Referee negotiations put NFL in tough spot

Are experienced NFL referees worth such a small investment of the league's overall revenues? Mark J. Rebilas/US Presswire

When companies replace one ingredient for another in order to save product costs, the first question they ask is: What is the opportunity cost?

That is, what do you gain and what do you lose from making a decision like the NFL has in locking out its referees?

The immediate answer for the NFL is that they save money. But how much money is it, and is it worth the trouble?

Here's what you have to know:

The average NFL game official last season made $8,764 a game. Under the NFL's last proposal, that would increase to at least $11,117 per game by 2018.

The league is paying the head replacement referee and the other replacement officials $3,500 and $3,000 per game, respectively.

When taking into account the entire package of where the NFL Referees Association and the NFL stands now, a source tells me the difference between them is north of $45 million over seven years.

Let's look at this from each side.

If you're an official, you take pride in what you do and you certainly think that you do a better job than the guy who is replacing you now.

Some officials have day jobs that they would be forced to leave so that they could be full-time referees. That has to account for some additional compensation.

And then there's this: The NFL pulled in $9.3 billion in revenues last year. In 2010, NFL commissioner Roger Goodell said he hoped that the NFL would hit $25 billion in annual revenue by 2025. Assuming that 10.5 percent a year growth rate -- and the numbers are surely going to be aggressive with the league pulling in $4.9 billion worth of television rights fees annually starting in 2014 -- the league will be bringing in $16.1 billion worth of business by 2018.

If the league pays the referees roughly $40 million a year, which is an estimate based on the referees' offer and the league's idea of expanding crews, that's 0.2 percent of the revenue the league takes in.

Are the refs worth that seemingly small investment?

The league and the owners may ask how much of being a referee is a unique skill. But what's the difference between a good and bad official? What does it cost us if an official really messes up?

The first two questions are a matter of opinion, but the last question is more of a known commodity. If an official blows a call and that call affects the outcome of a game, that one decision could cost a team millions and millions of dollars.

Now if all the owners are like Dallas Cowboys owner Jerry Jones -- who says mistakes are going to happen anyway -- roll the dice and pocket the $200,000 savings per year, per team.

But it's hard given the league's growth for fans to accept that that's the best option.