🔑 Key Takeaways
- Football's success is due to equal revenue sharing among owners, but the sport still faces controversies such as player safety and lack of diversity. Despite this, the Super Bowl remains a significant cultural event with over 100 million viewers, and the sport continues to evolve.
- The NCAA's formation and legalization of the forward pass made American football safer and introduced a strategic element, leading to the growth and popularity of the professional NFL.
- The NFL was founded with the goal of legitimizing professional football, and its principles of separating college and pro game, ethical play, and honoring indigenous athletes still hold true today. Jim Thorpe's legacy inspires generations.
- The NFL faced challenges in its early years, including competition from other leagues, a lack of support for professional football, and economic hardships. However, the league persisted and grew into the largest professional football league in America.
- The introduction of the All America Football Conference (AAFC) led to the rise of professional football in the USA with powerful ownership groups like the Cleveland Browns and Toppings' Yankees and Dodgers, forcing the NFL to adapt.
- To stay ahead, businesses must evolve by embracing innovation, diversity, and effective PR, and adjust to market demands, even if it means breaking away from the status quo.
- NFL's success is rooted in ensuring competitive games, regardless of team status. This rule has been a critical factor in selling out stadiums and becoming a prosperous league, now reinforced with growing online and TV revenue.
- Startups should focus on solving critical business problems for partners, and think strategically about partnerships to ensure success. Bigger companies move slowly and may have different priorities, causing leverage and velocity issues.
- The NFL's strategic expansion and league-first approach paved the way for their success with the rise of television, while baseball's focus on attendance hindered their growth in the medium. TV became a crucial factor in bringing sports into people's homes.
- Television broadcasts played a crucial role in transforming the NFL into a profitable industry, leading to the emergence of the AFL and eventually shaping the league into what we know today.
- Lamar Hunt's strategic use of a centralized TV contract and ABC's league-wide rights deal with the AFL elevated professional football to a national level, proving the impact of nationwide televised sports events.
- Pete Rozelle's expertise in PR and marketing helped transform the NFL into what we know today, expanding the league, opening up merchandise stores, and forming the Super Bowl through strategic partnerships and leadership.
- Rozelle's approach of building relationships with media and politics, crafting human stories, and negotiating TV deals helped NFL compete against baseball, but also led to antitrust violations.
- NFL's exemption from antitrust laws led to a landmark TV deal, which paved the way for the league to become a popular global sports league. The league also capitalized on storytelling and revolutionized sports video content.
- NFL Enterprises was established to create a standardized merchandise and maintain quality for the fans, while providing an equal revenue for all teams. The focus was on uplifting the league rather than making profits.
- The NFL's shared revenue model prioritizes the league's success over individual teams, driving increasing fan interest, TV dollars, and overall level of play. This model has allowed the league to keep growing and attracting fans, making it collectively worth $140 billion today.
- Joe Namath's ability to appeal equally to all demographics showed that football can be enjoyed by anyone, breaking the stereotype of it being a male-oriented sport.
- Mystery’s AI-powered platform offers scalable and systematic ways to track and improve employee engagement, while saving companies time and resources. With data-rich analytics and a trustworthy track record, it’s an efficient solution for modern HR departments.
- The merger between NFL and AFL was full of secrecy and betrayal, with the NFL poaching a kicker from the Bills and breaking the gentlemen's agreement. The negotiation process was kept hidden from the head of the Oakland Raiders, Al Davis, who was used as leverage in the negotiations.
- Al Davis' calculated steps in using his power ultimately gave AFL a bargaining chip in merger negotiations, leading to a turning point in professional football's growth and success despite power dynamics between the two leagues.
- The 1966 merger between AFL and NFL was made possible by antitrust exemptions provided by the government. This resulted in the creation of the Super Bowl and modernization standards that shaped the NFL into what it is today, with technology and television playing a major role.
- Hosting parties, events, and concerts before the Super Bowl helped the NFL add gloss and sheen, leading to exclusive TV rights and validation of AFL teams, making it an entertaining event.
- The NFL's success lies in its ability to balance competition and entertainment. This was achieved through smart TV negotiation deals and the birth of Monday Night Football, making it the thriving entertainment franchise it is today.
- Monday Night Football revolutionized sports broadcasting by showcasing a single game every week with high production values, providing a national event to watch and solidifying the NFL's growing popularity.
- Monday Night Football's immersive viewing experience reflects the power of innovation and the importance of recognizing what viewers want.
- Monday Night Football highlights were first introduced by Howard Cosell, while Nixon's intervention expanded NFL's distribution. A strategic flaw of gating content was overcome by the NFL's partnership with television, resulting in increased viewership and revenue.
- Despite the shift towards individualistic revenue streams, the NFL maintains competitive balance through the salary cap, which guarantees players close to half of the league's overall revenue. Startups seeking to sell to the NFL should prioritize SOC 2 compliance, and can save time and costs with Vanta's automated compliance solutions.
- The NFL's revenue growth is expected to continue thanks to factors like local revenue, collective bargaining, and its successful business strategies, which have made it the biggest media business in the world.
- Fantasy football and sports betting have significantly contributed to the NFL's revenue and popularity. With the increasing legalization of sports betting in many states, the NFL is expected to generate even more revenue from this source in the future.
- The NFL's lack of transparency about the long-term effects of head injuries and poor decision-making tactics have led to a decrease in audience participation and trust, exposing the need for increased transparency and accountability in the league's leadership.
- Despite a profitable business model, the NFL's mismanagement of social issues and disregard for player concerns may ultimately harm the league's success in the future.
- The NFL needs to focus on expanding and engaging with young people and international audiences, as their current methods may not be sustainable in the long term.
- The NFL's collective bargaining agreement and media rights deals have helped them capture more profit by reallocating value to content creators and negotiating with massive combinations. This strategy has helped increase the value of live football despite stagnant audience impressions.
- The NFL's success is not just about the players on the field but also their partnerships, marketing, and broadcasting. Owning an NFL team is a coveted and scarce asset in the world of kajillionaires.
- While the NFL has adapted and succeeded through cooperative capitalism and digital distribution, the valuation bubble of sports teams and inequalities in player compensation reveal the need for greater market diversity and player empowerment.
- The NFL's advantage lies in having the world's best players, giving them the ability to negotiate media rights and produce high-quality games. However, they face criticism for being extractive of networks and players, and the power of branding is not a significant factor.
- Despite the NFL's immense revenue and entertainment value, it's important to evaluate both the positive and negative impacts on players and communities and consider the future of the league.
- Despite challenges, the NFL's success is likely to continue with legalized sports betting and a strong fan base. Join the conversation on Acquired.fm.
📝 Podcast Summary
The Success and Challenges of America's Favorite Sport
Football has become America's favorite sport, with the NFL being the most valuable media property in America. The incredible success of the NFL is due to the cooperation and long-term bets made by the owners to divide revenues equally. However, the sport is not free from controversy, with issues such as player safety and lack of diversity among head coaches and owners. Despite this, football remains an important part of American society, with the Super Bowl having over 100 million viewers every year. The origin of football in America can be traced back to 1869, where it began as a violent game with no rules. Today, football is a finely tuned sport that maximizes entertainment value while still facing complex societal issues.
The Evolution of American Football from Dangerous College Origins to Professional Popularity
The origins of American football are rooted in college and were initially dangerous and violent. After a summit called by President Theodore Roosevelt in 1905, the NCAA was formed to make the game safer. This led to the legalization of the forward pass, which introduced the beauty and strategic element to the game. The popularity of collegiate American football led to the formation of barnstorming professional teams, which were viewed as immoral and profaned the amateur nature of the game. Despite this, professional football continued to grow in popularity and became one of the biggest sports in the United States, with the NFL as its pinnacle. The origins of football in college are crucial for understanding the growth and evolution of the sport.
The Founding Principles of the NFL and its Relevance Today
The founding of the NFL in 1920 was driven by the goal of legitimizing professional football in the eyes of Americans. The founders developed a plan consisting of three key points: (1) A strict demarcation between the college game and the pro game, (2) Playing the game at a high ethical and rules-based standard, and (3) Making Jim Thorpe, the greatest athlete of that time and an indigenous person, the president of the league. These key points are still relevant to the NFL today, which still maintains a strict demarcation between the college and pro game and holds itself to a high ethical and rules-based standard. Jim Thorpe's legacy as an athlete and as a symbol of overcoming oppression continues to inspire generations of football fans.
The NFL's Early Struggles and Growth
The NFL was founded with Jim Thorpe, a person of color, as its first star player and first president. It formed in 1920 with 14 teams that became the biggest professional football league in America, albeit with a lot of competition. Only three franchises endured, namely the Decatur Staleys (Chicago Bears), Racine Cardinals, and Green Bay Packers. The other problems the NFL faced were the prevailing sentiment that professional football stole the game's character-building qualities and loyalty, sacrifice and wholehearted devotion. Most teams were based in small towns and filling a niche demand for football. They were non-viable due to the depression in the 30s and the Dust Bowl except for Green Bay. The Redskins were very late to integrate their team.
The Rise of Professional Football in the USA after World War II
The post-World War II era saw the rise of professional football in the USA with the introduction of the All America Football Conference (AAFC), backed by high power ownership groups in several states. The NFL teams were reluctant to expand, but the potential ownership groups in other cities across the country were willing and started their own league. The AAFC had ace Paul Brown as the coach, and the Cleveland franchise named after him, the Cleveland Browns. The introduction of the Browns in the same city as the Cleveland Rams posed a threat to the Rams' existence. With the wars ending, the NFL had to adapt, and Toppings' Yankees and Dodgers also represented powerful ownership groups in the NFL.
The NFL's Battle Against AAFC: Integration, PR, and Modernization.
To compete against the AAFC, the NFL needed to go meet them where they were, put out a superior product on the field, and do a better job of promoting the league. The Rams and Dan led the way in handling the public relations aspect and successfully integrated their team, which was a huge PR coup for Los Angeles. Paul Brown was a modern coach who recognized the importance of film review, recognizing patterns, and statistical tallying. He was one of the first coaches to look at football as a science. He also led the way in racial integration of the team and employed a full staff of year-round assistant coaches. Moving the Rams to LA forced the league to integrate due to the Coliseum Commission's policy on segregation.
The Importance of Equality between Teams in the NFL
The lesson learned from the AAFC and Cleveland Browns situation was that the most entertaining football game is the one with enough equality between teams that it is always very competitive. This becomes a core tenant of the NFL league structure to ensure that any team in the league should be able to beat any other team on any given Sunday. The business model of professional sports was ticket sales in person attendance at the games, so it became critical to ensure competitive games to get enough attendance to sell 160,000 tickets every single weekend. This rule helped NFL survive and prosper and has become more critical in recent years as TV and online revenue are becoming more important.
Strategic Partnership for Early Stage Startups
Partnerships with bigger companies can be a waste of time for early stage startups, as bigger companies tend to move slowly and have more strategic priorities than promoting startups. The one case where a startup partnership may work is if the startup is solving a critical business problem for the partner. Therefore, startups must identify the partner's needs and determine if they can help solve their business problem. Leverage and velocity issues can hinder partnership success and startup founders must think strategically about partnerships. Bigger companies move slower than startups think and the startup's needs in a year could be entirely different. Startups must focus on solving a critical business problem for the partner to ensure successful partnerships.
The Impact of Television on NFL's Growth and Baseball's Struggle.
Television played a major role in the growth of the NFL, as more and more homes purchased TV sets in the early 1950s. The NFL's league-first mentality and expansion efforts in response to competition from the AAFC allowed them to become the dominant national sports league right as TVs were becoming more common. Baseball, on the other hand, was a victim of its own success and fought against TV because attendance was so important for revenue. Early experiments with televising sports, including football, were not well done and actually hurt attendance, leading to deals with clauses guaranteeing revenue back for any loss in attendance. Even with these problems, the message was clear: TV brought the game directly to your living room.
How Television Broadcasts Changed the NFL Forever
Television broadcasts revolutionized the NFL and became a significant revenue stream for the league. Initially, the NFL began broadcasting away games to accommodate strong local market demands to watch their team play on television. However, iconic matches such as the 1958 NFL championship game between the Giants and the Colts with Johnny Unitas as its player paved the way for national television contracts. This newfound lease on television broadcasts was initially not acknowledged by the NFL owners, which lead to the emergence of the American Football League (AFL) to compete with the NFL. This competition forced the NFL to change and eventually became the industry we know today.
How the AFL's Central Television Contract Helped it Compete with the NFL
Lamar Hunt's successful challenge to the NFL began with the formation of the American Football League in 1959. The AFL's use of a central television contract, with revenue shared equally between all teams, helped it compete with the NFL by promoting a league-first mentality. Although initially unsuccessful with major networks, the AFL found success with ABC and young executive Roone Arledge, who saw the demand for nationwide, televised football games. ABC's league-wide, five-year TV rights deal with the AFL for $8.5 million over five years was the biggest sports TV deal in history at the time, and helped turn pro football into a national event.
How Pete Rozelle Transformed the NFL
Pete Rozelle, with his background in PR and advertising and his understanding of marketing, became the Commissioner of the NFL during a time when the league was facing an existential crisis. Though many considered him to be a compromise candidate, he was able to transform the league and make it what we know today. He expanded the league, opened up merchandise stores, and partnered with brands like Roy Rogers Inc to make the Rams the most profitable team in the league despite not performing well on the field. He also ratified an expansion plan to meet the AFL, which eventually led to the formation of the Super Bowl. His leadership and vision made him an incredible leader that transformed the league for the better.
Pete Rozelle's Strategies that Modernized NFL
Pete Rozelle, the NFL commissioner, was responsible for modernizing the NFL by moving the league headquarters to New York and cultivating relationships with media, television, and advertising industries. He also hired writers to craft human stories around the game and sent them to reporters who were too busy to go to NFL games. Rozelle also cultivated political relationships with the Kennedy family, which helped him negotiate a national TV deal with CBS, worth $4.65 million per year, to be shared equally among teams. These moves helped the NFL compete with the dominant sport at the time, baseball, and grow the greater pie by saying no to growing individual slices. However, it also triggered an antitrust violation process against the NFL.
NFL's Bargaining Power and Landmark TV Deal
The NFL's monopoly power in bargaining led to the passing of the Sports Broadcasting Act in 1961, which exempted the league from antitrust laws and allowed them to negotiate a landmark TV deal. This deal helped drive commerce and was good for the American economy. On the back of this deal, NFL Commissioner Pete Rozelle did two other brilliant things. First, he allowed a suburban dad named Ed Sabol to make a movie out of the 1962 NFL Championship game, which revolutionized sports video content. Second, he understood the importance of narrative and storytelling in sports, which helped the league become one of the most popular sports leagues in the world.
NFL Films and NFL Enterprises: The Storytellers of the League
NFL Films and NFL Enterprises were created to promote the league and raise its stature. Rozelle and Sabol wanted to create entertainment and polish around the game. They wanted to build a story around every game. Rozelle implemented NFL Enterprises to standardize merch and create uniformity across the league. They wanted to provide the best experience for the fans, deepen the relationship, and maintain quality. Rozelle made sure every team gets equal revenue from NFL Enterprises, even though the teams weren't equal in merchandise sales. Rozelle's vision was to uplift the league more than making money. The Packers, a nonprofit corporation, highlighted that distributed ownership group in the NFL structure.
The NFL's Shared Revenue Model and its Impact on the League's Growth and Sustainability.
The NFL's shared revenue model, driven by the goal of raising the league's stature instead of individual team interests, has created an amazing flywheel of increasing fan interest, TV dollars, and overall level of play. This has no revenue ceiling, and enables the league to keep growing and attracting fans. The AFL is also thriving, thanks to the power of television. The shared revenue model has made the NFL and its teams collectively worth around $140 billion today. This revolutionary model is what has kept the Green Bay Packers in their hometown, despite capitalist forces and the whims of billionaires moving other teams around.
Joe Namath: The Athlete Who Transcended Football
Joe Namath was the first modern athlete who transcended football and appealed equally to men, women, and children. He knew how to play it right in the biggest market, with the brightest lights right there with the TV and advertising industries. He wore white cleats when everyone else wore black high tops and famously wore a mink coat on the sidelines. He started movies in the offseason and became a cultural icon across all demographics. Joe Namath was the first big example where everyone realized football totally can be for everyone, proving that football is not just a male-oriented sport, but it can appeal to everyone.
Improving Employee Retention Through AI-Driven Interaction Tracking
Employee retention can be improved by connecting the right employees within a company. Platforms like Mystery use AI to track and improve employee interactions in real-time with scalable and systematic ways. Their platform automates tracking and recommends events and activities to improve employee engagement. This saves the companies from distracting their teams with quarterly or monthly questionnaires. Mystery provides a data-rich platform to track ROI on the investment in team events and employee engagement. The platform is backed by people science and is regarded as a trustworthy platform for HR departments. Plus, their core product, Mystery Event, is being offered for free to all Acquired listeners who book for a demo. The NFL and the AFL war was a mafia-style game where owners negotiating with the Rozelle to find a truce and merge the two leagues.
The NFL-AFL Merger: Secrets, Betrayals, and Negotiations
The merger between NFL and AFL was a delicate situation as they had to keep it under wraps as other owners didn't know about it. The NFL's weak commissioner, Joe Foss, was fired, and Al Davis, head of the Oakland Raiders, was drafted as the new commissioner of the AFL. The NFL fired the first shot in the war as soon as Davis took over, and they broke the gentleman's agreement by poaching a kicker from the Bills. This made other NFL owners angry, and Davis saw it as a chance to sign all of their players and destroy them. The merger negotiations were not revealed to Davis, and they only wanted him to start a war and improve their negotiating leverage.
Al Davis' Strategic Moves in Securing AFL's Victory in Merger
Al Davis was a strategic and aggressive businessman who used his power and influence to send a message to the NFL and ultimately secure a victory for the AFL in the merger. He knew when to escalate and when to back down, and his actions ultimately gave the AFL a bargaining chip in the negotiations. The merger brought about many changes, including a common draft and a new pro football championship game, but also highlighted the power dynamics between the two leagues. Despite the challenges, the AFL's victory in the merger marked a turning point in professional football and set the stage for the sport's continued growth and success.
The Government's Role in Shaping the Modern NFL
The 1966 merger between AFL and NFL was only possible because of the US government's cooperation, which provided antitrust exemptions allowing them to negotiate on behalf of their member teams. The law was passed in October, and President Lyndon Johnson signed it into law. The logical result of the merger was the creation of the Super Bowl, which was a major sporting event invented for the first time within the TV era. Additionally, the NFL decided that anyone with less than a 50,000-seat stadium needs to change that according to new modernization standards. The cooperation of the government and other factors like technology, the growth of television and all these innovations played a pivotal role in shaping the modern NFL in America.
The NFL's Strategic Move to Add Gloss and Sheen to the Super Bowl
The NFL leveraged the opportunity of a national television event and created a deliberate invention leading up to the Super Bowl. Rozelle and his team hosted parties, events, concerts, and experiences to add gloss and sheen. It was all about adding the gloss to the advertisers, press, and TV partners. The TV contracts were already in place for the NFL and the AFL, but this new game allowed them to bid for exclusive rights for the first time. CBS and NBC bid $1 million each, and the game was watched live by over 65 million people, with a 79% share of American TV. The Packers' dominance validated all NFL teams, but the AFL team's Super Bowl III win proved that the AFL was not inferior to NFL, and it was entertaining.
The NFL's Success Story of Combining Competition and Entertainment.
In the NFL, everything is about competition and drama while making sure the game on the field is compelling. Owners debate on how far is too far in building these unbelievable businesses and turning football into an entertainment franchise. However, the NFL has had success with their combined TV negotiation deals. The pre-merger Super Bowl series ending in a tie and the first joint fully integrated TV negotiations for the 1970 season sealed the deal. CBS airing the NFC games and NBC airing the AFC games. ABC was interested in sports, and the NFL realizing the primetime potential eventually led to the birth of Monday Night Football. As long as there is competition, everyone wins, and the NFL continues to be successful today.
The Invention of Monday Night Football and Its Impact on Sports Broadcasting
Monday Night Football was a groundbreaking concept that came to fruition due to the partnerships of Roone Arledge and ABC. It was a single game every week with high production values, broadcasted in primetime on Monday nights. The NFL was the perfect candidate for this sports primetime experiment due to its growing popularity and advantages of providing a national event to watch. While CBS and NBC were diluting their resources all across the country, ABC only had to focus on a single game, and it paid off. The first Monday Night Football game aired was watched by 60 million US households. This invention from nowhere made football even more popular and watched over TV.
The Innovations that Made Monday Night Football Famous
Monday Night Football revolutionized the way football games were broadcasted by realizing the power of showbiz and creating a more immersive experience for viewers. They added cameras at field level, on people's shoulders, and on the 20 and 50-yard lines to get different views, introduced the three-man booth with action-oriented commentary, and had Howard Cosell injecting himself into the story. They also invented parabolic microphone coverage, split screens, on-field interviews, and green screens for the backdrop. Perhaps their biggest innovation was replaying highlights from the previous day's game, which eventually led to the creation of Sports Center as a program and ESPN as a network. This shows the power of innovation and recognizing the importance of providing an immersive viewing experience for fans.
The Evolution of Monday Night Football and NFL's Broadcasting Strategy
The idea of watching highlights of yesterday's games during Monday Night Football was first invented by Howard Cosell. The modern deals on broadcasting rights include the highlights as a part of Monday Night Football package. Nixon's intervention in 1973 urged the Congress to draft legislation forcing NFL to broadcast away games locally, which eventually expanded NFL's distribution and fueled the flywheel. NFL's strategic flaw was gating the content for too long, but the incredible marriage of NFL and television kept growing in the 70s, 80s, and 90s, leading to the continuous increase in viewership and revenue.
The NFL's Shift Towards Individualistic Revenue Streams and the Importance of SOC 2 Compliance for Startups seeking to sell to the NFL
The NFL's shift towards individualistic revenue streams, such as luxury suites and sponsorships, may erode the league-first mentality that got them here. However, the competitive balance is maintained through the salary cap, which ensures players receive close to half of the league's overall revenue. Being SOC 2 compliant is crucial for startups who want to sell to big customers like the NFL, and Vanta can automate up to 90% of compliance work, saving up to 85% in costs and 400 hours of team time. The 1993 collective bargaining agreement introduced free agency and a salary cap based on the league's overall revenue, which virtually guarantees players close to half of it, despite growing local revenue disparities between teams due to luxury suites and sponsorships.
The NFL's Massive Media Business and Revenue Growth
The NFL is the largest single media business in the world, generating $18 billion per year which is expected to grow to $25 billion by 2027. Local revenue is growing as a portion of the overall revenue for the top teams, with unshared revenue increasing from 12% in 1994 to over 30% today. The collective bargaining agreement and the advent of this form of free agency for the NFL essentially creates a balance between local and league-wide aggregate revenues that, if spreads too far to one side, can create a big imbalance that could make a team lesser competitive even when their players are paid just as much as those on the field of other teams. The NFL's success is powered by various factors including national TV, postwar prosperity, the rise of the middle class, the Madison Avenue explosion, and the league-first mentality.
The Influence of Fantasy Football and Sports Betting on the NFL's Dominance in Society Today
Fantasy football and sports betting have been the driving factors behind the NFL's dominance in society today. With around $30 to $40 million people playing fantasy football annually in the US, football has become the centerpiece of conversation among family, friends, and coworkers. Sports betting, which is now becoming legalized in many states, is another significant force. Approximately 46 million Americans or 18% of betting age adults bet on the NFL this year. Although the NFL does not generate meaningful revenue from betting yet, it is estimated that they will do so in the future. As a business today, the NFL generates around 61% of its revenue from media, 10% from general seating, 10% from premium seating, 10% from sponsorship and advertising, and 9% from other sources.
The NFL's Trust-Breaking Moment and Ineffective Tactics
The NFL hid research on the long-term effects of concussions and head injuries from football for a long time, and when they did release the data, they denied any provable link to long-term damage. This caused a major trust-breaking moment for both Acquired and the NFL audience, resulting in decreased interest and participation in football, particularly among Gen Z. Additionally, the NFL's tactics of controlling the narrative and influence over their broadcast partners proved ineffective in the era of social media, where individuals and fired reporters have a platform to speak out. Finally, the commissioner's obligation is solely to the owners, not the fans, leading to the blackballing of Colin Kaepernick and other decisions that prioritize the interests of the owners over those of the players and fans.
The Complex Business Structure of the NFL and its Mishandling of Controversial Social Issues
The NFL is made up of a thin layer on top of many teams, each of which is their own large business. The teams are their own taxpaying entities, hiring the commissioner to act as directed by the owners. In addition to negotiating revenue share deal with the players' association, the commissioner also negotiates with TV networks for the league's largest expense and revenue stream. While the NFL's mishandling of Colin Kaepernick's protest brought attention to racial inequality and police brutality, it also showed the league's lack of understanding of social media and players' platforms. Despite its missteps, the NFL's revenue and team values continue to rise. However, this mishandling of situations may ultimately damage its business in the long run.
Challenges facing the NFL and its relationship with college football
The NFL is still a huge revenue-making machine, even with the risk of losing younger generations. The Lindy effect is strong, and the NFL's international strategy needs more work. Despite all of this, college football has been instrumental in fueling the NFL's growth. However, they're not competing for talent, and the revenue generated from colleges and conferences isn't as large as the NFL's. The NFL needs to focus on increasing fan reach and engagement to grow their fan base, which seems challenging given that their flywheel is no longer operating efficiently. The future growth and current popularity of sports lie with young people and international audiences, with basketball being the second most popular sport in the world.
The NFL's Winning Business Strategy
The business of college football is still much smaller than the NFL, and it will be interesting to see how it changes as players start to get paid more. The NFL has a good business strategy with its collective bargaining agreement that lasts through 2030 and signing tenure rights for media before renegotiating with players. Despite stagnant audience impressions, media deals for NFL games have gone up in value due to scarcity of live football and networks' need for content. NFL has been able to capture more profit pool by reallocating value to the content creator and negotiating with massive combinations that can afford to generate any margin.
The NFL Business Beyond the Field
The NFL outsources and commoditizes direct marketing, broadcasts, and ad sales, enabling them to keep the vast majority of profits despite paying guaranteed money to players. Amazon's exclusive destination for Thursday Night Football underperformed expectations, as people still prefer to watch on TV, which highlights the value that the NFL and their partners add beyond players. The NFL is an $18 billion revenue business, yet oddly small for the large role it plays in our lives. Buying an NFL team has great trade value due to its scarcity, and it is the ultimate NFT for kajillionaires to flex on each other. The NFL's product is sports entertainment, not just the game on the field, and the NFLPA has managed to shift some value upstream to the NFL suppliers.
The NFL's Valuation and Success Amidst the Sports Industry's Challenges and Inequalities
The value of sports teams continues to rise due to social signaling and desirability, potentially creating a valuation bubble. However, changes in sentiment within the limited market of potential buyers could have a huge impact. The NFL has successfully transitioned to digital distribution and outsourced the technology and distribution parts, showcasing their ability to adapt and succeed. Additionally, their cooperative capitalism communist model has smoothed the curve of player compensation more than other sports leagues. However, NFL players have struggled to build wealth and businesses, in part due to the league controlling the message and social media value accruing more to NBA players who are the platform for audience value.
The NFL's Advantage and Challenges
The NFL's cornered resource of having the greatest players on earth is its most clear advantage, as no new league is able to compete. This gives them the ability to negotiate media rights and have the scale economies necessary to produce high-quality games. While the NFL has received antitrust exemptions and taxpayer-funded stadiums, they are considered to be extractive of networks and historically of players, although this has improved. Additionally, the power of branding is not present as people do not pay more for the same thing with a different brand, but rather because the NFL offers the best football.
The NFL's Value Capture, Community Extraction, and Employee Recognition.
The NFL is extremely good at value capture, including reselling media rights multiple times, and generates $18 billion a year in revenue. However, NFL teams also extract from communities in stadium deals and may not leave a lot of consumer surplus in dollars. The players now recognize they're all basically employees and players are more in it together as coworkers than against each other. This is probably a good thing for them to recognize, as football is a business that demands an immense amount and maybe even years off their lives for a lot of people. Despite the value destruction caused by long-term impacts on players, the NFL's entertainment value, mindshare, and unquantifiable consumer mindshare keeps growing. The NFL's bear case and bull case needs evaluation for its future.
The NFL's Future Amidst Challenges
Despite the issues that the NFL is facing like player safety, international expansion, and youth participation, the Lindy effect suggests that it will continue to be a successful, growing and cornered resource for a long time. Legalized sports betting will generate more revenue for the NFL. Although there are many problems around it, the quality of play and content around the game is great. Personal relationships with the game and the NFL are worth exploring. The NFL business is going to be fine. So, it's worth watching the playoffs and the Super Bowl which is exciting for fans. Acquired.fm is a great platform to join the discussion and get more involved with the community.