A Matter Of Economics

The NFL is not exactly heading into the same sort of recession that has gripped most of the rest of America, but it's noteworthy that commissioner Paul Tagliabue no longer says a labor agreement between management and the players is the most pressing issue facing the league. "It's probably the economy," he now says. One reason the weakened economy hasn't yet hurt the NFL is that the league is well insulated by its multibillion-dollar TV contract, which runs through the 1993 season and is guaranteed. What's more, through the first 15 weeks of this year, the average attendance of 61,877 wasn't far off the record of 62,321 set in 1990.

A few teams, the best example being the Chiefs, are even enjoying a resurgence at the gate. An aggressive marketing campaign and a winning record have increased Kansas City's season-ticket base from 25,000 in 1988 to a projected 65,000 in '92. In Atlanta, by the time the Falcons move into the new 70,500-seat Georgia Dome in August, they expect that all 183 of the luxury boxes available to the public will be sold at an average price of $65,000 for the season.

But there are ominous signs for the mid-1990s, most notably the continuing decline of TV ad sales and the threat of liberalized free agency, which could push up players' salaries. Tagliabue also notes that the downturn in NHL attendance this year could be a warning to the other pro leagues. "We were lucky in a sense that season tickets were sold in the spring, when everyone was euphoric after the gulf war, and the assumption was the economy would come back strong," he says. "Looking ahead to next spring, with the economy as bad as it is now, you could have a different situation."

In talks with the 10 ownership groups vying for two expansion franchises, Tagliabue heard that "the economy in their states is the worst it's been since World War II." He plans to have two new teams begin playing in '94, but he said the timetable could be pushed back if the economy doesn't improve.

Although the heavy losses being absorbed by the networks on NFL telecasts aren't having an immediate impact on the league, they bode ill for future rights fees. The five networks that carry NFL games (ABC, CBS, NBC, ESPN and TNT) vastly overbid in 1990, when they agreed to a combined four-year, $3.64 billion contract with the league, which Hooded an already saturated TV schedule with more NFL games. Now, Tagliabue says, the networks are looking to extend their contract with the league at a figure that's lower than the estimated $39 million per club the 28 teams will earn in the final year of the current deal. "The NFL was always considered the most solid sport on TV," says one industry source with knowledge of the league's television doings, "but this is the first year all three [major] networks will lose money on the NFL."

According to a second source, the provisions of the contract that added more national TV games by lengthening the regular season from 16 weeks to 17 and by expanding the postseason format have backfired for television. Instead of stimulating more advertising revenues, the extra week of games, the addition of two more wild-card playoff games and an added cable deal meant that advertising had to be sold for 15 more games—that's an increase of 840 30-second commercial spots—in the middle of a recession, when even established advertisers are cutting back. One ad executive said last week that Anheuser-Busch, for instance, used to buy six to eight spots per game on NBC's telecasts of NFL games; this year, the beer giant is buying one or two per game.

A few teams are beginning to feel the pinch of the recession in ways unrelated to TV. Although Detroit and New England are two of the NFL's most improved teams, they're nevertheless experiencing dropoffs at the gate. The Lions are fighting for the NFC Central title, but with the local automobile industry a primary victim of the recession, their attendance is down 6% and they had 11,000 empty seats at a recent home game. Also in the last two years the leases on 41 of the Silverdome's 102 once sold-out luxury boxes were not renewed, and no new full-time tenants were found for them.

Despite improving their record from 1-15 in 1990 to 6-9 and becoming fun to watch, the Pats have seen their attendance fall 3% at Foxboro Stadium, and owner Victor Kiam's personal financial difficulties have forced him to consider putting the team up for sale. Patriots CEO Sam Jankovich recently spent two days at economic seminars in Boston and came away fretting. "They said we were in for another year of tough times," he said. "The doom and gloom is not good."