Sport: The American Money Machine

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It's easy for people to ascribe the league's success to the money the networks splash out to televise NFL games. "Football is the best reality television going," allows the NFL's Goodell. And the networks pay dearly for the eyeballs they get. Last month the NFL renewed two network TV dealswith CBS, a division of Viacom, and with Fox, a division of News Corp.that will guarantee $8 billion for broadcast rights from 2006 to 2011. Another News Corp sibling, DirecTV, is paying $3.5 billion for satellite rights through 2010. There are still cable and Monday Night Football deals to be concluded. Finalizing them will mean that 52% of the league's revenues are in the bag. And that's just the television money. The league sells about 94% of its available seats, and many teams have waiting lists for season tickets. There are long-term naming rights to stadiums and signage and luxury-box deals. Merchandise? About $3 billion at retail annually.

With such fat TV contracts--and a labor agreement that includes an escape-proof salary cap--isn't the NFL virtually guaranteed to make piles of money? Not really: Europeans love their football (soccer) just as much, yet their leagues and team owners lose gobs of money. For instance, Italy's top league, the Serie A, is a mess. Several teams have gone bust, and one famous team, Lazio (the New York Jets of Rome), was forced to sell off top players to stay afloatthis despite big television contracts. "I've negotiated deals with all the major leagues, and I can tell you that this has nothing to do with luck. It has everything to do with planning for the future," says Dean Bonham, head of the Bonham Group, a sports-marketing agency in Denver. "The NFL is as good as you can get in the world of sports. These guys are clearly the model that everyone aspires to."

The league's fastest growing revenue stream comes from new stadiums, which are also a product of the recent centralization. Under a program called G3, the league grabs $1 million in television revenues from each team and uses the money as collateral to float bonds for stadium construction. The NFL has loaned $725 million to help build or renovate 20 stadiums in the past 10 years. Total investment: $3 billion, $2.4 billion of which has been put up by owners. To keep those projects going--new stadiums are abuilding in Dallas and Phoenix, Ariz.--the league maintains in-house finance and stadium-design arms that the owners can tap when needed.

These new football palaces have made the games a much more pleasant customer experience. And they gush money. The Patriots' Gillette Stadium opened in 2002 at a cost of $350 million. None of it was publicly financed, and about half was initially financed by the NFL. The new stadium has 87 luxury suites, which sell for $100,000 to $300,000 annually; its 6,000 clubhouse seats go for $5,000 each. Throw in the stadium signage and naming rights, and the Patriots go from 28th in the league in stadium revenues to near the top. The Green Bay Packers increased revenues 36% in two years with the help of a stadium renovation too.