Carolina Panthers

Why buying the Carolina Panthers – or any NFL team – is risky business

Carolina Panthers quarterback Cam Newton, left, greets owner Jerry Richardson prior to a game against the Oakland Raiders at Bank of America Stadium in 2012. The pending sale of the Panthers will a test of the value of NFL franchises.
Carolina Panthers quarterback Cam Newton, left, greets owner Jerry Richardson prior to a game against the Oakland Raiders at Bank of America Stadium in 2012. The pending sale of the Panthers will a test of the value of NFL franchises. TNS

When Tilman Fertitta bought the Houston Rockets last fall, the Texas billionaire spoke in a press conference about the merits of the NBA versus other professional leagues, like the NFL.

Fertitta, who owns the restaurant group that includes McCormick & Schmick’s and Morton’s, knows the NFL well, as he was an original investor in creating the Houston Texans. But he made clear he has his doubts about the league and its long-term success. Specifically, Fertitta said, the NFL doesn’t have the same international appeal as the NBA.

“People I know in football are concerned about where it’s going to be in 50-60 years,” Fertitta told reporters. “I would have been scared to pay $2.2 billion for an NFL franchise today. I know NFL owners might not like hearing that, but the NBA is where it’s at.”

Fertitta’s comments last October highlight the risks associated with buying an NFL team today. Once the indisputable king of American sports, the league has been criticized over the past couple of years, facing questions about player safety, declining TV ratings and protests during the national anthem.

The latest test of the league’s popularity is playing out in Charlotte, as owner Jerry Richardson looks to find a buyer for the Carolina Panthers. The sales process is heating up this month, and the final sales price will be a sign of whether the league is trending higher or lower. Forbes estimates the team’s value at around $2.3 billion.

The Panthers sale, as well as other issues facing the league, will be up for discussion starting Sunday at the NFL annual meetings being held in Orlando through Wednesday. So far, the Observer has identified four potential buyers: financier Ben Navarro, steel company CEO Alan Kestenbaum, e-commerce entrepreneur Michael Rubin and hedge fund manager David Tepper.

To be sure, the NFL is still the most popular sport in America. According to a Gallup poll in January, 37 percent of adults in the U.S. say football is their favorite sport to watch, the most of any other. Its popularity, however, has slipped from its peak of 43 percent in 2006-07.

But even if some of the NFL’s problems raise the eyebrows of prospective owners, they are unlikely to have much of an impact on the team’s sale price, according to David Carter, executive director of the University of Southern California’s Marshall Sports Business Institute.

“Demand far outweighs supply, even if the prospect of another team or two coming up for sale soon exists. Simply put, in sports business terms ownership of an NFL franchise still remains akin to beachfront property,” Carter said.

TV ratings

Television contracts are the leagues main source of revenue, and in recent years ratings have been sliding.

Last season, ratings were down 9.7 percent, according to ratings tracker Nielsen. A typical game drew 1.9 million fewer viewers than last season.

Critics have blamed the slide on fans tuning out for a variety of reasons, from disgust over player National Anthem protests and concerns about player safety. But NFL Commissioner Roger Goodell has pushed back, noting the league still stands above almost all other TV programming.

“We always want ratings to go up, but we’re 37 of the top 50 shows, which is higher than ever,” Goodell told reporters in January. “I think dominance of the NFL in television is still very clear.”

The league’s broadcast television package runs through 2022, but the next round of negotiations could be more difficult if ratings continue to falter. The three networks agreed to pay around $3 billion per year under the current deal, according to Forbes, up from $1.93 billion in the previous contract. And in January, FOX Sports reached an agreement with the NFL to air Thursday night games over the next five seasons.

The NFL makes about two-thirds of its total $13 billion in annual revenues from media rights, which are shared equally among all teams, according to John Vrooman, a sports economist at Vanderbilt University.

“The negotiations for the next TV deal could reveal the demand-side weakness of the networks and cable, but the league is usually one or two steps ahead” in adjusting to to new media platforms, Vrooman said.

Player safety

Player safety remains a key issue, as the league works to cut down on concussions that can knock players out of games and end careers early.

In 2016, an NFL official for the first time acknowledged there is a link between football head injuries and chronic traumatic encephalopathy, or CTE, a devastating brain disease. And in 2017, the league’s $1 billion settlement with retired players over consussions was finalized.

The Panthers have been in the middle of the issue, with star players such as Cam Newton and Luke Kuechly both suffering head injuries in recent seasons. In January, for example, the league and players association reviewed the team’s handling of a big hit on Newton but determined the Panthers did not violate the league’s concussion protocol.

Worries about concussions have led even some NFL players to say they wouldn’t want their children to take up the sport. The Gallup survey in January, however, found that parents of children under 18 – a group that might be expected to be most affected about concussion risks – were about as likely as others to pick football as their favorite sport.

Labor relations

The labor contract between the NFL owners and the NFL Players Association labor union doesn’t expire for three years, but the next round of negotiations could be contentious in 2021, a potential headache for a new owner.

“We prepare for war,” NFLPA executive director DeMaurice Smith said when asked about the negotiations last month.

In 2011, the players and owners didn’t reach a deal until after a four-month lockout, as the two sides tussled over issues such as revenue sharing. At the time, Panthers owner Jerry Richardson was considered one of the hard-liners among the owners, who were seen as winners in the negotiations.

Already the NFLPA is telling players they should save money in case they face another lockout.

Stadium deals

In the past few years, some NFL teams have struggled to land taxpayer financing for new stadiums or renovations in their hometowns. That’s led the Chargers, Rams and Raiders to engineer moves or planned moves to other cities, which alienates fans and requires expensive league relocation fees.

The Panthers have made significant improvements to Bank of America Stadium in recent seasons, with the help of $75 million from local taxpayers. But at some point in the future, a new owner is likely to want more drastic upgrades, or even a new stadium, especially as other teams build new homes with additional suites, restaurants and other high-end features.

The potential buyers of the Panthers have not been able to comment on their plans because of confidentiality agreements. But so far, sources familiar with the bidders have indicated they have no plans to move the franchise from Charlotte.

Buyers’ market?

The Panthers aren’t the only team that may go up for sale soon. The Denver Broncos, Tennessee Titans and New Orleans Saints are among the teams that could hit the market, providing more test cases for the value of the league’s franchises.

“Given the fact that league ownership is rapidly aging, as much as one fourth of the NFL could currently be up for sale,” Vrooman, the Vanderbilt professor, said.

Despite the league’s challenges, Vrooman remains bullish on the NFL’s prospects. Since the salary cap era began in the 1990s, the value of the average NFL franchise has increased at a rate of 11.6 percent, about twice the rate of the Standard & Poor’s 500 stock index, he said.

When Terry and Kim Pegula bought the Buffalo Bills in 2014, they paid a record $1.4 billion for the team. A recent Bloomberg report said bids for the Panthers could reach $2.5 billion, a new high for a U.S. sports franchise.

“The NFL,” Vrooman said, “is a fully-automatic perfectly-diversified stone-cold money machine.”

Staff writer Joseph Person contributed.

Katherine Peralta: 704-358-5079, @katieperalta

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