How does the NFL Make Money?
Historically, one of the most prosperous American sports leagues has been the National Football League (NFL). Despite all the talk about the “Big Three” sports in North America (or “Big Four” for hockey fans), the truth is that pro football comes first, followed by everything else.
The NFL renounced its tax-exempt status in 2015 in response to growing criticism over its rapidly increasing revenue. It had previously held this status since 1942. The 32 teams that make up the league now form a trade association that receives funding from them.
Thirty-one of these teams are privately owned, with the Green Bay Packers continuing to operate as a non-profit organization. The majority of the NFL’s income comes from TV contracts. Ticket sales, licensing and merchandising rights, and corporate sponsorships are additional sources of income.
The NFL seems to be doing better financially than ever despite some recent setbacks, including debates over player concussions, the national anthem, and the COVID-19 pandemic’s effects. But it is impossible to determine the exact amount of money the NFL makes due to its private nature.
The league earned an estimated USD 9.8 billion in revenue in 2021 (USD 309,206 divided by 32 teams), a decrease from the estimated USD 15 billion or more in revenue in 2019. The COVID-19 pandemic was said to be to blame for this decline. Roger Goodell, the commissioner of the NFL, set a revenue goal of USD 25 billion by 2027 a decade before the pandemic began.
The Business Model
The NFL divides its sources of income into two categories: local and national. The league itself negotiates national merchandising, licensing, and TV contracts, which make up the majority of national revenue. The 32 teams receive equal shares of this money after that, regardless of individual team performance. According to shareholder filings from the Green Bay Packers, the NFL generated approximately USD 9.8 billion in total revenue in the fiscal year (FY) ending March 31, 2021, with USD 309 million going to each team.
The teams themselves generate local income through concession sales, ticket sales, and corporate sponsors. The Packers’ local revenue for the fiscal year that ends on March 31, 2021, which fell by 70.7% from the prior FY as a result of COVID-19, totalled USD 61.8 million.
To help cover the high operating expenses of running a professional football team, large revenues are required. The Packers incurred expenses totalling USD 410 million in FY 2021. The majority went toward player salaries, with the remainder going toward stadium maintenance, advertising, and team and administrative expenses.
Here is the basic structure of the NFL’s business and how it breaks down:
Massive TV deals
The Super Bowls are among the most-watched TV broadcasts in American history, and NFL is by far the most-watched sport in the country.
Mondays, Thursdays, and Sundays during the regular season see live NFL broadcasts in the US. Since these games consistently have the highest TV ratings, media companies have paid a hefty sum for the right to broadcast them.
The NFL currently has TV agreements in place that run through the 2033 season with companies like Amazon, CBS, ESPN/ABC, FOX, and NBC. These deals, which were announced in March 2021, could be worth more than USD 100 billion, according to people with knowledge of them, CNBC reported.
According to the terms of the agreement, the four TV broadcasters will alternate hosting the Super Bowl each year, and Amazon will have exclusive streaming rights to “Thursday Night Football”.
Merchandising and Licensing Deals
The NFL also makes money by selling businesses the right to sell goods that bear the NFL’s logo, even though its massive TV deals account for the majority of its domestic revenue. For instance, in 2018, the NFL and Nike Inc. (NKE) partnered to sign a 10-year licensing agreement with online sports retailer Fanatics. By virtue of this agreement, Fanatics will serve as the sole manufacturer of all adult-sized, Nike-branded goods offered for sale on the NFL’s website.
Although the price of this agreement was not made public, it is most likely negligible in comparison to the NFL’s TV contracts.
Ticket Sales and Concessions
Even though ticket sales are a significant source of income for individual NFL teams, they still pale in comparison to the rapidly increasing revenue from TV deals (you’re probably noticing a pattern here).
The average NFL ticket is thought to cost about USD 151, and stadiums that hold that many fans typically sell out. There isn’t much room for improvement in this situation.
The only thing that sports teams can do is decide to renovate their stadiums so that more seats and concessions are added. Although expensive and disruptive, these renovations typically pay off. NFL teams can use their stadiums to host non-football events, like concerts, but there are still restrictions on the potential for revenue growth from these events.
Using the aforementioned averages, NFL teams could possibly make more than USD 10 million in ticket revenue from a single, completely sold-out stadium event. However, a number of costs must be deducted from that sum, such as taxes, marketing/administrative costs, and payments to musicians or athletes, and the profit is significantly reduced.
Concession sales, like ticket sales, are insignificant in comparison to TV deals and make up a small portion of the average NFL team’s revenue; however, the margins on selling food and beverages at games are very high.
NFL teams are paid by corporate sponsors to put their logos on merchandise, TV transitions, player uniforms, etc.
The naming rights to NFL stadiums are the most sought-after sponsorships. The Sports Business Journal estimates that the naming rights to So-Fi Stadium in Los Angeles are worth USD 30 million annually, whereas the naming rights to Allegiant Stadium in Las Vegas are worth between USD 20 and USD 25 million.
TV isn’t going away, despite some claims, at least not when it comes to football. The value of the NFL’s TV deals has increased dramatically over the last few decades and is expected to do so indefinitely.
Even though watching football on TV is still the norm, streaming is becoming more popular. In 2015, Yahoo! signed on as the NFL’s first streaming partner. Amazon.com Inc. and Twitter Inc. (TWTR) are just a couple of the numerous parties that have entered the fray since then (AMZN). The first NFL broadcast partner to secure exclusive rights to a selection of games on a digital platform was Amazon in 2021. For the exclusive right to broadcast “Thursday Night Football” on Prime Video, Amazon reportedly paid USD 1 billion.
These deals will also continue to expand quickly over the ensuing decades if the expansion of TV deals over the previous few decades is any indication.
The American Supreme Court ruled in May 2018 to leave it up to the individual states to decide whether or not to legalize sports betting. Given that option’s potential to bring in significant tax revenues—sports betting was predicted to be a USD 150 billion industry before it was legal—many states have since adopted it.
The NFL could take advantage of this by opening bookmakers in its stadiums, collaborating with well-known casinos, creating online sports betting websites, and other strategies. The NFL, which is obsessed with growth, will undoubtedly explore as many of the numerous opportunities as it can.
Who owns the National Football League (NFL)?
The National Football League is not owned by a single person (NFL). Instead, it is a trade organization made up of various teams or franchises. Only one of these teams—the Green Bay Packers—is owned collectively by shareholders as a nonprofit; the other thirty-one teams are owned individually.
What NFL team is worth the smallest amount of money?
The Buffalo Bills are the NFL team worth the least money, according to Forbes. The team’s last valuation was USD 2.27 billion, with estimated revenue of USD 340 million and an operating loss of USD 18 million for the 2021 season.
What NFL team is worth the most money?
The Dallas Cowboys are the NFL team with the highest market value. According to Forbes, which valued the Cowboys at USD 6.5 billion, the team generated approximately USD 800 million in revenue and generated approximately USD 280 million in operating profit for the 2021 season.
The Bottom Line
One of the most prosperous sports leagues in the country is the NFL. There is plenty of proof of the enormous revenue that it generates, even though it is a private entity and therefore not required to disclose how much it makes.
Most of the league’s funding comes from marketing and TV deals. However, the global COVID-19 pandemic is hurting its financial position. Some experts believe that the NFL will quickly recover from these short-term setbacks. That might be the case, and the popularity of the league certainly does not seem to be waning, but there is still a long way to go before the target of USD 25 billion in revenue by 2027 going to meet.