ICLEF I.P. Blog: Top Five Revenue Sources That Drive Value for the NFL

Top Five Revenue Sources That Drive Value for the NFL
by Mike PellegrinoPellegrino & Associates

Football is one of the most beloved American sports pastimes. Avid fans follow their favorite teams whether those teams win or lose. Many households plan their entire Sundays around football during the season, anticipating the next big play from high-profile team members. But, besides talent, what drives value for the NFL?

The NFL is worth billions of dollars. While the exact amount is not known, Forbes reports that at least 20 out of the 32 teams are worth more than $1 billion. The following list describes the top five sources that drive value for these teams.

1. Ticket sales. Ticket sales provide a great resource of revenue for the NFL, with each team generating approximately $51 million per year. With stadium seating ranging from capacities of 65,000 to 85,000, and with ticket prices at a near average of $80, ticket sales add up. And we can’t forget the Super Bowl because Super Bowl ticket prices rise tremendously in comparison with regular season tickets. For Super Bowl XLVII, average ticket prices were $3,100!

2. Merchandising. Hats, key chains, cups, socks, and of course jerseys name just the surface of available NFL merchandise. In 2010, NFL merchandise sales reached $2.1 billion. Merchandise is one of the most effective revenue sources because the reach extends beyond the United States–a reach that is more difficult for other revenue sources such as ticket sales and venue revenue.

3. Advertising. In the last decade, advertisers spent $1.85 billion during the Super Bowl alone. For the Super Bowl this year, a 30-second commercial increased to $4 million from $3.5 million the previous year! During the regular season, advertisers spend $3 billion.

4. Venue. The venue plays a big role in NFL revenue because it provides a variety of ways to generate revenue. New or updated stadiums are likely to fuel more dollars to the NFL because they tend to offer more seating, better views, and other perks. Forbes indicates that teams increase their value when new stadiums are built. Furthermore, venues position a variety of vendors such as food, beverage, and merchandise directly in front of football fans, giving vendors the ability to charge high prices. For instance, the 49ers make $6.8 million per year on just concession and merchandise sales.

5. Licensing. The NFL takes aggressive measures to insure its copyrights and trademarks are protected. It also charges a considerable fee to use the league’s intellectual property. In fact, at the end of December 2011, it was announced that the league was expected to increase its rights fees by 63 percent. One source indicates that television networks will pay almost $28 billion over a nine-year period to air NFL games! Additionally, advertisers that wish to promote products using NFL terms must license trademarks, which increases the cost of an already very expensive ad or marketing effort.

As noted above, the NFL generates a considerable amount of revenue in the sports industry. In fact, it generates the most out of any other major league in the United States. In 2010, NFL revenue reached $8 billion. However, if one or more of the above revenue sources were to falter, the league could suffer major losses. For instance, a lockdown could affect all of the revenue sources, resulting in a significant amount of loss in revenue. However, as the most watched, most attended, and most popular sport in terms of merchandise in America, it is likely that the NFL will remain lucrative and retain its revenue resources.

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