The Business of the NFL Rolls On

To the relief of a great many beers distributors, snack food vendors, per diem workers who are employed 10 days a year by NFL teams, fantasy football players, bookies, rather office pool organizers, casino operators in Nevada and those who cannot move from their couches for up to 12 hours at a time on Sunday because they are too busy watching football, the National Football League is back in business.

FOX’s Rupert Murdoch, CBS’ Sumner Redstone, General Electric’s Jeffrey Immelt (NBC’s head prior to the Comcast takeover of the Peacock Network), The Walt Disney Company’s Robert Iger and Direct TV executives don’t have to explain to anyone including a federal judge in Minnesota why they were willing to underwrite the NFL owner’s lockout. Iger heads up Disney and one of Disney’s companies is ESPN. That cable network would have put up money for the 2011 NFL season using subscribers’ money.

Only about a tenth (and that is being generous) of ESPN subscribers watch football yet 100 percent pay and that is permissible thanks to the 1984 Cable TV legislation passed by Congress and signed into law by President Ronald Reagan. People who have no interest in the NFL would have helped support the owners’ lockout. That law allowed cable TV multiple systems operators to choose what networks they wanted on a basic expanded tier and sell them as one. The legislation probably saved ESPN, CNN, MTV and others from financial ruin.

The NFL owners’ lockout—which may have been prompted by some owners whose teams play in old facilities like New Jersey’s Zygi Wilf’s Minnesota Vikings who could not keep up with a salary floor—is over. It is unclear whether the new collective bargaining agreement will address that issue. With the end of the lockout, NFL owners can go back and demand new taxpayer assisted stadiums where needed.

The players trade association, formerly known as the National Football League Players Association, never helped out broken-down old players so it might have been a bit much to expect them to hand over money to owners to help build football facilities. The NFLPA didn’t recognize in many cases that some of the retired players with very serious injuries that were sustained during their NFL careers ended up in government social safety nets long before their 65th birthdays such as Medicare and Social Security.

NFL owners and the NFLPA should have collectively bargained long-term health care for players but that was not an important issue in the past for the NFLPA. The new CBA seems to have some provision to take care of the health of players but until the CBA is fully digested by all, including the retirees, it is unclear how much help those players may get.

The National Football League (and by extension the players) depends on government subsidies and handouts. The deal with the players is done and now it is time for the league to get new facilities in San Diego, Santa Clara, Oakland (the San Francisco Bay Area), Los Angeles, Minneapolis or Ramsey County, Minnesota and to see what can be done with the Buffalo Bills franchise. Arthur Blank is seeking a new facility for his Atlanta Falcons franchise as the 19 year old domed stadium that houses his team is quickly becoming antiquated and New York realtor Stephen Ross is stuck with a 24 year old, although updated, facility which is no longer suitable for a Super Bowl outside of Miami.

The mayor of Toronto, Rob Ford—who seems to fit in with the United States Tea Party movement in that he wants to slash services to the bone but not raise taxes for those who can afford a slight increase—may be open to finding public funding to build a National Football League state-of-the-art facility in Canada’s financial capital.  Political leaders in both parties in Minnesota are trying to build Wilf a taxpayer-funded facility in some sort of public-private partnership.

In Santa Clara, hundreds of millions of public dollars have been set aside for the 49ers planned facility. Louisiana is still giving New Orleans Saints owner Tom Benson cash handouts and New York is doing likewise for Buffalo’s Ralph Wilson while cutting services. Florida politicians are seeking a way to help Ross and the NFL deal with their sad plight.

The 1986 changes in the tax code altered American sports. President Reagan’s signature gave owners who played in taxpayer-built facilities after 1986 an opportunity to get up to 92 cents on every dollar generated in the building with just as little as eight cents going to pay down the facility’s debt. It was great news for owners and a massive expansion of American sports would ensue.

Since the changed occurred, the National Basketball Association has grown from 23 to 30 teams, Major League Baseball has added four teams and in 1990, Major League Baseball signed a new deal with minor league baseball operators which forced cities to renovate or build new minor league parks or risk losing the minor league team. The National Hockey League went from 21 to 30 teams and some franchises were relocated. The 28 team National Football league also expanded and ended up with 32 teams. Major League Soccer was formed and MLS owners are also at the public trough claiming their fair share of tax dollars for stadium construction.

The NFL expansion process started in 1991 and started a chain reaction of events that included creating four expansion teams (Carolina, Jacksonville, Cleveland and Hpuston) and the movement of the Anaheim-based Los Angeles Rams to St. Louis and Art Modell’s Cleveland Browns to Baltimore. There was also the transfer of the Houston Oilers franchise to Nashville, Tennessee and Al Davis’ Los Angeles Raiders to Oakland.

The most eye-opening franchise-government deal that evolved out of the 1991 expansion was the $186.5 million 2001 agreement between Louisiana and New Orleans Saints owner Tom Benson that assured Benson would keep his team in the Superdome even though he had an existing long term contract that bounded him to the building. Benson got $186.5 million from cash strapped Louisiana to stay in the city between 2002 and 2010.

The league liked Charlotte and the possibility that a former player—Jerry Richardson—would own the franchise. Richardson didn’t need much public money because the team was going to get ticket buyers to pay twice for seats and that would pay for the construction of the facility. Richardson’s “personal seat licensing” scheme required ticket holders to buy a stadium seat over a set amount of years and then pay for a football game. NFL owners were impressed by the pricing mechanism and awarded Richardson a franchise but the NFL wanted two expansion teams so that the 28 owners would split up $280 million with each owner getting a $10 million payment.

Boogie Weinglass and the author Tom Clancy pursued a Baltimore franchise. Weinglass presented a proposal that Maryland would build a stadium and the team would be well supported even though Robert Irsay moved out of the city in 1984 and NFL Commissioner Paul Tagliabue soured on the city that was more interested in building libraries than a football stadium.

Weinglass was competing with two other Baltimore groups for the franchise. They all failed but the Baltimore/Maryland stadium bid was circulated within the NFL. Baltimore was offering a stadium complete with the requisite state of the art luxury boxes, club seats, restaurants, concessions with major revenue streams. The stadium would be paid through a combination of municipal resources including proceeds from the Maryland lottery.

The NFL said no to an expansion team but the terms of the Maryland deal was too good for Art Modell to pass up. In 1995, Modell took the offer (which included a multi-million loan to Modell) and made Weinglass a bit of a prophet.

It was thought that NFL marketing partner Anheuser Busch would be the deciding factor in St. Louis landing an expansion franchise in 1993. That was a concern for other bidders given AB’s cozy relationship with the city of St. Louis and the NFL. But St. Louis was a failed NFL market. Bill Bidwill left town after the 1987 football season and went to Tempe, Arizona. That was a black mark against the city because St. Louis refused to build Bidwill a new football facility.

After Bidwill left, Missouri, St. Louis County and the city of St. Louis socked away $258 million for a 70,000 seat domed football facility. The city was willing to help pay some of the costs for an expansion team. Some of the money was going to come from a motel-hotel sales tax hike.

Anheuser Busch didn’t have much sway over the NFL owners. St. Louis failed. Charlotte was an area that the league really wanted and got the 29th franchise. But number 30 was a fight between Baltimore, St. Louis and Jacksonville. Memphis was not seriously considered.

Wayne Weaver got involved in the Jacksonville bid before the NFL solicited interested people in what amounted to an auction for two franchises. Jacksonville was looked upon as a huge growth city by football people including Robert Irsay who thought about moving his Baltimore Colts to the town as well as Houston’s Bud Adams. Neither did but Jacksonville remained attractive.

“We had our mayor with us, Mayor Ed Austin,” said Weaver knowing that political support was a major component of any bid back in 1991. “We had our city council president, Warren Jones, we had the gentleman who will renovate our Gator Bowl, the biggest contractor in the southeastern United States, Preston Haskell, and our president David Seldin.

“We have three qualities that we think we set us apart from the other candidate cities and that’s what we talked about today. We think we have the best football fans in America. The second thing we talked about and what sets us apart from the competing candidate cities is that we have the only game in town. We have no competition from other major league franchises. I am not sure anybody can make that statement. We have no competition from college sports which Memphis has. We have no competition from other major league franchises and we think the only game in town aspect is an important ingredient. Finally and most importantly was the local ownership group issue. We have the financial credentials to qualify for an NFL expansion team and we made that very clear.”Jacksonville won the race and got a franchise.

Neither Los Angeles nor Anaheim has had an NFL team since the end of the 1994 season. Georgia Frontiere did her 15 years in Anaheim and when a better stadium deal did not develop, she opted to take the St. Louis offer that was still on the table after the NFL gave Charlotte and Jacksonville teams. Raiders owner Al Davis could have had the LA market to himself but negotiations between the NFL, Davis and Hollywood Park racetrack in Inglewood broke down after a deal looked to be coming together.

The LA area lost both teams but unlike Cleveland, they didn’t threaten to sue and replace a team. The NFL expanded into Cleveland after getting a deal done for a new stadium and the new Cleveland Browns started play in 1999. Los Angeles was given a 2002 conditional expansion franchise if a stadium was built. There was no available funding for a building like Houston had, so the NFL gave the fourth expansion team to Bob McNair and Houston.

Los Angeles’ Anschutz Entertainment Group (AEG) has told LA city officials they better sign off on a deal to help finance a new football stadium by July 31 and cash strapped Los Angeles seems to be ready to make a deal.

AEG has a list of targeted owners including Stan Kroenke who has the St. Louis Rams. There was a provision in the Georgia Frontiere-St. Louis 20 year contract (which is done in 2014) that probably will come back and haunt the city, county and state. The Rams franchise has to be in the upper quarter or top eight in stadium revenue generation. A 20-year-old facility cannot compete with new places like the New Meadowlands Stadium or Jerry Jones’ Dallas Cowboys Stadium in Arlington, Texas. St. Louis may run into the Louisiana problem of 1999 and 2000 when Benson complained that the Superdome was no longer in the top 4 of NFL revenue generators and had fallen to the bottom and needed help or he would have to move.

The NFL is back, although it never went anywhere. No games were missed, the three day draft was held in April and people had to pay for their seats on time or risk losing them. That’s the way NFL business operates and the business operations will soon be on display in Santa Clara, Oakland, Los Angeles, San Diego, Toronto, St. Paul, Minnesota and maybe in Jacksonville, South Florida, Atlanta and Buffalo with one certainty: the billionaire owners will be looking for tax breaks for their football businesses which really don’t do all that much for the economy.

Evan Weiner, the winner of the United States Sports Academy’s 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on “The Politics of Sports Business.” His book, “The Business and Politics of Sports, Second Edition” is available at bickley.com, Barnes and Noble or amazonkindle.