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Sunday, October 20, 2002

Bengals rake in money despite losing




By Mark Curnutte
The Cincinnati Enquirer

        Bradley DePoy of Chillicothe describes himself as a die-hard Bengals fan who normally goes to five or six games a year. “What can the fans do to help improve this team?” Mr. DePoy asks. “We may have to hit Mike Brown in the pocket. Is an all-out boycott the only answer?”

        The Bengals would feel a precipitous drop in attendance, especially from the likes of an organized ticket boycott. But the average NFL team gets 60 percent of its revenue ($70 million this year) from the league's national TV contract, and an increasing amount of the gate comes from corporate customers.

        So Joe Fan has little leverage on an NFL team - even if he's buying the most expensive $54 general-admission seat at Paul Brown Stadium.

        Frustration with the Bengals is at an all-time high in Greater Cincinnati. Even though the Bengals are into their third year in the taxpayer-funded stadium, they are 0-6 for the second time in the past three seasons.

NFL MONEY BAGS
  The NFL is the most popular sports league in the United States.
  Simply being one of the 32 member NFL teams is lucrative.
  Here is estimated income earned by the Bengals in fiscal year 2002.
  • Share of NFL's national television contract, $69,402,161.
  • Other NFL revenue, corporate sponsorships and merchandise sales, $5,290,637. (The Bengals received an equal share even though their merchandise ranks in the bottom third of individual team sales.)
  • Expansion fee payment from Houston Texans, $4,963,000. (Teams will receive an additional $5 million in fiscal year 2003 and $3.3 million in FY 2004).
  • Total, $79,655,798.
  Source: Green Bay Packers 2002 fiscal year shareholders report. The Packers are the only publicly held NFL franchise.

        The Bengals said they needed the additional revenue that the new stadium would create to be competitive. Instead, they have delivered a 10-28 overall record since taking occupancy of Hamilton County's $380 million football stadium.

        A 12th consecutive season without the playoffs is all but a certainty, and the composite record under Bengals president Mike Brown is 53-129 and counting.

        Many fans say that Mr. Brown and his family ownership group care more about making money than winning. The fans argue that owning an NFL franchise is so profitable that winning and the inhabitants of the cheap seats can be ignored.

        “Owning an NFL franchise is lucrative in and of itself,” says David M. Carter, a Los Angeles-based strategic marketing expert who teaches the business of sports and entertainment in the USC graduate school of business.

        Bengals executive vice president Katie Blackburn, Mr. Brown's daughter and heir apparent, insists that the club does care about winning and feels its fans' frustration.

        “If you're winning, you're going to do better,” Mrs. Blackburn says. “The goal is, if looking at it only from the business perspective, we should want to put together a winning team so we can do well financially - like everybody seems to think that's our only concern.

        “We want to win.”

        The Bengals, like other NFL teams playing in a taxpayer-funded stadium, have two major revenue sources that don't depend directly on support of the everyday fan or fielding a quality product.

        The Bengals and 31 other teams received $80 million apiece in shared revenues from the NFL in fiscal year 2002. And franchises make millions more from the sale of luxury suites and club seats that cater to a corporate clientele.

        Lease payments average out to approximately $100,000 each year on the 100 luxury boxes at Paul Brown Stadium, and the Bengals' lease with Hamilton County gives the club all revenue from the suites on game days.

        Club seats are $205 each this season. John Ziegler, of Mount Adams, purchased two to share this season with his grown son. Someone else had given them up. Mr. Ziegler had given up Bengals season tickets in 1989.

        “They want a four-year commitment to renew,” Mr. Ziegler says. “I'll probably do it. I love football. And you see (bizarre) things at Paul Brown Stadium you can't see anywhere else.”

        The $70 million in TV money for each team comes from the NFL's eight-year, $17.6 billion national contract. The television money essentially covers the cost of a team's player salaries. Salaries are capped this season at $71.7 million by the league's collective bargaining agreement. No other sports league gets as much TV money, and no league approaches the NFL's ability to pay its players with broadcast dollars alone.

        The Bengals are spending right at the cap, says Mrs. Blackburn.

        “I do think the assumption we would win if we just spent more money on players is just another false statement that keeps getting thrown out there,” she says. “It's not because we're not spending the money. Obviously, we have to do something else, whether it's getting (more) out of the guys we've got or getting a couple new guys in there, maybe a little bit of everything.”

        The league also shares other revenue evenly.

        Even though the Bengals are in the bottom third of league merchandise sales, they still received the same payment of roughly $5.3 million in pooled merchandise and national sponsorship money, according to figures culled from the Green Bay Packers' financial report. The Packers are the NFL's only publicly-held franchise.

        Their 2002 shareholders report also shows that 31 NFL teams, including the Bengals, have received $10 million in expansion fee payments the past two years and will get another $3.3 million in fiscal year 2004 from the Houston franchise. The Texans are in their first season of play, and the Bengals will travel to Houston to play on Nov. 3.

        These items all add up to make the Bengals more valuable.

        The franchise is worth $507 million, according to Forbes magazine. And the Bengals had $130 million in revenue and $15.5 million in operating income last year, up from an estimated $8.6 million in operating income in 1999.

        As a private company, the Bengals have successfully resisted repeated efforts to examine their financial records. Hamilton County commissioners tried to obtain detailed financial information from the Bengals during lease negotiations on Paul Brown Stadium in 1996 and '97.

        Sal Galatioto, managing director of the Sports Advisory Group of Lehman Brothers in New York, estimates that the average NFL team gets 60 percent of its revenue from the national TV contract. Another 25 percent comes from gate receipts, and 15 percent is from venue-generated income such as concessions and signage.

        Some larger markets, such as Dallas and Washington, D.C, have two or three times the number of stadium luxury boxes as the Bengals, Mr. Galatioto says. The cheap seats filled by the average fan become more important for the Bengals, he says, because the club gets a larger percentage of its revenue that way.

        But only nine times in 19 games at Paul Brown Stadium have the Bengals distributed as many tickets as the 59,755-seat capacity of their former home, Cinergy Field.

        Darker days might be ahead for the Bengals.

        The NFL's television contract is up after the 2005 season, and with networks losing large sums of money on the deal because of the soft advertising market, few experts expect the league to fetch another contract as big as the current one worth $17.6 billion over eight years.

        Also pressing the Bengals is the approaching expiration of some luxury-box leases. About 40 percent of the Bengals' suite holders have six-year leases, and their leases will expire after the 2005 season.

        Twenty percent of the boxes are leased for eight years, and 40 percent have 10-year contracts.

        Until they win, the Bengals will have to deal with the widely held image that they care more about money than winning.

        “When will everyone realize that Mike Brown will treat this team like the Cubs are treated in Chicago?” says Adrian Engelberth, a self-described ex-Bengals fan from Hoffman Estates, Ill. “Why field a product that can win when people show up each week any way?”

        Baseball's Cubs benefit from playing in the most charming ballpark in the big leagues, Wrigley Field, which is a drawing card by itself.

        The Bengals' biggest plus is simply being an NFL member club.

        E-mail: mcurnutte@enquirer.com

       



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