The National Football League (NFL) is considered one of the most popular sports in the United States. It is a professional league for American Football usually comprised of 32 teams belonging to either the National Football Conference (NFC) or the American Football Conference (AFC). The NFL is also one of the sports leagues with the highest revenue and the most valuable teams. They even have a set goal where they intend to raise their revenue to $25 billion. Their huge revenue has resulted in quite lucrative player salaries and administrative fees. This can be attributed to the NFL stakeholders being very good business men and coming up with a strong and productive business model that meets the high demands that come with running a professional football league.
The NFL’s sources of revenue are listed as either National Revenue or Local Revenue. National revenue sources include TV deals, merchandising and licensing. Local revenue typically comes from corporate sponsors, ticket sales and concessions. This article looks at how the NFL makes its money and how sportsbook works towards this.
How The NFL Makes its Money
Television Contracts
TV deals are listed as National Revenue in the NFL’s business model and are one of the major ways the NFL makes its money contributing to nearly half its yearly revenue, including the NFL 2020/21 season. They have made TV deals with Comcast’s NBC, Disney’s ESPN, CBS and Fox. One of their deals made in 2011, NBC, Fox and CBS agreed to a contract where they would pay a whopping $39.6 billion for the seasons running between 2014 and 2022. This contract gave the three broadcasters proportionate share rights to the much watched ‘Sunday Night Football’. They also get to annually rotate rights to the Super Bowl, one of the biggest and most watched TV broadcasts in the United States of America. These agreed on rates will also be increasing annually by 7% which sums up to $3.1 billion yearly from each broadcaster.
ESPN also agreed to a contract active until 2021 where they would pay the NFL $15.2 billion for the rights to ‘Monday Night Football’. Fox outbid CBS and NBC to sign another deal in 2018, giving them exclusive rights to ‘Thursday Night Football’, worth $3.3 billion. These deals are the financial backbone for the NFL and guaranteed to carry them to 2021 and beyond.
Merchandising and Licensing Deals
This is another form of National Revenue for the NFL. It involves the NFL selling rights to different companies allowing them to sell items that represent the National Football League. A good example would be the deal they made with Fanatics in partnership with Nike. This 10 year licensing deal gives Fanatics the exclusive rights to manufacture Nike merchandise in adult sizes that is then sold through an online store owned by the NFL. While the details of this deal are kept under wraps it merchandise sales show that its value is not far from that of the TV deals, this figure was approximated by Navigate Research to contribute about 10% to the yearly revenue of the NFL.
Ticket Sales
An average NFL stadium has a seating capacity of about 70,000 people and it is no secret that when games are in season these games are usually sold out. While the ticket prices have increased by 7% annually since the early 2000’s, this form of revenue collection leaves very little opportunity for growth. The revenue from these sales is considerable but does not quite measure up to the above mentioned quickly growing deals. This is however being improved by having teams renovate their stadiums for more seats and stands. This can be seen with the Packers who have spent $370 million to update their stadiums and this has yielded an increase in their yearly revenue to $71 million from $48 million. These stadiums also host concerts, football events that contribute to revenue for the league. NFL events are popular worldwide, and many are usually inspired to know how to get into American football.
The revenue from ticket sales is usually proportionally used on general stadium administration, taxes, paying players and coaching staff while still getting an 8% profit.
Corporate Sponsors
The NFL makes money from corporate sponsors who pay them to display their logos on sports uniforms, their merchandise, the stands and TV transitions. The revenue here is considerable as the NFL made over $1.3 billion from sponsorships. The most lucrative deal here comes with the naming rights for the NFL Stadiums as with the Met Life Stadium that is worth $19 million annually.
Upcoming Trends
NFL Online Betting
The NFL has always been against gambling. Recent developments have however seen States such as West Virginia legalizing gambling on the NFL. This came after the Supreme Court gave states the power to determine whether to legalize sports betting. Many states have already legalized sports gambling and if this were to spread across the whole of the US, this could prove to be one viable source of NFL revenue through deal and contracts with betting companies and sportsbook. Online gambling is a vast and profitable industry and would be an ideal option to be considered by the NFL. They could exploit this avenue by partnering with established casinos, setting up betting shops and parlours in their stadiums and set up NFL specific online gambling portals. With slight research into how sportsbook works, the NFL could turn this into one of their most profitable sources of revenue.
Streaming
TV is arguably still king over streaming services. However, streaming is fast becoming a competitive option to TV broadcasts, especially with the technological move towards connected mobile devices. The NFL recognized this and signed a 5 year deal with Verizon in 2017 for streaming rights, this deal was worth $2.5 billion. Amazon followed suit in 2018 getting a smaller two years of streaming rights for $130 million. These streaming deals are also expected to grow just as with the TV deals due to the likeness in industry.
Conclusion
While the NFL seems to be doing well financially, they have also encountered some challenges that have impacted their business model. The NFL greatly relies on the performance of its star athletes to keep their fans hooked and always coming back. Drops in player performance have been proven to result in viewership drops of up to 20%. Besides, the novel coronavirus pandemic has also had its fair share of effects. However, there are different COVID-19 alternatives for the NFL. There has also been a little political controversy surrounding the NFL especially seen with President Trump clearly expressing his disdain with the league. It is clear here that political support can and has influenced league attendance. These challenges are however a minor fluke and are in no way detrimental to the NFL’s solid business model that has made it one of the most profitable leagues worldwide.
