NFL franchise valuations

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4th&long
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NFL franchise valuations

Post by 4th&long »

https://www.sportico.com/feature/most-v ... 234684186/

Insane numbers thanks to Denver and with inflation running high last 2 years and going - expect then to keep going up fast!

MLS has grown for $10-25mm in 15 years to $250-300mm

Can XFL or USFL do similar? That's certainly what each league is working towards and hoping to acheive.
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Re: NFL franchise valuations

Post by GregParks »

For anyone who heard Mike Mitchell on the MarkCast Friday, it sounds like the USFL will be staying in a hub(s) until they can get someone to pony up about $200 million to play in the home stadiums. Now whether that is (a) an investor in the league itself or (b) individual team owners, I don't know. What happens if only two people come forward to buy teams? Will the USFL take the money and move those to the cities and play everyone else in a hub? Will it be problematic to have two individual team owners and the rest owned by the league? It's the same conundrum the XFL would run into if they want to sell off their teams at some point.

Problem with finding investors for the USFL teams is people don't know exactly what they'll be getting from a revenue POV. Let's say I want to buy the Philadelphia Stars. I have no idea what they will draw for attendance, no idea where they'll play or how much the lease will cost me, I have no baseline for any of that info in that city. How do you properly value the worth of the franchise?

Whereas a year or two down the line, if I want to by an XFL franchise like Orlando, I can say, based on the previous years' business, "okay, I can expect to draw X amount of people at Y price, I can expect Z merchandise per head at the stadium and in shops, XYZ to be made in local advertising," etc. etc.

Plus by naming these teams in a city, you've handcuffed potential buyers. I guess if someone REALLY wants to buy a team, they could purchase the New Jersey Generals and move them to Denver or something. But If I buy the Generals, now I'm in a similar situation that Oliver Luck found himself (and where the XFL is w/Vegas right now), where I've already named the city that I'm playing and the stadiums have me over a barrel on lease agreements (though I think he went a step further and actually named the venues before the contracts were signed), knowing that I've already committed to playing there.

The idea of getting people to buy franchises in either one of these leagues may be the ultimate goal of the owners of each, but I don't think it's going to be a magic wand that makes all their financial problems go away. In fact, it could bring more problems to the fore.
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Re: NFL franchise valuations

Post by GDAWG »

If the USFL and XFL gets individual team owners, they need to set guidelines in regards to the owners. The Big 5 (NFL, MLB, NHL, NBA and MLS) all thoroughly vet any new owners coming in. The USFL (and XFL too if they ever go that route) should never do the "hey, they got a lot of money, let's give them a team without looking over their finances" that has basically damaged the sport of indoor football. In indoor football, many new teams come in, only to fold either right before the start of the season or a week or two into the season due to financial issues of the owners. It forces these leagues to scramble and redo the schedule for the rest of the season and also declare players who have played basically free agents, causing issues for the other teams.

Also, if I am the USFL and XFL and I want individual team owners, make sure that not only are the prospective owners thoroughly vetted, but also make sure they have actual currency in hand, and not that stupid Crypto nonsense. I hope that Fox, Dani Garcia, The Rock and Redbird Capital aren't stupid enough to allow individual team owners whose main source of currency is Crypto in either league. If Crypto companies call, they need to hang up. As for the USFL, if they are looking at an investor for the league, that investor better have $200 million in actual cash, because if it's $200 million in Crypto, I think we can say goodbye to the USFL after year two.
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Re: NFL franchise valuations

Post by 4th&long »

GregParks wrote: Tue Aug 02, 2022 12:39 am For anyone who heard Mike Mitchell on the MarkCast Friday, it sounds like the USFL will be staying in a hub(s) until they can get someone to pony up about $200 million to play in the home stadiums. Now whether that is (a) an investor in the league itself or (b) individual team owners, I don't know. What happens if only two people come forward to buy teams? Will the USFL take the money and move those to the cities and play everyone else in a hub? Will it be problematic to have two individual team owners and the rest owned by the league? It's the same conundrum the XFL would run into if they want to sell off their teams at some point.

Problem with finding investors for the USFL teams is people don't know exactly what they'll be getting from a revenue POV. Let's say I want to buy the Philadelphia Stars. I have no idea what they will draw for attendance, no idea where they'll play or how much the lease will cost me, I have no baseline for any of that info in that city. How do you properly value the worth of the franchise?

Whereas a year or two down the line, if I want to by an XFL franchise like Orlando, I can say, based on the previous years' business, "okay, I can expect to draw X amount of people at Y price, I can expect Z merchandise per head at the stadium and in shops, XYZ to be made in local advertising," etc. etc.

Plus by naming these teams in a city, you've handcuffed potential buyers. I guess if someone REALLY wants to buy a team, they could purchase the New Jersey Generals and move them to Denver or something. But If I buy the Generals, now I'm in a similar situation that Oliver Luck found himself (and where the XFL is w/Vegas right now), where I've already named the city that I'm playing and the stadiums have me over a barrel on lease agreements (though I think he went a step further and actually named the venues before the contracts were signed), knowing that I've already committed to playing there.

The idea of getting people to buy franchises in either one of these leagues may be the ultimate goal of the owners of each, but I don't think it's going to be a magic wand that makes all their financial problems go away. In fact, it could bring more problems to the fore.
I haven't heard the MM discussion - but that is basically what Fox has said all along. Fox also has stated publicly they will be in 2 or 4 hubs next year.

https://www.cbssports.com/usfl/news/usf ... n-in-2023/

I do think the presence of 2 leagues may deter potential investors in both as no one wants to invest in the one over the other not knowing who is the eventual survivor. It's one major reason why I can see the leagues working together. What's changed for Fox is looking for a league investor vs individual owner. For a Hub based league - buying into the league may make more sense than individual teams. So it applies to XFL to some extent too.

The USFL has said it will play in 2/4 hubs next year, I'm betting 2 with possibly some games played in city driving distance from one hub. I think they will target 20+ games in front of a sizable BIRM game like crowd. That covers all the 'Broadcast games and some cable games'.

Your analysis is valid to a point, the teams in market will have ticket sales data. But they will also have data on how many free tickets and promos were given away. As we've come to learn many XFL tickets were given aways. Plus cost structure for the XFL is higher.

The ultimate driver for both leagues on the revenue side is TV/Media rights fees which is driven by ratings. Profitability aka the bottomline is important for sustainability (well beside the obvious) - and that includes costs. But franchise value will be based on TV ratings, revenue, profitability etc... Look at MLS for years money losers but their growth pushed franchise values up exponentially. That's the long play if these owners have the stomach for it.

So cost containment and TV ratings are the big drivers for these leagues. The outside issue is the recession we are in and how that impacts spending habits. With high inflation, lagging wage growth I hope this isn't UFL again (their timing was awful). Also with markets down will investors feel "rich" enough to invest in either league. Hopefully things work out well and both, one or a combo league emerges as a very long term player.
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Re: NFL franchise valuations

Post by Tank55 »

GregParks wrote: Tue Aug 02, 2022 12:39 am For anyone who heard Mike Mitchell on the MarkCast Friday, it sounds like the USFL will be staying in a hub(s) until they can get someone to pony up about $200 million to play in the home stadiums. Now whether that is (a) an investor in the league itself or (b) individual team owners, I don't know. What happens if only two people come forward to buy teams? Will the USFL take the money and move those to the cities and play everyone else in a hub? Will it be problematic to have two individual team owners and the rest owned by the league? It's the same conundrum the XFL would run into if they want to sell off their teams at some point.

Problem with finding investors for the USFL teams is people don't know exactly what they'll be getting from a revenue POV. Let's say I want to buy the Philadelphia Stars. I have no idea what they will draw for attendance, no idea where they'll play or how much the lease will cost me, I have no baseline for any of that info in that city. How do you properly value the worth of the franchise?

Whereas a year or two down the line, if I want to by an XFL franchise like Orlando, I can say, based on the previous years' business, "okay, I can expect to draw X amount of people at Y price, I can expect Z merchandise per head at the stadium and in shops, XYZ to be made in local advertising," etc. etc.

Plus by naming these teams in a city, you've handcuffed potential buyers. I guess if someone REALLY wants to buy a team, they could purchase the New Jersey Generals and move them to Denver or something. But If I buy the Generals, now I'm in a similar situation that Oliver Luck found himself (and where the XFL is w/Vegas right now), where I've already named the city that I'm playing and the stadiums have me over a barrel on lease agreements (though I think he went a step further and actually named the venues before the contracts were signed), knowing that I've already committed to playing there.

The idea of getting people to buy franchises in either one of these leagues may be the ultimate goal of the owners of each, but I don't think it's going to be a magic wand that makes all their financial problems go away. In fact, it could bring more problems to the fore.
A lot of great points and questions here.

I do think if I were a prospective USFL owner, I wouldn't be buying "the Stars". I'd be buying a USFL franchise with the right to locate it wherever. If I choose Philadelphia, the USFL will hand me the Stars brand. If I choose Denver, I can assume the Gold name or whatever and the league will deactivate whichever other brand makes the most sense.

I don't think it's a big deal if individuals own two teams and FOX (or the XFL) owns the other six. Obviously the goal should be to get everyone on a level playing surface, but small steps will need to be taken. MLS was sort of in this situation in their early days, where at one point Bob Kraft owned the Revs, Lamar Hunt owned Dallas and Kansas City, and some other guy owned the other five. Whatever it takes.

On that same note, if they're able to get two teams in market and the rest have to play in the hub, I still think that's a step forward.

The point about not having any information on market performance is interesting. On the one hand, that's sort of the deal with any expansion team. On the other, the fact that you've branded these teams city-specific sort of changes the calculation. Does the fact that the Philadelphia Stars already exist mean Philly is already primed for USFL football? Or is it compromised, in that the Stars aren't shiny and new; locals have already sort of tuned them out? It will be fascinating to see if that ever comes to pass.
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GregParks
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Re: NFL franchise valuations

Post by GregParks »

4th&long wrote: Tue Aug 02, 2022 8:52 am
The ultimate driver for both leagues on the revenue side is TV/Media rights fees which is driven by ratings. Profitability aka the bottomline is important for sustainability (well beside the obvious) - and that includes costs. But franchise value will be based on TV ratings, revenue, profitability etc... Look at MLS for years money losers but their growth pushed franchise values up exponentially. That's the long play if these owners have the stomach for it.
So how do you envision that working with the USFL, which has no rights fees coming in for half its games because they air on Fox, which owns the league? Will the owners be expected to split, with the league itself of course, whatever NBC is paying them? Or is there a long game where Fox eventually farms out all of the games for huge rights fees? And if that's the case, how long can they realistically play in however many hubs you want to say before they get those big rights fees and THEN find owners for these teams? You can't play five years in hubs, can you?
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Re: NFL franchise valuations

Post by Gopher123 »

One question this brings up to me is: How much thought did the USFL put into a 3 year plan when launching this league and how much thought was just solely to get through year 1? Completing that first year seems to be their big selling point for increasing viewership in year 2. I have my doubts on that plan.
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Re: NFL franchise valuations

Post by Tank55 »

The revenue from the games that air on FOX is the ad revenue. I'd have to think they'd split the rights fees from NBC and the ad revenue on FOX with individuals owners on a 1/X per team basis.

If FOX can draw monster ratings/ad revenue in a hub, there's no reason they couldn't stay there for 50 years. But I think it really limits their ability to generate enthusiasm/produce a consistent television product.
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Re: NFL franchise valuations

Post by 4th&long »

GregParks wrote: Tue Aug 02, 2022 10:37 am
4th&long wrote: Tue Aug 02, 2022 8:52 am
The ultimate driver for both leagues on the revenue side is TV/Media rights fees which is driven by ratings. Profitability aka the bottomline is important for sustainability (well beside the obvious) - and that includes costs. But franchise value will be based on TV ratings, revenue, profitability etc... Look at MLS for years money losers but their growth pushed franchise values up exponentially. That's the long play if these owners have the stomach for it.
So how do you envision that working with the USFL, which has no rights fees coming in for half its games because they air on Fox, which owns the league? Will the owners be expected to split, with the league itself of course, whatever NBC is paying them? Or is there a long game where Fox eventually farms out all of the games for huge rights fees? And if that's the case, how long can they realistically play in however many hubs you want to say before they get those big rights fees and THEN find owners for these teams? You can't play five years in hubs, can you?
Tank55 wrote: Tue Aug 02, 2022 11:42 am The revenue from the games that air on FOX is the ad revenue. I'd have to think they'd split the rights fees from NBC and the ad revenue on FOX with individuals owners on a 1/X per team basis.

If FOX can draw monster ratings/ad revenue in a hub, there's no reason they couldn't stay there for 50 years. But I think it really limits their ability to generate enthusiasm/produce a consistent television product.
Agree directional with Tank, w/o the XFL USFL would have more room/time to grow. XFL is more costs heavy and has less TV revenue.

Greg, Leagues merge all the time. If it makes business sense - they will work that out. We can speculate more in a bit but AFL/NFL, AAFC/NFL, WHA/NHL, ABA/NBA even MLL and PPL etc...

If XFL bleeds money, they may not, if USFL bleeds viewers may not... Its wait and see
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Re: NFL franchise valuations

Post by johnnyangryfuzzball »

4th&long wrote: Tue Aug 02, 2022 12:21 pm
Agree directional with Tank, w/o the XFL USFL would have more room/time to grow. XFL is more costs heavy and has less TV revenue.

Greg, Leagues merge all the time. If it makes business sense - they will work that out. We can speculate more in a bit but AFL/NFL, AAFC/NFL, WHA/NHL, ABA/NBA even MLL and PPL etc...

If XFL bleeds money, they may not, if USFL bleeds viewers may not... Its wait and see
You don't know that. We don't know either league's revenue situation at all. Both are getting rights fees, reportedly, but that's all we can confirm.

Now, as for merging leagues. The agreement to merge the AFL and NFL was struck in the 1966 offseason. Yet it didn't take effect for four more years after that. Why? TV contracts. As long as the rights to each league were held by separate networks (NBC and CBS respectively), they could not merge without violating those contracts. They could play Super Bowls, as long as the contract was negotiated separately.

The WHA and NHL were able to merge instantly because 1) neither the NHL nor WHA had an American national TV contract at the time and 2) it was structured so that it wasn't a merger, but an admission of four expansion teams using the WHA owners and intellectual properties. You couldn't pull that off with the XFL/USFL situation. Why would Fox buy into a league that is bound to an exclusive deal with a rival network?

So because the XFL has a deal with ESPN until at least 2027, there won't be a merger between it and the USFL until at least 2028. Plus there's the problem of reconciling the two different seasons they play in, the business model, among other things.
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