The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, analyzes NFL business issues heading to Super Bowl XL in Detroit.
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First of a three-part series. Part Two next week will explore NFL marketing issues, and expanding the female and minority fan base. Part Three will review specifics of Super Bowl XL: (a) marketing the NFL across the globe; (b) Corporate America and the Super Bowl ad buy; (c) hospitality, entertainment, and image at the Super Bowl; and (d) the last-minute hoopla in Detroit.
The NFL continues to set the gold standard of all professional sports – total league revenues are estimated to exceed $5.7 billion this year. Nevertheless, the league faces the following business challenges: (1) finalizing and extending the Collective Bargaining Agreement with the players; (2) finalizing long-term television negotiations; and (3) concluding unfinished stadium business – leveling the playing field.
1. THE CURRENT BUSINESS SITUATION.
The following measuring stick provides insight into the impressive growth of the National Football League:
-- In 1996, average team revenue was about $75 million. Last year, each team made about $190 million. Average player payroll approximates $114 million, producing an average balance of $76 million to each owner for non-payroll expenses and profits.
-- Attendance was almost exactly last year’s, stabilizing at 96 percent of total capacity – approximately 17.2 million fans attended NFL games.
-- Over 43.4 percent of Americans are “loyal” football fans who are “very or somewhat interested” in the NFL – over twice as intense as the next favorite sport.
-- The entity that evaluates long-term businesses – Fitch Rating Service – gave the league a superior A+ rating allowing each team to borrow funds of up to $150 million per team.
-- As far as salaries for players, in 1994, the average NFL salary was $627,000, with Denver’s John Elway the highest paid player at $4.6 million. This year, the average salary exceeds $1.3 million, and total compensation for players is above $2.5 billion, a 20 percent increase in the last two years alone.
-- The NFL’s current labor/management structure has been in place for over a decade, and the unique hard salary cap and league wide revenue sharing has been a win-win for both sides. The league salary cap in 1994 was $34.6 million. This season’s cap was $85.5 million, and the NFL Management Council expects the cap for next season to approximate $95 million per team. While the Raiders, Broncos, Jets, Chiefs, and Redskins together are scheduled to be at a combined $155 million over the cap, the average team is only $1.3 million over (well within the ability to “manage” the cap in the off-season through trades and contract restructuring).
2. MAJOR BUSINESS CHALLENGE ONE: FINALIZING AND EXTENDING THE COLLECTIVE BARGAINING AGREEMENT WITH THE PLAYERS.
The long-term partnership between Commissioner Paul Tagliabue and NFL Players Association Executive Director Gene Upshaw has been a major reason for labor peace and stability in the National Football League. The salary cap/revenue sharing structure has been in place for well over a decade. Players have received 65 percent of the “designated gross revenue” (basically, radio and television revenues plus ticket sales).
