It is football season, and we wanted to understand the financial impact of football, particularly, the value of the National Football League, the Internet’s influence on the game, and the lost productivity because of football.
First, let’s look at the value of the NFL. In 2011, the NFL signed an extension, running through 2022 season, for broadcasting rights with Fox, NBC, and CBS that pays the league 60% more. Each major network now pays roughly $1 billion annually, while ESPN pays nearly $2 billion a year, putting broadcasting rights at nearly $5 billion year. Including other media deals, like DirecTV, the NFL Network, and radio broadcasting rights, the 32 NFL teams divvy up about $7 billion in media money every year, or more than $200 million per team before tickets, beer, and jerseys are sold.
If you are a football fan, you probably heard the Buffalo Bills were recently sold for a record sum of more than $1 billion. This is a franchise that hasn’t been to the playoffs this millennium (1999), which is currently the longest such drought in the league. Not to mention, Buffalo isn’t exactly the bustling city it was about 60 or 70 years ago. The Buffalo Bills were recently valued at $935 million so the buyers are paying a bit of a premium. Clearly, there’s some value in owning an NFL franchise.
According to Forbes, the average franchise value is about $1.4 billion, which is 23% higher than last year. The most valuable franchise is the Dallas Cowboys at about $3.2 billion. This is a team that has won exactly one playoff game since 1996. The Atlanta Falcons are ranked #21 with a value of $1.125 billion.
Given Steve Ballmer just paid $2 billion to buy the Los Angeles Clippers, we wouldn’t be surprised to see a team move to Los Angeles for the bigger market and the value that’s created by being in that market. Possible teams include the San Diego Chargers, Oakland Raiders, St. Louis Rams, and the Jacksonville Jaguars, all of which rank in the lower third of the league in terms of franchise value.
The Internet has certainly helped the NFL gain in popularity with fantasy football. In a nutshell, fantasy football is a game played by everyday football fans where they draft a virtual team of offensive skill players and are awarded points based on the production of those players. Fantasy football actually has origins dating back to the 1960s, but since calculating scores and tracking games was much more difficult before the Internet came about, the popularity grew very, very slowly.
Then in 1997, CBS launched the first free fantasy football website and the rest was history. Nearly 40 million people, or more than 10% of the population, now compete in fantasy football leagues nationwide and is now considered the NFL’s most important marketing tool.
In the last decade alone, the NFL’s popularity has exploded. Ten years ago, 47% of Americans followed the NFL. Today, that percentage is closer to 60. There’s even some that have said the NFL is changing the rules because of fantasy football, such as calling more penalties on defensive players.
Much has been made of the lost productivity caused by the NCAA’s March Madness tournament, as millions of workers nationwide compete in office brackets. According to estimates from Challenger, Gray & Christmas, fantasy football costs employers upwards of $900 million a week, or about $13 billion for the entire season, double what the same firm said in 2012 when it estimated fantasy football cost employers about $6.5 billion. That said, fantasy football is also a morale booster and builds team loyalty, which can ultimately lead to increased productivity.
If you have questions, the experts at Henssler Financial will be glad to help: