Jacksonville Jaguars: A tale of two kittiesFebruary 7, 2012: 2:51 PM ET
Yes, the NFL is the friendliest league for smaller market franchises. But that doesn't necessarily translate into making a profit owning one -- so the Jaguars are looking abroad.
By Roy S. Johnson, contributor
FORTUNE -- Everything about Super Bowl XLVI was big. With 111.3 million viewers, according to Nielsen, it was the most-watched television program ever. One reason may have been that it was a classic matchup of big-market, superstar-laden behemoths: Tom Brady and the New England Patriots vs. Eli Manning and the New York Giants. And it lived up to the hype, with the Giants willing 21-17 after Brady's last-second Hail Mary heave fell harmlessly to the turf.
Interestingly, though, it only surpassed the last most-watched television program ever -- that would be Super Bowl XVL, last year -- by a scant 300,000 viewers. And that game featured teams from two of the league's smallest television markets, the Pittsburgh Steelers and the victorious Green Bay Packers.
Indeed, of all the professional sports leagues, the NFL is the friendliest for its small-market brethren. Five out of the last six Super Bowl champs have represented cities that rank out of the nation's top 20 television markets -- including the Packers (70th). (The Pittsburgh Steelers represent the 23d-ranked television market.)
The two primary reasons for the league's much-touted parity are its hard salary cap limiting the amount of cash teams can dole out for players and the sharing of its gargantuan national television revenue -- some $4 billion annually from FOX, ESPN, CBS, NBC and DirectTV. Those facts prevent big-market teams with big-spending owners from wielding their wallets like a hit by Steeler linebacker James Harrison. Yet friendly hasn't translated into profitable for many small-market teams, especially those not among the NFL's traditional powers, such as Green Bay, Pittsburgh and Indianapolis.
Shahid Khan, president and owner of Flex-N-Gate, the nation's 14th-largest auto supplier, was well aware of the business challenge when he paid a reported $760 million for the foundering Jacksonville Jaguars last November. The Jags finished 5-11 this season, tied for 5th-worst, and missed the playoffs for the fourth straight year. Little wonder they averaged a paltry 62,331 fans at EverBank Field, fewer than all but seven teams. The mustachioed Khan, 61, a naturalized citizen who was born in Pakistan, knows the path to profitability is lined with W's. "Winning on the field is big," he told me recently. "Having a winning tradition is huge...We have to win."
Since the end of the regular season, the Jags have hired a new coach (former Atlanta Falcons offensive coordinator Mike Mularkey) and are gearing up for the annual collegiate draft, where they'll be selecting 7th barring a trade to move up a tab a hot-shot wide receiver or cornerback. Yet Khan isn't banking on a quick on-field turnaround to draw fans. Instead, he hopes to fill the stadium with old-fashion hard work and by lowering the cost of attending a game so locals, especially families, might choose to spend Sunday with the Jags rather than at the beach. "Ticket revenue is secondary," he says. "It's more important to have an exciting environment in the stadium so the home-field advantage is real."
But his real path to profitability requires not another superstar or even a stadium filled to the brim, but a passport.
Khan is banking on the NFL's growing popularity worldwide to transform the Jags into a global brand. Earlier this month, the league announced the St. Louis Rams, another small-market team, would play a "home" game in London for each of the next three seasons. Khan hopes the Jags will be also be one of the leagues "travel" teams, citing not only the opportunity to grow the fans base overseas but also to save local fans money. "[That] relieves the pressure on season-ticket buyers," he says. "One less ticket to buy."
Khan cites London, naturally, as the "logical jumping off point" for his global strategy, mostly due to the huge popularity of futball and the Premier League, the English pro soccer league, which also has fans in the Middle East and Asia. But he also cites Germany as a potential market for the Jags. "I've done business there selling auto parts, and seen a lot of [NFL] games telecast in Germany" he says. He says the telecasts use different camera angles, tighter in the offensive and defensive lines to better emphasize the -- ahem -- violent nature of the sport to a fan base that loves rugby. "Some of the violence and the hits have to be respectful; you don't want to overplay into that angle their fans crave."
He also believes the Jags going global will aid Jacksonville economically, both in tourism (already a $57 billion industry, according to government data) and economic development. "I've spoken with the city's leaders and told them that if we're successful in getting a game or two overseas, they need to be on the plane with us," Khan says.
Khan came to the United States at the age of 16 and graduated from the University of Illinois, Urbana-Champaign with an engineering degree. He joined Flex-N-Gate as an engineering manager, then left several years later to start his own auto supplier (Bumper Works, which brought the one-piece bumper design to the marketplace) with $13,000 in savings and a $50,000 loan from the Small Business Administration. Two years later, he bought Flex-N-Gate.
Because of his roots in Champaign, Khan grew up a Bears fan, and still cites franchise icons "Red" Grange and Dick Butkus as his favorites.
He grew Flex-N-Gate the same "shoe-leather" manner in which he hopes to grow the Jags. In fact, during a period when he says he sold parts "one by one" he travelled to Jacksonville seeking new customers. Today the company sells parts in Europe and Asia, as well as throughout North America.
Khan isn't the only team owner to look overseas for profits. Russian billionaire Mikhail Prokhrov bought the NBA's New Jersey Nets in May 2010, and during this compressed, lockout-shortened 2011-12 season the team will play two "home" games in London just it did last year. Next season, the team moves to Brooklyn, which team executives cite as a "global brand" itself.
Ultimately, Khan's decision to employ a global strategy for his small-market franchise may prove to be his savviest move as an owner. It's about more than generating new revenue and building a sustainable business with bottom-line success equal to its on-field victories. It's about survival.
Journalist and entrepreneur Roy S. Johnson recently launched Fit! Live! Win!, a corporate wellness communications and consulting firm.