Before Paul J. Tagliabue, commissioner of the National Football League, made his first swing through Silicon Valley in early October, he had been well-briefed on the pitfalls of America's techno-utopia: the traffic jams, the rampant cyber jargon, the rigorously casual dress code. But who could have forseen that Carl Yankowski, Palm Inc.'s (PALM) CEO, would subject the commissioner and his five-man entourage to a gruesomely detailed account of a recent back surgery? "It's a good thing it wasn't a hernia," one of Tagliabue's aides wisecracked sotto voce as the meeting broke up.
The Palm ordeal came midway through a three-day tour that brought the NFLers to Intel (INTC), Yahoo! (YHOO), eBay (EBAY), Excite@Home (ATHM), 3Com (COMS), Inktomi (INKT), Electronic Arts (ERTS), and several other Valley companies. The trip was Tagliabue's way of emphasizing the growing importance of the Internet and other interactive media to the NFL--and the value to the Net world of digital properties controlled by the long-reigning king of sports TV. The commissioner invited a BUSINESS WEEK reporter and photographer to come along, underscoring the trip's promotional purpose. But Tagliabue also was eager to advance the NFL's dealmaking agenda and kept turning ceremonial occasions into brainstorming sessions with a simple, emphatic question: "What can we do together this season?"
Tagliabue and crew would return to their Park Avenue offices with two new partnership agreements in hand. On Oct. 2, the league announced that it will join with eBay Inc. to sponsor its first online auctions of collectible merchandise and fantasy experiences. The next day, Tagliabue closed a deal with Yahoo! Inc., which on Oct. 7 began Webcasting live audio coverage of the home games of 22 of the NFL's 31 teams.
Like many of the execs who hosted Tagliabue, Yahoo! co-founder Jerry Yang complimented the commissioner for "working on Internet time"--a comment that may say as much about the self-congratulatory mind-set of Silicon Valley as about Tagliabue's palpable sense of urgency. Tim Koogle, Yahoo!'s sphinx-like chairman and CEO, seemed equally impressed with the visitors from the East. "You guys are getting real traction in [the Internet] space," Koogle said at the end of an hour-long meeting. "Please e-mail me or call me anytime you have an idea. I really mean it."
"The same goes for us," replied Tom Spock, an NFL executive vice-president.
"Cool," Koogle murmured. "Cool."
The NFL expects its new ventures with Yahoo! and eBay to be profitable. But Tagliabue's overriding goal in partnering with these online powerhouses is to drive more traffic to the newly formed NFL Internet Network, which ties together 40 league and team sites. Its linchpin is NFL.com, which was launched in 1995 as an extension of the league's publicity department but which is fast becoming a revenue producer in its own right. "We are to the point of striking seven-figure Internet advertising deals with advertisers," says Chris Russo, NFL senior vice-president for new media. New advertisers this season include Miller Brewing, Gatorade, and Visa International.
NFL.com is produced by ESPN Internet Ventures under a three-year deal that pays the league about $3 million a year. The agreement expires after the current season and is unlikely to be renewed--especially considering the $100 million over six years that Turner Sports just agreed to pay NASCAR to assume the management of its Web site. The NFL undoubtedly would fetch an even higher sum if it puts its Internet rights up for bid. However, the league probably will opt to maximize control of its Internet presence by taking over the production of NFL.com next spring.
The NFL Internet Network attracted a record 6.6 million unique visitors in September, compared with 2.1 million a year ago, according to Nielsen/NetRatings. That's roughly three times the peak monthly usage recorded by NASCAR, Major League Baseball, and the National Basketball Assn. Yet most observers credit the NBA with doing the best job among the pro sports leagues of innovating in cyberspace and promoting its online presence. "Historically, the NBA has been more aggressive," says Patrick Keane, a senior analyst at Jupiter Research. "That said, the NFL has come around to do a lot of smart things recently. I now would put the NFL at a par with the NBA, with a grade of B. No one deserves an A yet."
Much of the content for the NFL Internet Network is supplied by the league's own multimedia production arm, NFL Films. This season, NFL Films has greatly stepped up production of original content for the Web, posting 75 to 100 video clips a week and also experimenting with live Webcasting. NFL Films owns a voluminous archive of film and photos dating back to 1894. While the NFL is just beginning the expensive and arduous process of digitizing its film archives, NFL Films already has converted to digital form all games since 1993 and all 34 Super Bowls.
In the meeting at Inktomi, which sells search-engine technology to many top portals and Web sites, Spock and Russo explained how NFL Films had created an elaborate indexing system that permits minutely detailed searches of the digital archives. "There's a huge amount of stuff we could do with that alone.... It means you don't have to view entire video clips to find the exact point you want. You can go right to it," said Eric A. Brewer, Inktomi's co-founder and chief scientist, who got so excited that he went to a blackboard and began diagramming. Working with Inktomi, Convera, and other companies, the NFL is looking at how to go about developing a subscription-fee service that would let fans do their own searches of the league's digital archives.
Like NBA Commissioner David Stern, Tagliabue believes that the Internet and its interactive offshoots eventually will not only augment television viewing but supplant it. Already, the league is experimenting in Singapore and Australia with the live Webcast of games. But in the U.S., NFL games are likely to be available only on television through the 2005 season at least.
In 1998, ABC, CBS, Fox Sports, and ESPN agreed to pay $17.6 billion for the broadcast rights to NFL games through 2005. "The fact that we did eight-year contracts was based on a view of how fast new media would emerge," Tagliabue said a few days after his return from Silicon Valley. "We saw it emerging fast, but not at the pace of a true revolution. That's turning out to be right." Still, Tagliabue is making sure that however swiftly the revolution progresses from here, the NFL will not be left watching it from the sidelines.