interview
American football is becoming increasingly popular in Germany. Before the start of the new NFL season, expert Patrick Esume looks at the favorites and explains the league’s business model.
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Capital: Mr. Esume, the American football league, the NFL, starts its new season on Friday. Who is your favorite this year?
PATRICK ESUME: At the risk of sounding predictable, it’s the Kansas City Chiefs again. They have the best quarterback in the league in Patrick Mahomes, which is crucial in this sport.
The Chiefs have won three of the last five Super Bowls. Isn’t that starting to get boring – something that doesn’t really fit with the NFL’s business model?
No, not at all. We have a situation that we normally only have every 20 years: a dominant player, Patrick Mahomes, with a dominant head coach, Andy Reid. That is not the norm, and I don’t find it boring either. Other teams have massively strengthened themselves for exactly this reason and are perhaps even stronger across the board.
The NFL ensures that the best college players go to the weakest teams of the previous year during the draft. This is intended to break the dominance of the strong teams and ultimately prevent monotony. Does this still work with regard to the Chiefs?
The drafts are just one thing. I think the salary cap set by the NFL is more important. That’s where economic performance is really crucial. Some teams are very clever in how they structure their contracts, for example the Chiefs. There are very different approaches.
What does smart team management look like in the NFL? And how does it differ from normal business?
It’s a bit like the world of finance. You focus most on your top assets – that means the quarterback, which for the Chiefs is Patrick Mahomes. Then comes the offensive line, because that protects your top asset. And from there it goes deeper. The corner back in particular is still crucial because he defends the opposing quarterback. Those are the key positions, and everyone knows that. The trick lies in the structure of the contracts. Because with every success it becomes more difficult to stick to the salary cap.
Because players gain market value and can negotiate larger contracts.
Exactly. On the one hand, you want to keep your successful team together, but on the other hand, salaries are rising. This calls for creativity – for example, through backloading contracts.
Back loaded?
This means postponing large amounts of income into the future. If it is written somewhere that a player will earn 500 million euros over ten years, then he will only receive a large part of the sum in the last one or two years. The question of how to stretch the salary over the contract is almost an art.
Many economists love the baseball movie Moneyball. In it, the Oakland Athletics successfully sign new players based on performance data rather than the human eye. Can this principle be applied to the NFL?
No, that’s different. In the NFL, a lot is decided at the draft. Whoever gets the best players within their budget will be successful in the long term. That’s a little different in baseball, where the sport is much less influenced by luck, injuries, etc. The game consists of fairly predictable processes, unlike American football.
One way to avoid breaching the salary cap is to raise it further. To do this, however, the NFL as a whole must generate more revenue. This has worked well in recent years. Within the USA, there are now signs that growth may be at an end. Do you agree?
The NFL is and remains number one in the USA – by a long way. Basketball and baseball have too many games, so that a single game has little meaning. That is completely different in the NFL. Nevertheless, I also believe that the market in the USA is largely saturated. That is why we are seeing the NFL expanding into other regions of the world, not least Germany. The growth is incredible, and there is still a lot possible.
Germany is actually the second largest market for the NFL and, in terms of numbers, is comparable to a small, fast-growing start-up. Hence the classic start-up question: is the NFL not facing growing pains in Germany?
I wouldn’t compare the NFL to a start-up. The NFL has had enough of a trial period, for example with NFL Europe a few years ago. It has learned from that and, unlike start-ups, it certainly doesn’t lack the capital to make the product big and glamorous. The fact that it has already been able to transport the glamour factor abroad is remarkable. You can’t do that as a start-up, because that requires lead time, capital and media power.
What can the NFL do to make the product even bigger in Germany? Many people were already annoyed by how heavily the NFL was being advertised everywhere.
The NFL needs to become more local. Currently, ten teams have marketing rights in Germany, which is quite a lot. But some teams do not use these rights at all. And that must not happen. Teams with marketing rights have the clear task of developing the countries locally. That means: activities outside of the games, flag football, creating local content and much more. There is still incredible potential there.
Your own European football project, the European League of Football (ELF), is also growing rapidly. You will completely fill the Schalke Arena for the final on September 20. How relevant are such events for the overall performance?
Viewer numbers are a very important metric for us. Probably the most important. Otherwise, we mainly look at ratings, where we performed well – considering the difficult environment caused by the European Championships and the Olympics.
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Source: Stern
