Super Bowl Teams Go Deep In Their Pockets
Sept. 5, 2003 -- — Throughout the 1980s, the Tampa Bay Buccaneers clocked a league-worst 45 wins and 106 losses in regular-season play while the San Francisco 49ers posted a 104-47 record, the league's best, including four championships. Trivia question: Which program made more money during the decade?
Answer: The Bucs: "The team that lost the most money [in the 1980s] was the 49ers," says Jeffrey Phillips, senior vice president of the sports group at Houlihan Lokey Howard & Zukin.
Such are the socialistic economics of the NFL. Thanks to a long-standing revenue-sharing system combined with a relatively short postseason, teams that win the Super Bowl may not necessarily score supersized profits. The salary cap instituted a decade ago has kept spending somewhat in check. Still, "you might lose money on a playoff run," concedes David Carter of the Sports Business Group, a marketing consultancy. (The Bucs, last season's Super Bowl champs, declined to comment.)
Since the early 1960s, the NFL sought to win fans across the country by establishing parity within the league. If all teams can afford to pay talented players, the theory goes, all teams will be competitive and able to attract fans (the Cincinnati Bengals notwithstanding).
Each of the NFL's 32 teams receives an equal cut of league revenue — $80 million from national broadcasts and $2.5 million from merchandising — accounting for two-thirds, on average, of their top lines. As for ticket revenue (called the "gate"), the home team gets just two-thirds of it; the remaining third goes into a pool shared by all the other teams.
By contrast, other sports leagues survive mainly on local distribution. Basketball and hockey franchises keep all local broadcast revenue plus the gate. Last year Major League Baseball gave a nod to parity, calling for 30 percent of revenue from local broadcasts, tickets and concessions to be shared among all teams.
Larger Expenses on Smaller Revenue
The rub on gridiron economics: Larger expenses on smaller revenue in the playoffs. First, Super Bowl contenders usually have to pay bonuses to players and staff. Then there's the burden of moving all that equipment to the game, as well as hosting a gaggle of friends, families, staff and sponsors. Gate receipts don't pick up the slack as much of the largesse goes back to the NFL's corporate offices. Costs continue to pile up the next season as players, coaches and scouts push for fatter paychecks.
Football's relatively short postseason also crimps profits. In other sports, making money in a given year may very well depend on how far a club advances in the play-offs. Championship basketball and hockey teams play as many as 28 postseason games (four best-of-seven series) — about half on their home turf where they keep most of the ticket revenue. World Series winners duke out up to 19 play-off ballgames. Super Bowl champs? Two contests (not counting the wildcard game), plus the Bowl.
On the bright side, winning teams often attract new sponsors and boost ticket prices. Failing some unfavorable leasing arrangement, that's money a team gets to keep. Last year Gillette bought naming rights to the home of the 2001 Super Bowl champion New England Patriots. The year before, mutual fund powerhouse Invesco slapped its name on the Broncos stadium in Denver after the team notched back-to-back championships in 1998 and 1999. When the Dallas Cowboys were hot in the early 1990s, PepsiCo bought pouring rights to home games.
Forget the Bottom Line
As for ticket revenue, the past four Super Bowl champs raised prices between 17 percent and 60 percent. The Bucs put through an 11 percent increase; meantime, the waiting list for season tickets rose 60 percent, to 80,000.
All of which tends to jack up the overall value of a franchise: By Forbes calculations, the Bucs' value increased by 11 percent, to $671 million, last year. That's not quite the pop afforded to either the Detroit Red Wings hockey team (up 18 percent, to $266 million) or the Los Angeles Lakers basketball squad (up 28 percent, to $360 million) after their championships in 2002 and 1998, respectively.
Still, for most owners, the bottom line on the Super Bowl is: Forget the bottom line. "If it's going to cost you a couple of million to win, who cares?" says Salvatore Galatioto, managing director of sports finance at Lehman Brothers. "You want to be in the Super Bowl."
For more, go to Forbes.com..