To put it bluntly, the NFL is a cash cow. Every single NFL team towers in revenue over some of the biggest sports leagues in the world, such as the English Premiere League (EPL). The lighter spending on players compared to other leagues, media deals with ESPN, Fox, CBS and more, and international recognition has made the NFL an attractive investment. In fact, the NFL has outperformed the S&P 500 for 20 consecutive years between 2002 and 2022.
For most of its history, however, the teams have been family-owned.
Many other sports leagues allow private equity firms - businesses that pool money from investors into funds that go towards investments - to own a portion of their teams. In 2020, the NBA permitted Dyal HomeCourt, a private equity fund, to buy partner stakes in team franchises. From hereon out, other private equity funds would & could be approved with limited ownership rights. In the NHL, minority stakes in franchises can be acquired by a singular private equity fund up to 20% - however, a team can't sell more than 30% of its stock to these firms.
What's the big deal? Firms can pull much more money than an individual can - is there really an issue with this type of investment?
Let's take a look at why the NFL prohibited such investment in the first place. If we know the past of franchise ownership, perhaps we can predict its future.
Fans are passionate about their teams, showing up to games in droves hoping their players will give it their all. Sometimes, business and entertainment don't align. Pictured: MetLife Stadium in New Jersey. Source: Myron Mott
The First Rules Against Cross-Ownership
Our journey starts with the Supreme Court case Radovich v. National Football League, 352 U.S. 445 (1957). This case held that the NFL must abide by anti-trust laws, seeing the association as a league of businesses rather than simply a way to play football. Trying to stop owners of teams from becoming investment-driven rather than focusing on their team's success, Bert Bell, the NFL Commissioner at the time, enacted a policy that prevented owners from investing in multiple leagues.
Many NFL teams operated as family businesses with succession lines due to limitations by the NFL Constitution & Bylaws. An owner cannot be a corporation, religious institution, non-profit organization, etc. according to Article IIII, Section 3.2(A), and membership cannot be sold without permission of the Commissioner under Section 3.5(A). Additionally, 1985 Resolution FC-7 requires that an owner has a minimum 30% controlling stake in the franchise with a maximum of 15 limited partners allowed.
Things began to change with National Football League v. North American Soccer League, 670 F.2d 1249 (2d Cir. 1982), which reaffirmed that the NFL is subject to anti-trust laws. Specifically, Section 1 of the Sherman Act, which prohibits "agreements that restrain trade unreasonably," as explained by the American Bar Association. By prohibiting NFL owners from investing in NASL teams, the U.S. Court of Appeals for the 2nd Circuit found that the NFL was actively discouraging the growth of other leagues through this rule.
This ruling didn't change the status quo until Wayne Huizenga was allowed to be the owner of the Miami Dolphins in 1997 while simultaneously being the owner of the Florida Panthers & the Florida Marlins (now the Miami Marlins). This was codified in 1997 Resolution FC-3, which allowed cross-ownership if: - The sports team acquired was located in the same city as the NFL team already owned, or
- The sports team acquired was located in a "neutral city," which is a city not currently associated with an NFL franchise nor will become associated.
Wayne Huizenga, pictured here, was the owner of the Miami Dolphins from 1994 to 2009; current owner Stephen M. Ross acquired the team from him. Source: Getty Images
Seeking to further control ownership rules, 2004 Resolution FC-2 clarifies the 1997 Resolution to apply to "any member of a controlling owner's immediate family who either (a) holds an interest in the franchise, (b) is an officer, director or executive of the club or a club affiliate, or (c) is designated by the club as a representative to the Executive Committee...." This prevents workarounds involving other members of the franchise.
Workarounds did exist, however. In 2015, sports manager Stan Kroenke had to transfer his ownership of the NBA's Denver Nuggets & NHL's Colorado Avalanche to his wife, which allowed him to keep ownership of the St. Louis Rams, now known as the Los Angeles Rams. This did not stop him from owning the Pepsi Center, now known as the Ball Arena. The next best thing after owning the teams is owning the very stadium where they play.
The Money Becomes Too Good to Ignore
By 2018, the League knew they've been gatekeeping a profit machine for decades.
The new generation of NFL owners wanted to maximize their profits. When the Carolina Panthers were up for grabs that same year, Forbes valued the team at $2.3 billion while other sports consultants expected a sale price of $2.5 billion or higher. The former ultimately was the final price, but from a pool of only about four potential buyers, there wasn't many offers to consider. When the Buffalo Bills got to be sold for $1.4 billion in 2014 (above the $935 million valuation), it's no wonder why meeting expectations was disappointing.
Thus, in October of 2018, NFL owners voted to permit cross-ownership with NFL cities. Nothing stopped Kroenke from taking back his ownership of the Nuggets and Avalanche from his family. Owners could seek out buyers from many other cities. All is well in the world!
What remained firm was the NFL's resolve in pushing out team ownership by private equity firms. They can't approve every investor in a firm, and they certainly couldn't go against the family-based foundation of the NFL. Surely, they would never give in to these firms. Right?
August 27th, 2024. Private equity funds are now allowed to purchase minority stakes in NFL franchises. 10% of a team's equity can be sold to a private equity firm, with a single firm being allowed to have the whole 10% if given the chance. A fund can even own up to six teams!
The vote was nearly uncontested, with the Bengals being the sole dissenter. Although only four firms were initially sanctioned to purchase stakes, more have been and will be approved.
In lieu of this decision, the NFL assured the public in a post that the dedication of teams to their fans will only be heightened, as franchises can now quickly inject cash into projects by selling stakes of their team. Just as Commissioner Bert Bell had said way back in 1957, the NFL is not a business.
The NFL is a Business
And so is every other league, for that matter. I've talked about the concept of "tanking" in my last post about the NBA Draft, where teams had more incentives to lose in order to have a greater chance of getting the #1 pick. Things don't translate the same to the NFL, but both leagues show that there is profit to be had when your money is in a sports team.
It's not a long shot to claim private equity investment firms could turn a franchise by the fans to one by the investors. Across Europe's regional leagues, 27 teams are backed by private equity firms, with 41.7% owning multiple teams. Some of these leagues, including LaLiga in Spain, Ligue 1 in France, and Serie A in Italy, allow private equity firms to straight-up own a team.
Fans were not happy with this trend. In Germany, soccer fans protested an investment deal by private equity firms during a 2023 Bundesliga match, holding back their traditional chants throughout the match and throwing chocolate coins into the field mid-game. Aaron Timms, writer for The Guardian, describes the trend in the Premier League as "the starkest illustration of how broken a sport can become once it’s given up to investors." Gouging ticket prices, minimal investment into improving the league, trivializing the integrity of the sport - so long as there's money to be siphoned, it will be done.
In the future, I will cover private equity firms' rampage on soccer as a greater illustration of the problem at end. But for now, know this: it's a beautiful thing when even billionaires are restricted from buying out teams. The Green Bay Packers are an example of how a team can be by the fans, for the fans - a non-profit corporation where shareholders get a voice rather than an hefty check. Fans are eager to put money into what they love if it means they can be heard. For-profit firms add noise to that communication and sever the connection between community and team.
The U.S. cannot let its beloved football succumb to a predetermined script. Once teams get a taste of how liquid these investments into their franchise can be, NFL owners are sure to vote to add more Kool-Aid. And once that happens, the fans start watching business rather than entertainment.
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