Rising NFL valuations mean huge profits for owners

A National Football League team is now a $6.5 billion business.

That's the typical value of the NFL's 32 franchises, in accordance with CNBC's official 2024 NFL Team Valuations. Professional football teams are a lucrative asset for the owners of the most well-liked U.S. sports league: The returns they’ve earned on their initial investments dwarf the gains of traditional stocks over equivalent periods.

Take, for instance, the Houston Texans, No. 11 in CNBC's 2024 value rankings. In 1999, the last time the NFL expanded, the late Robert McNair agreed to purchase the rights to the franchise for a purchase order price of $600 million, which takes under consideration the payment structure and the worth of a deal over time. The Texans at the moment are price $6.35 billion, greater than ten times McNair's transfer fee and 3 times the profits of the S&P500 since this 12 months.

That's not bad for a team that has a record of 152-202-1 in its 22 seasons and has never made it to the Super Bowl.

And Texans should not alone.

Of the last 10 NFL teams sold, seven have outperformed the S&P 500 on a percentage basis within the period for the reason that sale. The Washington Commanders and Denver Broncos — No. 13 and No. 14 on CNBC's list of 2024 team valuations — have lagged overall market gains and, notably, were sold throughout the last two years. The Miami Dolphins, No. 8 on CNBC's list, also lag the S&P but were last sold in 2009, when the stock market was getting back from a low point following the slumps through the 2007-08 financial crisis.

The increase in the worth of football teams is basically the results of the league's massive and growing media contracts.

The NFL’s current television contracts with Comcast, Disneys, Outstanding And Fox, The contracts that began last season are price a mean of $9.2 billion per 12 months, 85 percent greater than previous deals.

Add the streaming offers with YouTube for NFL Sunday Ticket and with Amazon Prime For Thursday Night Football, the NFL is guaranteed a mean of $12.4 billion per 12 months through 2032 – nearly double the $6.48 billion it earned annually during its previous media rights cycle.

In addition to those bulk deals, the league increased its media revenue by selling additional streaming games.

Last season, the NFL sold exclusive streaming rights to a Wild Card playoff game to Comcast's Peacock streaming service for $110 million, in accordance with an individual conversant in the deal.

The league sold three exclusive streaming packages for this season: two games on Christmas Day on Netflix for a complete of $150 million; a Wild Card game on Amazon Prime for $120 million; and a global regular-season game on Peacock for $80 million, in accordance with the person conversant in the deals. The league is anticipated to receive about $200 million for its Sunday Ticket industrial rights, which bring numerous NFL games to bars and restaurants, in accordance with the person conversant in the matter.

Combined, total media rights fees amount to $357 million per team (up from $325 million in 2023).

CNBC sources requested anonymity to debate details of the deals, which should not publicly available.

A rising tide lifts all boats within the NFL. The 32 teams split revenue from national media contracts equally, together with money from league-wide sponsorship and licensing deals and 34% of gate receipts. In 2023, $13.68 billion, or 67% of the NFL's $20.47 billion in revenue, was split evenly.

When such high revenue sharing is combined with a salary cap that limits player spending to about 49% of revenue, teams in small markets like Green Bay, Wisconsin, and Buffalo, New York, can compete with teams in large markets like New York and Los Angeles. The small-market Kansas City Chiefs, No. 18 in CNBC's 2024 rankings rankings, have won the last two Super Bowls and three of the last five.

But there continues to be an enormous difference between the teams' values, largely resulting from the stadiums. Teams don’t receive a share of the revenue generated from luxury suites, on-site restaurants, merchandise stores, sponsorships or non-NFL events at their stadiums.

Last 12 months it made a much bigger difference than usual.

Pop star Taylor Swift performed at several NFL stadiums as a part of her successful Eras Tour last 12 months, including SoFi Stadium in Los Angeles, Raymond James Stadium in Tampa Bay, Gillette Stadium in New England and Lincoln Financial Field in Philadelphia. An Eras Tour stop generated $4 million in revenue per show for the host stadium, in accordance with an individual conversant in the matter who spoke on the condition of anonymity to debate confidential information.

The Dolphins' Hard Rock Stadium, which can also be a stop on the Eras Tour, brought in greater than $30 million last 12 months from college football games, soccer matches, live shows, festivals and tennis matches – and that quantity could double this 12 months, in accordance with an individual conversant in the matter.

In addition, the revenue sharing and salary cap agreements make the league very profitable.

During the 2023 season, the 32 NFL teams generated average revenue of $640 million and average operating income (earnings before interest, taxes, depreciation, and amortization) of $127 million. The typical NFL team has an EBITDA margin of 19%.

The NFL's financial success led to higher bonuses for team sales.

Two years ago Walmart Heir Rob Walton bought the Denver Broncos for $4.65 billion, or 8.8 times the team's revenue. But nowadays, a possible owner is unlikely to pay lower than 10 times revenue for a team. The average value-to-revenue ratio in CNBC's rating of all 32 teams for 2024 is 10.2.

Last 12 months, private equity billionaire Josh Harris bought the Washington Commanders for $6.05 billion, or 11 times revenue. Earlier this 12 months, a possible owner considered buying the Tampa Bay Buccaneers for about $6 billion, which might have valued the team at 9.4 times revenue, in accordance with two people conversant in the matter.

When teams change hands, they prove to be a sensible investment.

The league's most precious team, the Dallas Cowboys, are price $11 billion – 73 times what owner Jerry Jones paid for the team in 1989. The S&P 500 has risen just 18 times since Jones bought the Cowboys.

The Cowboys had by far the best revenue of any team within the league last 12 months at $1.22 billion and the best operating income at $550 million, largely resulting from sponsorship revenue. Dallas is approaching an NFL high of $250 million in sponsorship revenue, in accordance with CNBC sources.

The Los Angeles Rams, ranked No. 2 on CNBC's 2024 valuation list, were also No. 2 in revenue with $825 million. The Rams were also No. 2 in sponsorship revenue within the league and made a tidy sum by hosting greater than 25 non-football events at SoFi Stadium, including six sold-out nights of Swift's Eras Tour and three of Beyoncé's Renaissance Tour, in addition to live shows by Ed Sheeran, Metallica and Pink.

The Rams, who were in St. Louis when sports and entertainment mogul Stanley Kroenke bought the team for $750 million in 2010, at the moment are price $8 billion. Even when factoring within the $550 million relocation fee Kroenke needed to pay the league to maneuver the team to Los Angeles, in addition to a $571 million settlement fee related to the legal challenges of the move, his investment is greater than 4 times as much.

The rise in the worth of NFL teams explains why private equity firms can't wait to speculate within the league.

For several years, Major League Baseball, the National Basketball Association, the National Hockey League and Major League Soccer have allowed institutional investors to buy limited partnership interests in teams. European soccer leagues akin to the English Premier League have done in order well.

The NFL followed suit just last week. The league's owners voted to permit a select group of personal equity firms – Ares Management, Sixth Street Partners, Arctos Partners and an investor consortium including Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners and Ludis – to purchase as much as 10% of shares in NFL franchises. The firms have committed $12 billion in capital over time, people conversant in the matter told CNBC.

Allowing private equity firms to speculate within the league is meant to make it easier to finance the acquisition of a team.

Even the lowest-valued team on CNBC's list, the Cincinnati Bengals, are price $5.25 billion.

Factoring within the league's maximum allowable debt of $1.4 billion, that leaves an equity burden of $3.8 billion. Assuming a general partner holds the required 30%, limited partners must contribute a complete of $2.7 billion to get in the sport.