannot help but notice emerging concerns regarding the game going forward. Even aside from in-game scandals, the specter of football injuries adds a precarious dimension to the sport.

On April 23, 2012, the UK's Daily Mail reported how former football star "Ray Easterling 'shot himself' at home after struggling to cope with dementia." Per the article, Easterling had been struggling with brain damage, depression, and insomnia. Further, Easterling was in the process of suing the NFL amid claims that the league "covered up links between football and brain injuries." Daily Mail: "His wife, Mary Ann Easterling, said she would continue the lawsuit in which she claims the NFL tried to cover up the danger of concussion. In the last year, the suicides of several sportsmen have been linked to chronic traumatic encephalopathy, which is caused by repeated blows to the head and often leads to bouts of depression and anger." Mrs. Easterling "intends to force the NFL to set up a fund for injured players as well as educating them about the risks."

On March 27, 2012, the Washington Times reported that 126 former football players filed a mass-tort lawsuit against the NFL. Washington Times: "The lawsuit alleges that the NFL was aware of the risks of repetitive traumatic brain injury but hid the information and misled players, resulting in permanent brain damage or neurological disorders." The NFL later released a statement in response to the lawsuit: "The NFL has long made player safety a priority and continues to do so. Any allegation that the NFL intentionally sought to mislead players has no merit. It stands in contrast to the league's actions to better protect players and advance the science and medical understanding of the management and treatment of concussions."

Super Bowl XLVI in February 2012 seemed to come with the backdrop of the looming issue of player injuries. At that time, I mentioned an excellent NFL commercial that played during the Super Bowl discussing the development of professional football and player safety. From the commercial: "We certainly have come a long way. Thing is, we're just getting started. Here's to making the next century safer and more exciting than ever. Forever forward, forever football." Even aside from changes in equipment and rules, it may become harder and harder for football to retain any sense of timelessness in the coming years. Former NFL quarterback Troy Aikman commented in February 2012 that in light of injuries, concussions, and the media, "the long-term viability [of football]...is somewhat in question as far as what this game is going to look like 20 years from now." Aikman suggested that if he had a son, Aikman may not encourage him to play football: "With other sports, you want your kids to be active and doing those types of things."

In a way, American football's evolution seems to be revealing a number of multiple, distinct sports. Believe it or not, the game of American football has its roots in association football (or soccer). The 1869 match between Princeton and Rutgers is regarded as being the first game of American football, yet the actual sport played probably more so resembled soccer or rugby. Whereas some evolution in sports can be expected, unlike a sport like soccer, if you contrast the game of football as played by Jim Thorpe to the football of Otto Graham to the football of Brett Favre to the football of Aaron Rodgers, you begin to see how American football has changed. And that's not even getting into arena football or Canadian football. As is evident (for example, in the Madden video game series), various changes in football can create issues of legitimate continuity in the sport.

I think there are reasons to believe that American football will evolve further. In my humble opinion, I think a noble target for professional NFL football in four or five decades can be found in the sport known as "rugby league". Arguably, the Wildcat formation is a step in this direction towards rugby league.

NBC Sports' Michael David Smith reported on April 14, 2012 that the NFL is "evolving toward" eliminating kickoffs, whereas the league's moving kickoffs to the 35-yard line "may have been the first step toward moving kickoffs out of football completely". Smith: "That's the word from Giants owner John Mara, a Competition Committee member who says the conversations have already started about potentially taking the play that has started every football game in history out of the league for good." Interestingly, Mara said that "the Competition Committee's top priority is player safety, and that the increase in touchbacks last year coincided with a decrease in concussions." Even further, "The NFL is serious enough about cutting down on injuries on kickoffs that last year's rules change won't be the last one."

I do think that American football will remain popular for the foreseeable future, but I do think changes may be in store in order to reduce injuries and make the game more viable in the long-term. If the NFL is looking for practical options to make the game safer and more viable while maintaining popularity and excitement with fans, I think it may help for the league to take a look at sports like rugby league, rugby union, Gaelic football, and Australian rules football. Given American football's history and rich tradition, I do think that perhaps considering a gradual transition over the next few decades to a more rugby-league-like sport may be for the best: more rugby-style tackles, perhaps a wider field, less equipment, and more innovative running plays. Being a football purist, I wouldn't mind seeing a return to a more tactical, strategic running game akin to rugby league with less emphasis on the quarterback and more emphasis on speed, athleticism, and strategy.

At the very least, I think professional football getting to a point where the rules no longer need to be changed would be a worthy goal for the NFL. As I've previously suggested, football in the year 2070s and 2080s may look very different from the sport we recognize as football today. We may see a wider field, less equipment, advertisements on jerseys, et al. I can only imagine what the video game Madden '77 would look like at that point in football's history.

Traders taking note of developments in the NFL may want to keep an eye on Nike (NYSE: NKE) and Under Armour (NYSE: UA). In terms of beverage stocks related to football's success or failure, traders can check out Anheuser-Busch InBev (NYSE: BUD), Coca Cola (NYSE: KO), and PepsiCo (NYSE: PEP). Other stocks to keep an eye with respect to the NFL include the ESPN owner Walt Disney Co. (NYSE: DIS), Electronic Arts (NASDAQ: EA), Sysco (NYSE: SYY), and DirecTV (NASDAQ: DTV).

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