NFL Dollars And Sense…

In something far below the level of Earth-shattering news – in fact even below the level of marginally important news – CBS Sports today announced that it will have a new logo and new on-screen graphics coinciding with its telecast of the Super Bowl in February 2016. The new logo is described as “newer” and “sleeker” than the old one. Please raise your hand if the logo that a network uses on its sports telecasts has any bearing on whether you choose to watch that event on that network.

I thought so…

I read another report regarding CBS recently. For the telecast of Super Bowl 50, CBS is charging $5M for the “prime” 30-second spots in the game and that almost all of the “prime” spots have already been sold. If that is the case and we are not quite into December yet, I suspect that the price of the unsold “non-prime” spots might see a slight increase as December proceeds into January.

Large sums of money and the NFL get mentioned together lots of times these days. As the league owners march toward a decision regarding whether to put a team or two in Los Angeles, some folks have begun speculating about the “relocation fee” that the non-moving owners will split up as collected from the owner(s) who receive approval for such a move. Speculation about the “relocation fee” started at $500M for each team that earns approval for a move and some estimates have been as high as $600M per team. Let me put that into perspective for you here:

    The Cleveland Browns relocated to Baltimore as the Ravens in 1996. In order to gain league approval for that move, Art Modell paid the NFL a total of $29M – $20M up front and $9M in deferred payments over the next 15 years.

    Therefore, in roughly 20 years, the relocation fee jumped about 1700%.

The dynamic here is also interesting. Imagine that the final outcome is that the league owners vote to allow 2 teams to move to LA. For the moment, it does not matter which two make the move; just consider that there are 2 such teams. And merely to make the math come out in even numbers, assume that the “relocation fee” is set at $600M per team. In this imaginary instance, 30 teams will split $1.2B of “relocation fees” which comes out to be $40M per team. So let me pose a couple of questions here:

    1. If you owned a team that was not going to be affected in any meaningful way, why would you vote to oppose moving two teams to LA? NFL teams are profitable enterprises and just because you happen to own one of those teams, you now have the option to cash in a $40M lottery ticket just for raising your hand and saying “Aye!”

    2. Since the cold hard fact of the dynamic in my imaginary scenario above is that the “relocating owners” are going to pay significant money to the “non-moving NFL owners” in exchange for their votes to approve the relocation, why is this not thought of in terms of bribery? When IOC members and/or FIFA execs receive things of significant value in exchange for their vote on a specific matter, the word “bribery” leaps immediately into our vocabulary. In a broad sense, the 30 “non-moving NFL owners” are doing the same thing.

Now look back at the terms of the “relocation fee” imposed on Art Modell when he moved his franchise from Cleveland to Baltimore. He paid two-thirds of the fee up front and then paid off the rest of the obligation over 15 years. [Aside: He paid $9M over 15 years or $600K per year. That is an amount of money that I would love to see deposited into my retirement account annually, but in terms of the amounts we are talking about in the current relocation situation, that is chump-change.] Some commentators have opined that the terms of the relocations fee payments could have a significant impact on which teams can make this move. Specifically, some folks have said that if the entire $600M had to be paid upfront as an integral part of the deal, that specification would take the Oakland Raiders off the board. Reporters in the Bay Area have said definitively that Mark Davis cannot come up with that amount of money in a single chunk without selling off a fraction of the Raiders that could put his total command of the team in jeopardy.

Please note, I am not the one saying that for a very simple reason. I have exactly no knowledge of Mark Davis’ balance sheet or the details of the ownership arrangement for the team. What I do know is that the Raiders are owned by a partnership and that Mark Davis – and presumably his mother – are the General Partners in the ownership arrangement while any other owners are Limited Partners. Remember, I am not an attorney, but my understanding of limited partnerships is that the General Partner has complete and total control of the entity up to the limit of the General Partner committing illegal acts. What I do not know is whether the partnership agreement that prevails in the Raiders’ situation might allow the Davis family to decree that they and the other limited partners need to pony up cash should it be necessary to pay the relocation fee in a single chunk.

I am sure that some Raiders’ fan somewhere is going to read that and soar straight into Paranoia Mode wherein the NFL now has some way to “get even” with the Davis family for legal actions undertaken by patriarch Al Davis 30 and 40 years ago. Hey, it could happen. On the other hand, I do not think that it is imminently important for everyone in Raiderland to fashion for themselves a series of tinfoil hats to ward off the mind-control rays emanating from mahogany row at NFL Headquarters.

Here is one other way to look at the relocation fee issue. The Chargers, Raiders and Rams are the 3 teams “in play” for league approval to move to LA. According to Forbes’ valuation of those franchises, these three entities are worth between $1.43B (Raiders) and $1.52B (Chargers). To make the numbers come out even, consider that they are worth $1.5B. If that is the case, then the relocation fee is 40% of the franchise value. The Spanos fortune comes from real estate ventures; the Kroenke fortune comes from real estate and sports entrepreneurial ventures. Within both entities, there are serious “business folks” who use sophisticated understandings of markets and opportunities to project profitable decisions.

    In both of those ownership situations, they think it is worthwhile to pay a fee of 40% of the overall worth of the franchise to move to LA. Therefore, what ought we to infer from that analysis and conclusion about the increased profitability and value of the franchise itself simply by locating itself in LA?

Finally, Scott Ostler of the SF Chronicle had this hopeful view of sports finances recently:

“Bob Iger will be paid $1 per year to steer the Raiders’ quest to build a stadium in Los Angeles. Sheikh Salman, running for president of FIFA, says he will do the job for free. This trend can mean only one thing: Cheaper beer.”

But don’t get me wrong, I love sports………