The NFL's Secret Finances: A $10 Billion Mysteryby
The National Football League season begins on Thursday night with two teams playing on national television. It doesn’t really matter which teams (Green Bay Packers at Seattle Seahawks) or what channel (NBC). Tens of millions of people will be watching. The NFL is the most popular show on TV and arguably the last totem of American mass culture. Last fall, 34 of the 35 most-watched programs on TV were NFL games. That doesn’t include Super Bowl XLVIII, which set a U.S. viewership record of 111.5 million.
So the NFL is about as public, in one sense, as any business can get. But it’s also run as a very private business.
While the league office is run as a not-for-profit “trade association promoting [the] interests of its 32 member clubs,” all but one of those clubs are privately held, for-profit companies that reveal next to nothing about their finances. (The lone exception, the publicly held, nonprofit Green Bay Packers, releases an annual report to its 364,122 shareholders.) But the league office is also obliged, to its dismay, to release a 990 tax form each year that lists its revenue, costs, and the pay of its top executives.
Between the Packers’ report, the league tax filing, and the few details the league decides to reveal, it’s possible to glimpse the big picture without pinning down many unknown details. Here, as one proxy for the NFL’s financial health, is the commissioner’s annual pay from 2004 to the last report in 2012:
In a memo to owners, the league’s compensation committee justified the more than $44 million in pay for its current commissioner, Roger Goodell, as “appropriate given the fact that the N.F.L. under his consistently strong leadership continues to grow and is by far the most successful sports league.” He has served as commissioner since 2006.
The Packers’ annual report, meanwhile, showed $187.7 million in national revenue last year. That’s the team’s equal share in the league’s national TV revenue and a grab bag of money called “NFL Ventures” that comes from the league’s cable network; collective merchandising, licensing, and sponsorships (excluding the Dallas Cowboys); production house; and digital properties.
Multiplying that $187.7 million by the number of teams puts the shared NFL revenue pot at just over $6 billion. Most of that money is from national TV deals, and the number will grow with the new $275 million Thursday-night package sold to CBS this year. Ventures revenue, however, is the most rapidly growing, according to John Vrooman, a Vanderbilt University economist who tracks the NFL.
That leaves more than $3 billion in local, unshared revenue between the 32 teams to get to the NFL’s total of roughly $9.2 billion. Most of the local revenue comes from ticket sales, which are split 60-40 for each game between the home and visiting team. On average, each NFL team generates about $100 million in unshared money. (The Packers claimed $136.3 million last season.)
But the split is far from even, and just how the franchises compare is a matter of guesswork. Given the chance to see every team’s books, says Vrooman, he would search for “evidence of the gross asymmetries in local revenues between the top and bottom revenue clubs.” Last fall, according to Sports Business Journal, the richer clubs filled a $100 million revenue-sharing fund to its brim.
The other, bigger mystery is on the expense side of the ledger. The biggest cost is player payroll, which can be tracked. The collectively bargained salary cap for this season is $133 million. (To arrive at that figure, the league combines 55 percent of TV money with 45 percent of NFL Ventures revenue and 40 percent of projected local revenue, then divides by 32 teams.) But aside from the players’ take, the NFL’s costs are a dark box, even when team financial statements are leaked. And teams have every incentive to disguise profits and claim poverty.
Beyond the normal tax concerns, profit squeezes can be used to negotiate down player costs and convince lawmakers to pay for new stadiums. Operating expenses, according to Vrooman, are where teams tend to “blow the most smoke,” when outside parties have been able to look at their books. “The non-player costs are highly irregular to say the least,” he says. “The scams range from owners employing themselves to disguising taxable return on equity as tax-sheltered interest on club debt.”