NFL doesn’t like how profits line up

Kai Ryssdal Sep 17, 2008

NFL doesn’t like how profits line up

Kai Ryssdal Sep 17, 2008


KAI RYSSDAL: When the economy is wobbly everything gets shaky, even businesses we might think are recession-proof. Like pro sports.

The New York Jets announced a deal with ticket seller StubHub today. The team’s going to be auctioning off the best seats in its new stadium to the highest bidders. A lot of sports are looking for ways to make a quick buck this season. NFL Commissioner Roger Goodell is warning the league’s not going to be bringing in as much money as originally predicted.

Terry Lefton at the Sports Business Journal got his hands on the commissioner’s memo saying as much.

Terry, welcome to the program.


RYSSDAL: I always thought, until I read your article, that the NFL was the best business model in all of pro sports. Now you’re telling me that’s not true.

LEFTON: Well, I’m not disputing the model. I’m just saying that in terms of new business and many businesses, if there’s no growth they consider it an epic tragedy. They’re not having a lot of growth and they’re having budget shortfalls in terms of expected new business. Their old business is still good. They’re still the biggest and most profitable sports property in this nation. And, so, I’m not feeling particularly sorry for them but it is interesting that you see a memo from the commissioner warning of budget shortfalls. And he kind of hints layoffs but doesn’t quite say that they’re layoffs.

RYSSDAL: Let’s go down some of their revenue streams. The first one, the biggest one, has to be television. And isn’t that guaranteed?

LEFTON: Right. Most of their big revenue streams are contractually obligated, such as TV. So here you’re talking about selling their own network, the NFL Network. You’re talking about selling advertising on that network, and you’re talking about corporate sponsorship revenues, which are in the hundreds of millions [of dollars]. Now, I can’t remember them starting a season in recent past without a new corporate sponsor. And they did not start the season with a new corporate sponsor. So, I think . . . My point in writing this article was not so much to tweak them, as to say, “Well, if the biggest and best and most profitable sports property in the nation — i.e., the NFL — is having problem turning over new business, what does that say about the Triple-A team in Portland, or a soccer team in Salt Lake City? They’re really all having a hard time generating new business, and that’s because of the economic squeeze we’re in.

RYSSDAL: Well, what about the areas where sports advertising typically gets most of its money. What are they doing?

LEFTON: Two of the biggest ones are financial services and the auto industry. And both are having big hurts right now. So that’s impacting them in terms of advertising and sponsorships. Both, at the top, with the NFL, and I think every club right now is having problems getting more money out of that category or signing new people in that category. You can’t really overstate the case because cars and banks and credit cards and other financial service ventures are big, big contributors to the sports economy.

RYSSDAL: In sports, it kind of gets personal when people don’t make as much money as they thought. These teams, for the most part, are owned by individuals. Do you get the sense that these owners are going to the commissioner and saying, “Hey, Roger, c’mon, you gotta do it for us.

LEFTON: I think it’s the other way around. This memo that I got from some people that weren’t really happy that a guy — the commissioner — that makes $12 million a year was talking about pulling in the strings a little. But this memo that I got was sent to every NFL league employee. That’s a number of a hundred. When he sends something out to every League employee, I’m sure he knows that that’s going to get to the clubs. So I think that’s one of his way of softening the blow — that “Hey, you know, we told you that we were going to have these revenues at the end of the year. We’re not. I’m sure he’s told all his owners, already. But now he’d told everybody at every level.

RYSSDAL: How much of this, though, in light of that, is bureaucratic in-fighting, and how much is substance?

LEFTON: I think it’s substantive. I think, you know, that, as I said, when the economy goes south, marketing budgets — rightly or wrongly — are often the first to go. And I think this is a sign of that. This year is a little bit of a false economy over all, because you’ve got both the election and the Olympics pumping an awful lot of money into sports and media in general. Next year, I believe it will get worse because you don’t have those thing propping it up.

RYSSDAL: Terry Lefton, editor-at-large at the Sports Business Journal. Terry, thanks a lot.

LEFTON: My pleasure.

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