(Bloomberg Opinion) -- If on-field success is a measuring stick, Appaloosa Management co-founder David Tepper’s 2018 purchase of the Carolina Panthers has been a disaster.
What’s taken place over the past six years under his leadership is a reminder that the National Football League absolves owners of accountability and places the burden of failure on players, host cities and fans.
It’s bad enough that the Panthers have struggled through an NFL-worst 32-70 record and run through seven head coaches. But the worst hit came last week when the team benched Bryce Young, the 23-year-old quarterback for whom the team traded away a treasure trove of draft picks in 2023. A more competent franchise would have surrounded Young with quality supporting players, a steady coach and patience; the Panthers did none of these things, and Young regressed. A 36-year-old journeyman is now taking his place (and led the team to a win on Sunday), and analysts have ranked the Young trade as one of the worst in NFL history.
Most businesses would reel from a similar record of failure. But this year, Tepper’s Panthers are worth $5.13 billion, up 133% since he bought them for $2.2 billion. And out of 32 teams, they managed to rank 15th in operating profits (with an estimated $130 million) despite having an abysmal standing in game-day wins.
Mismanagement hasn’t ruined the bottom line, and that’s by design — through the league’s revenue-sharing program, which is mainly bankrolled by media rights deals.
Last season, the NFL sent every team a check for over $400 million that all but guarantees a franchise’s profitability. The league’s intention is to ensure competitive parity, and it works. The system is how small market teams like Green Bay can compete for players and wins against big city revenue generators like the New York Giants.
The downside is that the financial safety net has disincentivized management competence, which is a problem for three important stakeholders within the NFL.
For starters, the players. While the salary cap and floor ensure that players will always have access to millions of dollars, winning teams earn prime-time TV spots (which the Panthers have not yet secured for 2024) and tend to get featured on national broadcasts, which enhances sponsorship opportunities for athletes. Losing franchises typically have their games shown only in the competing home-and-away markets that don’t afford players the same access to partnership deals.
Likewise, host cities that spend public money to build stadiums look like they have made a poor investment at taxpayers’ expense when they have a loser for a home team. I recently wrote about a Pennsylvania government report that claims the Pittsburgh Pirates baseball team’s losing ways have resulted in poor turnout and cost the state millions of dollars in economic activity.
Which brings us to the fans. NFL spectators remain among the most loyal — and free-spending — in all of sports, and seating and suite revenue accounted for 15% of total league revenue. But the Panthers lagged behind, with total home attendance ranking 20th in the NFL last season. That standing may even be an over-count; in recent years, Panthers home games have been dominated by fans of the visiting team. In Carolina, at least, the fans can be excused for feeling like they would simply be shelling out money — on tickets and perhaps on parking and child care — just to watch their rivals win.
Unfortunately, the NFL hasn’t shown any signs that it wants to reform the culprit: how it divvies up its haul of national media rights money.
But if it ever decides to rethink its approach, there are options.
The English Premier League is a good place to start. Under its revenue-sharing plan, 50% of television money is shared equally among the 20 clubs, and 25% is distributed to teams based upon how well they finish in the league standings (the other 25% is distributed based on how often they appear on television). Teams that do well earn millions of pounds more than those that don’t.
Would billionaire NFL owners care about the few extra million earned by moving from, say, the 20th to the 19th in the league standings? Those who built their own businesses before NFL ownership (there are at least nine, including Tepper), and know their way around a balance sheet, might. Tepper is a fine example. Despite his billions, he claimed to have spent the first two years of his Panthers ownership making “vast and sweeping changes” to the team’s business operations. That’s not the approach of someone keen to leave a few extra million on the table.
Of course, implementing changes to the NFL’s revenue-sharing model wouldn’t be easy.
Among other things, persuading NFL owners who preside over tanking franchises would be a main hurdle. They would likely be afraid of losing access to guaranteed future funds. But the league could argue that every other team would be in the same position, so parity wouldn’t be lost.
For now, the NFL’s growth is simply too great for the league to view revenue sharing as a problem, but it may want to start thinking about it. As the league expands into new global markets, it will be up against soccer leagues — such as EPL — in which teams and their owners compete to avoid relegation (and the financial hit that comes with it). It’s a tough system that incentivizes owners to compete at the highest level, contributing to soccer’s international popularity. If the NFL wants to succeed in these soccer-first markets, it will need to prove to fans that it has the same edge.
To contact the author of this story:
Adam Minter at [email protected]
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
A message from Advisor Perspectives and
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Adam Minter
