Do you know how NFL franchise owners make money? If YES, here are 3 most significant sources of annual revenue for owners of professional football franchises. Most times when we hear about the business side of football, we mainly see headlines about large year-over-year increases in reported Forbes’ team valuations, massive new national television contracts, unbelievable team sale prices, record free agent player contracts, and oftentimes annual financial losses for teams.
However, the most recent professional football franchise ownership change resulted in the second highest purchase price in MLB history for a team that generated operating losses in three of the past five seasons. This acquisition has propelled the question to how much professional football franchise owners make and invest in the United States.
In 2015, in response to mounting criticism for its quickly growing revenue, the NFL for instance gave up the tax – exempt status it had held since 1947. The league now exists as a trade association made up of and financed by its 32 member teams. 31 of these teams are owned individually, only the Green Bay Packers retains its non – profit status.
Although the goal of profit maximization is normal with any business, the sources of revenue for professional sports teams and operating expenses are unique versus other industries. Some financial information is reported in the press, mainly Forbes’ annual team valuations; however, the accuracy of this information is shallow and is sometimes disputed by the teams. Nonetheless, detailed audited financial statements for the teams are not available as all of the teams are private companies.
Based on previous reported data, media revenue and gate receipts make up a huge part of the total revenue with sponsorship, merchandise, and others making up the balance across the leagues. Operating expenses for the major football franchise owners are dominated by player salary expense, which tend to vary greatly from season to season and have a large impact on profitability (or lack thereof).
Also note that each football league in the United States has some form of revenue sharing among the teams; however, the specifics on what sources, and what portion of those sources, are shared differ between the leagues, and the numbers are well kept secret, away from the preying eyes of the public.
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Two Categories of NFL Revenue
For instance, the NFL groups its revenue streams into two categories: “national revenue” and “local revenue.” National revenue is made up of TV deals along with merchandising and licensing deals, which are negotiated at the national level by the NFL itself.
The above money is then divided evenly between the 32 teams regardless of individual performance. According to report, the NFL earned about $8.1 billion in national revenue last year, meaning each team received about $255 million in national revenue from the league.
Howbeit, local revenue, which is made up of ticket sales, concessions, and corporate sponsors, is earned by the teams themselves. According to the same report, Green Bay Packers earned $196 million in local revenue, 43% of their total revenue that year, which was $455 million.
Even though these fees can vary, and ultimately affect the exact amount every franchise owner could make, here are the most significant source of annual revenue for professional football franchises and their owners in the United States.
3 Most Significant Source of Annual Revenue for Owners of Professional Football Franchises
1. Media Revenue
Football is, without any arguments, the most – viewed sport in the U.S. Nineteen of the 20 most – viewed TV broadcasts in U.S. history is Super bowl of various years. In season, NFL games are broadcast live in the USA on Mondays, Thursdays, and Sundays.
Note that these games are consistently the highest rated shows on TV, so media companies have shelled out big bucks for the rights to broadcast them. The major sources of media revenue are national and local television contracts, with national and local radio, league – owned sports networks, and digital media also providing media revenue.
According to reports, the current national television agreements are long – term in nature, offering a significant stable source of revenue for the foreseeable future. Note that each football league shares the national television revenue equally amongst the teams. In addition, alternative media companies, including Amazon, Facebook, YouTube, Twitter, and others, have obtained non – exclusive rights to different packages of live professional sports games to carry on their platforms in recent years.
The fees from these technology companies are expected to increase in the coming years for similar, or possibly expanded, rights. National and local radio agreements are an additional revenue source for each league, but substantially less than the national and local television rights.
2. Ticket Sales and Concessions
This source of revenue is a function of ticket prices and attendance. Ticket prices vary from team to team based on local market demographics. Attendance is also largely dependent on team performance, but some markets can sustain high attendance with inferior team performance.
Although ticket sales constitute an important revenue stream for individual football franchise teams, they are nothing compared to quickly growing revenue from TV deals. On average, NFL stadiums seat about 70,000 people and games tend to always sell out. This doesn’t leave much opportunity for growth.
The average ticket price has increased about 7% annually since the turn of the century. Tickets cost about $30 in 2000 to about $102 in 2017, but the added revenue from these increases are still very little when compared to revenue growth from TV.
Football teams can also use their stadiums to host non – football events, like concerts, but opportunities for revenue growth from these events have the same limitations. Just like ticket sales, concessions are still very tiny compared to TV deals. Concessions contribute only about $3 – 5 million to the average NFL team’s revenue, but the margins on selling food at games are extremely high. Beer and soda sold at stadiums have margins of over 90%.
3. Corporate Sponsorships
Corporate sponsors pay NFL teams to display their logos on players’ uniforms, TV transitions, merchandise, etc. In 2018, the NFL in general pulled in over $1.3 billion in sponsorships. Professional football teams also receive revenue through sales of team merchandise, which includes jerseys, hats, and other team branded products.
Also, most teams receive stadium – related revenue, which includes naming rights, in – stadium signage/ advertising, luxury suites, parking, and concessions. The portion of these revenue streams that each team receives is dependent on the ownership or lease terms for the stadium.
In summary, the exact revenue stream for professional football franchise owners requires consideration of several unique factors that do not exist in most traditional business environments. These franchises are made up of a distinct market where teams typically generate income and sell at prices in excess of what would be expected based on traditional business methodologies.