The NFL set a goal of $25 billion in revenue by 2027.(Photo: Kirby Lee, USA TODAY Sports)
Story Highlights
- NFL Commissioner Roger Goodell says NFL wants to grow from $10 billlion to $25 billion by 2027
- League revenue comes from four major sources: media rights, sponsors, attendance and merchandising
- One risk for the NFL is whether its financial goals might price regular fans out of games
NEW YORK — Sunday's Super Bowl at MetLife Stadium in East Rutherford, N.J., might be the most popular and expensive television program in U.S. history – about 110 million viewers watching a football game that commands nearly $4 million for a 30-second commercial.
Tickets at the 50-yard line cost about $10,000. A 20-ounce cup of Bud Light will cost $14.
"Nothing is really sacred anymore," said John Vrooman, a sports economics professor at Vanderbilt University.
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It won't stop there. The National Football League hopes to achieve $25 billion in revenue by 2027, up from about $10 billion now. Several analysts told USA TODAY Sports that the NFL can get there, but it will be an expensive journey. More palatial stadiums. Expanded playoffs. More exposure in more places, including smartphones, games in London and more Thursday night games sold to the highest-bidding network.
NFL Commissioner Roger Goodell gave the magic number at a meeting of NFL team owners in 2010: a goal of tripling league revenue in 17 years. If it happens, the NFL would have more income than the gross domestic products of dozens of small countries and would be in the same financial district currently occupied by gigantic global brands such as McDonald's, Nike and Goodyear Tire, each of which recently took in about $21 to $28 billion annually.
Who will pay the price? Fans, sponsors and broadcasters. The NFL remains the most popular sports league in America, and it commands a premium. If the average NFL fan thinks the cost of attending games is already too high, how about paying ever-higher prices to watch games on ESPN and the NFL Network? Cable and satellite TV providers pay ESPN an average of $6.04 per subscription per month, more than double from 10 years ago and dwarfing the likes of CNN (63 cents) and TBS (72 cents), according to SNL Kagan, a market research firm.
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"The standard (cable television) package that households receive is skyrocketing in cost at a point in the U.S. economy when we have increasingly lopsided distribution of income," sports economist Andrew Zimbalist told USA TODAY Sports. "Those two things have to collide."
The future
The NFL declined to release financial data, but an estimate of its revenue can be pieced together through various sources by economists and market researchers. That $10 billion pie is roughly sliced four ways, according to Navigate Research, a Chicago-based firm that specializes in the evaluation of sports and entertainment marketing investments.
- About $5 billion from media and television rights to broadcast games.
- About $1-2 billion in sponsorships, such as its long-running deal with PepsiCo, worth about $90 million to $100 million per year.
- About $2 billion related to attendance and ticket sales.
- About $1 billion in merchandise and licensing.
Growing to $25 billion annually will require compound annual growth of about 7 percent, around $1 billion per year.
CBS, Fox, NBC and ESPN provide the NFL with a total of about $5 billion to $6 billion annually from contracts that run through 2021-22. By 2027, Navigate Research predicts such media rights revenues could reach $17 billion.
That ambitious projection assumes that live NFL games will continue to be a golden goose for networks and their advertisers for one major reason: NFL games are one of the few remaining programs that huge audiences want to watch live instead of recording to watch later – fast-forwarding through the commercials that companies pay millions to air.
"We are firm believers that there is nothing more valuable in the world of TV than the NFL – nothing," said Michael Nathanson, a media analyst at MoffettNathanson, a stock research firm that specializes in the media and telecommunications industries. "Their ability to get to $25 billion is kind of predicated on the staying power of the product. I think they're going to ask for whatever they need to from their broadcast partners, their cable partners."
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Vrooman, the Vanderbilt economist, says the NFL can get there primarily because it's a monopoly – the richest sports league on the planet with a business plan built largely through the Sports Broadcasting Act of 1961, which allows sports leagues to pool their television rights for sale to the highest bidder, protecting them from antitrust laws.
"The monopoly rule is to gouge half as many fans more than twice as much on everything," he said. He also predicts the league will become "increasingly more exclusive with the same general formula of fewer fans having access at higher prices to generate more certain media, venue and gate revenues."
The NFL disputes that, noting its commitment to broadcast some games on free over-the-air TV networks, which helps it reach bigger audiences. Even games on ESPN, for example, are available on free TV in local markets. But the league is not shy about its appetite for growth.
"We measure our business very simply: Is consumption going up, and is the economic pie growing?" said Brian Rolapp, the chief operating officer of NFL media.
Rolapp was involved in recent NFL deals with Verizon, Twitter, Microsoft and the television networks. He currently is involved in shopping a Thursday Night Football TV package and working on a new deal with DirecTV. He called the $25 billion goal an aspiration.
"In order to get to a number that lofty, it requires a lot of different things," Rolapp told USA TODAY Sports. "It requires, clearly, hard work. It requires different thinking. We are relatively strong in our business. We're strong as a league, but what we always say around here is complacency is our enemy."
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The formula
For better or worse, the road to $25 billion probably requires some variation of the following, analysts told USA TODAY Sports.
More new and upgraded stadiums. This year's Super Bowl is in chilly New Jersey, a reward for the Jets and Giants building the swanky MetLife Stadium, which opened in 2010. Yet it has been 11 years since the Super Bowl was in 70-degree San Diego, where the Chargers still play in outdated Qualcomm Stadium.
To keep revenue growing, the NFL needs stadiums that are big moneymakers, such as AT&T Stadium, home of the Dallas Cowboys, where suites cost up to $500,000 per year and fans pay more than $80 for seats in the upper deck end zone. Levi's Stadium, the new $1.3 billion home of the San Francisco 49ers, opens later this year and will host the Super Bowl in 2016. Later that year, the Minnesota Vikings will open their new stadium.
The risk for the NFL is that it might price out everyday, jersey-wearing fans, who might decide they'd rather watch games on high-definition TV anyway. Attendance accounts for only about about 25 percent of NFL revenue, and at times there have been signs of sagging demand. Three of the NFL's four first-round playoff games this year struggled to sell out. Will fans keep going to games if the price keeps rising and the view is better on TV?
"That is a big concern," Rolapp said. "It will always be an important part of the revenue …We still believe it's still the best place to experience NFL football. I think it will be for some time, but we have to keep innovating so it remains that."
More weeknight games, anyone? The NFL has been shopping a Thursday night package to TV networks and could announce a buyer soon with possible simulcasting on the NFL Network, the league's cable outlet. NFL games once were mass-delivered for television consumption on Sunday afternoons and Monday night.
NBC, for example, pays about $1 billion per year for its package of Sunday night games and playoff games.
More televised content. If there's demand, create more supply. That's why the league is considering expanding the playoffs, creating another product to sell to networks eager to capture big live audiences. The NFL also is turning the offseason into a moneymaker by televising the NFL Combine in February and the NFL Draft in April, which has expanded from one day to three days, including two nights in prime time.
New markets. The NFL has been priming London as a market, with two sold-out games there last year and three games on tap in 2013. Meanwhile, Los Angeles hasn't had an NFL team since 1994. Moving existing teams from weak markets into bigger vacant markets might give team owners a better way to increase their shared revenue as opposed to adding more franchises to the 32-team league.
Conversely, Los Angeles has value to the NFL as a bargaining chip – the unstated threat of moving into that big, empty market can help existing franchises wring out taxpayer dollars for stadium upgrades and new construction.
Get ready for NFL teams to make "renewed threats of franchise relocation to leverage public money for private stadiums in the second venue revolution, just like the first (round of stadium upgrades) over the last two decades," Vrooman said. "Monopoly power over TV rights and franchise location is what provides the real engine for the economic growth of the most powerful sports league in the world."
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Phones, Internet and new media. More consumers get their news and information from their smartphones –a trend the NFL recognized with its recent $250 million annual deal with Verizon to stream games onto phone screens. The NFL also recently made deals with Twitter and Microsoft's Xbox, giving it new revenue streams in growing interactive and social media.
With more viewers consuming video content online instead of on cable, cable companies and cable channels could see subscription revenue plummet. Those channels – including ESPN and the NFL Network – can try to recoup that revenue through online content, but it might not be as lucrative.
"The established content suppliers – NFL, ESPN – are uneasy and so going very slowly," said Roger Noll, emeritus economics professor at Stanford. "They see the potential for a huge payoff, but also for a huge bursting of the bubble, and want to keep control until they know where things are likely to go."
Television. The NFL's TV rights contracts soon will be worth about $7 billion per year combined, with most of them starting this year and lasting through 2022. What happens in 2023?
"It's a new day after that," Rolapp said. "We'll just have to see. A lot of things we do digitally along the way are a great experiment for us to see what the world will look like. We will be prepared one way or the other to be able to shift to where the consumer is."
To get to $25 billion, the NFL probably needs about $15-17 billion from networks.
If networks pay it, those costs likely will be passed down to the consumer. ESPN likely would ask for higher rates from advertisers and higher subscriber fees from cable distributors, and even viewers who don't like football would pay more because cable channels are not offered a la carte.
"Everything else 10 years from now will be worth less relative to what the NFL is going to be worth," said Nathanson, the stock analyst. "No other sport has that kind of national draw to it."
As long as the NFL can bring big live audiences, it'll be hard for the likes of ESPN to avoid paying up, but the growing risk is viewers who could decide to cancel their cable subscriptions and use other devices to watch what they want.
The NFL said it is committed to staying on free television, not just cable, where it has its own network and can reap cable subscription revenue in addition to advertising revenue.
"It would have been very easy years ago to migrate our games to cable," Rolapp said. "In fact, we could have gotten more money in the short term, it could be argued, if we would have done that. But we really are committed to a reach model and free television."
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Staying power
Much of this, of course, assumes that the NFL can continue to bring those live audiences well into the next decade.
Another risk to the league's long-term popularity is the concussion crisis. Amid lawsuits from former players, the league has vowed to make the game safer. This could mean changes in equipment and more rules that restrict bone-jarring hits.
"To the extent the NFL tries to pass new rules to reduce the force of hitting or the kind of hits you can make, I think it hurts the game," Zimbalist said. "And there signs that parents no longer want their children playing this game. I don't mean to predict doom for the NFL. I don't think there is doom, but the notion that they're going to get to $25 billion seems to be excessively optimistic. I would not bet on that figure."
Rolapp, the Harvard-educated NFL executive, says the league maintains a "healthy paranoia" about all perceived risks, including pushing too much product onto fans. In the meantime, the NFL plans to stick to a simple formula.
"We're really in the business of aggregating America around events and around our game," Rolapp said. "There are fewer and fewer places that can do that. If you can aggregate audiences, you are going to be more and more valuable."
Follow Brent Schrotenboer on Twitter @Schrotenboer. E-mail: bschrotenb@usatoday.com
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