The NFL'S Stadium Binge
The league is loaded down with debt from building venues filled
with luxury skyboxes. With tickets to games still unsold, owners
are pushing for a new labor deal with players.
By Aaron Kuriloff
Bloomberg Markets, November 2009
Anthony Noto, the National Football League’s chief
financial officer hired from Goldman Sachs Group Inc. last year,
dons a hard hat for a tour of what will be the most expensive
U.S. sports stadium ever built. On this sunny day in mid-2008 in
East Rutherford, New Jersey, workers pour concrete and weld
steel girders for the unnamed $1.6 billion venue where both the
New York Giants and the New York Jets will play their home games
next year.
Noto peppers Thad Sheely, a Jets vice president, with
questions about the costs and likely revenue from about 200
luxury skyboxes, each to feature flat-screen televisions and a
wet bar, as well as the Coaches Club. The club includes a
20,000-square-foot (1,860-square-meter) field-level bar designed
by Nobu restaurant architect David Rockwell and an outdoor patio
only 5 yards (4.6 meters) behind the bench where the Giants and
Jets sit.
The stadium epitomizes the NFL’s costly building spree
during the past 15 years. Many owners used cheap credit to build
and renovate 24 of the league’s 31 venues, more than quadrupling
debt held by teams and the league to about $9 billion this year
from 1996. With debt service headed for a 45 percent jump in
2009 from three years earlier and revenue growth slowing during
the recession, owners’ profits are falling. So now they’re
pushing for a new labor agreement with the NFL Players
Association that may take stadium and other costs into account,
reducing the total amount of money going to players at least in
the short term, says Michael Cramer, a former president of
baseball’s Texas Rangers who teaches sports management at New
York University.
First Shot
“The problem is, you had all this money floating around,
making it easy for owners to build stadiums,” says Brian
Billick, the Baltimore Ravens head coach when they won the Super
Bowl in 2001 and author of More Than a Game: The Glorious
Present and Uncertain Future of the NFL (Scribner, 2009). “A
lot of things like stadium debt conspired to draw down that
money, and owners said, ‘We got a problem; the good life is
about to end.’ That’s when they fired the first shot, opting out
of the labor deal.”
In May 2008, with Noto’s encouragement, the 32 owners voted
to exercise their right to end the labor contract, which was set
to expire in 2013, two years early. The agreement awards
salaries that devour about 60 percent of the league’s revenue.
The move was decried by the union, which said last year it can’t
convince players to make less so owners can make more, and set
the stage for a possible lockout or strike that could derail the
2011 season.
West Point Linebacker
Noto, who’s helped the league refinance about $2 billion of
its debt and develop a five-year growth strategy, gained battle
experience on the gridiron and Wall Street. The 6-foot-2-inch
(188-centimeter) CFO was a star linebacker at West Point
military academy, leading the team in tackles with 129 in 1990
before enduring one of the military’s harshest tests: training
to be a member of the Army Rangers, a special forces unit.
Later, as a Goldman analyst, Noto withstood media attacks --
CNBC reporter David Faber called him “Anthony No Dough, Anthony
Don’t Know” -- for hyping Internet stocks before they began
crashing in 2000.
Now he’s helping NFL team owners take on the 1,800-strong
players association. Noto says the current union deal impedes
the league’s ability to invest in projects such as international
expansion and that’ll hurt both owners and players.
“The issue is that the labor agreement and the increased
cost of running a team are meaningfully reducing our ability to
invest and reach more fans,” Noto, 41, says. “This is not good
for the league, which in turn is not good for the players.”
War of Words
Jeff Pash, the NFL’s chief negotiator, says a new agreement
that recognizes the economic realities owners face will spur
growth and generate bigger salaries and benefits to players.
The labor dispute has quickly escalated into a war of
words. DeMaurice Smith, executive director of the union, told
players in August to prepare for a lockout by owners.
“We find ourselves in one of the most difficult positions
as players in the history of the NFL,” Smith said at the Giants
camp in Albany, New York, according to Newsday.
NFL Commissioner Roger Goodell shot back in September,
saying owners are seeking an agreement through negotiations, not
a lockout.
“The idea that owners are looking for a lockout is
foolish,” Goodell told reporters. “That’s really not a
practical outcome for them in terms of being beneficial to the
league.”
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