US Markets
Thursday, September 5th, 2024 3:03 pm EDT
Key Points
- NFL Team Valuation Growth: The average NFL franchise is valued at $6.5 billion, with many teams seeing exponential returns on their original investments, far outpacing the S&P 500.
- Revenue from Media Deals: The NFL’s growing media agreements, including TV contracts and streaming deals, significantly drive team values, with total media rights fees reaching $12.4 billion annually.
- Revenue Sharing and Profitability: The NFL’s revenue-sharing model, combined with a salary cap, ensures profitability for all teams, regardless of market size, though luxury suite and stadium event revenues create valuation disparities.
The National Football League (NFL) has become a highly lucrative business, with the average value of its 32 franchises now at $6.5 billion, according to CNBC’s 2024 NFL Team Valuations. This represents a massive return on investment for team owners, as demonstrated by the Houston Texans, whose value has grown more than tenfold since Robert McNair purchased the team in 1999 for $600 million. Several teams have significantly outperformed the S&P 500 in terms of growth since their last sale, highlighting the financial success of NFL franchises.
The primary driver of rising team valuations is the league’s lucrative media deals. The NFL’s current television agreements with major networks like Comcast, Disney, Paramount, and Fox, along with streaming deals with platforms like YouTube and Amazon, guarantee an average of $12.4 billion in annual revenue through 2032, nearly double the previous deal. Additional deals, such as exclusive streaming packages sold to services like Peacock, further bolster the NFL’s revenue streams. As a result, each team receives $357 million in media rights fees, up from $325 million in 2023.
Revenue sharing and a salary cap have helped level the playing field for teams in smaller markets, like the Green Bay Packers and Buffalo Bills, allowing them to compete with larger market teams. Despite this, stadium-related income, such as from luxury suites, sponsorships, and non-NFL events, creates significant differences in team revenues. For instance, teams like the Los Angeles Rams and Miami Dolphins have generated millions from hosting major concerts and events, boosting their overall profitability.
NFL teams also deliver substantial operating income, with an average of $640 million in revenue and $127 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) per team. The Dallas Cowboys, the league’s most valuable team at $11 billion, lead the way with $1.22 billion in revenue and $550 million in operating income, largely due to sponsorships.
As NFL franchise values soar, so do the costs of acquiring a team. Recent sales, such as Rob Walton’s $4.65 billion purchase of the Denver Broncos, have shown that teams now typically sell for over ten times their revenue. Despite the high prices, teams remain an attractive investment, as illustrated by Josh Harris’s $6.05 billion purchase of the Washington Commanders and Ken Griffin’s recent offers for the Miami Dolphins and Tampa Bay Buccaneers. The profitability and growing value of NFL teams have drawn the interest of private equity firms, which were recently permitted to invest in limited stakes of up to 10% in NFL franchises. This move is expected to facilitate the financing of future team purchases.
In conclusion, NFL teams have proven to be exceptional investments, far outperforming traditional stock market returns. The league’s ever-expanding media deals and strong revenue-sharing system have driven franchise values to unprecedented levels, making team ownership an appealing prospect for investors and private equity firms alike.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/09/05/rising-nfl-valuations-massive-returns-for-owners.html
