Midgen wrote:
While TV revenue is certainly the primary income driver for pro sports teams, having a modern stadium that caters to luxury suites and catered boxes is also very important. They probably don't make a lot of money off of the 'bums' in the nosebleeds, but there is money to be made in the luxury seating areas.
And merchandise can be a money driver if you sell a lot of it, but don't forget that the league takes a cut off of all licensed merchandise sales.
I am pretty sure this disproves your theory:
Quote:
One reason NFL action is so competitive is the league has a hard salary cap. The new collective bargaining agreement adds a hard salary floor, mandating that nearly all cap space be spent each year -- as cash, not as amortization of past bonuses. This is a provision NFL players are going to like quite a bit. Fans of perennial cheapskate teams will like the provision, too.
But the must-spend clause does not take effect until 2013. The result is that many NFL teams have oodles of unused cap space, yet made few if any moves in free agency. The Chiefs have nearly $33 million of unused cap space. The Bucs, Jaguars, Bengals, Bills, Broncos and Browns have at least $20 million each. Another six teams have at least $10 million unused. And cap space is not cellphone minutes. It doesn't roll over to next season.
Cash flow is no problem for any of the teams with ample salary-cap space. The $125 million each NFL club will receive this season from the league's many national television contracts will cover player expenses, while ticket sales and local marketing cover overhead, and then some, even for small-market clubs. That leaves mucho grande greenbacks. Yet many NFL teams are not spending anywhere near as much as they could.
Player expense might not equate to wins, of course. But there's something more basic happening. In the NFL structure, a cheap team that loses might have more profits than an expensive team that wins. Victory is nice, to be sure, but losing cheap can be remunerative. As all NFL teams save the Packers are privately held, and of those all save the Raiders are family businesses, money that is not spent on players goes into the pockets of the owner and his relatives.
Each NFL team gets exactly the same national TV payment whether it's winning big on "Monday Night Football" or losing badly and never aired nationally. Ticket sales can vary and generally are where the profit resides. But the revenue swing between packing the house and having a poor gate just isn't that great.
Most teams go into the season knowing they will sell about 90 percent of their seats no matter how they perform; a few know every seat will sell regardless of performance. In 2010, even given a slack economy, the league average was 94 percent of seats sold, and every team except Oakland and City of Tampa sold at least 80 percent of its home seats. Winning can help sell tickets, but even a clunker season will fill most of the house.
According to a financial officer for an NFL team, after ticket price, concessions and parking are added up, and then the visitor's share, overhead and taxes are deducted, each sold home seat represents around $30 in profit. This jibes with the numbers reported by Green Bay, the sole NFL club that discloses financial data. For 2010, the Packers sold 566,362 tickets and reported an operating profit of $10 million -- about $18 per occupied seat. The Packers' expenses were high in 2010, as they appeared in four road playoff games. Had they not, the profit per seat would have risen to $25 or $30.
The $30 estimate is a simplified number, but suppose it's roughly accurate. That suggests the 2010 attendance leader, Dallas, had a $21 million profit on seat sales, while 2010's worst-drawing team, Oakland, had a ticket profit of $11 million. That's a $10 million swing between the best case and the worst case for filling the stadium. Because most teams are in the middle of that calculation, going all-out to win with player and coaching salaries will add considerably less than $10 million in profit on packing the stadium. Contrast that with not spending up to the cap, which can add $20 million to $30 million to the bottom line. If your first goal is financial results, losing cheap can look a lot sweeter than winning expensive.
When this is taken into account, seeming nonsense suddenly makes sense. The Bengals, a low-spending team, are refusing to trade Carson Palmer, who says he retired but actually wants out of the Queen City. What's the point of getting nothing for Palmer? The point is to shed Palmer's large salary while creating an excuse for another bad season. When in this situation, teams with winning mindsets shrug and trade the unhappy star for whatever they can get -- think Green Bay with Brett Favre or Philadelphia with Donovan McNabb. Cincinnati management does not make winning its first priority. Losing cheap is fine, and getting nothing for Palmer generates a nifty excuse for a weak 2011 season.
Buffalo, 11 consecutive years out of the playoffs, just traded one of its few established performers, Lee Evans, to the Ravens for a middling draft pick. Unloading Evans and replacing him with a minimum-salary young player cuts the Bills' costs by about $3 million this season, which is more than profits would rise if every seat were sold. Trading Evans makes a winning season less likely, but the odds of a profitable season go up -- and a built-in excuse is created. How long until a Buffalo team official says, "We knew we'd have an off year when we lost Lee Evans," as if he had been swept from the practice field by helicopter-borne commandos, rather than deliberately traded away.
For Buffalo, this is a recent pattern. Just before the 2009 season began, the Bills waived their starting left tackle, Langston Walker, and the team's highest-paid offensive player. Two games into the 2010 season, the Bills waived their starting quarterback, Trent Edwards, their second-highest-paid offensive player. Both actions increased profits while setting up an excuse for a losing season.
Walt Disney Pictures Scrooge would be right at home with salary cap decisions for the 2011 season. There is a way most NFL teams could enhance the bottom line while also spending freely on players: reduce front-office costs. But some teams are loath to do that, as the front office is populated by family members and cronies with senior titles, hefty salaries and few if any duties.
For example: The Bears, who are $19 million below the salary cap, have four senior managers with the last name McCaskey. Chicago has a chairman of the board, a secretary, a president and CEO, a general manager, seven senior directors and numerous people with the title director or manager. The team masthead lists 38 people in the front office, and that's not including clerical and sales personnel. If Apple had the same ratio of senior titles to revenue as the Chicago Bears, it would have 244 presidents and 1,708 senior directors.
The story repeats at other NFL clubs. Revenue will be about the same whether the team wins or loses; profit will be a lot higher if salary-cap money isn't spent; family members would rather the team lose with them in cushy front-office roles than win with streamlined management. Some NFL owners go all-out to win anyway. But until 2013, there's considerable incentive to lose cheap.
_________________
Quote:
In comic strips the person on the left always speaks first. - George Carlin