Issue of Sports Funding by Business'

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5th Jun 2020 Business Assignment Reference this

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Have you ever wondered how your professional sport teams get funding to pay for new player contracts or build new stadiums? Does the price of a ticket for a game really cut maintenance costs enough to be beneficial? Does the national league provide any funding for local teams? What role do sponsorships play in revenue increases? These questions and others will be discussed in detail throughout this paper. There are over 120 professional teams within the four major league entities (NFL, NHL, NBA, MLB), and each league brings in between $3.7B (NHL) and $13B (NFL)(How Much, 2016). To understand how revenues are generated for these leagues and the teams within them, this paper will focus on one team in particular: The New Orleans Saints.

Billion Dollar Teams

Since its inception in 1920, the National Football League (NFL) has become a prime example of success, demonstrating the ability to develop profits sharing, a core of superiority in competition, and strong charters throughout the league. The New Orleans Saints is the professional football team located in New Orleans, Louisiana and is one of thirty-two teams that comprise the NFL. Over the decades, the NFL has awarded cities with franchises which has ultimately helped the local economies in these locations. For New Orleans, it brought national football to the south and stimulated local economic growth. Although the football program was largely unsuccessful as a team in the development years, the Saints became an unstoppable force and household name in 2010 when they won their first and only appearance in the Super Bowl Championships. In this section, we will take a look at a small history snapshot of the Saints franchise.

NFL Revenue Sharing

The NFL has a multitude of provisions that allow revenue to be shared with each of the 32 professional teams in the league. In fact, 40 percent of all ticket sales and 55 percent of all television agreements are shared among the 32 teams. Each team also shares revenue produced from national licensing and sponsorship contracts (Abreu & Spradley, 2016). According to the Green Bay Packers financial statement (as they are the only publicly owned team in the league) we can assume that each of the 32 teams received just under $8 million through its revenue sharing programs in 2017 (Ryman, 2018).

Saints Owner History

The New Orleans team was the 16th franchise to be awarded by the NFL on November 1, 1966. In early 1967, the team was officially named the Saints and has maintained that name ever since. The team has changed ownership three times since its inception and is still privately owned. The first owner was John W. Mecom Jr who was the first major stockholder of the team and maintained ownership until its sale on June 3, 1985 to Tom Benson, a local businessman. Tom bought the team for $70 million after hearing that the team may be moved out-of-state. The current owner, Gayle Benson, acquired the team after her husband’s death in 2018. This caused quite a stir with heirs and was a point of contest until a settlement was reached prior to his death. Gayle Benson became one of Louisiana’s richest women over night. Not only did she inherit the New Orleans Saints, she also gained ownership of the New Orleans Pelicans (the local NBA team), several automotive dealerships, the Dixie beer brand, and the GMB racing stables (which she established in 2014) (“Biography,” 2018).

Saints Valuation

Valuations assess many things but among them are a subject’s creditworthiness, performance, and return on investment (Helgesson & Muniesa, 2013). In the case of the NFL in general and the New Orleans Saints we can find valuation being conducted in every aspect of the game of football. From how much value the players bring to the team, the city, and the league to the overall performance of each player throughout the season. We especially notice the valuation of a team when their performance levels rise or fall. This is more evident when a local team wins a championship or Super Bowl title.  Not only is the valuation seen in the performance, but the investment return can be felt across the nation. Ticket sales increase, merchandise sales increase, and the overall popularity of the team increases. Prior to the 2009 season, the New Orleans Saints had mediocre performances with a 7-9 record in 2007 and an 8-8 record in 2008. In fact, until their Super Bowl win, they were a below average team that was easily forgettable. However, once they became Super Bowl champions, their valuation skyrocketed on every level. Currently, the valuation of the Saints is approximately $2.1 billion according to Forbes (NFL Team Valuations, 2019).

Billion Dollar Broadcast Deals

The NFL has several contracts currently in place until 2021-2022 that include ESPN, CBS, Fox, and NBC with a price tag of over $40 billion. Most of the contracts that are in place are long-term agreements that last for 8-10 years. While these types of contracts seem like they monopolize the broadcast industry, they help promote competition between the broadcasting companies. In more recent years, the introduction of data streaming and social media channels such as YouTube, Twitter, and Instagram have allowed the NFL to broadcast to even more people, increasing revenues significantly. The most popular of these are the NFL game day packages available through local cable providers for an additional fee. Packages like Sunday Ticket, the NFL Redzone, and the NFL Network are all multichannel packages that cost between $9.99/per month to $24.99 per month. These fees are based on what your current cable package includes or if you even have cable TV.

One of the several broadcasting deals that the New Orleans Saints has in place is WWL 870AM and 105.3FM. It is considered the flagship station and is known as Saints Radio. A second media deal that the Saints have is with Fox 8 in New Orleans. In this section we will look at some of the history of WWL and how it came to be the radio station for the New Orleans Saints.

WWL was the first radio station in Louisiana and started out as a campus radio station for Loyola University to raise funds for additional buildings around campus. In 1922, the initial broadcast was a speech given by the president of the university Father Cummings. Since the station was a project of the university, it was bound by Catholic law and as such was required to devote equal broadcast time between religious and commercial programming (Chicco, Kelley, Martin, Schubert, & O’Dwyer, n.d.). Since its founding, WWL became a mainstay in national radio broadcast stations through the 1940’s, 50’s, and 60’s and routinely featured local music talent and live concerts. Entercom Communications Corp. bought WWL in 1989 and in 1995 entered into an agreement with the New Orleans Saints to be the broadcasting flagship. After Hurricane Katrina, WWL was one of the only stations in the area to remain on the air, providing emergency coverage during and after the storm (Ross, 2012). To this day it continues to broadcast and cover both New Orleans Saints and Louisiana State University Tigers football.

Fox 8 (WVUE-DT) was purchased (along with two other television stations) for $229 million after Fox Broadcasting Company won a contract war with CBS for broadcasting rights to the NFL package. Since Fox owned the new rights, WVUE became the New Orleans Saints television home after 1994. In 2008, the station was sold to Tom Benson, the current owner of the Saints and NBA’s Pelicans for $41 million (WVUE-DT, 2019).

Billion Dollar Stadiums and Arenas

During the team’s inaugural season, they had an average home attendance of over 75,000 and in the first regular season game of that year had a total of almost 81,000 spectators crammed into Tulane Stadium. The team moved from Tulane to the Superdome in 1975 where they continue to play today. The team has averaged over 72,000 spectators for home games during regular season from 2008-2018 (Statista, 2019).

Current talks are underway to renovate the aging Superdome a second time since Hurricane Katrina caused severe damage in 2005.

Sport Sponsorships

Since the beginning of the NFL, each of the 32 teams secured licensing agreements with use of the team’s logo, colors, and trademarks. In 1963, The NFL Properties, LLC (NFLP) began awarding non-exclusive agreements to several vendors to produce apparel using the team’s insignias. In 2000, NFLP was authorized to give out exclusive licenses to single vendors (Pike, 2010).

References

  • Abreu, M. & Spradley, B. D. (2016). The national football league’s brand and stadium opportunities. The Sport Journal, 20. ISSN: 1543-9518. Retrieved from http://thesportjournal.org/article/the-national-football-leagues-brand-and-stadium-opportunities/#more-4708
  • Biography. (2018). Retrieved on March 31, 2019 from https://www.neworleanssaints.com/team/front-office-roster/gayle-benson
  • Chicco, J., Kelley, L., Martin, D., Schubert, N., & O’Dwyer, K. (n.d.). Founding WWL: Louisiana’s first radio station. New Orleans Historical. Retrieved on April 30, 2019 from https://neworleanshistorical.org/items/show/1123
  • Helgesson, C. F. & Muniesa, F. (2013). For what it’s worth: An introduction to valuation studies. Valuation Studies, 1(1), 1-10. doi: 10.3384/vs.2001-5992.13111
  • How Much. (2016, July 1). Which professional sports leagues make the most money? Howmuch.net. Retrieved from https://howmuch.net/articles/sports-leagues-by-revenue.
  • NFL Team Valuations. (2019). #26 New Orleans saints. Forbes.com. Retrieved from https://www.forbes.com/teams/new-orleans-saints/#52d908957f6b
  • Pike, L. (2010). American Needle v. National Football League and the future of collective licensing agreements in sport. Sport Marketing Quarterly, 19(3), 166-169.
  • Ross, B. (2012, February 1). WWL radio: The Times-Picayune covers 175 years of New Orleans history. NOLA Media Group. Retrieved from https://www.nola.com/175years/2012/02/wwl_radio_the_times-picayune_c.html
  • Ryman, R. (2018, July 17). Packers’ set new records with 2017 revenue, expenses. Green Bay Press-Gazette. Retreived from https://www.greenbaypressgazette.com/story/news/2018/07/16/packers-finances-teams-2017-revenue-expenses-set-new-records/771113002/
  • Statista. (2019). New Orleans Saints average season home attendance from 2008 to 2018. Retrieved from https://www.statista.com/statistics/249636/average-home-attendance-of-the-new-orleans-saints/
  • WVUE-DT. (2019, April 30). Retieved from https://en.wikipedia.org/wiki/WVUE-DT.

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