Nfl Business Model
The NFL’s Current Business Model and the Potential 2011 Lockout
Jake I. Fisher Economics 1630: The Economics of Sports and Entertainment Professor Stanley Engerman May 4, 2010
1
Introduction In March 2010, Roger Goodell, the Commissioner of the National Football League (NFL), announced an aggressive goal for his business: $25 billion in yearly revenue by 2027.1 To put that figure in perspective, the countries of Panama, Jordan, Ghana, and Iceland all had nominal GDPs less than $25 billion in 2009.2 For the NFL to reach Goodell’s lofty target, the league will have to quickly build on what Business Week has already called, “one of America’s best-run businesses.”3 During the 2008 season, the NFL made an estimated $7.6 billion in revenue and $1.0 billion in operating income. The average team value was $1.04 billion.4 The Economist wrote in 2006 that, “[the NFL] remains the most popular of the four big American sports on almost every measure, from opinion polls to television ratings.”5 A comparison of 2008 financials for the NFL, Major League Baseball (MLB), National Basketball Association (NBA), and National Hockey League (NHL) is displayed in Appendices 1 and 2. The conclusion is clear: with the highest revenue, income, and value, the NFL leads the American professional sports business. This paper will take a critical look at the NFL business model. Specifically, it will investigate how the NFL has constructed a sports empire in the United States. How does the league generate its revenues and earn profits and how has it popularized and stabilized demand for its product? I will demonstrate that the NFL’s noticeable profit
1
Kaplan, Daniel. “Goodell sets revenue goal of $25 billion by 2027 for NFL.” Sporting News NFL. 5 Apr. 2010. http://www.sportingnews.com/nfl/article/2010-04-05/sbj-goodell-sets-revenue-goal-25-billion-2027for-nfl 2 International Monetary Fund, World Economic Outlook Database, Apr. 2010: Nominal GDP list of countries. Data for the year
Jake I. Fisher Economics 1630: The Economics of Sports and Entertainment Professor Stanley Engerman May 4, 2010
1
Introduction In March 2010, Roger Goodell, the Commissioner of the National Football League (NFL), announced an aggressive goal for his business: $25 billion in yearly revenue by 2027.1 To put that figure in perspective, the countries of Panama, Jordan, Ghana, and Iceland all had nominal GDPs less than $25 billion in 2009.2 For the NFL to reach Goodell’s lofty target, the league will have to quickly build on what Business Week has already called, “one of America’s best-run businesses.”3 During the 2008 season, the NFL made an estimated $7.6 billion in revenue and $1.0 billion in operating income. The average team value was $1.04 billion.4 The Economist wrote in 2006 that, “[the NFL] remains the most popular of the four big American sports on almost every measure, from opinion polls to television ratings.”5 A comparison of 2008 financials for the NFL, Major League Baseball (MLB), National Basketball Association (NBA), and National Hockey League (NHL) is displayed in Appendices 1 and 2. The conclusion is clear: with the highest revenue, income, and value, the NFL leads the American professional sports business. This paper will take a critical look at the NFL business model. Specifically, it will investigate how the NFL has constructed a sports empire in the United States. How does the league generate its revenues and earn profits and how has it popularized and stabilized demand for its product? I will demonstrate that the NFL’s noticeable profit
1
Kaplan, Daniel. “Goodell sets revenue goal of $25 billion by 2027 for NFL.” Sporting News NFL. 5 Apr. 2010. http://www.sportingnews.com/nfl/article/2010-04-05/sbj-goodell-sets-revenue-goal-25-billion-2027for-nfl 2 International Monetary Fund, World Economic Outlook Database, Apr. 2010: Nominal GDP list of countries. Data for the year