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Opening the books

Even in Green Bay, the profits are down. Andrew Brandt

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As the person responsible for the players’ purse strings in Green Bay for nine years, I always dreaded this day on the calendar – the Monday following the weekend news stories about the Packers’ operating profit the previous year. As the NFL’s only public company, the team’s annual report is an open book for the world to see the profits and losses of a professional football franchise. Right there in the news were our revenues balanced against our expenses. Even when I spoke to NFL managers at the annual program at Stanford in June, our statement was right there on the PowerPoint for everyone to pick apart.

The majority of my time there, the profit margin ended at around $20 million. For the fiscal year that ended in March, the Packers show $248M in total revenue against $228M in expenses, an impressive accounting in the midst of this economic crisis, but a profit margin of only $4M, down $19M from a year ago.

Gene UpshawAPFormer NFLPA executive director Gene Upshaw

The reason I dreaded the day is that a steady stream of calls would come in from player agents suggesting ways we could put all that profit to use. It was especially difficult when I was in the middle of a negotiation arguing over hundreds – or even tens -- of thousands of dollars with headlines about our $20M-plus in profits with no debt to retire. I usually ended up thanking everyone for offering ways to burn through that profit and reminded them that there were plans for that money (plans that were divulged on a need-to-know basis).

Another person who was always keenly interested in the news of our annual report was the late Gene Upshaw. He and the NFL Players Association would use the operating profit margins from – by far – the smallest market in the league to show the owners that even tiny little Green Bay could be in the black by over $20M. Now, with that profit margin down 80 percent from a year ago, the new union leader, DeMaurice Smith, may not be able to crow as much as Upshaw about tiny Green Bay and its profits.

What Upshaw certainly knew -- and Smith knows as well -- is that the Green Bay Packers are a truly unique brand, one that is not replicated in any fan base in the country. Believe me, I lived it. Packer nation is unlike any other. With 81,000 people on a season-ticket waiting list, with half the population on any given day wearing Packers gear, with Fanfest in March selling out in minutes, with practice squad players recognized wherever they go, the Packers are a brand that the NFLPA would have to admit is not typical.

The books are open and the Packers are making money, although far less than in recent years. This story will be spun in different ways in the coming months. …

The New York Giants’ deal with Timex, announced last week, represents a win-win for both parties and a true sign of the times.

The Giants’ and Jets’ new stadium opens a year from now, a jewel of a sponsorship opportunity with twice as many games as every other NFL stadium. There has been no news on the naming rights since the failed attempt from Allianz this past fall, a deal scuttled by the company’s ties – however real or perceived -- to the Nazi regime. Similarly, the Cowboys’ new stadium, a magnificent palace featuring the highest profile team in the NFL, is unveiling this season without a naming-rights sponsor.

Jimmy BuffettAPJimmy Buffett

On the naming-rights front, we’re left with just one deal this year in the NFL, a short-term branding opportunity for Land Shark Lager, a joint creation of Anheuser-Busch and Jimmy Buffett. Land Shark will be the naming-rights sponsor for Dolphins games this year, although the inventory does not include the marquee events in that facility in early 2010, the Pro Bowl and the Super Bowl.

The lack of big-time, big-money, long-term naming-rights deals is not a surprise in the meltdown/downturn/recession we’re in. The market adjusts, adapts and reconfigures toward deals like Land Shark and the Giants’ agreement with Timex.

Timex will be the name sponsor not for the new Giants stadium, but for the team’s new practice facility, a state-of-the-art complex that will be named the Timex Performance Center. Perhaps more importantly, Timex will have its name on Giants players’ practice jerseys this summer at training camp, a piece of inventory the NFL opened up this year – along with liquor and lotteries – to provide clubs with more potential revenue streams.

This is a sensible and shrewd deal for the Giants. They now have a reported $35M from a partner with strong name brand and credibility, and they preserve the most important inventory, naming rights for their new stadium.

And a brilliant play by Timex. On every evening newscast, in every morning newspaper and online sports section, in every report about the New York Giants this summer -- all in the country’s largest market -- there will be a picture from that day’s practice with a player wearing a practice jersey adorned with Timex. Similarly, once the new stadium opens in 2010, there will be strategically placed Timex clocks counting down to kickoff, reminding thousands what company is providing that countdown. Now, if Timex could only get the players to wear its watches during the games. …

Bernie KosarAPFormer Browns quarterback Bernie Kosar

The report of Bernie Kosar filing for bankruptcy protection is a surprising and serious cautionary tale for all athletes of any income level. As I say so often when I speak to players, whether as an agent or working with a team, professional football allows players a head start on the rest of their lives. That’s all. With careers being so short and the earning potential so fleeting, the number of athletes who can realistically claim long-term financial security from careers in professional football is smaller than most believe.

Kosar is not someone you’d think would be financially unstable. He graduated in three years from the University of Miami and enjoyed a long and successful career with – for the time he played – top-of-market earnings at the highest-paid position in the game. In addition, he appeared to be doing well following his playing career and was even touted as someone who was as successful in business as he was on the playing field.

Not so. Kosar has listed assets of $1-10M and liabilities of $10-50M. He owes almost $1.5 million in unsecured debt to the Browns, for whom he played from 1985-1993. He also owes his ex-wife $3M and owes the owner of the Cleveland Gladiators of the Arena League $725,000. And he owes a bank more than $9M for bad real estate deals.

Kosar made tens of millions playing in the NFL and appeared to possess some business savvy in his post-career business and financial dealings. Now it appears he’s fallen victim to those dealings.

Michael Vick – forgetting everything else swirling around him – was the highest-paid player in football not long ago. He, too, has filed for bankruptcy protection.

The toughest job for agents, managers, friends, family, wives and girlfriends of professional athletes is very simple: curb the enthusiasm for spending. I realize it’s difficult for athletes who haven’t had much in their lives to delay gratification, but I’ve seen too many end up broke. If there’s one mantra every athlete should remember about getting paid in pro sports, it’s this: It’s not what you make that counts, it’s what you keep.

Welcome to summer. In the east coast, we’ve been building arks.

Follow me on Twitter: adbrandt.

Comments

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InFact
Jun 22, 2009
11:55 AM

Sad to read about Kosar.

I'm always amazed how few professional players know how to invest.

It's not difficult to find a 5.0 - 6.0% fixed CD when you have a minimum of $25-$50K -- and that rate is all you need to float smoothly if you got the big bucks........BUT, alas, players somehow spend their money.

Amazing.

Some Other Andy
Jun 22, 2009
12:22 PM

Maybe I'm missing something but when I was taught accounting, $248 million of revenue and $228 million of operating expenses yielded a $20 million profit, not $4 million. That is a much more credible number than the $4 million quoted by Mr. Brandt. Most of the operating revenues and expenses for football teams were locked in by September 2008, prior to the significant decline in the economy. I would expect the effects of the economy to be felt in the coming season by most teams, not in the year just ended.

Jayme
Jun 22, 2009
12:31 PM

I've seen a statistic somewhere that 65% of all professional athletes are basically broke 5 years after they're done playing. Do you know what the NFL is doing to stop this from happening? How does the NFL pension work? Are there ways to set up a contract that basically call for an annuity payment for years beyond a players last game? I believe that either you or Bechta mentioned in one article that you found a way to invest a clients money to get him 20K a month for the rest of his life, is the NFL actively working to push athletes in this direction?

I'm quite certain that the only real way to answer all of these questions with any sort of detail is with a new article, so I guess these can be some ideas for you to work with down the line. If you want to give quick and dirty answers here, though, that would be much appreciated.

Po'ed Citizen
Jun 22, 2009
01:48 PM

Down $19M from a year ago is something to be proud of ? Another 6-10 season and the Packers recession will last longer than the country's.

BigJohn
Jun 22, 2009
03:23 PM

The Milwaukee Journal Sentinel reported the Packer revenue story on Sunday (Saturday on their website), June 21, and the story by Don Walker stated as follows:

"The economic downturn was a factor. But so was the team's 6-10 record and the loss of quarterback Brett Favre, the franchise's one-man marketing and promotional machine."

"Marketing, Pro Shop and Atrium revenue: $43.7 million, down from $50.2 million."

See http://www.jsonline.com/sports/packers/48692082.html

The Pro Shop and Atrium revenues were down almost SEVEN million last year. Trust me, this is not the result of the Lambeau faithful eating fewer brats or consuming fewer beers.

The JS story does not overstate the fact that Favre was worth MILLIONS to the bottom line in Green Bay.

Last year, Packer CEO Mark Murphy stated that the firing of Favre was STRICTLY a football decision; and that he would not interfere with Ted Thompson's implementation thereof. Of course he wouldn't; that's what yes-men do.

It is now clear that Murphy was totally wrong; and that the firing of Favre had SIGNIFICANT BUSINESS RAMIFICATIONS. This was not anything close to being just football decision.

Speaking charitably, Murphy is an idiot for not forseeing this; speaking cynically, he lied to the Packer Nation, at the behest of Ted Thompson.

Where are the responsible Packer executive committee members who are allowing an irrational despot to pi$$ away millions, and divide the fan base for years?

Chris
Jun 22, 2009
06:46 PM

In the midst of the worst financial downtown most living Americans have experienced Packer revenue must only be down because Favre left, and left in such a way that 50%+ of the fan base were extremely disappointed in him?

It had a big effect I'm sure, but I suspect it's ludicrous to think that the fast approaching 10% unemployment rate didn't have a larger effect.

And despite a perfect storm of two very nasty setbacks the team STILL earned a profit. Think the Vikings can say the same?

Andrew Brandt
Jun 22, 2009
07:54 PM
Andrew Brandt

Andy-
The difference, as reported, was investment losses that ate a large chunk of that 20M and yes, the challenges from the economic crisis are largely ones that are yet to come. Thanks.

Flip
Jun 23, 2009
02:10 AM

I am no business expert, but I thought the least amount of profit shown was always, a substantially good thing. Less income means less taxes taken out.
I know I had read somewhere that the Packers were sitting on quite a large war chest in the 220+ million range. Is that part of their investment loss?
the loss of Favre might have some fans quarreling, but would this effect the teams bottom line? Not really. It is going to hurt short term sales, but no long term effects will emerge.
Montana, Unitas and Tittle. These were 3 qbs who left their teams in twilights of their careers. i am sure their was animosity, but I doubt it lingered that long.

Farve's departure may not sit well with most packer fans, it is still a business and was a business decision. Just like it was a business decision for the Packers to give up a first round pick, for a 2nd round selction that was over weight and actually did not pass his trade physical.

While the economy might be hurting a lot in the country, most football teams are financially stable, which includes Green Bay. Hard to think that a team that has 81,000 people waiting for season tickets is going to be hurting for revenue anytime soon.

As a Steelers fan i hated Bernie when he played, as simply saw too many Pitt losses in that time to him, not to mention the 1983 orange Bowl, which we do not speak of. But declaring bankruptcy is sad to see. I am sure he will bounce back

Etienne
Jun 23, 2009
02:30 AM

When you say Liquor as one of the pieces of inventory the NFL opened up this year, what does that actually mean? Am I gonna be able to get Bucs Brew or Buccaneer Vodka any time soon?

Blogspan
Jun 23, 2009
04:27 AM

I agree with this, Maybe I'm missing something but when I was taught accounting, $248 million of revenue and $228 million of operating expenses yielded a $20 million profit, not $4 million. That is a much more credible number than the $4 million quoted by Mr. Brandt. Most of the operating revenues and expenses for football teams were locked in by September 2008, prior to the significant decline in the economy.

Po'ed Citizen
Jun 23, 2009
11:15 AM

Revenues are down and everyone has an answer as to why. Since Ted Thompson crapped on Brett Favre I haven't spent one shiny dime on his Packers. This coming from a guy who use to pretend he was Bart Starr on the playground. One of the reasons the Packers are in the black is because of the new atrium, a big part of why the Atrium was even built was because of Brett Favre. Favre gave the Packers their swagger back and the tax payers were more than willing to due their part. How many people bought sod or payed to get their name on a tile in the new Atrium because they wanted to be associated with a winner ? The reason the Packers were winning was Brett Favre.

Some Other Andy
Jun 23, 2009
04:30 PM

Thanks for the clarification Andrew. I haven't looked at the Packers' numbers but if the bulk of the difference is due to investments, I'd be willing to be a lot that the decline in cash flow (which is by far the more important number) is nowhere near the 80% decline that you've implied. Investment losses, particularly of that magnitude, are usually on paper but have little or no impact on current operations. Either purposely or not, you've quoted a number that sounds dire but is, in fact, close to meaningless. Assuming it was intentional, it's a classic case of crying wolf, something that front offices in all professional sports are infamous for. There may well be a wolf at the door in FY 2010 but you won't convince people by quoting declines in relatively irrelevant financial measures.

BTW, for those of you who are about to protest that profit is very relevant, I can suggest that you talk to anyone who has ever had to make a payroll. Profit pales in importance compared to cash flow.

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