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Why Buy an NFL Team?
Beacon on the Hill Sports Marketing answers the question!
Answer Outline
- To purchase a $600 million diamond filled gold mine that will double in value in 1-5 years (depending on whether it stays put or moves) while generating $3.5 billion in revenue in 10 years.
- To develop and market the premier "product" of sports-entertainment: NFL Football, an industry that includes communications, hospitality, tourism, business incubation, and real estate development.
- To turn the five keys of success in the NFL:
- Be in contention by focusing on winning the Super Bowl
- Be creating and expanding by focusing on winning the “profit bowl”
- Be a major contributor to the “spirit” of community
- Be a provider of positive role models for kids and young people
- Be an economic magnet and community development prosperity zone for the area in which the team’s stadium and training facility are located.
Answer Outline
There are 5 Reasons (Summary p. 2, Details p. 3ff): for “Why?” to Buy an NFL team: BECAUSE:
- It is like purchasing a rare diamond worth $600 million that will double in value in 5 years while generating $3.5 billion in ten years. but generate $300 million/year in the process. Diamond available: Vikings, 49ers.
- For little out of pocket money it can create greater wealth, as it will generate $100 million/year guaranteed through NFL sharing (Source: Forbes, NFL); $100 million/year in local revenues with a new stadium (Source: Merrill Lynch); $200 – 400 million from the NFL for a new ($200 million) or shared ($400 million) stadium (Source: NFL); $100 million or more/year through the identified 40 ways in 26 categories for generating revenue with an NFL franchise, using the stadium as the anchor of a sports-entertainment-communications-hospitality-tourism-real estate/business incubator-investment industry complex. (Source: Beacon on the Hill Sports Marketing)
- It’s “The The New Piggy Banks for Financial Wizards” (Source: San Antonio Express-News, 8-8-02).
- The financing works Source: (Forbes)
- Beacon on the Hill Sports Marketing is available to help make it happen.
The goal is to support a prospective buyer(s) in developing and marketing the premier “product” of the sports-entertainment-communications-development business, NFL football, doing so while being (1) in contention and focusing on being competitive for the Super Bowl; (2) being competitive in the “profit bowl,” (3) standing out as a major contributor to the “spirit” of community; (4) providing positive role models to kids and young people, and (5) serving as an economic magnet, tax revenue generator, and community developer partner for the area in which the team’s stadium is or will be located.
Executive Summary: Why Buy an NFL Team?
To Generate $300 Million Year, $3.25 Billion the first decadeSummary for the 5 “Because” Reasons
- Why buy and NFL team? Because the rare, once in a lifetime opportunity of purchasing an NFL team is like purchasing a rare diamond worth $600 million that will not only double in value in 5 years but generate $300 million/year in the process: they are seldom for sale, and so the excitement today: at least two teams are for sale: The Minnesota Vikings and the San Francisco 49ers. Buying a team places the buyer (or buying group) into the elite pantheon of sports and the #1 draw and revenue generator in this unique, one-of-a-kind sports-entertainment-communications industry.
- Why buy and NFL team? Because purchasing an NFL team provides an unusual opportunity to generate even greater wealth for little out of pocket money (see #4 below). The revenue yield is simply fantastic: $300 million/year, and growing. There is also a potential additional bonus of $250 million every decade from a Super Bowl with an almost sure thing for a Super Bowl during at least the first decade. In the first decade, that means $3.25 Billion in revenue, and growing. The five part revenue yield is as follows:
- $100 million guaranteed through NFL sharing (Source: Forbes, NFL)
- $100 million in local revenues with a new stadium (Source: Merrill Lynch)
- $100 million or more/year through the identified 40 ways in 26 categories for generating revenue with an NFL franchise, using the stadium as the anchor of a sports-entertainment-communications-hospitality-tourism-real estate/business incubator-investment industry complex. As an added “bonus,” the deal can be structured with minimal actual cash down. (Source: Beacon on the Hill Sports Marketing)
- $200 – 400 million from the NFL for a new ($200 million) or shared ($400 million) stadium (Source: NFL)
- The team value will double in value over the next 5 years (Source: Forbes)
- Why buy and NFL team? Because purchasing an NFL team is like purchasing a “gold mine with diamonds in the Mother Lode: The New Piggy Banks for Financial Wizards” (Source: San Antonio Express-News, August 8, 2002)
- Why buy and NFL team? Because the financing “works” (Source: Forbes)
- Why buy and NFL team? Because Beacon on the Hill Sports Marketing is available to help make it happen.
Detailed Answers to the Question: Why Buy an NFL Team?
Here are five reasons why!
Reason# 1: Why buy an NFL Team? BECAUSE the rare, once in a lifetime opportunity of purchasing an NFL team is like purchasing a rare diamond worth $600 million that will not only double in value in 5 years but generate $300 million/year in the process: they are seldom for sale, and so the excitement today: at least two teams are for sale: The Minnesota Vikings and the San Francisco 49ers.. Buying a team places the buyer (or buying group) into the elite pantheon of sports and the #1 draw and revenue generator in this one-of-kind sports-entertainment-communications-hospitality-tourism-real estate/business incubator-investment industry.
- Participating in the #1 sport with a team with the potential to be the #1 sports draw and revenue generator.
- The opportunity to generate wealth exists for both the 49ers in San Francisco and for the Vikings in Minnesota.
- Thus, the opportunity is for wealth, fun, and legacy.
- Purchasing an NFL team is not just grabbing the Brass Ring, it is also grabbing the gold & diamond rings too.
- There are only 32 NFL teams; very few teams come up for sale; many are passed on for generations.
- The NFL business model is structured for profitability, unlike the NBA, MLB, and NHL.
- The stadium and surrounding complex becomes a destination and gathering place for fans, visitors, tourists, consumers, and sports/entertainment/hospitality/tourism/real estate/ business people, for it will serve as a business/real estate/communications hub, generating profits in the near term and long term, year round. It allows for partnerships and alliances with the city’s business community, so that there are many stakeholders looking out for the over all success of the complex.
Reason# 2: Why buy an NFL Team? BECAUSE purchasing an NFL team provides an unusual opportunity to generate even greater wealth. The revenue yield is simply fantastic: $300 million/year, and growing. There is also the bonus of $250 million every decade from a Super Bowl. In the first decade, that means $3.25 Billion in revenue, and growing. The five-part revenue yield is as follows:
- $100 million guaranteed through NFL sharing (Source: Forbes, NFL)
- $100 million in local revenues with a new stadium (Source: Merrill Lynch)
- $100 million or more/year through the identified 40 ways in 26 categories for generating revenue with an NFL franchise, using the stadium as the anchor of a sports-entertainment-communications-hospitality-tourism-real estate/business incubator-investment industry complex. As an added “bonus,” the deal can be structured with minimal actual cash down. (Source: Beacon on the Hill Sports Marketing)
- $200 – 400 million from NFL for new ($200 million) or shared ($400 million) stadium (Source: NFL)
- The team value will double in value over the next 5 years (Source: Forbes)
- The NFL is becoming the center of the sports entertainment universe. Understood within the wider understanding of the industry, an NFL team can be the KING of all sports in any given city.
- An NFL team is in the wider industry that sports. It is in the sports-entertainment-tourism-hospitality-real estate-business incubator-investment development business. A stadium is a real estate development anchor. It is a mixed use sports/entertainment/tourism/hospitality/real estate development enterprise, meaning constantly developing new businesses from the mixed use elements, while the stadium anchors ongoing present time commercial and high end residential condos and hotels as well as year round arena activities.
- As the NFL expands overseas and around the globe, even greater revenues and profits will ensue.
- One thing an NFL team will not be: undercapitalized. In addition to the $100 million in shared revenue that each team gets, teams with new stadiums can, according to a Merrill Lynch study, generate over $100 million in local revenue. The 40 ways to generate revenue in 26 categories that we have identified would add yet another $50 – 100 million. Tax deductions can be maximized, tax liabilities minimized, and revenues sheltered. A wide range of depreciations, write-offs, deferrals, amortization, are available, some of which can be charged against income, etc.
- Not only will an NFL team become a city’s sports/entertainment leader, it can be a profit leader for the other businesses that can be placed under its brand umbrella as partners, alliances, or subsidiaries.
- Forbes, January 26, 2004. The National Football League's economic system has delivered parity on the gridiron. But there is no parity when it comes to the owners' bank accounts. Our proprietary analysis shows that those teams with the best stadium deals and richest corporate sponsorships--run by the NFL's new breed of entrepreneurial owners--are worth hundreds of millions of dollars more than their rivals. Rank Franchise/ Principal Owner(s) (year acquired) CURRENT* ($mil) 1-YEAR change Annualized change** DEBT/ Value^ REVENUES ($mil) Operating Income^^ ($mil) 24 San Francisco 49ers,Denise DeBartolo York ('77) 568 23 16 13 142 16.0 30 Minnesota Vikings/Billy Joe McCombs ('98) 542 24 17 23 135 35.2 January Forbes re Vikings: “The Vikings play at the antiquated Metrodome and have a lease that gives them among the lowest stadium revenue in the NFL. To enhance his cash flow, team owner Red McCombs, who bought the Vikings in 1998 for $246 million, has expanded his game plan and now sells Minnesota Vikings-branded milk and ice cream. McCombs has also opened the team's first official team pro shop, a stand-alone store called Vikings Locker Room in a Bloomington mall. Still, the Vikings desperately need a new stadium or, at the very least, a less onerous lease at the Metrodome to remain competitive. If McCombs doesn't get a better stadium deal soon, look for him to move the team to San Antonio or Los Angeles.
- Forbes, September 3, 2004. The National Football League is the most valuable and profitable team sport in the world. This year the average team is worth $733 million, a 17% increase over last year. Operating income (earnings before interest, taxes, depreciation and amortization) for the 32 teams came in at $851 million on revenue of $5.3 billion, an operating margin of 16%. Rank Team Current 1 Yr Value Debt/Value Revenues Operating Value Change % ($mil) Income ($mil) (%) ($mil) 25 SF 636 12 16 151 29.4 49ers 30 MN. 604 12 21 144 4.1 Vikings From Forbes: A dominant NFL franchise during the 1980s, the San Francisco 49ers have struggled on and off the field in recent years as a result of years of high player payrolls and an antiquated stadium. A year ago Denise DeBartolo York and husband John bought out the remaining interest of her brother Edward, who was forced to sell his stake in the 49ers as a result of an investigation for illegally acquiring a Louisiana riverboat gambling license. While the new owners have cut costs, the team's revenues will remain in the bottom half of the league until taxpayers agree to help finance a new stadium
Reason# 3: Why buy an NFL Team? Because purchasing an NFL team is like purchasing A “GOLD MINE WITH DIAMONDS IN THE MOTHER LODE: The New Piggy Banks for Financial Wizards” (Source: San Antonio Express-News, August 8, 2002)
- The NFL is the goose that lays the golden eggs. Even the lowest revenue teams are profitable. Vikings in MN: 31st in local revenue (would quintuple with a move to a new stadium), 26th in overall revenue. HOWEVER, new stadium teams will continue revenue growth, old stadium teams will continue to loose revenue potential, with some without stadiums heading for losses.
- The NFL guaranteeing stability and profits is no accident. The NFL:
- Has the best TV contract in all sports
- Has the #1 rating in TV viewing.
- Has the beset satellite EV package in all sports,
- Has a hard salary cap,
- Has shared revenue from TV/cable/satellite, radio, tickets, concessions, and merchandise
- Has a G-3 fund to help teams with new/renovated stadiums (increasing shared revenue)
- Has labor peace
Reason# 4: Why buy an NFL team? Because purchasing an NFL team works because the financing “works” (Source: Forbes)
- The Vikings are valued by Forbes (September 2004) at $604 million, and the 49ers are valued at $636 million (up 17% from January 2004, when he Vikings were valued by Forbes for $542 million, and the 49ers for $568 million). Stadium financing is available from the NFL, local infrastructure financing is available, and investment models exist, including the DreamWorks model; also: a combination of General Partner with Limited Partners is allowed.
- Much can be done “for no money down,” as the team can be bought with little or no out of pocket dollars, as earlier owners have done, either taking direct loans or loans collateralized, with payments costs of financing (usually the interest) expensed and paid by team revenues.
- Red McCombs, using Clear Channel shares as collateral, bought the Vikings in 1998, Red, through J.P. Morgan, from a group of Minnesota business owners for about $200 million and the assumption of $45 million in existing debt. The owners before him borrowed approximately $10 million each, some on their signatures, and others with collateral, and made payments through team revenues. Thus, they too, in essence, didn’t put up any cash.
- Red’s initial bid was $150 million. The NFL loaned him $100 million so he could out bid the local bidder. Another $100 million came from J.P. Morgan Chase Bank against collateralized stock (USA Today, August 6, 2002).
- When he had to cover his collateral during the market bubble burst, Mc Combs sale of the Clear Channel stock was not immediate. Instead, Gary Woods created a complex hedge transaction known as a "variable prepaid forward” that allows Mc Combs to receive cash up front, but not actually deliver the shares to the buyer for several years.
- That means Mc Combs still will be able to vote the shares in any decision put before Clear Channel shareholders, yet he can defer taxes until the shares go to the buyer.
- The pact also protects Mc Combs from any continued depression in the stock price and allows him to make money if the stock price climbs in the next few years.
- "Suddenly, the owner … isn't paying much out of his own pocket.”
- Although there are a myriad of “funding tools,” we have identified 8, including the DreamWorks investment model that would garner far more investment dollars than needed to both purchase a team and to either build a new stadium or remodel/renovate an older one. Run like a business and not an extension of the taxpayer’s vending machine, the team and its real estate sports entertainment development complex can not only be profitable from the start but the start can be much quicker without having to wait for city councils or state legislatures to put up the moneys.
- By collateralizing his purchase price with Clear Channel stock and obtaining a $150 million loan from the NFL, Red bought the Vikings for no out of pocket money, got his 5-year tax depreciation write down and obtained his 5-year tax write offs.
- For no money, Red “sold” stock to pay off the loans without having to truly give up the stock, gets to keep the stock sold to cover the loan and thus hang onto the voting rights of the stock “sold,” and is able to use the stock “sold” to cover the loans in a “variable prepaid forward” that protects him from any further depression in the stock and allows him to make more money if the stock price climbs in the next few years.
- For no money, he bought an NFL team, had a grand time, and then was able to sell stock that has reduced in value 80% and freezing any further drop in value yet allowing profit if the stock later rises.
- For no money, a new NFL owner or ownership group can obtain over $80 million/year from the NFL in shared TV revenue, with another $20 million available through other sharing, including merchandising, visitors piece of every home gate, and other shared revenues.
- For no money, an owner gets the loan interest payment tax write offs.
- For no money, a new NFL owner or ownership group gets a team that is very much a “value added” commodity for the owners in the same way it is a “value added” entity for the fans in community terms.
- For no money, a new NFL owner or ownership group can purchase an NFL team as a straight upside investment, as no hedge transactions is required as no downside is seen: it is all up side when played financially in this manner.
- For no money, a new NFL owner or ownership group purchases an investment with NO downside.
- For no money down a new NFL owner or ownership group can purchase an economically dynamic entity geared to generate profits, and generate tax write offs and write downs.
- For no money down, and with a money machine from local revenues, many teams have no incentive to go beyond the traditional game day revenues and NFL revenue sharing. Our list of 40 ways in 26 categories can add another $100 million to the $100 million from the NFL and the $100 in traditional local revenues.
- For no money down, using an NFL team as an anchor, a new NFL owner or ownership group, if they took the anchor of a development project complex as key, could generate 4-5 times or more profits than other teams.
Reason# 5: Why buy an NFL team? Because Beacon on the Hill Sports Marketing is available to help make it happen. Beacon on the Hill Sports Marketing stand “at the ready!” Beacon On The Hill Sports Marketing has a consulting team available to help guide and physically man the transition, initial operations, new stadium funding, and, as needed, work with any site, whether for new building or for renovation.
- Beacon On The Hill Sports Marketing brings individuals with significant NFL experience as well as experience in planning for stadium and local revenue developing projects, as well as in communications and business development experience and expertise to serve any who would step up to provide the investment and new ownership leadership needed to bring this project to fruition. Just as the Olympics were used 2,500 years ago and in 2004 to put Athens on the map, so too will the new owner will put the team’s city even more “on the map” than it already is.
- Beacon On The Hill Sports Marketing is available to potential owners to customize relevant plans from past experience in such areas as:
- Proposal to S.F. 49ers re a new stadium (2000)
- Proposal to MN Vikings re a new stadium (2000)
- Models for Operations (2000)
- Ways to deal with Legislatures (2000)
- 40 Ways in 26 (mostly local) Categories to Generate Revenue (2000)
- Competitive Analysis “Ideal Type” Analytic Model (2000)
- 12 Models for Stadium/Team Operations, plus Twins 13th Model (2001)
- Categories for Player Compensation Golden Handcuffs (2000)
- Internet Strategies (2000)
- PR/Communications Models (2001)
- Executive Briefing on Stadium Mixed Use Model (2002)
- Smart Growth Strategies (2000)
- Business Development PR Strategies (2002)
- Sales/ownership transfer PR Campaign (2002)
- Reality Check List (2003)
- Reasons for a Stadium Complex with Stadium as Anchor (2003)
- PR Campaign to Beat the Blame Game if a move is involved (2003)
- Fan Plans To Build Attendance, Sustain Sell Outs, Increase Revenues (2004)
- For more the background of Peter Jessen, go to www.peterjessen-gpa.com/pages/about.html.
- Investment Analysis Assumptions For Buyer(S) By Beacon On The Hill Sports Marketing
Investment Analysis Assumptions
Assumption #1: All participants will be exercising a desire or dream that transcends traditional business models and traditional ways of doing business. It is assumed that investors (as business partners) will have a passion for a great football team and for business profitability.
Assumption #2: The business is “sports-entertainment,” not just a football business (avoiding the mistake of the train industry that didn’t realize it was in the transportation business). The NFL has a business model that works differently from other business models as the sports-entertainment models includes numerous additional revenue streams to build on top of the guaranteed revenue stream (NFL shared TV revenue money plus local retained stadium revenue from suites, sponsorships, tickets, parking, concessions, etc.), and allows for creative application of business sense to create additional revenue streams in the additional areas of communications, hospitality/tourism, business incubating, and investing.
Assumption #3: That the key is to create a super brand name out of the team’s name, to use the team as an umbrella brand for other emerging brands of the multiple revenue streams for the mixed-use sports-entertainment-communications-hospitality-tourism-real estate-business incubation-investment development model.
Assumption #4: Beacon on the Hill Sports Marketing proposes to act as a catalyst for the new owner and the investments garnered, taking the initial lead in the charge to success.
Assumption #5: There are financial funding and operational tools models galore to choose from to find the appropriate ones to help ensure profitable success.
Assumption #6: On the revenue side, using the team and stadium as an anchor means using a business growth model rather than a government subsidy model. We have identified at least 40 different ways in 26 different categories to generate significant local revenue.
Assumption #7: The project will generate hundreds of millions in the government jurisdictions as well as for other corporations who become part of the development and investment aspects of the stadium complex, as part of a “smart growth” policy generating jobs for people, revenue and profits for companies, economic growth and tax revenue for city and state.
Chronology Leading to this Proposal
- Founded Peter Jessen GPA, 1999
- Proposal to S.F. 49ers for off field entertainment products to generate revenue, July 2000
- Stadium Complex Proposal to S.F. 49ers, July 2000
- Stadium Complex Proposal to MN Vikings (& shown to Twins & MN Leg), August 2000
- Ways to work with the legislature, August 2000
- Generic Model for Stadium Complex, derived from #s 3&4, April 2001
- Launch www.peterjessen-gpa.com, September 2001
- Place Generic Model on site, October 2001
- Launch Stadium complex web example: www.chargersstadium.com, June 2002
- Launch Stadium complex web example: www.lacoliseumstadium.com, June 2002
- Team Purchase Proposal, November 2002, followed by presentations
- Team Purchase/Move to L.A. Proposal, Nov. 2003, followed by presentations
- Founded Beacon On The Hill Sports Marketing, August 2004
- Launch www.BeaconSportsMarketing.com, August 2004
- “Why Buy an NFL Team?” November 2004
- “Why Buy the Minnesota Vikings and Move Them to L.A.?”, December 2004
Closing Comments
(Former Introduction)
In 2002, I attempted to demonstrate to the San Franciso 49ers and the Minnesota Vikings (and the Minnesota Twins), how they could build new stadiums without having to raise new city or state taxes. Minnesota wanted three stadiums (Vikings, Twins, and the University of Minnesota’s Gophers). Twelve ways were presented, each with 3rd party validation and verification. No takers. No interest. No phone calls or Emails returned. No legislator, businessman or other officials responded. No one.
Upon further research and interviews with legislators, businessmen, and other officials and leaders, I found out why: a consensus existed with the leaders of the community – legislators, businessmen, and city officials, that not only were no monies going to be spent on the Vikings for a stadium, but that the consensus view was that only three teams could be supported by business (purchase of corporate suites) instead of four and so one had to leave, and that the odd team out was the one with the fewest games: the Vikings. This conclusion is also supported by two recent books by local writers, Jay Weiner (Star Tribune reporter), in his 2000 book “Stadium Games,” published in 2000, and by community advocate Ron Edwards, “The Minneapolis Story, Through My Eyes,” 2002.
Several who have crunched the numbers as they explored purchasing the Vikings have come to the same conclusion, stadiums in the Twin Cities are not economically viable. It has remained our view since 2000 that three stadiums (Vikings, Twins, Gophers) could be built without adding new taxes. But it has become clear that no one will take up the challenge, and that unless someone does, the team will move. Then the Twins will get a renovated Metrodome and the Gophers a new on campus stadium. Doesn’t matter. The team is for sale. I’m here to support a bidder either way, stay or leave.
The purpose of this Why buy an NFL team? paper is to demonstrate to the reader/investor that whether the team stays in Minneapolis or moves (e.g., to Los Angeles), it can be purchased and operated more than adequately from a profit standpoint, especially if the “40 ways to generate revenue in 26 categories are followed, even though the full revenue potential can’t be reached until a new stadium is built. A separate piece has been written for why and how to effect a move to Los Angeles, regardless of what team it is.
This is written with seven points in mind: The first deals directly with the Vikings: purchase them now and, if no stadium becomes viable or possible, move to a city where a new stadium will be declared viable and possible. The second: accept the inevitability now and purchase the team and immediately negotiate for a move to another city. The third: approach a second team, the San Francisco 49ers, regarding purchasing them. The fourth: simultaneously bid on the Vikings while also negotiating with Los Angeles to move there and to play in the Memorial Coliseum. The fifth is, like Thomas Edison, to cause the light to go on with an investor(s) who then says, “let’s go!” Presentations have been made. We are still waiting to hear those words and be put on retainer. Needed is a lead buyer (the General Partner) who either wants to purchase it himself or do so as the head of a buying group (putting up a third of the sale price and splitting the rest with limited partners). The sixth is to apply this packet to any professional team of any sport in any league. Finally, the seventh is to seek retainers for Beacon on the Hill Sports Marketing for other tasks unrelated to the NFL but still related to projects geared to developing new business and to generate new profits. Beacon on the Hill Sports Marketing stands at the ready to serve any client to help them prepare for discussions on project goals & project revenues/profits.
Beacon on the Hill Sports Marketing seeks retainers to to serve as consultant to any project in general and, in particular, projects related to the purchase of teams and the building of their stadiums.
Page content written / posted: 11/2002, 11/2003, 11/2004, 10-15-13
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