While the article specifically speaks to about 32 people who own National Football League (NFL) teams, there are millions of interested fans and observers who are wondering how such ownership works and profits from them. As we embark upon a new football season, and a new television contract for the NFL just down the road, how exactly are today’s franchises valued and are they still a viable investment for the richest of the rich?
According to Forbes, the value of the average NFL franchise has plateaued, showing a meager 2 percent rise in 2017 to $2.57 billion. This was the smallest increase since 2011, and adjusted for inflation resulted in a loss of 0.7 percent. The average American might find relevance in the real estate market and buying a co-op, in say Florida or New York. The main drawback of the co-op ownership is that the investor must pay for the unit entirely in cash. Yes, 100 percent. As such, this immediately eliminates a vast percentage of the market who don’t have that kind of cash laying around. Segue to the NFL. There are very few who have the liquid wealth to meet the NFL standard of providing 30 percent of the appraised value in cash.
This is exemplified in the recent purchase of the Carolina Panthers franchise. Analysts estimated that the team would fetch some $3 billion when put out to bid. Billionaire David Tepper got the team for $2.3 billion because he was the only person sitting at the table with enough cash to satisfy the league’s financing rules. Of the four major professional sports, the NFL has the most stringent equity requirements, ensuring new owners have a minimum of a 30% equity stake in the franchise.
During the past 20 years NFL team values have climbed almost nine-fold, or at an 11.6% annual rate, versus just 4.5% for the S&P 500. The stock market is the most liquid means for those in the category to purchase an NFL franchise to bring cash to the table, and it has not kept up with the premium growth of the average NFL team. Certain stipulations on ownership have also lead to the downsizing of ownership candidates. For one, no corporate entity is permitted to own a franchise, and the number of limited partners that can make up a general partnership is 24. Given the average value of a franchise today, the limited partners in aggregate would have to pony up roughly $1.37 billion, and have no say in the operations of the business. That’s a tough pill to swallow.
The NFL is already the biggest and most profitable league in the world, with average team revenue of $427 million and annual profits of $95 million. To make matters more interesting, the league can exercise its option and discontinue its Sunday Ticket deal with AT&T’s DirecTV in 2019. Suitors will include the likes of ESPN and Amazon. The current deal is worth $1.5 billion to the NFL per year, 50% more than the previous deal. Although there has been chatter and backlash as a result of the national anthem, owners agree that a new deal will surely be higher. Dallas Cowboys owner Jerry Jones recently said, “Legalized gambling is going to increase the amount of time people spend watching the NFL on television and online, and therefore it is going to have a very positive impact on the value or our content.” The 5 top valued NFL franchises are listed below, with the Dallas Cowboy’s still looking to be America’s best financial team.