I realize that in tough economic times pro sports may suffer. I can understand why the NHL may really get hurt because they rely on game attendance and don’t have the TV money. MLB could face huge attendance problems. The NBA is headed for a huge labor fight and has attendance problems. But the NFL?
Isn’t their primary source of income the TV contracts which are locked in? They have a very favorable Collective Bargaining Agreement. The popularity of the game is still strong. I can understand individual franchises having problems but this is about the NFL league office, not some franchise like the Bills.
Can anybody provide some factual insight into what is going on? If the NFL is feeling this kind of squeeze what is in store for other pro leagues?
One issue, which I think I heard from John Madden, is that it is getting increasingly difficult to get sponsorship in the stadiums. Perhaps companies are also cutting back on sky boxes?
Yes, but isn’t that a franchise problem? Does the league office get a cut of that revenue? Even so, with the huge TV money I would think that they could operate without taking the drastic action of cutting 15% of their jobs. The only thing I can think is that they feel they are top heavy, want to create a more efficient operation and are using economic conditions as an excuse to take out the carving knife.
The league is technically a nonprofit corporation. Revenue it receives from TV contracts, NFL Properties, NFL network, etc, mostly goes right through to the league members, and the league member franchises support league operations by paying money to the league. If the franchises’ revenue, from whatever source, goes down, the league office takes a hit too.
Two things… league revenues were down by $50 million in 2008, and early indications are that they’ll be down much more in 2009. The early indicators of that include plummeting merchandise sales and the disappearance of major sponsors (like the auto industry). Their also going to get less than projected from new media streams.
Second, the league offices are funded by the member teams, so when they suffer, the league suffers. All of the teams have huge fixed costs for player salaries and many teams are carrying debt on stadium construction/renovation. They’re also looking at significant decreases in revenue from sky boxes, ticket sales, advertising, and the other local sources of income.
Huh, apparently so (according to Wiki.) They’re a 501(c)(6) organization. I particularly like the list of examples in the Wikipedia article (bolding mine):
What assets does the NFL really have? Some office space in Manhattan? It doesn’t own any of the teams in the league. The only income it has is what the team owners collectively decide to give to it. If their team profits have been low lately, they probably decided to cut back on the money the league gets.
What value do the teams have without the league? The league negotiates the TV contracts which is where the huge money is generated. The Buffalo Bills or the Green Bay Packers without the league are little more than small college franchises.
The league can dictate the terms. Without the “NFL” and their clout and contracts, the individual teams have very little to offer. Who are the Bears going to play, Northwestern if the Giants decide to play Rutgers?
I think you’re confusing the tail and the dog. To turn your question around, what value does the league have without the teams? The teams without the league would survive, albeit in a diminished capacity. The league without the teams would not.
The League was set up by the owners so they could get the maximum value out of the assets they owned. But the league doesn’t control the teams. It’s the team owners who collectively decide league policy.
The league and the teams are not separate entities. The League is the collection of teams, and the commissioner is chosen by the team owners to represent their collective interests.
The league splits revenues but not ALL revenues. Three of the most important revenue sources team do not share are luxury seating, food and inside arena advertising.
This is HUGE, this is a main factor in teams wanting new stadiums every so often and why new stadiums can pull in more profit than bigger stadium without such facilities, even if the team is doing better.
