By Jesse Marx
By Chris Parker
By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
Within months of purchasing the Minnesota Vikings for $250 million in July 1998, Texas billionaire Red McCombs was angling for a new stadium to replace the Hubert H. Humphrey Metrodome.
Never mind that the 16-year-old indoor structure had been built at the behest of the Vikings, that the team had a lease in place that obligated them to remain at the Dome for another 13 seasons, and that rookie sensation Randy Moss was leading the Vikings to a near perfect 15-1 record that brought them within a missed field goal of their first Super Bowl appearance in 22 years.
Instead, McCombs focused his efforts on demonizing the home field as obsolete and arguing that the team needed a new stadium to be competitive.
By the following May, McCombs, who made his initial fortune in the used-car business, was telling a gathering of Minnesota auto and truck dealers that the Vikings were going to need a "facility fix," comparing the Metrodome to a "car dealership that hasn't been renovated while its competitors in the marketplace have modernized."
One month later, the Metropolitan Sports Facilities Commission unveiled a renovation plan to add concession stands, increase the number of luxury suites, and convert 6,400 of the Dome's 63,000 seats into the pricier club variety.
McCombs rejected the plan, insisting that only a new, 68,500-seat stadium with 150 corporate suites and 8,400 club seats would meet the Vikings' needs. Club officials also began to hint about not being able to "keep the Vikings in Minnesota," a sharp contrast to McCombs's earlier statement, upon being introduced as the new Vikings owner, that "we have no plans to move this team whatsoever."
And all of this before the 1999 NFL season was even underway.
Six years later, having failed to win legislative support for a stadium plan that had morphed into an ambitious $1.5 billion, 740-acre mixed-use development in Blaine known as "The Preserve at Rice Creek," McCombs cashed in his chips and sold the Vikings to a group headed by New Jersey-based real estate developer Zygmunt Wilf. The price? A cool $600 million, representing an incredible 140 percent return on investment—or $50 million per year for the seven seasons that McCombs owned the team.
Had McCombs held onto the team for another three years, he might have reaped an even greater windfall, based on the $839 million valuation that Forbes put on the Vikings on the eve of the 2008 season. In fact, a study by University of Chicago economists Kevin Murphy and Robert Topel found that "between 1998...and 2008, the average NFL team increased in value from $288.1 million to $1.04 billion, or 360 percent."
Simply put, NFL teams are cash cows. Billionaires regularly vie to become part of pro football's exclusive enterprise, a monopolistic juggernaut that enjoys the most lucrative broadcast rights in all of professional sports, and by virtue of a league-wide salary cap, controls labor costs so that all teams—from small-market Green Bay to metropolis New York—can compete on relatively equal terms for the best players.
The NFL's annual broadcast revenue is approximately $4 billion, which essentially covers the $120 million annual payroll for each team. This allows for income generated from advertising, concessions, licensed goods, luxury suite rental, premium seating, etc., to be devoted to other things, such as bonuses to attract key free agents, a beefed-up coaching staff, front office perks, stadium enhancements, marketing, and promotions.
Bottom line: Increase the local revenue and the owner not only reaps greater profits, he also sees exponential growth in the value of his franchise. This enormous upside explains why Zygi Wilf, with a net worth of a mere $300 million or so, wasted little time in launching a new stadium campaign shortly after his investment group acquired the Vikings.
During the 2006 legislative session alone, Wilf shelled out $750,000 in lobbying and advertising expenses. In subsequent years the team poured another $2.5 million into efforts to win public funding for a new stadium. This past fall, the Vikings spent $350,000, of which more than 80 percent was devoted to the team's slick "Preserve the Legend" advertising blitz aimed at building support for the "people's stadium" that Gov. Mark Dayton has been touting.
Unfortunately for Wilf, those efforts have yet to produce the stadium of his dreams, and as opposed to McCombs's experience, the current Vikings' ownership group has actually seen a decline in the franchise's value over the last few years (the team is now estimated by Forbes to be worth $796 million). For a successful developer like Wilf, that 5 percent drop in value is more an annoyance than anything else, as is the relatively paltry 4.2 percent annual return on investment he would realize if the Vikings were sold tomorrow.
What probably irks Wilf the most is that his team has the NFL's third-highest debt to equity ratio, trailing only the New York Giants and Jets. How much risk that debt load might pose for Wilf and his partners is unknown, but obviously the lure of greater revenue streams and a potentially sizable bump in the team's market value makes whatever the Vikings spend on lobbying mere chump change.
If the corporate goal is to dramatically enhance your team's bottom line at public expense, the obvious solution to an "inferior" facility is an upgrade to one with "modern amenities." What would such a venue look like? To quote the Vikings' chief financial officer, Steve Poppen, "a stadium that met the personality of Minneapolis; not extravagant, but also not something that you'd be embarrassed of."