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
|Shared||NFL Properties income||45.8|
|Retained||Other - Local Media, Concessions and parking||13.3|
|Retained||Private box income||12.9|
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