Financial figures revealed in league's trial with Raiders provide insight into its money-making ways.
©Los Angeles Times
© St. Petersburg Times, published May 14, 2001
Confidential NFL financial documents, never before seen in full detail even by the 31 teams in the league, reveal a robust enterprise that gets more so each year as team after team moves into new or renovated stadiums, many paid for by taxpayers.
The league is not as profitable as many American industries. But prospective owners keep bidding up the value of franchises, attracted by the allure of joining the select group that runs the country's most popular spectator sport.
The Saints, for example, lost $849,000 in 1999, but owner Tom Benson probably would be in for a windfall if he put the team on the open market, where the latest franchise to change hands sold for $700-million.
According to the documents, the Bucs recorded an operating profit of $24.6-million in 1999, sixth highest in the league.
The documents show the Bucs taking in total revenues of $122.3-million, fifth highest in the NFL, including local revenues of $57.5-million. The latter figure represents money a team does not share with other teams, and the Tampa Bay franchise is eighth in the NFL on that list.
When total operating expenses listed at $94-million and shared league expenses of nearly $3.7-million are subtracted from the total revenue, the documents show the Bucs at the $24.6-million profit.
The documents, entered into evidence in the Raiders' lawsuit against the league, itemize each team's revenue and expenses from 1995 through 1999. The documents also trace certain financial data as far back as 1989, making plain the import of a wave of stadium construction and renovation over the past decade across the nation.
The figures could spur further debate about whether public funds should be used for such facilities. They reveal:
The average per-team operating profit, arrived at by deducting expenses from revenues, jumped to $11.6-million in 1999, up 68 percent from 1994. In 1999, the teams generated an average of $45.3-million in local revenue, meaning primarily the dollars that can be wrung out of a stadium, an increase of 80 percent from 1994. Each team's share of common revenues, mostly from merchandising and national television, was about $65-million in 1999, up about two-thirds from 1994.
First in the financial ledgers in 1999 was the Browns, an expansion team that -- though poor on the field, as most fledgling teams are -- made a $36.5-million profit in its first year back in the NFL. Such performance underscores the value of a team playing in a stadium paid for primarily by taxpayers, where luxury boxes and club seats generate big revenue for the team. Cleveland was the third-highest generator of local revenues, money a team does not share with its NFL business partners and on-field competitors.
On the other hand, owning an NFL franchise has to be viewed as a capital investment, not a short-term profitmaker. Cleveland's initiation fee in 1998 was $476-million; an annual profit of $36.5-million is not even a 10 percent return. Then again, the league was able to entice businessman Robert McNair to pay $700-million in 1999 for a new Houston franchise to begin play in 2002, representing a 47 percent increase in asset value for the Cleveland franchise in one year.
There is a loose correlation between financial success and success on the field. Three of the four teams in the past two Super Bowls -- Baltimore, St. Louis and Tennessee -- have moved into new stadiums in the past few years, in the process abandoning longtime fan bases in Cleveland, Los Angeles and Houston. They now rank in the top half of the league in local revenues. But of the 11 franchises that posted the poorest performance in generating local revenue, only three made the playoffs in 1999. "The disparity is real," Chiefs president Carl Peterson said. And, he said, "It is widening."
The NFL long has guarded its revenue and expense numbers.
It generates such figures on an annual basis, demanding that each team supply a variety of revenue and expense calculations. Then the league ranks each team and teams learn their own rankings.
But, as former NFL president Neil Austrian testified in the Raiders' Superior Court lawsuit against the league, "No club gets the other club's financials."
Until now. The financial data, complete with rankings of each of the 31 teams in a variety of revenue and expense categories, became Exhibit 681 in the Raiders vs. NFL case.
The Raiders claim that the league sabotaged their plans to move into a proposed new stadium at Hollywood Park, forcing the Raiders -- who played in Los Angeles from 1982-94 -- back to Oakland, the team's original home. The league has denied any wrongdoing. The team is asking for more than $1-billion in actual damages, plus punitive damages.
The NFL financial documents were kept under seal before the trial started. During the trial, various league ledgers and memos were shown to the jury and then entered into evidence. Even so, the NFL objected to the release of Exhibit 681. Superior Court Judge Richard C. Hubbell agreed not to release the 100-page exhibit while jury deliberations continued. The jury finished its second week of deliberations on Friday. The Los Angeles Times had earlier obtained a copy of the document.
Asked about the league's objection, league spokesman Joe Browne said: "I just think the less read about dollar signs, the better. This case involves potential damages."
The 100-page memo contains myriad details, breaking out ticket sales, parking and advertising income, player costs and team expenses.
Figures for the 2000 season, which concluded in January with Super Bowl XXXV are not available.
The one financial facet the memo does not explore is the primary lure of NFL ownership -- which relates less to any increase in operating profit and more to the way the value of an NFL franchise appreciates over time.
An NFL team cost about $600,000 in the early 1960s, compared to $140-million paid for the Carolina and Jacksonville franchises in 1993 and $700-million paid for Houston in 1999.
Why do millionaires keep paying huge premiums for teams, when they could undoubtedly generate higher operating profits in other businesses?
As John Madden, the Fox TV analyst and former Raider coach, put it, "It's a very exclusive club. There's only 32, so you're one guy in 32. There are very few people who can afford it. You have to go quickly to that ego word."
At the same time, the NFL is reaping the benefits of both a $17.6-billion TV deal, which runs from 1998 through 2005, and an unprecedented stadium boom.
Over the past decade, according to evidence presented by the league in the Raider trial, about two dozen stadiums have come -- or are coming.
What's behind the push for new stadiums?
"It's all about local revenue," the money each team keeps for itself, said Marc Ganis, a Chicago sports business consultant and expert on NFL finances.
"Financially, the only way to differentiate yourself from the pack is to have a strong local stadium deal and strong local broadcasting (for preseason games) and sponsorship," Ganis said.
A "strong" stadium deal can involve naming rights, advertising, and, perhaps most important, luxury boxes and club seats.
Luxury boxes typically sell for $50,000 and up, and a new stadium will have hundreds of them.
The impact -- and the lure -- of a new stadium has reshaped the NFL dramatically.
The Redskins, for instance, ranked 17th in the league in locally generated revenue in 1996, the team's final year in aging RFK Stadium. In 1997, the team moved to a new stadium in the Washington suburbs, a privately funded facility now called FedEx Field.
That year, the Redskins soared to No. 2 in the league in local revenue. In 1998, they were No. 2 again. In 1999, they led the league, with $83.9-million.
The Redskins ranked second in 1999 in the league in operating profit, clearing $32.4-million.
- Copies of confidential NFL documents detailing the revenue and expenses of the league's 31 teams can be viewed on the L.A. Times' Web site at latimes.com/nflteams.