Big NFL figures disguise modest corporate reality

Financially, few teams play major-league ball

July 27, 1999|By Vito Stellino | Vito Stellino,SUN STAFF

It's easy to think that the NFL is awash in money.

After all, the Dallas Cowboys have given contract extensions of $85.5 million to Troy Aikman and $51.5 million to Deion Sanders, and the Arizona Cardinals have handed Jake Plummer a $15 million signing bonus.

And the league is heading into the second year of a record $17.6 billion television contract that increased each team's TV revenue from $40.8 million in 1997 to $59.8 million last year.

"People think we have a bottomless barrel of money," said Mike Brown, owner of the Cincinnati Bengals.

"With all the publicity we get and the emphasis on big contracts, it gives you the impression it's a far bigger business than it is," said Chuck Schmidt, chief operating officer of the Detroit Lions.

But many NFL franchises, such as the Ravens, are merely medium-sized businesses in the corporate landscape. Half of the NFL teams grossed $102 million or less last year, according to the Green Bay Packers' annual statement.

"It depends on the industry," said Anirban Basu, director of applied economics at RESI, a research institute at Towson University. "A $100 million airline would be a small company. A $100 million printing industry would be very large. But football teams are not necessarily major operations. Many businesses are larger."

Jos. A. Bank Clothiers, by contrast, is a Baltimore public company that is bigger, financially, than most NFL teams, grossing $187 million last year.

For a benchmark, consider the Packers, the only community-owned team in the league and the only one to issue a public financial statement.

At their annual stockholders meeting held earlier this month at Lambeau Field, the Packers reported that they grossed $102 million. (That doesn't count the one-time, $16.7 million Cleveland expansion fee, which amounted to $10.6 million after taxes.) The Packers ranked 15th in the league in gross revenues.

"If you add up the total revenue for the 31 teams, we're probably a mid-cap stock," said the Lions' Schmidt. "We're not a small business individually, but we're not big on the radar screen compared to a conglomerate."

Bonuses and cash flow

Although the Packers showed a $17 million profit because of the Cleveland expansion payment and investment income from their $52.4 million in reserves, treasurer John Underwood announced the franchise had a negative cash flow during the last fiscal year. He blamed the shortfall of $154,000 on having paid out $32 million in signing bonuses.

Attempting to maintain a playoff team, the Packers spent the bonus money on 11 players, including $6.5 million on Dorsey Levens and $6 million on Santana Dotson.

Underwood said his report was an "economic reality check" for the Packers, who would have had a negative cash flow of $10.7 million without the expansion payment.

There will be a tighter squeeze on teams this year because of the addition of the Browns, which means the TV income will be divided by one more team.

The next expansion will be on the minds of NFL owners when they gather in Chicago tomorrow to discuss placing a 32nd team in Los Angeles, hoping to set a franchise fee soon.

Meanwhile, the Packers are starting to campaign for a new stadium to replace Lambeau Field. It's not a popular move, but team president Bob Harlan said: "We've gone through an education process [with the fans]. I think we're making progress."

Why abandon Lambeau Field, which is virtually a shrine in the sport? Teams at new stadiums can gross more than $125 million and make more than $20 million in profit. They don't have to share the revenue from lucrative luxury boxes and premium seats with their rivals.

When they were for sale, the Washington Redskins reported they grossed $140 million in 1997 because they have 208 luxury boxes and 15,000 club seats.

Not that a new stadium solves all of the problems.

According to league rankings, the Ravens are in the top quarter in revenue with such teams as Dallas, Washington, the Carolina Panthers, Jacksonville Jaguars, St. Louis Rams, Tampa Bay Buccaneers and Miami Dolphins, who have lucrative stadium deals.

But the Ravens' $185 million debt has meant financial constraints, like a consumer maxed out on his credit cards. That's why owner Art Modell, who has no other business but the Ravens, is trying to find a minority investor. The league recently arranged a bridge loan so lenders wouldn't foreclose.

The Ravens are no longer the team with the biggest debt. Daniel Snyder, the communications executive who bought the Redskins for a record $800 million, probably has twice as much debt. But because he's a multimillionaire with other businesses, lenders don't fret about his ability to cover the debt service.

Deep pockets

As the sale prices keep going up, owners coming into the league have deeper and deeper pockets.

Banker Al Lerner, owner of the new Browns, is worth $2.8 billion, according to Forbes magazine's list of the nation's richest people.

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