Colts and Super Bowl and Jim Irsay and Sports Business

Super Bowl win not necessarily profitable

January 29, 2007

On Super Bowl Sunday, Indianapolis Colts quarterback Peyton Manning will likely be going deep to wide receivers Marvin Harrison and Reggie Wayne.

If the Colts win Feb. 4, team owner Jim Irsay also will be going deep--into his pocket.

Contrary to popular belief, winning the Super Bowl is not a huge financial windfall--at least not in the near term for the team and its owner.

In a quirk of NFL economics, expenses rise and revenue falls for playoff teams, sports economists said.

But there are measures teams can take to make the championship run pay.

If history is any indicator, a Super Bowl XLI victory for the Colts will mean a significant ticket increase for the team's fans.

Seven of the last 10 Super Bowl champs have increased ticket prices the following year more than 10 percent, and four of those raised ticket prices more than 20 percent.

And with good reason. Eight of those 10 teams reported a double-digit increase in either season-ticket sales or the length of their season-ticket waiting list. The Tampa Bay Buccaneers saw their season-ticket waiting list grow a whopping 60 percent following their first Super Bowl victory, in 2003.

Ticket-price increases are one of several means by which Colts officials could seek to offset Super Bowl expenditures, sports marketers said. Colts officials were not available for comment.

"They'll try to leverage this into not only ticket sales, but things like sponsorships, suite sales and stronger local TV and radio deals," said Milt Thompson, president of Grand Slam Cos., a locally based sports marketing consultancy. "It will be incumbent upon the team to be creative enough to maximize their revenue from this."

Pain and gain

Balancing long-term opportunities and challenges generated by the success of a Super Bowl run will demand the attention of Irsay and his top front-office lieutenants in the coming months.

Without proper management, the short-term expenses that come along with the team's success can turn into long-term financial nightmares.

"Super Bowl success in many ways causes management headaches," said Mark Rosentraub, noted sports economist, author and former IUPUI dean.

Among the challenges will be paying additional cash to players, coaches and front-office staff whose contracts call for Super Bowl bonuses. Sports business experts said that could exceed $15 million for the championship team. That would eat up more than half of the Colts' $25 million operating income for 2006, according to Forbes Magazine.

Each player for the winning team will get $78,000 from NFL coffers and each member of the losing team will get $40,000. But many players, especially marquee players, will want much more.

The title will send lots of staffers--not just players--running to Irsay and team President Bill Polian for long-term salary increases that exceed bonus amounts.

"A lot of people will be lining up in front of [Jim Irsay] with their hands out," said David Carter, principal with Los Angeles-based Sports Business Group. "That's the way this business works."

Player payroll increases could easily push the Colts up against next year's $109 million salary cap. This year, the team had a $96 million player payroll, $2 million less than the Bears, according to Forbes. Both teams, sports business experts said, can expect hefty payroll hikes to keep their teams intact.

"There's a real salary cap balancing act once you get to the top," Rosentraub said. "In 2008 and 2009, the Colts will find themselves in the same position that has weakened the New England Patriots."

Ironically, Rosentraub said, it was salary cap concerns that forced the Patriots to let all-pro kicker Adam Vinatieri go. Vinatieri was a key off-season acquisition last year for the Colts.

While the NFL covers basic playoff and Super Bowl travel and hotel expenses for players and coaches, teams often supplement that. And Irsay will have to foot the bill to transport and house front-office staff, corporate partners and others in Miami.

"The entertainment and networking opportunities for a team owner at a Super Bowl are huge," Rosentraub said. "You know that's going to cost [Jim Irsay] some serious cash, because he's going to throw one hell of a party."

Hospitality officials said hotel accommodations, transportation and entertainment could cost the Colts $1 million or more.

Party expenses might seem frivolous, but the wining and dining that goes on at a Super Bowl can pay long-term dividends, Carter said. The year after New England won its first Super Bowl in 2002, it signed a $100-million-plus sponsorship deal with Gillette. Following Super Bowl victories in 1998 and 1999, the Denver Broncos signed a $60 million sponsorship package with Invesco Funds Group. When the Dallas Cowboys were winning Super Bowls in the 1990s, they inked a strong eight-figure pouring-rights deal with PepsiCo.

Sharing the wealth

The National Football League's strong revenue-sharing policy--the same policy that makes it possible for a team in Indianapolis to compete with large markets like Chicago--makes it almost impossible to make a quick buck from the playoffs.

In the regular season, home teams get 60 percent of ticket revenue, plus revenue from suites, concessions and parking, but playoff games and the Super Bowl are the property of the NFL. Teams get reimbursed for travel and most stadium operations, but the league sucks up most of the ticket and other game-day income for its revenue-sharing pot.

While there are some ways for teams to make money through home playoff games--such as hospitality, local broadcasting deals and certain in-arena advertising--the NFL's playoff format isn't nearly as lucrative for the featured teams as are the post-season formats for the National Basketball Association and Major League Baseball, where each playoff round can mean three or four additional home games. A run to the NBA championship or World Series can mean an additional 28 home and away games. The Colts, by contrast, will play only four post-season games this year, and only two added home dates.

The Colts are further hampered by the 22-year-old RCA Dome, which has fewer revenue-generating features than many of its NFL counterparts, Rosentraub said.

Not only does the majority of ticket revenue get shared among the NFL's 32 teams, but so does apparel sales, a multimillion-dollar revenue stream generated by teams reaching the Super Bowl. The Colts get a slightly larger cut for items sold at the RCA Dome or in their team-owned gift shop at Circle Centre mall.

"It's a system that helps keep all the teams competitive theoretically, but it's not one that necessarily pays immediate dividends for winning in the playoffs," said Andrew Zimbalist, a professor at Smith College in Northampton, Mass., and a noted sports economist.

For a small-market team like the Colts, the post-Super Bowl hit is harder to absorb. On Forbes magazine's annual NFL valuation rating, the Colts were 22nd in 2006, with revenue of $167 million. The Bears meanwhile were ranked 10th, with revenue of $201 million.

While a Super Bowl trip certainly raises the value of NFL franchises, it doesn't raise a team's relative value as much as an NBA or World Series title would, according to Forbes.

The bottom line for NFL owners when it comes to winning the Super Bowl may well be to forget the bottom line.

"It may actually cost you a couple million in the short term to win the Super Bowl," Zimbalist said. "At the end of the day, though, it's still about winning, and a belief that, in the long run, winning trumps losing every time."

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