Monday, 18 November 2019

NFL Clubs and Their Business 'Model'

I sat yesterday and read through a number of economic pieces over NFL football, and came to several realizations.

There are only three way that the NFL ownership (of each team)....score on profitability.  They are: (1) gate receipts and junk/food bought for each home game, (2) the TV contract, and (3) fan gear.

With all the negative criticism on the NFL product today, one has to look at the profits.....or lack of profits, and wonder about the business model, and if it's doomed.

So put yourself into a NFL owner's shoes.

There are 17 regular season games in a season....with it generally split in 8 home games one year and 9 home games in the next.  Preseason games?  Some teams do four, and others do five.  You can generally anticipate that preseason games rarely fill up a stadium, and most clubs have to offer serious discounting for preseason games...just to get 25,000 fans into a 48,000 seat facility.

So you look at ticket prices currently at NFL regular games.  The lowest 'average' price is the Buffalo Bills entry for around $70.  The Washington Redskins will average around $100.  And at the very top, at $165, the LA Chargers.  The majority of the successful clubs are $100 or more. 

Parking?  Most stadiums now charge $40 to $50 for parking a vehicle. 

Food and beer?  In most stadiums, you are talking about an adult fan costing around $75 minimum.  If you were taking your son over to a game and eating decent ribs in the hour before the game, with a decent half-time burger, and four beers in the mix of the probably are getting closer to $200 for the two of you.

So that visit (for two)....will run you in the $400 range.  The owners will get a small cut of the parking, all of the entry ticket minus stadium costs, and a cut of the $200 on beer and food purchased.

Onto fan-gear.  Before all this criticism in recent years....most of the big-name clubs (Patriots, Cowboys, Steelers, etc) were making a fairly decent cut on fan-gear.  T-shirts, leather jackets, and hats topped the lists.

The great thing here was that sports gear shops were situated all around the US....even in non-sports towns.  Most owners would admit 50-percent of their income was NFL gear.  Hockey and baseball were much less, and the NBA gear somewhere in the middle. 

Since the NFL 'tumble'?  A lot of the sports gear shops are in trouble....they don't have the turnover in NFL gear to the extent they had ten years ago.  Most marginally get by at this point, and are dependent on the other sports to make up for losses.  I watched some video clip of a shop owner who pointed out at the end of 2018....they were surviving but they were also cutting their NFL gear orders by 50-percent. 

The TV contract business?  That's really the serious and continual contribution to owners....that they can depend upon.  The contract change coming in 2022?  No one talks much about it, or if the networks will cut the offer by some amount.   My guess is that they should be expecting a 10-percent cut as a minimum. 

The blunt side of this?  The NFL model for business, simply doesn't work at this point.  Supply and lack of demand will cut into the future, and players will eventually be handed the bill for the negativity....seeing a 10-to-20 percent cut coming after 2022 (in my humble opinion). 

The sad thing that a number of owners paid substantial prices for their clubs ten and twenty years ago, and the clubs at present....are marginally worth what they bought them for.  In another two years, with the new TV contract....I suspect most clubs will be dropping on their value.   

A new model coming out of this over the next decade?  Maybe, but it'll mean less profits and less guarantees.  The day of the $120 entry ticket?  It might be shifting downward to $80.