Advertisement

NFL Team Valuations 2022: Cowboys Rule at $7.6B as Average Tops $4B

Kurt Badenhausen
·12 min read

NFL owners will gather in Minnesota next week to vote on adding a new member to their exclusive club. In June, Walmart heir Rob Walton agreed to pay $4.65 billion for the Denver Broncos, and approval for the 18th richest person on the planet, worth $60 billion per Bloomberg, is a mere formality in a deal that sets a new bar for team values.

The average NFL franchise is worth $4.14 billion, up 18% over last year, according to Sportico’s calculations, which were derived from interviews with more than 30 bankers, lawyers, team executives, owners and consultants involved in the sport, as well as public documents. Collectively, the value of NFL franchises, including team-related businesses and real estate held by owners, is $132 billion.

More from Sportico.com

The Dallas Cowboys are the most valuable franchise in football and across all of sports at $7.64 billion, $630 million ahead of MLB’s Yankees. There are 16 NFL franchises worth at least $4 billion, versus seven total in the other U.S. sports leagues (four MLB, three NBA).

Second to None

“There isn’t anybody that compares to the NFL in sports or entertainment,” George Pyne, founder of investment firm Bruin Capital, said in a phone interview. “They are in an orbit all by themselves.”

The chasm is most evident on TV, where the NFL accounted for 75 of the 100 most-watched programs of 2021, including 90% of the top 40. Broadcast ratings rose 9% last year, while the number of people watching linear TV overall declined by 10%, according to Nielsen.

The NFL outperformed revenue expectations in 2021, on both the local and national side. Fans returned to stadiums in force, following a season of almost no spectators because of COVID-19 protocols, while sponsors flooded into the sport, with league partnership revenue up 23%, per IEG. The 32 teams generated $17.4 billion in cumulative revenue, including 64% from equally shared national streams, up from $12.4 billion in 2020. The 2021 revenue tally is nearly twice that of its closest competitor, the NBA.

The NFL’s three richest clubs have all expanded their empires beyond just football. The Cowboys, Los Angeles Rams ($5.91 billion) and New England Patriots ($5.88 billion) have valuable real estate developments and businesses where their teams serve as the backbone. The Cowboys, for example, started the hospitality company Legends alongside the Yankees.

“Sports may not be for everybody, but for those who do love it, it is real fertile ground,” Stephen Jones, Cowboys COO, said in a phone interview. “Whether it's a Legends platform, a real estate platform, a technology platform, we've seen that you can use The Star, the Cowboys and sports to really enhance business.”

The Jones family has been breaking barriers in the NFL ever since patriarch Jerry bought the team for $150 million in 1989. The Cowboys revolutionized how NFL teams ran their businesses locally. “America’s Team” kicked off the sponsorship wave in the 1990s; took control of its merchandise business; launched Legends; built AT&T Stadium; and opened its $1.5 billion practice facility and mixed-use development, The Star.

And when the NFL opened the crypto exchange category to sponsorships in March, the Cowboys were first in line. The club announced a deal with Luxembourg-based Blockchain.com three weeks later.

“We've obviously done some pretty unique things, but I still think there's meat on the bone,” Jones said of the Cowboys' business.

The Rams had a banner year on and off the field, pushing their value up 26% and ahead of the Patriots for the first time. The team won its second Super Bowl in franchise history and finished second in the NFL in revenue with fans at SoFi Stadium for the first time, following a fanless 2020 season when the building opened. The Rams and owner E. Stanley Kroenke have supercharged the idea of using a team to serve as the center of a larger business, developing 300 acres around SoFi into the Hollywood Park mixed-used development.

The Las Vegas Raiders ($4.08 billion) matched the Rams' NFL-high 26% value gain. Like the Rams, fans couldn't attend games during the first season at Allegiant Stadium, but demand was massive during the 2021 season. The Silver and Black led the league in ticket revenue at $119 million. The Raiders rank No. 15 in total value.

Mile High Price

The NFL’s status as the world’s richest sports league was on display this year with the Broncos’ sale. The deal, led by Allen & Company, was 47% more than the $3.16 billion Chelsea, a Premier League soccer club that touches every corner of the globe, fetched this spring. The previous team record price in sports was $3.3 billion for the 2019 sale of the Brooklyn Nets and operating rights to Barclays Center. The Broncos went for 41% more.

The Broncos’ deal was the first sale of an NFL team in a top 12 market in more than two decades. It served as a litmus test on the current NFL ownership rules, which require the general partner to hold equity of at least 30%—twice the NBA minimum. The league also limits debt to $1 billion for an acquisition and does not allow any institutional ownership. The NFL aced the test in the first deal since it locked in 10 years of labor peace and 10 years of new media deals worth $110 billion.

The Broncos sold for roughly nine times 2021 revenue, versus the six times David Tepper paid for the Carolina Panthers in 2018, which was the last NFL sale and the previous NFL record deal at $2.28 billion. The Broncos are projected to generate $540 million in revenue for 2022. Scarcity value plays a significant role in the valuations, with only two teams changing hands since 2013 before the Denver deal. An added bonus: Walton should be able to write off roughly $4 billion of the purchase price to offset his income, thanks to how tax law treats the acquisition of intangible assets.

Three groups submitted bids of at least $4 billion for the Broncos, which Pat Bowlen bought in 1984 for $78 million. Three additional groups were ready to pay $4 billion but didn’t see a scenario to outbid Walton, according to one source. Walton’s ownership group includes his daughter, Carrie, and son-in-law, Greg Penner, who succeeded Rob as Walmart chairman. Ariel Investments co-CEO Mellody Hobson and former Secretary of State Condoleezza Rice are also part of the cap table.

The Broncos rank 10th in Sportico’s NFL valuations at $4.65 billion.

The NFL found another 10-figure net worth individual to join its exclusive club, as it did with Tepper, but as values rise, transactability becomes an issue under the current ownership rules.

Institutional Waiting Game

The NFL doesn’t rush anything when it comes to “the shield.” Jersey sponsors, legalized sports betting and institutional team ownership have all been widely embraced by the other four major U.S. sports leagues in recent years, but only betting has infiltrated the walls of 345 Park Ave., and only after everyone else rushed in. It is easy to move judiciously when you are sitting on top of the mountain.

Institutional investors have poured money into teams in the NBA, NHL, EPL, MLS and MLB during the past two years. Arctos Sports Partners has been one of the most prolific, with stakes in more than a dozen teams, including the Golden State Warriors, Los Angeles Dodgers and Chicago Cubs, franchises which are all worth more than $4 billion.

The NFL has said no to these deep pockets, so far, but institutional money is coming. The question is whether it is next year, five years or “in my lifetime” on the long end, as one 50-something investment banker told Sportico. There are a number of NFL owners who want the league to open its doors to these funds. The pro argument is it will inject more liquidity without adding debt, as well as ease the sale of limited partner stakes. The “smart” money wants in because of the league’s steady cash flow and asset value appreciation. And they won’t be a pesky LP who complains about the location of their suite or parking spot.

“I don't see them amending their rules, but there may be situations where a more bespoke finance solution would be helpful and the league would embrace an institutional non-control, passive interest,” Charles Baker, co-chair of Sidley Austin’s entertainment, sports and media group, said in a phone interview. “The league seems more open than they were two or three years ago when the other leagues first started to amend their rules to permit it.”

The NFL has often made exceptions for ownership groups who fell out of compliance on league rules around debt or ownership stakes. It just changed its rules around controlling owner stakes, lowering the threshold from 5% to 1%. The rule only applies for teams that have had the same ownership for at least 10 years, and the family collectively must still own 30% of the team—the minimum for a new owner buying into the league. The intention was to help with estate planning and tax bills, as team values soar.

“Solve a problem” was a common refrain from those around the league on the role that investment funds could play. The league is unlikely to make sweeping changes to allow firms like Arctos to buy stakes in five teams (NBA) or an unlimited number (MLB) any time soon. But if a team comes to the NFL where a fund can alleviate a financial issue around a family squabble, estate planning and stadium financing, or fill a financial gap in a team sale, there are many in the game who think that scenario has a chance of getting approval from the NFL in the years to come. The business of the NFL has no peers in sports, as teams generate more than $100 million annually on average in EBITDA, but not every owner is cash rich like Tepper or Walton.

Unlike other leagues, the NFL really has not had a need for an injection of cash from investment firms. The G-4 financing program has supplanted financing for new stadiums, and the league bumped up the debt limit to $500 million in 2020 to help liquidity. Teams have tapped $8.6 billion in debt from the NFL’s credit facility, according to Fitch Ratings. It is only a blip for an operation worth $132 billion.

“The NFL is a league I don’t lose much sleep over on this credit in terms of how they are going to perform,” Fitch analyst Henry Flynn said in a phone interview. “It is in a category of its own and has a pretty strong and clear trajectory of how it is going to be over the next decade.”

There are two major hang-ups for the NFL around allowing institutional capital, according to multiple sources. The Green Bay Packers report their financial results as the NFL’s only publicly owned, nonprofit corporation, but the league is hesitant to reveal more details about its finances to institutional investors. The other issue is the exit strategy for these funds. The NFL wants its owners to think long-term—the average ownership tenure will “dip” to 40 years after Walton’s approval. Funds typically have shorter horizons, and it is unclear how they will exit their team stakes in other leagues, beyond control sales.

“It is certainly something that we look at in terms of where it could take us and what it would mean to our league," Jones said regarding institutional investment in NFL teams, "But I don't know that we need that yet.”

Next Up

For all the power and reach of the NFL, it is still just a $17 billion business and wouldn’t crack the top 200 of the Fortune 500 ranking of largest U.S. public companies by revenue. Yet, there are few brands that occupy greater mindshare of consumers, and that is where the league and its teams see opportunity.

“The untapped future for sports is monetizing the lifetime value of their customers, beyond selling tickets and merchandise and maybe a subscription to Sunday Ticket,” Pyne said.

The lifetime monetization of a customer is something large tech companies have mastered, and why the NFL's streaming packages are attractive to the FAANGs, despite a potential $2.5 billion-a-year price tag for the league's Sunday Ticket package. Fanatics serves as an example in sports with its trove of customer data fueling a booming merchandise business and laying the groundwork for new verticals, like trading cards and gambling. The NFL was the largest investor at $320 million in Fanatics' most recent funding round that carried a $27 billion valuation.

NFL teams are working to build their connection with fans beyond the eight or nine home games. The Washington Commanders recently launched a content studio, Washington Branded, while the Atlanta Falcons will have their digital studio up and running in the next few months. The benefits are two-fold, engaging fans and helping on the corporate sponsorship side.

Legalized sports betting is still only in the first quarter, and the NFL is in the best position to capitalize on its spread, which is still not widely available in the three most populous states of California, Texas and Florida. Morgan Stanley forecasts the sports betting industry to hit $12.8 billion in 2025, up from $400 million in 2018. Teams benefit from gaming sponsors and making fans more "sticky" with their viewership.

“The NFL has been almost untouchable through broader economic forces, like inflation, wars, challenged elections, recessions and COVID,” Baker said. “The league is a juggernaut, and I see more upside growth ahead.”

Best of Sportico.com

Click here to read the full article.