Friday, January 23, 2009

Lingering Items--Business Edition

Times are tough everywhere. It seems like twice a day there is a story about one employer or another laying off workers by the hundreds, sometimes by the thousands. But if you’re former Cleveland Browns’ president Carmen Policy, it means waiting out a soft economy in a $15 million estate in the heart of Napa Valley.

According to a story in Friday’s Wall Street Journal, the estate is surrounding by grape vines for Policy’s winery which is housed at another location. This luxury comes, if not directly, then as near as a straight line as is possible, from the generosity of the Lerner family. Policy was a minority owner and club president for Al Lerner when he bought the Cleveland franchise back to life. When Policy ultimately was too distracted to really do the team much good, he was bought out at a handsome premium, especially given the fact that he essentially had no money of his own in the team in the first place, and given a first class ticket to Napa. All in all, a nice and expensive consolation prize for doing more harm than good.

I thought about the contrast between Policy and the 12 or so workers that got laid off this week from the Browns. While they may have been given some severance pay, the likelihood that they were treated like Policy, or Butch Davis, or Phil Savage, or Romeo Crennel, is pretty remote. Indeed, for a fraction of the price that any of the foregoing received for their spectacular failures, all the laid off could still be employed today.

But when it comes to this franchise at this point in its existence, connecting dots isn’t a core competency.

When the layoffs occurred, the Browns, in almost knee-jerk fashion, blamed the economy. Worth asking, though, is exactly which part of the economy is to blame?

This past season, every Browns’ game was a sell out. For reasons that apparently have nothing to do with performance, the season ticket base remains relatively high. They still sell their share of swag and $4 hot dogs and $8 beers. The riches continue to flow to them like they do to every other team from the league’s lucrative media contracts signed before this economic downturn. In other words, to the extent that any industry can be immune from the problems plaguing its customers, it’s the NFL.

But the other part of the story, the one not readily discussed by the team, is the significant hit they’ve taken in so-called luxury revenue for the last several seasons. While they won’t admit it publicly, the Browns are having trouble renting out their loges. Corporate Cleveland, which is counted on heavily for support, isn’t responding to this team in nearly the same numbers as it did when the Browns first returned. Some of that is the economy certainly. Some of it is also the simple fact that when client entertainment dollars are limited there better entertainment values in the city at the moment. Choices are getting made and increasingly it’s at the expense of the Browns. This hit to the Browns’ bottom line is real.

While Cleveland’s economy can be blamed—you don’t have to have an M.B.A. to know, for example, that when a Pittsburgh bank takes over your city’s biggest bank there will be repercussions locally—the suggestion from Browns’ camp that this is what led directly to the layoffs is pure spin worthy of Policy. The Browns have literally burned through so many millions over the last several years papering over their failures that they no longer have as big a cushion to weather a sinking economy.

In truth, the downturn in luxury revenue has been years in the making, even when the economy was better. It’s stems from one indisputable fact—the Browns have been a lousy team. When they returned, everyone wanted a piece, irrespective of the results. But as the losses and the years have piled up and the mismanagement has become the dominant story line, there is no longer much cachet to owning a loge at Cleveland Browns Stadium. Clients are far more likely to want to see LeBron at the Q than Brady on the lakefront. When the Browns are out of contention by their third home game, companies have trouble giving the tickets away. The value in owning a loge is tough to measure anyway, but when you literally have to beg people to use it, it’s pretty clear that it has about as much value as a Lou Camille rookie card.

Welcome to the actual business of running a professional franchise. Wins do matter. Having an excited and energized base does matter. Having a product that people want to spend money on does matter.

If I had a nickel for every time I heard someone say that Browns’ owner Randy Lerner is “a good businessman” I could buy a team in the English Premier League. But the assumption that Lerner is some kind of master businessman is based solely on the fact that he happens to be rich, which is based solely on the fact that he had the good luck to be Al Lerner’s son.

Randy Lerner is a gentleman. He’s earnest almost to a fault in his quest to improve this franchise’s lot. He means well. But none of that has made him much of a business man. Indeed, all Randy has done since inheriting the business empire that his father built was to sell it. He then turned around and bought a soccer team. Ok, he likes his toys and maybe, just maybe, that toy will make him some money. But focusing just on his business acumen when it comes to the Browns, the evidence is mounting that he needs help, significant help.

The Policy debacle and buyout cost this franchise millions but it can’t be laid at Randy’s feet. Pretty much everything else can. When Butch Davis quit on this team, it was just months after Lerner had given him a two-year contract extension that he hadn’t earned. Lerner also had elevated him even further in the organization’s hierarchy, all on the strength of a 5-11 season. In total, Davis voluntarily left a positon he was unqualified to hold with three years and some $12 million left to be earned. For reasons that were never explained, Lerner nevertheless paid off Davis as if he had been fired. It was a nice gesture and completely unnecessary. But if that’s how Lerner wants to spend his money, so be it, unless you’re one of the recently laid off I guess.

Fast forward to last spring when Lerner gave lengthy, multi-million dollar extensions to both Phil Savage and Romeo Crennel that neither had likewise earned. Both still had two seasons remaining on their contracts. A good businessman may have given both a pat on the back and said “good job” and let’s talk about what we can accomplish next season. Not Lerner.

In the case of Savage, at the time he was fired he had four years remaining on a contract that paid him approximately $2.7 million a year. Crennel had three years remaining on a contract that was paying him about $ 4 million a season. And let’s not forget that at the time Crennel got his extension, offensive coordinator Rob Chudzinski received an extension through 2011 as did Mel Tucker, who had been promoted to defensive coordinator. The figures on those contracts weren’t reported, but most coordinators make at least $1 million a year, some double that. Thus assume that combined the two had $6 million left on their contracts when they were fired.

If you’re doing the math at home, that means that when Lerner cleaned house recently, he was still on the hook for around $25-30 million. But it’s also safe to assume that it won’t cost Lerner quite that much. in each case a financial settlement was or will be worked out in recognition that each is likely to find another job. Still, by even the most conservative estimates, the purge cost Lerner $15 million, minimum, and likely far more. Throw in the $12 million he paid Davis and in just the last few years Lerner has essentially given away upwards of $30 million of his money to former employees that have failed him.

Layered on all of this, of course, is the hit to the luxury revenue that the team has taken because of all of its on-field failures, pretty much all of which can be traced from Policy straight through to Crennel. If all this makes Lerner a good businessman, it’s chilling to think what would constitute his being a bad businessman.

Meanwhile, a variety of low-paid front office types hit the streets in response. Maybe it was the economy that’s to blame, but not the economy you and I are experiencing but the one the Lerners heaped on themselves.


Speaking of Policy, the story about his life in Napa is fascinating. But of all the revelations, this one stood out:

“Upstairs is the Policy’s private domain, where a small guest room houses a crib for their grandchildren. On another patio, the outdoor shower (which former 49ers wide receiver Dwight Clark calls ‘sexy’) has windows that can be shuttered for privacy or opened to the expansive views.”

What strikes you as more unusual; the fact that Policy and Clark are still so close that Clark showers at Policy’s house or the fact that Clark is taking showers on an outdoor patio and in the vicinity of where where Policy’s grandchildren are napping? To me, the whole thing seems, what’s the word I’m looking for here, oh yea, “creepy.”


A few words about Dante Lavelli.

His loss will certainly be a public relations lost for the Browns. Lavelli had been one of the most visible and best representatives of the Browns in the community and embodied everything that’s ever been right with this franchise.

Lavelli, almost more than any other Browns’ alum, had the perfect pedigree. He grew up locally (Hudson), played his college ball in Columbus for the Buckeyes and played his entire pro career in Cleveland. His first four seasons were played in the All American Football Conference and his last seven in the NFL. He was inducted in the Pro Football Hall of Fame in 1975.

Lavelli was a constant presence in the community on behalf of the Browns. He was never anything less than gracious and accommodating. He loved to sign autographs and even as his health was failing in recent years, he always took the time to write neatly on whatever article was given to him to sign “Dante ‘Gluefingers’ Lavelli, HOF ’75.” He also liked to remind people that the NFL should have counted his accomplishments in the AAFC as part of his NFL career. He wasn’t bitter about it, just correct.

One of Lavelli’s favorite hobbies was golf. He played in nearly every golf outing sponsored by the Browns or the Hall of Fame, year after year. I had the privilege of playing golf with Gluefingers on a few occasions in some of those outings and ran into him at least twice a year over the last 10 years or so. Because he met so many people, he usually just gave them nicknames. To him I was “Lefty” because I play golf left-handed. You couldn’t find a more pleasant playing partner or a more competitive one. Gluefingers wanted to win. The last time I saw him was in the fall at a golf outing fundraiser for the Hall of Fame Foundation. Looking more frail than he ever had, he still played as much as he could, which meant he’d contribute as best as he could to the scramble with some chipping and putting. To the surprise of no one, Gluefingers’ group won, naturally.

I think about Lavelli often in the context of wondering why a player like Braylon Edwards isn’t better. I suspect Lavelli often wondered the same thing.

As new Browns’ headquarters starts looking more and more like that of the New York Jets, this week’s question to ponder: “If Eric Mangini hires another assistant and nobody cares did the hiring ever really happen?”

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