NFL
The NFL — it’s almost synonymous with America today. And its history is a fascinating lens to explore the nation’s development over the last 100 years, from WWII to TV and suburbs to the Internet.
Editors Note: This NFL issue was already scheduled to post today before the horrific shooting at 345 Park Avenue this week. The shooter blamed the NFL for covering up the dangers of C.T.E.. My thoughts and prayers are with everyone involved. I decided to go ahead and post this issue because Ben and David dig into the NFL’s struggle with CTE. You can read more below.
The NFL — it’s almost synonymous with America today. And its history is a fascinating lens to explore the nation’s development over the last 100 years, from WWII to TV and suburbs to the Internet and social media. What began as a quasi-illicit league in small midwestern towns is now the single largest media property in the world today by revenue. And whether you watch football or not, this is one incredible business story. Acquired is ready for some football!
Company Overview
Company Name: National Football League (NFL)
Founding Year: 1920
Headquarters Location: New York, NY
Core Business: The NFL is a professional sports league comprising 32 teams, organizing American football games, and generating revenue through media rights, ticket sales, merchandise, and sponsorships.
Significance: It is the largest single media property in the world by revenue, captivating over 100 million viewers annually for the Super Bowl and shaping American culture through its sports entertainment product.
Narrative
The NFL’s story, as detailed in the Acquired episode, is a saga of transforming a quasi-illicit, small-town sport into America’s preeminent media juggernaut, reflecting the nation’s evolution from post-Civil War grit to postwar prosperity and media-driven spectacle. Ben and David narrate this journey with enthusiasm, marveling at the NFL’s strategic brilliance while acknowledging its controversies, such as racial exclusion and player safety issues. The narrative unfolds in three key phases: origins and survival, television-driven growth, and modern dominance amid challenges.
In its infancy, American football emerged as a violent, character-building collegiate ritual, codified after Theodore Roosevelt’s 1905 intervention to curb fatalities. The NFL’s 1920 founding in Canton, Ohio, led by George Halas and Jim Thorpe, aimed to legitimize professional football despite its stigma as a profane imitation of the college game. Facing economic hardship and societal disdain—exemplified by Fielding Yost’s 1922 critique—the NFL struggled through the 1920s and 1930s, with most early teams folding due to the Great Depression. The league’s early diversity, with Black players like Fritz Pollard, was erased by mid-1930s segregation, a policy influenced by owner George Preston Marshall, not reversed until the 1946 integration of the Rams in Los Angeles. The NFL’s survival hinged on its ability to differentiate from college football, establishing ethical standards and leveraging Thorpe’s fame, yet it remained a niche, loss-making endeavor in small Midwestern towns.
The post-World War II era marked the NFL’s ascent, driven by television and a league-first mentality. The AAFC’s 1944 challenge forced expansion, with the Rams’ move to Los Angeles and integration under public pressure setting a precedent. The 1958 NFL Championship, watched by 45 million, signaled football’s TV potential, but the NFL’s reluctance to expand led to the AFL’s 1959 formation under Lamar Hunt. Pete Rozelle’s 1960 appointment as commissioner was a turning point. His media-savvy vision—moving headquarters to New York, partnering with Sports Illustrated, and founding NFL Films with Ed Sabol—crafted a polished, narrative-driven product. The 1961 CBS deal, enabled by the Sports Broadcasting Act, and the 1966 NFL-AFL merger, spurred by Al Davis’s aggressive tactics, unified professional football. The Super Bowl, born in 1966, and Monday Night Football, launched in 1970 with Roone Arledge’s showbiz flair, transformed the NFL into a cultural phenomenon, redefining Sundays and Mondays as national football events. Ben and David highlight Rozelle’s flywheel: enhancing the product (via competitive balance and production values) drives fan engagement, boosting TV revenue, which funds better play, perpetuating growth.
Since 1970, the NFL has solidified its dominance, though not without missteps. The 1993 salary cap and free agency balanced player compensation, but the league’s handling of CTE—denied until 2016—and Colin Kaepernick’s 2016 blackballing exposed its control-oriented approach, clashing with the social media era. Despite these, the NFL’s $18 billion annual revenue, projected to hit $25 billion by 2027, reflects its unmatched scale, driven by media deals with CBS, Fox, NBC, Disney, Amazon, and YouTube. Ben and David express mixed feelings, loving the game’s entertainment but grappling with its ethical costs, like CTE’s toll (e.g., seven deceased players from the 2001 Patriots). The NFL’s story mirrors America’s: a blend of innovation, cooperation, and unresolved tensions, with its league-first ethos now strained by growing local revenues and societal scrutiny.
Timeline
November 6, 1869: The first intercollegiate football game is played at Rutgers University, resembling “mob football” with 25 players per team, marking the origins of American football.
1905: Theodore Roosevelt calls a summit to address football’s dangers after 19 fatalities, leading to the NCAA’s formation and legalization of the forward pass, differentiating American football from rugby and soccer.
August 20, 1920: The American Professional Football Conference (later renamed the NFL) is founded in Canton, Ohio, with 14 teams, led by George Halas and Jim Thorpe as president.
1922: Fielding Yost criticizes professional football, reflecting its stigma as immoral compared to the revered college game.
Mid-1930s: The NFL adopts Major League Baseball’s segregation policy, excluding Black players until after World War II.
1944: The All-America Football Conference (AAFC) is founded, challenging the NFL with teams like the Cleveland Browns, prompting NFL expansion.
1946: The NFL’s Cleveland Rams move to Los Angeles, integrating the team to play in the publicly owned LA Coliseum, with PR support from Pete Rozelle.
1950: The Rams sign a TV deal with Admiral, which compensates for a 50% attendance drop, highlighting television’s early impact.
1958: The NFL Championship, dubbed the “greatest game ever played,” draws 45 million viewers, showcasing football’s TV potential.
August 1959: Lamar Hunt forms the American Football League (AFL) with eight teams, securing a $8.5 million, five-year TV deal with ABC.
January 1960: Pete Rozelle, a 33-year-old Rams GM, becomes NFL commissioner after a contentious vote.
1961: The NFL negotiates a $4.65 million annual TV deal with CBS, requiring a congressional antitrust exemption via the Sports Broadcasting Act.
1962: Ed Sabol’s Blair Motion Pictures wins rights to film the NFL Championship, revolutionizing sports cinematography, later becoming NFL Films.
1963: Rozelle moves NFL headquarters to New York, partners with Elias Sports Bureau for statistics, and establishes the Pro Football Hall of Fame.
June 8, 1966: The NFL and AFL announce a merger, effective 1970, with a $18 million payment from AFL teams and a new “Super Bowl” game starting in 1966.
1969: Super Bowl III sees Joe Namath’s Jets upset the Colts, boosting the AFL’s legitimacy and drawing massive media attention.
1970: The NFL and AFL fully merge, signing a $156 million, four-year TV deal with CBS and NBC; ABC launches Monday Night Football for $8.5 million annually.
1973: President Nixon pushes for a blackout ban, allowing local broadcasts of playoff games, against Rozelle’s resistance.
1993: The NFL introduces free agency and a salary cap (48.8% of revenue) via a collective bargaining agreement, replacing the restrictive Rozelle Rule.
2016: The NFL acknowledges CTE’s link to football after years of denial, settling a $1 billion lawsuit with players.
2016: Colin Kaepernick kneels during the national anthem, leading to his blackballing by NFL teams, resulting in a confidential settlement.
2022: The NFL signs a $112 billion, 10-year media rights deal with CBS, Fox, NBC, Disney, Amazon, and YouTube.
NFL & CTE
Chronic Traumatic Encephalopathy (CTE) is a progressive neurodegenerative disease linked to repeated head trauma. Caused by sub-concussive and concussive hits, CTE leads to severe brain damage, manifesting in symptoms like memory loss, depression, aggression, and increased suicide risk. The episode highlights its devastating impact, noting seven players from the 2001 Patriots championship team died between ages 35–50, with 24 others showing CTE-related symptoms. This underscores the human cost of football’s physicality, a core tension in the NFL’s narrative.
The NFL’s handling of CTE, detailed in the episode, was a significant trust breach. Research in the 1990s confirmed CTE’s link to football, but the league suppressed findings, denying connections until 2016. This led to a $1 billion lawsuit settlement with players and families, addressing long-term health consequences like shortened lifespans. Ben and David express personal conflict, loving football’s entertainment but grappling with its ethical implications, especially as fans like LeBron James discourage their children from playing due to safety concerns.
CTE’s broader impact threatens the NFL’s future. Declining youth football participation (5% annual drop from 2010–2012) reflects parental fears, shrinking the talent pipeline. The episode notes Gen Z’s waning interest (23% favor NFL vs. 19% for basketball), exacerbated by CTE awareness, amplified in the social media era. Unlike the NBA, the NFL’s control-oriented response—evident in mishandling Colin Kaepernick’s protest—failed to mitigate CTE’s public relations fallout. While the NFL’s $18 billion revenue and media dominance ensure short-term stability, CTE remains a bear case, challenging its long-term fan base and moral standing. The league’s cooperative capitalism, which fueled its rise, now faces scrutiny as player safety concerns demand systemic reform.
How the NFL Makes and Shares Revenue
The NFL generated approximately $23 billion in revenue in 2024, making it the most profitable professional sports league in the United States. This financial prowess stems from a diverse revenue model, primarily driven by media rights, with additional streams from ticket sales, sponsorships, merchandise, and licensing. The NFL’s revenue is split into national (shared) and local categories, with a unique sharing system that ensures competitive balance but highlights disparities between big- and small-market teams. Player participation and the salary cap further shape the economic landscape.
Revenue Breakdown:
Media rights dominate, contributing 61% of total revenue ($14 billion in 2024). This includes a $12 billion annual deal from CBS ($1.85 billion), Fox ($2 billion), NBC ($1.7 billion), Disney ($2.55 billion for Monday Night Football), Amazon ($1.3 billion for Thursday Night Football), and YouTube ($2 billion for Sunday Ticket). Ticket sales and luxury suites generate $3 billion (15%), with general seating at 10% and premium seating at 10%. Sponsorships and advertising add $2 billion (10%), led by categories like ticketing ($253 million), financial services ($225 million), and alcohol ($180 million). Merchandise, licensing (e.g., $300 million annually from EA’s Madden), and other sources (e.g., NFL Films) contribute $1.5 billion (9%).
Revenue Sharing:
The NFL’s national revenue—$13 billion in 2023, or $416 million per team—comes from media, league sponsorships, and licensing, shared equally among the 32 teams, regardless of market size or performance. This includes 34% of ticket revenue pooled and redistributed ($25 million per team). In 2023, 67% of the $20.5 billion total revenue was shared, fostering parity. Local revenue, kept by individual teams, includes ticket sales, luxury suites, concessions, parking, and local sponsorships, totaling about $7.5 billion league-wide.
Local vs. League Revenue:
National revenue ensures small-market teams like the Green Bay Packers ($654 million total revenue in 2023) remain viable, receiving $402.3 million in shared revenue. Big-market teams like the Dallas Cowboys ($1.22 billion in 2023) generate significantly more local revenue ($145 million in ticket revenue, $130 million in luxury suites) due to larger stadiums and markets. This creates a revenue gap, with the Cowboys’ total revenue nearly triple that of low earners like the Detroit Lions ($450 million). Local revenue, 33% of the total, is growing, rising from 12% in 1994 to 30% in 2022, straining the league-first mentality.
Player Participation and Salary Cap:
Players receive 48.8% of total revenue under the 2020 Collective Bargaining Agreement (CBA), equating to about $11.2 billion in 2024, covering salaries ($255.4 million cap per team) and benefits ($74 million per team, including healthcare and pensions). The salary cap, tied to revenue projections, ensures equitable player compensation but limits spending, benefiting owners. Teams must spend 90% of the cap in cash over four-year periods, with penalties for non-compliance redistributed to players. This system aligns player and league interests but disadvantages small-market teams when local revenue disparities force them to allocate a higher percentage to salaries.
Big vs. Small Market Teams:
Big-market teams (e.g., Cowboys, 49ers) leverage large stadiums and affluent fan bases for higher local revenue, while small-market teams (e.g., Packers, Bills) rely heavily on shared revenue. The Cowboys’ $550 million operating income dwarfs the league’s $127 million average, highlighting profitability gaps. However, the salary cap and draft system enable small-market teams like the Kansas City Chiefs to compete, winning three of the last five Super Bowls.
Additional Insights:
The NFL’s revenue model, rooted in 1960s innovations like equal TV revenue sharing, ensures financial stability but faces challenges. Growing local revenue threatens parity, and public stadium subsidies (e.g., Bills’ new stadium) spark controversy. The NFL’s $25 billion revenue goal by 2027 seems achievable, driven by new media deals and betting, but long-term growth may hinge on addressing player safety and international expansion failures.
Notable Facts
Cultural Dominance: The NFL is America’s most popular sport, with 33% of US adults naming it their favorite, three times basketball’s 11%, and the Super Bowl attracting over 100 million viewers annually.
Jim Thorpe’s Legacy: As the NFL’s first president, Thorpe, a Native American and Olympic gold medalist, lent instant legitimacy, yet the league later excluded Black players until 1946.
Television Pioneer: The NFL’s 1961 CBS deal and 1970 Monday Night Football redefined sports broadcasting, introducing innovations like parabolic microphones, split screens, and highlight reels.
Player Safety Crisis: The NFL’s denial of CTE’s link until 2016, despite 1990s research, led to a $1 billion settlement, highlighting a major trust breach.
Unique Ownership: The Green Bay Packers, owned by a publicly held nonprofit, remain the only small-market team from 1920, resisting relocation pressures.
Financial Metrics
Annual Revenue (2022): $18 billion, with $12 billion from media rights, expected to grow to $25 billion by 2027.
Media Rights Deal (2022): $112 billion over 10 years, with annual payments: CBS ($1.85 billion), Fox ($2 billion), NBC ($1.7 billion), Disney ($2.55 billion for Monday Night Football), Amazon ($1.3 billion for Thursday Night Football), YouTube ($2 billion for Sunday Ticket).
Team Valuations: Average team value is $4.5 billion (2022), up from $1.2 billion in 2012, with the Dallas Cowboys at over $1 billion in annual revenue.
Revenue Breakdown: 61% media, 10% general seating, 10% premium seating, 10% sponsorship/advertising, 9% other (e.g., NFL Films, Madden licensing at $300 million annually).
Fan Engagement: 46 million Americans (18% of betting-age adults) bet on NFL games annually; 30–40 million play fantasy football, driving viewership.
Salary Cap: Players receive 48.8% of league revenue, ensuring equitable compensation but strained by growing local revenue disparities.
Transaction
The 1966 NFL-AFL merger, which was a structural consolidation rather than a specific financial transaction. The merger involved an $18 million payment from AFL teams to NFL owners (primarily Giants and 49ers) over 20 years, enabled by a congressional antitrust exemption in 1966. This unified professional football, creating a 24-team league (expanding to 28 by 1970) and establishing the Super Bowl. The episode emphasizes the merger’s strategic impact—consolidating talent and media rights—over financial details, as it set the stage for the NFL’s media dominance.
Impact Analysis:
Short-Term: The merger ended the costly NFL-AFL war over players, stabilized finances, and introduced the Super Bowl, which drew 65 million viewers in 1966, despite only 63,000 live attendees.
Long-Term: Unified media rights (e.g., $156 million in 1970) and competitive balance (via draft and scheduling) fueled the NFL’s flywheel, making it the world’s largest media property by revenue.
Grading
Ben and David did not assign an overall grade for the NFL’s performance, as the episode focuses on its historical trajectory and business strategies rather than a singular evaluation. However, their analysis implies a high assessment of the NFL’s success through the Pete Rozelle era (1960–1989), with caveats for modern challenges. They marvel at the NFL’s transformation from a struggling league to a $18 billion media giant, driven by Rozelle’s league-first mentality, media innovations, and competitive balance.
Bear Case and Bull Case
Bear Case:
Youth Participation Decline: Youth football participation dropped 5% annually from 2010–2012, part of a broader youth sports decline due to video games and social media, threatening the NFL’s talent pipeline.
Player Safety Concerns: CTE awareness and high-profile cases (e.g., seven deceased 2001 Patriots players) deter parents and players, potentially reducing future engagement.
Failure to Internationalize: Unlike the NBA, the NFL lacks global appeal, with failed initiatives like NFL Europe and ineffective home marketing agreements (e.g., Cowboys in Mexico).
Eroding League-First Mentality: Growing local revenue (30% of team revenue in 2022 vs. 12% in 1994) creates disparities, with teams like the Cowboys ($1 billion) outpacing smaller markets ($450 million), undermining competitive balance.
Social Media Missteps: The NFL’s control-oriented approach, exemplified by Kaepernick’s blackballing, alienates younger audiences, with Gen Z favoring basketball (19%) over football (23%).
Bull Case:
Lindy Effect: The NFL’s 100-year history and cultural entrenchment ensure durability, with no immediate threat to its dominance.
Media Revenue Growth: A $112 billion, 10-year media deal and emerging betting revenue (46 million Americans bet on NFL games) drive projected growth to $25 billion by 2027.
Fan Engagement: Fantasy football (30–40 million players) and the Super Bowl’s 100 million viewers sustain deep engagement, unmatched by other sports.
Scarcity Value: Limited team supply (32) and high demand among billionaires support team valuations ($4.5 billion average), with social signaling akin to luxury assets.
Player Compensation: The 48.8% revenue share aligns player and league interests, stabilizing labor relations.
Good for the World vs. Bad for the World
Good for the World:
Community and Economy: The NFL unites communities, drives commerce (e.g., Super Bowl parties, tourism), and supports local economies, as argued by Rozelle in securing antitrust exemptions.
Entertainment Value: High production values, NFL Films, and stars like Joe Namath create a compelling, inclusive spectacle, appealing across demographics.
Cultural Integration: Post-1946 integration and 70% Black player representation reflect progress, despite early segregation.
Bad for the World:
Player Safety: CTE’s devastating impact (e.g., suicides, shortened lifespans) and the NFL’s 1990s cover-up betray players, eroding trust.
Social Missteps: Kaepernick’s blackballing and resistance to player voices highlight a disconnect with social justice movements, alienating some fans.
Economic Extraction: Taxpayer-funded stadiums often yield minimal community benefits, with teams like the Bills leveraging public funds.
Value Creation vs. Value Capture Analysis
Value Creation: The NFL creates immense value through entertainment (100 million Super Bowl viewers), community engagement (fantasy football, betting), and cultural storytelling (NFL Films). It benefits fans, advertisers, and local economies, with innovations like Monday Night Football redefining sports as showbiz.
Value Capture: The NFL captures nearly all created value, reselling media rights multiple times (e.g., Sunday Ticket, highlights), extracting high margins from networks (e.g., $44 million per game), and leveraging taxpayer-funded stadiums. Players’ 48.8% share is significant but dwarfed by owners’ profits, with local revenue disparities (e.g., Cowboys vs. Lions) highlighting extractive practices.
Powers
Ben and David land on one power:
Cornered Resource. Ben and David identify the NFL’s control over top football talent as its primary power, stating, “If you want to watch professional football played by this set of athletes, they’re the only game in town.” This was solidified by the 1966 merger, which unified the best players, eliminating competition from the AFL. The cornered resource ensures pricing leverage over networks (e.g., $112 billion deal) and fan loyalty, as no alternative league (e.g., XFL, USFL) matches the NFL’s talent quality. This power connects to the episode’s playbook, reinforcing competitive balance and media dominance, though it’s challenged by player safety and social media issues.
Playbook
Ben and David outline four playbook themes, using their exact terms, which encapsulate the NFL’s strategic success:
Keep the teams competitive to maximize entertainment value: Bert Bell’s “on any given Sunday” mantra, implemented via stacked scheduling and reverse-order drafts, ensures parity, making games compelling (e.g., AAFC’s Browns dominance showed the risk of imbalance).
Create storylines around the game: Rozelle’s partnership with Sports Illustrated and NFL Films crafted narratives (e.g., Joe Namath’s Super Bowl III guarantee), driving fan engagement and media coverage, transforming football into a cultural drama.
Outsource (and commoditize) distribution to the TV networks: The NFL avoids producing broadcasts, instead selling rights to networks (CBS, Fox, NBC, Disney, Amazon, YouTube), capturing high margins ($44 million per game) while networks bear production costs.
Cooperative capitalism: The league-first mentality, exemplified by equal revenue sharing (e.g., 1961 CBS deal, NFL Enterprises), prioritizes collective growth over individual team gains, though strained by rising local revenues.
These themes drive the NFL’s strategy by aligning talent, media, and fan engagement, ensuring a scalable, high-value product. However, challenges like CTE, Kaepernick’s blackballing, and local revenue disparities threaten future success, as the league-first ethos wanes.
Carveouts
Ben’s Carveout: The Menu, a beautifully shot, fun movie.
David’s Carveout: Peyton’s Places on ESPN+, a nostalgic, high-quality series on football history, highly recommended for its storytelling.
Additional Notes
Episode Metadata: Season 12, Episode 1, “The Complete History & Strategy of the NFL,” released January 25, 2023, duration 3:47:25, available on Acquired’s website and Apple Podcasts.
Related Episodes: The NBA (Season 7, Episode 4, 9/30/2020), From NFL to Startup COO to Congressman (8/1/2022), CAA with Michael Ovitz (Season 9, Episode 8, 12/21/2021).