Saturday, January 10, 2009

PAPA ASKS: WHAT'S THE MOST PROFITABLE SPORT?

What is the most profitable sport in America? Think about it before answering. It’s not as easy as you might think. You probably won’t figure it out from checking the media. In the newspapers, sports-talk radio, the 24-hour cycle non-stop TV coverage, almost every story about professional baseball, football and basketball – in fact about almost all sports – starts with money. How big and how long are the contracts? How much are the players getting? How much does it cost to buy season tickets? What about the fifty bucks you have to shell out for a hotdog, fries and a beer? But, for America’s richest sport, the media gives them a free pass when it comes to $$$$. Go figure.

Thanks to FORBES annual assessment, we know the so-called value of every professional sports franchise. The most valuable sports business in America is the Dallas Cowboys with a listed worth of $1.612 billion. Based on this prospective sales price, the National Football League is far and away the richest of all sports, but not the most profitable. Of the 32 NFL teams, FORBES has 17 of them worth more than a billion dollars. Of course, how they figure these numbers is a mystery. The Cowboys show a profit of $30.6 million which mean FORBES says they are worth about 53 times one-year earnings. Pretty fancy multiples. Make sense to you? Not if you look at the Seattle Seahawks franchise. That team shows a profit of only $8.9 million, yet it has a value of $1.010 billion - that’s nearly a multiple of 115 times one-year profit. Why is Seattle’s profit margin worth more than twice that for the Cowboys? Your guess is as good as mine.

Overall, the NFL is pro sports most consistently profitable enterprise. Only one NFL team (surprise! The Detroit Lions) operates at a loss, and despite losing $3.1 million last year, FORBES says that team would still sell for $917 million. Almost a billion dollars for a losing enterprise? Only in America. God bless capitalism.

In the National Basketball Association, after the profits of the Chicago Bulls and the Los Angeles Lakers, the pickings get pretty slim and fully a third of all NBA teams lose money. The picture is Dickensian for the National Hockey League. For them it’s the best of times and the worst, all at the same time. The single most profitable sports team in North America is the Toronto Maple Leafs. That team made $66.4 million last year. But, almost half the teams in the NHL can’t break even and the league, as an entity, is constantly in jeopardy of either contracting drastically or closing up altogether. I suppose the Toronto Maple Leafs could suit up and skate against the Little Sisters Of The Poor, or a pick-up team from the local 7-11, and the good folks of Toronto would pay big Canadian bucks to watch.

Major League Baseball is the most difficult sport in which to assess value. They keep their numbers to themselves and they have always spent like there is no tomorrow. The Supreme Court, in 1922, ruled that Baseball is not a business – it’s a sport, and thereby granted them an exemption from anti-trust laws no other sports league enjoys. One may well argue that Baseball’s owners have taken that ruling to heart in the way they operate their teams. Both costs and revenues vary wildly for MLB. FORBES places a value on the New York Yankees of $1.306 billion, although the team probably loses money – on paper anyway. Revenue for the Yankees is listed at $327 million, or about three times that for the Florida Marlins, who are among the most profitable MLB teams. Go figure.

Outside the US, only soccer has any financial success, and it has quite a lot. Following the Dallas Cowboys $1.612 billion, on the FORBES list, is the British soccer team, Manchester United at $1.4 billion – yes, a soccer team in a city you’ll never set foot in (and can’t find on a map) is worth more than the New York Yankees.

FORBES cannot judge some sports because there are no teams, no franchises, only individuals. In this category there are three standouts including the richest athlete in the world. Tiger Woods, all by himself, is the sporting world’s only $100 million a-year producer. Second and third on that list might surprise you – you might not recognize at least one of them. Number 2 is the boxer, Oscar De La Hoya. You may have heard of him, but did you think he made $43 million last year? And number 3 is an automobile racer named Kimi Raikkonen (Who?), who made $42.2 million last year…. doing what, where?

So, have you decided yet – what is the most profitable sport in the country? The answer is – American college football. That’s right. Division 1A – which is big-time college football – a supposedly non-professional enterprise - produces more profit than any other sports activity in America. According to FORBES, here are last year’s profits – that is the net revenue after all expenses – for the Top Ten college football teams.

1. University of Texas $46.2 million
2. Notre Dame 45.8
3. Georgia 43.5
4. Florida 38.2
5. Michigan 36.2
6. Auburn 33.9
7. Alabama 31.8
8. LSU 31.7
9. Penn State 29.4
10. South Carolina 28.9

Is it any wonder that six of them are in the South where college football challenges Christianity as the dominant belief system?

There are 119 colleges and universities playing Division I football and they all make money. Outside of their conference games, colleges schedule all their games separately. There is no organization – its every school for themselves. To get another team to come to your stadium and play a football game, you have to pay them, and probably return the favor next year or the year after at their place. Gee, that’s a shocker, isn’t it? How much do you have to pay? Depends upon which team you want. Try to get Notre Dame on your schedule and be prepared to pay millions – yes, millions. Even schools you don’t think of as football powers, or perhaps schools you’ve never heard of and have no idea where they are, charge a fancy fee to show up and play football for a couple of hours. The Air Force Academy, a government facility training future pilots, got $850,000 to go to Knoxville to play the University of Tennessee. The University of Louisiana-Monroe (Huh? Who? Where?) received $700,000 to play football against Kansas. C’mon, Kansas? And, Florida-Atlantic University (does anyone know who they are or where this school is? I thought they were on the Internet.), they got paid $900,000 to show-up in Austin, Texas to take the field against the team from the University of Texas. Almost a million bucks, for who?

In college football you don’t even have to be good to make big money. In 2007, the University of Syracuse, a small city in upstate New York, won only 2 football games. Nevertheless, they made $29.6 million that season. The same year, the University of Minnesota managed only 1 victory all season while making a profit of $17.3 million. The list of schools with teams that won 1, 2, or only 3 games yet showed profits in the millions is very long.

But, doesn’t all this money serve a noble purpose? Doesn’t it go to academics? Isn’t football the key to funding chemistry labs, paying the salaries of poetry professors, paying the costs of the Music Department and contributing to all academic disciplines within the university community? No. It doesn’t work that way at all – with a single notable exception.

Little known to most observers, big-time college football teams are NOT the property of the schools whose names they bear. Instead they are owned by corporate entities, private companies that appear to be school-related, but are not, such as The University of Georgia Athletic Association, Inc. – not part of the public university known as the University of Georgia, but rather a separate corporate entity altogether. Most Georgians have no idea.

Remember the $46.2 million “profit” made by the football team at the University of Texas? Only $4.7 million of it went to the university. The rest - $41.5 million! – was retained by the corporate entity controlling the team. Pennies for test tubes, books, schoolrooms and dorms – millions for coaches and millions more for recruiting new players – plane tickets, hotels, and God only knows what else.

The sole exception – the University of Notre Dame – unique - a football team owned and operated by the university itself, its program produced $22.1 million for academic use – more than the next half-dozen top programs combined.

The reason college football is so financially rewarding is simple – labor costs, or the lack of them. As a comparison, the National Football League, which employs the highest paid unionized workers in the world, pays out about $4.5 billion (that’s billion with a B, each year to its players. That equals about 60% of total league revenue.) College football pays… nothing, not a cent. And, they’re proud of it. What do they provide? A free “education.” Sure, they do. Do you know their graduation rates?Have you seen the majors for many big-time college football players? Did you know, for example, that the National Champion Florida Gators have players who major in something called “Recreation Event Management?” What the hell is that? College football is more professional than college, more business than sport, and more private than public.

And finally, here is FORBES’ list of the 10 most profitable sports teams:

TEAM 2007 PROFIT
1. Toronto Maple Leafs NHL $ 66.4 million
2. Washington Redskins NFL 58.1
3. Chicago Bulls NBA 55.4
4. Los Angeles Lakers NBA 47.9
5. Univ. of Texas (college) 46.2
6. Notre Dame (college) 45.8
7. Houston Texans NFL 43.9
8. Washington Nationals MLB 43.8
9. Univ. of Georgia (college) 43.5
10. New York Giants NFL 41.2

7 comments:

valentine marofsky said...

Can it be that you wrote a rather long article on the business of sports and the value of franchises without mentioning the New York Yankees? Did I miss something?

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Anonymous said...

"Manchester United at $1.4 billion – yes, a soccer team in a city you’ll never set foot in (and can’t find on a map) is worth more than the New York Yankees." - Are you fucking retarded? You can't find a city of 2.5 million people on a map? I guess as an America, geography isn't your strong point

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