Sports Economic Slump

Richie FenderCorrespondent IDecember 10, 2008

The National Football League is set to lay off about 150 employees. NFL commissioner, Roger Goodell stated that the league will cut more than 10 percent of its staff. This is in response to the downturn in the American economy.

The NFL has revenues of approximately $6.5 billion, of which an estimated $4.5 billion goes to players. The NFL has always been regarded as one of the most wealthiest professional sports leagues in the world. In fact, Forbes called the NFL “the richest game” and the “the strongest sport in the world.”

Goodell officially announced the cuts to league employees in a memo. What a nice guy. The NFL will eliminate about 150 of its staff of 1,100 in New York, NFL Films in New Jersey, and television and Internet production facilities in Los Angeles. In an interview. Roger Goodell stated that the league and its teams could feel the economic slump in sponsorship and marketing.

Goodell's memo read, “These are difficult and painful steps. But they are necessary in the current economic environment. I would like to be able to report that we are immune to the troubles around us, but we are not.”

However, ticket sales for this season have been strong and stadiums have been mostly sold out. NFL officials believe that was because season tickets for this year’s games were sold in the spring and summer before the financial squeeze on America. Goodell feared the league and its teams would take a bigger hit when season tickets go on sale for next year’s season.

League spokesman Greg Aiello replied, “We’re looking at everything with an eye to how we can be more efficient and reduce costs.” Aiello also said that the NFL still plans to throw parties at the Super Bowl, elaborate events for which the game has long been known.

The NFL is not the only league feeling the effect of a lack luster economy. The Arena Football League is facing financial pressures that could possibly force the league to dissolve.

According to The Denver Post, two unnamed sources "with knowledge of the league's troubles," were cited as stating the league could dissolve if it doesn't secure financing by Dec. 19.

Michael Young, Colorado Crush executive vice president, told the Denver Post, "The business model for the league is broken. If the rug is pulled out from under us, it's pulled out from under us."

The AFL issued an official statement which read, "The AFL is working on long-term structural improvements which have unfortunately delayed some important events, such as the release of the 2009 schedule, the Dispersal Draft, and the beginning of free agency. We thank our fans for their enthusiasm for these events and ask them to be patient a little longer while we finalize our long-term improvements. All AFL teams are working toward winning ArenaBowl XXIII."

Even though some teams are feeling the effect of uncertainty, coach Bret Munsey of the Jon Bon Jovi-owned Philadelphia Soul responded, "We're business as usual. I am continuing to try and find players to make our 2009 roster. That's what we're doing until I'm told to do otherwise. I think they're working on some things at the ownership level and we're just being told to concentrate on keeping this football team competitive and continue to look for players."

Since November 2007, the AFL's board of directors has been looking into various ways to improve the league's finances. One proposal involved individual franchise owners ceding control of the league to new investors.

Reported in Sports Business Journal, AFL owners had approved a tentative deal with Platinum Equity in which the company would invest up to $100 million and assume management control of the league. That deal has yet to be completed and there are no guarantees of an AFL bailout.

In 2006, ESPN acquired the national TV rights to the AFL and also has a minority stake in the indoor league. ESPN signed a five-year deal to have multimedia rights that included everything from Internet to radio to publishing to international distribution.

ESPN released a statement, "We have always admired the AFL's fan-first philosophy, but we have no comment on their business activity."

Will the financial woes of larger sports leagues allow for alternative leagues to succeed?