Packers' Financials - Salary Cap Ramifications

Multiple sources have reported on the Packers' financial statement for the last fiscal year, including this article by Bill Huber for Sports Illustrated.  The Packers lost $38.8 million last year, their first loss since 2003 when stadium renovations were completed.  For context, the year before the most recent year had an operating profit was $70.3 million.  That is a big swing, but there is no need to worry about the franchise's long-term viability because the Reserve Fund increased from $370 million to $491 million due to an improved stock market and other profits.  While that is mostly "paper money" it is still a lot of money and it should easily allow the Packers to ride out this downturn.

More concerning is the tepid growth in the National Revenue and the big story is the cratering of local revenue.  Each team received $309.2 million as revenue sharing from the NFL, an increase of $13.2 million (4.5%).  For context, revenue sharing increased by $22 million in the previous fiscal year to $296 million, an 8% increase.  $13 million is a nice increase until one realizes that the new CBA increased minimum salaries by at least $4 million per team and probably more, and that salaries in general grew at a higher rate than 4%.  The two extra playoff games had been projected by Pro Football Talk to produce $150 million in additional revenue as well, so the 4.5% rate of increase disappoints me.

The big news is the cataclysmic decrease in local revenue, which dropped from $210.9 million all the way down to $61.8 million.  That is a decrease of $149.1 million, or 70.7%.  Wow!  That will affect the salary cap limits for 2022 through 2024.

In my June 10, 2020, article I estimated the net effect on the cap of local revenue losses.  I concluded that a loss of 70% would lead to a salary cap of roughly $143.2 million assuming national revenue remained the same.  The decrease turned out to be a little bit more (70.7%) and there was a small increase in revenue sharing.  It appears that the 2021 salary cap should have been $147.1 million (the methodology is detailed below for those who are interested).  Since we know the 2021 salary cap was artificially set at $182.5 million, that means the owners "loaned" to the players very roughly about $35.4 million per team, or a total of something in the neighborhood of $1.133 billion.

The owners will be paid back, probably with modest interest of perhaps 2.5%.  The current agreement between the NFL and the Union specifies that the loan will be paid back over the course of the 2022, 2023 and 2024 seasons, presumably in equal installments of about $12.1 million with the interest.  I think it would make sense to repay 20% in 2022, 35% in 2023 and 45% in 2024, but since the NFL has announced that the salary cap will not exceed $208 million in 2022, it appears that the owners are interested in being paid back in a more expeditious manner.

At present, it looks like the salary cap will be $12.1 million less than what it would have been otherwise for the 2022 through 2024 seasons due to having to repay the loan.  Fans can hope that the 16 additional regular season games produce a lot of revenue in 2021.  All of this assumes no setbacks due to any possible resurgence of COVID-19.  Some of the new national television deals kick in after the 2021 season; that is, for the 2022 season and the increased revenue should be reflected in the 2023 cap.  Some of the bigger national television deals do not begin until the 2023 season and will not be reflected in the salary cap until 2024.   

 

[METHODOLOGY:  It was devised by Jason Fitzgerald and I linked to his article in my June 10th article.  The $198.2 million salary cap was the last year that the salary cap was based on normal calculations devised in the CBA.  Those numbers are from 2019/2020 season.  That is the benchmark number.  The local revenue from the most recent fiscal year (2020/2021 season) was down $149.1 million, of which 47% is attributable to the players/salary cap.  That equals $70.08 million.  80% of that goes toward the salary cap calculation with the other 20% assigned to players' benefits. (I have no way to know if the reduction in revenue would be insufficient to fund basic or sunk costs attributable to the players' benefits that must be paid regardless of the usual formula, so it may be that sunk costs might require more than 20% of the revenue to be satisfied.)  In any event, 80% of $70.08 million is a negative $56.06 million.  Ditto for national revenue which was a positive $13.2 million.  Multiplied by 47% and that result multiplied by 80% equals a positive $4.96 million.  The net change is $51.1 million.  The benchmark of $198.2 million minus the net change of $51.1 million means the 2021 cap should have been about $147.1 million.  Since the 2021 salary cap has been artificially fixed at $182.5 million, some $35.4 million more than what the actual numbers would have provided, that is the amount of the loan.  2.5% interest on $35.4 million is $885,000 for a total of $36.285 which has to be repaid over the 2022 through 2024 seasons..   I am not going to compute the interest on a daily compounded basis, annually, or by the millennia for that matter.]

 
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2 points

Comments (14)

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stockholder's picture

July 18, 2021 at 06:05 pm

Time the FO takes a pay -cut.

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flackcatcher's picture

July 18, 2021 at 06:08 pm

Thanks TGR. This fills in a large blank for those of us who follow this stuff. The lost of local revue for the owners may effect their personal bottom line more than we fans know. Because the Packers have no owner, the local got plowed back into the reserve fund. (Jerry Jones and Mark Davis must hate the Packers ha ha ha... :-) Still, as you point out, this is all unknown territory for all parties in the league. And I really doubt that the owners and players are ready for the financial hits the league will be receiving over the next couple of years. (Except for the Packers, they seem to understand what's coming. I wonder how many of the 'old guard' in the league is preparing as well)

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Thegreatreynoldo's picture

July 18, 2021 at 07:41 pm

The Packers generally are in the top 10 highest for local revenue, albeit usually 8th to 10th. I always assumed that the stadium produced a lot, perhaps $100M per year (it is very hard to find data on NFL profit centers). I assume without knowing that online sales decreased as well. I figure people buy a jersey in part because they are going to attend a game, go to a bar to watch a game, or attend a private Packers party at someone's home and want to rock a new Tonyan Jersey or the like. That did not happen much in 2020, but I can't quantify those numbers.

The Packers had two home playoff games in 2020, which should have boosted revenue. Now, the NFL is socialistic in that regard: teams don't keep the money from ticket sales for playoff games. The NFL gets that money and instead pays teams a not-too-generous stipend for putting on the game. The actual ticket revenue is put into a general pot and distributed to all of the teams as revenue sharing. Players do not earn what their contracts call for either; if you are a player making $1M per game, what you get for playing a playoff game is pennies on the dollar. Players earning the minimum do pretty well, earning more than they would for a regular-season game. I can remember reading over the years that some owners grumbled that they did not earn much of anything despite hosting a home playoff game.

Teams do keep their concession revenue (and any increased online sales, of course) for their home playoff games. I found a 2014 article (sorry - couldn't find anything newer) that indicated the Patriots earned profits of at least $2M per home playoff game but that the Falcons were contractually limited to at most $500K because they didn't fully own their stadium. I do not know where the Packers fall in that spectrum, but most previous articles about the Packers' financials mention that there was or was not a home playoff game or games.

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Leatherhead's picture

July 19, 2021 at 06:05 pm

70,000 fans x $10 average concessions equals $700,000/game, and I’d bet the average is more than $10/fan. But only 1/3 of that the is profit. $2 million profit / game seems kinda high, unless things like parking and pro shop is part of it.

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Coldworld's picture

July 18, 2021 at 08:44 pm

So overall, from the Packer’s perspective this really doesn’t mean much. What they lost in football related income they more than recouped from gains on assets.

As far as the league goes, those teams who retain assets in the business not strip them likely will have had a similar result. In the end, less wealth accumulated but still either the owners (if they had taken the funds out personally) or the teams ended up richer.

I’d say, extrapolating the Packers’ results, the league could, as you suggest, afford to be more generous in terms of the cap “loan” to the players. Doing so might best ensure product quality. Other than that, the impact is nothing material for most if not all of the owners.

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MarkinMadison's picture

July 18, 2021 at 11:00 pm

I don't know about that. In a way, you're right, because they still have plenty of cash. But I don't think that the NFL factors stock market earnings on rainy day funds when they set the salary cap.

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Coldworld's picture

July 19, 2021 at 08:10 am

Not in the cap, which is an artificial calculation anyway. The underlying reality is that the Packers (and likely most owners/teams) just made a little less, hence the comment about the resources to preserve player quality despite the fact that the cap calculation will take a bigger hit on paper.

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Thegreatreynoldo's picture

July 18, 2021 at 11:15 pm

Essentially I agree. Of course, that rainy day fund is paper money. The stock market went down in March of 2020 so the gain is inflated. The rainy day fund in September was well over $400M IIRC. So, since the fiscal year started April 1, the $121M gain for the rainy day fund uses a March 31 valuation, which was down tens of millions from just a few months earlier.

But yes, GB has a lot of cash in a kitty.

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porupack's picture

July 19, 2021 at 08:37 am

oh, i hope that doesn't mean more TV timeouts, longer commercials and virtual brands superimposed all over the field.

Seriously though, thanks TGR for providing this angle of info. Thanks to you and all CHTV writers for this and all your posts, getting us through this offseason. We're almost there and you're still give us some good stuff to argue about. Cheers!

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CheesyTex's picture

July 19, 2021 at 08:54 am

Thank you, TGR. You shed so much light into the mysterious world of NFL $.

It still bugs the tweet out of me that sheer Owner GREED is having such a negative effect on Salary Cap, forcing their Front Offices to make unplanned personnel moves, and ultimately on player morale. As Coldworld points out, the Packers' franchise value actually INCREASED (and presumably other Teams' did too) despite revenue losses due to Covid.

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greengold's picture

July 19, 2021 at 10:03 am

TGR, thank you for writing this. Very helpful in understanding the Packers financial landscape compared to other teams/owners.

After spending about 13 years in Arizona, I can tell you that Cardinals franchise is a true family business, and where that team sits today is in a much different financial place than the Packers organization. We are fortunate for the structure Earl "Curly" Lambeau helped to establish as the Green Bay Packers, Inc. on August 18th, 1923.

In 1921 he appealed to the Indian Packing Company to put up $50 to buy the Packers a franchise in the American Professional Football Association, now known as the NFL. FIFTY BUCKS!!! The competition got better, and Curly wanted to be able to lure better players to Green Bay with more financial gain. That's when 5 local businessmen got together and launched the Green Bay Packers Corporation. Stock shares were $5.

Curly wanted to call the team the "Indians" in honor of the support the Indian Meat Packing Co. gave to him in buying them uniforms. His girlfriend, Agnes Aylward, suggested, "Why don't you call them the Green Bay Packers?" Team naming rights were sold to the ACME Packing Company, and they have been the Packers ever since.

Just looked up some stuff and had to share. Cheers, friends!

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Since'61's picture

July 19, 2021 at 10:16 am

Good job gg. Thanks for sharing the early history of the Packers beginnings. Since '61

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Coldworld's picture

July 19, 2021 at 06:07 pm

It’s great to have a team with so much and unique history. Curly’s corporation went belly up later, but the new one that replaced it survives today.

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Since'61's picture

July 19, 2021 at 10:11 am

Great article TGR. appreciate your hard work to bring us this information. Thanks, Since '61

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