State of the NFL? It's a mixed business bag

Commissioner Roger Goodell will have plenty to brag on as he delivers his annual "State of the NFL" address in Arizona on Friday. Such as:

• The league enjoyed its fifth consecutive season of record attendance in 2007, drawing 17.3 million, or 90 percent of total stadium capacity.

• TV ratings were through the roof, or, if you will, the dome. Fox attracted its biggest audiences since 1995, averaging 17.1 million a game. CBS's viewership surged 8.6 percent from 2006, to 16.7 million a game. The two conference championship games carried by those two networks drew 10 percent more viewers than last year. (Ratings for the prime-time packages of NBC and ESPN declined, but "Monday Night Football," on the latter, was still the most-watched series on cable in 2007.)

• The commish threw the book -- with a nice, tight spiral, by the way-- at the league's bad guys. Armed with a toughened player conduct policy, he suspended Pacman Jones for a season and Michael Vick indefinitely. He needed to do that for the league's image, and he managed to get buy-in -- not opposition -- from players union boss Gene Upshaw.

• Goodell has tackled other issues, as well, on which the league had long been either wrongheaded or in denial. He assembled a concussion summit in June, bringing together for the first time the league's policy makers and their critics to huddle about head trauma. Nothing was decided, but a dialogue of any kind was valuable and amazing. "It was like the Berlin Wall falling," says agent Leigh Steinberg, a longtime critic of the league's concussion policies.

You've got to hand it to Goodell, maybe even lateral it. This year's speech has a good deal more potential for applause lines than did President Bush's State of the Union address on Monday. As Super Bowl week rolls grandiosely along toward Sunday, the NFL is clearly king of American sports.

Yet uneasy rests the crown. The NFL's current glories are offset by some real worries. They fall into two general categories.

The Gathering Labor Clouds
Under the terms of the collective bargaining agreement reached in March 2006, the contract can be reopened for renegotiation in November 2008.

The owners almost surely will do so, feeling the NFLPA (players union) got way too sweet a deal the last time around. In the past two years, the salary cap has shot up from $85.5 million to $109 million, with further escalation to come.

Small-market owners such as Ralph Wilson (Buffalo) and Wayne Weaver (Jacksonville) are particularly vehement about it. They can't readily cover increased costs like the big-market owners can. The league's fat cats generate far more revenue from pricey luxury suites and corporate sponsorship packages, and needn't share it.

New stadiums in New York and Dallas only exacerbate the problem. Those billion-dollar palaces, to open in 2009, will absolutely juice their occupants' financials. Cowboys fans who want a club seat at the new stadium must pay $16,000 to $50,000 just for the right to buy a $340-per-game ticket.

But what's great for Dallas owner Jerry Jones isn't so great for fellow owners. The Cowboys' windfall will further escalate the salary cap, which is based on total league revenues.

If there is a re-opener, it's hard to choose the greater of two challenges Goodell will face. Is it maintaining unity among owners with vastly different economic interests? Or is it the risk of rupturing his relationship with Upshaw? To this point, Goodell's partnership approach with Upshaw has been the catalyst for progress on tough issues such as outlaw players (see above) and retiree disability benefits, which have been improved.

Goodell faces a big challenge in extending the league's current 20-year run of labor peace.

The NFL Economy
What oil is to Saudi Arabia, broadcast rights are to the NFL. Four networks pour a total of $3.7 billion into league coffers each year, and will keep doing so through 2011. But what then?

Sure, the NFL is ratings gold for the networks, but how long can it keep extracting huge jumps in rights fees from them? They went up 53 percent in the latest round of deals. League officials know the media world is changing too fast to count on that continuing to happen.

"We've got five years in a relatively safe haven," one owner says. "But there are going to be huge changes in how the games are presented."

To this point, the NFL has been a laggard in new media. Major League Baseball created a new business unit -- MLB Advanced Media (MLBAM) -- to aggressively develop online commerce, while the NFL was content for years to contract with CBS SportsLine to run its NFL.com Web site.

MLBAM is now a $400 million annual business, which is one reason MLB has closed a once-substantial revenue gap with the NFL, to within about $1 billion of pro football's approximately $7 billion in annual revenue.

Give the commish credit, though. He has dismissed CBS SportsLine and brought NFL.com in-house, where it's put a heavier emphasis on video clips and become a more-trafficked site. (The NFL has also sharply limited the ability of other Web sites to show video highlights.) He also formed a "digital media" ownership committee, headed by Microsoft co-founder and Seahawks owner Paul Allen, and charged it with hatching big ideas.

To some, the NFL's arrogance has impeded innovation. It has been No. 1 for years and so hasn't had to try harder. The league's healthy self-regard also contributed to its problems with the NFL Network.

In 2006, the NFL decided to put eight prime-time games on the network and charge cable operators much higher fees -- going from 20 cents per subscriber to 70 cents -- to carry it. League negotiators, accustomed to having their way with the broadcast networks, had no such sway over the likes of Comcast and Time Warner.

They haven't budged, and the NFL Network's growth has been stunted. It currently has 43 million subscribers, far short of its aspirations. Moreover, the league risks alienating the very broadcast partners it needs to be cultivating if there is to be another round of TV rights megadeals. The NFL Network is competing with the other networks for advertisers.

Sure, it's hard for Goodell to acknowledge these clouds in the midst of another glorious Super Bowl week, in the valley of the sun. But it's better to be a little humble than to be imbued with hubris.

The true state of the NFL is this: The league has many points of pride and profit. But it also has plenty of issues of which it should be wary.

John Helyar is a senior writer for ESPN.com and ESPN The Magazine. He previously covered the business of sports for The Wall Street Journal and Fortune magazine and is the author of "Lords of the Realm: The Real History of Baseball."