Ravens OK on middle ground

Economic changes in NFL may not hurt team in short term

March 08, 2006|By CHILDS WALKER | CHILDS WALKER,SUN REPORTER

The Ravens would face neither the best of times nor the worst of times if the NFL's labor negotiations radically change the league's economic structure, say experts on pro football's dollars and cents.

The Ravens aren't among the revenue-rich franchises that could spend wildly if the league's salary cap were obliterated. But with a relatively new stadium and strong management, the franchise wouldn't sink quickly in an uncapped world.

"If there was one franchise you could say is absolutely, smack dab in the middle, it's probably the Ravens," said Marc Ganis, a Chicago-based sports marketing consultant.

But mid-market teams like the Ravens inevitably would suffer if the league went without a cap, said author Michael MacCambridge, who chronicled the rise of the NFL in his 2004 book America's Game.

"Most people who are wondering how they would fare in an uncapped world don't want to know," he said.

When NFL owners first agreed to negotiate all television deals as a group and split the proceeds evenly, they had little idea they had created a system that would be the envy of other sports leagues.

But the spoils of mammoth broadcast deals have made NFL franchises the most valuable properties in sports. The Minnesota Vikings, the least-valuable team in the league according to Forbes, are worth more than all but one baseball franchise.

In recent years, some NFL franchises have tapped into lucrative markets for luxury boxes, stadium naming rights and other sponsorship deals. Revenues from those sources need not be shared. Washington, Dallas, Philadelphia and several other big-market franchises have taken full advantage. The Redskins earn so much that football expenses eat up less than half of their total revenues.

By contrast, smaller-market teams in Buffalo, Cincinnati and Indianapolis spend as much as 70 percent of their revenues on football expenses.

That discrepancy hasn't showed on the field because the salary cap equalizes spending on player contracts. But smaller-market franchises want their richer cohorts to contribute more to the revenue pool from which the players union is demanding 59.5 percent.

The Ravens find themselves in the middle. The franchise has benefited from a new stadium with luxury boxes and a naming deal. But Baltimore is not thought to have much growth potential.

Most observers say the Ravens would be best off if the league's economic structure remains relatively unchanged. But should a labor deal prove elusive and should the league enter the 2007 season without a salary cap, the Ravens would be better off than many.

"The system, as far as the Ravens are concerned, has worked fairly well," Forbes analyst Mike Ozanian said. "But they have an excellent stadium deal, so they would be able to always pay more in most years than most teams would."

The Ravens compete in a division filled with small to mid-size markets in Pittsburgh, Cleveland and Cincinnati. Compare that to the Orioles, who go head-to-head with the two wealthiest franchises in baseball in the New York Yankees and Boston Red Sox.

The Ravens also have a talented front office that could adapt to any environment, Ganis said.

On the other hand, the Ravens are boxed between two of the richest franchises in football in the Redskins and Eagles, meaning they have little opportunity to expand their fan base.

A cap-free NFL would "put an inordinate amount of pressure on a team's ability to generate local revenue from its stadium," said David Carter, executive director of USC's Sports Business Institute.

As other franchises like Indianapolis move into new stadiums, the Ravens' relative economic strength due to its stadium deal may lessen.

And one of the team's best assets, its respected front office, could be less stable than the underlying revenue advantages enjoyed by the Redskins, Eagles and others.

Forbes releases the most thorough annual studies of franchise values and last year ranked the Ravens 11th among NFL teams at $864 million. The Redskins ranked first at $1.26 billion, the most valuable franchise in American sports. That's almost twice as much as the Vikings at $658 million.

But the discrepancy is nowhere near that in baseball, where teams can keep local television revenues and spend what they please on talent. In that world, the Yankees are worth $950 million according to Forbes, compared to $341 million for the Orioles and $176 million for the least-valuable team, the Tampa Bay Devil Rays.

Forbes breaks a franchise's value into categories. The Ravens, like most teams, rely on shared revenue for the majority of its worth. The magazine estimates that the team's market is worth $153 million, its stadium deal $138 million and its merchandising brand $58 million.

The Redskins' market is worth $339 million, its stadium (owned by the club) worth $308 million and its brand worth $112 million.

But even so, said Ozanian, the Redskins would never enjoy a Yankees-type advantage. Shared television revenues make the smallest franchises economically formidable.

"This is a case of the have-a-real-lots and the have-a-lots," he said.

Long term, that could change, Carter said. If richer teams can drastically outspend poorer ones, "it undermines the entire business model the NFL has developed over the years," he said. "Then they might find themselves in a situation where they would be less valuable to major broadcasters."

No one really knows if a football championship can be bought because NFL teams have never operated in a world with unrestricted free agency and without a cap.

Ganis said teams like the Redskins would have an advantage in such an environment.

"But how great an advantage, I don't know," he said. "I don't know if you can buy a championship in football. There are so many other factors that are important, like injuries and coaching, that I'm not sure you can."

childs.walker@baltsun.com

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