Lucrative TV Deals, Strong Brands Contribute To Value of Franchises

According to the most recent (2018) Forbes.com valuation of NFL franchises, the Dallas Cowboys currently command a valuation of $5 billion, making them one of the most valuable franchises in the world in any sport.

Six NFL clubs - the Cowboys, New England Patriots, New York Giants, Los Angeles Rams, Washington Redskins and San Francisco 49ers - are worth at least $3 billion.

The "cheapest" franchise in the league, the Buffalo Bills, would run you $1.6 billion.

Every single team in the NFL is profitable, and every single team posted revenues of at least $300 million during the 2018 season. The Bills posted revenues of $364 million and net operating income of $67 million, and they are the least expensive franchise in the league.

The Dallas Cowboys, at the opposite end of the list, made a staggering $365 million on revenues of $864 million.

In total, the NFL currently brings in roughly $15 billion in revenues every year, with the goal of reaching $25 billion/year in revenues by 2027.

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Let's take a look at why NFL teams are worth so much:

1. TV Deals.

The NFL brings in over $5 billion a year from national TV deals with the likes of CBS, Fox, NBC, ESPN and Amazon.

This TV revenue money is distributed evenly to the 32 NFL teams, regardless of their popularity. So, the Cowboys are getting the same check every year that the Buffalo Bills are getting. This is obviously a massive boost to every team's bottom line, as they get a check for over $150 million just from TV rights (the actual check is much higher after factoring in sponsorship revenues, etc) before the season even starts.

With a continued ferocious appetite for live television content, the likes of Fox, CBS, NBC, ESPN and Amazon are expected to pay 50% more for their TV deals when the current contracts expire in 2022. People are expecting that Amazon will make a big play for TV rights as well.

2. Sponsorship Deals.

Microsoft. Pizza Hut. The list goes on and on. League sponsorship revenues are well in excess of $1.25 billion, and this gets distributed equally to all 32 of the league's teams. Microsoft's deal with the NFL, which was extended for the 2018/19 season, reportedly costs them $80 million per year. In addition, the NFL recently signed a deal with Caesar's Entertainment where Caesar's will become the NFL's official "casino partner" in exchange for $30 million/year.

3. Ticket Revenues.

Home teams keep 60% of their ticket revenues, while the remaining 40% is entered into a pool and divided equally between the league's 32 teams. The NFL generates an estimated $3.3 billion per year in ticket revenues.

4. Merchandise Sales.

Again, the league splits merchandise sales, with the exception of the Dallas Cowboys, who keep all of their merchandising revenues and aren't a part of the general sharing pool. Merchandise sales are a billion dollar plus industry for the NFL's teams.

5. Naming Rights.

Here is where the teams can start to differentiate from each other, as NFL owners get to keep all of the money generated by naming rights.

The Dallas Cowboys have a naming rights agreement with AT&T, with the company reportedly paying between $17-$19 million per year to have their name on the stadium.

6. Local Sponsorship Deals.

The Cowboys, for instance, have their own sponsorship deals with the likes of Bank of America, Ford and Winstar Casino. Again, any money generated goes to the owners and doesn't have to enter into a shared pool.

7. Suite and Club Seating.

Each franchise in the NFL retains all of its own suite and club seating revenues. This can be especially lucrative, as luxury suites fetch a price of well over $100,000 per year, and can rise to close to $1 million/year for some of the league's most prestigious franchises.

8. Stadiums.

Some teams (such as the Buffalo Bills) pay rent to play in their stadiums, while other teams own their stadiums outright.

Certain teams, such as the Miami Dolphins and New England Patriots, own their teams outright. In most cases, the stadiums are owned by the cities that the teams play in, as massive amounts of taxpayer dollars and subsidies are used to fund construction.

9. Concession Stand/Parking.

This is considered "local revenue" and is kept by the teams, and amounts to millions and millions of dollars per game in extra revenue.

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In addition, all 32 of the NFL's teams own an equal share in the NFL Network, which launched in 2003. The NFL Network is available in over 70 million US households and is surely valued in the many billions of dollars.

Lastly, the NFL brand and the brands of each of the NFL's teams are worth a fortune as well, with the Dallas Cowboy's brand alone likely clocking in at $1 billion in value.

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In short - the NFL is a money-making machine that continues to print money with each passing year. By the time that the 2022 season comes around, the NFL will likely be bringing in roughly $20 billion per year in revenues, which should help to propel team valuations even higher.

Source: Forbes.com - NFL Team Valuations

Filed under: General Knowledge