30 November 2007

Let's Guess at DC United's Budget Outlays

Perhaps this is a game that's fun only to me, but let's take a guess at what United is actually spending in a given year. We know from the article that Oscar linked yesterday that rent at RFK is $18K a game. Oscar hypothesizes that the $10M loss MacFarlane claims is a loss in opportunity cost (i.e., he's not making the $10M he could if he had a new stadium). Let's see if we can figure out a way that a $10M loss, if United were operated as its own team regardless of revenue sharing, could be explained in any other terms. In short, we stipulate to no revenues whatsoever, let's see how much we can run up in costs.

We start with salaries. Assume that in 2008 United ponies up salaries up to the Salary cap. That's $2.25M, but it likely doesn't include the cost of benefits. So we'll add 20% to salary costs to cover benefits and the like. We also have to assume some overhead costs for the players, including their lockers, meals at games, travel costs, uniforms, etc... Let's make that roughly 40% of the modified salary number. And we'll have to include stadium costs in addition to rent, such as security, I imagine DC pays for the lights at game time, so that's some more cash, plus they rent the auxiliary fields... And we'll need the Front Office salaries, as well as their equipment and office space rent... And the various fees to contractors for legal services, medical services, field management, etc...

Anyways, for your benefit, the spreadsheet below is what I've developed, and as a general rule it seems about right. I figure I may have slightly underestimated the cost of just doing business in DC, but it at least seems like a decent grounds-up estimation of DC United's spending:



Now, this has no accounting for revenues of any sort. So unless United is pulling in less than $1M a year (unlikely, given not just ticket sales but also corporate sponsorships and the like) then the $10M number seems like it almost has to be an opportunity cost number, and not an actual number. That seem right to everyone? Can we make this perhaps a bit more accurate? C'mon, I know we can.

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7 Comments:

At 30 November, 2007 15:58, Anonymous Mickey said...

Brilliant start... Fair assumptions given that paucity of info available from the ownership.

However, you nailed it in terms of the remaining items necessary to refine the balance sheet... revenue.

One thing worth considering ... while the costs and expenses of managing DCU have been relatively static over the past 4-5 years (taking into account modest escalation for the cost of doing business in DC and the costs of keeping up with the Joneses (i.e., MLS operations have gradually improved over the years for all clubs)), DCU revenue MUST have increased exponentially during the same period because (a) the points of revenue have increased with additional fixtures (CONCACAF, SuperLiga, Nissan, etc.), (b) the ticket prices and the amount of package ticket holders have increased (although negligable in some categories), and (c) the broadcasting revenues have increased (the fountain of profit for sports enterprises).

 
At 30 November, 2007 21:42, Blogger Guy Franzen said...

A lot of travel expense missed.

 
At 30 November, 2007 22:35, Blogger Jason said...

Remember that all members of DC's team/staff have to fly commercially per MLS regulations... that's a lot of money for all of those away games etc etc etc.

 
At 01 December, 2007 00:13, Blogger Kinney said...

Also remember that MLS' single entity structure can lead to some completely legal but none the less interesting accounting. What do you count as MLS expenses and what do you count as DC United expenses? The same is true for incomes. This allows a lot of leeway for how much a team is losing or making a season.

 
At 01 December, 2007 00:49, Anonymous Kelly said...

Yeah, I was going to point out the lack of travel expenses, which would also include some kind of per diem per player, coach, medical and equipment manager going along above the costs of travel.

There is also probably some kind of full time medical personnel for games and doctors for putting players back together. There would probably also be a law firm on retainer of some kind. The legal haggling over the Veron contract alone is probably costing the team a pretty penny.

You also over looked things like balls, nets, corner flags, shin guards, jock-straps, socks, uniforms, boots, gloves, tape, water bottles, towels, buckets, bandages and magic sponges.

And there is also the added costs of playing in the various tournaments and playoffs which add play dates to RFK and travel as well. Was there any thing for advertising? Promotions? Programs? Give aways like the T-shirts or mini-balls?

There's also the expenses of running the reserves and the youth programs. What about scouting? United probably also pay some kind of stipend to players for auditions.

I think you're probably looking at an additional 5-10 million of outlay.

Off the top of my head, it probably costs something in the neighborhood of $8,000 merely to fly the players to one game, which would come to about $190,000 for just the league games. I'm figuring low on the airfare and not including support, executive and coaching staffs. That also doesn't include lodging, ground transportation and meals.

Kelly

 
At 01 December, 2007 01:29, Anonymous Goose said...

Front office staff is more like 40 people.

 
At 03 December, 2007 09:11, Blogger D said...

Mickey: Revenue is certainly something I want to look at, but I wanted to start with the area where I felt like we knew the least.

Guy: Excellent point. I'll throw a number in there for that.

Kelly: Fortunately, we've included expenses for a Medical team and legal, but I doubt those are on-site costs, more like contracts that have been awarded. We have half a million towards those numbers, and that at least seems reasonable. Similarly, basic equipment costs come under overhead (the same way computers for the front office staff would) so I think we're covered there. The travel expense you describe seems reasonable, so I'll probably throw a number like that in there for that.

Goose:I may have miscounted, and will adjust to your number

 

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