RISING PLAYER COSTS REMAIN A CONCERN
The rough economic times had a noticeable impact on the Green Bay Packers' latest financial report, as profits from the past fiscal year fell considerably over the previous year - from $23 million to $4 million, a drop of more than 80 percent.
But Packers executives credited the ongoing success of the stadium renovation, the overall fan support, and very disciplined business practices with allowing the franchise to weather the economic storm and keep it in solid financial shape.
"The strength of the organization really gives me confidence for the future," President/CEO Mark Murphy said, as the team gave a preview of its latest financial figures over the weekend. "We are fortunate to have the kind of support we do in terms of season ticket sales and corporate sponsors, and that support has really been helpful in allowing us to make it through a difficult time.
"I think we've managed our resources and our finances well, and I'm confident that things will be much better in the future, especially as the economy turns around."
Murphy and treasurer Larry Weyers pointed to three main factors for the $19 million drop in profits - significant investment losses, a softening of Pro Shop sales, and rising player salaries - though they emphasized that the organization's support of football operations has not been constrained. The team also continued its charitable efforts through in-kind and direct financial contributions to charities, foundations and community organizations. This year's charity impact amounted to approximately $4 million.
The first two factors affecting the bottom line are directly related to the economy. Investment losses in the stock market did not allow for additional contributions to the Franchise Preservation Fund, but the fund does remain at the same level as a year ago - $127.5 million.
A decrease in Pro Shop sales also accounted for a significant portion of the $5 million drop in local revenues, from $105.8 million to $100.8 million.
"The previous year was really a record year in terms of our sales in the Pro Shop," Murphy said. "We had two home playoff games. But we dropped off significantly this year, and having a losing season was part of that as well."
Despite that drop in local revenues, the organization's overall revenue rose $6.6 million, from $241.3 million to $247.9 million, which Murphy expects will keep the franchise well into the upper half in the league rankings and therefore contributing to the revenue sharing pool. Last year's $241.3 million figure ranked 10th, and this year's ranking will be known sometime in the fall.
National revenue, comprised mainly of television contracts and other league media and sponsorship deals, rose $11.5 million, from $135.6 million to $147.1 million.
But that rise in national revenue was outpaced once again by the $14 million jump in player salaries - from $124.7 million to $138.7 million - a continuing trend that was the primary reason the league owners opted out of the current collective bargaining agreement with the players' union. That agreement is now set to expire in March 2011 unless a new deal is struck before then.
For the Packers, operating expenses outside of player costs actually fell $6.1 million, as the organization monitored expenses closely during the downturn in the economy.
But the $14 million boost in player salaries still created a $7.9 million rise in overall expenses, and when the increase in national revenues is not able to keep pace with the rise in player salaries, it puts added pressure on all NFL organizations, including the Packers, to boost their local revenues. Those efforts require additional investment and expense, which is what has made the current CBA - calling for the player salary cap to be a percentage of the league's gross revenue - an unsustainable business model in the eyes of the league owners.
"The system doesn't recognize the costs that owners incur to generate that revenue," Murphy said. "The biggest area is debt service that teams incur to build new stadiums and to increase revenue, and that's pretty significant for most teams. The issue is getting recognition for the costs and changing the system so the player costs aren't escalating at such a fast rate."
The Packers' debt service is minimal, but that's not the case for all teams building new stadiums or renovating current ones. Even in the Packers' case, Murphy pointed out that from 2005 through 2008, the Packers generated $82 million in incremental revenue, and $65 million of that went to player salaries.
Combine that with the downturn in the economy and it does create financial pressure on organizations like the Packers already in the top half in revenue rankings, not to mention those further down the list.
"Our profitability the last few years really reflected the success of the renovation of Lambeau Field, and the fact that we've been able to get through this year and still have a profit, though smaller, demonstrates that our conservative nature and establishment of the preservation fund has been rewarded," Weyers said.
"I think it's also a tribute to our fan base and the Packer image. Even when times get tough, we still have fans who are very loyal to us and fans who want to come and see the Packers and spend time at Lambeau Field."
{sportsad300}Looking toward the future, the franchise made two notable capital investments in the past year - the rebuilding of Nitschke Field and the purchase of both a new building for the Pro Shop warehouse and new data management software for Pro Shop operations.
The new Nitschke Field will serve as the team's training camp venue beginning this summer, with permanent bleachers and lighting. A portion of the field also will be heated, allowing the team the option of practicing outside in the colder weather late in the season.
The new Pro Shop warehouse will be located nearby on Ashland Avenue and, along with the data management software, will provide for more efficient retail operations, particularly for online sales.
"We focused capital expenditures this year on things that would have a direct impact on our fans, from a service and relationship standpoint, and our football team," said Jason Wied, vice president of administration/general counsel. "We think during a difficult economic year these are very sound investments for the Packers to continue to make. Our fans and our team are always going to be our top priorities."
The organization also looked strongly at the economy's impact on the fans in deciding not to raise ticket prices for the coming season, in a year when it would normally do so.
On the long-term horizon, plans for development within and around Lambeau Field are being discussed with local political and community leaders. More than a year ago, the Packers purchased various parcels of real estate in the stadium vicinity with an eye toward future development. Last year, the franchise also put on hold a planned Atrium expansion, preferring to step back and make sure any new developments fit the bigger picture.
"When you talk about a broader development plan like that, the plan itself can't be dictated by one entity," Wied said. "The Packers are one stakeholder of many in this. We need community input, and we want to make sure we're getting input from all the right people locally. There's no specific timeline in place, but we want to make sure we're having the broadest positive impact possible on the community itself."
