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NFL Owners Debate Pros and Cons of Corporate Ownership

From Bloomberg

The National Football League’s old guard has fought off corporate ownership the way an offensive lineman fends off pass rushers.

As the value of NFL franchises leap higher, some owners say it’s only a matter of time before the league drops its ban of corporations and welcomes big companies, just as the other major North American sports leagues do.

The issue is a hot topic now, because of the competition between various ownership groups to purchase the expansion Cleveland Browns. Owners will meet in Atlanta on Wednesday to listen to presentations from several potential purchasers.

“I think the more you discuss it the more probable it becomes,” said Green Bay Packers Chief Executive Bob Harlan. “On the other hand, I think people who have been in this league a very long time are comfortable with the system and would be leery giving up control to a publicly traded company.”

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All NFL owners want the league and franchise values to grow. Some of them, however, are concerned that allowing corporations to own teams would upset what perhaps is most competitively balanced league in North American sports.

Fifty-three professional sports teams have some degree of corporate ownership. Among them: the Atlanta Braves, owned by Time Warner Inc.; the Anaheim Angels and Anaheim Mighty Ducks, owned by Walt Disney Co.; and the Chicago Cubs, owned by the Tribune Co. The Packers, which are nonprofit stock corporation, have a special exemption from the NFL.

Browns Bids

While Browns bidders haven’t made their bids public, estimates run as high as $500 million, easily passing the sports franchise price record of $311 million that News Corp.'s Fox Sports paid for the Los Angeles Dodgers baseball team in Sept. 1997.

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The Minnesota Vikings were sold for about $250 million, including debt, at the end of July.

Owners opposed to allowing corporations as owners argue that there are enough individual investors willing to spend money to drive up franchise values.

“We don’t seem to have a problem coming up with buyers so far,” said New Orleans Saints owner Tom Benson. “The price has gone up to $200 or $300 million, but peoples’ incomes are going up tremendous, too. We have more millionaires today than we’ve ever had.”

Two years ago, NFL Commissioner Paul Tagliabue and Vice President of Football Development Roger Goodell met with executives of the Walt Disney Co. and Seagram Co.'s MCA/Universal to discuss the possibility of corporate ownership and putting a team in Los Angeles, the NFL said.

Executives might have envisioned a Disney-managed stadium, hotels and theme park, as well as the millions that could be made in licensed merchandise and other entertainment opportunities. NFL owners aren’t buying it just yet.

Ownership Rules

Under NFL bylaws, a team must have at least one general partner who holds a minimum 30 percent stake in the team. Partnerships can’t number more than 24 persons, and corporate ownership is denied.

Owners of teams in small markets say wealthy corporations would create a competitive imbalance, even with the league’s salary cap.

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Their argument: If a player signs a $10 million contract that includes a $2 million signing bonus, the $10 million is pro-rated over the length of the contract. Unlike contracts in some other major sports, the player only gets paid for each year of the agreement if he makes the team. His only guarantee is the $2 million bonus he receives up front.

If major corporations are allowed into the league, the best free agents probably would sign with teams that have the money to pay the largest bonuses, opponents argue.

A second disadvantage some say, is that a corporate representative would be unable to make quick decisions the way individual owners can.

Potential Buyers

The NFL probably wouldn’t have trouble finding corporations willing to buy into the league, said Richard Read, a media and entertainment analyst for Credit Lyonnais Securities.

Media conglomerates usually find sports franchises attractive investments because they provide programming.

The NFL, however, presents a dilemma. Unlike basketball, hockey and baseball, every NFL game is cover by a national television contract. The league still would draw interest, most likely from a corporation that advertises or broadcasts NFL football games.

“If I am a corporate buyer and I own any distribution outlet--whether it’s a TV station or a cable network, an ABC or ESPN--and I depend on airing pro sports where the rights fees are rising dramatically, the only way to protect yourself is to own the team,” he said, “become a seller of the rights, as well as a buyer.”

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Denver Broncos owner Pat Bowlen said while he can envision corporate ownership sometime, he would prefer corporations as minority partners, rather than controlling interests.

“I’m realistic enough that I can see that happening in the next couple years,” Bowlen said. “But I don’t see a model where a public corporation would ever own the whole thing.”


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