The Dudes Abides...Who Won the Bailey-Portis Trade? (and why Daniel Snyder doesn't care)

I've read that it's hard to know who got better end of the deal in the Champ Bailey - Clinton Portis trade.  

If you reside in Oakland and your friends know you as Raider (insert your first name here), it might indeed appear that you can't really know if the Broncos got the better end of this trade.  Of course, if you live in Oakland, it's possible that you are struggling to complete the 8th grade.

The truth is that one can measure almost anything, if one establishes up front what is to be measured.

One of my areas of expertise (aside from quoting The Big Lebowski)  is business valuation.  In this field, free cash flow is king.  If one can determine how much free cash flow a business generates, one can arrive at a legitimate understanding of value, and in turn, success.

But what about the NFL?  How do we determine who "got" more value out of this particular trade?   Was it Washington or Denver?

One way to look at this is through the eyes of our mild mannered Joe Six-Pack fan.  This is the guy that tailgates, listens to talk radio, and generally doesn't pay much attention to the intricacies of the 3-4 defense, Cover 3, or whether or not RB is more important to a team than CB.  He cares about what almost everyone cares about, which is wins and losses.  In short, the more wins a team gets, the more successful it is.  The more losses, the less successful.

Thus, one way to approach the Bailey-Portis trade is simply to examine the win and loss records of both teams after the trade.  In addition, one ought to consider such things as playoff appearances and division titles (every fan likes to say we won our division last year).  

The trade was made at the end of the 2003 season.  Here's what has transpired since:

Denver has notched 9 more wins than the Redskins and 1 more division title.  Both teams have made the playoffs twice.  From this perspective, Denver has gotten the better end of the deal.  9 extra wins in 5 seasons and an AFC Championship game are good proof.  But certainly anyone would admit, in the last 3 years, both teams haven't exactly been tearing it up.

This is another way to look at the trade, however, and this is through the eyes of both Pat Bowlen and Daniel Snyder. You see, they don't measure success exactly the same way that Joe Six-Pack does.  Sure, they care about wins and losses, but they also care about the bottom line.  And in the NFL, the bottom line ain't too bad.  It ain't too bad at all.

Here are some statistics you probably haven't seen that often.  They are the total valuation of the Redskins and the Broncos since 2003, along with Gross Revenues and the Operating Profit of each team.  The figures are in the millions.

Denver Broncos

Year Valuation    % Change    Gross Revenues    % Change    Operating Income    % Change    Op Inc./Gross Rev.
04   815              N/A                 183                            N/A                 42.8                             N/A                 23.39%
05     907              11.29%          202                           10.38%          49.4                             15.42%         24.46%
06     975              7.50%            207                            2.48%            26.9                             -45.55%       13.00%
07     994              1.95%            212                            2.42%            15.9                             -40.89%        7.50%
08     1061            6.74%            226                            6.60%            18.8                             18.24%         8.32%
          Totals          N/A                 1030                          N/A                 153.8                            N/A                N/A

Washington Redskins

Year  Valuation    % Change     Gross Revenues    % Change    Operating Income    % Change    Op Inc./Gross Rev.
04      1104            N/A                  245                            N/A                 69.6                             N/A                 28.41%
05      1264           14.49%           287                            17.14%          53.8                            -22.70%        18.75%
06      1423           12.58%           303                             5.57%           108.4                          101.49%        35.78%
07      1467            3.09%            312                             2.97%            66                               -39.11%         21.15%
08      1538            4.84%            327                             4.81%            58.1                            -11.97%        17.77%
           Totals          N/A                 1474                           N/A                 355.9                          N/A                  N/A

For those of you who don't like to stare at charts, let me give you the big picture:

• Bowlen has increased the value of the Broncos by 30.18% since the trade.
• Snyder has increased the value of the Redskins by 39.31% since the trade
• Since the trade, neither team has seen a decrease in gross revenues.
• Snyder has done a better job of keeping more of his bottom line as represented by Operating Income as  Percentage of Gross Revenues.  In Synder's worst year, he retained 17.77% of his gross before taxes.  In Bowlen's worst year, he still retained 7.50% of his gross before taxes.
• Both are incredibly successful at making money with their teams (a big DUH!).

There are not many business in which your operating margins are 7.50% of gross...in your worst year.  This speaks to the massive success of the NFL.

But back to the question at hand.  From this perspective, who "won" the trade?

From the fans perspective, I say a clear case can be made for the Broncos.  More wins, more division titles, case closed.  But from an owner's perspective, the Redskins have done very well and Synder has been able to increase the value of his business more than Bowlen.   However, both franchises are in the top 11 with respect to valuation, so don't shed a tear for Mr. Bowlen (shed some for Al Davis, though, the Raiders are 31st). 

And ultimately, this is the point.  From Bowlen and Synder's perspective, the trade is probably a wash.  Both men have continued to use Bailey and Portis to market their teams and sell merchandise, and ultimately, increase the value of their assets.  

Still, I'm going with the Broncos on this one, and not simply because the wins support the argument.   Here's why. When Bailey enters the Hall of Fame (on the first ballot), he'll be a Bronco.  Portis?  Well, he's not getting in.  

This Hall of Fame opportunity (and hidden opportunity cost Snyder did not think about) will continue to generate revenues in ways Bowlen can smile about down the road (sales of the Elway jersey don't slow down after retirement).  

It's elementary, really.  

Don't tell Daniel Snyder, though.  He may try and buy the Hall of Fame and switch the jersey.

Go Broncos!!!!!!