Podcast Alert: How Will the NFL Continue to Grow?

Transcript

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Charles Rolston: [00:00:00] Welcome to Navigating Sports Business. I’m Charles Rolston, joined as always by Navigate’s founder, AJ Maestas. Today we’re gonna talk about the NFL and American football in general. How much bigger can the sport get from a monetization perspective? Already commanding 86 of the top 100 TV broadcasts last year, we take a look at international expansion, adding an 18th game to the season, renegotiating current media deals, and other ways that the NFL can continue to dominate the sports landscape.

So AJ, let’s really start with the big question, the gap. How far ahead is the NFL really?

AJ Maestas: All right I’m always pushing people to quantify things. Over half of Americans adults and teens are NFL fans. The next closest league, a- and this is self-identified fandom, is baseball at 38%.

Well ahead. You just said 86 [00:01:00] of the 100 t- top telecasts were the NFL, so it, that’s even more dramatic I guess. Just to quantify some specific ratings, the average regular season game in the NFL is 19 million viewers. It’s almost three times the average major college broadcast.

We’re trying to do apples to apples here, so I’m comparing to network broadcasts, so it’s around seven million, let’s say, for major college football. And it’s 10 times the average NBA game. That’s, that’s a little under two million, so it’s not even close. And it’s, but it’s been this way for a long time, right?

This isn’t new. It’s not like the NFL is running away from everyone else, but it’s dominant, it always has been for our lifetimes and it remains that way. Some of the things I think people might find interesting is that average NFL broadcast of about 19 million people, that is bigger than the single biggest regular season college broadcast, college football that is which was Ohio State versus Michigan.

Pretty crazy, right? … And some of this stuff is beating a dead horse, but just as a reminder to folks, there’s about 350 million people in the US right now, [00:02:00] 130 million of them watched the Super Bowl. So I there’s just nothing like it. Any way you split it, the NFL is king, and there’s no realistic threat in our lifetime that will challenge that

Charles Rolston: Yeah and the hottest topic in sports media right now is obviously the next round of NFL media rights negotiations.

The first half of this year, the, when we did that episode and we were talking about the prediction of what the next NFL media rights could command, we saw signals from the league office basically saying they wanted to open up their rights early and renegotiate with their current partners to to try to get a significant deal.

Now, that hasn’t necessarily produced, strong conversations and a lead that this early negotiation window will actually open up, but let’s talk about that next media deal. How much more is on the board for the NFL?

AJ Maestas: Like you said we know they’re gonna get more, right? It’s just a question of what deals open up.

I think people are following the news well enough to see that, some of these networks are pushing back if there’s really a look in and, if it applies to them and things [00:03:00] like that. But just some fun, simple metrics. The, the NBA currently gets about three times the money per fan than the NFL.

You’ve gotta think NFL owners, wanna fix that. They wanna close that gap, right? Especially ’cause their sport is the most popular sport. And so just to further quantify that the NFL gets about $1.20 per viewer against the NBA’s $3.55. So

Charles Rolston: Yeah, I think just to play devil’s advocate a little bit, like at this ceiling where the NFL commands significantly higher, total TV dollars than any other property in the world, price is really set by what the buyers can pay. How much further can a Fox go? How much further can Disney, CBS, Amazon?

ESPN has lost 45 million subscribers, and Fox announced, ear- earlier in this year that they were publicly walking away from the early re- renegotiation with the NFL. The NFL is really starting to discover that the remaining bidders might just be, three massive tech companies that don’t necessarily need the football to be profitable.

They’ve been [00:04:00] extremely profitable on their core business functions and don’t necessarily need those NFL rights. I think another important caveat to think about is this NFL 10% investment in ESPN. They are incentivized in E- in ESPN’s profitability. Now, having a record media rights payment from Disney that might spook shareholders and say, “Hey, I don’t know if I’m comfortable paying that price,” that has a opposite effect on what the NFL really wants from their 10% investment in ESPN.

So let’s talk a little bit about, where do you think that these rights are really gonna land? Who’s it gonna be? Is it gonna be those tech companies, or do you think it’ll be many of the same players currently?

AJ Maestas: I- if I could just comment on that a little bit, by the way. N- it’s not just ESPN that’s lost all those paid TV subscribers, right?

That’s the overall paid TV universe. And ESPN has the NBA rights same company in that sort of apples to apples comparison. But yeah is the NFL valuable to all media? Yes, without question. It is [00:05:00] the largest audiences you can put together in the United States, and that’s important to everybody.

In fact, the media companies have more money, right? They almost seemingly have, endless money relative to legacy media players. And there’s more to it than just distribution, right? From an advertising perspective, and w- you could debate how smart this is, but advertisers flock to the major events.

They pay a premium for what often is a deluded audience, with these larger sort of tentpole events. And, the innova- the NFL sort of dominates that landscape on the, the calendar and Ad effectiveness is stronger. We know NFL ad effectiveness is stronger. So yeah, if you want the premier stuff and you’re looking for scale, whether that’s subscriptions or advertising or distribution or what have you, or even second and third order effects beyond that, yeah, y- you want the NFL.

So I would assume that it’s very valuable to everybody, and that we’ll continue to see those players enter bidding wars for NFL rights.

Charles Rolston: Yeah. It’s certainly valuable on [00:06:00] the pay-TV side. Obviously, advertising revenue records are shattering every year related to NFL content. On the streamer side, not too much data is available.

We know that we keep– they keep the data fairly close to the chest, but some of the things that we found was 71% of subscribers were retained seven weeks from that Peacock playoff game that they had solely during the last playoffs. So I think that’s evidence of the fact that, subscriber retention, which is probably the key focus on why any of these streamers would be buying the NFL rights because it would probably be just a very small package, even if they get one, two, three, four, five games over the course of the season and maybe some playoffs, they’re still retaining those subscribers and then pushing them on to their other content.

I think one of the most interesting stats is that right now, of the sports media rights pie in the US, NFL already commands 30% of those fees. That’s a massive chunk and, people are speculating maybe they’re gonna get a [00:07:00] 50, 60% bump on their NFL media rights in the next round of renegotiation.

Do you see that leaching from that current pie of sports media rights, or do you think it goes into non-sports content acquisition fees and really goes beyond the current pie that the broadcasters and streamers have set a budget towards?

AJ Maestas: It’s interesting. I haven’t thought about that.

What we’ve seen up to this point is sports losing a share of sort of leisure time attention revenue, right? Because social, digital, mobile has outperformed its growth rate. But that’s a good question. It’s not crazy to think it goes back the other way, but I would say you’re dealing with a re- relatively fixed universe of value, especially what’s happening with declining profits and legacy, broadcasters.

So with that said I think that the NFL will get and deserves to get the lion’s share of that. I think it’s one of those, the blockbuster effect. If someone listening is not familiar with that, all the attention’s going to the top sports, those top teams, the top athletes, the [00:08:00] top, musicians.

And the NFL’s gonna get their share and a larger share of that total pie. But is that total pie gonna grow relative to other? I, I don’t think so. That would be my gut instinct. Yeah. What do you think?

Charles Rolston: I th- I think m- what you said about, time, leisure, and control of people’s, allocation of where they’re spending their recreational time I think that’s an important note.

I think that most of the increase here is actually gonna come from the current sports right fee pool, just because we’ve seen this cannibalization already, and this is probably the first time that the NFL has gone to market during this massive cannibalization that we’ve seen with the blockbuster effect, the stars really shining and getting more, and that being taken away from some of the tier two and tier three properties.

So I think the, the bulk of this increase is going to come at the expense of other sports rights, unfortunately. But I still think a little of it is probably leeching into non-sports as well. We’ve seen primetime [00:09:00] attention related to networks that have non-sports content, basically go down over the past 20, 25 years pretty consistently, while the NFL’s specific viewership numbers have remained stagnant and actually been growing at, a two or 3% clip.

So I think, again, long way of saying I think it’s probably majority coming out of the sports pool, but there definitely has to be some leeching of the non-sports pool. And what I wanna talk about is what the NFL has been holding back. I think the biggest lever in this negotiation round is the fact that this 18th game is gonna be probably on the table depending on how the CBA negotiations go.

So let’s talk a little bit about the scarcity that the NFL has built that feels like it might be going away because you have a Thursday night game, you have some Friday games, you have Saturday, Monday double headers. Obviously, they own Sunday. The international mornings, the streaming exclusive window, it seems like you can pretty much find NFL content every single day of the week in season.

So what do you think this 18th game is gonna do? Is [00:10:00] it gonna water it down, or do you think that it will basically just be the massive lever that the NFL is able to leverage in this next round?

AJ Maestas: Obviously add more games and there’s some diminishing returns, right? And to your point, there’s a really fragmented media space so how much can we carve this up?

I have– We have a fun stat that I think you know as well, which is 35% of fans don’t know when their team’s games are on. Which is crazy when you think about like Google and AI search, but I find myself in the same situation, just a day or two before trying to figure out what time and what, channel I’m gonna have to find this thing on.

But yeah it’s the shortest season in sports in, in the US, right? And so do they still have scarcity? Yeah. Do they still have windows they can occupy? No doubt. And every time they do, they dominate. Think about the NBA and Christmas Day and the NFL pops in there and it, of course, it just dominates the audience and there’s room there, that extra game, I look at Labor Day weekend, I think what a showcase for opening your season, closing out [00:11:00] summer. Right now, college football owns it, but that’s only because the NFL chooses not to be there. It seems like that would be a great opening tent pole moment and opportunity, and we know it would just push college football to the side as far as audience.

So yeah it has to be on some level dilutive each incremental game that you add, but The NFL’s still king, right? So

Charles Rolston: it’s- Yeah, exactly. The demand is just so huge, people just, they just want more football. And until the NFL proves me wrong and the demand domestically drastically goes down, I’m gonna keep betting on them to to get record growth and record numbers in their next round of media rights negotiations.

But I focused on domestic there. I don’t know, do you wanna talk about the international piece?

AJ Maestas: Yeah. Yeah, I do, and thank you for bringing that up, because adding a game, this is an apples to oranges comparison, so forgive me for that, but adding a game is 6% more inventory, essentially. Now we know it’s really lucrative ’cause, domestic is where the money is, what have you, but the US is about 4% of [00:12:00] the world’s population.

So that means for every American, there’s 25 people around the world somewhere else, or 25 times larger potential market. So if you’re the NFL and you really want to have transformative growth, significant growth, and you were forced to choose between the two, it would be global. It’s very clear what the NBA has done with its global audience in basketball overall.

We could tell the same story with college football and college basketball, but yeah where would I go? Global, without question. And they’ve had challenges and a- and they’re new, newer to the game. But yeah, if I could put it back on you, Charles, yeah, would you want more domestic premium inventory, or would you want to become a global sport, if you had to choose?

Charles Rolston: Yeah, the 4% of the population residing in the US it’s an interesting stat, but 35% of the ad spend is focused in the US, so I think that’s where the real calculus comes in here when we’re talking about media rights potential. I think that the global markets program has been successful.

It’s [00:13:00] doing a great job at building global fandom, but does it actually turn into meaningful dollars from a media rights perspective? I don’t know how much they’re gonna be able to get from international broadcasters in this next round of renegotiation. A quick stat from the NBA, who’s been working on their globalization strategy for, 30 years so a significant head start against the NFL, 10% of the NBA’s revenue comes from international markets.

Currently only 1% from the NFL. So- Let’s call that the ceiling, 10%. If we’re thinking that they’re gonna get 16 billion or 20 billion from, their next round of media rights re- negotiation without making a concrete prediction, that, that’s probably around 1.6 to 2 billion. That, that seems a little bit steep.

I don’t think it’s quite there yet, but when I see their game days i- in, in, in European markets, in Mexico, in South America, I see that the fan passion is there on game day. What I really wanna see is that it’s there 365 days, and that it’s [00:14:00] actually able to be monetized by the broadcasters in those specific markets.

AJ Maestas: Sometimes you have to build it, and then they will come. I wanted the NFL to be in London 10 years ago with a full regular season. Maybe I’m goofy. I think the NFL’s pretty conservative and they move slowly, deliberately, carefully. So obviously, their plan is to keep expanding these international games up until they have what effectively is a regular season schedule that’s global.

But not the same team that you can root for week after week and what have you. That’s what I wish was happening, or that’s what I would do if I was accidentally given the controls. But 1 to 10%, here’s why it’s not possible. It’s not a global game. Playing American football and participation is not realistic globally and, but even domestically, the sport defies that, right?

A very small percent of NFL fans play the game. Can they get to 10% of their value global? I think the answer is yes. The US has a nice long multi-generational history of exporting our culture around the world, and there’s a highly fragmented [00:15:00] rugby landscape that is, it’s just not unified.

There’s not a collective effort there. So it’s realistic in my mind that gridiron football becomes this thing much the way that top-tier European football has in the United States, where they may never even attend a game in person. But there’s a cachet, there’s a cool factor, there’s a cultural thing.

It’s, globally relevant, and if you wanna know about the United States and communicate with American and connect you pr- you should probably follow the NFL. So yeah, 10% coming from that in 10 or 20 years, that doesn’t seem crazy. And to your point, let’s say it’s in 10 years, then it’s, $1.5 billion is that meaningful?

Yeah. Yeah. If I can ramble a little bit, and I know I’m always at risk of doing this when we talk about these subjects, but there are a billion people in the Americas, and it’s expected to be pretty flat over the next 30 years. There’s a billion people in Europe expected to be pretty flat as far as population growth.

But Africa is expected to go from over a billion to as much as four billion in the next 30 years. So one team in that time zone gives you access to, 30 years from today, five times the audience on the [00:16:00] right time zone watching live games. So just Africa alone and the motivation for Europe being the si- size of the Americas in total, that, to me feels like a, a no-brainer.

It’s a media sport, right? We know the NFL is increasingly revenue and what have you wise. It’s about, the television product. So I would bring the game to that audience as fast as I could

Charles Rolston: And we’ve seen the first steps towards exporting the American football version to global markets with flag football.

So do you wanna talk a little bit about what they’re doing with their global strategy there around flag?

AJ Maestas: Yeah I like it. I don’t have my arms around it a great deal, but I like it because, you’re skipping out on the equipment. It’s more accessible, to more people. It seems more realistic.

If you think of the rugby, analogy, it would be the sevens or nines or something like that, right? A faster game, and it just seems realistic and very unrealistic to do the opposite, which would be to bring the full, gridiron, with pads game to, the world.

Even though I just said participation is not necessary as [00:17:00] many people think it is, to create fandom, I think that’s their play, right? As far as participation, no doubt about it. And it takes time. So in the moment you might say, “What’s happening here?” But right, it’s coming to the Olympics and what have you.

So yeah I think it’s a smart play.

Charles Rolston: Yeah, I mean we’ve seen success stories, right? T20 obviously being a massive one. Pickleball’s influence over the past, several years has turned into a product that could be monetized and people have an appetite to watch on mainstream TV. Let’s talk a little bit about predictions.

Let’s put something on the record. What happens next with this media deal?

AJ Maestas: I don’t have high confidence here, but and the particular reason I don’t have a lot of confidence is it’s not clear who’s gonna be able to come to the open market anyway, right? Do they have the right to push these existing partners into a renegotiation?

But, there’s a pretty consistent compound annual growth rate for quality rights that is, 6.6 to 7% a year. So you just apply that math and say, yeah, 50% bump’s not out of the question. It’s the NL- It’s the NFL. [00:18:00] It’s the end all be all, and so that’s not crazy. So just to quantify that, what that means for your team, if today they’re getting $380 million distributed from TV, it would mean about $480 million starting with the next deal, and crawling from there.

It, going back to the blockbuster effect that we both mentioned, what else would you have if you’re one of these networks, and how do they survive, to compete with tech players and, who wants a seat at that table? Some of these businesses completely depend on having the NFL.

Some people would argue some of them only exist ’cause the NFL. Turn back the clock and there’s an argument that Fox is not Fox without their NFL rights when they first won them. So yeah, I think they’ll get a good hunk of money. Let’s call it 50% from those that they’re able to open up, and I just don’t know how many they’ll be able to open up.

Charles Rolston: Yep, I’m in the same ballpark, 50 to 60%. We’re looking at the 2030, 2031 potential league opt-out window. A lot can change. We’ve seen the world change, we’ve seen technology change in the past year alone. Who knows, could be, could Nvidia [00:19:00] be a, a potential consumer-facing broadcast product at this point?

There’s a lot that can change, but I agree. I think we’ll see a lot of the same partners at– But at the same time, one of these streamers are gonna, make a splash and and get more of a lion’s share of content within the streamer universe as well.

AJ Maestas: Sure, yeah, and the money they have, my God, right? I mean- I think there are second, third order effects to those rights for those tech companies too. They’re selling technology and, who knows how you could integrate that. They, in an Amazon example, there’s this third revenue stream.

They’re a retailer, they can sell products and services. They are increasingly, with AI, increasingly capturing a larger share of advertising dollars through their ability to measure and deliver, actual results. Not only they have more money, but they have more ways to monetize it.

So yeah it’ll be fun to watch. And that’s funny you mention international. I’ve thought about that before. Think about the bump that Amazon got with their first NFL game, right, and subscriptions and Amazon Prime. Imagine an international player comes in with the technology to stream, [00:20:00] and you look at the richest marketplace in the world, the United States, and say, “Boy, just imagine if I only got 10 or 20 million subscribers, by buying this product,” and it actually launches the product.

So anyway, I don’t think this is actually gonna happen, but imagine a WeChat or an Alibaba or what have coming in and saying they wanna be in that business. What price could they pay, and where would you wanna start? You’d wanna start with the NFL. Must-see V-TV that tens of millions of people will instantly subscribe to.

So yeah, it’ll be it’ll be fun to watch what the NFL gets away with here.

Charles Rolston: Yeah, and you touched on it a little bit. Let’s just assume, probably what is a fact at this point that domestically the NFL is going to smash it, and it’s gonna be a resounding success. Beyond what you just said, how does the NFL expand globally from here, and how do they do it successfully?

AJ Maestas: I think it’s tough to see people playing the game, and I think there’s– it’s a cultural export, so I think there’s ways to do that. Think of what “Drive to Survive” did for Formula 1, right? Think what Taylor Swift did for the NFL, and dating Travis Kelce and what have you. I think there’s [00:21:00] ways that it doesn’t have to actually be the game.

But yeah I think a concerted effort will get them there. I think there will be 16 international games. Our math on that says they make as much on an international game as they do on average for a domestic game. Now, owners don’t like giving up a, a home game for these matches.

But if it breaks even or even makes a little more money and it’s a marketing mechanism, why on earth wouldn’t you play more international games? No question about it. I know that I’m gonna be wrong here. I’m sure I should say I’m gonna be wrong here, a, a full-time overseas franchise just makes sense for the stickiness of fandom and the time zone and future television rights, and it’s just not as hard as I think people make it out to be.

Crossing the Atlantic from the Northeast is not that much different than going from east to west, or coast to coast in the United States. Come on. They play once a week. I think that, I think they can ma-manage this, right? Time zone-wise and what have you, and yeah. So I think there’s ways they can have an international franchise in a different time zone or play more and they will.

Games there that helps pays for itself, so that’s helpful. The [00:22:00] hard part is Asian time zones. That’s where it gets really taxing in crossing the Pacific. I- that’s a really difficult problem to solve, and NFL Europe obviously didn’t, succeed or maintain, the level that was necessary for them to keep it afloat.

So it’s hard to figure out how you have international leagues the way the NBA… And this is actually it might be interesting if you find this interesting to listen to our podcast on, the NBA’s investments in Europe and Africa. It’s a lot harder, right? You don’t have the natural talent there.

The game is not known there, etc. So

Charles Rolston: I think we all, we might be surprised by the appetite for football domestically. I think it it’s proven us wrong many times in the past and it just continues to grow. I, I really like your thoughts about a actual international franchise, specifically in European and African time zones.

What other league do you think could really do it, just based off of the logistics, the season length, how many games you have to play home and away? I think, I don’t I’m not gonna say it’s gonna happen in five, 10 years, but I you’d think that the NFL would be the first to do it. What do you want to

AJ Maestas: [00:23:00] I- if I could, I know we’re getting off the subject of the NFL, but I just, I can’t help myself.

There are fully functioning successful leagues in Taiwan and Korea and Japan for baseball, and they’re sending their talent to the US, and it’s succeeding. Our generation’s Michael Jordan is a Japanese baseball player, right? Does your league have to travel a distance and play or can there be standalone leagues?

Who’d have thought that, and what would the NFL do, to have the equivalent, foot in the door in Asia? It would just be incredible, and I think ice hockey missed an opportunity. I think the NHL talked about a lot of having this sort of northern European league. Imagine the Nordic countries and London and who knows, maybe there’s a Berlin and a Paris in there.

I think there was a chance to have, whatever, a feeder league or what have you. I actually think it’s hardest on the NFL to pull this off, not because of the schedule, that makes it easiest, but just ’cause of, existing talent, the game being played there, the latent demand that’s there for it, but anyway, I took us on a tangent, but I just couldn’t help the saying that the, the NFL is dominant domestically, but the most hemmed in, as a domestic sport in the US [00:24:00] relative to those examples, at least in my opinion. Top takeaways. What do you think is worth taking away for the folks who gave us their time to listen to this?

Charles Rolston: Yeah overarching is NFL is king, and whatever aspirations, benchmarks, thresholds that the media has a consensus around that they’re gonna reach, let’s not be surprised if they surpass that in this next round of renegotiation. The, the NFL has left the stratosphere of pro sports across the world.

You know what I mean? Their competition is not necessarily the NBA, MLB, or NHL. Their competition is social and digital media right now. They’re in a different stratosphere, as I said. I think, this equity and leverage, are really important. They matter along with the rights fees.

What I kinda talked about before with the 10% investment in ESPN, they are incentivized to see them be successful and profitable. That’s not a meaningless investment. And so don’t be surprised if, ESPN or ABC, Disney, obviously they get some favorable terms compared to some of the other partners.

I think [00:25:00] another big piece when we talk about international expansion, globalization, awareness and participation are really two different problems here. I think that the global market strategy has done a really good job of building awareness. I’m less bullish on flag football being something that is actually gonna drive a significant monetization in the future.

I think it’ll be great for participation. I think people are gonna tune in and they’re gonna absolutely love it. But I’m not sure that it’s actually gonna lead to participation into a NFL fan that they can monetize for life. And any key takeaways there that I missed?

AJ Maestas: No I think you’re on it, and I think we’ve taken enough of everybody’s time today.

So yeah, let’s wrap it up.

Charles Rolston: All right. Football, it’s already the biggest in American sports, and so I think that the next phase that we kinda harped on here is how aggressively that they are going to focus on a globalization strategy. Thanks for listening to Navigating Sports Business. It’s been a pleasure.

One thing that I wanna [00:26:00] do quickly before we go, the Pro Public Policy Poll is back for year two. That’s Pro Sports Assembly and us at Navigate. If you’re a full-time leader or an equity holder at a US team, league, or union, we want your read on the issues facing the industry. Take it, and you can opt in to the executive summary, early access to the debriefs, and we’re also giving away three prizes.

So the link will be in the show notes, or visit prosportsassembly.org. And just to round us out here, I’m Charles Rolston, joined always by AJ Maestas. If you wanna dig into this further, you wanna talk NFL, you wanna talk media rights, or just sports business in general, you can reach me at Charles@NVGT.com or find us at nvgt.com.

We’ll see you next time