Halo

http://www.washtimes.com/sports/2004...0824-5896r.htm


By Jody Foldesy
THE WASHINGTON TIMES


AMELIA ISLAND, Fla. — Jim Irsay thinks the Indianapolis Colts are dying.
Not on the field — at least not yet. But the Colts' owner perceives his franchise's ability to stay competitive as bleeding away in small-market Indianapolis.

Holding court with a small group of reporters at the recent owners' meetings, Irsay insisted he isn't looking ahead to a future in Los Angeles but nonetheless painted a bleak picture of the prospects in Indianapolis.
"I've been in the league 33 years," said Irsay, the son of former Colts owner Bob Irsay, who moved the franchise from Baltimore to Indianapolis in 1984. "I'm in it to win, [but] I think the problem is you get to a point of 'how long?' "
The clock is ticking on a financial battle that threatens to disrupt the NFL's envied state of affairs. Although generous revenue sharing among NFL clubs has helped drive the league to the pinnacle of the sports world, owners on both sides of the debate are unhappy these days.
On one hand are Irsay, other small-market owners and the old guard. They believe revenue sharing is a crucial pillar that needs to be strengthened. If dated loopholes aren't closed, they argue, the current setup will lead to baseball-style competitive disparity. The Pittsburgh Steelers of today will become the Pittsburgh Pirates of tomorrow.
On the other hand are a growing number of owners who are either so indebted from recently buying into the NFL's bull market or so confident of their marketing acumen that they want more control of local revenue. They worry the league is riding its gravy train rather than finding new ways to propel it. Front and center in this capitalistic push are Washington Redskins owner Dan Snyder and the Dallas Cowboys' Jerry Jones.
The widening schism presents the greatest test in the system's four-decade existence. Each side makes a compelling argument that the other could undermine the long-term success of the league.
"There's definitely a bigger spread today between the haves and the have-nots," Atlanta Falcons owner Arthur Blank said. "The question is whether that's self-imposed. Is every team doing the same amount in terms of effort? Does every team have the same opportunity? There's a lot of moving parts in that."
Regardless of how the battle is resolved, it illustrates how much the league has changed since the first national television contracts were signed in 1964. Being an owner in the modern NFL requires a broader focus. Winning off the field now seems as important as winning on it.
"The big item of discussion at our meetings used to be the player limit or the adoption of the football," 87-year-old New York Giants owner Wellington Mara said. "Now we go to the meeting, and we might be here all day and football not be mentioned. It's a business.
"It was a lot more fun many years ago," he added with a grimace.
An untenable situation
To demonstrate the financial vice squeezing small-market clubs in general and the Colts in particular, Irsay presents Exhibit A: The $98 million contract extension Colts quarterback Peyton Manning signed not too long ago. Club coffers were too shallow to cover such a pact, and a portion of the funds had to come from Irsay's own pocket.
"Not an intelligent business decision in the short term," the owner called the move.
To stay in the Super Bowl hunt — and to have any chance of selling out the new stadium being considered in Indianapolis — the Colts felt they had to re-up their franchise player.
But player salaries and popular contract structures crimp small-market clubs. For teams like the Redskins and Cowboys, a record $34.5 million signing bonus would hurt but not threaten their overall viability. For the Colts, it exacerbates what Irsay says already is an untenable situation.
"This problem has existed since the late '90s and into the 21st century," Irsay said. "For us, as such a low-revenue team, to even pay to the cap you're at 70 percent of revenue. But we've been tens and tens of millions of dollars above cash over cap, and everyone knows how you can get to that position because the money's amortized on signing bonuses."
Signing bonuses have become the preferred currency in the NFL, in which generally no other contract elements are guaranteed. Irsay sometimes soars over the cap because of signing bonuses. And even if he paid only to the cap, he argues, much of his revenue would be spent before anyone else — from president Bill Polian to the caterer at training camp — got paid.
Small-market owners like Irsay levy two primary complaints: No. 1, they can't keep up with the Joneses in paying massive signing bonuses. And No. 2, because the revenue largess generated by some clubs swells the cap (thanks to the way the spending limit is calculated), they worry that soon they won't be able to afford even the cap.
In Irsay's mind, there is "no question" revenue disparity already has led to competitive disparity.
"It's already there, and it's immense and growing when you see more than a $100 million difference in the top and the bottom [clubs]," Irsay said. "That's something I think we're working on and that we have to address."
A market inhibited
Times were obviously much different in the early 1960s, when the first TV contracts were signed. Players made a pittance. The AFL had just come into being and was separate from the NFL. There was no Super Bowl. National fan interest was a fraction of its current level. And a football team wasn't necessarily the largest element in an owner's set of businesses.
Art Modell, as a gesture to convince big-market owners George Halas (Chicago), Dan Reeves (Los Angeles) and Jack Mara (Wellington's brother; New York) to join a proposed revenue-sharing plan, gave up the independent TV deal he had for the Cleveland Browns. The move worked, and at this spring's meetings in Palm Beach, Fla., Modell's last session, the outgoing Baltimore Ravens owner dubbed revenue sharing his "greatest contribution" to the NFL.
"We couldn't have gotten it done without all of the teams participating," Modell told reporters in Palm Beach. "I don't want to sit in judgment on today's events. Jerry has his own thoughts. Snyder has his own thoughts. It's a short-term approach. It's imperative that this league continue to share revenues. When you look at baseball and basketball and hockey, you only need to look around in the sports sections to see what's happening."
It was Jones, after purchasing the Cowboys in 1989, who sparked the move toward the current crossroads. The former oil wildcatter claims the team was losing $1 million a month under H.R. "Bum" Bright. Dallas' two-decade string of winning had run dry in the mid-1980s, and only six of 114 new luxury suites at Texas Stadium were leased.
Jones changed everything. On the football side, he fired the legendary duo of Tex Schramm and Tom Landry. And on the business side, he began milking the latent cash cow that was "America's Team," peddling the more than 300 suites and maximizing marketing opportunities. By 1998, Dallas was in record-setting territory for NFL revenue ($162 million that year) and operating profit ($57 million).
But some of Jones' marketing efforts trespassed on the league's deals. Jones sold "pouring rights" to Pepsi while the NFL was aligned with Coke. He made American Express the "official card" of the Cowboys, spurning league sponsor Visa. The NFL sued; he counter-sued. A settlement allowed him to keep promotions attached to the stadium.
Jones, who declined comment for this story, told Forbes in 1999 that basic market forces were being inhibited by revenue sharing.
"Let the people who have the most to gain be the marketers," Jones said.
That mentality has only grown as franchise values have soared. Jones paid $140 million for the Cowboys 15 years ago; a decade later Snyder, who also declined comment for this article, paid $800 million for the Redskins. The sense among many debt-laden owners is that they can't afford to be complacent financially anymore.
"You've got the owners who have bought their teams for $600 million or more, and there's about a half-dozen of them," Chicago-based sports industry consultant Marc Ganis said. "And then you've got another dozen who have inherited their teams, and there really hasn't been any acquisition cost. ... There's simply a difference in the economic results there."
New breed expands
Ganis foresees a compromise: The socialists will win greater revenue sharing, but heavily indebted owners will win an adjustment to the formula for contributions. Rather than measuring simply revenue (cash in), the calculation, Ganis predicts, will be based on profit (cash in minus cash out).
Commissioner Paul Tagliabue has created the "special committee on league economics" to oversee the issue, and it is peopled with club officials from both sides of the debate. The chairman is Houston Texans owner Bob McNair, who purchased the expansion team in 1999 for about $700 million.
Because there is validity to each side's argument, no major changes are being considered by the committee at this time.
"What's acknowledged across the board is that revenue sharing is one reason the NFL has grown to the importance that it has and that you want significant incentive for individual teams to improve themselves," Ganis said. "The challenge is finding a balance."
Even if the compromise comes to pass, the capitalists' push will continue. Jones and Snyder still want greater control over local revenue associated with team logos, trademarks and sponsorships. A recent vote extended by 15 years the NFL Trust, the sharing agreement associated with that area, and sent a message that the spirit of revenue sharing remains strong.
But as time goes on, the new breed of aggressive, revenue-driven owners likely will grow. Even new Ravens owner Steve Bisciotti, an avowed traditionalist, will compete vigorously with Snyder for regional sponsorships and transient fans. New Cleveland Browns owner Randy Lerner hired John Collins, the former NFL senior vice president of marketing and sales, as team president. And in Atlanta, Blank is bringing fans the "Home Depot experience" that minted the home improvement chain he co-founded.
"When I acquired the Falcons [in February 2002], a lot of the attitude inside the building was, 'You have to win games; everything else takes care of itself,' " Blank said. "You do have to win games. But there's a lot of other things that don't take care of themselves, that you have to attend to today to run a successful football franchise."
To be sure, being an owner in today's game is a much different job, and old-guard owners like Mara and the Pittsburgh Steelers' Dan Rooney will fight for a preservation of traditional values.
"We were concerned in the old days about revenue, but we were making it with gate receipts, television, things like that. It was more related to the game," Rooney said. "Now a lot of people are more worried about selling T-shirts. ... The game has to be the whole thing."
As for the Colts, it's unclear what might happen. Irsay acknowledges his problems are as much Indianapolis-specific as systemic. Even a new stadium might not sturdy an economic model floundering in the game's current atmosphere.
"It's a work in progress, and there's no end in sight," Irsay said. "From my perspective, it's more, 'How much longer can you keep putting your money into your franchise with no hope of seeing things change?' "
•Staff writer Eric Fisher contributed to this article.