The National Football League (NFL) has become a multi-billion dollar business, with the average value of its 32 franchises standing at $6.5 billion. This makes football teams highly lucrative assets for owners, as their returns on investment have outperformed traditional stocks. A prime example is the Houston Texans, which was purchased in 1999 for $600 million and is now worth $6.35 billion. Despite its lackluster performance on the field, the team has seen significant growth in value over the years.
In fact, seven out of the ten most recently sold NFL teams have outperformed the S&P 500 in terms of percentage gains. The Washington Commanders and the Denver Broncos, both of which were sold within the past two years, are exceptions to this trend. The rising valuations of NFL teams can be attributed to the league’s massive media deals, particularly its television agreements with Comcast, Disney, Paramount, and Fox. These agreements, along with streaming deals with YouTube and Amazon Prime, have significantly increased the NFL’s revenue. The league now earns an average of $12.4 billion per year through 2032, almost double its previous media rights cycle.
The NFL has also been generating additional revenue by selling exclusive streaming rights for games. Last season, the league sold exclusive streaming rights to a Wild Card playoff game to Comcast’s Peacock streaming service for $110 million. This season, the NFL has sold three exclusive streaming packages to Netflix and Amazon Prime, among others. These additional streaming agreements have increased the league’s media rights fees to $357 million per team, up from $325 million in 2023. The revenue generated from these deals is shared equally among the 32 teams, along with money from leaguewide sponsorship and licensing deals.
The revenue sharing model, combined with a salary cap that limits player spending to about 49% of revenue, allows small-market teams to compete with big-market teams. The Kansas City Chiefs, a small-market team, has won the past two Super Bowls and three of the past five. However, team values still vary significantly due to stadiums. Revenue from luxury suites, on-site restaurants, merchandise stores, sponsorships, and non-NFL events at stadiums is not shared among teams. Last year, stadiums hosting non-NFL events, such as Taylor Swift’s Eras Tour, generated significant revenue. For example, one Eras Tour stop netted $4 million in revenue per show for the hosting stadium. The Miami Dolphins’ Hard Rock Stadium raked in over $30 million from various events and is expected to double that amount this year.
The NFL’s financial success is evident in the average revenue and operating income of its teams. During the 2023 season, teams generated average revenue of $640 million and average operating income of $127 million, resulting in an EBITDA margin of 19%. The league’s rising team values have made them attractive investments, with prospective owners now paying at least 10 times revenue for a team. The Dallas Cowboys, the most valuable team in the league, is worth $11 billion, 73 times the amount Jerry Jones paid for the team in 1989. In comparison, the S&P 500 has only increased 18-fold during the same period.
The success of NFL teams in generating revenue from sponsorships is another factor contributing to their high values. The Dallas Cowboys, for instance, have revenue approaching $250 million from sponsors. The Los Angeles Rams, ranked second in terms of team value, earned $825 million in revenue last year and hosted numerous non-football events at their stadium. These events, including concerts by Taylor Swift and Beyoncé, contributed significantly to the team’s revenue.
Given the NFL’s financial success, private equity firms are increasingly interested in investing in the league. Major sports leagues like Major League Baseball and the National Basketball Association have already allowed institutional investors to buy limited partner stakes in teams. The NFL recently followed suit by permitting select private equity firms to take up to 10% stakes in NFL franchises. These firms, including Ares Management and Sixth Street Partners, have committed $12 billion in capital over time. This move not only makes it easier to finance the purchase of a team but also highlights the value and potential future growth of NFL teams.
In conclusion, the NFL’s team valuations have skyrocketed in recent years due to the league’s massive media deals and additional revenue from streaming agreements and non-NFL events at stadiums. The revenue sharing model and salary cap have helped small-market teams compete with big-market teams, resulting in increased parity within the league. Despite variations in team values, NFL teams have proven to be smart investments, with their values significantly outperforming traditional stocks. The league’s financial success has attracted interest from private equity firms, further solidifying the NFL’s status as a highly profitable and valuable business.
