Short Read

The Economics of the NFL

For the American people, football’s social importance is on a par with religion. Football is so integrated into America’s quotidian that it’s not uncommon to find a town’s entire population either supporting the Friday night High School Football game on the television screens at a bar, or in the stadium bleachers. At the highest level, the National Football League dominates Sundays, as well as Monday and Thursday nights, in America – during the 2018/19 season, NFL viewership averaged 15.8 million per game on all networks, including the likes of CBS and NBC, gaining 5% from the previous year. Remarkably, NBC’s Sunday Night Football was the most-watched program in America in 2018, for the eighth year in a row.  

The sheer scale of audience contributes heavily to the economic prosperity of the NFL, which considers itself a trade association financed by its 32 member teams. In the 2018/2019, The NFL generated around $15 billion – it is truly the king of sports in the USA. Fantasy Football in America is a $7 billion industry by itself. Economically however, there is much more than meets the eye when it comes to the NFL. 

The first Sunday of each February is marked by the most hyped, most glitzy and richest sporting event on the planet – The Super Bowl. Serving as the finale of a tough season for players, staff and fans, it is the pinnacle of American sport. What makes the Super Bowl so remarkable isn’t just the football taking place on the field, but the sums of money which surround the game.  

For starters, Super Bowl 53 took place on 3 February 2019, at the Mercedes-Benz Stadium which is home to the Atlanta Falcons Franchise. The projected construction cost of this state-owned multi-purpose arena is $1.6 billion dollars – with a ‘B’. Interestingly, construction of the stadium was partially bankrolled by the taxpayer, with public spending eclipsing $700 million. Attendance was in excess of 100,000 people and the average ticket price was $6,122! By comparison, the average ticket price for the English FA Cup Final in 2019 was just over £90, just $115 dollars. In revenue terms, the Americans are truly playing a different ball game.  

However, these eye-popping figures do not stop there. It was estimated by the American Gaming Association that Americans bet $4.2 billion on last year’s fixture, with 97% of bets wagered illegally. The figure which most illustrates the extent to which the Super Bowl is an economic bonanza is the cost for a 30 second advertisement, for which a new record was set this past year. According to CNBC the cost for 30 seconds of commercial time was a whopping $5.25 million dollars. The reported cost for PepsiCo’s advert was $10.4 million dollars – enough money to buy more than 8.7 million cans of Pepsi. The Super Bowl showcases the economic power the NFL possesses in a nutshell, exemplifying consumerism. 

Aside from hosting a tournament final which leaves the Champions League Final resembling a kickabout in the back garden, the NFL is economically unique in its corporate structure, which has socialist elements, differing from the set ups of other major sports leagues such as the Premier League or The Rugby Championship. NFL Revenue is derived from three primary sources: merchandising, Sunday Ticketing (coupled with their own online network, ‘The NFL Network’) and television contracts with major networks. Unlike many other sports leagues, the NFL distributes their revenue stream equally amongst all member teams, regardless of how they perform. Again, the kind of sums involved are huge – each team receives $255 million annually from TV contracts alone. This equality causes us to see little deviation in turnover figures throughout the league. 

The socialist undertones seem to prevail when we look at the annual NFL Draft, which offers the top picks of the best collegiate football players to the worst performing years. On paper this method of levelling the playing field seems smart, because the NFL revenues benefit from having strong competitive teams all over the country rather than having them concentrated in typical large markets like Los Angeles and New York, as we see in the NBA (ignoring the Knicks franchise under James Dolan’s ownership) and the MLB. However, it is not fool proof as despite similar financial power to their competitors, the Cleveland Browns have been consistently poor, while the Patriots have managed to forge a winning dynasty, regardless of the league’s effort to weaken them with lower draft picks every year. 

As well as this, the NFL operates with a hard salary cap – meaning there is a limit on total team salary per year which no team can exceed under any circumstances. Set at $118.2 million for this 2019-20 season, the cap ensures teams with wealthier owners can’ t essentially “buy championships” – stockpiling their rosters with top-tier talent to build an unassailable team. This adds another facet of intrigue to the NFL as a season unfolds, because owners and general managers of franchises find themselves considering opportunity cost when making squad decisions.  

For example, the Dallas Cowboys currently face an issue where their star quarterback, Dak Prescott, is demanding $40 million a year to resign with the franchise widely known as ‘America’s Team’. While he may merit this amount of money, the dilemma for owner Jerry Jones stems from the fact that rewarding Mr Prescott $40 million per annum would require him to neglect renewing the contracts of other star players such as Ezekiel Elliot or Jalen Smith because of the prohibitive hindrance inherent in the hard cap. On the flip side, the NFL has an ’89 percent spread rule’ which essentially means over a 4-year time span, NFL teams must spend at least 89% of the cap limit on salaries. For teams in a rebuild phase focusing on the promotion of younger players, this becomes an issue as it can lead to owners rewarding overly inflated contracts to exceed this lower bound.  Topics such as these tend to dominate the morning sports talk shows in America – at times, money talks louder than the game.  

Although the New England Patriots may have won the game, the real winner of Super Bowl 53 was the U.S. Economy. On a regional level, in 2011 NFL cities generated $5 million dollars per game day. According to an NFL Players Association analysis, the NFL annually adds $5 billion to the U.S. Economy  in NFL cities alone. The NFL can also promote tourism in America. For example, having the Browns franchise has significantly benefitted Cleveland’s tourism, despite the lack of team success. In the 2008 season, it was estimated that every Cleveland Browns home game generated almost $8 million in Cleveland business, equating to $63 million dollars a year. 

Furthermore, on the back of a 10-year labour agreement formulated in 2011, the NFL supports 110,000 jobs in NFL cities. The NFL is a good example of seasonal employment. At the “MetLife” Stadium in New Jersey, only about 80 employees are paid full-time. On the contrary, according to stadium CEO Mark Lamping, they employ 4,000 workers – comprising parking attendants, security guards, ushers, ticket takers, janitors, merchandise sellers and concession workers – part time. These 4,000 do not work in the autumn and winter without football games. This illustrates the dependence of the game that people outside the actual football-playing have on the NFL for literal survival. Rick Abramson, president of Delaware North (a concessions company) said that, ““A missed season would be a problem for a lot of people because they’re counting on that money to make ends meet.”  

The NFL is truly an economic bonanza with multiple facets contributing to the USA’s economic prosperity, from the money-spinning Super Bowl to the provision of employment in multiple cities nationwide. Having already practically monopolized the day of Sunday in America, it will be fascinating to see how economically powerful the National Football League can become. The creation of the NFL London Series – where four regular season games are staged at Wembley Stadium and (this year) Tottenham Hotspur Stadium – will only increase league revenues further, with 2018 gate revenue from the four games exceeding $30 million. The London Series adds yet another element to what is a remarkably layered financial make-up of a sports league massively boosting the American economy. The National Football League is America’s game-winning drive. 

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