SBJ/January 24 - 30, 2005/This Weeks Issue
The payoff for making the playoffs comes later for teams
Published January 24, 2005
The two teams heading to Jacksonville for the Super Bowl in 13 days carry with them a dirty little secret of the NFL: For all the plaudits and attention and fame, clubs reaching the ultimate football game will almost surely lose money in doing so.
Unlike the other major sports leagues, where making the playoffs can be the difference between red and black ink, the NFL’s system of sharing is actually accelerated during the playoffs. While almost all NFL teams earn a nice profit because of the league’s massive TV deals and sponsorship, a long playoff run can actually chip away at the bottom line.
Like a bureaucratic commissar, the NFL collects all the ticket revenue from playoff games and then doles out to each team an expense stipend to cover costs.
Revenue sharing often keeps teams from breaking even on playoff costs.
The checks are $600,000 per club for the wild-card round, $800,000 for the next round, with higher amounts for the last two, a source said. A home team also subtracts stadium operations costs from the ticket revenue it hands over to the league.
But if a team’s expenses are larger than its NFL check, say because of a large entourage, extra pricey championship rings or an extravagant postgame party, then the club eats the extra costs.
“The ancillary benefits of being in the playoffs far outweigh the expenses,” said John Jones, the Green Bay Packers’ chief operating officer. The following season, a team can charge more for sponsorships, ads, tickets and concessions, he said. In addition, there are benefits in national branding opportunities.
John Mara, executive vice president of the New York Giants, agreed, noting, “If you are winning, people want to be associated with you. … If you are losing, it’s a different ballgame.”
Mara’s Giants eked out a small profit during their Super Bowl run four years ago. But many other executives at teams said losing as much as a few hundred thousand dollars during a playoff run is not uncommon.
With most teams earning millions of dollars annually, the loss is a small price for the glory and future financial benefits that accrue.
During the regular season, teams keep most of their ticket revenue, with some club-seat money diverted either into a leaguewide stadium fund or shared with other clubs and players.
In the playoffs, the teams can keep only categories like concessions, parking and game-day publications.
The system dates back to before the first national media deal, which was struck in 1963. Prior to that year, NFL clubs had their own individual TV deals, so some clubs were at a disadvantage. As a result, the league needed a uniform way to pay player playoff bonuses, said Marc Ganis, a sports consultant.
So, playoff gate became the league’s first national shared revenue stream, he said. When the first national media deal was signed, the league just kept the playoff system. Any profit the league comes away with is distributed evenly among all 32 NFL clubs.
Keeping the regular-season revenue-sharing formula, in which teams retain most of their gate, would deprive the league of the funds to pay playoff bonuses, Ganis said.