I don’t think there will be any loss of fan attendance, media audience, merchandising sales or overall fan loyalty for the Birds once this lockout ends… The only problem I see is a stagnant revenue stream relative to rising operational costs…
The most recent blurb I wrote about Andy’s “poker-game mentality” toward divisional rivals in his draft strategy was whimsical and a little silly in parts. But I’m really excited about the upcoming NFL Draft going on as originally scheduled for April 28-30 at Radio City Music Hall…and I can honestly predict there will be no drop-off in local or national audience interest in the event. If nothing else is clear to both owners and players as a group, their fan bases are starved for football news. It would not surprise me if this year’s NFL Draft draws its biggest TV ratings ever.
Here in Philadelphia, the Eagles’ annual Draft Party at Lincoln Financial Field was sold out in one morning…people are so crazy for Eagles-related activity that all 6,500 seats available were grabbed online within four hours of being made available.
You look at something like that, which is virtually phenomenal, and you ask yourself: “Why would anyone in the business of pro football—owners and players—want to mess around with the formula of such a successful operation?”
Which got me to thinking: just how financially healthy are the Eagles right now? And where do they compare to the smaller-market franchises which we knew were having major problems in local attendance and revenue streams…?
Forbes Magazine releases the franchise valuations every year, and certainly the net worths of nearly all NFL teams have increased over the term of the expired labor agreement with the players. The players looked at these numbers and basically said, “Hey! The teams’ net worth is way up, but our paychecks really haven’t increased as much as the owners’ equity has…” What the players don’t yet realize is—both the net equity of many NFL franchises as well as the overall revenue stream of the league is declining relative to increased costs of operation.
The old agreement between the NFLPA & owners was based on players being paid a percentage of revenues. Ah yes, revenues… a lot of players have trouble understanding the difference between equity and revenue.
The combined equity value of NFL franchises is at an all time high… A really easy way to understand “equity” is what the combined assets, including goodwill and ongoing revenue streams, of a team would be worth as a resale value to a willing buyer.
Revenues, on the other hand, are what the league owners receive in ticket sales, TV-radio money, luxury suite rentals, merchandising, licensing deals and concessions… and they are directly affected by rising costs of operations. This is a simplistic way to explain it, but even the Eagles are feeling the pinch of rising fuel costs, physical plant maintenance, energy bills, employee benefits, cost-of-living expenses and personnel budgets…not to mention debt and financing costs.
Trust me, I’m not a homer for the owners…but even Jeff Lurie can’t get a gallon of gas for under $4 these days…
Meanwhile the revenues coming in have basically leveled off. TV-radio contracts are strained to the point of no future raises in the near future. Advertising revenues are leveled off or down for broadcasters, too. Revenue streams are not increasing at the same rate as had been predicted when the prior CBA got done. SuperBowl ads no longer sell out…actually, they have fallen in cost. If the employee salaries and expenses proportionally outgrow the revenue streams, the CBA doesn’t work— regardless of who agreed to it…
How many businesses over the past few years have had to either reduce salaries or let people go altogether? Do you think that these business owners were forced to open up their books to legitimize those decisions? I don’t think so. If the owners don’t want to open up their books and the players don’t like it, well tough. Go find a new job. Welcome to the real world… the world you and I live in.
The CBA was negotiated so that the players get a 60-40 percentage of of the revenue. If revenue increases, so does their cut. Then again, so does the owners’ cut. The players aren’t asking for more money, just to hold on to their negotiated 60% of revenues. The players didn’t cancel the CBA with two years left to go, either. The owners did so, as was their option.
Both sides are gambling that none of us diehard fans will ever leave them when they come back…and, up to a point, they’re right.
And when 6,500 fans “sell out” Draft Day Party at the Linc within four hours, they shouldn’t worry too much…yet.
Look at these Forbes numbers from the end of the 2009 season. Unfortunately I don’t have access to the soon-to-be-released 2010 season valuation stats, but this list gives you a fairly accurate snapshot of what teams are worth in equity around the league…but pay attention to that little column called ” Revenue”…
|Rank||Teams||Current Value ($mil)||1-Yr Value Change (%)||Debt/Value (%)||Revenue ($mil)||Operating Income ($mil)|
|3||New England Patriots||1,367||0||20||318||66.5|
|4||New York Giants||1,182||0||55||241||2.1|
|6||New York Jets||1,144||-2||66||238||7.6|
|13||Tampa Bay Buccaneers||1,032||-5||14||246||56.1|
|14||Green Bay Packers||1,018||0||2||242||9.8|
|20||Kansas City Chiefs||965||-6||14||235||47.8|
|21||New Orleans Saints||955||1||13||245||36.7|
|22||San Francisco 49ers||925||6||14||226||21.0|
|24||San Diego Chargers||907||-1||14||233||24.7|
|29||St Louis Rams||779||-15||8||223||29.0|
(“Revenue” is net of stadium revenues used for debt payments. Operating Income is earnings before interest, taxes, depreciation and amortization.)
As you can see, the Eagles franchise is relatively healthy in terms of Current Value (equity)… but surprisingly lagging far behind the Cowboys and the Redskins in revenues…and their net income (profit) is not as obscenely large as you may have thought.
But we’re better off than most teams, many of whom are losing equity (current value) at an alarming rate…with revenue streams and net profits less than the Eagles’…
I’m not a number-cruncher, I’m a sportswriter…but even I can spot some undeniably disturbing financial trends in that list. Some of those small market teams are essentially just holding on…and without revenue sharing of NFL-league TV money, they’d be gone in a Jacksonville minute…
Most players don’t get this model of slowing revenues and increasing costs. They don’t understand that luxury executive suites are actually declining in rent value due to an economy in the throes of recession. Maybe they start to get it when they travel to Carolina or Jacksonville to play a game and witness a sea of empty seats. There’s a visual that can’t be ignored…
In the last four years, only two franchises have averaged at least 8.0 percent growth per year, the Cowboys and the Giants. But Jerry Jones and the Cowboys Inc. have a new bazillion-dollar stadium to finance…and the Giants likewise are in debt-service to the New Meadowlands Stadium. Meanwhile, 23 teams have averaged less than four percent growth during that time period. And three teams (Jaguars, Lions, Rams) have actually lost value since 2006.
Revenue streams compared to expenses is where this game must ultimately be played. If revenue is slowing or declining, expenses must be cut or held constant at one level or another… it’s called financial survival…and it can take many forms of evolution or cooperation, neither of which is a bad thing. In my opinion, it’s time for the players to wake up to the financial reality of revenue streams, which are measured in millions, and stop being hung up on equity value of their franchise employers, which is measured in billions. They’re apples and oranges…
Revenue streams will probably get worse before they get better.
And if this data were’t provided by the prestigious Forbes group, I’d be skeptical as the players are, too. But it’s Forbes talking—many of whose accountants on this project have season tickets to the Giants or the Jets. So I tend to believe the data…
The players should ask: “Is it worth it to me, with what they are willing to pay me, to go out and do what they want me to do?” In other words, will they be compensated enough? It has nothing to do with the owners’ books or greed…clearly the shrinking revenue stream is the key economic issue nobody on the players’ side wants to talk about.
A couple of quick football observations—-
From the always amusing New York Jets blog Rex Sanchez :
“From all indications this lockout is GREAT for the Jets. The 2011 season is almost guaranteed to be an uncapped year, and if the same free agency rules stay in place, Santonio, Cromartie, and Brad Smith will all be restricted free agents, not unrestricted. Additionally, when you consider the Jets have played more games (38) than any team in the NFL the past two seasons, is a spring and early summer of no minicamps and OTAs the worst thing in the world? Let Sanchez’s shoulder rest. Let Revis’s hamstring relax with Mac Miller. And let Shonn Greene continue to sit on the sideline so Schotty can work on establishing LT. Also, Tom Brady and Peyton Manning get a year older (rustier, in other words). Big Ben has more down time (that’s a very good/bad thing). And the Patriots’ 24 first-round picks have virtually no training camp before starting the season. I see no downside to any of this.”
From Andre Juge, columnist for Saints Nation :
“The draft class this year at Quarterback is looking really poor in my opinion. Just three guys are likely to get picked at some point in the first round: Blaine Gabbert of Missouri, Cam Newton of Auburn and maybe Jake Locker of Washington. Locker could also easily drop to the 2nd round.”
“After those guys, there’s 3 other prospects that I view as worth taking and are shaky propositions at best. You’ve got Christian Ponder of Florida State, Ryan Mallett of Arkansas and Andy Dalton of TCU. Of all these names I just listed, I think… that Gabbert and Dalton are the two guys I see potentially having success at the next level. The others I don’t really see breaking it big. Newton is a huge question mark because his style of play doesn’t always translate well at the next level, Mallett has character and work ethic issues, Locker has big-time accuracy issues, and Ponder has potential but the big question is whether he can read NFL defenses or not.”
“Good thing the Saints are set at quarterback with Brees and Chase Daniel as a reliable backup. I know there’s a lot of teams that are desperate for help at quarterback, and they will reach on some of these guys. Ultimately their franchises may continue to suffer from drafting a questionable prospect too high.”
From Nick Houlis at the Tampa Bay Bucs blog BucStop …
“We know pretty much for sure the Tampa Bay Buccaneers will give up a home game against the Chicago Bears at Raymond James stadium for the right to play in London, England in historic Wembley Stadium, the second time in three years the Bucs have done so…Lets face it, you know, the Bucs know, everyone knows, the Tampa Bay Area has a big “screw us” sign on our backs. Last year the Bucs were an exciting offensive football team that never, not once at any time, had a losing record during the 2010 season. We finished 10-6 and it’s the first time in decades a team missed the playoffs with a 10-6 record, and first time ever the Bucs did not win a division or make the playoffs either with such a record. Yet the national spotlight stayed as far away from Tampa Bay as it could. You would have thought the Bucs turned into the Rays and Joe Morgan was in charge of scheduling TV Broadcasts.”
Have a good day. And oh yeah, the annual Brizer MACH 10 Draft Challenge event’s deadline is April 27th, not April 20 as originally reported here…So plenty of time left to get your MACH 10 ballot posted here in the Comments section…get it in within “24 hours and 20 minutes prior to the start of the NFL Draft”… per GK Brizer’s mandate. Carry on…