Posted by John Vrooman on Tuesday, September 30, 2014 in National Football League.

Interview with Charlotte Observer.

– The Bills recently sold for $1.4 billion. How much could a franchise like the Panthers go for?

I pegged the final auction prices of $1.4 billion for the Buffalo Bills last month and $2 billion for the LA Clippers 2 months ago by using the following fool-proof blind-squirrel-finding-acorn method.

Annual NFL National revenue for 2013 was about $180 million for each club. Beginning in 2014 the national revenue for each NFL club includes TV rights of $160 million through 2022, visiting team gate share $20 million, and annual revenue from NFL Ventures (including $44 million from NFL Network and DirecTV) at about $60 million.

So equally shared revenues should total $240 million per club in the new TV rights deals regardless of the economic power of a home market. The revenue multiple for the average NFL club is about 4.8 and so the base price of any NFL club is currently about $1.15 billion (4.8 x $240m) based on capitalized national revenue alone without any consideration for home market local revenue.

Local revenue for the Panthers (Richardson Sports LP) was reported at just over $83 million in 2012 (low compared to $130 for the Green Bay Packers.) If local revenue in Charlotte is adjusted upward to $100 million for 2014 then a slightly lower (more risky) local revenue multiple of 4 can be used to estimate the present value of the cash flow from Charlotte at about $400 million. This puts the total expected value of the Carolina Panthers at $1.55 billion.

In an auction this true expected price would probably be the average bid but the team would go to the highest bid because of the monopoly power of the NFL. In the case of the Carolina Panthers the club would be valued between $1.5 billion to $1.6 billion and could go for a systematically inflated price as high as $1.7 billion.

– We have a similar situation with an older owner who has said he wants the team sold after his death. Should fans be concerned the team could move?

No, the team will not move now or in the future regardless of ownership, because there are no superior economic alternatives to Charlotte. Any gains from an  upwardly mobile move to a larger market would be taxed away by the rest of the League in the form of a relocation fee. The extortion relocation threats during the recent renovation funding debate were not credible and they are still not credible in the 4 more years non-relocation promise in exchange for even more public funding. This not-so-veiled bluff threat should have been and should be called in the future.

The irony of all of the public posturing in the renovation funding debate is that the Panthers were one of the only NFL clubs to get the original stadium funding right in the beginning.

Bank of America (Ericsson) Stadium was a revolutionary design that probably landed Charlotte the franchise to begin with back in 1995. The economic architecture that combined PSLs, Club seat mezzanine and luxury suites into a cash cow money machine allowed the Panthers to privately fund the venue (76% of total $248 million cost) . The newly renovated BOA still has economic value for the franchise.

– Why is it likely that Mr. Richardson wants the team sold?

Richardson probably wants to sell the club after his death to pay for the estate taxes. The NFL expansion fee of $140 million in 1995 has exploded more than 10 times in the last 20 years (25% cagr).  Although the estate tax was repealed in NC the Federal estate tax is applied to all estates in excess of $5.34 million in 2014. 

So the Richardson estate may have to cash out the club to afford to pay the estate tax. This has often been the case with the inheritance of a sports franchise that has rapidly appreciated in value. For example, when Joe Robbie died in 1990 his feuding family sold the Dolphins to Wayne Huizinga to cover $43 million estate taxes.

– How do the Panthers compare in value to other teams?

The 32 NFL teams can roughly be split into 8-team quartiles and the Panthers are probably at the bottom of the second quartile.  The major problem in the NFL currently is the polarizing dynamic between the upper elite 8 quartile (Dallas, New England, Washington, New York (2), Houston, Philly and Chicago) and the bottom 8 (Arizona, San Diego, Cincy, Oakland, Jacksonville, Detroit, Buffalo and St. Louis) which includes the 4 relocation possibles San Diego, Oakland, Jacksonville and St. Louis. So in the larger scheme of things Carolina is smack dab in the economic middle and the relocation threat is not credible.

– Despite recent misconduct issues, what is the overall financial health of the league and its teams?

In spite of the NFLs amazing ability to simultaneously alienate the entire political spectrum with misconduct and governance issues and tax exemption TV black out pretzel logic the NFL remains defiant but still economically strong. Elsewhere I have called the NFL bulletproof and a perfectly diversified and legalized cartel. The main strength is the $5.9 billion 9-year TV deal that runs through 2022 and the 10-year CBA than runs through 2020 and caps the players share of revenues at 48 percent.

The mega-TV deal is used as collateral for a new $1.4 billion G-4 stadium loan program that replaces the $1.2 billion G-3 loan program that ended in 2006. All bond ratings are A/A+ so the League borrows at market AAA rates and then loans to member clubs at even lower rates. The new G-4 program is housed under NFL Ventures while the old G-3 loan program is administered through the NFL Office. The NFL Office does not appear to gain any additional advantage (to the loan syndication advantage) from its nonprofit tax-exempt status the tax-exempt G-3 program and for profit G-4 loan program appear to be tax neutral on the bottom line.

New stadiums for San Francisco (Santa Clara), Minnesota and Atlanta are all receiving $200 million loans to be repaid from the visiting team share of club seat fees. Renovations in Carolina ($37.5 million), Cleveland ($62.5 million), Green Bay ($55 million) and Philly have received almost $200 million total from the Big League G-4 Bank. Overall the NFL league cartel is strong in spite of some of the bottom 8 clubs being economically weakened by a gross asymmetry in unshared venue revenues derived still unresolved stadium issues.

V