Bills staying in Buffalo - The Economics 101

[CodeMonkey]

I will keep it short and not so sweet.

 

Dallas Cowboys - Seating capacity 112,000 (including standing area) at an average ticket price of $160 (Wow!).

This works out to $17,920,000 per game just in ticket sales.

 

Buffalo Bills - Seating capacity 73,967 at an average ticket price of $51

This works out to $3,772,317 per game just in ticket sales.

 

We will ignore luxury box income, concession, and parking income (which all favor Dallas VERY heavily) for the sake of simplicity. But you get the point.

 

So, because we are in the era of profit sharing in the NFL, Jimmy Jones in particular, but most NFL owners get boned in a major way when playing the Bills. The Cheatriats, with the second highest per ticket price in the NFL, have to suffer with this every year.

 

So, if the NFL owners had a choice to say, leave the Bills in a small, semi-destitute market like Buffalo and keep the price structure the same. Or have them go somewhere that the ticket prices could double (along with the parking etc.). What do you think they would do? What would you do if you were in their shoes?

 

That has been true for quite some time. But now it is about to get even more interesting. No salary cap. So Jimmy Jones and the other big market owners can throw gobs of cash at the top players to stack their teams. Think Steinbrenner but for football. What are the small market teams going to do? You got it, bend over.

 

I have no crystal ball and I certainly am not a NFL owner and do not claim to have any inside information. And of course I could be all wrong. But looking at it from a business/economic viewpoint, this is how the numbers add up for me.

 

As with the "True fans only" thread, please serious responses only. No reason for "real" fans to tell me I suck for bringing this up. I already know how you feel about the whole Bills Moving subject.

 

Thanks.

[murra]

I will keep it short and not so sweet.

 

Dallas Cowboys - Seating capacity 112,000 (including standing area) at an average ticket price of $160 (Wow!).

This works out to $17,920,000 per game just in ticket sales.

 

Buffalo Bills - Seating capacity 73,967 at an average ticket price of $51

This works out to $3,772,317 per game just in ticket sales.

 

We will ignore luxury box income, concession, and parking income (which all favor Dallas VERY heavily) for the sake of simplicity. But you get the point.

 

So, because we are in the era of profit sharing in the NFL, Jimmy Jones in particular, but most NFL owners get boned in a major way when playing the Bills. The Cheatriats, with the second highest per ticket price in the NFL, have to suffer with this every year.

 

So, if the NFL owners had a choice to say, leave the Bills in a small, semi-destitute market like Buffalo and keep the price structure the same. Or have them go somewhere that the ticket prices could double (along with the parking etc.). What do you think they would do? What would you do if you were in their shoes?

 

That has been true for quite some time. But now it is about to get even more interesting. No salary cap. So Jimmy Jones and the other big market owners can throw gobs of cash at the top players to stack their teams. Think Steinbrenner but for football. What are the small market teams going to do? You got it, bend over.

 

I have no crystal ball and I certainly am not a NFL owner and do not claim to have any inside information. And of course I could be all wrong. But looking at it from a business/economic viewpoint, this is how the numbers add up for me.

 

As with the "Real fans only" thread, please serious responses only. No reason for "real" fans to tell me I suck for bringing this up. I already know how you feel about the whole Bills Moving subject.

 

Thanks.

 

How many large markets are there? They wouldn't move the team off the principle that the Bills are netting 3million a game, where a select few cities like Dallas or Boston can take away a little more than 5 times that. Secondly, you failed to mention that our Toronto deal places us right in the middle of the pack again.

 

If we go it will have absolutely NOTHING to do with ticket sales/prices. There aren't exactly 30 Dallas Cowboys.

[dave mcbride]

The size of the current television contracts (per year)

 

CBS - $622.5 million

NBC - $650 million

Fox - $712.5 million

ESPN - $1.1 billion

Direct TV - $700 million

 

Total from TV contracts: $3.785 billion/year.

 

Stadium receipts are a drop in the bucket. Also, don't compare the Bills with the richest team; compare them with a mid-tier team like KC, Pitt, Cleveland, Detroit, or Baltimore. The NFL can't move everyone, so they're far better comparisons.

[BuffaloBill]

The size of the current television contracts (per year)

 

CBS - $622.5 million

NBC - $650 million

Fox - $712.5 million

ESPN - $1.1 billion

Direct TV - $700 million

 

Total from TV contracts: $3.785 billion/year.

 

Stadium receipts are a drop in the bucket. Also, don't compare the Bills with the richest team; compare them with a mid-tier team like KC, Pitt, Cleveland, Detroit, or Baltimore. The NFL can't move everyone, so they're far better comparisons.

 

 

Good points ...

 

The original post correctly points out that the Bills have an uphill battle. This is especially true if the Toronto deal is not renewed as it really pushes the ticket price average up for Buffalo. The bottom line is simply that. If Buffalo can't keep up with the financial metrics of the new NFL then the team will eventually move.

[CodeMonkey]

Both good points.

 

About 2/3 of the NFL's money comes from the TV deal. The players get about 2/3 of team revenue. So, more or less, the TV contract goes to pay the players. That is currently how it works, with the salary cap.

 

Yes, I was comparing the top (Dallas) against one of the bottom (Bills). To show the large gap between the two. Of course the other teams, or the Bills in another city, would not likely come close to Dallas. That's why I said double the ticket price instead of 3 times. Maybe 1.5 times would have been a little better.

 

I tried to keep the original post simple, but the corporate box money is not shared. So the big market teams have that to draw on once the salary cap goes away.

 

It all adds up to the small market teams getting screwed.

[jahnyc]

I think the near term issue will be what happens after RW. The Bills currently are profitable, but one of the reasons is that the team has little or no debt to service. If the Bills are sold, any purchaser will need to borrow hundreds of millions of dollars, and paying that debt service will make the Bills unprofitable with their current economics in terms of ticket sales, luxury boxes and other sources of income.

[BuffaloRebound]

There is also the economic cost of buying a team for close to $1b, building a stadium for close to $1b, and paying a relocation fee on top of that. There's not many people who have that kind of money. Is there really a market out there that will re-coup the $1b+ over just keeping the Bills in Buffalo?

[DC Tom]

The size of the current television contracts (per year)

 

CBS - $622.5 million

NBC - $650 million

Fox - $712.5 million

ESPN - $1.1 billion

Direct TV - $700 million

 

Total from TV contracts: $3.785 billion/year.

 

Stadium receipts are a drop in the bucket. Also, don't compare the Bills with the richest team; compare them with a mid-tier team like KC, Pitt, Cleveland, Detroit, or Baltimore. The NFL can't move everyone, so they're far better comparisons.

 

 

Which is why the Bills will move. Moving a team from a small TV market like Buffalo to a large TV market like LA increases the value of those contracts on renegotiation, regardless of whether or not the local sports market will support the team or not.

 

It's a somewhat stupid kind of logic, because it ignores the long-term investment into the league's various brands (the teams, and their followings), in favor of a short-term cash flow valuation. In the long run, moving teams around like they have the past 20 years will only hurt the league.

[GrudginglyPessimistic]

Both good points.

 

About 2/3 of the NFL's money comes from the TV deal. The players get about 2/3 of team revenue. So, more or less, the TV contract goes to pay the players. That is currently how it works, with the salary cap.

 

Yes, I was comparing the top (Dallas) against one of the bottom (Bills). To show the large gap between the two. Of course the other teams, or the Bills in another city, would not likely come close to Dallas. That's why I said double the ticket price instead of 3 times. Maybe 1.5 times would have been a little better.

 

I tried to keep the original post simple, but the corporate box money is not shared. So the big market teams have that to draw on once the salary cap goes away.

 

It all adds up to the small market teams getting screwed.

The key point as many always point out is the NFL will likely go where the money is. The key point here is that the money is in new markets like Mexico City, Berlin, Tokyo and other places where the NFL would love to stimulate more eyeballs to watch so the real money from TV nets can make them rich compared to the relative peanuts to be found from gate sales.

 

This means the key thing to think about when considering Dallas is how do you use America's team as a tool to help you get Mexican eyeballs and the key thing when considering Buffalo is how do the NFL use the Bills to get Toronto eyeballs.

 

The answer is likely not to move the team but to create rivalry with new teams to be created and situated in Mexico City and Toronto.

 

This is not your grandmother's NFL any more where individual owners made individual decisions. Mr. Ralph and the Bengals voted for the good old days when Tagliabooboo twisted arms to make all the owners see this and they lost the vote 30-2.

 

The idea of small market vs. large market is 20th century thinking. Here in the 21st century there is one market and that is a global one. If the NFL could do the whole thing like a Madden game in the studio they would. The Bills have far more value to the NFL as one of the orignal AFC teams and the link to tradition than they do as a franchise which can be sold and moved.

 

I think this is the Econ 101 about whether the Bills move or not.

[Delete This Account]

i'd discount L.A. for the Bills.

i can't see the NFL giving up on this region. note, i used the word "region," one that includes southern Ontario.

 

jw

[rstencel]

The key point as many always point out is the NFL will likely go where the money is. The key point here is that the money is in new markets like Mexico City, Berlin, Tokyo and other places where the NFL would love to stimulate more eyeballs to watch so the real money from TV nets can make them rich compared to the relative peanuts to be found from gate sales.

 

This means the key thing to think about when considering Dallas is how do you use America's team as a tool to help you get Mexican eyeballs and the key thing when considering Buffalo is how do the NFL use the Bills to get Toronto eyeballs.

 

The answer is likely not to move the team but to create rivalry with new teams to be created and situated in Mexico City and Toronto.

 

This is not your grandmother's NFL any more where individual owners made individual decisions. Mr. Ralph and the Bengals voted for the good old days when Tagliabooboo twisted arms to make all the owners see this and they lost the vote 30-2.

 

The idea of small market vs. large market is 20th century thinking. Here in the 21st century there is one market and that is a global one. If the NFL could do the whole thing like a Madden game in the studio they would. The Bills have far more value to the NFL as one of the orignal AFC teams and the link to tradition than they do as a franchise which can be sold and moved.

 

I think this is the Econ 101 about whether the Bills move or not.

 

Your point is good for the league, but not the owner of the team that depends on the local revenue to pay the coaches and front office people, beside cover the debt payments and provide the profit for the team.

 

Also have to have enough cash flow from profits to cover the bonuses paid out to sign players. Even though for salary cap reasons, that money is spread out over the length of the contract, it has to be paid up front.

 

The small market teams that don't have enough of a high salary fan base to fill the luxury boxes, and stadiums with higher ticket prices will have even more trouble making profits if bring in more large cities to boost the average income to point where the network deal no longer covers the player salaries even.

[DarthICE]

sigh...

 

The Bills aren't moving! they were 12th in operating profit last year!! Christ folks. Look before the NFL owners would ok a move (and YES they have to vote and approve the move) you must have a new owner that will have to try and get more out of a market that sells out consistently when fielding a crappy team!

 

You cannot tell me a new owner brings in a great GM, HC, Staff etc that this fan base wouldn't pay 10-15.00 more per ticket. You bet your ass they would. We haven't sold naming rights either. So until several of those options are explored, no way they let the team move.

 

Next, Where to? The Bills are NOT going to friggin LA. Where in this Economy are you going to find a City that will foot the bill for an 800 million to a billion dollar stadium?

 

Look this team is going no where for a long time IF they are allowed to move at all. If anything I can see the NFL allowing 2-4 teams to fold up tent and go back to 28 teams, before anymore moves are made.

[rstencel]

i'd discount L.A. for the Bills.

i can't see the NFL giving up on this region. note, i used the word "region," one that includes southern Ontario.

 

jw

 

 

Have trouble seeing a group that is trying to keep the team local, being able to keep up with bidding against a investment group planning on moving the team. Area cant afford much as far as incentives to keep the team, and if add the debt burden to the mix, will have a hard time keeping ticket prices low enough to keep the stadium full.

 

That being said, I have a feeling that L.A. market will probably already have a team by the time that the team goes up for sale.

[GrudginglyPessimistic]

Your point is good for the league, but not the owner of the team that depends on the local revenue to pay the coaches and front office people, beside cover the debt payments and provide the profit for the team.

 

Also have to have enough cash flow from profits to cover the bonuses paid out to sign players. Even though for salary cap reasons, that money is spread out over the length of the contract, it has to be paid up front.

 

The small market teams that don't have enough of a high salary fan base to fill the luxury boxes, and stadiums with higher ticket prices will have even more trouble making profits if bring in more large cities to boost the average income to point where the network deal no longer covers the player salaries even.

I am under no illusion that this will be easy. I think the folks who are living in an illusion are those who think this is a simple calculus between small market teams and large market teams as it actually is much more complex than that simple equation.

 

The ironic thing here I think that the old model of an owner be it Mr. Ralph, George Halas or any individual is the thing that is type of owner is outmoded here.

 

My guess (and this like all the other predictions here be they by folks like me who know this is too complex for the average individual to understand alone or those who think they actually understand and can predict this stuff from their armchairs or their desk) is that I would not be surprised when Mr. Ralph dies to see the NFL as an entity raise the capital to pay off Mr. Ralph's heirs and any estate tax (which anyone with good lawyers and the ability to give their heirs cash rather than the legacy of individual team ownership should be able to escape).

 

My guess as to who the next owner of the Bills will be is the NFL itself. I do not think that there is anyone I can see who will be able to raise the over a billion in assets it will take to buy the team and can swing the approval of 75% of the owners which is ESSENTIAL to make any deal work.

 

Particularly after the recent meltdown of the economy this is going to be a very different game and be a potentially lucrative but World Series of Poker like risk.

[Mr. WEO]

sigh...

 

The Bills aren't moving! they were 12th in operating profit last year!! Christ folks. Look before the NFL owners would ok a move (and YES they have to vote and approve the move) you must have a new owner that will have to try and get more out of a market that sells out consistently when fielding a crappy team!

 

You cannot tell me a new owner brings in a great GM, HC, Staff etc that this fan base wouldn't pay 10-15.00 more per ticket. You bet your ass they would. We haven't sold naming rights either. So until several of those options are explored, no way they let the team move.

 

Next, Where to? The Bills are NOT going to friggin LA. Where in this Economy are you going to find a City that will foot the bill for an 800 million to a billion dollar stadium?

 

Look this team is going no where for a long time IF they are allowed to move at all. If anything I can see the NFL allowing 2-4 teams to fold up tent and go back to 28 teams, before anymore moves are made.

Darth is right. This is becoming tedious.

 

The League can't make a team move, nor can the owners. There is no viable landing place even if the next guy wants to move. A modest bump in the NEXT TV contract (because of the "LA market") is not going to help the new owner pay his monthly nut (purchase price, moving price, stadium cost-shared).

 

There's nothing wrong with the franchise, economically or course, where it is. It's a gold mine for the current owner. The next guy will have to take the tens of millions in margin Ralph currently buries in his back yard and will use it to service purchase debt. The fact that the stadium is full for the year, nearly every year, is evidence that another ticket increase would be accepted by the paying public. Winning will make it very easy to further raise prices.

 

This IS simple economics.

[rstencel]

sigh...

 

The Bills aren't moving! they were 12th in operating profit last year!! Christ folks. Look before the NFL owners would ok a move (and YES they have to vote and approve the move) you must have a new owner that will have to try and get more out of a market that sells out consistently when fielding a crappy team!

 

You cannot tell me a new owner brings in a great GM, HC, Staff etc that this fan base wouldn't pay 10-15.00 more per ticket. You bet your ass they would. We haven't sold naming rights either. So until several of those options are explored, no way they let the team move.

 

Next, Where to? The Bills are NOT going to friggin LA. Where in this Economy are you going to find a City that will foot the bill for an 800 million to a billion dollar stadium?

 

Look this team is going no where for a long time IF they are allowed to move at all. If anything I can see the NFL allowing 2-4 teams to fold up tent and go back to 28 teams, before anymore moves are made.

 

Have a feeling the large market teams wouldn't mind seeing one less team they have to subsidize. If there isn't an investment group willing to pay top dollar, doubt that owners would vote against allowing team to move honestly.

 

As far as the profitability of team goes. Allot of that has to do with Ralph owning the Bills outright. He doesn't have any loans to worry about. That and he keeps costs down on staffing and bonuses paid as much as possible. Whoever buys the Bills wont have the luxury of not having any debt, and will likely want to try and improve the product, meaning higher costs for staff, from coaches to gm's. Will probably have to put money into the stadium as well, since will likely be around 10 years down the road before that happens.

 

It is very true, that if there is a group that can bid high enough to satisfy the Estate layers, then the team will stay local, as the League will not want to move the team if can keep it local. The lawyers will have an idea on what the other groups wanting to move the team are willing to go, so they wont get much of a local discount. The lawyers have no incentive to sell local, they are going to try and get top dollar for their clients.

 

Allot can happen between now and then to change everything as well. Since there will most likely be a new collective bargaining agreement in place before then. If the salary sharing percentage goes down, that would really help the team stay local.

[rstencel]

Darth is right. This is becoming tedious.

 

The League can't make a team move, nor can the owners. There is no viable landing place even if the next guy wants to move. A modest bump in the NEXT TV contract (because of the "LA market") is not going to help the new owner pay his monthly nut (purchase price, moving price, stadium cost-shared).

 

There's nothing wrong with the franchise, economically or course, where it is. It's a gold mine for the current owner. The next guy will have to take the tens of millions in margin Ralph currently buries in his back yard and will use it to service purchase debt. The fact that the stadium is full for the year, nearly every year, is evidence that another ticket increase would be accepted by the paying public. Winning will make it very easy to further raise prices.

 

This IS simple economics.

 

There was approximately 20 million in profits last year. So yes that is allot of money. However if figure the yearly payments on a several hundred million dollar loan, there goes your profits.

[rstencel]

I am under no illusion that this will be easy. I think the folks who are living in an illusion are those who think this is a simple calculus between small market teams and large market teams as it actually is much more complex than that simple equation.

 

The ironic thing here I think that the old model of an owner be it Mr. Ralph, George Halas or any individual is the thing that is type of owner is outmoded here.

 

My guess (and this like all the other predictions here be they by folks like me who know this is too complex for the average individual to understand alone or those who think they actually understand and can predict this stuff from their armchairs or their desk) is that I would not be surprised when Mr. Ralph dies to see the NFL as an entity raise the capital to pay off Mr. Ralph's heirs and any estate tax (which anyone with good lawyers and the ability to give their heirs cash rather than the legacy of individual team ownership should be able to escape).

 

My guess as to who the next owner of the Bills will be is the NFL itself. I do not think that there is anyone I can see who will be able to raise the over a billion in assets it will take to buy the team and can swing the approval of 75% of the owners which is ESSENTIAL to make any deal work.

 

Particularly after the recent meltdown of the economy this is going to be a very different game and be a potentially lucrative but World Series of Poker like risk.

 

Great post, there is a good chance you are right that allot of the people that have the means and desire to purchase the bills would have a hard time going through league approval. This is a very possible scenario.

[GrudginglyPessimistic]

Great post, there is a good chance you are right that allot of the people that have the means and desire to purchase the bills would have a hard time going through league approval. This is a very possible scenario.

This why the "it is guaranteed to go to the highest bidder is nonsense." If the highest bidder is Rush Limbaugh (or someone else who raises the hackles of any of the other essential players in this) then they are not going to be approved by the 75% of the other owners it takes to get approved.

 

Since Mr. Ralph does not have any apparent heirs who want to pay the likely substantial costs of inheriting this gift they would have done nothing to earn, my bet is that in the end it will be the NFL as an entity which pays off any estate fees to Mr. Ralph's designated heirs and takes control of the team because that is where the money will be.

[BB Fan 4 LIFE]

How many large markets are there? They wouldn't move the team off the principle that the Bills are netting 3million a game, where a select few cities like Dallas or Boston can take away a little more than 5 times that. Secondly, you failed to mention that our Toronto deal places us right in the middle of the pack again.

 

If we go it will have absolutely NOTHING to do with ticket sales/prices. There aren't exactly 30 Dallas Cowboys.

 

Were you listening to the Dude's story Donnie?

 

Even a broke team like the Chefs would be better off facing a big market team with higher sales revenue because of the sharing.