Sacks of Cash
(Business 2.0 Magazine) -- Sports fans may endlessly debate the relative merits of football and baseball. But when it comes to making money, football wins hands down. Compare the sports' annual broadcast deals: $2.2 billion for the NFL vs. an anemic $570 million for MLB.
As Mark Yost points out in his new book, Tailgating, Sacks, and Salary Caps (Kaplan Publishing), that isn't just because football has more viewers. It's because the NFL is a supremely savvy business - one that hawks $3.4 billion in merchandise every year and makes shrewd use of the shared-revenue business model and the salary cap.
With shared revenue, all 32 teams get an equal cut of any deals the league makes - yet if Pepsi (Charts) pays to be the NFL's official beverage, say, that doesn't stop an owner from selling his stadium's pouring rights to Coke (Charts).
The salary cap, established in 1993, treats teams as subsidiaries of the league. They may occasionally dance around the restriction - as the Indianapolis Colts did with quarterback Peyton Manning - but on the whole, the cap prevents teams from overspending and ruining the NFL's bottom line.
Throw in audacious ideas like the pricey Tailgate Clubs that offer fans little but thrive on exclusivity, and you can see why the NFL became an oasis of financial stability in a cash-strapped sports world.To send a letter to the editor about this story, click here.