The American Money Machine

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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."

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."