Every year, the NFL faces issues that could cripple the league within the next few years. One of the main concerns in the NFL is that the fans often feel alienated by the franchises they support. The owners and team management make questionable personnel decisions every year and fans are often left confused about why certain decisions are made.
The business side of professional sports is constantly overlooked. Players are traded or released to save money all the time as many team owners often are looking for ways to make their franchises profitable. Players are a commodity that can be replaced in the business of sports. Fans typically fail to understand this concept. As a result, fans often feel alienated by those who manage their favorite team.
What if there was a way for fans to feel a part of their team and have a deeper understanding of the business of the NFL? The stock market can be the right vehicle and can provide a huge profit for the NFL if publicized in the right way.
Currently, the Green Bay Packers are the only NFL team to offer a public interest in the franchise. They have been operating in this fashion since the 1920’s and have a loyal following which spans multiple generations. Their management has worked in harmony without the stress of dealing with an overbearing owner for nearly a century. The Packers have claimed a litany of championships while under public ownership.
The NFL no longer allows teams to be offered to the public making the Packers the exception. The NFL has been struggling with attendance and viewership in recent years and has been trying in vain to boost those waning numbers. These numbers might improve if more teams were offered to the public.
While the Packers are the only publicly owned NFL team, they are not offered on the New York Stock Exchange. However, Manchester United and the New York Knicks are offered on the NYSE. These two case studies are vastly different in how they approach the business side of their profession. The NFL can learn a lot from these two organizations in terms of offering teams on the NYSE and spiking national interest.
Green Bay Packers Inc.:
The Green Bay Packers were in financial distress in 1923 and nearly folded as a franchise. The team offered 1,000 shares of stock at five dollars per share. The original articles of incorporation stipulated that if the team was ever sold, the proceeds would go to the Sullivan-Wallen Post of the American Legion to build a memorial for fallen veterans.
Since then, no shareholder has ever been allowed to make financial gain from the team. The beneficiary of the financial benefits of the team was changed to the Green Bay Packers Foundation. This foundation makes donations to charities and institutions throughout Wisconsin.
The team never folded and has thrived in the decades since. It has offered shares in 1923, 1935, 1950, 1997 and 2011. Currently, 360,760 people own shares of the franchise, not one receiving a single dividend.
The most recent stock offering was in 2011 when the team needed money of expansion of Lambeau Field. The sale was successful and the team raised over $64 million. Most importantly, the team has thrived in recent years and has been a title contender over the last two decades. Team management has continued to operate in an efficient fashion while avoiding alienating their fan base orstockholdersholders. They set the standard for publicly owned sports franchises.
According to Article III, Section A of the NFL Constitution written in 1970 “No corporation, association, partnership, or other entity not operated for profit nor any charitable organization or entity not presently a member of the League shall be eligible for membership”.
The Packers are grandfathered in as they established this financial backing decades before the current NFL Constitution was written. The NFL no longer allows teams to be owned by nonprofit organizations, which is what the Packers have been for decades.
In Article III Section A, Subsection 3 of the NFL Constitution of 1970, it states that “The Football Company and all individuals or entities holding a direct or indirect in the Football Company shall be subject to all of the League policies and requirements on ownership that the members may from time to time adopt or apply, including without limitation, all reporting, audit, ownership, and debt limitation requirements”.
Due to this statement, it is clear that the NFL is cautious about adding too many owners. It is already difficult enough to monitor the activities of several hundred players. The NFL believed at the time that adding thousands of owners to the mix was just too much monitoring for a multimillion dollar business to monitor.
Times have changed and the NFL has expanded to exponential proportions. It has grown from a multimillion dollar business into a multibillion dollar colossus. They have many more resources than they did when the NFL Constitution was written.
The time might be right for the NFL to consider offering teams on the New York Stock Exchange. The following are two examples of teams which are on the NYSE and how they have managed.
Manchester United (MANU):
Manchester United is one of the cornerstone franchises of the Barclay’s Premier League in England. It has won multiple championships and boasts a rich history which dates back to the late 19th century.
The majority of its’ stock was bought by Malcolm Glazer in 2005 and was looking at a staggering amount of debt which exceeded €265 million due to the complicated manner in which the Glazer family purchased the team. After years of refinancing, the Glazer family decided to list the team on the NYSE with the purpose of raising €100 million.
The class A shares would not have a dividend and the Glazer family’s class B shares would have ten times the voting power. The initial public offering (IPO) was on August 10, 2012, and the club raised €62.5 million by November of that same year. While paying off debt is always encouraged, team management has done an excellent job of leading a proud club.
The team is always in the running for a championship and has made its’ shareholders proud. It won both the UEFA Europa League championship and the EFL Cup in 2017. It also won the FA Cup in 2016 as well as the First Division of the Premier League in 2013. They have continued to set the standard for the Premier League and have reaped profits for their shareholders. They started paying a dividend to their shareholders in 2015 which has increased interest in investors. They are a great example of a publicly traded team on the NYSE because of the championships won and the profits gained.
The Madison Square Garden Company (MSG):
The idea of owning stock in a sports franchise is enticing to many fans. James Dolan, the CEO of the Madison Square Garden Company, has put together a stock offering which could change the landscape of sports ownership. This is not simply a professional sports franchise but it is a holding company of four franchises. These franchises include the New York Knicks and Rangers. It also owns a minor league hockey team, the Connecticut Whale, and a woman’s basketball team, the New York Liberty. It was named after the venue which hosts these teams, Madison Square Garden. It is a historic landmark in American sports and the name is held with a great deal of pride.
The company was made public in 2010 and has seen impressive gains over the past five years. While it was as low as $58.97 in July of 2013 it has risen to as high as $310.19 per share. The market cap sits at $7.34 billion but these are just numbers.
Management is another story and it is a key reason why MSG is not worth more. For years the Knicks management has been criticized for poor decisions in the personnel department. These poor decisions have been reflected on the court as the Knicks have not been to the playoffs since 2013.
While they continue to rebuild, the stockholders are helpless as they watch team management continue to make mistakes. They have alienated their shareholders by not giving a dividend. The company was put on the market for revenue purposes, not to bring along more decision makers. This is an example the NFL should look at with caution if they ever want to venture into the stock market.
The Future of the NFL:
This might be the right time for the NFL to consider putting a team on the NYSE. In recent years, the league has battled against bad publicity and poor attendance. The research on concussions and CTE in football spell ominous for the sport which holds Americans captivated every Sunday.
However, enough fans are enraptured by the allure of football to keep the NFL in business. Quite simply, this is a league looking at a potential crisis while enjoying $14 billion in annual revenue. The NFL needs to keep the fans interested in the sport and needs to find that niche quickly. A possible solution would be offering teams on the stock exchange. The team does not need to be wholly owned by the public, such as the Packers. Manchester United and the Knicks are owned by a majority owner who makes most of the decisions.
What needs to happen for this to work is a bit of politics and Silicon Valley. Most fans tend to shy away from owning a team when they realize that they will have no voting power. A number of businesses on the NYSE hold shareholder votes to determine key issues such as voting for board members and key decisions. By giving shareholders the power to vote, they will be more comfortable with the idea of owning a part of a team.
The 49ers are in an excellent position to become a pioneer for this sort of business. Resting in the heart of Silicon Valley, they are surrounded by more than just tech startups but financial powers such as Charles Schwab. If they were to bundle up just 20% of the stake in the team, they could offer its’ shares on the NYSE. The best way to attract investors is to offer dividends and voting power. Silicon Valley is full of people who want to make money off of the stock market and want their stake in a business to count.
This brings up an interesting loophole in the NFL policy on this subject. The rule specifically states that they do not want any nonprofit organizations to own a team. It does not state that a team cannot be offered on the NYSE. By offering a dividend and allowing people to sell their shares this obliterates any notion that this is a nonprofit organization.
The Packers are considered a nonprofit because their stockholders do not receive any dividends nor are they allowed to sell their shares. Manchester United provides dividends to its shareholders as a way of showing gratitude and in hoping that those dividends will be reinvested into the team. Both Manchester United and the Madison Square Garden Company allow the sale of shares which is forbidden in Green Bay.
By offering shareholders these incentives, the team could reap significant financial gain. The NFL is a profit-driven league with the highest revenue compared to the NBA and MLB.
Offering teams to the public can also help soften the lack of attendance at NFL games. Currently, the NFL still relies heavily on attendance but is also looking at other revenue streams including international play, television and personal seat licenses. The NFL is in turmoil from younger generations of parents who do not want their children to play football due to concerns of brain injuries.
Due to this fact, there is a chance that youth football leagues might not exist in the ensuing decades. This will absolutely devastate the NFL’s revenue as the passion for the game often starts at a young age. Offering NFL teams on the NYSE can prepare the NFL for the potential financial disaster. Most importantly, fans will feel like they are truly involved with their team. The NFL can revolutionize professional sports if they use the lessons learned from the New York Knicks and Manchester United.