- Geekmaster
- 2020-07-18 12:31:18
- 11 minute(s)
NFL Super Bowl Business Model At a Glance
The National Football League (NFL) has several sources of revenue from the Super Bowl and its business model is no less than astonishing.
The Super Bowl has topped the 100m mark every year since 2010.
Every year, millions of Americans — and even more around the world — take time out of one particular Sunday to watch one of the most captivating, polarizing and moving spectacles in culture today: the Super Bowl.
Being at the Super Bowl is a sign of prestige, with attendees paying thousands of dollars for a single ticket.
On their side, companies pay millions to get a 30-second commercial before an audience. It’s also the one event that celebrity performers line up to play—for free.
The Super Bowl brings together the best of the best on the most-watched gridiron of the year.
ImportantMore than half a century since the first Super Bowl, the event has evolved into so much more than the championship game of the National Football League.
It’s now an unofficial American holiday.
WarningAside from the occasional Olympic Games or World Cup, it dominants the sports landscape around the world across all industries, too, from sports to entertainment to technology to finance.
But how much is the Super Bowl actually worth?
How much money does this game make? On which business model is it built up on? What are its streams of income?
Let’s take a look at just how big of a deal (literally) the Super Bowl is from a business perspective and what’s its business model.
Ad Sales
The Super Bowl is one of the most profitable pieces of programming for TV Networks. Most of the top 10 most watched TV broadcasts were Super Bowl events.
ImportantWith an all but guaranteed audience above 100m, companies are willing to pay millions to get their products in front of consumers for a few short seconds.
It is that makes the Super Bowl so appealing to advertisers.
WarningIn the era of so-called “cord cutting,” live sports have increasingly become essential to the network television business model. Networks pay so much money because broadcasting NFL games is worth so much money.
It is one of the few forms of TV that viewers can be counted on to watch in a specific way, at a specific time.
With millions of football fans keeping their eyes peeled on the TV broadcast before, during, and after the game, businesses try to make the most of the NFL’s signature event by advertising their products and services to a huge and engaged audience.
As a result, advertisements for popular sports have become both more expensive and more important to the bottom line.
In 2020, Fox has benefited from a record-setting price of $5.6 million for a 30-second ad spot. Super Bowl revenue in 2019 was around $382 million from in-game ads alone.
Super Bowl is America’s premier advertising event in which professionals showcase some of their most creative work and wealthy corporations tout their brands.
ImportantMany viewers see Super Bowl ads as nothing more than entertainment. They have grown accustomed to the Super Bowl being filled with dazzling commercials, often playing into the tongue-in-cheek humor.
The list of alternatives is remarkable, yet the certainty of eyeballs during the NFL’s championships game is enticing.
WarningBuying a Super Bowl ad doesn’t simply reach the largest audience in media. It sends an economic signal that your company is a business titan.
Brand loyalty is key to creating a successful company. Super Bowl ads surely assist in that pursuit.
NFL Super Bowl Business Model At a Glance
Broadcast Rights
The big money, however, comes from broadcast rights. The NFL reportedly makes more than $5 billion per year selling broadcast rights for all its games, which includes the Super Bowl, the most-watched game of the year.
Every year Fox, CBS and NBC collectively pay the NFL $3 billion for the rights to broadcast the league’s games.
This deal includes the rotating right for one of these three networks to host the Super Bowl. In 2020, Fox broadcast the game. That’s not including overseas broadcasters as interest in the Super Bowl continues to glow globally.
Nineteen of the 20 most-viewed TV broadcasts in U.S. history are Super Bowls of various years.
ImportantThese games are consistently the highest rated shows on TV, so media companies have shelled out big bucks for the rights to broadcast them.
With usually 180 countries broadcasting the game in 25 different languages, it has no shortage of a diverse audience.
As aforementioned, the TV networks leverage advertising, which contributes heavily to the overall annual amount they pay the NFL for the right to broadcast.
According to Forbes, broadcasters make small losses on NFL broadcasts most years. However, Super Bowl years tend to cover the costs.
WarningMoreover, fees due by these networks are set to rise about 7% annually, meaning they will each be paying the NFL about $3.1 billion per year by 2022.
Broadcasters might end up paying more for the Super Bowl than it’s worth.
NFL Super Bowl Business Model At a Glance
Licensing & Sponsors
Although the majority of its national revenue comes from its monster TV deals, the NFL also makes money by selling companies the rights to sell items that represent the NFL.
The NFL doesn’t release detailed financial data, but only about 10% of the NFL’s yearly revenue might come from these licensing deals.
For instance, the NFL, in partnership with Nike, signed a 10-year licensing deal with online sports-retailer Fanatics in 2018.
This deal makes Fanatics the exclusive manufacturer of all adult-sized, Nike-branded merchandise sold through the NFL’s online store.
In 2018, the NFL pulled in over $1.3 billion in sponsorships.
ImportantCorporate sponsors pay NFL teams to display their logos on players’ uniforms, TV transitions, merchandise, etc. For the sponsors, it’s an opportunity to have their brands exposed to more than 15 million people every match.
The most coveted sponsorships are naming rights to NFL stadiums.
According to the New York Times, the naming rights to MetLife Stadium in New York and the AT&T Stadium in Dallas are both worth $19 million a year.
The NFL is now also able to generate significant revenues from the gambling and betting sector.
Thanks to the passing of legislation allowing sports betting in numerous states including New Jersey and Nevada, the NFL signed up Caesars, its first casino partner, in a contract reportedly worth $30 million.
The NFL is positioned as the biggest sport in the world’s biggest sponsorship market, so it is no surprise that the league generates over $1bn annually through sponsorship.
NFL Super Bowl Business Model At a Glance
Ticket Sales
Tickets account for many million dollars’ more. Due to the rules of supply and demand, the prices for Super Bowl tickets continue to go higher and higher.
On average, NFL stadiums seat about 70,000 people, and games usually sell out.
WarningWith standard ticket prices reported to range from $1,000 to $5,000, this doesn’t leave much opportunity for growth.
The one thing teams can do is choose to renovate their stadiums to add more seats and concession stands.
Since 2010, the Packers spent more than $370 million gradually updating its stadium, including adding more seats. Since then, their yearly ticket revenue has jumped from $48 million to $71 million.
Such renovations are costly and disruptive, but usually pay off.
ImportantNFL teams can also use their stadiums to host non-football events, like concerts, but opportunities for revenue growth from these events have the same limitations.
The average ticket price has increased about 7% annually since the turn of the century.
Tickets cost about $30 in 2000 to about $102 in 2017 (see below), but the added revenue from these increases stay negligible when compared to revenue growth from TV.
An NFL team earned about $7 million, on average, in ticket sales from a single stadium event in 2016.
WarningAbout 55% of that revenue is used to pay athletes or musicians. 10% goes to general stadium administration, 5% goes to the team’s coaching staff, 5% is paid in taxes, and the remaining 8% are profit.
Like ticket sales, concessions are peanuts compared to TV deals.
ImportantConcessions contribute only about $3-5 million to the average NFL team’s revenue, but the margins on selling food at games are extremely high.
Beer and soda sold at stadiums have margins of over 90%.
NFL Super Bowl Business Model At a Glance
Future-Proof
Although TV is still king when it comes to watching football, streaming is on the rise. In 2017, Verizon signed a new $2.5 billion deal with the NFL for five years of streaming rights.
In April of 2018, Amazon signed a deal of $130 million for two years of streaming rights.
ImportantIf the growth of TV deals in the last few decades are any indication, these deals will also continue to grow rapidly over the coming decades.
In addition, the Super Bowl stadium is just the sort of place where 5G will make a major difference.
That means sports fans will, for example, have an easier time posting on social media, the sort of user generated promotion that could help bring more fans to live games in the future.
It turns out, sports fans really do want a digital experience, even when they’re in the stadium.
5G is also expected to hugely improve streaming and live gaming, meaning leagues will be able to better reach fans even when they’re following their favorite teams from home.
On the other side, although the NFL has always officially been against sports gambling, that is likely to change soon.
ImportantThe Supreme Court decided to let states determine whether or not to legalize sports gambling. Legal sports betting is now in effect in more than a dozen states within the US.
A legislative wave on gambling has begun.
To capitalize on this, the NFL could set up betting parlors in stadiums, partner with established casinos, or set up online sports gambling portals.
Contrary to some claims, TV isn’t dying, at least not when it comes to football.
The value of the NFL’s TV deals has skyrocketed in the last few decades; by all accounts, it will likely continue to do so.
WarningAs a result, the NFL’s biggest focus for reaching its aspirational $25 billion in revenue by 2025 is continuing to secure bigger and bigger TV deals.
NFL Super Bowl Business Model At a Glance
Final Thoughts
The Super Bowl is one of the most watched sporting events each year. The Super Bowl numbers never cease to amaze me.
ImportantAlthough the viewership is predominantly domestic, the fact remains that the NFL is making great strides to expand the interest of American football at a worldwide level.
The gargantuan profits made by the NFL and the price fans pay to attend might seem sickening.
WarningHow can so much money be thrown around for pure entertainment? The high costs and high profits reveal something: Americans immensely value either attending or watching the big game.
The best you can do is set up a business to help sports fans enjoy the Super Bowl even more and that’s exactly what the NFL has always been working on.
It’s an age-old tale of subjective value. Remember that you can’t knock sports fans for what they value.
The Super Bowl has always been immune from price pressures.
ImportantThere is no denying that the Super Bowl presents a multitude of revenue generation and added value exposure opportunities for companies and brands.
As of right now, even with a ratings drop, football is still the most important regularly scheduled programming type in the country.
As the spectacle continues to evolve and grow, the business of football will continue to eclipse the conversation and the market.
Do write in the comments section below telling me about what do you think about the business model of the Super Bowl and what are the things that you believe are determinant.
Geeknack's Picks
This analysis of the NFL’s Super Bowl business model was intriguing. I expected nothing else, anyway, how is the training going?