Thursday, November 11, 2010

What does Robert Kraft know that the rest of us don’t


Earlier this week National Football League commissioner Roger Goodell suggested time was running out if the NFL and the NFL Players Association are going to agree to a new collective bargaining agreement before the current CBA expires on March 5, 2011.

“We continue to have discussions, but we’ve got to focus on having productive discussions where there’s actually progress being made,” Commissioner Goodell said, as reported by Scott Brown of the Pittsburgh Tribune-Review. “We’re getting closer and closer to that March deadline, and I think for the good of the game, for the good of the fans, for the good of the players, we need to reach an agreement that’s fair to everyone. We have a lot of work to do and we’ve got to sit down and work on it. We owe that to the game.”

Goodell’s “pessimism” aside, one of the few voices suggesting there will be labor peace well before March 5 is New England Patriots owner Robert Kraft. Kraft remains one of the NFL more influential owners spoke out last week in during an in-depth profile that appeared at Fortune.com.

The sentiments expressed by Kraft are similar to the one he said after last month’s NFL ownership meetings in Chicago. Kraft has been one of the few NFL owners to speak out on NFL labor issues and his remarks should not come as a real surprise to anyone. Last month, The Wall Street Journal reported the league could lose as much as $1 billion even if the 2011 NFL season is played in its entirety. The WSJ report suggested uncertainty is hurting the NFL everyday by challenging the Lords of the Pigskin from moving forward in managing the business affairs of the NFL.

Is Kraft a cockeyed optimist? Or is Goodell being a pessimist? Kraft is telling football fans what they want to hear – fear not there will be labor peace. Kraft is also playing the role of a good NFL owner by assuring fans and more importantly the NFL corporate and media partners that at the end of the day things will work out. But Robert Kraft’s pronouncement is much more than that. Kraft is one of the best owners in the NFL, a business man extraordinaire.

Kraft announced his intention to bring New England a championship the day he bought the Patriots in 1994. In the 15 years since, he has made good on that pledge several times over, as the Patriots have won an unrivaled three Super Bowls, five conference championships and eight division championships during that time. Since 1994, the Patriots have qualified for the playoffs 10 times and advancing to the Super Bowl on five occasions. No other NFL franchise has earned more than three Super Bowl berths in the past 15 years. With a 173- 91 (.655) overall record, the Patriots have won more games and more often than any other team since Kraft purchased the franchise.

Under Kraft, the Patriots have experienced one of the most dramatic turnarounds in the history of sports. In the four seasons immediately preceding Kraft's acquisition (1990-93), the Patriots compiled an NFL-worst 14-50 (.219) overall record, which included a 1-15 finish in 1990 and a 2-14 record in 1992. The Patriots were not only last in the standings, they were also last in attendance and overall revenue.

But it did not take long for Kraft's vision to come into focus. His personal investment in the team restored the faith of Patriots fans and rejuvenated interest throughout New England. The year he bought the team, season ticket sales soared to new heights, eclipsing 40,000 for the first time in franchise history. By the start of his first season, every game was sold out, a feat that had never been accomplished in the franchise's previous 34 seasons. The achievement ensured that local broadcast blackouts would be lifted and every Patriots game, home and away, would be televised throughout New England for the first time in team history. Every game has been sold out since that 1994 season opener. By season's end, the consecutive sell out streak will extend to 169 games.

By his fifth anniversary as owner, the Patriots had already established themselves as perennial playoff contenders, qualifying for the postseason four times, twice as division champions. In 1996, the Patriots claimed their first division title in 10 years. After defeating Pittsburgh in the playoffs, the Patriots hosted their first conference championship game in franchise history and advanced to Super Bowl XXXI.

The transformation of the Patriots under Kraft's leadership constitutes one of the greatest long-term, worst-to-first revivals in sports history. In 2005, Forbes magazine valued the Patriots franchise at one billion dollars. The Patriots were just the fourth sports franchise in history to eclipse that financial plateau. After winning back-to-back Super Bowls and three titles in four years, Forbes also named the Patriots "The Best Team in Sports."

In 2007, the New England Patriots won a, franchise record, fifth consecutive division title. They also became the first NFL team to win 16 games during the regular season and the only team to ever win 18 consecutive games in one season. The undefeated regular season boosted the team's overall record from 2003 to 2007 to 77-17 for a remarkable .819 winning percentage. The 77 wins in five years is the most by any team over any five-year span in NFL history. From Sept. 14, 2003 to Oct. 26, 2008, the Patriots won 82 games with only 18 losses. It marks the most successful 100-game stretch since the league was founded in 1920.

The Patriots also own three significant NFL records for consecutive wins. In 2003 and 2004, the Patriots won 21 consecutive games, which included three playoff games. Two years later, the Patriots started another streak and over the next three seasons won 21 consecutive regular season games. In addition, the Patriots established an NFL record by winning 10 consecutive playoff games (2001-05). During that time, the Patriots also won 21 consecutive games at Gillette Stadium, the longest home win streak in franchise history.

Kraft's impact on the Patriots was immediate and it did not take him long to earn the respect of his NFL colleagues and peers. Since 1994, he has played an integral role on many of the NFL's most prominent owner committees. As a member of the broadcast committee, he had an essential role in negotiating the most lucrative broadcasting contracts in the history of sports. In 2009, as the chairman of the broadcast committee, he was one of the principals responsible for negotiating the extensions of the CBS and FOX contracts, as well as the extensions of the broadcasting agreements with DirecTV and Comcast. Kraft was also instrumental in putting together a deal that made New England-headquartered Reebok International, Ltd. the official and exclusive apparel manufacturer for the NFL, helping to create a new model for the sports license apparel industry. Kraft is now widely recognized as one of the most respected and influential owners in sports.

Kraft began his business career with the Rand-Whitney Group, Inc. of Worcester, Mass., a company that converted paper into packaging for various industries. He later acquired the company. In 1972, he founded International Forest Products, a trader of paper commodities that now does business annually in more than 80 countries. Together, Rand-Whitney and International Forest Products comprise one of the largest privately-owned and fully integrated paper and packaging companies in the United States. Kraft founded The Kraft Group to serve as the holding company for the family's varied business interests, which are concentrated in five specific areas: the distribution of forest products, paper and packaging manufacturing, sports and entertainment, real estate development and private equity and venture investing.

From 2000 to 2002, The Kraft Group's real estate development team oversaw the on-time and on budget construction of Gillette Stadium, a privatelyfinanced $325 million state-of-the-art stadium that the Patriots and their fans are proud to call home. The financial commitment from Kraft provided a solid foundation on which to build for the first time in the franchise's nomadic history. Moving from Foxboro Stadium into the majestic Gillette Stadium marked another worst-to-first transformation for the Krafts, who now operate New England's premier entertainment venue. After opening Gillette Stadium, Kraft was recognized as the Sports Executive of the Year by one national publication and he and Jonathan Kraft were named Sports Industrialists of the Year by another.

The construction of Gillette Stadium was the first project of The Kraft Group's real estate development team. In 2007, The Kraft Group expanded the site development with the construction of Patriot Place, a 1.3 million square foot mixed-use lifestyle center and entertainment destination.

Throughout Kraft's professional career, many of his biggest risks have yielded the greatest rewards. That was true throughout his pursuit of the Patriots ownership, beginning in 1985 when he first purchased an option on the land surrounding the old stadium. It was a large investment for an underdeveloped parcel of land, but proved to be an important first step in a long process toward owning the Patriots. In 1988, he took another step by purchasing the stadium out of bankruptcy court. It was another large investment, this time to purchase an antiquated stadium that was eventually demolished. But, with a binding lease through 2001, the acquisition of the old stadium proved to be an invaluable asset in Kraft's quest toward owning the team.

When his opportunity came in January of 1994, Kraft faced a difficult business dilemma. He had to decide between committing over $172 million of family resources to purchase the Patriots or accept a lucrative $75 million buyout offer to void the final years of the team's stadium lease and allow the team to move out of New England. On Jan. 21, 1994, Kraft passed on the buyout offer, choosing instead to make an 11th-hour bid to buy the team. On Feb. 26, 1994, a day after Kraft earned league approval; season tickets for the 1994 season went on sale and Patriots fans showed their support for Kraft's decision in record numbers. By the end of the first business day, amidst a winter nor'easter, 5,958 season ticket orders were processed, shattering the previous single-day sales record of 979. The show of support validated Kraft's decision to buy the team and gave him the confidence to focus on another risky, long term project: the construction of Gillette Stadium.

In 2000, Kraft took another risk when he surrendered a first-round draft choice to a division rival to acquire the services of Head Coach Bill Belichick from the New York Jets. The decision was heavily criticized at the time, but like so many of Kraft's decisions along the way, the risk was answered with great reward. Since then, the Patriots have recorded more wins and more championships than any other team in the NFL and Coach Belichick has become the first head coach in NFL history to win three Super Bowls in four seasons.

A native of Brookline, Mass., Kraft attended local public schools before entering Columbia University on an academic scholarship. Upon graduation, he received a fellowship to attend Harvard Business School, where he earned a master's degree in business administration.

Kraft first became a fan of the Boston Patriots in their AFL days during the early 1960s. He attended games at each of the team's Boston venues: Boston University Field, Fenway Park, Boston College Alumni Stadium and Harvard Stadium. When the team moved to Foxborough in 1971, he invested in season tickets for his family. Kraft credits the memories and experiences shared with his family and other Patriots fans at Foxboro Stadium for his passionate pursuit of ownership of the franchise.

Over the past four decades, the Kraft family has been one of New England's most philanthropic families, donating tens of millions of dollars in support of local charities and civic affairs. Kraft serves on the board of directors for Viacom and the Federal Reserve Bank of Boston. He also serves on the executive committee for the Dana-Farber Cancer Institute, where he established the Robert K. Kraft Family Blood Donor Center. He is a trustee emeritus at Columbia and is a trustee at Boston College. He has received honorary degrees from a variety of New England universities. In 2006, Kraft was awarded the NCAA's highest honor when he received the Theodore Roosevelt Award, "presented annually to a distinguished citizen of national reputation and outstanding accomplishments."

Currently, three American terrestrial (over the air) television networks CBS ($3.73B), NBC ($3.6B) and Fox ($4.27B), as well as cable television's ESPN ($8.8B) are paying a combined total of $20.4 billion to broadcast NFL games through the 2011 season for CBS, Fox, and NBC and through 2013 for ESPN. The current NFL agreement with DirecTV ($4B) through the 2014 season – tells the story of how the NFL’s economic engine, its television.

Kraft played a central role during the latest NFL television contract negotiations, working with Goodell, CFO Anthony Noto and Steve Bornstein, CEO of cable's NFL Network in putting together the multi-billion dollar agreements.

"Robert was side by side with Roger, myself, and Steve and the media team in strategically thinking about these deals," Noto told Fortune, who recently left the NFL to return to Goldman Sachs (GS). "It's a lot of work and effort for him, a huge investment of his personal and professional currency in traveling across the country and personally calling on the Les Moonveses, the Rupert Murdochs, the Mel Karmazins of the world."

Kraft and Cowboys owner Jerry Jones played key roles last year in helping to resolve the differences Philadelphia based cable giant Comcast had with the NFL Network that kept the NFL Network off the Comcast system.

Why does Robert Kraft get on the Acela train, go down to Philadelphia, and personally invest the time to solve complex differences of opinion?" Noto asks. "Because he cares about the league first and last. He does not get any more than any other club for the investment of his time. He gets 1/32 of that deal" -- referring to the league's model in which the 32 owners split revenue equally -- "not 2/32 or 16/32. It's 1/32."

If modesty is an attribute for titans like Kraft – this quote from the Fortune profile suggests when it comes to owning an NFL franchise, Robert Kraft is team player.

“We're all fractious," he says of his fellow owners. "But we're only as good as our weakest partners. That's not a trite saying. I want everyone to do well. If the NFL does well, the New England Patriots are going to do well."

Kraft has always seen the big picture. For Robert Kraft it is not a matter of if, but when the NFL will return to Los Angeles. A notion Kraft has been a major proponent of for several years.

"I'd be very surprised if it doesn't happen in the next five years," Kraft told USA TODAY. "We have to be in L.A. How can we not be in the second-largest city in America, which is a gateway to Asia and Mexico?"

When there is a new NFL CBA and there will be new CBA (maybe not until well after March 5, 2011) expect Robert Kraft to play a key role. There are leaders who (pardon the cliché) are men among boys, Robert Kraft is one such man. When the clock strikes twelve on the current NFL CBA (and be very sure the bell will ring at midnight) the NFL will need the calm resolve, proven leadership and understanding that Robert Kraft has offered the NFL time and time again. Robert Kraft – he simply knows more than the rest of us.

For SportsBusinesssNews.com this is Howard Bloom

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