Experts say Browns sale looks like fair deal

August, 2, 2012
8/02/12
5:38
PM ET
The Cleveland Browns reportedly have been sold to Jimmy Haslam for more than $1 billion, and experts say it’s a fair deal for all involved, with room for Haslam to get a good return on his investment in the future.

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“I think it’s right where you’d expect it to be,” sports economist Andrew Zimbalist said of the sale price, of which $700 million will be paid to take over controlling interest and another $300 million to close the deal.

“The typical revenue multiple in NFL is around four,” said Zimbalist. He estimated the Browns’ revenue at $250 million per year, which would put the sale price right in the predictable range.

The sale is also on par with the Jacksonville Jaguars’ purchase earlier this year for $760 million. The Jaguars are the NFL’s lowest-valued team at $725 million, according to Forbes, while the Browns come in at $977 million, good enough for 20th in the league.

Zimbalist agreed with the Forbes valuations and the sales prices, saying, “The Browns have a better market and much better stadium. They’re certainly worth more than the Jaguars, and based upon the revenue figures I’ve seen, I’d say the sales prices are on target.”

We get a glimpse into NFL financials thanks to the Green Bay Packers, who are the league’s only publicly-owned company subject to such disclosure. Their latest financials show $171.6 million in national revenue from sources like the league’s national television deal. Since the NFL divides national revenue virtually equally between all 32 teams, we know that more than half of the Browns’ revenue comes from the league. That revenue is expected to increase in 2014, when new television contracts go into place that are 60 percent higher than current contracts.

National television revenue won’t be the only source that could bolster Haslam’s return on his investment. The Browns have several areas in which things can seemingly improve.

Despite the product on the field, the team has a loyal following. If it can get some on-the-field success with the addition of players such as recent draft picks Trent Richardson and Brandon Weedon, the team has plenty of room to raise ticket prices and increase revenue.

In 2010, the Browns had the league’s lowest average ticket price at $55. In 2011, the team was one of four NFL teams that lowered ticket prices. This year there will be no increases, and at least one area, the “Dawg Pound,” was reduced from $45 per game to $32 per game for a season-ticket plan.

The most interesting thing here isn’t the reduced prices, it’s that there are reduced prices at all. Although not sold out every game last year, the Browns did average 90 percent of capacity. They also sold 1,000 more full-season ticket packages than the previous year and more than 40,000 group tickets, a team record.

So far, things are looking good this season, as well. Within 2½ hours of single-game tickets going on sale earlier this week, three games sold out. As of Wednesday, only 1,000 seats remained for the Oct. 14 Bengals game.

Lou Imbriano, former chief marketing officer for the New England Patriots, said the Browns are leaving money on the table.

“I think there is a minimum, even in the Cleveland market, of $15 million they’re leaving on the table a year,” said Imbriano.

“I think their real upside is the fact the stadium isn’t named,” said Imbriano. “There’s an opportunity there.” Imbriano estimated naming rights could bring in $6 million to $10 million per year.

In addition, Imbriano said the Browns fan base presents untapped opportunities.

“They have a rabid following. There’s power in that. When I started with the Patriots, we were sold-out all the time and the fans were rabid. All these folks want to be a part of the team,” said Imbriano. In response, his team created opportunities and experiences both on game day and outside of the games that allowed for additional revenue.

With all the growth opportunities, it seems Haslam might be getting a good deal for his $1 billion investment.

“Even at $1 billion,” said Imbriano, “I would think there’s room to make some real money owning an NFL franchise like Cleveland.”

Kristi Dosh

Sports Business
Dosh covers sports business for ESPN. She is an attorney, founder of BusinessOfCollegeSports.com, and joined ESPN in October 2011.
Author of "Saturday Millionaires: How winning football builds winning colleges."

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