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Sep 19, 2017

To most Americans, Sunday afternoon means one thing: football. To the select few owners making up the 32 teams in the National Football League, Sunday afternoons are synonymous with money, a lot of money. Roger Goodell, the NFL league commissioner, has projected revenues of $25 billion by 2027. If so, team owners have much to look forward to. But the current picture of the NFL revenue model is looking quite peachy as well.
Recently, teams have been on the move, looking to create new fan bases and loyal followings where prior entertainment models have proved successful. Take the Los Angeles Rams for example. Just last year the Rams called the city of St. Louis, Missouri home. With an unemployment rate exceeding the national average prior to the decision to relocate, one could argue the city has been slow to rebound from the financial crisis still lingering in the American economy. Los Angeles, a city built on entertainment and the American dream, seems to match up with the ideology of American football; gladiators facing off in front of thousands of people to determine who is the stronger team and as a result, the victor.

Team relocations can substantially increase the value of an NFL team, and with that the NFL as a whole. The recent move by the Rams to Los Angeles from St. Louis doubled their value. This was before they even played one game in the city. The San Diego Chargers felt a similar impact, taking a once tired brand and seeing its value increase practically overnight.

The news of these relocations, as well as the announcement of the Oakland Raiders moving to Las Vegas by 2020 and new stadiums for the Minnesota Vikings and Atlanta Falcons, have helped NFL team values skyrocket by 19%, A savory return on any class of investment. In fact, the average NFL team is now worth $2.34 billion. The NFL’s most valuable team? The Dallas Cowboys, coming in at a total value of $4.2 billion, owned by Jerry Jones.

Relocation Fees and Revenue Models

A large portion of revenues for NFL teams are derived from their unique revenue sharing model. Year over year, the league shares roughly 60% of total revenues generated by business activities. The largest generator of revenue for the league is of course, their television agreements. These guarantee NFL games will be in front of millions of viewers each week for 16 straight weeks; not to mention the playoffs and the Super Bowl, the most viewed sports event in America every year.
On top of sharing their revenue for television agreements, the NFL also shares ticket and merchandise revenues. This can be another lucrative source of revenue for team owners. On an average season, the NFL can bring in as much as $2.5 billion in ticket sales alone. Combine that with the almost 25 million NFL jerseys sold yearly, and you can understand why team owners are substantially increasing their wealth.

Another large source of income for NFL team owners is their partner sponsorships and exclusive seating packages such as luxury suites and club seats. Depending on the team, price tags for these lavish viewing experiences can be in the hundreds of thousands of dollars. Once again, the valuable franchise of the Dallas Cowboys tops the bill offering luxury suits that sell in the range of $224,000 to $900,000.

If the money above didn’t get your attention, the NFL actually charges teams for relocating in the form of relocation fees. When a team wants to change home base, such as the Rams or the Chargers (moving to Los Angeles) the NFL charges them a substantial fee for the move. This fee, often a very large sum of money and paid off with yearly installments, is then distributed to the other teams in the league. This means, because of the Rams and Chargers being relocated, another team such as the Cleveland Browns will see a portion of the fee. Combined relocation fees for the 2017 season accumulate to a cool $650 million for the rest of the league.

While the audiences for football games are caught up in the game, the owners are making some serious cash. In order to continue this impressive revenue growth, the NFL will need to adapt to new consumer viewing trends and tackle new regions to increase audience retention.

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