When it comes to the ability of a business to earn money, the impact of earnings can be viewed in multiple ways.
For the Packers, for example, the notion that the team had record revenues in its most recent fiscal year is balanced by the reality that, as explained by the Associated Press, profits dropped by 97.9 percent.
But profits dropped because expenses increased, dramatically. Expenses increased dramatically because the Packers, during their most recent fiscal year, paid out gigantic money to re-sign quarterback Aaron Rodgers and to sign linebacker Za'Darius Smith, linebacker Preston Smith, safety Adrian Amos, and guard Billy Smith.
The Packers dished out many millions in signing bonuses to Rodgers and the newcomers during the 12-month window ending on March 31, 2019. The new guys got $56 million collectively; Rodgers got $57.5 million on his own.
It’s easier for the Packers to shrug at a slim profit given that they don’t have an owner who hopes to siphon off cash for the purposes of buying superyachts or rare guitars. CEO Mark Murphy characterized that dynamic somewhat differently.
“We don’t have a rich, deep-pocketed owner, so we have a $400 million corporate reserve,” Murphy said via the AP. “Three or four years ago, we put $50 million into the corporate reserve. It’s grown since then with investment returns, and we’ve made significant investments in real estate around this area.”
Putting $50 million into corporate reserve is another way of saying, “We consciously chose not to spend that money on making the team better.” And this continues to be perhaps the most glaring aspect of the labor deal that the NFL Players Association needs to address in talks that are scheduled to resume this week.
Currently, individual teams are required to spend only 89 percent of the salary cap, on a four-year rolling average. This means that 11 cents of every cap dollar can be retained by a team as pure, raw profit.
Think about the teams that are carrying huge amounts of cap space. Some fans cheer about the existence of a major surplus, but that’s money that could have been spent on players. Instead, it counts as profit.
Indeed, it Ted Thompson were still the G.M. in Green Bay, the Packers likely would have had profits of more than $50 million in their most recent fiscal year, because big money wouldn’t have been spent on four expensive free agents.
The real message is that the Packers can keep spending major amounts of money. After all, the Packers spent like never before and also struggled through another disappointing season, but they still made a profit. Which means they didn’t have to even touch that $400 million reserve to make ends meet.
While the AP article that has landed in newspapers and websites throughout the country focuses on the dramatic drop in Packers profits, the news actually is very good for the Packers and the rest of the NFL. For all teams, revenue has grown to the point where even non-playoff teams can go on a massive, unprecedented spending spree and still end up with more cash in than cash out.