Football Revenooers League
Franchise Financial Model
Proposal: To have
a separate “game within a game” of profit/loss calculation associated with a
fantasy football league, modeled after the NFL.
This will be included into a new 16-team, 53-man roster, TE/DT premium, start 13 IDP, complex scoring, salary cap contract league I am starting for the 2018 season,
*** WARNING *** The profit/loss model is intentionally complex in order to make it more difficult to game, but the two most important factors regarding whether a team is profitable is how often they win games, and what and when they make decisions regarding improving their stadium.
I. Franchise Revenue
Franchise Revenue
will be derived from broadcast rights, national sponsorships (together being
fixed amounts shared by all teams amounting to 55% of overall revenue), ticket
revenue, luxury suite and club seat revenue, local sponsorships, and other
gameday revenues (such as parking and concessions).
Broadcast rights and
National sponsorships: Will change each year by the % change of the NFL’s
salary cap. For example, from 2017 to
2018 the salary cap increased from $167M to $177.2M, or 6.1%. These will initially produce 55% of total
revenue but may change as fantasy league revenue growth and NFL revenue growth
diverge.
Ticket Revenue: Each
team will be able to keep 75% of home game ticket receipts, 50% of neutral site
receipts, and 25% of away game receipts.
The game receipt value will be calculated by a formula using both teams’
fan base support, and stadium size and viability (see Revenue Points and
Stadium Multiplier below). This will
initially compose approximately 15% of total franchise revenue.
Luxury Suite and Club
Seat Revenue: Each team will keep 100% of their home games’ revenue
generated by luxury suite and club suite sales, using a similar formula as
ticket revenue. This will initially
compose approximately 10% of total franchise revenue. In subsequent years, it will increase at
least 2% times the stadium multiplier, times an adjustment of the team’s end of
year RPs.
Local Sponsorships: Consisting of stadium naming rights, stadium
signage, and similar corporate partnerships.
As such agreements are normally formalized prior to the season, the
amount will be based on the team’s prior season’s results, adjusted by stadium
size and viability. In the initial
season, all teams will receive the same amount, totaling $50M. In future years, the team will be assigned an
amount ranging from $20M to $80M, subject to the stadium multiplier, though
this range will be increased by 2% per year for inflation.
|
Rk
|
Local Sponsorship Revenue
(Baseline)
|
|
1
|
$80M
|
|
2
|
$75M
|
|
3
|
$70M
|
|
4
|
$65M
|
|
5
|
$60M
|
|
6
|
$55M
|
|
7
|
$55M
|
|
8
|
$50M
|
|
9
|
$50M
|
|
10
|
$45M
|
|
11
|
$45M
|
|
12
|
$40M
|
|
13
|
$35M
|
|
14
|
$30M
|
|
15
|
$25M
|
|
16
|
$20M
|
Additional revenues
include any relocation fees paid by other franchises and distributed to the
other team owners, and carry forward dollar amounts from one year to the next
(explained in greater detail under expenses).
II. Franchise Expenses
Franchise Expenses
will consist of player signing bonuses, player salaries, coaching and scouting
salaries, team administration, gameday operations expenses, stadium and field
maintenance, and debt repayment.
Player Signing
Bonuses – When a player is acquired by a team either in the rookie draft or
veterans auction, 40% of the total contract amount will be the player signing
bonus. For example, a player who
receives a 4-year contract with a first year salary cap figure of $10M will
have a signing bonus of $18.5M (40% of the first year $10M cap amount plus 40%
of the second year $11M number, 40% of the third year $12.1M number, and 40% of
the fourth year $13.3M number). The
cumulative new player signing bonuses will be it’s own line item on the team
financial report.
Player Salaries –
Total team player salaries will be calculated as 60% of the total roster salary
cap dollar amount at the conclusion of the veterans auction.
Coaching and Scouting
Salaries – All franchises will begin with coaching and scouting salaries
totaling $25M. This total will increase
by 5% each year. When a franchise
announces a coaching change, these salaries will by increased $5M that year.
Team Administration –
All franchises begin with team administration expenses of $10M. This total will increase each year by a
multiplier consisting of 10% times the city ownership percentage. For example, a franchise in New York will
increase $1M in the second year whereas a franchise in Denver will have these
expenses increase $0.7M. When a
franchise announces a city relocation, team administration expenses will
increase $5M.
Gameday Operations
Expenses – Each team begins in year zero with $10M in annualized gameday
expenses. These are adjusted at the end
of the year by a 2% increase due to inflation, as well as half the new year’s
stadium multiplier and half the previous year’s end-of-year RP. For example, after the first season, a team
has an end-of-year RP of -10 and invests in a major renovation. The new season’s gameday operations expenses
will be $10M * 1.02 (inflation) * 1.15 (half the new stadium multiplier) * 0.95
(half the end-of-year RP) = $12.60M.
Stadium and Field
Maintenance – All franchises begin with stadium and field maintenance costs
of $20M. These expenses increase 2% each
year, unless a new stadium, or stadium improvement is completed, which will
increase these expenses by half the stadium multiplier as a one-time increase. For example, a major renovation has a stadium
multiplier of x1.3, so that year the maintenance expenses will increase 1.15,
or 15%.
Debt Repayment – Whenever
a franchise declares a stadium improvement, they also declare the timeframe for
financing that improvement over a number of years, interest free. Additionally, the team must pay 5% on
cumulative franchise monetary losses over the prior two seasons. For example, if a franchise has lost $50M and
$10M over the prior 2 seasons, they have an interest expense of $3.0M in the
current year.
For the initial two years, each franchise will have a debt
amount of $50M multiplied by their city’s debt %.
Relocation Fee –
A team that relocates to a new city pays the league a relocation fee of $90M
per year over three years. This fee is
distributed to the other teams equally.
Carry Forward Amount
, or Debt Payoff – At the beginning
of the league year, each franchise may announce an amount of money between $0
and $50M, in increments of $10M, to either pay down their current debt, or to be
placed aside for future stadium improvements.
This dollar amount is counted as a current year expense and thus affects
the determination of end-of-year profit prizes.
Stadium Ownership and
Debt Percentages
Each franchise will be based in an actual city capable of
supporting a major sports franchise. The
more populous a city, the greater the potential for ancillary revenue associated
with hosting games, but the less they are willing to provide financial support
for stadium construction and renovation.
For example, a franchise based in New York will keep 100% of all
game-related revenue, but will be responsible for 90% of all construction and
renovation costs, whereas the city of Denver will cover 40% of costs, but in
return demands 30% of all gameday revenue to cover that investment. The percentage difference is because studies have shown that cities end up paying for significant hidden costs associated with infrastructure improvement and waste cleanup that average to about 10% of the total project costs.
When building a new stadium, franchises can declare an
ownership / debt % amount within 10% of the base value in the table below, so
long as the debt % is 10% less than the ownership %, and ownership % cannot exceed 100%.
|
Rk
|
Cities
|
Ownership %
|
Debt %
|
|
1
|
New
York
|
100.0%
|
90%
|
|
2
|
Los
Angeles
|
100.0%
|
90%
|
|
3
|
Chicago
|
95.0%
|
85%
|
|
4
|
Dallas
|
95.0%
|
85%
|
|
5
|
Houston
|
90.0%
|
80%
|
|
6
|
Washington
|
90.0%
|
80%
|
|
7
|
Philadelphia
|
85.0%
|
75%
|
|
8
|
Miami
|
85.0%
|
75%
|
|
9
|
Atlanta
|
85.0%
|
75%
|
|
10
|
Boston
/ New England
|
80.0%
|
70%
|
|
11
|
San
Francisco / Oakland
|
80.0%
|
70%
|
|
12
|
Phoenix
/ Arizona
|
80.0%
|
70%
|
|
13
|
Detroit
/ Toronto
|
75.0%
|
65%
|
|
14
|
Seattle
|
75.0%
|
65%
|
|
15
|
Minneapolis
/ Minnesota
|
75.0%
|
65%
|
|
16
|
San
Diego / Anaheim
|
70.0%
|
60%
|
|
17
|
Tampa /
Orlando / St. Pete
|
70.0%
|
60%
|
|
18
|
Denver
/ Colorado
|
70.0%
|
60%
|
|
19
|
St.
Louis
|
65.0%
|
55%
|
|
20
|
Baltimore
|
65.0%
|
55%
|
|
21
|
Charlotte
/ Carolina
|
65.0%
|
55%
|
|
22
|
Portland
|
60.0%
|
50%
|
|
23
|
Pittsburgh
|
60.0%
|
50%
|
|
24
|
Cincinnati
|
60.0%
|
50%
|
|
25
|
All
other cities
|
55.0%
|
45%
|
Stadium Multiplier
New stadiums and stadium improvements dramatically increase
the scale and variety of potential revenue streams to a team. Because the salary cap increases as a
percentage of overall league revenues, franchises must compete not just on the
field, but in maximizing local revenue streams in order to stay
competitive. Otherwise, player salaries
may increase faster than team revenue, and they will find themselves losing
quite a bit of money. Unfortunately (at
least in this game), these stadium improvements are expensive.
Franchises can declare they are performing renovations
somewhat frequently. Both minor and
major renovations have no lead time. A
stadium, however, does have lead time, depending on the size of the
stadium. Yet construction expenses begin
the year the declaration is made. No
stadium improvements may be performed the year after a minor renovation, the
two years following a major renovation, or three years following construction
of a new stadium.
When announcing a stadium improvement, a franchise will
declare the number of years in which they are spreading out the costs. Renovations can be paid all at once in the
first year or spread out up to 5 years with no interest costs. Stadium financing may be up to 10 years in
length. For example, a team in
Pittsburgh is responsible for 50% of all stadium-related expenses, and declares
that they will construct a new Large Stadium, with 8 years financing. They will begin paying $50M per year ($800M x
50% / 8 yrs) immediately, but will not receive the x2.0 multiplier on all
stadium-related revenues until Year 3, as the first two years will have the new
stadium being under construction.
|
Improvement
|
Cost
|
Multiplier
|
Construction Time
|
Frequency
|
|
Minor Renovation
|
$75M
|
x1.1
|
0 years
|
1 per 2 yrs
|
|
Major Renovation
|
$200M
|
x1.3
|
0 years
|
1 per 3 yrs
|
|
New Standard Stadium
|
$400M
|
x1.5
|
1 year
|
1 per 10 yrs
|
|
New Large Stadium
|
$800M
|
x2.0
|
2 years
|
1 per 10 yrs
|
|
New Mega Stadium
|
$1,600M
|
x2.5
|
3 years
|
1 per 10 yrs
|
Revenue Points
Each team earns or loses Revenue Points (“RPs”) based on
their game results and season achievements.
Each Revenue Point corresponds to a 1% adjustment in game-related
revenue. At the league start-up, all
teams begin with 0 RPs. Teams may accrue
both positive and negative RPs.
During the season, a Home victory increases the team’s RPs
by 2, an Away victory by 1, a neutral site win by 1.5 RPs, and a bonus 1 RP for
the length of the current win streak.
For example, a Team wins their 4th game in a row at
home. Their RPs increase 2 points for
the home win, plus a bonus 3 points for the 4-game win streak, or 5 RPs
total.
Likewise, a Home loss changes the team’s RPs by -2, an Away
loss by -1, a neutral site loss by -1.5 RPs, and an extra penalty -1 RP for the
length of the current losing streak. So
if a team loses its 4th game in a row at home, they decrease their
RPs by -2 for the home loss, and another -3 RP penalty for the 4-game losing
streak, or -5 RP total change.
Game Revenue
Adjustment
Game revenue is adjusted by a percentage based on the
combined RPs of both teams. Each RP
corresponds to a 1% adjustment in revenue.
For example, the Home team has +12 RPs, but the Away team has -8
RPs. They combined RPs between the two
competing teams is +4, so game-variable revenue will be 104% of the base
amount. If the Home team has positive
RPs, then the adjustment cannot fall below 100%. Likewise, there is a cap in how much of an
adjustment can take place, between a minimum amount of 50% and a maximum of
200%. So if both teams combined for less
than -50 RPs, the 50% adjustment would be used.
Similarly, if they combined for more than 100 RPs, the max 200% would be
used.
Based on this, you can see that a game featuring two bad teams
will have little fan interest, and thus lower game-related revenue. Whereas, a game featuring two good teams,
such as a playoff game, can a big payday for the home team. A team that wins home field advantage for the
playoffs can really separate themselves in this area from the rest of the
league.
The league championship game is played on a neutral field,
as are all Bidet Bowl and Toilet Bowl games.
Other In-season RP
awards
+3 Clinch Division Title
-1.5 Eliminated from Playoffs
+10 Win Championship
+ 4 League Runner-up
-5 Lose first round of Toilet Bowl
-1 Lose first round of Bidet Bowl
-2 Lose second round of Toilet Bowl
Off-season RP Changes
and Awards
At the beginning of a new league year, each team’s RPs are
adjusted by 75%. For example, a team
with +100 RPs will have them reduced to +75, and a team with -100 RPs will have
them increased to -75.
A team may announce the hiring of a new head coach if their
team is 8 games below .500 over the prior two seasons or 10 games under .500
over the prior three seasons. A team may
only announce two head coaching changes every five seasons. A coaching change produces a one-time 20
point increase in the franchise’s RPs, or cuts their negative RP total in half,
whichever is better for the franchise.
A team may also relocate their franchise to a new city. Once they make the declaration, they
immediately lose 50 RPs. However, once
the relocation is complete and they are in their new stadium, their RPs are
re-set to zero.
Prior to the beginning of the regular season, the following
RP adjustments will be made:
+15 RPs to team that uses the 1st overall rookie
draft pick
+10 to team that uses the 2nd overall rookie
draft pick
+5 to team that uses the 3rd overall rookie draft
pick
-10 to team that is the last to use a rookie draft pick
-5 to team that is the second to last to use a rookie draft pick
-5 to team that is the second to last to use a rookie draft pick
+15 to team that spent the most $ in the veterans auction
+10 to team that spent the second most $ in the veterans auction
+5 to team that spent the third most $ in the veterans auction
+10 to team that spent the second most $ in the veterans auction
+5 to team that spent the third most $ in the veterans auction
-5 to team that spent the third least $ in the veterans
auction
-10 to team that spent the second least $ in the veterans
auction
-15 to team that spent the least $ in the veterans auction
+10 to team that has the highest scoring returning QB from
the previous year (weeks 1-16)
+5 to team that has the 2nd highest scoring
returning QB from the previous year
+2.5 to team that has the 3rd highest scoring
returning QB from the previous year
-5 to team that has a presumptive starting QB that is the
lowest scoring from previous year in comparison to all other teams’ presumptive
starting QB (determined by previous year’s week 1-16 point totals)
-2.5 to second worst presumptive starting QB
+3 to team that has the highest scoring returning RB from
the previous year
+3 to team that has the highest scoring returning WR from
the previous year
+5 to team that has the previous year’s Defensive Player of
the Year
Sample Franchise
Accounting:
|
Revenues
|
2014
|
2015
|
2016
|
|
|
Broadcast
Rights
|
$130.40
|
$149.05
|
$170.37
|
|
|
National
Sponsorships
|
$50.00
|
$57.15
|
$65.33
|
|
|
Relocation
Fee, rec'd
|
-
|
-
|
-
|
|
|
Money
Carried Forward
|
-
|
-
|
-
|
|
|
Ticket
Revenue
|
$50.00
|
$56.92
|
$69.99
|
|
|
Club/Suite
Revenue
|
$32.50
|
$37.95
|
$35.89
|
|
|
Parking/Concessions
|
$17.10
|
$18.97
|
$17.95
|
|
|
Local
Sponsorships
|
$50.00
|
$57.15
|
$65.33
|
|
|
Total Revenues
|
$330.00
|
$377.20
|
$408.70
|
|
|
Expenses
|
||||
|
Player
Salaries
|
$(133.00)
|
$(143.28)
|
$(128.24)
|
|
|
Player
Bonuses
|
$(50.00)
|
$(73.73)
|
$(48.09)
|
|
|
Coaching/Scouting
|
$(25.00)
|
$(26.25)
|
$(27.56)
|
|
|
Team
Administration
|
$(10.00)
|
$(10.20)
|
$(10.40)
|
|
|
Gameday
Expenses
|
$(10.00)
|
$(10.50)
|
$(11.03)
|
|
|
Stadium/Field
Maintenance
|
$(20.00)
|
$(25.00)
|
$(25.00)
|
|
|
Relocation
Fee, paid
|
-
|
-
|
-
|
|
|
Carry
Forward Amount
|
$(20.00)
|
-
|
-
|
|
|
Debt
Repayment
|
$(50.00)
|
$(30.00)
|
$(25.00)
|
|
|
Total Costs
|
$(318.00)
|
$(318.96)
|
$(275.32)
|
|
|
Net Profit/Loss
|
$12.00M
|
$58.24M
|
$133.38M
|
|
The franchise must pay a relocation fee to the league of $90M per year for 3 years. This money will be distributed evenly amongst the other non-relocating franchises. The team also receives an immediate -50 RPs, but the team's RPs will re-set to zero once they are in the new city.
Other ideas:
- Teams may adjust the cap numbers of two contracts per season, either by front-loading the deal to decrease the cap numbers on the later years, or by converting salary into a new signing bonus and decreasing the cap hit in the current year by pushing that money into future years. In either case, the team may not cut the player for the remainder of that season.
- Exclusive right free agents – players starting the league year with an expiring contract, and with experience of 3 or less, may be kept for minimal salaries of $600K for year 1, $650K for year 2, and $700K for year 3. Such a player entering their 4th year may be kept as a restricted free agent (“RFA”), with minimum salaries of $1.2M for Right of First Refusal (“R1R”) Only; $1.2M or 110% increase of prior year’s salary, whichever is higher (“or 110%) for R1R and original draft round pick in compensation; or $1.8M or 110% for R1R + 2nd rounder; or $2.6M or 110% for R1R + 1st rounder.
- Teams must have a minimum number of 28 contract years for offensive players and 32 for defensive players on their roster at the conclusion of the veterans auction.
- Players acquired via the Veterans Auction who are given a 4-year contract must have a minimum of $4.0M cap number, 3-year contracts must be at least $2.5M, and 2 year contracts must be at least $1M.. If the player was won with a cap # lower than this minimum, their cap number will be increased to the minimum with the assignment of the contract length.
- Rookie contracts will mimic the prior year’s NFL rookie contract at double the draft slot. For example, the 1st overall 2018 draft pick will receive a contract commensurate with the 2nd overall 2017 NFL rookie contract.
- Annual prizes will be divided half towards on-field performance, and ½ to profit/loss performance. Initially, these will overlap, although a slight edge in profit/loss goes to teams with higher schedule difficulty (better matchups brings in higher gate receipts). With stadium improvements and new debt payments, along with a significant amount of team revenue dependent on the prior year’s performance, these numbers will depart quickly in year 2.
- The first year will have a rookie draft. Considering the advantage in acquiring the higher round 1 picks (especially this year), the draft order will be reversed for round 2 through 7 (i.e. the team picking 1.01 will also acquire the 2.16, 3.16, 4.16, 5.16, 6.16, and 7.16 picks). Additionally, the teams will select their base cities in reverse order of the first round.
