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In a preseason matchup at AT&T Stadium in Arlington, Texas, Ryan Flournoy of the Dallas Cowboys made a notable catch for a touchdown while being defended by Matt Hankins from the Los Angeles Chargers during the first half of the game on August 24, 2024.

The Financial Landscape of NFL Franchises

The current landscape of National Football League (NFL) teams has transformed into a lucrative enterprise, with the average value of each franchise estimated at $6.5 billion, according to CNBC’s Official 2024 NFL Team Valuations. Pro football has proven to be a significant asset class for team owners, offering impressive returns on their initial investments that significantly outpace traditional stock market investments over equivalent time frames.

For instance, the Houston Texans, ranked 11th in the 2024 value rankings, were acquired by the late Robert McNair for $600 million during the NFL’s last expansion in 1999. Fast forward to today, the Texans’ valuation has soared to $6.35 billion—surpassing McNair’s original purchase price by over tenfold while tripling gains compared to the S&P 500 during the same period, despite the team’s less-than-stellar record of 152-202-1 and never reaching a Super Bowl appearance.

Notably, the Texans are not an isolated case within the league’s financial success. Of the ten most recent NFL franchise sales, seven have yielded returns that surpass the S&P 500 in percentage gains since their transactions. In contrast, the recent sales of the Washington Commanders and Denver Broncos— ranked 13th and 14th respectively—have underperformed broader market aggregates.

Valuation Surge Driven by Media Deals

The upward trend in team valuations correlates closely with the NFL’s lucrative media rights agreements. The current contracts with major broadcasters such as Comcast, Disney, Paramount, and Fox, initiated last season, feature an impressive average annual value of $9.2 billion, representing an 85% increase over previous agreements. With additional streaming arrangements secured with platforms like YouTube and Amazon Prime, the NFL is set to collect approximately $12.4 billion annually through 2032, almost twice the revenue from its previous rights cycle.

Moreover, the league is advancing its media revenue by auctioning exclusive streaming rights for select games. For example, last season, a Wild Card playoff game’s rights were sold to Comcast’s Peacock streaming service for $110 million.

Impact of Revenue Sharing on Competitive Balance

Revenue sharing within the NFL plays a crucial role in maintaining competitive parity among franchises. All 32 teams evenly distribute the revenue generated from national media deals, sponsorship initiatives, and 34% of gate receipts. In 2023, this sharing accounted for $13.68 billion, or 67% of the NFL’s total revenue of $20.47 billion.

This financial structure enables teams from smaller markets, like the Green Bay Packers and Buffalo Bills, to be competitive against franchises based in larger markets, such as the New York Giants or Los Angeles Rams. For instance, the Kansas City Chiefs, identified as a small-market team, have triumphed in the last two Super Bowls.

Despite the shareable revenue, there remains a significant disparity in team valuations largely attributed to individual stadium revenues. Franchise income derived from luxury suites, local sponsorships, and non-NFL events hosted at stadiums continues to create gaps in overall value.

Concert Revenues Elevating Stadium Earnings

Recent events have showcased the financial potential of stadiums beyond sporting events. High-profile concerts, such as Taylor Swift’s Eras Tour, have contributed significantly to stadium revenues. One performance reportedly generated $4 million per show for a hosting stadium.

For instance, the Miami Dolphins’ Hard Rock Stadium accrued over $30 million in revenues from hosting various sports and entertainment events last year, with projections indicating a potential doubling of that amount this year.

Market Forces Behind Team Sales

The financial health of NFL teams leads to higher expectations for ownership acquisition. After Walmart heir Rob Walton’s purchase of the Denver Broncos for $4.65 billion—valued at 8.8 times the team’s revenue—potential buyers now face a market where paying at least 10 times revenue is becoming the norm. CNBC’s 2024 valuations reflect a valuation-to-revenue multiple averaging 10.2 across the league.

High-profile acquisitions, such as Josh Harris’s purchase of the Washington Commanders for $6.05 billion (11 times revenue) and hedge fund manager Ken Griffin’s attempts for both the Tampa Bay Buccaneers and Miami Dolphins, underscore the rising stakes in NFL ownership.

The Dallas Cowboys, recognized as the league’s most valuable franchise, currently hold a market value of $11 billion, representing a staggering 73-fold increase from Jerry Jones’s 1989 purchase price. In comparison, the S&P 500 has only increased 18-fold during the same period.

Amidst these soaring valuations, institutional investments have begun rolling into the NFL. In a recent vote, league owners permitted select private equity firms to acquire up to 10% stakes in NFL franchises, signaling a shift towards broader investment opportunities. These firms are projected to inject around $12 billion in capital into the league over time.

Even the franchise with the lowest valuation currently, the Cincinnati Bengals, is assessed at $5.25 billion. Considering the maximum allowable league debt, prospective investors must be prepared for substantial equity requirements to enter the ownership landscape.

Disclosure: Peacock is the streaming service of NBCUniversal, the parent company of CNBC.

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