TV static could keep NFL expansion fuzzy At labor peace, owners turn to expiring deal

January 08, 1993|By Jon Morgan | Jon Morgan,Staff Writer

Even though the NFL has found its long-sought labor peace, it's a little early to begin budgeting for a Baltimore season ticket -- just yet.

The league has said repeatedly that it would expand if it could settle the myriad of legal disputes with its players, something that apparently was achieved this week with an out-of-court settlement reached in a Minneapolis courthouse.

But observers inside and outside pro football note several factors that could further delay expansion, including troubles implementing the new labor agreement and possible objections to the deal.

And there is an even darker cloud for Baltimore and the four other cities competing for the two teams the league says it will add: television.

More than any other major-league sport, football depends on network television. The current, four-year national contracts total billion and represent nearly 60 percent of football revenue. This money is shared equally among teams, nearly $40 million this year for each of the 28 teams.

These contracts expire at the end of the coming season, and all indications are they will be renewed for less money. Is it prudent to cut an additional two slices out of that pie?

Owners appear uncertain.

Bob Tisch, part owner of the New York Giants, said he'd like to have a good indication, if not a signed contract, from the networks before committing to expansion.

"I think the TV contract is important," Tisch said.

As for expansion, he said, "I don't know if it will be the focus of attention, but I think it will at least get some attention. How quickly they will move, I don't know."

He said there has been a lot of discussion about a new TV deal and the outlines of an agreement could come together and allow for the selection of expansion cities this year.

Atlanta Falcons owner Rankin Smith, one of seven members of the owners' expansion committee, said, "I've been an optimistic supporter of expansion and I remain one. But there are other things that need to be looked into."

Among the other issues, he said, are television revenue and sorting out the new labor agreement. But he said expansion should step quickly to the fore.

"You never know what will pop up, but I think there's a good possibility" that expansion will become a top priority this year, he said.

Paul Much, a sports business consultant and senior managing director of Houlihan Lokey Howard & Zukin in Chicago, said, "If I were the current owners, I might not want to expand until I wrap up the TV deal."

Even if the network contract revenue remains steady, cutting in an additional two teams would mean a loss of almost $3 million a year for the existing franchises.

If the new franchises, as expected, pay fees of $125 to $150 million for the right to join the league, each of the existing teams would get $9 million to $10 million. Spread out, that would amount to $2 million to $3 million for each of four years.

"It might be a short-run cash enhancement, but in the long run football may have leveled out in terms of revenues," Much said.

Generally, expansion makes more sense for sports with significant revenue growth potential, such as hockey, he said. If the league waits until revenues look more promising, it will be able to charge a higher franchise fee, he said.

Also, he said, "If I were a prospective owner, I would want to know what the broadcast rights will look like before I sign on the bottom line."

Adding new teams to the league might enhance the value of the network broadcast rights. And an increase in sales of licensed goods -- such as hats and T-shirts of the new teams -- could be expected when the teams are fielded. But these additional revenues are unlikely to outweigh the loss of admitting new members any time soon, he said.

Network officials are reluctant to discuss their role in expansion because of the pending negotiations. A spokesman for ABC would say only "what's good for the league is good for us."

But Robert J. Wussler, a media consultant and former president of CBS, CBS Sports and Turner Broadcasting, predicted that the addition of teams to the league would noticeably improve ratings.

"Teams always do well, or do their best, in their home marketplace. In theory the more teams you have the more viewers you have," Wussler said.

Expansion may not boost the value of NFL TV rights, but it could help keep them from declining, he said.

The league has not expanded since 1974 when Tampa Bay and Seattle were granted franchises to begin play in 1976. Congress, noting the sport's tenuous antitrust standing, has threatened to force expansion if the league doesn't do it itself.

It has been a priority of Paul Tagliabue since becoming NFL commissioner in 1989. He appointed the expansion committee in 1990, initially with plans to add two teams for play this year.

In 1991, the owners passed a resolution calling for two new teams to be named in the fall of 1992 for play in 1994 "unless. . . labor-management issues constitute an impediment to such an expansion timetable."

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