Wednesday, August 19, 2009

Claims of Vikings' Cash Flow Problems Ludicrous

The latest rumor circulating the web is that the Minnesota Vikings are cash-strapped. The purported evidence for this is that the team reportedly spread out newly signed quarterback Brett Favre's guaranteed bonus money over a three-year period, even though all of it counts against the team's 2009 salary cap.

While economics may have prompted the Vikings to push forward some of Favre's guaranteed pay to future years, the team's financial situation almost certainly did not. Although Favre's signing was yet another indication of the team's concern that the team's fan base was becoming disenchanted and possibly disinterested in the product on the field and in the mall, the Vikings nevertheless have been sheltered--as have most all NFL teams--by the league's revenue-sharing system.

In 2008, the Vikings netted somewhere in the neighborhood of $60 million. That's net--after payroll, after debt payments, after everything. And that's a conservative figure (one broken down in greater detail previously on this site).

Though ticket sales, concessions, and suites contribute greatly to the Vikings' bottom line, like all NFL teams, the Vikings primary source of revenue is the far more bountiful largesse that is the team's portion of the league's collective wealth generated from television rights contracts, merchandise sales, and the like. In 2008, the NFL received approximately $7 billion from these sources, most of which was divided among the league's 32 teams. That meant a take of roughly $210 million per team.

If the Vikings' have cash problems, they are not indicated by their revenue streams--which approached $260 million last season. Only pilfering--not modestly lagging ticket sales or a flagging economy--could put much of a dent in that figure.

Driving home the sound economic condition of NFL teams are two other factors. The first is the league's recently renewed television deals with CBS and NBC. Those contracts, inked in May of this year, resulted in an increase in television revenue through 2011 from the two networks. Yes, an increase--that, in spite of the purportedly tough economic times for the NFL.

The NFL's own salary cap only cements the evidence of the sound financial footing of the NFL and its beneficiary teams. In 2009, the player salary cap pool per team increased from $116 million to $132 million--$4 million more than even the league had anticipated. So what? One might ask. So this--the cap is calculated strictly based on league revenues so that the players directly receive a CBA-calculated percentage of the revenues (approximately 57% in 2009). Thus, the salary cap serves as a quick proxy for league well-being, and as a nearly equally direct proxy for individual team well-being.

There is no question that the only financial concern that the Vikings currently have is whether they make as much money as their NFL brethren--not whether they are making gobs of money, which they assuredly are. Because private suites, seat licenses, concessions, naming rights, parking, and other stadium-related fan expenditures are not shared with the league, teams thus benefit even more when they have greater revenue streams in these areas. For these latter sources of revenue, the Vikings lag well-behind their wealthier peers, but that doesn't make the team poor. Not even close.

Whether the Vikings' agreed to pay Favre his guaranteed money all at once or over three or four years has nothing to do with team wealth and everything to do with the deal that the Vikings were able to make. As the purveyor of the Vikings' poorhouse status noted, time is money. It thus makes sense for the Vikings, and for any team, to pay tomorrow what they could otherwise pay today, given no penalty for paying tomorrow. All this shows is that the Vikings agreed to pay Favre $12 million in guaranteed money in exchange for the concession of delayed payments. That's all.

Up Next: The Favre Trickle-Down Effect. Plus, more stadium talk.

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