Last week, Dallas Cowboys owner Jerry Jones filed his $750 million lawsuit against NFL Properties and every team owner except the Oakland Raiders' Al Davis. A day later, Browns owner Art Modell announced he would move his team from Cleveland to Baltimore next season. Next to pull up stakes will be Houston Oilers owner Bud Adams, who plans to announce today his team will depart for Nashville, Tenn.
At issue for these owners is control of their own destinies, but their actions could also affect:
The league, whose NFL Properties annually generates $3 billion-plus in licensing revenues at retail from team-sponsored merchandise. Each NFL team, regardless of market size, equally shares those proceeds, about $3 million each. But Mr. Jones' Cowboys account for 20% of licensing dollars, and he wants complete control to sign his own deals.
National marketers. Browns sponsors are uncomfortably close to the heat Mr. Modell is taking from seething fans in Cleveland. This scenario has the potential to be replayed again and again, as eight other teams are making noises about leaving their current hometowns if they don't get better deals and better stadiums.
Unfortunately for marketers that have come to rely on the NFL as a national vehicle, teams like the Browns may feel compelled to act since Mr. Jones has raised the stakes for prospering in the league. He has proved a team must be cash rich to be a winner. The Cowboys are worth more than $200 million.
In the past couple years, Mr. Jones has concocted a formula to make that kind of money: build or rent a state-of-the-entertainment-art stadium, and control your own marketing in most, if not all, categories. Mr. Jones has made more than $45 million from his stadium this year. He spent that money to get superstar Deion Sanders. The Cowboys were 8-1 going into last weekend.
Mr. Jones' lawsuit was in retaliation to the NFL's $300 million suit against him earlier this fall over his outside sponsorship deals. At the time, the rest of the NFL seemed unified against him over such pacts, but many NFL observers feel that the tide will turn for Mr. Jones, especially now that Mr. Modell, a respected member of the NFL old guard, has opted to go his own way.
The Browns are worth $165 million, but the team is only milking its stadium for $7 million. In Baltimore, Mr. Modell could more than triple that figure if he has the flexibility to sell sponsors exclusivity rights to his team, traditionally the job of NFL Properties.
Mr. Jones has a convert, albeit a qualified one, with the St. Louis Rams. The Rams last year abandoned Los Angeles for a city that allows them to take charge of their financial destiny. The Rams control marketing for the new stadium and adjoining convention center, and have seen revenues increase "multifold," said Marc Ganis, a marketing consultant for the team.
Mr. Ganis said he agrees with Mr. Jones to a point. But unlike the Texan, Mr. Ganis believes licensing should be handled by NFL Properties. "NFL Properties should continue to market us nationally; I think marketers will still find value in those deals," Mr. Ganis said, though he added: "But if they don't because it's not exclusive, that's fine. From our perspective, we don't need them."
Mr. Ganis believes sponsorships in categories like restaurants and soft drinks should be handled by the teams because they can milk more money out of them, especially via stadium concessions.
If such a tack becomes the league rule, current NFL sponsors like Coca-Cola Co. and Visa USA would find it more difficult, if not impossible, to execute the kind of high-profile, national promotions NFL fans have come to expect, because now they would have to negotiate individual deals with each team for prices that, added together, would exceed what they pay now.
But Messrs. Jones and Ganis believe teams will be better served by sponsors that execute promotions that speak specifically and intimately to the local market.
That local market is in turmoil on the shores of Lake Erie. Two days after Mr. Modell announced the Browns would leave, the Ohio Lottery, McDonald's Corp. and Papa John's Pizza requested immediate nullification of their ad deals in Cleveland Stadium in deference to angry fans.
Companies with licensing arrangements with the NFL see the situation differently. Marketers like Reebok International buy rights to all logos but have an on-field presence with only certain teams.
"We put most of our marketing muscle behind the teams we have on-field relationships with. We sell more of their product than anyone else," a Reebok spokesman said. "We are prepared to play the game the NFL decides to play, and we intend to play it aggressively."