Redskins' Revenue Reaches $300 Million
Saturday, August 20, 2005
The Washington Redskins, the National Football League's richest franchise, are even wealthier than people thought.
The Redskins' gross revenue reached $300 million last year, well above published estimates and nearly double the $162 million that the franchise grossed before Daniel Snyder bought it in 1999, according to a document Snyder filed this week with the Securities and Exchange Commission as part of his attempt to take control of Six Flags amusement parks.
The Redskins' revenue is more than that of the rival Dallas Cowboys and approaches the annual gross revenue of the New York Yankees.
While player payroll, administrative expenses, taxes, security and the mortgage on FedEx Field likely will eat up more than $200 million, the franchise's stunning revenue performance likely places it among the most profitable teams in U.S. professional sports.
While Snyder's financial success with the Redskins has been widely acknowledged, the SEC filing confirmed for the first time just how successful he has been and opened a window into how aggressively he has employed marketing and ingenuity to grow the business. The filing also offers insight into how he plans to apply the same moneymaking techniques to Six Flags, which owns and operates 31 amusement parks in the United States, Canada and Mexico.
Snyder, who made a fortune in marketing before age 30, brought a lengthy menu of moneymaking strategies with him when he bought the Redskins and their privately built stadium from the estate of Jack Kent Cooke for $800 million. He has added about 10,000 seats to FedEx Field, which now has a capacity of 91,665; it is the largest stadium in the NFL. Snyder boosted the number of luxury suites from 199 to 208, installed 500 more loge seats, established an owners' club class of 35 super suites and added 1,488 "dream seats" ringing the field -- each of which he sells at premium prices. He built escalators to make it easier for fans to get to their seats. He added restaurants. He automated concessions so fans could buy more food and beverages with greater frequency.
Snyder sold the stadium's naming rights to Federal Express for $200 million over 27 years, placed advertising throughout the building, and instituted the exclusive Tailgate Club.
Snyder's efforts have not been without controversy. He angered many fans last season when he added thousands of seats with an obstructed view of the field. The Redskins have lowered the price of some of those seats this season, team spokesman Karl Swanson said yesterday. Snyder also tried to accept only the Redskins MasterCard from season ticket holders who wanted to pay by credit card, but then withdrew the requirement after the credit card company intervened. And despite all their financial success, the Redskins have posted only one winning season since 1999, the year Snyder bought the team.
The Redskins have raised the price of general admission tickets twice since 1999, in 2000 and again in 2001, when they instituted a $4 per ticket surcharge for security following the Sept. 11 attacks. "We worked hard to increase revenues through efficiencies, and not by raising general admission prices for the last four years," Swanson said.
What the SEC filing showed, however, is that Snyder and his business partners have excelled at making it easier for fans -- and big name advertisers and sponsors -- to spend their money on the Redskins brand.
Snyder expanded sponsorship revenue from $4 million to $48 million, the document said, by offering businesses more opportunities to reach Redskins fans inside FedEx Field and at home. He reduced lines by automating concession stands with a "tap and go" payment system, boosting food sales from $9 per person per game when he bought the team to $15 last season, according to the proxy filed by Red Zone LLC, a holding company for Snyder's various investments. This effectively means Snyder has increased concession revenue at FedEx from around $8 million a year to nearly $15 million a year.
Snyder outsourced the concessions business to an operator with expertise in that area "while maintaining control over the brands of food and beverages that are sold at its stadium," according to the SEC document. In other words, Snyder was able to preserve lucrative sponsorships with companies like Coca-Cola by requiring the food service company to serve those brands, while getting the Redskins out of the concessions business. The Redskins' owner also sold the stadium's concessions equipment to a food service operator for $16 million, using that money to pay down the substantial mortgage that he once owed on the team.
Snyder and his investors borrowed at least $495 million to buy the team and stadium in 1999, $395 million of which was tied directly to the team and stadium. Snyder also put up about $120 million of his cash. After at least two re-financings with attractive interest rates, a $50 million lump sum payment and the sale of a big part of the team in 2003, Snyder has reduced the debt on the stadium and the Redskins to around $250 million. Snyder now owns between 40 and 45 percent of the team.
Snyder stated in his SEC filing that he has also started a "special events business line" promoting concerts, parking lot entertainment and other events at FedEx Field that now generate $2 million per year. He also has had help from the NFL, which distributes around 60 percent of its more than $5 billion annual revenue to the 32 teams. National television contracts alone bring in more than $100 million of Snyder's $300 million annual revenue.
"This is a testament to Dan Snyder's ability to run and manage an entertainment-based business," said Marc Ganis, a Chicago-based sports marketing consultant. "His success with the Redskins has been nothing short of phenomenal. It shows he knew what he was doing when he paid a then-record $800 million for this franchise."
Researcher Julie Tate contributed to this report.