Case Study on "Regulation of the NFL From Founding"

Case Study 34 pages (10136 words) Sources: 18 Style: Harvard

[EXCERPT] . . . .

Regulation of the NFL

From Founding To Present

The objective of this work is to examine the American National football League (NFL) and specifically to examine the history of the NFL from its founding and its evolution to the present. This work will include a study of the structure of the NFL and the regulations of the NFL and the manner in which NFL clubs are governed and managed. Finally this work will contrast this with the Premier (English) league.

The research questions in this study include those as follows:

(1) What is the financial situation of the NFL and it clubs?

(2) What sort of turnover are the clubs achieving?

(3) Do the NFL clubs have large debt?

(4) What are the sources of income for the NFL clubs?

(5) What sort of profits are the NFL clubs making?

INTRODUCTION

The business models of the NFL Football League and the English Premier Football League are quite different as this work will demonstrate. It is likely that the differences in the business model of these two football leagues is the reason for the different financial track records of each of the leagues in terms of the financial stability of the two leagues. As well likely to be a factor in the financial success or lack thereof in these two football leagues are the regulations pertaining to ownership of the football clubs in the leagues.

I. NFL TEAM AVERAGE WORTH

It was reported by Forbes in the 2006 work entitled: "The Business of Football" that this year the average NFL team is worth $898 million" which is 211% more than when the first calculation of team values was conducted by Forbes eight years ago. The Forbes report states that football team values "have increased 11 more times than the S&P 500 since 1998. This year the average NFL team posted $30.8 million in operating income (earnings before interest, taxes, depreciation and amortization) versus $5.3 million in 1997." (Badenhausen, Ozanian and Roney, 2006)

II. NFL TEAM OPERATING REVENUE

The following are the top-ranked NFL League Football teams along with each team's operating income in millions for each team.

____Rank

Team

Operating income (%mil)

1

Washington Redskins

2

Houston Texans

57.6

3

Tampa Bay Buccaneers

56.9

4

Philadelphia Eagles

54.2

5

Chicago Bears

54.5

6

Tennessee Titans

48.3

7

Cleveland Browns

47.1

8

New England Patriots

43.6

9

Dallas Cowboys

37.1

10

Miami Dolphins

33.4

Source: Forbes (2009)

III. THE Business OF FOOTBALL (TAGLIABUE, 2004)

Paul Tagliabue writes in the work entitled: "The Business of Football" on the 'State of the NFL' that the NFL is "highly successfully. By almost any measure, we are the number one spectator sport in America by a wide margin. Our structure ensures a very strong product on the field that is attractive to a mass audience, continuing to attract and retain that mass audience is one of the key objectives of our business. The other sports leagues with which we compete may be losing their mass audience on television. We are the only league sport that continues to be prominent on broadcast television without heavily migrating to cable television." (2004)

The NFL is stated "off the field" to have "unique structural elements unlike those of any other athletic league in the United States and probably the world." (Tagliabue, 2004) Tagliabue writes that the League "controls the television broadcasts of our regular-season and post-season games, which have generated between 50 and 60% of our total revenue over the life of our current television contracts. We expect to have about $5 billion in revenue this year. Just over half (about $2.7 billion) will come from national television, with additional contributions coming from other national media. No other league has that kind of control over its televised product or the resulting revenues -- in fact, because clubs in other sports have so many more games to telecast, it may not be possible for any other sports league to manage its television exposure in the way the NFL does." (Tagliabue, 2004)

Tagliabue states that these arrangements with television serve to benefit the League in terms of its "competitive effect." (2004) The League share the national media revenue "equally among the teams" so that ease club has a solid financial base on which to operate. The NFL's player salary cap and the League's free agency arrangements are stated by Tagliabue to be "predicated on this equal sharing of media revenue and broad sharing of the most of the rest of our revenue." (Tagliabue, 2004) Tagliabue states that that revenue sharing in the NFL is more extensive than any other league and therefore the equal sharing of revenue and the League's control of media exposure "are the two unique structural underpinnings" of the League that serves to differentiate the NFL from other sports leagues throughout the world. (2004)

In regards to the 'Goals of the NFL' Tagliabue states that just as in any other business it is "critical...to have a clear vision of its key goals and to pursue those goals with both vigor and rigor." (2004) Tagliabue has more than 35 years of involvement with the NFL and 15 of these years as the NFL's commissioner and he states that he has "for ten years...kept our strategic goals on one sheet of paper." (2004) The NFL is stated to have six primary goals as follows:

(1) Continue to cultivate America's passion for the sport of NFL football;

(2) Ensure that the game on the field is outstanding; on-field competition as the NFL's core product;

(3) Guarantee great television that reaches a mass audience, which requires a substantial effort, especially in view of the digital and online technological revolution;

(4) To have fan-friendly stadiums for all of the teams in the League;

(5) To continue to support the development of the game at all levels -- especially among America's youth -- to ensure that the game remains strong for future generations; and (6) To continue to expand our presence and fan base, both domestically and internationally. (Tagliabue, 2004)

Tagliabue states that the environment in which the NFL operates has "several over-arching considerations" and states those as follows: "First and foremost is maintaining the supply of great football-playing talent. Specifically, how do we ensure that we continue to have gifted athletes playing our sport to maintain the quality product that we supply? We do so by thinking ahead -- making sure that football is as safe as it can be so that young athletes will choose football over other sports, and making sure that as demographics and as college and high school athletic programs change, football remains a viable option for the best young athletes in America and elsewhere. Many of the initiatives we have implemented to address these issues have been cooperatively devised with the NFL Players Association..." (2004)

Tagliabue states in regards to the already mentioned need for maintaining the appeal of the NFL sports for a mass audience that "In the current television environment, where the typical household may have access to between 60 and 400 channels on digital cable and satellite television, much programming, including sports programming, has been commoditized to the point where it is becoming marginalized and irrelevant. From both an advertiser's and a sponsor's perspective, audiences that other sports attract on 400-channel television are so marginal that the telecasts may become unattractive as an advertising platform. In many respects, the only sports that continue to have mass television audience appeal for spectators and advertisers alike are the NFL and the Olympics; they may well be the only sports that will continue to find it financially viable to use broadcast television as their main media delivery vehicle." (2004)

Both the NFL and the Olympics are stated by Tagliabue to present 17 days of programming and he additionally states that "their programming is concentrated in terms of when it occurs (thereby generating huge fan interest), and that they continue to have broad reach on broadcast television. The Olympics last for two and a half weeks; our regular season is 17 weeks. About 125 million people watch our games every Sunday; the Olympics draw on a similar sized audience when they are at their peak. Other sports attract audiences that are only a fraction of that number...Therefore, retaining the mass appeal needed to attract such an audience is an over-arching consideration that shapes much of what we do and what concerns us." (2004) Stated as the biggest competitive advantage that television has been for the NFL is that the NFL's product "...is offered only one day of the week, through a broad array of regional telecasts, with key matchups of national interest featured as late games on Sunday afternoon and Sunday evening and with one Monday telecast -- Monday Night Football -- which has become an American television institution. Many current and potential television partners have noted this concentration of product and have proposed NFL television packages to air other nights of the week. We have approached such… READ MORE

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