Investment pros will tell you that there is a difference between a good company and a good stock. Recently, owners of Apple have come to understand this clearly. A company can make excellent products, but the capability is too well known. The stock price is too high and ready for a fall.
In January 2000, one could have said the same thing about AOL. In fact, the firm I worked for at the time did exactly that. We showed how even the most heroic results for AOL could at best match the return on treasury bonds because the price was already so high. Unfortunately, we did not have a chance to tell this to Time Warner CEO, Gerry Levin, who sold his company to AOL for $164 billion. That would have been fine, if the shareholders to whom Levin was responsible had received cash, but they received AOL stock and the rest is history.
Super Sunday has achieved iconic status in the United States. Unlike Christmas, Easter, Yom Kippur or Rosh Hashanah, you can wish a happy Super Bowl party to anyone in the United States with no risk of giving offense. The NFL might be as close to a national religion as we have in the United States, which tells me it’s time to sell. NFL Commissioner, Roger Goodell’s assertion that “the NFL will be here in 30 years,” raises more red flags than a parade in Tiananmen Square.
Truth be told, you can’t sell the NFL because, with the exception of the Green Bay Packers, no team’s shares are publicly traded. The owners of the 32 teams own the league itself so you can’t sell the league either. But, if you could, would you? And, if so, to whom? Here are 12 reasons that you should.
1. According to a Fran Tarkenton, an NFL quarterback in the 60s and 70s, the NFL is not very concerned about doping. In a recent Wall Street Journal article, he said, “Cycling champion Lance Armstrong has gone from hero to villain for using performance-enhancing drugs, and baseball’s Hall of Fame this month elected no one on the writers’ ballot because all the eligible superstars were tainted by records or suspicion of ‘juicing.’ But while cycling, baseball, track and field and other sports have seen major scandals over steroids, there doesn’t seem to be comparable outrage or concern over drugs in football.” When Tarkenton was starring in the league, there were no 300 pound players. Forty years later there are two-dozen of them on the rosters of the Super Bowl contestants. Even if fans put up with it, regulators do not. Tour de France owners take note.
2. The viability of many of the franchises depends upon bamboozling city officials into building expensive stadiums to provide the proper fan experience. Under threat of being the “Mayor who lost the Aardvarks,” city officials race to the financial bottom to enhance their prestige by hosting one of the 32 teams. Financial distress in the United States begins at the bottom of the governmental food chain. Costs get shoved down from federal to state to local governments whose ability to tax is constrained by the relative ease with which taxpayers can move away. We might not be far from the time that “losing the Aardvarks” gets you reelected.
3. If you brought your binoculars and sat in the upper deck of Sunday’s game, a ticket would have cost you $1300. Better seats cost around $4000 each. These are not levels designed to appeal to the bottom 99%. For the regular season, the ticket price is only part of the cost, with long-term seat licenses adding significantly. A Sunday outing to see the Aardvarks in action is far from a family activity, especially if you are required to buy all eight home games plus a handful of meaningless exhibitions.
4. The esteemed Nate Silver, prognosticator to the stars and seer of all things, explained in some detail why defense wins Super Bowls. It is unwise to differ with Nate Silver because he is often right – though not last night, when the Baltimore Ravens beat the San Francisco 49ers 34-31. Defense might usually win, but it is boring. Americans don’t much like soccer because there aren’t any goals and they might not like 3-0 football games either.
5. Football is designedly violent and there is increasing evidence of debilitating head injuries with long-term consequences. Lawyers have discovered this, and lawsuits with spectacular demands have been filed. Two of America’s top public relations stars – President Obama and Commissioner Goodell — have taken opposite sides of the “would you let your son play football?” question. Obama would “think long and hard” while Goodell says “absolutely.” Easy for them to say as each has two daughters and girls don’t play much football. What color ribbons should the “safety police” choose in a nationwide campaign to end the scourge of football? There are big bucks in campaigns against scourges.
6. Related to the head injury lawsuits is the supply of players. If parents side with the President and guide their sons to other sports, football will quickly become a game played by mercenaries escaping even greater misery elsewhere.
7. The 32 team owners are competitive people and, if left to their own devices, they would outspend each other to win. Since the United Sates does not have 32 cities with equal shares of the demographic and economic pie, the advantaged would soon wipe out the disadvantaged. To solve this, the NFL has an annual salary cap of $120.6 million. Thanks to long-term contracts, some of the players are extremely valuable, and the risk of injury requires team owners to insure their contracts. Now back to the competitive part. Injuring a key player can help coaches to win games and keep jobs – or get better ones. There have been bounty scandals involving cash payments for knocking key opponents out of games. The game changes considerably if the insurance is no longer available.
8. American attention spans are not notably long. The Super Bowl was more than a four-hour event though, to be fair, 34 minutes were consumed by a power failure that any suburban, game-watching-party host would have resolved with a quick pull on the cord of his backup generator.
9. Tax reform could prove detrimental to ownership of all professional sports franchises if either of two tax provisions were curtailed: the business entertainment deduction that decreases the out-of-pocket cost of tickets and sky boxes; or the tax benefits to owners permitting sports team losses to be offset against other income. Or both.
10. Though some fans do not object, others find the conduct of players both on the field and off to be less than inspiring. The most sensitive viewers react adversely to player hairstyles and elaborate tattoos though this might result from racism as much as a concern about role models. Far more are concerned about star players who were involved in multiple stabbings, as was the case in the Super Bowl. The values on display in an elaborately choreographed touchdown dance might not be those a parent would teach to his child.
11. This comment on the Super Bowl from England suggests there is little room for international expansion: “boring, long winded, too many interruptions, simple, unexciting, crassly commercial and that was without the power cut. How can you have a power cut at your major sporting event? Haven’t they heard of stand by generators? I fell asleep, but saw enough to think it was dreadful! But maybe I don’t appreciate the subtleties. Or even the subtitles…”
Whether these are the best reasons to short or sell the NFL, they are thought provoking, but obviously most owners disagree or their teams would be on the block. That leads to number 12.
12. What happens when the owners start asking themselves who might be the logical buyers for billion-dollar franchises? Chinese plutocrats? Russian kleptocrats? Oil princes? None of these groups fits nicely into the desired NFL image and the league gets to approve each sale. As an owner, would you prefer to be the first to try to replace yourself with a dodgy buyer or the last? Rushing for the lifeboats does not tend to increase the prices.