Corporate Social Responsibility / Entertainment / International Business / Organizational Strategy

The NFL Has a Growth Problem

Goodell-ref-lockout

Chris Barker

The National Football League’s central office, led by Commissioner Roger Goodell, exists to maximize the value of the individual teams. While not technically a corporation- the league considers itself a trade association of thirty-two separate companies- the league has dispersed ownership and needs a central business strategy. The individual team owners cede some of their own authority to the collective in an attempt to maximize the value of the league, and then share the rewards.

The NFL is hugely profitable. According to Forbes estimates, the teams brought in a combined $1.71 billion in operating profit during the fiscal year 2013[1]. Only the Detroit Lions lost money. However, the game by now reaches such a wide audience in the United States that growth is difficult to find. Since Goodell took over in 2006, NFL franchise valuations have grown at an annual rate of 3.5%, That rate is far lower than the rates at which NHL, MLB, and NBA franchises are growing, and is a far cry from the 11.7% annual growth the NFL experienced under the leadership of previous commissioner Paul Tagliabue from 1991 to 2006[2]. In order to rekindle that growth, the NFL needs to get creative and formulate a new strategy.

Manifest Football Destiny

One potential way to make the game bigger would be to become more popular overseas. As the NFL’s COO under Tagliabue, Goodell was a champion of the World League of American Football, or NFL Europe, an attempt to establish a developmental league in the Old World which folded in 2007. Today, the commissioner continues to tout the potential of Europe as a market for American football. Goodell suggested on NFL Network that a franchise could be based in London in “five or ten years”[3]. The league schedules several regular season games in London’s Wembley Stadium each season, which have routinely drawn impressive attendance figures of over 80,000[4].

It is easy to see the inherent risks of putting a NFL team in London. Perhaps English fans of American football are interested in a few games per year, and consume it much like a movie or a play, but would not be interested in the product for a full season year in and year out. The NFL would be committing a huge amount of resources to a total unknown when there are several capable host cities in the Western Hemisphere like Los Angeles, Toronto, or even Mexico City. Goodell should pay heed to the specters of the history of foreign soccer players like Pelé and David Beckham who were supposed to bring a soccer revolution to the United States. Soccer’s popularity among Americans is improving, but the average MLS team is worth $37 million and losing money. The most valuable franchise, the Los Angeles Galaxy, is worth $100 million, which is about a fifth of the total value of FC Barcelona star Lionel Messi’s contract[5]. Perhaps it would be unwise for one of the big European soccer leagues to move a franchise to the United States based on good World Cup ratings. In essence, the NFL would be doing that by committing an entire franchise to London based on good ratings in the International Series.

That analysis is before even stopping to consider the risks a London NFL team would bring to the league in terms of impacting the on-field product. Savvy NFL fans are acutely aware of the impact of a team from the West Coast playing a 1:00 P.M. game on the East Coast at 10:00 A.M. Pacific Time. For example, on October 26th the Seattle Seahawks are scheduled to play the Carolina Panthers at 1:00 P.M. ET in Charlotte, NC, and one can expect Las Vegas to adjust the point spread accordingly. This effect would become even more dramatic if teams from the United States have to travel across the Atlantic Ocean. Even a 4:00 P.M. GMT start would be the equivalent of 11:00 A.M. for East Coast teams and 8:00 A.M. for West Coast teams. It is fair to speculate whether fans of the Oakland Raiders would be willing to wake up at 7:30 A.M. to watch their favorite team play London. Placing a team in London would be a logistical nightmare, inconvenient to the players, detrimental to the on-field product, and burdensome to the league’s existing fans.

A New Customer Base

In recent years, the league has been encouraged by an explosion in its popularity among female fans. The league reports that 44% of all its fans are now female, ESPN research finds the NFL as second in popularity among women only to college sports, merchandise sales among women were growing by annual rates above 100% as recently as a few years ago, and the number of American women participating in fantasy football doubled in 2011[6]. Perhaps women could be the next frontier for the league.

The league has made some easy steps towards reaching out to potential female fans. For instance, fans can order women’s jerseys from the NFL’s website, as well as plenty of other female-friendly apparel items. This perhaps has been the main causal force of the aforementioned explosion in merchandise sales to women, not the improved popularity of the game among women. Additionally, the league is proud to celebrate Breast Cancer Awareness Month every October. The players wear pink gloves, pink cleats, pink towels, and turning on an NFL game exposes fans to an overwhelming amount of stimuli that force you to think about breast cancer. The NFL loves to promote the stories of “I decided to get a mammogram because the NFL encouraged me to, and my breast cancer was caught early,” which are heartwarming, plentiful, and genuine.

Recently, this optimism has been threatened by public outrage regarding a series of domestic violence incidents over this past summer and the league’s tragic mishandling of them. Evidence exists that Goodell may have attempted to sweep Baltimore Ravens running back Ray Rice’s egregious case under the rug in an ill-fated mission to get Rice back on the field more quickly. If true, the episode is a damning indictment on both Goodell’s morality and competence. The moral issues surrounding the cover-up are obvious, and the suggestion that one team was potentially getting preferential treatment from Goodell is a fascinating dynamic.

Most puzzling, though, is the apparent absence of a motive for Goodell’s actions. Ray Rice serving an adequate suspension would have had no bigger impact on the NFL’s bottom line than a rounding error. Brett Favre, arguably the most decorated quarterback of all time, retired after the 2010 season and the league’s revenues grew by about $500 million the next season. Who is carrying the ball for Baltimore is wholly irrelevant, but the league’s relationship with women is not. Goodell easily could have immediately come down hard on Rice, as well as other domestic abuse culprits Greg Hardy and Ray McDonald of the Carolina Panthers and San Francisco 49ers respectively, established the moral high ground, and the league would have been more profitable for it thanks to positive public relations fallout.

Goodell’s inane handling of this is the type of affair that gets heads of companies fired, but the league’s owners will pay him $44 million for his services this season. If the league is interested in tapping into its next best potential source of growth, female fans, it needs to replace Goodell with a new leader who is capable of constructing a business strategy that might be more aligned with the values of women. Dare I recommend a woman? Several NFL owners are women, such as Chicago Bears owner Virginia Halas McCaskey, Detroit Lions owner Martha Ford, Carol Davis of the Oakland Raiders (part owner), Susie Smith and Amy Hunt of the Tennessee Titans (part-owners), and soon-to-be Buffalo Bills part-owner Kim Pegula. Those women are all on the elderly side except for Pegula, whose resumé may not be built for a position like this. Perhaps former Secretary of State Condoleezza Rice, a member of the NCAA’s College Football Playoff Selection Committee, would be a viable candidate, but her private sector experience is limited.

One thing is apparent: Roger Goodell is not the right leader for the NFL to tap into the rest of the female market, as the NFL’s owners certainly desire. The search for the next commissioner needs to be conducted under the guidelines of finding a sustainable and safe way for the league to continue to grow in popularity in the coming years. The wrong choice could fulfill Mark Cuban’s ominous prophecy that the NFL’s greedy strategy could come back to haunt them[7].


[1] http://www.forbes.com/nfl-valuations/list/

[2] http://fivethirtyeight.com/datalab/nfl-owners-may-be-overvaluing-goodell/

[3] http://profootballtalk.nbcsports.com/2014/07/18/goodell-sees-tremendous-demand-for-the-nfl-in-europe/

[4] http://www.bbc.com/sport/0/american-football/24687966

[5] http://www.forbes.com/sites/chrissmith/2013/11/20/major-league-soccers-most-valuable-teams/

[6] http://espn.go.com/espnw/news-commentary/article/7536295/nfl-finding-success-targeting-women-fans-merchandise-fashion

[7] http://espn.go.com/dallas/nba/story/_/id/10662203/dallas-mavericks-owner-mark-cuban-says-greedy-nfl-10-years-away-implosion

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