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SBJ/20080908/This Week's News
Goodell memo: NFL revenue under pressure
Published September 8, 2008
The party line from many of the larger sports and broadcast properties has been that they remain largely unaffected by the current economic squeeze. However, a recent memo from NFL Commissioner Roger Goodell to league staffers warns of impending new business shortfalls at what is usually seen as
“Our costs are rising and our league revenues are under pressure,” Goodell wrote, in what appears to be the first admission of economic shortfalls at the NFL. “…This means we must carefully control our costs on a daily basis and aggressively identify new sources of revenue.”
While every corporate captain is charged with maintaining or cutting overhead during this tight market, Goodell indicates that the league’s budget projections are imperiled. “We remain committed to the bottom-line budget results that our league entities projected to the clubs for the 2008-2009 fiscal year,” he wrote. Without explaining the likely budget shortfalls, Goodell goes on to say, “I have asked Finance to coordinate across all departments as we make the necessary adjustments to meet our financial projections. We will all see and feel the effect in our travel, events, promotional spending and other areas.”
While declining to specify which NFL revenues are “under pressure” or what steps the league is taking to reduce costs, league spokesman Brian McCarthy said, “No business is immune to current economic conditions, including the NFL. Revenues are under pressure because we have partners and sponsors that are responding to a weak economy and higher costs. Like our partners, we are proactively and pre-emptively looking carefully at our expenses.”
The league’s largest businesses, like television revenue, are contractually guaranteed. Sources identified the revenue shortfall as being principally in the media sales and sponsorship areas.
Consultant Marc Ganis, who has advised several NFL teams, also identified the league’s licensing business as “feeling pressure” during a period of overall dismal retail results. He added that Internet and mobile business had not developed as quickly as hoped. “Not just for the NFL, but for all leagues, but I have no doubt they will get there eventually,” he said.
Noting the dismal state of the auto industry, particularly the trucks and SUVs that have been heavy NFL advertisers, he cautioned, “you can’t overstate the impact the auto industry’s problems have with the NFL and every other sport.”
A senior marketer for a large NFL sponsor said he had noticed one key difference in meetings with the NFL this year. “They are more sales-focused than ever, even to sponsors who already have big investments, and this probably explains that,” the marketer said. “And it does make you stop and think, ‘If they aren’t writing new business, who is?’”
If the NFL’s new business is down, it raises intriguing questions about the continued growth of any large sports property. Can sports expect the corporate gravy train to continue, even after a correction in the economy? For now, it’s the slowest corporate sales environment since the post-9/11 freeze.
“Every client or would-be client is trying to get in the door for the minimum amount and stretch their dollars even while they are doing that,” said NHL sponsorship chief Keith Wachtel. “When brands are trying to do more with less, it means the properties have to be more creative.”
“While we have seen dramatic growth in recent years for things like corporate hospitality and sponsorships, we are worried about that continuing,” said Sam Kennedy, Red Sox executive vice president and chief sales and marketing officer. Kennedy cautioned early this year that the team was unlikely to meet sales projections despite winning a World Series title. “We haven’t seen any dramatic cut, although we have had some 2009 planning with sponsors who have told us some stories about their business that aren’t pretty. We [Fenway Sports Group] also have a sizable NASCAR investment, and while I am no expert, the word around the garage is that unless you are running among the top 10 or 15 cars, it is going to be very tough to attract tier-one sponsors.”
Octagon President Rick Dudley, himself a former MLB, NHL and NFL marketer, said that brands with sports portfolios continue to plan and activate, “but the thought of taking on anything new is usually dismissed immediately, there just aren’t a lot of available funds,” he said. “How long this condition lasts is the question we’d all like the answer to.”