As anyone who reads this blog knows, the Bengals are in an enviable financial position for a number of reasons:
1. Their business exists in a league that is immensely popular.
2. Their business is subsidized by other businesses in the form of shared broadcasting revenues and supplemental revenue sharing, where the top 15 teams are forced to pay into a $220M fund which is distributed to the lower revenue teams (like the Bengals).
3. Large capital expenditures, such as a stadium, are funded by taxpayers.
The Browns are one of a handful of owners (with the Rooney's of Pittsburgh and Ralph Wilson of Buffalo, among others) where their NFL Franchise is their primary source of income. So how will the lockout affect the Bengals? Can they survive a year without football?
The NFL has revealed that owners have been stockpiling cash for two years as a safety measure in case of a work stoppage. Now, whether this is just PR or not, a recent judges ruling may prevent the NFL from collecting the 2011 telelvision broadcasting revenues of $4B. The NFL bargained hard to add this provision into contracts with ESPN, Fox, CBS and NBC, and is only paid to the NFL in case of a work stoppage. Think about that: the NFL compromised to ensure that this provision was added to cover them in case of a lockout.
So will the Bengals be able to wait it out? Forbes' annual NFL Team Valuation put the Bengals at 25th in 2010, but also estimated operating income of $49.4M, which would put the team as the 5th most profitable in the league behind the Cowboys ($143.3M), Redskins ($103.3M), Patriots ($66.3M) and Bucs ($56.1M). The Browns might now win football games, but they can run a business.
So, just based on this fact, it would seem that the Bengals are positioned very well compared to other teams. Yes, the team might lose out on the broadcast fees and ticket revenues, but the Bengals' profitability would lead you to think that they have enough cash to ride this out.
Forbes' valuations are based on estimated revenues and the value of each team's stadium deal. But Forbes does not release its methodology for how it came to estimate teams revenues and costs, so to back up their numbers, I decided to spend some time calculating some financials myself.
The Packers are the only NFL team that reports its financials, so let's look at their numbers to see how the Bengals might fare. They last reported for the Fiscal Year Ending March 31st, 2010, so numbers for the 2009 season. As the below numbers indicate, the Packers reported $258M in revenue and operating income of $9.7M, down more than 50% from 2009.
| Green Bay Packers, Income Statement for league year ending March 31st, 2010 | ||
|---|---|---|
| Revenue Type | Revenue Source | in $ million |
| Shared | Television and radio | 95.8 |
| Mixed | Ticket Revenue: Home games | 31.1 |
| Shared | Ticket Revenue: Road games |
16.0 |
| Shared | NFL Properties income | 45.8 |
| Retained | Marketing\Pro Shop | 43.0 |
| Retained | Other - Local Media, Concessions and parking | 13.3 |
| Retained | Private box income | 12.9 |
| Total Income |
258.0 | |
Let's break down revenues first to see how the Bengals might compare.
Television and Radio (Shared Revenue)
Each team receives the same share from broadcasting rights to Television and Radio from contracts with ESPN, Fox, NBC, CBS and Westwood One, which was $95.8M in 2009. Revenue from non-network providers like DirectTV and from local media deals are not included in this number. Contracts with ESPN, CBS, Fox and ABC are locked in until 2013, and will remain constant at $3.085B (excluding the $4B lockout provision for 2011 discussed above). The Bengals also received the same $95.8M.
Bengals Revenue: $95.8M
Per NFL regulations, non-luxury box revenue is shared with other teams. Specifically, 66% of non-luxury box home ticket sales are retained by the home team. The remaining 34% of the pool is shared with the other 32 teams. Teams retain 100% of revenue from luxury boxes.
In 2009, the Cowboys led the league with an estimated $112 in ticket income with the Raiders in last with an estimated $34M. The Packers earned $47.1M in ticket revenue, below the 2009 NFL League Average of $54.1M.
Now, how does this compare to the Bengals? Lambeau Field seats 73,128 with 167 luxury suites and 6,260 club seats. In 2009, total attendance was 565,666 had an average ticket price of $72.36.
Paul Brown Stadium seats 65,515 with 114 Luxury Boxes and 7,620 club seats with an average ticket price of $72.04 and total attendees in 2010 of 482,917.
And let's also just assume that the Packers are a 25% bigger draw on the road than the Bengals.
So the Packers earned $47.1M in ticket revenue, $31,1 from home games and $16.0 shared from road games.
Putting it all together for the Bengals, looking at tickets sold, average ticket price and the revenue sharing figures, in 2010 they earned $23.0M from home games and $12.0M from road games, for a total of $35M, putting them close to the bottom of the league in ticket revenues.
Bengals Revenue: $35.0M
Marketing/Pro Shop (Retained)
Green Bay earned $43.0M in 2009 from local advertising, pro shop sales and sponsorships. Without any real figures to go on, I'll take ticket sales as a proxy since the people buying tickets are also buying the merchandise and show the general popularity of a team which appeals to local sponsors. In 2010, the Bengals sold 14.6% less tickets than the Packers so lets assume they made 14.6% less in "marketing and pro shop," or $36.7M.
Bengals Revenue: $36.7M
NFL Properties Income (Shared)
Licensing for all 32 teams is handled centrally by the NFL, with annual revenue being shared equally among the 32 teams. This revenue includes the traditional merchandise with the NFL logo like jersey's, hats and coffee mugs, but also contracts with DirectTV and Verizon Wireless.
As Green Bay's income statements show, this revenue segment has seen increases of more than 870% since the 2002 season, rising from $4.7M in 2002 to $45.8M in 2009.
While the NFL just lost a Supreme Court case that challenged the league's exclusive contracts, a lower court still has to rule the NFL's case in light of the Supreme Court ruling so these exclusive contrats still remain.
These funds are share equally among all 32 NFL teams, so the Bengals share can be estimated to be equal to Green Bay. If we took the 2009 figure and an average 5 year growth rate of 23.2%, this figure would be $56.51M for 2010.
Bengals Revenue: $56.5M
Other - Local Media, Concessions and parking
The Packers earned $13.3 in this miscellaneous category that includes local media sponsorships, parking and concessions. Again, using the same 14.6% proxy, we can assume the Bengals made $11.3M.
Bengals Revenue: $11.3M
Private Box Income (Retained)
Income from luxury boxes are 100% retained by each NFL team, and this is a driving factor that pushes many NFL owners to want to build new stadiums (including the Bengals). Green Bay reported income from luxury boxes of $12.9M from 167 boxes. Paul Brown Stadium has 114 boxes. If we assume a similar price for each box (since ticket prices for each are similar), the Bengals would earn about 31% less from private boxes, or $8.1M.
Bengals Revenue: $8.1M
Total Bengals Revenue: 243.4M
Conclusion
Our calculations from 2010 are about $10M more than Forbes esimated for 2009 for the Bengals. However, what these numbers do show is how much revenue from each team is derived from revenue sharing. The 2009 Packers had 59% of their revenue given to them by the NFL league office. Our calculations for the 2010 Bengals show an even higher percentage (62%) generated from revenue sharing. This makes sense as the larger market and more successful teams (Cowboys, Patriots, Redskins) are able to generate more revenue from retained sources such as local merchandise, Personal Seat Licenses, and Luxury Boxes, while smaller market teams, especially teams with older stadiums without luxury boxes (such as the Bills) struggle to keep pace.
The NFL maintains the closest economic parity among all 4 major sports regarding revenue. After the Cowboys, Patriots, Redskins and Giants (who had revenues between $270-$420M), the rest of teams in the league had estimated revenues in 2009 of between $222M and $260M. So the teams that are going to be able to ride out this lockout in hopes of securing an even more lucrative deal with the players are the teams at the very top of the revenue scale and the ones who can control costs and increase operating income.
And as the Bengals are estimated to have the 5th highest operating income and 4th highest profit margin at 21.3%, the Bengals are likely well positioned to ride out this lockout.
That's a lot of assumptions....either way Brown's tyranny will continue to rule. The only chance we got is to draw attention and public embarrassment. i.e. tv blackouts, convincing season ticket holders to go to games not buy anything then collectively execute a mass walkout. ( and not a normal walkout when the game is over in the 4th quarter, I'm talking about midway thru the 1st quarter, even better if the Bengals are actually tied or winning the game walkout.) Getting press. That's all we can do.
Posted by: Neutered Bengal | March 15, 2011 at 03:32 PM
I'm so happy for Mikey and pumpkin that they've been stashing money away for 20 years or so.
God I'd love to see 10 years worth of this ass clowns audited financials. Maybe then even the die hard douche bags would see he's fielding a bottom 10 product while reaping top 10 profits.
I'm hoping for a red October and no orange and brown.
Posted by: JM | March 15, 2011 at 10:29 PM
I am genuinely frightened that Mike Brown is on the bargaining committee for the league. His "high profitability via a crappy product" model obviously works for him, but the entire league can't survive on the model. God help us all.
Posted by: Major Payne | March 16, 2011 at 09:05 AM
Ces équipes sont les meilleures! Par conséquent, ils méritent un tel gaspillage d'argent!
Posted by: generique | March 16, 2011 at 09:21 AM
Awhile back I had a conversation with a German friend of mine. He described to me the system that is used for their professional soccer leagues. At the time, I didn't like it very much...but now given how I feel about the Bengals, I've come around to being a fan. If I remember right, it works something like this:
- There are many leagues, and they are hierarchical. That is, you have the top league. Below that, you have another, and below that, another. (Kind of like baseball, but the teams in the lower leagues are not necessarily related to one another.)
- Anyone can start a new team or play for a team. That is, average Joe Blow can play for the local SuckMeisters and be part of the system. He might be in the lowest of leagues, and he might suck, and his team might suck, but they are in the system.
- Every season, the bottom two teams per level move down one league. Likewise, the top two teams move up.
So when I heard this, the idea made me nervous. In this world, my beloved Bengals would be delegated to the minor leagues in no time. But with time, seeing how MB runs things, and seeing the cartel-like qualities of the NFL, there is a lot I like about this system. I like the parity of the NFL and I don't know how that would be reconciled with a system like this, but otherwise, I like its meritocratic qualities. Owners like MB would be forced to evolve or lose his place. As has been pointed, under the current system, he can coast without any real repercussions.
Posted by: Matt C | March 16, 2011 at 10:48 AM
This is an interesting, even if simplistic, look at the financials of the organization. Correct me if I'm wrong, but doesn't this indicate (though it does involve some assumptions) that regular attendance, i.e. non-luxury box tickets, and merchandise purchases do indeed hit this douche in the only place he can comprehend/feel (his wallet)? A good chunk too, possibly over $50M (23 + 36).
Posted by: bungalfamily | March 16, 2011 at 03:42 PM
Funny thing that I found out about the NFLPA -- they decertified so they are defunct, yet they are telling anyone who will listen (read: prospective draftees) to not go to the NFL Draft -- who are they? They aren't a union...
Well these same jizz-brains have prospective cows when the Owners prepared (which any 'good' owner would sensibly do) for the lockout by saving about 4 billion in cash) and have the chutzpah to claim that the owners are colluding -- when being in a union IS colluding in and of itself. Oh well, toadstools!
Posted by: wch | March 17, 2011 at 02:38 AM
Matt C - all European football leagues work on a basis where if you are in the bottom two or three you are relegated to an inferior division. The English Premier League used to be called plain old First Division before Rupert Murdoch and TV cash ruined football. How? Small clubs began to load up on crappy expensive footballers on rediculous wages in an effort to get to the promised land of huge TV contracts and massive sponsorship deals. Clubs live in total fear of relegtion now as it means a much smaller share of TV cash while leaving the club with all those crappy expensive players to pay. And the buggers don't come cheap. Many football clubs in England have been forced into bankrupty and administration through owners' greed and mismanagement. Mike Brown is fucking lucky to work in a sport where failure is rewarded - but we all know this don't we?
Relegation would kill the Bengals.
Posted by: DorsetBengal07 | March 17, 2011 at 01:32 PM
unions in and of themselves do not act secretly, nor do they work to achieve a fradulent, illegal or decietful purpose. it doesn't surpise me at all to find that wch spends his time watching fox news when he's not busy being a troll.
Posted by: bungalfamily | March 17, 2011 at 07:10 PM
Bungalfamily - I do support the players in the dispute but I am no big fan of how the NFLPA handled itself during negotiations. And surely plently of unions have the capacity to act towards a fradulent, illegal or decietful purpose. Where there is power there is an opportunity to abuse it. Fucking sucks but it's the truth bud. The demand on rookies to boycott what is essentially the biggest night of their young careers reeks of union bullying - all this, as wch has pointed out already, from a non-existent union to non-members of said non-existent union. Not to mention the fact they the first-round guys are expected to take a paycut once normality returns, and ex-union has the gall to ask the same players to boycott on their behalf? Jesus, this is unreal.
Posted by: DorsetBengal07 | March 18, 2011 at 02:23 PM
Union bullying? Do you listen to the pre-recorded deal at the end of an NFL broadcast that basically says that you are prohibited from publicly rebroadcasting the game or even talking about the events? The NFL owners won't allow you to use their name or games for free without getting money for it.
Why should the players show up at the sports pimp's, I mean ESPN's draft overload show and be able to market them without allowing them the ability to sign a contract to play football?
Let's put it another way. There's a really good whorehouse. The girls sign a contract to work there which has expired. There is one girl there who gives the best blowjobs. Her name is......... oh I don't know, let's call her wch. Why would wch allow the whorehouse to attract clients (make money) by use of her image when she is no longer under contract?
See that analogy even applies to the draft too.
Posted by: JM | March 18, 2011 at 09:37 PM
Well done estimates -- certainly within 10% of reality.
Mike Brown finally gave an "extra" interview to let any Bengals.com fans know that he's still in control, has been stockpiling money to ride out a work stoppage and won't cut employees' salaries. This last note shouldn't surprise anyone since half the front office are his own relatives.
Reality, however, is that Mike Brown is like the warden of a public restroom. He spends all of his time figuring how he can keep people locked into his shitty confines and derives great joy illustrating descriptions of what he calls his success. From the ovens of his home-bred statistics Trolls he brings fucked-up statements such as:
* "Less than half of the league has won 2 Division Championships from 2005-10"
* "We're 10th in the League over the past 10 years for games started by own draft selections"
* "Adolph Hitler wasn't so bad until he started burning people in addition to books"
OK, that last one was only a paraphrase -- but you get the idea.
Mike will never come out of his shit can colony to answer real questions, however -- questions such as:
* "How many owners in NFL history were faster to 200 losses or slower to 100 wins in their careers?"
* "How many playoff games has the team won under your sole direction?"
* "Why do you call a Press Conference and then refuse to answer appropriate questions from attending journalists?"
* "How can you justify paying yourself $2 million annually as the football GM of the Bengals?"
* "How are you going to get even with Carson Palmer after he took $80 million from you, gave you a public bitch-slapping and worked your ass without even giving a reach-around?"
After watching the recent events of the NFL CBA debacle, I have come to realize that the league is a well-worked scheme by elite shysters to bring a form of pseudo-religion to a large segment of America which has lost real meaning in life. As long as the head buffoon (Goodell) can watch and do nothing to pimps like Mike Brown, it will be difficult for me to move from that conclusion.
Posted by: West TX Bengal Fan | March 19, 2011 at 12:45 AM
JM - fair enough. I propose a compromise then.
Draftees can go to New York, but when selected they can deliver a headbutt to Mr Goodell in person. Everyone wins!
Posted by: DorsetBengal07 | March 19, 2011 at 07:16 AM
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