Thursday, September 07, 2006

The National Football League – a business getting it right

More so then any sports league, and most businesses the Lords of the Pigskin, those entrusted with running the National Football League go where few sports entities have ever gone, they get it right. Not only do they understand how to manage a sports league but every conceivable facet of that league. The party begins tonight and ends with Super Bowl XLI at Miami’s Dolphins Stadium. More then a party – the start of the NFL season represents the single best example of how corporate America, the media and sports have merged to create an economic engine. How big is the National Football League – it’s an industry that generates $6 billion annually.

As has been the case since the NFL first opened their schedule on a Thursday night, the league will meld the worlds of football and entertainment together. It kicks off with a pre-game party on-air and in both cities (Diddy is in the house).

"We're trying to prime the pump for avid fans and non-avid fans," Peter Murray told Brandweek, NFL vp-partnership marketing and corporate sales, New York. "We raised the bar last season working toward Super Bowl XL. Now we're taking the power of the NFL brand to make it even more compelling building toward Super Bowl XLI (Feb. 4, 2007, in Miami)." The NFL also will hold a marketing summit this week in Miami with about 60 of its partners to discuss plans for 2007 and 2008, including building international and Hispanic initiatives, said Murray.

Tonight’s game ushers NBC’s return as an NFL broadcast partner. Dick Ebersol walked away from the NFL in 1998 believing he couldn’t afford the tremendous fees the NFL was able to generate. Ebersol’s Football Plan B first involved the XFL and then the Arena Football League – two mistakes in Ebersol’s Hall of Fame career.

“I don’t think there’s a high probability that we’d be back in football if we hadn’t fallen from the top,” Dick Ebersol, the chairman of NBC Universal Sports, said yesterday from Pittsburgh, where the network will televise the opener between the Super Bowl champion Steelers and the Miami Dolphins told The New York Times.

“Football is the only content that you can look at over the long haul that will retain its value,” Ebersol added. “If you have an ‘ER,’ a ‘CSI’ or a ‘Grey’s Anatomy,’ there’s no guarantee the whole audience won’t disappear on you in two years. That’s not an issue with the N.F.L. over the past 30 years.”

The NFL welcomed NBC back with open arms, offering NBC a flexible Sunday night schedule for week’s 10 to 15 and 17 of their 2006 schedule. (week 16 is Christmas week, logistics make it impossible to make that week part of NBC’s flexible NFL schedule.)

"We want to see NBC get off to a strong start," said Howard Katz, the NFL's scheduling boss. Katz joined the league after a tour of duty as the president of ABC Sports. NBC is paying the NFL $600 million a year, ESPN $1.1 billion a year for Monday Night Football. ESPN doesn’t have the flexibility NBC will enjoy. NBC has hired Al Michaels and John Madden, ABC’s popular MNF crew.

The network is also launching a website dedicated to sports. NBC Sports related content had been hosted at MSNBC for many years.

“Not only is the sports marketplace robust, but the online sports marketplace has an enormous user base that we need to tap into,” said Gary Zenkel, president, NBC Olympics and executive vp, strategic partnerships. The site will have broadband elements tied into NBC’s Sunday Night Football coverage, and will carry a pre- and post-game show for Notre Dame football. Toyota, Sprint and Vonage are among the site’s launch sponsors.
The NFL will generate $3.7 billion from their network partners this year, an astounding $106 million for each of the NFL’s 32 franchises. Ebersol may have run and hid eight years ago, but as the 2006 season begins network advertising executives are reporting they’ve sold out most of their commercial inventory.

According to a Mediaweek report: NBC has sold about 85 percent of its Sunday Night Football in-game ad inventory and has completely sold out its seven Notre Dame football telecasts and upcoming Ryder Cup golf coverage, while CBS is between 80-85 percent sold on its Sunday afternoon NFL game inventory and 90 percent sold out of its college telecasts. ESPN has sold out its Monday Night Football inventory and ABC has sold out its fourth quarter Saturday night college football commercial inventory.

Jason Kanefsky, senior vp, group account director, national broadcast at media agency MPG, told Mediaweek a big plus for advertisers is sports programming’s shorter commercial pods, which translates to less commercial clutter.

“Commercial pods in live sports telecasts are much shorter than in prime time, daytime or any other time,” said Kanefsky. “If an advertiser is going to spend a considerable amount of money on a commercial unit, they have a better chance of it being watched in a sports telecast. Plus, there is a track record of ratings that is more consistent certainly than in a new prime-time show.”

When the NFL season kicks off this weekend most of the major sponsors will introduce new commercial campaigns. The Super Bowl remains the biggest single day in the sports (and commercial advertising) industries, but the start of the NFL season is quickly becoming almost as important. Diet Pepsi, Reebok, Coors, Nike, General Motors, Miller and Samsung are a few of the companies who will be debuting new commercial campaigns built around the start of the NFL season.

The NFL may try and distance itself from NFL related gambling, but the numbers relating to betting on sports is staggering. According to’s Rick Harrow, an estimated $5 billion is bet on football games every weekend -- $40 million in legal football betting in Nevada alone. In fact, pro and college football generated $969 million last year in Nevada, 46.5 percent of that state’s gambling revenues. The football betting obsession culminates with up to $7 billion legal and illegal bets placed around Super Bowl Sunday each year.

Forbes Magazine released their 2006 NFL team financial valuations last week – the numbers weren’t just staggering, the numbers showed how powerful a business the National Football League had evolved into: this year Forbes believes the average NFL team is worth $898 million, 212% more than when Forbes began calculating team values eight years ago. Look at it this way: Football team values have increased 11 times more than the S&P 500 since 1998. Profitability? In 2005, the average NFL team posted $30.8 million in operating income (earnings before interest, taxes, depreciation and amortization), versus $5.3 million in 1997.

The NFL Network will offer a package of late season Thursday and Saturday night games. How serious is the NFL taking the NFL Network – constantly selling a message telling football fans to call their local cable provider to make sure they’ll be able to see the late season NFL games. Time Warner and Cablevision are among a handful of major cable providers refusing to offer the NFL Network. Over the next few weeks, leading up to the first NFL Network telecast on Thanksgiving Day, November 23, 2006 you can expect the NFL to turn up the pressure on cable operators not ready to offer the NFL Network under terms favorable to the NFL.

How far is the NFL prepared to go to get the NFL Network into American homes? Consider the Los Angeles City Council on August 18 passed a resolution introduced by Councilman Bernard Parks that encouraged the Federal Communications Commission to extend indefinitely a temporary order issued Aug. 3 that required Time Warner to restore NFL Network to its customers. The original order extends through Sept. 3.

The resolution asking for the extension passed by a 7-1 margin. (the order has been extended to September 15)

The NFL believes in building their brand brick by brick, understating more often then it’s the “little touches” that build multi-million sponsorship programs. The NFL according to a report in the USA Today invited its 20 corporate partners to purchase sponsored “vignettes” that would be interspersed with game action during telecasts the 2006 season, according to Peter Murray, the NFL's vice president of partnership marketing.

Three companies have made agreements; more are coming, Murray says.

With viewers skipping or ignoring ads, sponsors are using other ways to get their names into live TV sports rather than being limited to traditional commercial breaks, says Ann Marie Dumais, vice president of Nielsen Sports, a unit of the company that tracks TV ratings.

The NFL has had sponsored messages during game action before. But worried about over-commercializing games, it ended them after the 1997 season. This time it will limit them to one 30-second, or two 15-second messages, a game, Murray says.

The league will charge sponsors about the same price they'd pay to buy a national 30-second TV spot, Murray says, or several hundred thousand dollars. That’s taking care of your sponsors.

Last year the NFL played a regular season game in Mexico City, next year the league is planning on sending the New England Patriots and the Seattle Seahawks to Beijing for a pre-season game. London is expected to host a regular season game in the next two years.

Electronic Arts released Madden NFL 2007 on August 22. In its first week, EA reported that it had sold more than two million copies of Madden NFL 2007 in the week after its Aug. 22 launch, up roughly 12% from the 1.8 million copies of last year's version sold in its first week on the market. That exceeded the opening-week box-office gross of some hit summer movies such as "Cars," which had $83 million in ticket sales in its first seven days in theaters, according to

The NFL gets it right because of the leadership instilled first by Pete Rozelle and then by Paul Tagliabue. Rozelle changed the face of professional football in 1963 when he convinced owners of major market franchises (New York and Chicago) it would be in their best interests to share all of their television revenues. Sports socialism was born. Today the NFL shares 83% of all their revenues, and most franchises believe they have a reasonable opportunity to win the Super Bowl. Paul Tagliabue who retired last week, left a league he took over in 1989 free of labor related issues, and a business showing no signs whatsoever of slowing down. Let’s Get Ready for some football and enjoy watching the NFL business machine continue to move forward.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: Adweek, Brandweek, USA Today, the Wall Street Journal and Forbes Magazine