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SBJ/20080623/This Week's News
Packers: Higher player costs cut into profit
Published June 23, 2008
The Green Bay Packers’ operating profit declined 37 percent to $21.4 million in the most recent season because of rising player costs, the team said, but investments boosted net income.
The mixed picture emerges as the NFL and the players union appear headed for labor battle, with owners claming the current labor pact has compressed profit margins to a point where the deal is no longer working economically. Because Green Bay is the only NFL team to publicly report its financials, the union has raised the club’s healthy results in the past as a defense of the current deal.
And the numbers that the team will mail out to its shareholders this week certainly have not changed the labor group’s mind.
“Net income went to $23 million, poor little Green Bay,” said Gene Upshaw, executive director of the NFL Players Association. “This is why they [the NFL] don’t want public disclosure of their numbers. If this is the middle, based on the size of the Green Bay market, what is the top?”
Nonetheless, Green Bay described the decline in operating profit from $34 million to $21.4 million as troubling, even though revenue jumped 11 percent to $241 million.
“Traditionally the national revenues have covered player costs,” said Mark Murphy, the team president. “And the trend is at this point it (revenue) is not keeping up. That is the crux of the issue we have with the players union.”
Team operating expenses rose nearly 20 percent to $219.9 million, which the team blamed on player costs. But the union pointed out that the team let several front office executives go, and severance payments could have contributed to the rise. The team’s cash spent on players actually decreased by about $1 million in 2007 to $101.5 million, the NFLPA said.
Murphy attributed that to timing of payments. Vicki Vannieuwenhoven, the Packers’ vice president of finance, said by the team’s calculations, player costs rose 7 percent in 2006, and 13 percent in 2007.
The league has told the union that profit margins are slipping into low to mid-single digits, so Green Bay would still appear to be an outlier in this regard with an operating profit margin now at 9 percent. Green Bay is aided by being one of the few NFL teams with little debt, as the city and state paid almost entirely for the renovated Lambeau Field.
Upshaw pointed out that borrowing is a voluntary decision of clubs, and that the teams, not the players, own the underlying asset carrying the debt, so it’s unfair to ask the union to share in that risk.
Green Bay’s results were helped again by a rise in leaguewide NFL money from sponsorships, licensing, and satellite TV and radio. The figure, categorized as other national revenue, after rising 74 percent in 2006, rose another 26 percent in the year ended March 31, 2008, to nearly $33 million. Extrapolated over 32 teams, that means the NFL distributed $1.05 billion from these sources, compared with $480 million just two years ago.
The NFL last month opted out of the current collective-bargaining agreement. This coming season and the following are left intact, and 2010 would become the third and final campaign, though there would be no salary cap that year.
The Packers have been building a fund in part to cover expenses in the event of a labor disturbance. Dubbed the Packers Preservation Fund, the pool was at $127.5 million as of March 31.