The NFL is one of the most profitable sports in the world. In 2004, the average NFL team was worth $733 million, an increase of 17% from 2003. In 1984, the average value of an NFL team was $80 million. The value of a team is also a good indicator of the Super Bowl winner. According to Forbes magazine, since 1999, of the two teams competing in the Super Bowl, the one with greatest franchise value has won each time.
The more success an NFL team has during the season (making the playoffs, winning a division, and winning the Super Bowl) the more profit the team makes, right. Wrong. Teams usually lose money during their post season play. However, a team’s value usually increases in following years with current season playoff success.
During the 1980s, the Tampa Bay Buccaneers had the worst regular season won-loss record of any NFL team, 45-106. On the other hand, the San Francisco 49ers compiled the best record during the 80s, 104-47, including 4 Super Bowl championships. Which of these teams made the most money during the 80s? Tampa Bay made more money and in fact, the 49ers lost the most money of any team during the 1980s. Since then, the NFL has implemented a salary cap (no team can spend more than 65% of its gross revenue on player salaries) and this helps keep spending in check but, “you might lose money on a playoff run,” admits David Carter of the Sports Business Group, a marketing consulting company.
Before his team’s first playoff game in 2004, Atlanta Falcons President and General Manager, Rich McKay, stated, “I would expect to lose a little bit of money on the game. It is not a money-maker.” The Green Bay Packers, the NFL’s only publicly owned franchise, lost $1.5 million during their Super Bowl appearances in 1997 and 1998. The St. Louis Rams also reported losing money during their Super Bowl winning season in 2000. Why do teams lose money during the playoffs? Many point the revenue sharing system employed by the NFL.
Each team receives and equal amount of league revenue, TV contract, merchandising, and home game ticket revenue. During the regular season, home teams get to keep two-thirds of the ticket revenue, the remaining third goes into a pool shared by all other teams. The NFL keeps all ticket revenue during the playoffs, but home teams can keep money made off other stadium related sales, merchandise, concessions etc. etc. The NFL pays division winning teams a flat fee of $580,000 and other teams $500,000 in the first round. In the second round, each team gets $580,000 and in the championship round $960,000. The Super Bowl winner receives $3.5 million and runner up $2.59 million. That is usually not enough to cover team expenses. John Jones, Executive Vice President and Chief Operating Officer of the Green Bay Packers said, “Expenses usually exceed whatever you get from the league.”
Other reasons for teams losing money in the playoffs include paying bonuses to staff and players for successful playoff runs, moving equipment to the games (obviously, home teams do not have to worry about this), and hosting VIPS and sponsors.
Players do not profit from playoff games either. NFL teams do not have to pay their players during the playoffs because the league covers the playoff salary pool, which is beyond regular season pay. A player’s salary is divided among the 16 regular season games. A marquee player may make nearly $800,000 per game in the regular season but in the playoffs, he will make the same as a player who sits on the bench most of the time, generally around $18,000 per game. Most NFL players make more money than you and I can ever imagine so, I bet your heart, like mine, is not bleeding at all for them.
These puzzling playoff finances conjure up three questions to the skeptic. Do some owners intentionally keep their teams from making the playoffs in order to have the greatest profit for a season? All teams, except the Arizona Cardinals, make sizeable profits during the regular season. Do some owners want their teams to make the playoffs, have some success, but not total success (Super Bowl winner) so they can improve their team’s future long term value and minimize their playoff losses? Do some players put forth less effort in the playoffs since they only get paid a small fraction of their normal regular season salary?
As a die-hard NFL fan, I would like to believe greed does not exist in the NFL. Since money plays such a large role in most people’s lives, one would be naïve to think that the scenarios mentioned above are not at least a possibility. The answers may be disturbing. In the end of the movie, Planet of the Apes, Dr. Zaius says to Taylor, as he is riding away to discover what happened to the Earth he once knew, “Be careful what you look for Taylor, you may not like what you find.”
Even though the NFL playoff finance system seems puzzling, the NFL still has the best business operations of all sports. In a perfect world, the NFL would have a system, which rewards players and teams for their post-season efforts. Nevertheless, it is not a perfect world and I still look forward to each NFL season and post-season.
