The NFL's Most Valuable Teams 2016
The NFL's Most Valuable Teams 2016
The Rams doubled in value, to $2.9 billion, after moving from St. Louis to Los Angeles. The Rams are scheduled to play three seasons at the Los Angeles Memorial Coliseum before moving into a new stadium in Inglewood. The Rams could soon be worth close to $4 billion if Stan Kroenke scores with his $3 billion mixed-use real estate project that could bring him hundreds of millions of dollars more than his team was making in St. Louis, net of the relocation fee he agreed to pay ($650 million over 10 years, in equal installments, starting after the 2019 season).
The Oakland Raiders and San Diego Chargers are up 47% and 36%, respectively. The Raiders generated the lowest revenue ($301 million) in the league in 2015. But not for too long. The team will either have a new stadiumin Oakland, move in with the Rams, or relocate to Las Vegas. Either way, these options make the team worth $2.1 billion. The Chargers get first dibs on becoming Kroenke’s tenant, or can opt for a new stadium in San Diego, which is why the team is valued at $2.08 billion. The main thing is both the Raiders and Chargers are portable, meaning they aren’t chained to their antiquated stadiums.
Portability (which is one word for “much richer stadium deal”) has great value because the NFL’s 32 team share equally the vast majority of their television money, national sponsorship revenue as well as about one-third of ticket proceeds. In 2015, the league shared 63% of their combined $12.2 billion in revenue (including what teams take in from non-NFL events at their stadiums, net of what goes towards stadium debt). The pecking order of team values is determined by stadium revenue that is not shared, namely luxury suites and advertising.
The Vikings started this season at spanking new, $1.1 billion, U.S. Bank Stadium. The team’s value is up 38% from last year, to $2.2 billion. Vikings supporters paid between $500 and $9,500 just for the right to buy a season ticket and stadium seating and luxury suites are sold out for the season. In addition, U.S Bank is paying an average of more than $10 million annually over 20 years to put its name on the stadium.
The Falcons move into $1.5 billion Mercedes-Benz Stadium next season. The automaker agreed to pay the team $345 million over 30 years for the naming rights. Arthur Blank, who also owns Major League Soccer’s Atlanta United, is building the stadium for both football and soccer. PSL sales for the Falcons have gotten off to a good start and Atlanta United, who debut in 2017, have already set a record for season ticket sales for an MLS expansion team. We reckon the Falcons are now worth $2.13 billion, 27% more than last year.
But because business acumen counts for more than bricks and motor, none of the moving or building is going to unseat the Dallas Cowboys as the league’s most valuable team. In 2015, the Cowboys set a U.S. sports team record for both revenue ($700 million) and operating income ($300 million). Jerry Jones has begun marching towards another financial score with his new $1.5 billion headquarters and practice facility. My early take is there will eventually be tens of millions of dollars of sponsorship money flowing to the Cowboys from the new project. The Cowboys already have deals with the likes of Ford Motor (I have to admit, it amuses me that the family that runs the automaker and also owns the Detroit Lions is paying Jones), Nike and Dr. Pepper. The Cowboys are worth $4.2 billion, up 5%.
Notice that several low-revenue teams that are not likely to experience significant increases in local revenue, like the Detroit Lions, Cincinnati Bengals and Tampa Bay Buccaneers, rose in value by at least 15%. This is due to two economic forces unique to the NFL: immense profitability and content demand.
Every team generated operating income of at least $26 million and the league’s average operating margin ($91 million as a percent of $380 million) was a record 24% for the 19 years Forbes has been tracking team values. No other sport is selling its content for as much money on so many different platforms.The best recent example might be the sale of its Thursday Night Football package four times–CBS/NBC, NFL Network, Twitter and Verizon. This advantage will be monetized further as consumers adapt to an ever broader range of devices to consume NFL content. The average U.S. household now has over seven active devices in use each day. Devices used per-person in the U.S. are projected to grow by 55% by 2020.
What does this mean for investors? If you buy the average NFL team today (assuming that 80% of the purchase price is written off over 15 years) you get a 9% cash yield. Throw in stadium capex for some teams and you get around a 7% to 8% yield with an asset that has appreciated at a 12.5% annualized ratesince 1991 prior to this year’s valuations.