NFL Sees Modest Revenue Growth as Sponsors Stay Shaky on Economy
The National Football League’s 32 teams expect modest revenue growth this year due to a sluggish economy and uncertainty over government tax and spending decisions, said Eric Grubman, the NFL’s executive vice president and president of NFL Business Ventures.
Grubman, a former managing partner at Goldman Sachs & Co., said the league’s fortunes will improve in 2014 when a contract extension increases television revenue. The NFL’s TV revenue will rise to an average $7 billion annually through 2022 from an average $5.1 billion under current agreements.
While the NFL remains the U.S.’s most popular sport -- 31 of the 32 most-watched television shows in the fall of 2012 were NFL games, and the league sold 98 percent of its available tickets during the regular season -- companies and their employees are careful with their advertising and discretionary spending and have been especially sensitive to ticket prices.
“We had modest growth last year, we’ve had very modest growth for the past couple years,” Grubman said in a telephone interview. “When companies are comfortable with the risks and what they see when looking over the horizon, they make investments and take on debt. When they are worried or they don’t know what is over the horizon they spot cash on their balance sheet and they pay stuff off, and they don’t buy what they don’t need.”
U.S. companies are beating analysts’ quarterly sales estimates at the highest rate in 1 1/2 years, with 67 of the 175 companies in the Standard & Poor’s 500 Index reporting fourth- quarter results as of Jan. 29 exceeding analysts’ average revenue projections. That’s the highest percentage since the second quarter of 2011, according to data compiled by Bloomberg.
“Companies have lots of cash, but they are not throwing it at sponsorships and their employees are not throwing it at club seats and tickets,” he said. “Everybody in this economy is feeling a little bit squeezed.”
Grubman wouldn’t specifically project NFL revenue for the current fiscal year, which ends March 31, 2013.
Ticket revenue has been flat in recent years, with average prices increasing 7.2 percent annually from 2004 through 2008, and 2.1 percent from 2008 through 2012, according to Team Marketing Report. The average ticket price was $78.38 in 2012, the company said.
“Our local revenue has grown modestly,” said Baltimore Ravens President Dick Cass. “We’ve grown local radio and television in terms of advertising revenue. We sold all of our tickets and suites. We have some increases built into existing sponsorship agreements.”
“All the uncertainty in Washington has a negative impact on the economy and that affects all businesses including ours,” Cass said.
Although corporate profits have steadily increased, with the S&P 500 rising 13.4 percent in 2012 and the U.S. economy adding 1.84 million jobs, reducing the unemployment rate to 7.8 percent from 8.5 percent, fans are still watching their wallets -- and that’s kept downward pressure on ticket prices.
“Our ticket prices have been somewhat restrained in the past few years. We think it’s likely you’ll see that restraint continued,” Grubman said. “We see the club seat product as being a product that is tougher around the league, and folks are thinking about how to deal with that. We see clubs having more price points.”
The economic recovery hasn’t been even throughout the country, allowing some franchises to recover more quickly.
The Houston Texans (12-4), who won the AFC South Division this past year, announced last week that they will increase ticket prices 9.8 percent to an average $86.39 in 2013.
For the 49ers, who are building a new stadium, team President Gideon Yu said the franchise is having a “fantastic year,” though he declined to say how much revenue has increased.
Yu, who earned an engineering degree at Stanford University and an MBA at Harvard University before serving as the chief financial officer at YouTube Inc. and Facebook Inc. (FB), said the NFL’s biggest concern should be ensuring the in-stadium experience exceeds what fans can get at home watching high- definition television.
New stadiums have to offer paperless, cashless environments and be at the forefront of tomorrow’s advances in mobile and other technologies, he said.
While the league waits for television and ticket revenue to grow, Grubman is looking to the league’s business partners and entrepreneurs to provide the next great innovation.
Some innovations that would drive revenue would be technology that allows television networks to count as viewers people at bars and parties where large groups of people watch games. This would increase the value of the NFL’s television contracts.
“I believe it’s vastly undercounted,” Grubman said of the NFL’s television audience.
Other areas of possible growth include enhancing the league’s Internet streaming of games to international markets, and enhanced use of statistics that could make the game more of an intellectual pursuit, with fans getting real-time stats on players’ speed, acceleration and other measures.
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