Posted: 1:00 p.m. Tuesday, Sept. 3, 2013
By David Fucillo
Over the weekend, Tim Kawakami had an interesting report on the 49ers new stadium. According to his sources, the 49ers could be in line for upwards of $100 million in profit in their first season at the new Levi's Stadium. The team has done a great job selling season tickets, and they've connected on some big time partnership deals.
Kawakami's sources indicate the profit would be a result of a potential increase in annual revenues from around $220 million to closer to $400 million. As Kawakami pointed out, this moves them closer to the neighborhood of the Dallas Cowboys and Washington.
The most important part to me was this point:
By the way, that's up from a $0 expected paper profit for this year and the past few years. I'm told that while the 49ers have been a (barely) profitable enterprise in this era, on the straight revenue-in/cash-out basis, they have not had a profit to speak of.
We'll never know rock solid financial numbers because the Green Bay Packers (a "publicly-owned" entity) are the only team that have to provide that information to the public. We're left with anonymous sources and random reports. For example, Forbes.com puts together various valuations of professional sports franchises. They are entertaining, but it's hard to take them super serious given the lack of public information. They claimed that in 2012, the 49ers had a profit of $30 million. They did not provide specific "profit" information for 2013.
I generally am not inclined to believe when a professional football is making little profit, but given the 49ers are playing in a worn-out stadium, I am willing to give them some benefit of the doubt. Professional sports franchises have plenty of ways to turn actual profit into no profit or even a loss as needed.
I spent 4+ years working in the finance department of a professional sports team. Teams can amortize player contracts as a depreciating asset, which can add up with a larger payroll. The 49ers did go through a brutal decade before Jim Harbaugh came aboard, so it would not surprise me if their profits were less than stellar.
Although there is a salary cap in the NFL for player salaries, extra revenue can still put the franchise in a position to continue its success. This increase in revenues means more money to retain the coaching staff. It means more money for the scouting department. It means more luxuries for the team, which could potentially influence free agents. Even in focusing on player salaries, it could potentially provide more up-front cash for signing bonuses.
These kinds of revenues provide the 49ers with a chance for a serious competitive advantage. This does not guarantee the team hits on every draft pick, or every free agent, but it provides them with the tools to get as close as possible to the unachievable perfect.