NFL less cash flow

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0NyrM4Uck8E

Summary
Anthony Noto, the CEO of NFL, reported a 9% gain in total revenue while salaries (60% of expenses) and cash flow resulted in a 9% and 8% respectively in the season of 2008-2009. As a result of decreased cash flow and increased expenses, Noto realized it is urgent for NFL to start controlling players’ salaries. The management of NFL planned to terminate players’ contract two years before it ends in 2012. However, management team of NFL clearly know it will be hard to convince player to take less from NFL. There are rumours that there will be a “possible strike and lockout following 2011 season.” Presently, NFL has already capped the salaries for each team to be $128 millions and top 8 teams in the league are restricted to certain number of free trades and payroll.

Connection
This article mentioned how operating activities can affect the cash flow of the operating section in the cash flow statement. Despite the elevation in revenue, NFL reported a decrease in both net cash flow and operating expenses. This is mainly due to increase in players’ salaries and full payment of cash must be credited from bank account at the end of the fiscal period. Less cash flow and decrease in net income will less likely attract investors as they are seeking for steady and long-term growth return. If the problem lingers, financing will become harder for NFL and NFL might experience insolvency in a long-term run. Moreover, because there is a possibilities that a strike will take place, events of such will lag the cash flow of the NFL. The main reason behind the drag is NFL still has to pay operating expenses while having zero revenue from television broadcast and gate entries during strikes.

Reflection
I agree with Noto’s move to renegotiate salaries with NFL players because salaries are the largest portion of operating expenses and it can significantly reduce NFL cost in the future. If deduction is not reached, a frozen salaries level must be implemented to ensure NFL's benefit. While controlling salaries, it is also important for NFL to explore new markets like India and China. A possible method can be sponsoring inter-school league teams or work together with milk industry to gain popularity in these “football deserts.” By presenting this promotion plan to investors, NFL will be able to acquire extra funding from them which will consequently increase their cash flow through financing activities. When television broadcasts in China and India are determined, players and NFL can then negotiate to come up with a “win-win” solution.