The American Money Machine

Not

many businesses survive, never mind thrive, with a customer-satisfaction rate of 50%. Somehow that ratio doesn't do justice to the 68,756 patrons packing spiffy Gillette Stadium and the 5.5 million homes watching ESPN as quarterback Tom Brady leads the New England Patriots past the Buffalo Bills. Armed with a game plan designed by the league's best coach, Bill Belichick, Brady dismantles the Bills. No doubt Bills customers at home in western New York are disappointed. Two weeks earlier, it was the Pats turn to disappoint, courtesy of a whipping from the surging Pittsburgh Steelers. The real winner, as it is every Sunday, is the National Football League. "We compete against each other for three hours a week," says Robert Kraft, owner of the defending-champion Patriots, speaking of his gridiron adversaries. "Otherwise we have aligned interests."

Exquisitely aligned, in fact. Call it the m formation, as in money. In a world of $100 million players, $1 billion franchises and $10 billion television contracts, the scale of the sports industry has grown dramatically in just the past decade. More than any other league, the NFL has been able to capture that rising value while profitably using technology like the Web to reach fans in new ways. "The risks and rewards of success and failure in the football business are greater than ever," notes NFL commissioner and de facto CEO Paul Tagliabue. "So is the degree of sophistication and expertise required to manage the business." This year the NFL will bring in some $5 billion in revenues. The league won't discuss profits, but the community-owned Green Bay Packers earned $29.1 million on revenue of $179.2 million. That's a lofty 16% margin, although the NFL says the Pack is one of the better financial performers.

The days when quarterbacks like Fran Tarkenton drew plays in the dirt are long gone. There's now far too much money at stake to leave anything to chance, particularly when a team like Green Bay has $100 million invested in its quarterback, Brett Farve. The modern NFL player is fast, ferocious and laptop equipped, and he reports to a coaching staff so well organized that it puts most corporate setups to shame. That's because if the decision making isn't right on Sunday, you lose. And so do your customers.

The NFL's management playbook, from the fields to the owners' boxes to the NFL office in New York City, has lots to offer more conventional businesses. Just look at the scorecard: the NFL has increased the value of its product, expanded seamlessly into other distribution channels, like satellite, started its own television network and raised billions for lucrative new stadiums. And the game has never been more popular.

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.