The NFL: Forgetting Its Business Model

When did it happen? When did the National Football League, the most successful professional sports organization in the United States, suddenly lose its ability to manage its own affairs after thriving for almost a century?

Many believe that this past month (or even this past week) has been the worst time in the history of the League.  And for good reason: public protests have recently exploded over a startling series of violently criminal acts, debilitating player injuries, and highly questionable corporate behavior.

But the origins of such recent outcomes might be traced back to 2013. Last year, after all, was the time that the NFL first appeared to decisively step away from its traditionally successful sports business model.

Or perhaps it would be more appropriate to describe its decision as “intentionally forgetting” its classic model. After all, at its essence, the traditional game of football generates far more violent physical contact than any other major sport in the United States.

That’s why, for much of its existence, the game was only played on Sunday afternoons. And that’s why each game initially featured (and still features) a half time break midway through its sixty minute period.

League officials always knew that the human body can only sustain “just so much” violent activity before it requires resting and healing time. Weekday, Saturday, and halftime (on game day) rest periods were thus mandated for recuperation purposes.

But last year, the NFL announced an unprecedented agreement for a television network to broadcast Thursday (i.e. midweek) games throughout the season. And earlier this year, the League boldly asked performers at its Super Bowl half time show to begin paying fees in exchange for media exposure.

So what should we make of a full slate of midweek games, staged for the benefit of television networks? And an even more drastically elongated half-time show for the purpose of showcasing musical acts?

Such activities are inconsistent with a traditional business model that is dedicated to placing the fittest (and the most appealing) players on the field to compete for athletic victories. Nevertheless, they are perfectly consistent with a model that is dedicated to optimizing television ratings, music sales, and other media revenue streams.

So it shouldn’t come as any surprise that the NFL’s recent travails betray a surprising forgetfulness of its traditional game-dominant business model. Instead, the League has recently chosen a media-dominant business model, a strategy that is now impacting its fortunes accordingly.

Super Bowl 2014: Welcome to the Big Apple!

Congratulations to New York City for winning the right to host the Super Bowl, American football’s professional championship game! In 2014, the Big Apple will crown the league’s champions for the first time since 1962, when its New York Giants lost to the Green Bay Packers at Yankee Stadium.

In order to award New York the Super Bowl, though, the National Football League (NFL) was required to break with its 44 year tradition of playing championship games at sites that can guarantee that snow storms will not mar the festivities. That tradition has led to repeated stagings of the games in subtropical cities like Los Angeles and Miami, with occasional diversions to chilly northern cities like Detroit and Minneapolis that sport indoor stadiums with weather domes.

The NFL has offered a number of explanations for its decision to risk extreme weather conditions during its marquee event, ranging from respect for the New York Giants’ deceased owner Wellington Mara, to a residual desire to help Gotham recover from the trauma of 9/11. Although these factors might indeed appear to be convincing, the League’s decision was also undoubtedly influenced by the continuing evolution of its own business model.

Who Provides The Revenues?

Forty four years ago, at the birth of the Super Bowl era of American football, the internet didn’t exist at all; furthermore, television promotion and coverage of major sporting events was in its infancy. All of baseball’s World Series games, for instance, were still played during the day time hours because the television networks were not yet convinced that viewership would justify evening “prime time” coverage; thus, the first night game in World Series history would not be staged until 1971. And two different television networks (CBS and NBC) actually co-broadcast the very first Super Bowl game; apparently, the game failed to sell out its tickets, and neither network was interested in paying for exclusive rights.

At that time, far more significant portions of total NFL revenues were derived directly from fans in the form of game day ticket sales, concessions business, and other retail activities. Today, however, far more revenues are received from television broadcasters, online services, and other indirect sources. Thus, the comfort levels and spending patterns of the fans who actually attend the games are now far lower priorities (from a revenue generation perspective) than the abilities of media organizations to deliver huge audiences via electronic communication technologies.

A few simple numbers can easily illustrate this point. If 100,000 spectators are watching a game in a stadium and 100 million additional spectators are watching the same game on television or via an online web stream, a well placed video beer advertisement might reach 1,000 times as many thirsty customers as an equally well placed stadium sign. And those video viewers might buy beer by the keg or the case instead of by the cup!

The American Dream

Interestingly, though, many football fans actually support the placement of the Super Bowl in a cold weather locale, even though they will experience a far greater level of physical discomfort if they attend the game in person. For such fans, a cold weather climax to the season represents a return to the roots of the sport, promising an experience that is as traditionally authentic as the one enjoyed by hockey fans who attend the frigid outdoor Winter Classic each New Year’s Day.

In fact, the attraction of Sun Belt locations for outdoor winter sports games may have peaked with the Baby Boomers’ migration to America’s subtropical regions during the post World War II period. As long as the lifestyles of sun drenched states like California and Florida represented the American Dream, teams like baseball’s legendary Brooklyn Dodgers were happy to move there, and major sporting events like the Super Bowl were increasingly staged there. The migration of American sports leagues to these regions, in other words, reflected an underlying shift in cultural preferences.

The recent outmigration of citizens from states like California and Florida, though, has led to a resurgence in population and wealth of traditional cold weather cities like New York, Chicago, and Washington DC. As the American Dream of an ideal cultural lifestyle has shifted from I Dream of Jeannie’s Cocoa Beach to Seinfeld’s Upper West Side of New York, sports leagues that cater to the broad American public have shifted their marketing promotions as well.

Another Few Decades? Fuhgeddaboudit!

So will it take another few decades for the NFL to decide to stage another Super Bowl in a cold weather location? Although New York itself acted cautiously, requesting only a one time waiver of the warm weather requirement, League Commissioner Roger Goodell has publicly acknowledged that similar proposals will be welcome in the future if the 2014 championship game is a success.

In fact, as long as marketing executives believe that Times Square provides a more compelling media image to the American consumer than Malibu Beach, Goodell will likely remain focused on cities like New York. Why? Because the nature of the NFL’s evolving revenue structure simply favors the economics of playing high profile games in the Big Apple.