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Sorting out the touchy business of revenue sharing, stadium financing, and the salary cap are key to the future success of the National Football League.
Lori Calabro, CFO Magazine
February 1, 2006
The National Football League has scored several financial touchdowns this year. For starters, the league has signed some $24 billion in new long-term TV contracts and completed the successful launch of its own cable-channel, the NFL Network. But future success, says 37-year-old CFO Kimberly Williams, will depend on sorting out the touchy business of revenue sharing, stadium financing, and the future of the salary cap. "It's a bit algorithmic," she says. But Williams knows that, with some $6 billion in revenues in 2005, the league is negotiating from a position of strength. "There are worse problems to have," she quips.
As the 86th season of the NFL comes to a close, how does it compare financially?
Over the past three-to-five years, this business has had double-digit year-over-year growth, much of it driven by very strong relationships with our broadcast and cable partners. We have renegotiated all of our television packages in the past year, save one — the Thursday/Saturday package — and the increase in the average annual rights fees is now 42 percent over the last deal. And if you exclude TV, the other pieces — licensing, international, and sponsorships — have enjoyed 34 percent year-over-year growth over the past three years.
The NFL is considered the best-run league financially. What does finance do to contribute to the success of the product?
One of the underlying strengths of the NFL is that we are a trade association, meaning that the clubs are independent entities. So there is a lot of discussion, financially, legally, and from a community standpoint, about what rights are maintained nationally. And the NFL has threaded that needle very well. Keeping rights at a national level allows the NFL to extract a premium for exclusivity in relationships with our partners while still providing other rights to the clubs that they can then exploit locally.
How do you measure your success?
We had two priorities this year: brand and cash. Obviously, brand is a little more difficult to quantify.... But this past year, we spent a lot of time educating each department about what's on brand, what's off, what's the NFL's brand, and how each department contributes to it.... Obviously, with cash, it's much more quantitative. Our business generates a lot of net income, but what we want to know is how net income translates into cash. So we spent a lot of time looking into payment terms. We did metrics around our vendors in terms of when the value exchange occurs.
To a certain extent, the NFL is constrained by the limited number of teams and length of its season. Where will growth come from?
When you look at the history of our growth, there are some lessons. Look at something like NFL Sunday Ticket, which in the 1990s was a small piece of our business, but now is as big as, if not bigger than, our other TV packages. Our relationship with Sirius Satellite radio and the deal we just made with Sprint to deliver information through wireless platforms are other opportunities for growth.
Is the NFL Network the best example?
The NFL Network is great for the NFL. It gives us a direct line of sight to our fans and it allows us to provide them with unique content. It also was an adrenaline rush for the organization. Obviously, subscriber fees are a revenue stream we didn't have three years ago.... And what tremendous leverage in our TV negotiations.
What is your role with the owners, and in particular with the finance committee?
One of the things I've focused on is stepping up the frequency and transparency of the financial information the owners receive. So we send out a quarterly report as well as operational highlights to each owner. I've also spent a lot of time reaching out to the clubs. One of my concerns is ensuring that people do not develop relationships with the NFL on the cheap.
There is a lot of discussion now about revenue sharing and how it may polarize the league. How much of a threat is it?
We are still discussing options, and a lot is tied up in what happens with the CBA [collective-bargaining agreement]. So it is a bit of "which domino will fall first?"... But as you can imagine, revenue sharing is a key component of the organizational backbone of the NFL. It involves our projections for revenues, our relationship with the CBA, the understanding of the economics at the club level, and understanding how the revenue sharing has transferred wealth from club to club. It is sort of a prickly topic and a bit of a web when you throw in the CBA, the salary cap, revenue sharing, and stadium financing.
The CBA expires in '07. Have you learned any lessons from other leagues with labor issues?
I believe that a CBA negotiation is not about the period of time you are negotiating; it's about the relationship you want to maintain throughout the agreement. Our support for players both on and off the field — not just financially but with manpower, organization, and outreach — is very important. There's a reason why the NFL has maintained labor peace for as long as it has compared with our friends in other leagues.... I'm confident we'll get through this, and in large part because of that support.
The NFL has made a real push for diversity. Does it matter that you're a female CFO here?
As a woman working for the NFL, it's quite honestly no different than working for any organization that is passionate about what it does, has tremendous integrity, and respects diversity. The fact that I am a woman in a predominantly man's game really has no bearing on how proud I am to be part of the success of this league.
Are you a fan?
Absolutely. And while we shouldn't choose among our children, I am from Philadelphia.