Forbes' valuation of Rams was nearly $200 million off

The value of NFL franchises has been increasing in recent years, due to significant growth in profits.  And as the value of a team rises, the return on the investment — the profit — must remain strong in order to justify the increased value of the team.

If, for example, a billion-dollar business merely breaks even on a consistent basis, it won’t remain a billion-dollar business for very long.

And that’s possibly what has happened to the Rams.  In September 2009, Forbes pegged the franchise at a total value of $913 million, down from $915 million the year before.  According to Howard Balzer of Globe-Democrat.com, however, the total value of the team was pegged at between $725 million and $750 million in connection with the sale of the 60-percent interest held by Chip Rosenbloom and Lucia Rodriguez to Shahid Khan.

So the next time NFLPA Executive Director De Smith laughs off (as he did last Thursday) a drop in operating profit for a team like the Packers from $34 million to $20 million, keep in mind that sagging financial performance makes the franchise less valuable than it was — and it makes folks with the wherewithal to own a team less inclined to get in, and it could make those who already hold the keys to a club more inclined to consider getting out.

24 responses to “Forbes' valuation of Rams was nearly $200 million off

  1. Bad new and good news for the owners
    The players need to wake up and understand that the cash cow is running low on milk
    If the team sucks it is not worth what you might think
    I am sure D Smith will have a very good answer for this to explain why the team has gone down in value

  2. De Smith can laugh off all the numbers that he makes up because he has no skin in the game except his salary.

  3. Florio,
    Return on Investment is not the same as profit.
    ROI is measured as a %, profit is measured in $$.

  4. Vic Ketchman answered a question about the process Forbes uses in their valuation of NFL teams in his September 9, 2009 edition of Ask Vic. I’ll let him take it from here:
    “Let me tell you what ‘Forbes’ does: Only one team in the league, the Packers, provides its financials for public consumption. The Packers have to do that because they’re municipally owned. ‘Forbes’ takes the Packers’ financials and uses them to guess at what the rest of the league’s earnings are. They should be ashamed of their assessment of the Jaguars’ situation.”
    If they were wrong on the Jaguars and wrong on the Rams, isn’t fair to ask if they’re right about anyone? The NFLPA should think twice before using anything Forbes reports.

  5. Clearly an effort by the ultra-liberal media (in this case, Forbes) to get a white male Republican to pay more than he should.
    We should all be thankful that this plot against Rush Limbaugh, instigated by the Global Democrat Party (see story above) was thwarted by Rush’s savvy.
    OR, could it be that Obama – also from Illinois like Khan – MADE the Rams let this man (surely a terrorist because his name isn’t Western European) buy in at a discount of $200MM.
    And who made up that $200MM? That’s right. YOU! The red state taxpayer. Because no one else in America pays taxes except for rural midwestern white men over the age of 50.
    OK, the conspiracy is cracked. Can we move on…

  6. Florio: “If, for example, a billion-dollar business merely breaks even on a consistent basis, it won’t remain a billion-dollar business for very long.”
    ——————–
    Thanks Mr. Obvious. Gosh, you should run a financial web site too !!!

  7. Yeah, I’m sure the owners will be clamoring to get out if they only pull a $50m net profit versus $60m net profit. Because that’s what successful business owners do. They dump businesses that are making a net profit.
    Florio, I respect your legal analysis because your working familiarity with the subject is often proven with the excellent insights you provide.
    But your total lack of business acumen means you should probably check your theories, run them by someone with a little experience. There isn’t a business owner on this planet that would sell a business making a solid net profit, especially one where no significant further capital investment is required for future growth. The only profitable businesses that get sold are when the owner wants to retire, or has died and left the business to family members that want to cash out, or the business needs to grow but isn’t generating sufficient capital (or credit) to finance that growth.
    It’s Business 101, dude. Stick to law. You sound like a newbie out of their element when you talk business/finance.

  8. actually Uncle Leo, ROI comes down to $$$ and time. You take the profits made by an organization and estimated profits over time to determine how long it will take to get your ROI and then be in a position where your investment has paid for itself thereby leaving you with straight profits.
    Its the criteria that tech purchases are made on in big business and how costs (initial purchase costs) are justified.

  9. I doubt it will be the 49ers moving to LA who ever wrote that. The only way the 49ers would move is if the Yorks sold the team, and if they sold the team than Larry Ellison would probably be the one to buy them, and he would probably keep them in the bay area.
    The Vikings seems unlikely to me too, in fact any team moving to LA seems unlikely. LA is not a football town, never has been. The only team that would make any sense is San Diego but even they seem unlikely. I doubt any non-expansion team will move to LA.

  10. If this is the case, it may behoove owners to mention it. The new era we live in requires a different sort of PR.
    For example, the Eagles owner stiffed the city on millions in taxes (which he says were ‘forgiven’ in a handshake agreement with our crooked ex-mayor). He has also been building a mainline mansion as libraries, pools, and rec centers close. This was over $8MM. The team was said to be worth $1B as of last season.
    Maybe going down a peg isn’t the worst thing for perception.
    Then again, maybe Lurie is a scumbag no matter what the price (oh, and if they did not pencil in that ‘forgiven debt’ as income back on that federal return…aren’t they in trouble with the IRS?).

  11. Oh yeah Forbes magazine. Don’t they also publish the incredibly unscientific list of the wealthiest americans based on these same sort of interpolations and estimates.
    Forbes is a magazine and the goal of a magazine is to sell copies first. Providing accurate data is somewhere further down the list of priorities.
    The fact is that nobody can value these teams without complete detailed financial information on each one – like the information I am sure provided to Mr. Shah prior to acquisition. In the absence of this data, my guess is as good as Forbes.

  12. Bravo, hiddentrack. As long as the NFL fails to provide an accurate accounting, the league is not negotiating in good faith. Others have pointed out that labor costs make up the bulk of any business’s operating expenses. In the NFL, players aren’t just labor, they’re also the commodity. Yet they seem to cut into less of the NFL’s profits than workers in most other corporations. (The owners take $1 billion off the top, then 40 percent of the rest.)
    We’ve just been told the NFL has scored the highest ratings of its existence but we’re supposed to believe the owners are losing money? Forbes’ data is questionable, but no other data is forthcoming. No wonder De Smith is laughing. You can’t believe anything the NFL says.

  13. hiddentrack, Forbes DOES NOT use the Packers’ data to extrapolate for the whole league and neither did Financial Weekly, which did it before Forbes. Look, just because you (and that idiot) don’t have a handle on what a team’s revenue or debt is worth, that doesn’t mean that Forbes doesn’t. Forbes KNOWS how much each team makes from their TV deals and they know MOST, if not all of what they make from the gate (You CAN go to the teams’ web sites and look up how much it costs for a ticket or groups of tickets) and the premium seats (Same thing).
    Seriously, EACH NFL team suckles from a $3 billion ANNUAL TV teat that from NBC, CBS, Fox and ESPN. In addition to that, they also suckle from a $700 a year DirecTV teat AND the NFL Network brings in revenue from their broadcasts.
    I haven’t even addressed naming rights (The Redskins, for example, have a $7.6 million deal with Fedex that will pay more than $200 million if the deal goes to 2025 and I’m sure that they’d find a replacement for more if Fedex backs out). I haven’t even covered licensing fees, which cover apparel and posters and games and whatever, that totals BILLIONS of dollars that they share.
    Also, you should note that the revenue and operating income that Forbes used for this year’s list is from last year and next year, they will reflect what happened this year. Even now, they expect to revise Dallas’ total value from $1.6 bil to over $2 bil because of that. Given all the deals that Dallas has in the works, you’d be an IDIOT to try to use the Packers as a model to estimate how much the Cowboys are worth because their income doesn’t even come close NOW or NEXT YEAR.

  14. Read this earlier post people. It is the truth which is not what you find here often….
    # Mooch says: February 11, 2010 2:08 PM
    Clearly an effort by the ultra-liberal media (in this case, Forbes) to get a white male Republican to pay more than he should.
    We should all be thankful that this plot against Rush Limbaugh, instigated by the Global Democrat Party (see story above) was thwarted by Rush’s savvy.
    OR, could it be that Obama – also from Illinois like Khan – MADE the Rams let this man (surely a terrorist because his name isn’t Western European) buy in at a discount of $200MM.
    And who made up that $200MM? That’s right. YOU! The red state taxpayer. Because no one else in America pays taxes except for rural midwestern white men over the age of 50.
    OK, the conspiracy is cracked. Can we move on…

  15. Rush American= No Good.
    Khan Middle Eastern= Good?
    Discriminate against Americans…….
    The final days of Rome are here.
    Keep up the great Patriotism America!

  16. this class sucks says: “…The Vikings seems unlikely to me too, in fact any team moving to LA seems unlikely. LA is not a football town, never has been.” [italics added for emphasis]
    Well, with a screen name of this class sucks it shouldn’t surprise me that you would make such an ignorant, uniformed comment.
    • The Rams were here from 1946 to 1994. That’s 48 years — longer than quite a few NFL teams have even existed.
    • The Raiders were so convinced that it wasn’t a football town that they moved here from another city and stayed for 12 years.
    • The Xtreme of the ill-conceived and spelling-challenged XFL drew decent crowds for their single season. Let me repeat that: Fans actually turned out to watch the XFL .
    • The Avengers were one of the few teams in the Area League to operate at a profit, however slim.
    • USC regularly draws something like 80K for it’s games, and that’s just college football.
    You can not like the idea of a team relocating, of course. If I lived in Minnesota, Jacksonville, or St. Louis, I’d be dead set against it, too. But to say that this area has “never been a football town?”
    Doesn’t hold water.

  17. Hell, it happened to all of us working shlubs who pay hundreds of dollars each for tickets to these games. Our homes and other items of value are no longer worth what they used to be. Why not the same with these billionaire team owners? Why should they be immune to the ravages of the economy?

  18. this class sucks says: “…The Vikings seems unlikely to me too, in fact any team moving to LA seems unlikely. LA is not a football town, never has been.” [italics added for emphasis]
    This is not true at all. If you build a first class venue in a safe area, and a great franchise, fans in L.A. will support it.
    Expecting fans to patronize the L.A. Memorial Coliseum(otherwise known as an outdoor insane asylum) in a war zone is folly.
    Bring the 49ers or the Dolphins to L.A. and you will see support and sell outs.
    Bring the Jaguars or Bills expect little support.
    Bring a big name franchise with a history of winning.

  19. @WashingtonRedstorms …
    To heck with that! Why should L.A. get someone else’s big name franchise. They lost two franchises in a single year. Let ’em have the Rams back, otherwise, they can make do with two major college teams, two NBA teams (wasn’t one swiped from Minnesota?) and the baseball team they ripped off from Brooklyn.
    Expect little support for the Jags or Bills, huh? That just sounds so … Rodeo Drive! “Oh yes, we want pre-fabricated stars.” They can’t get my team, so I really shouldn’t care, but that just sounds ridiculous. If they really wanted a team, they’d be thankful for what they got and content to build it into a winning franchise. But how silly of me! Why don’t we just give them the reigning champs–parade and all? Hey, throw in Mardi Gras and Emeril!
    It’s a money town. If any place in the country should be able to pull together a consortium of wealthy investors to launch a franchise, it’s L.A. They shouldn’t need to pilfer other cities’ teams. I could sympathize with sending back the Rams. Otherwise, let them start from scratch like everyone else.

  20. “Bring the 49ers or the Dolphins to L.A. and you will see support and sell outs.
    Bring the Jaguars or Bills expect little support.
    Bring a big name franchise with a history of winning. ”
    And that type of fan “support” helps explain why the NFL is in no hurry to return to L.A.

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