Another football league?

Via King Kaufman, who does an interview with one of the investors, we have this NYT article about a proposed Friday night football league called the United Football League (UFL), which would play in the fall and thus compete with the NFL. The founder is Bill Hambrecht, who as a part owner of a USFL franchise, knows a thing or two about going up against the great football hegemon. Which doesn't mean he has learned all the lessons from that experience, as this suggests to me:

Where others might be daunted by the N.F.L.'s success and power, though, Hambrecht came to believe its monopoly status gave him an opening. "I really started thinking hard about this after the Los Angeles Rams left to go to St. Louis and the Houston Oilers went to Nashville," he told me over drinks recently. "Why do you leave two of the top 10 TV markets in the country for these two smaller markets?"

The answer, of course, is that the N.F.L. doesn't really have to worry about where its teams are located, since most games are televised and the bulk of the league's revenues come from its network contracts. What's more, with the right stadium deal and enough corporate sponsorship, team owners can make as much (or more) money in smaller cities as they can in larger ones. That's why the N.F.L. does just fine despite not fielding a team in 21 of the country's top 50 markets -- including such enormous metropolitan areas as San Antonio, Las Vegas, Orlando and (of course) Los Angeles. Nor does the N.F.L., which now has 32 teams, have much incentive to expand. On the contrary: expansion dilutes the TV money. (Greg Aiello, the N.F.L.'s spokesman, told me that "expansion isn't on the table right now.")

So the first step in Hambrecht's plan is to enter big cities where the N.F.L. isn't. As Mark Cuban put it to me in an e-mail, "There are quite a few good-sized non-N.F.L. cities that can support a pro team." So far, the U.F.L. has decided to put teams in Los Angeles, Las Vegas and Mexico City. (Cuban is considering taking the Las Vegas franchise.) Each owner will put up $30 million, giving him an initial half-interest in the team; the league will own the other half. But eventually the fans themselves will become shareholders -- because each team is going to sell shares to the public. Then the owner, the league and the fans will each own a third of every franchise.

First, I like the idea of fans as shareholders. Not sure how that will work in the real world, but I think the concept of selling stock in a team will appeal to a lot of people, and therefore will be a success from a capital perspective.

But there's some real disingenuousness in these paragraphs. The NFL only has 32 teams, so in the best-case scenario it would be leaving 18 of the top 50 markets out. Obviously, the NFL has a gap in Los Angeles, but it's interesting that the UFL is talking about Las Vegas, Orlando, and San Antonio instead of San Juan, Portland, and Sacramento, all of which are larger metropolitan areas than those three. Vegas is the hottest city without a major sports team, but it's not like Orlando (three NFL teams in Florida) or San Antonio (traditionally Dallas Cowboys turf) are un-served.

Another head-scratcher to me is in the interview Kaufman does with Hambrecht:

I think it strikes a lot of people as odd, though, for people like you and Mark Cuban to say, "This is the new business we're going to invest in in sports, competing with the NFL," as opposed to, say, getting in on maybe not the ground floor, but the second floor, with something like lacrosse, where there's obviously huge potential for growing from almost nothing.

Well, the people that understand the business understand exactly why we're doing it. We've had some very interesting conversations with some NFL owners and others. Hey, they understand. Football is the most valuable content that there is now in the media world. By design, they've restricted the supply to get a monopoly price out of the consumer. Look at the fights they've had with Comcast.

It's almost an obvious monopoly, and they have left 40 percent of the market open. They have not kept up with the demographics of the United States. It's still basically a Rust Belt league. You just look at the map, it's really kind of fascinating to look at it compared to the population. It's shifted and they haven't kept up with that. So, you know, if it were any other business, there'd be people filling that market.

This is the one major sport that's left a good part of the market open. As we move along, particularly in the media world, it'll get a lot more understandable and hopefully a lot more believable.

Again, look at the MSAs-by-population chart. Pittsburgh and Buffalo are shrinking, New Orleans has shrunk since 2000, though not because it's a "Rust Belt" city, and Cleveland is growing slowly, but again factoring out the LA anomaly, I'm not sure where the NFL is losing out on national population trends. Besides, how is it that the NFL is the "one major sport that's left a good part of the market open"? You could make the same case for Major League Baseball, which ignores all six of those major metro areas I mentioned above. Only the NBA would seem to have the market as Hambrecht sees it covered.

I'm not going to say Hambrecht is totally wrong here - even if I thought he was off his nut, the UFL is still in its conceptual stage, so what exists now and what will be when they kick off may be two different things. Read the Salon interview and see what you think. I think if I were a zillionaire I'd have find more productive ways to squander my money, but hey, I'm not, so what do I know?

Posted by Charles Kuffner on June 05, 2007 to Other sports