"You can be bullish or you can be bearish, but for God's sake, don't be hoggish." -- Wall Street Saying
In his 21 years as commissioner of the National Football League, Pete Rozelle has directed the building of a financial empire the likes of which sports has never seen.
He has used his public relations skills and the leverage gained by shrewdly marketing a popular product and using special antitrust concessions to negotiate ever-larger contract deals with the three television networks.
Under Rozelle's guidance, the league has grown from 12 teams to 28 and once half-empty stadiums have been filled to the brim with screaming fans. American Football League owners who paid about $25,000 for their franchises in the 1960s before the merger with the NFL now find their investments are worth upwards of $35 million. Back in 1960, each club collected $150,000 a season for television rights, but since 1978 each has received $5.8 million annually. When the current contracts runs out after the next season, the owners will be looking for a whopping increase.
While Rozelle's policies have further enriched his 28 already well-heeled bosses, they have vested him with the mantle of a football czar and an appropriately regal salary estimated at $430,000 a year, plus innumeralbe bonuses.
The chain-smoking, conservatively dressed Rozelle, 54, operates from a Park Avenue executive suite that includes not one of the 89 million items of NFL "official" paraphernalia that he has helped unleash on the world. About the only evidence of his football affiliation, in fact, is a three-foot high stature of a football player, gloriously idealized with flowing cape. Otherwise, Rozelle's office could belong to a banker or broker.
For make no mistake about it, behind all the hoopla the NFL first and foremost is a big entertainment business that systematically seeks to cut costs while it increases revenues now totaling well over one-half billion dollars annually.
If there is a single key to Rozelle's success it is his mastery of the law of supply and demand. He has cannily sensed how much football the market will bear, and he has been careful not to push a good thing too far.
The NFL team owners form a very exclusive club and Rozelle wants to keep it that way. Corporations need not apply (they would get the league into pesky public disclosure and federal regulations), and individuals must be able to finance at least a 51 percent interest to qualify to buy a club. Rozelle says he may add another two teams to the league some day, but they won't be within 75 miles of existing teams. This extraordinary power to limit competition for markets is spelled out in the NFL constitution.
That is why the rebellious effort by Al Davis, Oakland Raider managing general partner, to move his club to the Los Angeles Coliseum is viewed by virtually all his fellow club owners as a threat to the balance created by Rozelle. To them, Davis is uncontrollable and blinded by greed.
If oakland wins the Super Bowl Sunday against the Philadelphia Eagles and Rozelle, as is customary, presents the owner of the winning team with the trophy before 100 million TV viewers, it will mark a bizzare twist in a long, contentious relationship. It would not be unlike the brash Davis to take the delicious opportunity to whisper in Rozelle's ear, "I'll see you in court."
On Feb. 9 at U.S. District Court in Los Angeles, the trial is scheduled to begin on Davis' suit against the NFL for trying to block him from moving to that city where he clearly hopes to reap the rich rewards of a huge cable TV market in years to come.
Davis' cavalier attitude in abandoning his loyal Oakland fans -- who filled the stadium each week -- for a richer market is in harsh contrast to the image of the NFL that Rozelle has worked so hard to promote.
What is worse, Davis is going to court to challenge the once-sacrosanct NFL consititution, which forbids one team moving to within 75 miles of another without approval of other owners. In this case, Davis eyes the L.A. Coliseum where the Raiders would play not far from the Rams' new home at Anaheim. The other owners have vetoed Davis' proposal.
"He wants to bring everything down," said Rozelle of the Davis lawsuit during a recent interview. "The key issue is whether we're going to continue as a league with people adhering to the rules. If we don't have that, we're going to have anarchy."
If a court battle does ensue, one intriguing result could be that the league's closely guarded finances finally may be disclosed. In past internal squabbles, the NFL owners have seen to it that financial records were sealed, but that won't happen in a trial.
Even though the full financial picture of the NFLis known only to Rozelle and to some of the club owners, it is possible through available records and interviews to get a good idea of the dimensions of the financial house that Rozelle built.
Briefly stated, the NFL under Rozelle is a brilliantly conceived, extremely profitable institution whose club members consciously limit their annual cash returns to finance what must be history's most lavish continuing public relations campaign and to help insure the NFL's longevity.
For example, NFL films has the exclusive rights to film the games and to sell the film . Rozelle claims each team owner collects only about $15,000 a year from NFL Films, which means that most of the revenues are sunk back into the company's elaborate studios in Laurel, N.J., and used for public relations. NFL Films, which is owned by the 28 clubs, probably will pay off big dividends one day. In the meantime, though, it acts as an immensely powerful propaganda arm for the owners, who individually could never afford the elaborately devised productions.
At the head of the NFL structure is the league office presided over by Rozelle. The late Sen. Everett M. Dirksen (R-Ill.), in a curious act of generosity, pushed through legislation in 1966 that specifically made "professional football leagues" exempt from taxes. As a result, the NFL is not subject to taxes that other businesses must pay.
The league office has satellites owned by the 28 club executives. These include NFL Properties Inc., the licensing and publishing organization, and NFL Films Inc., which exclusively films the games. There also are NFL Charities and the NFL Management Council, an arm of the owners that negotiates with the players union.
The two biggest and most evident sources of revenue to the team owners are television and gate receipts. For the 1980 season, the league announced that the average attendance at games was 59,000. NFL officials say that more than 90 percent of the seats in all the stadiums sold, at an average price of $11. Adding in the gate and TV revenues from exhibition and postseason games, the NFL had gate receipts in the 1980 season of about $360 million.
The league is in the third year of a four-year contract with the three networks, which pay the NFL $162 million a year to telecast games. This amount is divided equally among the 28 teams.
TV and gate receipts total $522 million in annual revenues, which would rank the NFL at 435 in the Fortune magazine listing of the 500 largest U.S. industrial companies.
The only NFL team whose balance sheet is published is the Green Bay Packers, who are publicly owned. That club in 1979 had a net profit of $1.9 million on a total income from operations of $10 million. This means the club earned nearly 20 percent on sales -- a handsome return for any company.
Informed sources say that there are no losing franchises in the NFL. This is in sharp contrast to other professional sports franchises whose wealthy owners use their losing operations as tax shelters for their other money-making investments.
The NFL's unique structure allows it to operate in the best of all worlds. To loyal fans, NFL clubs present themselves as separate entities competing with each other. Yet, when it comes to matters of mutual interest, such as finances, each club enjoys backing of the other 27. This makes league teams formidible adversaries. For example, NFL legal expenses, among other major costs of doing business, are divided 28 ways.
But nowhere is the NFL monolith more effective than in negotiating television contracts. Back in 1961, shortly after Rozelle took over as commissioner of the league, Congress gave sports teams an antitrust exemption. This allows teams that are members of a league to ban together in negotiating contracts with television networks.
According to an A.C. Nielsen survey, 1.8 billion people watched NFL football on the three networks in 1979. And while some sports on TV, such as golf and professional basketball, have suffered a decline in viewers, pro football continues to attract record numbers.
Certainly, these statistics will be touted by Rozelle when he begins negotiating a new contract with the networks next year. The speculation is that Rozelle will seek a $1 billion, four-year package from the networks.
"We won't figure that until next spring," says Rozelle, who adds pointedly that "Dallas" (the prime time soap opera) "gets $250,000 for 30 seconds of commercials and NBC is selling a minute for $550,000 for the Super Bowl."
According to Broadcasting Magazine, sponsors paid $110,000 for each 30-second ad during the 1980 NFL season, up from $95,000 in 1979.
The value of television to the survival of the clubs was amply demonstrated a few years ago with the collapse of the short-lived World Football League. Angry investors in the WFL blamed their losses on what they viewed as Rozelle's stranglehold on the three networks.
Chances are that before this decade is over, football fans will be paying to watch their favorite teams play on TV -- and still have to put up with beer and car ads, too. This is because the league will begin negotiating with cable television once the system reaches enough homes.
Rozelle figures that "cable is five or six years away, but we're keeping abreast of it."
So is Chester R. Simmons, president of the Entertainment and Sports Progamming Network (ESPN), a cable programming company, who says that almost 25 percent of the homes in U.S. are wired for cable. When 60 to 70 percent are, he says, "that's the time we'll make the run."
As part of the contract with the networks, the NFL limits the number of commercials that can be shown during a game to 23 minutes -- far below the number allowed by the Federal Communications Commission, according to Val Pinchbeck, the NFL's director of broadcasting.
Also as part of the contract, the NFL gets one minute in each game for "an NFL message" -- usually a slickly produced ad for the United Way showing a football player doing good works in the community where his team plays.
". . . Thanks to you, it works," says the player to the millions in the television audience. While the ads provide a nice plug for a well-known charity, they also are an effective public relations device for the league.
The NFL takes credit in the ads for their presentation. Since commerical advertisers pay $220,000 a minute, it's reasonable to figure that the two 30-second ads in each of the nationally televised games each year give the league millions of dollars worth of free publicity and the image of an institution that is concerned for the welfare of mankind.
In 1974, Rozelle established NFL Charities, whose grants each year are overseen by the commissioner and a group of prominent figures, including Ethel Kennedy, business executive David Mahoney, Rep. Jack Kemp (R-N.Y.), a former Buffalo quarterback, and NFL club owners Lamar Hunt and George Halas.
The board of directors meets during the incongruous excesses of Super Bowl weekend to decide which causes will get how much in grants. Last Year, for example, the grants totaled $597,000 ranging from $100,000 to Vincent Lombardi Cancer Center at Georgetown University to $5,000 to the National Athletic Trainers Association.
Like most everything else, the NFL's generosity is well publicized. Checks are presented during halftime of football games and the whole effort is described in a reprinted four-page article from PRO! magazine, the official NFL game program, subtitled "Giving and caring are all in the game" -- and the work -- of the $3 million National Football League Charities Foundation.
NFL Charities technically is funded by the club owners, but it is only a paper transfer. The funds come from NFL Properties, a tax-exempt licensing organization that controls distribution of the multitude of products that bear the NFL logo.
The NFL Properties-Charties operations are a superb example of Rozell's publilc relations genius.
In 1960, not long after he moved from general manager of the Los Angeles Rams to NFL commissioner, Rozelle decided to control the proliferating products bearing the names of NFL teams. The official NFL line is that Rozelle did it to control the quality of products bearing team names, but he must have seen a great business opportunity, too.
According to Bob Carey, a former Procter & Gamble marketing man who is president of NFL Properties, Rozelle first turned over the operation to Roy Rogers Enterprises. But the relationship ended in 1963, says Carey, because Roy Rogers "got greedy and signed up all kinds of licensees."
The business really took off after what Carey describes as the watershed year of 1970 when the leagues merged. The licensing business has succeeded for the NFL where it has failed for other sports, says Carey, because "Rozelle convinced the owners to turn over their trademarks. If one or two pulled out, NFL Properties would collapse like a Roman arch."
NFL Properties licenses manufacturers to produce thousands of items with NFL team logos, ranging from bicycles and baby bibs to underwear and cocktail glasses. For these rights, the manufacturers pay NFL Properties 6 1/2 percent of the wholesale price.
NFL Properties has become the world's premier marketer of sports paraphernalia, and Carey proudly notes that the first 32 pages of the Sears Christmas catalog was NFL items. "Every page in the catalog has to pull in $1 million of business," claims Carey.
Carey says that the wholesale value of the products sold last year was $100 million, the retail value $200 million. This means that the items were so popular that the manufacturers were able to charge a 100 percent markeup.
The NFL got license fees in 1980 of about $6.5 million, according to Carey, who added that this accounted for about one half of NFL Properties income.
Most of the balance comes from PRO! magazine, the program sold at each NFL game. Like TV Guide, PRO! carries national and local advertising. The clubs get a percentage of the national ads, and all the income from local ads.
Apparently football fans can't get enough of the booster journalism found in PRO! NFL Properties finances books by authors who glorify the sport. And this year, NFL Properties will alunch a son of PRO!
The game program will be renamed Stadium PRO. And for an $18 subscription price, fans will get seven issues of a new version of PRO! plus a Super Bowl program.
The Super Bowl program seems to have a life of its own. NFL Properties has shipped 300,000 for sale at newstands around the country at $3 a copy. Philadelphia alone has gotten 100,000 of the programs to capitalilze on that city's passion for the contending Eagles.
Exactly how much NFL Properties -- a "not-for-profit" firm for tax purposes -- makes from all this is not clear, but Carey suggests the figure was about $13 million last year. About $300,000 of that is used to finance patent infringement suits against companies that rip off NFL products, he claims.
That leaves about $12.5 million. Of that, $619,111.11 was split 28 ways and sent to each club owner, who was expected to give the money to NFL Charities. But NFL Charities is a Rozelle creation, which probably explains why Oakland's Al Davis kept his $22,111.
Precisely what has happened to the balance of $11 million or so earned by NFL Properties is unclear. But it's safe to say that the great share of it was spent promoting the league, especially among the young fans of the future. For example, Carey says that royalties will help launch a Youth Fan Club next year and joiners will get a membership card signed by Pete Rozelle. "It's a chance to maintain kids' interest in pro football," says Carey.
One group with an abiding interest in the future of pro football is the NFL Players Association. The current labor contract expires after the 1981 season, and the union's executive director, Ed Garvey, says, "We're going for a percentage of the gross revenues."
But the NFL Management Council, the owners group that will negotiate a contract, is equally adamant about not sharing revenues with the players. Anticipating difficult contract negotiations, the owners have hired a seasoned negotiating team from National Airlins. Jack Donlan, who at National experienced three major strikes in 14 1/2 years, says of the players' major demand, "We're open to reasonable negotiations on wage scales, but we don't have an interest in going along with a percentage of the gross. The players don't have capital at risk."
With about 1,550 players in the NFL earning salaries that average $69,500, labor costs are by far the biggest expense facing the owners.But Garvey, who settled with the owners last time before seeing the huge TV contract the league got from the networks, does not intend to let that happen again.
"That's why my friends call me omelet face," says Garvey. "But I'm not going to make that mistake again."