NFL valuations are increasing, resulting in significant returns for owners. Here's the extent of the investment's success.

• According to CNBC's Official 2024 NFL Team Valuations, the average value of the NFL's 32 franchises is $6.5 billion.
• In the U.S.'s most popular sports league, pro football teams have been highly profitable for their owners, generating returns that far surpass the gains of traditional stocks over equivalent time periods.
• The surge in football team values is mainly due to the league's substantial and expanding media agreements and thriving stadium enterprises.

A National Football League team today is a $6.5 billion business.

The average value of the NFL's 32 franchises, according to CNBC's Official 2024 NFL Team Valuations, is significantly higher than the returns on traditional stocks over the same time period.

The Houston Texans, valued at $6.35 billion, have experienced a significant increase in worth since their purchase in 1999, with a value of $600 million, which was three times more than the gains since that year.

Despite having a record of 152-202-1 over 22 seasons and never making it to the Super Bowl, the team is not bad.

And the Texans aren't alone.

In the past decade, seven out of the ten NFL teams sold have outperformed the S&P 500 on a percentage-gained basis. However, the Washington Commanders and Denver Broncos, both ranked 13th and 14th on CNBC's 2024 team valuations list, respectively, underperformed broader market gains and were sold within the past two years. The Miami Dolphins, ranked eighth on CNBC's list, also lagged the S&P but was last sold in 2009 during the aftermath of the 2007-08 financial crisis.

Rising valuations

The league's massive and growing media deals are largely responsible for the escalation in football team values.

The NFL's current television agreements with CBS and NBC, which commenced last season, are valued at an average of $9.2 billion annually, representing an 85% increase over the prior agreements.

The NFL has secured a deal worth $12.4 billion a year through 2032, which includes streaming deals with NFL Sunday Ticket and Thursday Night Football, and is almost double the $6.48 billion a year it collected during its previous media rights cycle.

The league has been increasing its media revenue by selling extra streaming games on top of the bulk agreements.

The NFL granted Comcast's Peacock streaming service exclusive streaming rights to a Wild Card playoff game last season for $110 million, according to a source.

The NFL sold three exclusive streaming packages for this season: two Christmas Day games on for a total of $150 million; a Wild Card game on Amazon Prime for $120 million; and an international regular-season game on Peacock for $80 million, according to a source. Additionally, the league is expected to earn about $200 million for its commercial Sunday Ticket rights, which grants access to a variety of NFL games in bars and restaurants, according to the same source.

The combined agreements for media rights fees have increased from $325 million in 2023 to $357 million per team in 2024.

Sources close to the matter have requested anonymity to discuss private deals that have not been made public.

The NFL's revenue is shared equally among the 32 teams, with 67% of $20.47 billion coming from national media deals, leaguewide sponsorship and licensing deals, and gate receipts.

With a revenue sharing system and a salary cap that restricts player spending to approximately 49% of revenue, small-market teams such as Green Bay, Wisconsin, and Buffalo, New York, can compete with big-market teams in New York and Los Angeles. The small-market Kansas City Chiefs, ranked No. 18 on CNBC's 2024 valuation rankings, have won the past two Super Bowls and three of the past five.

Stadiums are a significant source of revenue for teams, but this revenue is not shared among them, leading to a significant gap in team values.

Last year, that made a bigger difference than usual.

Taylor Swift's Eras Tour included performances at several NFL stadiums last year, including SoFi Stadium in Los Angeles, Raymond James Stadium in Tampa Bay, Gillette Stadium in New England, and Lincoln Financial Field in Philadelphia. A source close to the matter revealed that one of the tour stops generated $4 million in revenue per show for the hosting stadium.

Last year, the Hard Rock Stadium, which is also a stop on the Eras Tour, generated over $30 million in revenue from college football games, soccer matches, concerts, festivals, and tennis matches. It is predicted that this revenue could double this year, according to a source.

Return on investment

The revenue sharing and salary-cap agreements also make the league very profitable.

In the 2023 season, the NFL's 32 teams had an average revenue of $640 million and an average operating income of $127 million. The typical NFL team has an EBITDA margin of 19%.

Financial success for the NFL has meant higher premiums for team sales.

In 2019, Rob Walton purchased the Denver Broncos for $4.65 billion, which was 8.8 times the team's revenue. However, today, it is challenging for a potential owner to acquire a team for less than 10 times its revenue. According to CNBC's 2024 ranking of all 32 teams, the average value-to-revenue multiple is 10.2.

Last year, private equity billionaire Josh Harris bought the Washington Commanders for $6.05 billion, or 11-times revenue. This year, hedge fund manager Ken Griffin made an unsolicited $6.05 billion offer for the Tampa Bay Buccaneers, valuing the team at 9.8-times revenue. However, the offer was rejected by the Glazer family, who own the franchise.

According to various media reports, Griffin earlier this year made an offer of $7.5 billion for the Miami Dolphins, which is 11 times their revenue.

When teams are sold, they have shown to be a wise investment.

The Cowboys, the most valuable team in the league with a worth of $11 billion, is 73 times more valuable than what owner Jerry Jones paid for the team in 1989. In contrast, the S&P 500 has only increased by 18-fold since the Cowboys were bought.

Last year, the Cowboys generated the highest revenue in the league, with $1.22 billion, and the most operating income, with $550 million, largely due to sponsorship revenue. Dallas is currently on track to earn $250 million in sponsorship revenue, according to CNBC sources.

The Los Angeles Rams, ranked No. 2 on CNBC's 2024 valuations list, also ranked No. 2 in revenue with $825 million. The Rams were also second in the league in sponsorship revenue and made significant money by hosting more than 25 non-football events at SoFi Stadium, including six sold-out nights of Taylor Swift's Eras Tour and three of Beyoncé's Renaissance Tour, as well as concerts for Ed Sheeran, Metallica, and Pink.

The Rams, who were in St. Louis when Stanley Kroenke bought the team for $750 million in 2010, are now worth $8 billion. Despite paying a $550 million relocation fee to the league and a $571 million settlement fee related to legal challenges for relocating, Kroenke's investment has increased more than four-fold.

Private equity firms are eager to invest in the NFL due to the increase in team values.

Institutional investors have been allowed to purchase limited partner stakes in teams in Major League Baseball, the National Basketball Association, the National Hockey League, Major League Soccer, and European soccer leagues such as the English Premier League for several years.

Last week, the NFL approved a plan that allows private equity firms to take up to 10% stakes in NFL franchises. The firms, including Ares Management, Sixth Street Partners, Arctos Partners, Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners, and Ludis, have committed $12 billion in capital over time.

Allowing private equity firms to invest in the league could facilitate the financing of purchasing a team.

The Cincinnati Bengals, despite being the lowest-valued team on CNBC's list, are worth $5.25 billion.

With the league's maximum allowable debt of $1.4 billion, the equity burden is $3.8 billion. If a general partner holds the minimum required 30%, limited partners must contribute a combined $2.7 billion to participate.

Peacock is the streaming service of NBCUniversal, the parent company of CNBC.