Sport: The American Money Machine

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Just as the game has evolved--there's far more passing, for instance--so too has the NFL's management under commissioner Tagliabue. The league office has transformed itself into an organization that functions more like a holding company than a rules-and-procedures operation. It's a strategy that has propelled the NFL into what Tagliabue calls the league's third stage. The first was the community-based, pre-TV era, when guys played without face masks for peanuts. The second, the TV era, was created by Tagliabue's famous predecessor Pete Rozelle, who got Congress to pass the law that allowed the NFL to sell a national television contract. Now, as the league advances in the digital mega-money age, it has a structure to suit. By centralizing some management and service roles at headquarters, the NFL has been better able to manage its trademarks and expand its businesses.

Licensing is a perfect case in point. At one time the various teams had as many as 425 licensing agreements, and the league lacked control over its trademarks and the products being produced. "We pulled all that back [here]," says NFL chief operating officer Roger Goodell. "We've done that in every one of our businesses." The number of licensees was cut down to 110. Last year the league created an entity called the Master Agreement to manage its trademarks and merchandising deals. More important, the NFL got owners to cede control (with the notable exception of Dallas Cowboys owner Jerry Jones, who retained some local marketing rights, and risks).

The Master Agreement in turn is part of NFL Business Ventures (NFLBV), which handles everything from sponsorships to merchandising, with Goodell as president and the commissioner as chairman. "It's not so much that we changed anything. There really wasn't a structure," says Tagliabue. NFLBV has cut lucrative deals with on-field vendors such as Reebok (for uniforms) and Motorola (communications). That still leaves stadium advertising in the hands of each team.

The key to the NFL's profitmaking prowess has long been its revenue sharing. About 80% of the NFL's revenues are shared, a distribution that allows each team to have the resources to be competitive. Team owners joke that they are socialist millionaires, a collective farm that distributes the harvest. But it's more like a cooperative monopoly--call it a co-opoly. "We're in the 20th biggest market," says Denver Broncos owner Pat Bowlen. "We do wellwe have a stadium filled with 76,000 people. But it would be very difficult to be competitive on a model that didn't involve revenue sharing."