Monday 21 January 2013

The value of football

Dots are sized according to 2011-2012 season revenue. Thank you to everyone that located the missing
team in the original map: the Redskins.
I finished the article on the value of hockey and I thought to myself "why not do it for football too?" So here we are.  Forbes has again compiled financial information on each of the teams, including their own valuations.
Here are those valuations:

Dallas clearly stands out as by far the most valuable team. Is that justified through revenue? Funny you asked:

Yes they do. They took in half a billion dollars in the last season, or about 6% of the league total. For reference, that's a little less than the three biggest hockey teams (the Maple Leafs, the Rangers and the Canadiens) combined. And their lead is even more pronounced when looking at profits, making 17% of all the profit in the league:

Again for reference, that's over 90% of the profit generated by the entire NHL. In other words,  the Cowboys are phenomenally profitable, keeping 45% of the revenue they generate:

It's not just the Cowboys in remarkably good financial health, the league as a whole is far more successful than any other in North America. They made $1.3 billion in profit on $8.8 billion in revenue last year, meaning they're both the most profitable both in absolute terms and percentage-wise (at 14.9%). Again referencing hockey, the NFL is 2.6 times bigger than the NHL in terms of revenue, and 5.3 times bigger in terms of profit. Only 3 NFL teams lost money in the last season, compared to 13 NHL teams and 15 NBA teams (only 3 MLB teams lost money, although that league's overall profits were only 6.8% of revenue).

So how do the Forbes valuations look? Here's a scatter-plot comparing revenue and profit to their valuations:

It looks to me like the revenue vs valuation line is much less scattered than the profit vs valuation line. I think that suggests Forbes is doing its valuations based on revenue rather than profit. The only two teams significantly deviating from the line are the Minnesota Vikings and the San Francisco 49ers, who are valued significantly higher than their revenue alone would indicate. The Vikings had the lowest revenue in the league, in fact, but are valued at 25% more than the St Louis Rams, who had comparable revenue. Maybe they had some unusual circumstances or a lack of debt or something.

I would think this methodology (determining value based on revenue, rather than profit) is a bit dispiriting to teams in smaller markets. It's basically saying no matter how efficiently the little guy runs his team, Forbes doesn't think it's worth more than a free-wheeling, inefficient, big-market team. For example, the New Orleans Saints brought in $37 million on $259 million of revenue, but is ranked about 10% less valuable than the Carolina panthers, who made just $11.5 million on $1,048 million in revenue. From a business perspective I suppose this makes sense - you can make a sports team twice as efficient a lot easier than you can double the size of its market, so it's the market size that really matters when determining its potential. As with other professional sports, being successful at the actual sport appears to be one of the least important factors - the Cowboys haven't won (or been to) the Super Bowl in 16 years, although to be fair before that time they went more than any other team, and also ties for the lead in playoff appearances, with 30.

One last note - the two conferences (the American and National Conferences) are remarkably well balanced in terms of revenue, but signicantly different when it comes to profit. The NFC brings in about 5% more revenue than the AFC ($4,522 million versus $4,301 million) but makes 25% more profit ($735 million versus $580 million). As you  might suspect, a lot of this comes down to the Cowboys - eliminating the biggest teams in the two conferences (the Cowboys and the Patriots), the profit gap shrinks to 10%.


  1. Yup, missing the redskins in the top one

  2. Thanks guys, I'll update it

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