The NFL Is Red Hot Once Again and Ready to Score a Huge Payday

(Bloomberg) -- Two years ago, the National Football League was a hot topic of conversation in America for all the wrong reasons.

The furor over quarterback-turned activist Colin Kaepernick and President Donald Trump’s acid Twitter comments had turned the sport into the latest culture war skirmish. TV ratings were collapsing. And gruesome accounts of concussions shocked viewers and prompted parents to push their kids away from football. One expert, Andrew Zimbalist, an economics professor at Smith College, declared the end of an era, giving voice to what was a popular refrain at the time -- is football the next boxing?

Today, that question seems laughable. Not only has the NFL halted its slide, it’s booming once again, further cementing its position as the king of U.S. sports. Its ratings surged during the most recent season for the second straight year -- climbing as much as 7% on some networks -- even as TV watching declined overall. A remarkable 41 of the 50 most-watched programs on TV last year were NFL games.

All of which comes at a propitious time for the league and its commissioner, Roger Goodell. The rights to broadcast the media world’s most coveted asset is now up for grabs for the first time in a decade, and TV networks and cash-rich technology companies are lining up to fork over billions.

Goodell has begun renegotiating television deals with CBS, Fox, NBC, ESPN and DirecTV for rights that expire in the next two years. With digital companies like Apple Inc. and Alphabet Inc.’s Google likely to jump in for the first time too, experts say the league could pull in as much as 35% more than the roughly $6.5 billion per year it now gets.

All in, meaning corporate sponsorships and the like, Goodell’s goal of hitting $25 billion in revenue by 2027 – from $16 billion now and about $8 billion when he first set it 10 years ago -- looks increasingly realistic, and maybe even conservative.

The league’s negotiating position is “incredibly strong,” Dan Cohen, a media rights consultant at Octagon sports agency, said in an email. “As cord cutting continues to erode the cable business and sports become ever more critical to maintaining a live audience, the NFL remains the crown jewel.”

The turnaround appears to result from a number of factors, not the least that the conversation around concussions and political protests has subsided. Legal sports betting, now spreading across the country, has probably helped as well. Moreover, this season saw the emergence of new stars -- Baltimore Ravens quarterback Lamar Jackson and the two young signal-callers in Sunday’s Super Bowl, Patrick Mahomes of the Kansas City Chiefs and Jimmy Garoppolo of the San Francisco 49ers.

Of course, plenty of problems remain. Public distrust for the league and its executives is still high. And head trauma remains a large issue for the sport as a whole. Youth participation in tackle football has fallen 16% in the past six years, according to the Sports & Fitness Industry Association.

Zimbalist, who specializes in the business of sports, conceded the NFL is now in “decent shape” but said a broader worry looms -- the migration away from live TV and toward streaming services, YouTube and video games.

“The new generation coming up has much different cultural practices” regarding their viewing habits, Zimbalist said. “All of the sports are going to suffer. There’s simply too many options out there, too much competition for there to be the same attention to any one sport.”

There’s also a possible labor battle. The league’s collective bargaining agreement expires at the end of the 2020 season, and negotiations have already begun between the league and its union. The last negotiation, in 2011, resulted in the longest work stoppage in NFL history.

Still, the prospect of new, richer TV deals have already factored into talks, and may help facilitate a new deal. “Everyone has seen how long-term labor ‘peace’ has helped drive revenues, which players have benefited from,” said DeMaurice Smith, executive director of the players’ union.

Indeed, analysts say they can’t imagine Fox, CBS or the other networks doing anything to jeopardize their rights at a time when record users are leaving live television for the fractured world of digital streaming. All four of the league’s major broadcast partners saw viewership gains this season. Fox’s games were up 7%, ESPN was up 6%, and CBS and NBC both rose 4%.

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The prices will likely be goosed even more by bids from streaming services. Amazon.com Inc. currently pays about $65 million to stream Thursday games on a non-exclusive basis, rights previously held by Twitter. The NFL isn’t expected to grant the service exclusive rights to games, in part because the technology remains less popular and less reliable than television when millions sign in.

The NFL’s strength over other advertising choices can been seen even beyond regular games. The 2019 NFL draft averaged 6.1 million viewers over three days in April, double the average for the first 48 National Basketball Association playoff games last year. Even the annual NFL combine, a series of drills for college prospects, scores ratings comparable to big-conference college basketball games.

“The NFL has weathered some tough business and legal challenges both on and off the field over the past 18-24 months and is now enjoying a very competitive season with breakout stars and strong storylines,” said Chuck Baker, an attorney who represented hedge fund titan David Tepper in his record $2.3 billion purchase of the NFL’s Carolina Panthers.

In addition to record TV ratings and media money, corporate sponsorships are at an all-time high, bringing in $1.5 billion to the league and its 32 clubs this past season, according to consulting firm IEG.

“The NFL has done a great job over several years of transitioning its brand from what was just regular season, playoffs, Super Bowl, into a brand that exists 365 days a years,” said Adam Jacobs, director of sports marketing for Lowe’s Cos., which joined the NFL last January as a partner after it ended a 17-year relationship with Nascar.

Sports betting is poised to become another huge sponsorship area. The league recently signed its first-ever casino partnerships and teams are increasingly doing the same. Legal sports betting is now available in 14 states, with an additional seven preparing to join them. Gambling should further drive engagement, encouraging fans to watch more games, and for longer. Those companies will also start to advertise more nationally (remember that 2015 ad war between DraftKings and FanDuel), which will further push up the price of NFL media rights.

The American Gaming Association and Nielsen estimate the NFL could reap $2.3 billion annually from robust sports gambling, more than double the next closest U.S. league.

Perhaps the clearest sign of the NFL’s rebound was evident in July, when the biggest names in media and finance descended on a small Idaho resort town for a week of deal-making. At the Sun Valley conference, even amid the likes of Mark Zuckerberg and Jeff Bezos, the most sought-after attendee might have been Goodell.

“Every media executive,” said Marc Ganis, co-founder of Sportscorp Ltd. and an adviser to the league, “wanted time with Roger.”

To contact the reporters on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net;Scott Soshnick in New York at ssoshnick@bloomberg.net

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Larry Reibstein

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