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Packers’ financials signal ESPN equity stake potentially a nine-figure boon for NFL teams
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- Packers’ financials signal ESPN equity stake potentially a nine-figure boon for NFL teams
Edit via Liam McGuire
This week, the sports media world gasped as layoffs hit high-profile names across ESPN, including at NFL Network and the show NFL Live . But while ESPN may be cost-cutting in the wake of its January 31 acquisition of NFL Network and RedZone, its counterparty is rolling in it.
The NFL exchanged those two media assets (plus its fantasy football platform) for 10 percent of ESPN, and that deal is already boosting the bottom lines of its teams. The Green Bay Packers , the only team in the NFL to publicly report earnings, told reporters today on a call that a massive $133.6 million jump in non-operating income was due to investment gains, as well as the NFL Network transaction. The year before, non-operating income was $1.9 million.
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"It's a gain," said Maureen Smith, the Green Bay Packers' chief financial officer. "It is on the balance sheet — our 1/32nd share of this investment. In addition, any gains or losses of that entity flows through our non-operating income. So that would reflect the ESPN deal and any other gains or losses that happen within that investment entity."
A few observations. The Packers would not offer the next mathematical step and break down how much of the nearly $134 million is divided between securities profits and the value of the ESPN investment. A spokesman added that the figure also includes gains from other NFL equity investments.
But most of those investments were live a year ago when non-operating income was nearly flat, and the ESPN transaction is the only one the Packers corporate hierarchy went with.
"That's almost a 7,000 percent increase," team president Ed Policy said of the jump in non-operating income. "Now that increase is really due to two things. There are two drivers there. One is gains in our investment in the corporate reserve fund. It's been a good year for those investments, and the other one is the NFL sale of the NFL Network to ESPN for a 10% equity stake in ESPN." The ESPN transaction was valued at $3 billion at the time of closing.
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The jump in non-operating income masked a rare loss in operating income, the first one for the Packers since 1989 (not including 2020, the pandemic year). The team reported $753 million in operating revenue (putting it in the second quartile of NFL clubs) but $754 million in expenses, blaming NFL player contracts for the evaporation of the previous year's cushy profit.
The team's mega trade for Micah Parsons not only signed the linebacker to a major contract, but by trading Kenny Clark , the team could no longer amortize his bonuses over the remaining years of his contract and had to account for them all in the most recent fiscal year. The team had several other similar contracts that led to a $1.1 million loss from operations (it was $83.7 million the year before).
Player costs were $447 million even as the cap was $279.2 million. The cap is largely an accounting figure, the real number for teams is cash out the door. The Packers' much larger player-cost figure reflects benefits and payments.
There are a couple more observations to make from the Packers' call, both of which are labor-related. The NFL's labor deal expires in 2031, though the skirmishing has already begun, with NFL commissioner Roger Goodell suggesting at the league's annual meeting how the salary cap is structured might need to be revisited.
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The Packers are very unlikely to report future operating losses, but they might not be as robust as in past years. Assuming this somewhat reflects the rest of the NFL, one could see the league pounding the table that margins are shrinking, and that threatens future investments (this was the line in 2011 before the lockout).
At the same time, the NFLPA will surely look at that gain on the NFL Network sale, and say players got nothing from it, but it was built on their backs. So at the very least, when determining margins, that should be included in the calculation.
This is the difference between saying the important figure in the Packers' earnings is the loss in operating income, and arguing instead the figure that counts is the $132.5 million gain in net income, which includes the non-operating bonanza.
As 2031 advances, NFL reporters better get their econ hats on.
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