If you invested in a National Football League (NFL) franchise ten, five, or even two years ago and decided to sell your share tomorrow, you would probably make a huge profit.
Whether an investment today would yield a similar profit two, five, or 10 years from now, though, is a big question mark because the NFL might be on the verge of having a variety of short and long-term problems. Despite the current debate about how the NFL should handle players who refuse to stand up while the American National Anthem is playing, the league has far more serious concerns.
A Litany of Issues
While a lot of pundits like to point to the anthem protests popularized by former 49ers quarterback Colin Kaepernick, the league’s problems have been a long time coming. Let’s take a look at all the factors below.
TV Is Less Popular:
“Cord cutters” are one of the “Five Non-Political Reasons That The NFL’s TV Ratings Are Down,” Forbes magazine article reports. The accelerating trend of cancelling pay-for-television services predated President Donald Trump asking fans to boycott NFL games if players kneeled during the National Anthem. About 16.7 million Americans cancelled their cable, satellite, or telco services in 2016. That number is projected to be 22.2 million in 2017, Variety magazine reported. The average time Americans watch TV will drop 3.1 percent in 2017.
Future TV Deals:
The amount of revenue that the NFL receives from TV stations that broadcast its games is based on past ratings, including record ratings in 2015. In the last two years, though, the average viewership of an NFL game has plunged from 17.9 million to 15.1 million, Nielsen ratings show. Business Insider reports that TV executives “fear” that broadcasting too many games has harmed ratings and TV networks will negotiate much less lucrative contracts when the current contracts expire.
Millennials:
The Millennial Generation — people born between the late 80s and mid-90s — are more adventurous than their parents and are, thus, more interested in less popular products. Nielsen ratings show that the number of millennials who watch NFL games on television dropped about 30 percent from 2011 through 2016, the article “Switch Off the Football” reports. Millennials also watch about half as much TV in general than older people, partly because they have far more entertainment options.
Parents:
Football isn’t popular outside the USA, but is here in part because its large presence in our communities has spurred boys to play football and millions of people to watch them. In recent years, though, news about players sustaining long-term brain damage has spurred parents to prevent their sons from playing. One report shows that the number of people at least six years old playing football declined from 8.4 million in 2006 to 5.48 million in 2016. The number of Californians playing high school football has also dropped 10 percent since 2007.
The Quality Of Play:
This could be a major long-term problem if the number of players continues to decline. ESPN reports that 34 NFL players under the age of 30 have retired in the past two years. Many cited the risks of long-term health damage. NFL reporter Clay Travis wrote quarterback play could decline because wealthier parents are more apt to prevent their sons from playing football.
“I think (the brain disease) CTE is likely to decimate the quarterback position in football,” he wrote. “That’s because quarterbacks tend to come from two parent, middle class households.”
Impressive Numbers
Is it possible that the NFL can improve its future outlook so an investment in a team today can be as wise as an investment made a few years ago?
The answer is “yes” IF the NFL can figure out a way to make the sport safer, more ways to make revenue via targeting its most loyal customers and offering them more individualized products and services (such as news alerts), and more ways to make revenue by reaching more fans on the mobile devices that more people are using as they are watching less television.
Of course, the NFL is trying to do all of these things — and it might succeed. Certainly, the NFL is in a much better position than Major League Baseball (MLB) was about 15 years ago when several of its teams were in very serious financial trouble or were unable be competitive on the field against large-market teams with much larger payrolls than theirs. Wealth Authority recently reported on how MLB was able to completely reverse its fortunes by focusing on local sports fans and local markets.
Pro football is still the nation’s most popular sport by a 2:1 ratio over baseball, the second most popular sport. NFL games also remain very popular programs despite the plunge in ratings this year.
“Since the start of the season, 17 of the top 20 shows on TV have been NFL games,” CBS reported on Oct. 20. “NBC’s Sunday Night Football remains the most watched show in Prime Time.”
Currently, NFL teams are also worth far more on the average than teams in the USA’s other three major sports. A chart in this article shows that the average NFL team is worth $2.3 billion — more than five times its worth in 2000 — while the average MLB, National Basketball Association (NBA), and National Hockey League (NHL) team is worth $1.3 million, $1.2 million, and $500,000 respectively.
Which team interests you? Green Bay is the only NFL team that sells stock directly to the public. You can also be a part owner of a team by buying a share in the company that owns that team, but mostly you have to contact a part owner. Most teams have a well-known principal owner and many unknown part owners.
The Dallas Cowboys are the NFL’s most valuable team with a current value of $4.8 billion, according to this list in Forbes magazine. New England, the New York Giants, Washington, and San Francisco are the second through fifth most valuable teams. Buffalo, with a value of $1.6 billion, is the least valuable team. Detroit, Cincinnati, Cleveland, and Tampa Bay are the second through fifth least valuable.
Dallas was also the most profitable team in 2016 with operating income of $350 million. New England, Washington, Houston, and the Giants were second through fifth. The least profitable team was Oakland with operating income of $41 million. Detroit, Buffalo, the Los Angeles Chargers, and Kansas City were the second through fifth least profitable.
The NFL’s total revenues increased from about $4 billion in 2001 to more than $12 billion in 2015. Attendance has been basically the same for the past nine consecutive years, but the average price of a ticket increased from $72.20 to $92.98 during the same time span. The average age of an NFL fan, though, has increased from 46 to 50 since 2006.
So now, we’re nearing the end of a story on the NFL’s current and future problems and we haven’t even mentioned Colin Kaepernick.
”The NFL’s TV ratings would have fallen this year regardless of whether former San Francisco 49er quarterback Colin Kaepernick stood, kneeled or performed cartwheels while the National Anthem played,” wrote Jonathan Berr in the Forbes magazine article on why the NFL’s TV ratings are down.
Regards,
Ethan Warrick
Editor
Wealth Authority
