When I was a kid, I learned something important from professional wrestling. I’m sure that sounds funny, since I'm obviously the kind of adult who does not watch RAW, so let me explain. At some point in the late 80s, there was this wrestler called The Million Dollar Man Ted DiBiase, and he used to wear sparkly suits with dollar signs on them and go around with a black manservant giving people money to humiliate themselves. Everybody has his price. That’s what he always said, and that’s what I learned. I think it’s true to this day, and frankly, if you would stick to any position at all despite an offer of any amount of money, I think that you fundamentally believe that your principles are worth more than they really are. At some point, the price and the alternative are better than your original position and empty pockets.
There was some discussion in the comments of Monday’s Lard about the Jaguars trading for Tim Tebow, and it made me think about what the price would have to be to do it. It’s a really interesting thought exercise, because you have to look at it a few different ways to really get to the answer, and in so doing, you can get past the surface level of a few interesting things. You know, the surface where commenters on this site who don't like Tebow say that he's worth a bag of footballs.
First of all, let me state something that we know to be true, and then we’ll talk about the reasons for it. Tim Tebow is worth more to the Jacksonville Jaguars than he is to any other team, regardless of how well he plays. He’s from Jacksonville, and probably 40% of the people in the city are Florida Gators fans. We’re going to value that connection in terms of dollar value.
First, consider the Jaguars as a franchise. They were founded in 1995, the year before I moved to the city. In their second season, they made the AFC Championship game after the most infuriating football game I’ve ever witnessed. (I still hate Michael Dean Perry to this day for loafing off the field and being the illegal 12th man during Jacksonville’s only would-be punt of the fourth quarter.)
From 1995 to about 2001, the Jaguars were popular around town, but that adulation gradually ran out of steam once the novelty wore off. The simple truth is that Jacksonville is a college football town, and professional football is second place there. If you’ve never been there, let me paint you a picture: I have a house, and you have a house, and they’re next to each other. I have a Gators flag on my house, and you have a Seminoles flag on yours. We don’t like each other, and it’s pretty serious. If you saw me cutting the grass, you’d never offer me one of your Keystone Lights (because you're a tacky redneck Seminoles fan who drinks Keystone Light), and the feeling is mutual. No, you can't have one of my Bud Lights. (What can I say? J-ville is an Anheuser-Busch town.)
The Jaguars have never captured the city like that, where very many people are passionate about the team, or the NFL. It could happen, but it hasn't happened yet. Now, let’s talk about the field of many names, currently known as EverBank Field. I went to both the 2001 and 2002 Gator Bowls there, and it’s not a bad place to catch a game. One thing that jumps out about it is that it’s very big.
The capacity of EverBank Field for NFL games used to be 76,867 seats, but the team eventually covered 9,621 of them, because it decided that its attendance sweet spot was 67,246 seats. Remember that number. First, though, you may or may not know that the annual Florida-Georgia game is played at EverBank. It used to be called the World’s Largest Outdoor Cocktail Party until some dumbasses got drunk and died of self-inflicted dumbassery. Somebody in some ivory tower then decided that the name promoted drinking too much. That's why we can't have nice things. Guess how many seats are available for that game? Try 84,000 of them. There’s usually about 200,000 more people hanging out who don’t have tickets, too; it’s the biggest weekend of the year in the city.
It probably won’t surprise you to learn that the Jaguars are the league’s 32nd-most popular team (with a bullet!). My old buddy Adam Schein (who has always been weirdly nice to me on Twitter when I’ve ripped him in the past) always calls the Jags America’s Team on Sirius radio, and it always kind of cracks me up. I think back to the locals with their car magnets and flags, which were displayed prominently in 1996 and 1997, but which were much less common by 2000 or 2001, even as the team was playing its best football in its history, up to then or now.
So, this all comes together into a financial picture, and we should take a look at it - because it’s going to be the baseline for our pro forma valuation. According to Forbes, the Jaguars are the least valuable team in the NFL, just ahead of the Raiders. Forbes valued the team at $725 million, and they were actually sold to Shahid Khan effective January 4, 2012, for $760 million, so we'll go with that value. Here are some key financial facts of the Jaguars vis-à-vis game attendance and its related revenue:
a. The Jaguars’ average ticket price is $57.
b. The seating capacity at EverBank Field, as mentioned, is 67,246 seats.
c. The Jaguars’ total gate receipts were $45 million, and I’m going to (educated) guess that 50% of that comes from their own ticket sales (10 games), and 50% comes from the league-wide pool that comes from 40% of all NFL-wide gate receipts. That means that if we’re trying to back into revenue from home tickets sold, we have to understand the other $22.5 million to be 60% of the total sold by Jaguars ticket-takers, and if you divide $22.5 million by 60%, you come up with the answer that Cletus and Jim-Bob and the others down there sold tickets to games held in Jacksonville worth $37.5 million. That predictably makes the Jags a
welfare revenue sharing recipient, because the extra $7.5 million in their Gate Receipts total comes from the 40% that the 31 other NFL teams pooled together.
(To give you a sense of the math I’m using, total gate receipts for the NFL were $1.79 billion – 40% of that is $716 million, and if you divide that by 32 teams, you get $22.35 million per team. That’s not exact, but it’s close enough for this purpose.)
So, from the department of “you’ll never use algebra in real life,” let’s set up an equation:
(Home gate receipts) / (Avg. Ticket Price * Number of Seats) = % of Max Revenue
($37.5 million) / ($57 * 67,246) = % of Max Revenue
($37.5 million) / ($38.33 million) = 97.8% of Max Revenue
That’s actually not as bad as I thought it was going to be. It indicates that the Jags are appropriately priced in their current marketplace, and that they come close to selling out most games. Here’s a view of the current Jaguars’ income statement, from information in Forbes:
They’re actually running a significantly more cost-efficient business than the Broncos are, at least in the last year. Their gross margin is 13.9%, while the Broncos run at 11.1%, making $4.3 million less profit on $19 million more revenue than the Jags do. So why are the Broncos worth $1.05 billion, and the Jaguars are only worth $760 million?
The answer is the fan base and the market, and what those factors say about long-term viability. The Broncos are in a metro area with 2.5 million people, and we’re a long-running loyal bunch as a fan-base. We’re spread well past the Denver area, but the Denver people can be counted on to show up to games, and we all can be counted on to watch the national telecasts, which is where the real money is. The Jaguars are in a metro area with 1.3 million people, and as previously mentioned, they don’t care all that much. It’s a struggle to get them to show up to games, especially when the team is not competitive.
If I were Shahid Khan, I’d be doing whatever it takes to get Tim Tebow, because he personally has the potential to turn the Jaguars into the Colts, financially speaking, over the next decade. The Indianapolis area only has 1.7 million people, and they’re worth $1.06 billion, according to Forbes. The reason is because Peyton Manning represents a good reason for fans to go to the games and to watch on TV. Remember, the Colts have only been in Indianapolis since 1982, and before Manning arrived in 1998, they hadn't fully grabbed their market yet. The 2012 Jags are in a really similar spot.
Now, before you get all apoplectic and tell me that Tebow is no Manning, take a Valium, chug your Keystone Light, and relax. This isn’t a football discussion, it’s a financial discussion. Colts fans go to games because they think Manning is going to make them win. Jags fans will go because they love Tebow, and the level of commitment will be the same, or greater. Kids who otherwise wouldn’t have done so will grow up loving the Jags, and the franchise will be set up for the rest of its history by that. The NFL will finally thrive in Jacksonville, which is a rapidly growing area thanks to it being a port and the largest city by land mass in the lower 48 states.
NFL team valuation clearly isn’t tied to operating profit - which makes no sense to me - but it is what is, I suppose. It’s seemingly tied to prestige and projected future viability within each team's market. The $1.06-billion Colts had an operating profit of $32.8 million. The $760-million Jaguars had an operating profit of $32.8 million. I think I'd rather save the $244 million if I'm getting the same profit in the end.
There’s $250 million of potential value-add that can come from the Jaguars better connecting with their market and the people in it. The Panthers started in the same year as them, and they’re at $1 billion of value in a 1.7-million-person metro area, and operating income of $31.2 million. Believe me when I say that the Jags' 1.3-million-person metro area becomes a 3-million-person metro area if Tebow is on the team. People will come from all over north Florida - as far away as Pensacola and Orlando - to come see Tebow play. The Gator Nation is everywhere, especially in Florida proper. This rise in value is doable for the Jaguars, and Tebow is the only guy who can do it.
For discussion’s sake, let's just say that the acquisition of Tebow allows the Jags to raise their average ticket price from $57 to $65 within a year. (It's eventually going to $75) Let’s also assume that they can uncover those 9,621 seats, and that they’ll sell out every game. Cletus and Jim-Bob and company in the ticket department now sold $50 million worth of tickets, rather than $37.5 million. The Jags’ revenue from Gate Receipts goes from $45 million to $53.1 million, with virtually no incremental money spent. (The Jags might need some extra PR people or ticket salespeople.) And then, when do you start thinking about using all 84,000 seats?
So the question, in terms of football assets, is what $250 million of potential future franchise value is worth to Khan. Now, remember, this has nothing to do with any other team. BLAH BLAH TEBOW'S ONLY WORTH A 4TH-ROUNDER BLAH BLAH. Draft value charts and Tebow’s value to anybody else don’t matter. Tebow’s incremental monetary value to the Broncos doesn’t really matter, because they’re going to sell out their games one way or another. He’s worth national TV appearances and merchandise sales to them, but he can come and go, and real Broncos fans are still going to be Broncos fans, and the game is going to sell out.
Let’s assume that Khan is calling and making his best offer, and it’s all being kept completely silent. He's getting this thing done, because he knows that everybody has his price. What’s that offer comprised of? Let’s take a look through the Jaguars’ roster and see what we see.
There isn’t much there, if you ask me. I think the Broncos would need to get Blaine Gabbert back as part of a larger package. He’d be of little ongoing value to the Jags, and he does have some talent, despite being the worst starting QB in the NFL in 2011.
Gabbert’s issue is that he looks at the pass rush rather than feel it. He also was never that great of a player in college, and I didn’t love him coming out of Missouri, but he’s a good athlete (not in Tebow’s class, but few are), and he can make every throw with accuracy and velocity when he’s wearing shorts.
Beyond Gabbert, I don’t see much. The receiver crew is a mess, and so is the offensive line. Marcedes Lewis is good, but I don't really want to trade for that contract. I’d take Terrance Knighton back at DT, but I’d think the Jags would be reluctant to part with him. He's a Jack Del Rio guy, so I could see the Broncos really wanting him. Nobody else moves me, due mainly to age and/or cost issues.
The Jags pick seventh overall in April, and that’s the real prize here. That’s going to need to come back to the Broncos somehow here. They also hold the 38th, 71st, and 101st picks. I don’t love draft picks, but I love the players they eventually become. The Broncos can do a lot of things with some of these picks.
Let’s start out with Gabbert, who is a throw-in like Kyle Orton was a throw-in. By that I mean that he’ll be out of a job at his old place, and he’ll have the potential to be a high-value acquisition for the new one, if one or two things go right.
|Broncos receive:||Gabbert||7th pick|
|Broncos receive:||Gabbert||7th pick||38th pick||71st pick|
|Jaguars receive:||Tebow||25th pick|
|Broncos receive:||Gabbert||7th pick||Knighton||71st pick||101st pick|
|Jaguars receive:||Tebow||25th pick|
Now, remember that these are really good offers for the Broncos, and really costly ones to the Jaguars, and that’s the point. Khan wants the $250 million in value that Tebow has a chance to provide, so he’ll take the risk. No other player could add that much value to any other team, because no other team has failed to connect with its market like the Jaguars have. This is a highly unique situation, and it has to be understood as such. If Tebow doesn’t play well enough, not that much is really lost, given the upside potential that exists. If he can play well enough to keep the Jags in the playoff hunt every year for a decade (which seems likely), then the trade is a win, no matter what it costs.
I don’t think something like this is going to happen, but if I were the Broncos, I’d certainly be open to doing a lopsided deal if one were offered. Like the Million Dollar Man said, everybody has his price. As for what to do with the haul, who cares? That's another topic for another day. Maybe they try to go with Gabbert for a year and see if he develops, or maybe they try to trade up for Robert Griffin. None of that is really the point here; the point is that the Broncos probably ought to be quietly waving Tebow at Khan, regardless of how much I or anybody like him as a QB, because he could bring back a really disproportionate haul.