Bengals Finances - Private Equity

[cincygrad]

Private equity in the NFL? How team ownership might shift

A move to allow private equity firms to invest in NFL teams would represent a large shift in how the league has historically operated.

www.espn.com

This is an underrated topic that not enough people talk about. Given the demands for guaranteed contracts and the need for liquid assets to support the guarantees, there are major issues for teams that aren't owned by folks with wealth from other endeavors. The Brown family, Bidwells, Rooney's, etc are all at a disadvantage when it comes to the modern era of contracts. If teams can start selling off some of their equity and future profits for liquid cash, this could help these teams. The Bengals likely need this to happen if they are going to survive in the modern era...... Or they will have to further exhaust revenue streams, which will hit a limit at some point in a small market like Cincinnati.

 

[Cincyfan78]

Private equity in the NFL? How team ownership might shift

A move to allow private equity firms to invest in NFL teams would represent a large shift in how the league has historically operated.

www.espn.com

This is an underrated topic that not enough people talk about. Given the demands for guaranteed contracts and the need for liquid assets to support the guarantees, there are major issues for teams that aren't owned by folks with wealth from other endeavors. The Brown family, Bidwells, Rooney's, etc are all at a disadvantage when it comes to the modern era of contracts. If teams can start selling off some of their equity and future profits for liquid cash, this could help these teams. The Bengals likely need this to happen if they are going to survive in the modern era...... Or they will have to further exhaust revenue streams, which will hit a limit at some point in a small market like Cincinnati.

One of the big issues I've been stating starting with the Burrow contract...teams with private ownership that don't have a Billion dollar business to fund their football team are going to have to find ways to raise revenue to allow for escrow revenue in these guaranteed contracts.

The only other option is to lower the amount required - which, I don't think the NFL would want because if a team were to go under (would never happen, but...) - the NFL would likely end up on the hook for paying the salaries of those players contracts.

 

[Debbie Does]

Vulture Capital doesn’t have a good reputation for supporting businesses. They like to buy companies, sell off high-value assets, leave the company floundering and then dump it.

Suppose Vulture Capitalists bought a team and began making trades not to improve the team's won/lost record but just to improve the team's bottom line. Suppose they bought team's and planned to move them to another city, just to make more money?

 

[Cincyfan78]

Vulture Capital doesn’t have a good reputation for supporting businesses. They like to buy companies, sell off high-value assets, leave the company floundering and then dump it.

Suppose Vulture Capitalists bought a team and began making trades not to improve the team's won/lost record but just to improve the team's bottom line. Suppose they bought team's and planned to move them to another city, just to make more money?

NFL has a spending floor - that could be raised. It's really hard to build a team that is just built to tank in the NFL. Not saying it can't be done, because it can - but you can't do it in the same manner as an owner can do in MLB.

NFL has to approve any move - so trying to do what MLB allowed Loria to do to the Expos in tanking that team/organization in order to move them likely wouldn't fly. The move, once it played out, was not met with smiles in MLB and certainly organizations are now much more weary of these moves.

Likely - any kind of move to sell rights/equity/ownership would also have to go through a thorough approval process.

 

[DanBengalfan]

looking at things from a business perspective, if a team like the Bengals can get similar production at 1 million that they get for 30 million, they have to go with the player who's kicking ass for 1 million.

Chase is popular, but even so, if he has an injury, you are essentially paying him 30 million to rehab (kind of like Eifert)

the Bengals have been loading up on talented receivers. Jones and Iosivas might be the best backups in the league, and now we have Burton.
if we're going to spend money, it might be a good idea to have the best defense in the league, at least for a few super bowl runs.

 

[Cincyfan78]

looking at things from a business perspective, if a team like the Bengals can get similar production at 1 million that they get for 30 million, they have to go with the player who's kicking ass for 1 million.

Chase is popular, but even so, if he has an injury, you are essentially paying him 30 million to rehab (kind of like Eifert)

the Bengals have been loading up on talented receivers. Jones and Iosivas might be the best backups in the league, and now we have Burton.
if we're going to spend money, it might be a good idea to have the best defense in the league, at least for a few super bowl runs.

The difference here is - Chase is a top 5-7 WR in the NFL.

If we were talking about Higgins (who is top 20-25) I'd agree.

You have to find a way to keep/pay the elite guys. The Burrows and the Chase's. If Burton bursts onto the scene and then you have 2 WR's in that top 10 category, that becomes a different story - but for the most part - good players are going to cost money and while you want to draft, sign, retain your core and keep costs down, at some point you do have to spend money. The issue is going to come when you need to sign a guy like a Burrow with nearly 90% guaranteed down the road AND need to pay a WR, OL, DL, LB, etc...so even on the defensive side - at some point you have to have enough cash flow to put money into the escrow account.

 

[cincygrad]

Vulture Capital doesn’t have a good reputation for supporting businesses. They like to buy companies, sell off high-value assets, leave the company floundering and then dump it.

Suppose Vulture Capitalists bought a team and began making trades not to improve the team's won/lost record but just to improve the team's bottom line. Suppose they bought team's and planned to move them to another city, just to make more money?

I heard a recent argument that this is precicely what Jerry Jones has been doing in Dallas for years..... He's quietly been focusing on building and maintaining the value of the Cowboys without actually spending liquid cash where needed. I don't know enough about their situation to say if this is true, but it's an interesting concept.

 

[DanBengalfan]

The difference here is - Chase is a top 5-7 WR in the NFL.

If we were talking about Higgins (who is top 20-25) I'd agree.

You have to find a way to keep/pay the elite guys. The Burrows and the Chase's. If Burton bursts onto the scene and then you have 2 WR's in that top 10 category, that becomes a different story - but for the most part - good players are going to cost money and while you want to draft, sign, retain your core and keep costs down, at some point you do have to spend money. The issue is going to come when you need to sign a guy like a Burrow with nearly 90% guaranteed down the road AND need to pay a WR, OL, DL, LB, etc...so even on the defensive side - at some point you have to have enough cash flow to put money into the escrow account.

we will likely keep Burrow, but not chase. they aren't going to let other key players go (giving up points on defense, letting Jo get sacked, not having a run game, etc.) just to pay a WR when you can get one on the cheap.

 

[Cincyfan78]

we will likely keep Burrow, but not chase. they aren't going to let other key players go (giving up points on defense, letting Jo get sacked, not having a run game, etc.) just to pay a WR when you can get one on the cheap.

Still got to have an elite guy to throw to. The Brady thing glosses over the fact that Gronk is a HOF TE and put up ridiculous numbers.

Again - you have to pay someone, somewhere, sometime...Yes, the QB - but a skill position is going to get paid. Used to be the RB - now it's the WR...No matter how good your QB is, they need a high end guy to throw to. Be it a TE (Gronk, Kelce) or a WR.

 

[cincygrad]

Still got to have an elite guy to throw to. The Brady thing glosses over the fact that Gronk is a HOF TE and put up ridiculous numbers.

Again - you have to pay someone, somewhere, sometime...Yes, the QB - but a skill position is going to get paid. Used to be the RB - now it's the WR...No matter how good your QB is, they need a high end guy to throw to. Be it a TE (Gronk, Kelce) or a WR.

I also think the Bengals can potentially go lower on guarantees if they go much higher on yearly average. That is, Chase might be motivated to have the highest per-year contract relative to the rest of the league in exchange for less guaranteed up front. That would be a win/win for team and player.

 

[Cincyfan78]

I also think the Bengals can potentially go lower on guarantees if they go much higher on yearly average. That is, Chase might be motivated to have the highest per-year contract relative to the rest of the league in exchange for less guaranteed up front. That would be a win/win for team and player.

Very true - and the Bengals can likely point to the fact that the majority of their players see the end of their contracts...they don't try to backload and then cut.

 

[DanBengalfan]

they got chad in the 2nd round, also pickens was 2nd round. they will try to repeat that success if chase doesn't want to negotiate.

he will want 40+ million a year by the time we get around to franchise tagging him.

 

[Cincyfan78]

they got chad in the 2nd round, also pickens was 2nd round. they will try to repeat that success if chase doesn't want to negotiate.

he will want 40+ million a year by the time we get around to franchise tagging him.

IF they have another option...

Chad wasn't Chad until year 3. If Burton develops into an elite guy - you have some leverage and wiggleroom. Pickens didn't hit his stride until year 3, either. Green would be a better comp - and even then, year 2 was really his big year. So, even though he went for 1K yards his rookie year - it still took some time before Green was really seen as the Green we knew. Also, Green/Dalton, Chad, Pickens were starting from scratch - this version of the Bengals have AFC Title goals, and Super Bowl dreams. Those teams had no goals, no aspirations - they could take guys and risk more because they were already bottom feeders.

All of the examples of drafting guys and getting an immediate impact guy is great, but reality is most of them still take a year, or two, to really come into their own. Does anyone really want to waste a year, or two, of Burrow because they didn't pay Chase?

Tag this year is 21M. It may reach 26-28M by the time they tag Chase. It won't double.

This is a lot of conjecture and hand-wringing over something that is very easily doable.

Offenses are going to pay a QB and a WR when they are winning Division titles.

Defenses are going to pay CB/DE when they are winning division titles.

The only way moving on from Chase makes sense is if the Bengals completely fall a part and there is going to be a gap year or two where they don't expect to compete. I don't see that happening under Burrow.

 

[Debbie Does]

Who remembers the film "Rollerball?"

 

[Cincyfan78]

One other thought about the WR's mentioned: All were drafted in the top of the draft 1st round, or top of the 2nd round.

Unless the Bengals reach for a guy and get lucky - do we really want them taking that risk at the back of the 1st round, where they are likely to be (in the mid to late 20's)?

Again - those Bengals teams were not what this team is - the Bengals are in a prime window with Burrow and Chase - you keep that window open for as long as you can and pay a top 5 QB and a top 5 WR to keep them together.

The cap will be fine - there is concern with the guarantees at some point, but not immediately and as mentioned - there are ways around this.

 

[CrashDavisSports]

Private equity in the NFL? How team ownership might shift

A move to allow private equity firms to invest in NFL teams would represent a large shift in how the league has historically operated.

www.espn.com

This is an underrated topic that not enough people talk about. Given the demands for guaranteed contracts and the need for liquid assets to support the guarantees, there are major issues for teams that aren't owned by folks with wealth from other endeavors. The Brown family, Bidwells, Rooney's, etc are all at a disadvantage when it comes to the modern era of contracts. If teams can start selling off some of their equity and future profits for liquid cash, this could help these teams. The Bengals likely need this to happen if they are going to survive in the modern era...... Or they will have to further exhaust revenue streams, which will hit a limit at some point in a small market like Cincinnati.

Why wouldn't the NFL just remove the escrow part of the guarantees. Teams are still required to pay that money and it would be guaranteed, meaning, if a player got cut, that team owes them that money still, but why force a team to put all that massive guarantee into an escrow? This is forcing the NFL team to lose money when they could invest that same money into a no risk account that could net a little extra cash. They can also pay it year after year with their revenue sharing that compensates for the salaries. So only time it is going to hurt a team is if they cut said player. It never hurts the player, as they are still guaranteed the cash. If a team manages their money poorly, they will be forced to sell their franchise or seek out those venture capitalists at that point. However, there is no reason to do that if the NFL just allows them to guarantee portions of contracts without the escrow accounts being necessary.

 

[DanBengalfan]

my feeling is we'll get our answer soon enough.

if other WRs end up surpassing Chase due to injury or just sheer grit, he won't get a big deal from us.
if we draft another WR in the first round, it's a sign that the Bengals have decided to do a tag and free strategy to Chases contract.

 

[redskinsfan1963]

Who remembers the film "Rollerball?"

James caan.it was remade in 2002 very shitty too.

 

[BigKen]

First, owners should be required to have a certain level of billions. Whether it be family money or a lucrative oil business, they should have a certain amount. Then require them to set a certain amount in an interest earning account or money market fund in reputable bank. Those funds would guarantee long terms and guaranteed contracts.

Second, find an insurance company that would cover every player contract. It would hav to be a combination of workers comp, disability and accidental death. It would be very costly, but every player injury would be covered and an injury retirement would be also.

If an ownership has been in a family since WWII ended and that family is struggling to keep up with a volatile financial period, then the league should be looking at the team finances and if necessary, force the sale of the team. I don't care if it's Paul Brown, Rooney, Kraft or Jerry Jones, if you don't have the finances to compete in today's world, you shouldn't be trying to flim-flam around to keep your club membership.

How many people have the $125,000 membership fee to Augusta National every year? They don't let you join on a promise to pay later.

 

[Cincyfan78]

Why wouldn't the NFL just remove the escrow part of the guarantees. Teams are still required to pay that money and it would be guaranteed, meaning, if a player got cut, that team owes them that money still, but why force a team to put all that massive guarantee into an escrow? This is forcing the NFL team to lose money when they could invest that same money into a no risk account that could net a little extra cash. They can also pay it year after year with their revenue sharing that compensates for the salaries. So only time it is going to hurt a team is if they cut said player. It never hurts the player, as they are still guaranteed the cash. If a team manages their money poorly, they will be forced to sell their franchise or seek out those venture capitalists at that point. However, there is no reason to do that if the NFL just allows them to guarantee portions of contracts without the escrow accounts being necessary.

In theory - if the team goes bankrupt - the NFL would likely then be on the hook to pay the salary. Not that they couldn't, but it could lead to teams giving out 100% guarantees left and right and the NFL isn't going to want to risk it.

Likely to happen? No - but I don't see the NFL removing this part. Maybe they lower the amount required to be kept in escrow? I'd see them go that route 1st before removing it all together.