America loves its sports, there are no two ways to say it. The average American loves sport, and follows at least 2 teams, especially in his vicinity. Americans pride themselves in their Big Three (American Football, Baseball and Basketball), and while these sports have a cult following on North American shores, they also enjoy wider global appeal, especially the NBA.
The National Football League is however the golden goose, with its annual Super Bowl tournament, a one-off game attracting remarkable viewership and even more astronomical numbers. Names such as Vince Lombardi and Tom Brady have made the sports more popular, but the NFL offers much more than nostalgia. The ROI for potential investors is quite the proposition, given that the potential reach is in billions of people.
There are 32 member teams but only Green Bay Packers retains its non-profit status. The other 31 teams are privately owned. Despite controversies over player concussions and the national anthem, a steady decline in viewership, loss of matchday revenue due to the Covid-19 pandemic, the NFL is still making unbelievable revenue. During the 2019 season, it made an estimated $15.26b, a 5.4% increase from the $14.48b generated the previous year. According to the Commissioner, it is also targeting a revenue of around $25b by 2027.
In this article, we highlight how the NFL makes its money.
TV is King
Most of the revenue the NFL generates is from TV, because American football is the most-viewed sport in the US. Media companies shell out top dollar to show these games on live TV, as they are consistently ranked the highest rated. Games are broadcast live on Mondays, Thursdays and Sundays. To put this into proper context, the Super Bowl accounts for 19 of the 20 most-viewed TV broadcasts in U.S history.
Companies such as CBS, NBC (owned by Comcast), ESPN, and Fox have deals with the NFL, with an agreed 7% annual raise, meaning that the NFL is guaranteed to net at least $3.1b per year by 2022.
Licensing and Merchandising Deals
Apart from its massive TV deals, the NFL sells licensing and merchandising rights to companies so that they can sell items that represent the NFL. In 2018, the NFL, in cahoots with Nike, signed a 10-year licensing deal with online sports retailer Fanatics to make the brand the exclusive manufacturer of all adult-sized, Nike-branded merchandise through the league’s online store. Although the value of this deal is undisclosed, there are indications that it doesn’t come close in terms of worth to the mammoth TV deals.
Concessions and Ticket Sales
NFL Stadiums sit at least 70,000 people, and oftentimes, these stadiums are not enough to sit the throng of people that want to experience matchday action live. In 2000, an NFL ticket was priced at $30, though as of last year, it was sold at $151. While there is also an average increase in price of 7% annually, these prices pale with what is accrued from TV.
In order to increase revenue from ticket sales, teams have renovated their stadia to provide a premium experience. Concessions are given to food vendors, although the margins are quite minimal compared to the sale of soda and beer, which generate up to 90% markup. Averagely, an NFL team earns about $8m, of which 8% is profit, with about 55% going to pay musicians or athletes, 10% for general stadium administration, 5% to the coaching staff and 5% in taxes. Concerts and non-football events are also an avenue to make money, but there are also limitations for growth.
Uniforms, TV transitions, and merchandise are a key source of corporate sponsorships as brands and major companies pay NFL teams to display their logos on these media. However, naming rights to stadiums are the most coveted. The Met Life in New York and the AT&T Stadium in Dallas have naming rights that are worth $19m a year, according to the New York Times.
There are plans for the future…..
Like all properly-run businesses, the NFL is also projecting long-term as it seeks to conquer new landscapes and secure even more viewership in the US, and spread its tentacles all over the world into uncharted territories. It has plans for increased TV deals. Streaming is also not left out, as these deals will continually be on the rise in the years to come. Gambling will also become more significant in terms of revenue, although the league body is officially against it.
The NFL could decide to partner with established casinos and set up betting parlours in stadiums. With American sports gambling being worth a reported $150bn annually, the opportunities are endless, and the NFL could tap into this.
The earning power of the NFL is mind-boggling with the potential to be more. It has become one of the most successful sports leagues in the world and doesn’t look like it will rest on its laurels anytime soon. The structure, organization, and fan love mean it will continue to rake in remarkable numbers.
While Covid-19 and steady declining viewership mean that the bottomline will be affected, there is still enough going on for the league to ensure that it will stay on course for its large profits forecast.