Sports Outside the Beltway

NFL’s Have-Not Franchises

John Helyar presents the side of the underachieving owners, however, and points out that many operate at a substantial disadvantage.

The economic backbone of the NFL has been broad-based revenue-sharing ever since 1961, when then-commissioner Pete Rozelle convinced teams to split network TV money equally. Franchises could thus exist in markets as disparate as New York and Green Bay because national broadcast rights provided clubs with a common, equal economic foundation. The national TV deals are still by far the greatest source of income for NFL teams, with each receiving about $85 million last year.

What has changed is the amount of locally generated revenue, which as recently as 1993 was paltry enough that the union didn’t press to include it in “designated gross revenue.” (That’s the pool of money that determines the salary cap.) The stadium-building boom since then, however, has produced facilities which throw off huge sums of cash: from suite leases, naming rights, corporate sponsors and a cornucopia of other income-producing opportunities. Locally generated income has grown from 12 percent of total league revenue to 20 percent, according to league officials.

It’s not just the union that wants to tap into these lush revenue streams, but a growing number of owners. This is unshared revenue, and this is what has opened the yawning gap, between the league’s haves and have-nots. “The teams in smaller markets, like Jacksonville and Cincinnati, got their stadiums first,” says Marc Ganis of Sportscorp Ltd., who has consulted on a number of NFL stadium deals. “Then it was the big markets’ turn — Boston, Houston, Philadelphia, and soon New York and Dallas. The disparities between markets have become magnified.”

That’s because the teams in bigger cities have more corporate fat cats and can command more for their premium seating. The New England Patriots lease their suites for $100,000 to $300,000 a year, according to a team spokesman. Some of the Indianapolis Colts’ suites go for as little as $34,000, according to the sports division of Fitch Ratings, which rates stadium bond issues. Reliant Energy pays $10 million a year to hang its name on the Houston Texans’ stadium. RCA has been paying the Colts only $1 million a year for stadium “naming rights,” according to Fitch.


It’s not that most high-revenue teams are dead set against broadened revenue sharing. According to a league official, McNair’s committee has been kicking around formulas calling for sharing anywhere from 20 percent to 34 percent of now unshared local revenues. But owners who have privately financed new stadiums want their debt and other expenses taken into account, not just their gross.

Bob Kraft vaulted his New England Patriots from dead last in the NFL in revenue, at the time he bought the club in 1994, to near the top of the league after opening Gillette Stadium in 2002. But he also took on $350 million of debt. And high-powered entrepreneurs like the Cowboys’ Jerry Jones, who maximize every revenue opportunity extant, say they refuse to subsidize less driven ones. Make the “have nots” meet certain business performance standards, they declare, before being eligible for “welfare.” (Yes, that sort of pejorative occasionally gets tossed around in these heated discussions among multi-millionaires.)

The entrepreneurs can neither understand nor abide an old-guarder like Cincinnati Bengals owner Mike Brown, who decided against putting a company’s name on his new stadium — and pocketing big bucks — and instead named it Paul Brown Stadium, in honor of his father. Says one team executive: “It’s a philosophical split, as well as an economic one.”

FWST reporter Clarence Hill adds,

Jones said the dispute between owners is not about revenue sharing and market size but management style, which he says is the top thing that affects a club’s economics. He said teams’ differing philosophies and management styles are being debated.

“It’s about their desire to spend and their desire to make a commitment,” Jones said. “You have hustle and good marketing. You have clubs that get out there and market and promote. Do you want to create incentives for clubs that aren’t willing to do that? Or do you want to create disincentives if they don’t do it, which is what happens to the rest of us. If you go out and work, you get it; if you don’t, you don’t. Those are the debates. There are visions about where you want the league to go in the future.”

The well-off owners are taking a reasonable stance here. The late Wellington Mara was praised for his foresight in agreeing to share his much higher ticket sales with owners in smaller cities. There is little doubt that revenue sharing has helped produce much greater competitive balance in the NFL than in any other major American professional sport.

At the same time, though, there has to be an incentive for the Mike Browns of the world to do their part. If he wants to share in the profits made by the likes of Jerry Jones, he should at least maximize the available revenues in Cleveland.

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