The Rainmen Have Value

After this season, I think Mr. Levingston should seriously consider taking on some local investors and pony up the $1,000,000 to join the NBA Development League. That means 20 people at $50,000. That is chicken feed, to be part of the NBA Organization. As reference, the Raptors have a franchise value of $373,000,000 on revenues of $124,000,000 and operating income of $29,000,000 last season. This page on the Forbes website has more information. I like the Wins-to-player cost ratio at the bottom of the page, it gives us an idea if the payroll expense is really worth it, since wins and losses (and championships) are how we judge sports teams.

I don't know the Rainmen's revenues, but let's just say they only get their home game ticket sales and merchandise. If they average 2,000 people per game for 18 home games at $15/ticket, allowing for discounted tickets but also the floor seats, that is $540,000. Let's say they sell 2,000 mechandise items this season, at an average of $25 each, including replica jerseys. That is another $50,000.

I don't know how much sponsorship they have, or if it is even included in revenues. Most of the sponsorship appears to be in kind, like the Printing House, Daily News, Q104, Reebok, Physioclinic, The Westin. As a guess, let's say the total sponsorship is $300,000. I assume the Metro Centre keeps the concession revenues, to keep things simple. Based on the Raptor's value to revenue ratio, this makes the Rainmen franchise worth about $2,700,000, from $890,000 in revenues.

These figures are all just guesses on my part, I have no actual information on the Rainmen finances. I also assume that there is no economy of scale; in other words, a bigger company like the Raptors would probably have better profit margins than a new company that operates on a smaller scale, like the Rainmen. This is because fixed costs such as travel, salaries, venue rental, etc. are probably all a much bigger percentage of revenue for the Rainmen than for the Raptors.

If the Rainmen don't make as much as 24% income on their revenue (the revenue figures being complete conjecture on my part), then the franchise value would not be as high as the above figure. If their costs are $20,000 per game ($8,000 for venue rental in Halifax, say the same for travel costs for away games, $12,000 per game in salaries of players, coaches, staff), that means they have costs of $720,000 for a 36 game season. That leaves about $170,000 of around 19% of revenue, as income. Based on the Raptor's figures, that makes the Rainmen worth about $2,200,000.

I am guessing these figures are on the low side, but my point from this exercise is to show that the franchise has a value that could easily be supported with a local consortium with the current owners retaining 50% of the team to reward their risk-taking on starting the team, to enter the NBA Development League. Once the Rainmen join the NBADL, attendance will go up and that increased revenue will go toward the bottom line, although I figure player salaries will probably also rise, but probably not as much as the increased revenues from attendance and merchandise.

How about the Green Bay Packers model of local people owning shares, maybe for a part of the team ownership to raise money (it essentially acts as a bond to raise money)? Sell 2,000 shares at $500 each. I would definitely buy one of those, and I am sure most other season ticket holders would, too. Heck, I paid more than that for my 5 season tickets. What do you think, Mr. Levingston?