Not even the NFL is immune to the recession.
As a sellout crowd of more than 70,000 packed Raymond James Stadium for Super Bowl XLIII, which drew up to $3 million for a 30-second commercial to air on NBC. But as the season ended with the Steelers departing Tampa, Fla., with the Vince Lombardi Trophy, it began an era of uncertainty for the NFL in its quest to prosper in a dismal economy.
Roger Goodell, the league’s commissioner, said he’s aware more than 11 million are unemployed nationally and companies of all sizes are cutting expenses, especially in advertising and sponsorship deals, which are vital sources of its revenue.
“We’re not immune to what’s going on out in the economy,” Goodell said. “For people who’ve lost their jobs, can they continue to afford to come to an NFL game, or to any other event?”
Some teams already have been impacted. The Washington Redskins laid off about 30 employees, and the Cleveland Browns got rid of 12. The NFL has announced it’s cutting 150 jobs.
The Ravens, however, have not had any layoffs, but aren’t planning on adding any employees, said Dick Cass, the team’s president. The team also will cut its budget by up to 10 percent, but that won’t impact its budget for players’ salaries. The NFL is expected to set the salary cap at about $123 million next season, up from $116 this past year.
“The talk around here is not that much different than the talk that’s going on everywhere else,” Cass said. “You have to be careful with things like operating and capital expenses. You’re not going to grow and add a lot of employees right now. You’re just going to hunker down and manage what you’ve got.”
The Ravens will be cutting their annual budget by up to 10 percent, but that won’t impact the team’s ability to pay for players.
“I’ve been through economic downturns in my other business, and so I think that we know how to prepare for those kinds of things,” Ravens owner Steve Bisciotti said. “But you can’t prepare for loss of revenues. You just have to try and manage it the best you can and minimize the losses.”
Goodell said about three-quarters of the NFL’s 32 teams have agreed not to raise ticket prices in 2009. But the Ravens have yet to make a final decision. The team generally increases ticket prices every other year, and the team didn’t raise prices for the 2008 season. But the Ravens’ more pressing bigger concern is selling all of their 120 suites at M&T Bank Stadium, as the team still has about 10 that are not under contract.
“We know what the economy is like,” Bisciotti said. “We’re running on fairly small margins when it comes to cash flow. So all those companies in Baltimore that buy our suites and everything, I need them to keep on going, and I need the people to keep on buying tickets. So we have to be sensitive with increases and everything else, but the economy is definitely a factor, and it’s the first time we’re going to go through it.”
One way the Ravens and NFL have remained insulated from the economy is their long-term TV deals with NBC ($600 million/year through 2012), FOX ($712.5 million/year through 2011), CBS ($622.5 million/year through 2011) and ESPN ($1.1 billion/year through 2014).
The Ravens have several high-profile free agents that don’t have a contract for next season, including center Jason Brown ($1.4 million in 2008) along with linebackers Ray Lewis ($6.5 million), Terrell Suggs ($8.5 million) and Bart Scott ($3.4 million). Each are expected to make more next season coming season, especially Brown and Suggs, who are each entering the prime of their careers and would be two of the most coveted free agents in the NFL should they hit the open market..
Cass said he envisions some teams, especially those with low season-ticket bases, having difficulty signing and retaining free agents. He said the Ravens have 90 percent of the seats at M&T Bank Stadium are already sold to season-ticket holders. The team also has a waiting list with 3,000 who want to buy a personal seat license, which is needed to buy season tickets from the team.
“If you’re a team without a large season-ticket base then the current economic ticket base could have an impact on ticket sales,” Cass said. “In some markets if you don’t have a lot of multi-year sponsor or suite agreements then those team could be even more impacted on what they can spend on player.”
The NFL’s outlook could become even cloudier if the league and the players can’t agree on a new collective bargaining agreement. The CBA expires following the 2010 season. The 2009 season will be the last year with a salary cap, and 2010 will be an uncapped year if a new deal is not reached.
The NFL Players Association claims the league still is one of sport’s most profitable, as a report last week stated the average team nets an average $24.7 million annually.
But Goodell said that’s not true.
“There is a lot of fiction in it,” he said. “That report is not accurate.”
