Sports Business: FOOTBALL
HOW THE NFL LOSES FANS AND GETS RICHER
The lords of football master the playing field that matters
Yep, it's time for Super Bowl XXXII, and emotions are running as high as those Roman numerals. Will it be John Elway and his long-shot Denver Broncos or the sentimental favorite and defending champ Green Bay Packers? As another season of bone-crunching, end-zone-prancing action ends, it's about pride. It's about honor. It's about commercials that cost $43,000 a second.
Yet for owners of the 30 National Football League franchises, the Super Bowl is something more: It is public affirmation that their sport remains the hottest and healthiest of the major leagues. Never was that more apparent than on Jan. 14 when the NFL announced the last in a series of television deals so rich they'd almost make Seinfeld blush (page 40). Total value over eight years: $17.6 billion--not counting escalator clauses in the contracts. That's quite a leap from the four-year, $4.4 billion deal now expiring.
RICH COWBOYS. Has there ever been a better time to own a piece of the NFL? Not if unprecedented wealth is your thing. According to Financial World's annual survey (before the deal), valuations of NFL franchises average $205 million, compared with $148 million for the National Basketball Assn., $134 million for Major League Baseball, and a mere $90 million for the National Hockey League. Of the 10 priciest teams, 7 are in the NFL. The top-ranked franchise? America's gold standard, the Dallas Cowboys, valued at a cool $320 million.
Football's economic vitality can be explained in a word: television. The NFL's new national TV contract figures to put as much as $74 million into the pocket of each owner each year--before the first 50-yard-line ticket or stadium hot dog is sold. (Compare that with Major League Baseball's network TV deals, which pay each club not quite $11 million.)
In next season's lineup, Fox will keep the National Football Conference. CBS will replace NBC as the network of the less telegenic American Football Conference--at twice this season's price. ABC will keep Monday Night Football, and cable cousin ESPN gets the Sunday night package. Of the major nets, that leaves only NBC without a pigskin.
Say this for the NFL's savvy TV negotiators: They know how to run an auction. There's just never enough games to quite sate the ravenous nets and cable operators. "They understand the business of supply and demand," says Sean McManus, president of CBS Sports. "And this time, there is supply of three and demand of four. When that happens, batten down the hatches."
So it's not unlikely that all the owners get down on their knees at night and thank God for Fox and cable. Without them, the NFL fees might not defy the laws of gravity--and economics. After all, football audiences are getting smaller: Monday Night Football ratings have slipped each year for the past three. The NFL's shifting geography hasn't helped, either. It gnaws at the nets that there are now no franchises in three of the largest TV markets--Los Angeles, Houston, and Cleveland.
But hey, it's still the NFL. And, say network executives, nothing draws a bigger crowd on a snowy Sunday afternoon. That's just part of the importance, though. Says McManus: "No one anticipated that on the heels of losing the NFL [four years ago], eight CBS stations would go over to Fox. No one anticipated the terrible effects on 60 Minutes. No one anticipated the demoralizing effects on the entire company. Morale was horrendous. You can't describe how unpleasant it was for employees of CBS."
For owners, the TV windfall amounts to a fat insurance policy against such hazards as front-office bungling and pricey players who fail to perform--the sort of thing that might threaten profits in other leagues. Even the perpetually downtrodden seem to prosper. Case in point: the lowly Arizona Cardinals, who have mustered three winning seasons in the past 21 yet, according to Financial World, operate in the black.
Of course, the NFL isn't perfect. Just as big TV money unites the owners, big money from other sources increasingly divides them. The latest battlegrounds are the closely linked issues of team relocation and new stadiums. In the past two years, Baltimore and Nashville have snared franchises almost entirely on the promise to build sports palaces that deliver such lucrative renenue streams as private-box rentals, upscale club seats, and advertising signage.
In today's NFL, the worst fate that can befall an owner--far worse than an injury to a star player--is to be stuck playing in dank digs. That's why franchises such as the New England Patriots, the Pittsburgh Steelers, and the Broncos are scrambling to line up public support for new or rebuilt home fields. Fret not, they'll all probably get the taxpayer bucks they're chasing. Come Super Bowl Sunday, Jan. 25, only one team will emerge victorious in San Diego. But in the sumptuous world of NFL owners, there are rarely any losers.By Mark Hyman in BaltimoreReturn to top