Wednesday, December 13, 2006

How about them Cowboys?

Yesterday, the Dallas Cowboys unveiled the designs for their new football stadium. Estimated to cost $1 billion dollars and to be built in time for the 2009 football season, it truly is an amazing structure. The supports for the structure are two massive steel beams that will extend like two arches the length of the building. The stadium will have retractable roof and walls so that it can either be open or closed to the elements. And it will seat 80,000 fans, making it the largest NFL stadium.

But the truly amazing and overwhelming feature of the project, IMO, is the 200 suites that will ring the stadium. Think about that--200 corporate suites. Just to put that into context, the new Cardinals stadium has about 53 suites; the new Indianapolis Colts stadium will have 142 suites across a price range from $40K to $235K. That means the new Cowboys stadium will have almost 60 more suites than the Colts venue (which itself is costing about $500 million to build).

One of the important parts of this is how stadium revenues factor into the profitability of a sports franchise. The NFL's salary cap forces teams to offer huge signing bonuses that are prorated for the life of the contract; in order to pay those signing bonuses (like Peyton Manning's $34 million bonus on the contract he signed last year), owners need to have enough cash flow to pay up front money. How do owners get that kind of cash on hand? The only way is through maximized income streams, such as stadium income.

And so, the Cowboys, with a potential suite income of $40 million (calcaulated at each of those suites going for $200K; that does not count the 80,000 seats, which themselves will go for a pretty penny), should be able to pay for whatever free agents they need to continue to build the team and still maintain an incredible profitablity for owner Jerry Jones. It is easy to envision that whenever Jones, or his heirs, gets ready to sell the Cowboys, the franchise could easily go for over $2 billion (considering that today, the Redskins and NY Yankees are each valued at around $1 billion).

As Jimmy Johnson would've said, "How about them Cowboys?"

1 comment:

Alex Ford said...

It's unfortunate that they'll never have a classy team to be the home team in their nice new stadium. I suppose they'll have to rely on their rivals for class.

Go Skins!!