NFL Case Study: The Most Powerful League in the World

With the NFL starting today…

I thought it made sense to look at the most powerful sports league in the world.

And not just the typical stuff, but some of their other verticals.

Let’s Dive In 👇

Creating A Behomoth League

I’ve concluded that…

“Sports Leagues succeed by how many players are known by casual fans.”

The NFL is one of the most powerful entities in the United States because of how many players are known (not just 1 or 2).

peyton manning pat mahomes ray lewis

Compared to the MLS, most casual sports fans can only name one player, Lionel Messi. That’s a great start and already immensely helping the league, but you need multiple players to take off.

There are a few ways this is accomplished…

1. Media Production

The NFL is a storytelling machine (and once deemed “the most effective propaganda organ in the history of corporate America” by SI).

They’ve engaged fans beyond the field since the creation of the league:

  • NFL Films started in 1964.
  • Hard Knocks debuted in 2001.

And it carries over to Live viewership…

top 100 most watched us tv broadcasts 2023

The National Football League is looking to step it up even further.

Last year, they formed a joint venture with studio Skydance Media to create the world’s premier sports production house.

Skydance and the NFL will also produce a variety of other content:

  • lifestyle shows
  • foreign-language programming (to help with the NFL’s global push)

Expect to see some new “Hard Knocks of _____” in the near future.

2. Fantasy Sports

Fantasy football has turned fans into general managers of their own teams.

The NFL can thank Bill “Wink” Winkenbach, a former minority owner of the Oakland Raiders, for creating it in 1962.

Wilfred "Bill" Winkenbach founder of fantasy football

By the late 1980s, more than a million people played fantasy football…

Today, the stats are nuts:

  • 29.2 million people in the US play fantasy football
  • Fantasy sports have exploded into a $25 billion business

The Internet and smartphones have made joining and organizing leagues easier, while satellite TV packages allow fans to watch more of their players live.

global Fantasy Sports Market

But above all, it has greatly intensified fan interest to watch games outside their favorite team.

And this is getting more expensive each year…

If you own no streaming platforms or NFL Sunday Ticket, here’s what it will cost you to watch every single game this upcoming season:

  • NFLST: $184
  • Netflix: $7 x 1 = $7
  • Peacock: $6 x 1 = $6
  • Amazon Prime: $9 * 5 = $45
  • YTTV: $75 x 6 months = $450
  • TOTAL = $692

Being spread out over multiple streaming services is an increasing problem as the ecosystem is extremely fragmented, and cable is slowly dying.

3. Video Games

In 1988, the first Madden video game hit the shelves for Apple Computers.

Today, Madden EA Sports makes about $600m annually from the football video game (its contract pays the NFL $300M/year).

Madden game from 1988 to 2023 graphics

For comparison, the NFL brought in ~$20.5 billion in 2023 — making the Madden revenue stream a measly 1.46% of total revenue.

But the most important aspect of the game…

The impact that Madden has on making younger generations interested in football.

  • Sports video games are “participatory” and “fan engagement” tools.

If anything…the NFL should be paying EA Sports for increasing interest in the league.

Macroeconomics of the NFL

Sports leagues follow the “3 C’s”:

Content, commerce, and community. 

Many consumers define their identities through sports fandoms — spending time, money, attention, and emotional energy.

CONTENT, COMMUNITY AND COMMERCE circles

The NFL captures all three better than any other league in the world.

As stakeholders throughout the consumer economy compete for market share, they all need to “pay rent” to the NFL to access their IP (and the fandoms that come with it).

For example, look at the NFL:

  • traditional media – $113B deal
  • trading cards – Fanatics exclusive
  • sports betting – $1B deal w/ sportsbooks
  • gaming & esports – $1.5B deal w/ EA Sports
  • e-commerce – Fanatics exclusive merchandiser
  • data and technology – $120M/season with Genius Sports
  • tickets and live events – LiveNation / TicketMaster exclusive
  • AI, web3, and VR/AR are up next

The values and varieties of revenue streams for leagues and teams that follow the tides of the modern consumer economy continue to rise.

The NFL has almost one million fewer weekly viewers today than it did in 2010.

However, the value of the media packages is more than double ($113 billion).

Institutional Capital

This is a major trend across sports, and the NFL has now accelerated it to a whole new level.

  • 2019: MLB allows private equity investors to own minority interests in multiple teams
  • 2021: NBA, MLS, & NHL followed suit
  • 2022: Euro soccer clubs see an influx of private capital
  • 2024: NFL will start to allow institutional capital

As this new capital enters the traditional sports leagues, value investors are starting to look at the increasing multiples.

league valuation multiples
slightly outdated, but a good visual

The NFL realizes its next major moves need to be both horizontal and vertical:

  • expansion teams
  • international (ex. NFL Africa)
  • downstream (ex. flag football)

The league also aims to profit from the companies benefiting from their players and platform.

The NFL’s Venture Arm: 32 Equity

Launched a decade ago, 32 Equity is named after the 32 teams that make up the NFL.

The fund is mainly focused on investing in companies within:

  • betting
  • fitness/apparel
  • fan engagement
  • media and streaming
  • player health and safety

The league started with a $1M contribution from every team and recently collected another $5M from each organization.

nfl 32 equity logo

The goal?

To find and support innovative technologies to improve the sport for players, teams, and fans.

For example…

In 2017, 32 Equity purchased a 3% stake in sports e-commerce platform Fanatics for $95 million — which valued the company at $3.17 billion.

That’s worth 10x as Fanatics’ recent raise valued them at $31 billion.

fanatics nfl jersey

By aligning financial interests with companies like Fanatics, the NFL can leverage its partnership for equity — eventually capturing some of the financial upsides it inherently helped create.

Tech

Alternate telecasts are the poster child for successful digital innovation. At the forefront is the NFL, which has Nickelodeon and Disney partnerships.

  • Cowboys vs. 49ers (2022) on Nickelodeon and CBS Sports was the most-watched NFL wild-card game in 7 years, averaging 41.5 million viewers across both networks.
  • Toy Story Funday Football delivered the biggest live event on Disney +
Nickelodeon slimecast NFL

The NFL did $20.5 billion in revenue last year — and if you want to buy a team, you’re paying north of $5 billion.

But I have a question to leave you with that I’ve been thinking about…

If someone wanted to buy the NFL, how much would it cost?

$200 Billion?

It is one of the most coveted assets in the world — drawing live eyeballs like nothing else.

Going Forward

Football is the core product that attracts fans, but the NFL is increasingly a media and technology company.

I’m excited to see them continue to pave the way for other emerging sports leagues.

And one more thing…

If sports leagues are primarily driven by how many “names” in them you know

Doesn’t that make creator leagues made up of YouTube and TikTok stars an interesting value proposition?

I think so. Exciting times ahead!

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