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The Business of Professional Football

National Football League
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The National Football League

While several professional football leagues have come and gone over the past half century, the focus of this section will cover the National Football League (NFL). Today, the National Football League is the premier league for professional football (American-styled football) worldwide. The National Football league was established in 1922 with eight teams. During the late 1960's, the NFL merged with another professional football league, the American Football League (AFL) expanding the number of teams to 13. In 1966, the league itself (not the individual teams) became a 501(c)(6) non-profit organization. 1 This is why in many cases financial information about the league is hard to come by.

Since the 1920's the NFL has had three NFL presidents, four commissioners, and one treasurer. 2 Presently, the NFL is made up of 32 teams with a newly realigned conference structure implemented in 2002. Few professional sports have experienced the growth, stability and success as the National Football League. Its longevity and expansion is a testament to that success.

It even tried to branch out into international markets with the creation of the World League of American Football in 1991. In 1995 it changed its name to NFL Europe with substantial financial support from media giant Rupert Murdoch and the FOX TV network. Unfortunately, attendance of NFLE games fluctuated overtime and it ceased in 2007.

BERA - Business & Economics Research Advisor - A Quarterly Guide to Business & Economics Topics

Issue 3/4: Summer 2005
Updated July 2013

The Sports Industry

Table of Contents

Introduction
General Guides and E-Resources
Baseball
Basketball
Football
Golf
Soccer
Tennis

Alex Yunevich, running with football, [1931]
Alex Yunevich, running with football, [1931]
from the collections of the
Prints and Photographs Division
(Library of Congress)
Reproduction number: LC-USZ62-117937

NFL Revenue System

The NFL utilizes a number of different types of revenue sharing methods. Retained revenues and shared revenues are the two main types of revenue sources for NFL franchises. Retained revenues, consisting of revenue generated and kept by individual teams, include 60% of stadium (gate) receipts for home games, naming rights, sponsorships, luxury suite revenue, concessions and local broadcast rights.

The building of new stadiums and the selling of stadium naming rights has contributed enormously to the revenues of NFL franchises. This trend has continued to grow within the league over the last several years. In addition, the NFL is experiencing an overwhelming wave in new stadium construction and is on pace to replace nearly all of the existing stadiums in the next several years. From 1990 to 2004 19 new stadiums have been built for a total of $6.3 billion for the same period. 3

The primary source for shared revenue in the NFL is through national broadcast rights fees, away game ticket sales, and licensing. In December 2011 the NFL announced a new media running though the 2022 season. 4 While specific details weren't announced, one estimate has the TV rights for 2014-2021 being $4.95 billion. 5 Another estimated that each network will pay roughly $3 billion per year. Between that deal and deals with other media outlets, it is estimated that teams will share $7 billion in media money. 6 Compare the media rights estimates for the future with the revenue figures for the 2011 season. The 2011 season brought in $9.4 billion total revenue, of that $5.5 billion (58.5 percent) came from national money like media, sponsorship and NFL Ventures. 7

The NFL's marketing enterprise has also generated substantial revenue for the league via NFL Ventures. Organizationally, NFL Ventures includes several subsidiary elements: NFL Enterprises primarily concerned with the advertising, publicizing, promoting, broadcasts of NFL games; NFL Properties which oversees the licensing and sponsorship; NFL Productions which produces NFL-related programming; and NFL International which promotes the NFL internationally. According to documents leaked in 2011, NFL Ventures profit in 2009 was $955 million and $1.295 billion in 2010 a substantial increase from one year to the next. 8

NFL Salary Caps

Despite the NFL's longevity, the league finds itself challenged by the current player free agency and team salary cap system. The salary cap is the result of league revenue sharing between teams and players, which is based on an agreement of defined gross revenues (DGR). The league then defines the share of DGR that will go to each franchise's player roster. The salary cap actually serves as a ceiling placed on spending which is equally applied to all teams. The formula for determining the salary cap is depicted below. 9

C = (1/n) x s x DGR
n = number of teams
s = share
DGR = defined gross revenue

In comparison to the other professional sports implementing the salary cap system, the NFL has proven to be the most effective at managing player salaries and the vastly expanding cost involved in operating the National Football league.


1 Doug Farrar. "The U.S. Senate may ó and should ó review the NFLís tax-exempt status, " (May 21, 2013), available at http://sports.yahoo.com/blogs/nfl-shutdown-corner/congress-may-review-nfl-tax-exempt-status-004521453.html.External Link Accessed June 24, 2013.

2 Jozsa, Frank P. American Sports Empire (Westport, CT: Praeger, 2003), 20.

3 Kagan's the Business of Football (Carmel, CA: Paul Kagan Associates, 2002), 17.

4 "The tradition continues: NFL to remain on broadcast TV," NFL (December 14, 2011), available at http://nflcommunications.com/2011/12/14/the-tradition-continues-nfl-to-remain-on-broadcast-tv/.External Link Accessed June 24, 2013.

5 Daniel Kaplan "The road to $25 billion," (January 28, 2013), available at http://www.sportsbusinessdaily.com/Journal/Issues/2013/01/28/In-Depth/NFL-revenue-streams.aspx.External Link Accessed June 24, 2013.

6 Kurt Badenhausen "The NFL Signs TV Deals Worth $27 Billion," (December 14, 2011), available at http://www.forbes.com/sites/kurtbadenhausen/2011/12/14/the-nfl-signs-tv-deals-worth-26-billion/.External Link Accessed June 24, 2013.

7 "The road to $25 billion,"

8 Tommy Craggs "Exclusive: Leaked Documents Show Operating Profits For NFL Ventures Rose 29 Percent Last Year," (July 15, 2011), available at http://deadspin.com/5821386/audited-financials-operating-profit-for-nfl-ventures-lp-rose-from-999-million-to-13-billion-last-year.External Link Accessed June 24, 2013.

9 Fort, Rodney D. Sports Economics (Upper Saddle River, NJ: Prentice Hall, c2003), 165.

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Electronic Resources

General          Official League Web Sites          Pro-Football News

General

Athlon Sports.com NFL Homepage
http://www.athlonsports.com/nfl External Link

Web site of Athlon Sports, Inc. providing links to articles and information on professional football.

Baade, Robert A. and Victor A. Matheson. "Super Bowl or Super (Hyper)Bowl? Assessing the Economic Impact of America's Premier Sports Event."
http://web.williams.edu/Economics/wp/mathesonSuperbowl.pdf External Link [PDF format: 177 KB / 33 p.]

Looking at the economic impact of a Super Bowl on a host city.

Matheson Victor A. and Robert A Baade. "Padding Required: Assessing the Economic Impact of the Super Bowl." September 2004.
http://college.holycross.edu/RePEc/hcx/Matheson_Padding.pdf External Link [PDF format: 297 KB / 35 p.]

Looking at the economic impact of a Super Bowl on a host city using evidence from host cities from 1970-2001. Detailed Appendix with numbers/tables back to 1970 as well as other articles on the topic of economic impact of the Super Bowl. Does site a NFL / Sports Management Research Institute study on the economic impact of the Super Bowl XXXIII on South Florida.

Matheson Victor A. and Robert A Baade. "An Evaluation of the Economic Impact of National Football League Mega-events." August 2011.
http://ideas.repec.org/p/hcx/wpaper/1112.html External Link

SportsBusiness Journal
http://www.sportsbusinessjournal.com/ External Link

A weekly journal providing news and information on the sports industry. The journal covers industry transactions and trades, contracts and other sports management issues, as well as various aspects such as, media, marketing, finance and sports facilities on a number of different sports.

Official League Web Sites

The web sites listed are the official sites to professional football leagues. Each web site contains links to official team home pages, league team sites, team rosters, depth charts, game schedules, league news, as well as statistics and scores.

Arena Football League (AFL)
http://www.arenafootball.com/ External Link

Canadian Football League (CFL)
http://www.cfl.ca/ External Link

National Football League (NFL)
http://www.nfl.com/ External Link

National Football League Players Association
https://www.nflplayers.com External Link

Pro-Football News

This list of media sources provides links to the professional football homepages. The web sites include: league news and analysis; team news; player links; scores and statistics; video and other multimedia links.

CBS Sportsline - NFL Page
http://www.cbssports.com/nfl/ External Link

ESPN.com - NFL Index Page
http://football.espn.go.com/nfl/index External Link

FOXSports.com - NFL Page
http://msn.foxsports.com/nfl External Link

NFL Network
http://www.nfl.com/nflnetwork External Link

Pro Football Weekly Home Page
http://www.profootballweekly.com/PFW/default.htm External Link

Prof Football Reference
http://www.pro-football-reference.com/ External Link

Sports Illustrated - Pro Football
http://sportsillustrated.cnn.com/football/nfl/ External Link

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Selected Print Resources

Abrahamson, Alan. "NFL Ledgers Reveal Profits Depend on New Stadiums," Los Angeles Times, May 13, 2001.

Carlino, Gerald. Compensating Differentials and the Social Benefits of the NFL. Working Paper No. 02-12/R. Philadelphia: Research Department, Federal Reserve Bank of Philadelphia. September 2003.
http://www.phil.frb.org/files/wps/2002/wp02-12r.pdf External Link [PDF: 350.1KB/ 40p.]

In this paper the author utilizes wage equations to measure differences in compensation in various metropolitan areas which have NFL franchises. The study looks at the effects that NFL franchises and new stadiums have on cities and residents, and the value of the investment.

Carlino, Gerald, and Coulson, Edward. "Should Cities Be Ready for Some Football?" Q2 Business Review (2004),. 7-17.
http://www.phil.frb.org/files/br/brq204jc.pdf External Link [PDF: 451.2KB/ 11p.]

The authors examine the issue of whether the public should finance stadiums for NFL franchises. The article also discusses if cities benefit from having NFL franchises and new stadiums.

Davis, Michael C. and Christian M. End. "A Winning Proposition: The Economic Impact of Successful National Football League Franchiese." Economic Inquiry 48.1 (Jan 2010): 39-50.

This articles look at the economic benefits of cities whose teams experience seasonal success.

Hampe, Robert K., Paul J. Much, and others. "The Evolving Economics of the National Football League and Franchise Value," in Financial Valuation : Businesses and Business Interests. New York : Maxwell Macmillan, c. 1990.
LC Call Number: HG4028. V3Z84 1990
LC Catalog Record: 89026668

Heiges, Chad. "NFL's owners seek local revenue for financial edge." South Florida Business Journal. January 14, 2005.

The article discusses changing economic trends in professional football, particularly the revenue generated from sports stadiums and the growing number of stadium being constructed in the NFL.

Josza, Frank P. American Sports Empire: How the Leagues Breeds Success. Westport, CT: Praeger, 2003. 239 p.
LC Call Number: GV583 .J65 2003
LC Catalog Record: 2002029759

Jozsa investigates the major leagues' histories with unparalleled depth and rigorous economic analysis. In his economic analysis of the successful professional league sports in the United States, Jozsa (economics and business administration, Pfeiffer U.) emphasizes the way that the different actors (leagues, clubs, franchise owners, players, media, and government organizations) cooperate to increase profit. Synopsis by Book News, Inc.

Jozsa, Frank P. Football Fortunes : The Business, Organization, and Strategy of the NFL. Jefferson, N.C. : McFarland & Co., c2010.
LC Call Number: GV955.5.N35 J69 2010
LC Catalog Record: 2010003175

Jozsa has written a number of books on the business end of sports. This title is particular to how the business end of the NFL developed into the billion dollar industry by looking at the mergers, expansions, and relocations as well as the operation and organization of franchises and the role of stadiums and markets.

Kagan's The Business of Football. Carmel, CA: Paul Kagan Associates. (Annual)
LC Call Number: GV955.5.N35 K34
LC Catalog Record: 00212695

An annual publication published by Kagan World Media that provides comprehensive analysis, financial statistics, and information on the professional football industry in the U.S. The publication covers various professional leagues, both past and present, and historical overviews of the leagues. Much of the data focuses on the National Football League (NFL). Included is analysis and data on NFL revenue, media rights, NFL teams and franchise valuations, player salaries, and NFL stadiums.

Oriard, Michael. Brand NFL : Making and Selling Americaís Favorite Sport. Chapel Hill : University of North Carolina Press, c2007.
LC Call Number: GV954.3 .O75 2007
LC Catalog Record: 2007008867
Table of Contents

This title is written by a former professional football player turned professor. It looks at the development of the sport and at the image of the NFL and its place in American life as it grew - particularly since the late 1950's. Attention is paid to league changes, player independence and union influence, the rise of player salaries, and the NFL's relations with the cities that host the teams.

Quinn, Kevin G. ed. The Economics of the National Football League : The State of the Art New York [NY] : Springer, 2012.
LC Call Number: GV955.5.N35 E36 2012
LC Catalog Record: 2011944271

This particular titles is from an economic/economists perspective. There are 4 parts: Part I provide an overview; Part II is a collection of surveys of the economics of the NFLís most important revenue streams, including media, attendance, and merchandising; Part III, focuses on the labor economics; Part IV includes essays on competitive balance, gambling, and economic impacts of the Super Bowl, etc.

Quinn, Kevin G. "Getting to the 2011-2020 National Football League Collective Bargaining Agreement." International Journal of Sport Finance 7.2 (May 2012): 141-157.

There is historical look at the relations between the union and the players league particularly the 1993 Collective Bargaining Agreement, this article is concerned examines the economic issues leading up to the 2011 NFL lockout and the resultant CBA with the NFLPA.

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Library of Congress Catalog Searches

Additional works on the business of football in the Library of Congress may be identified by searching the Online Catalog under appropriate Library of Congress subject headings. Choose the topics you wish to search from the following list of Library of Congress subject headings to link directly to the Catalog and automatically execute a search for the subject selected. Please be aware that during periods of heavy use you may encounter delays in accessing the catalog. For assistance in locating the many other subject headings which relate to football as a business, please consult a reference librarian.

Last Updated: 07/09/2013

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