View From The US: How Sports Teams, Leagues and Owners Make Money

In this View From The US piece, Kurt Badenhausen, sports valuations reporter at Sportico evaluates how sports teams, leagues and owners are making money.

The NFL just wrapped up another monster season off the field that will have league revenue top $20 billion. The Super Bowl had a record 123 million viewers, and the Chiefs walked away with the trophy for the third time in five years. Consolation prize for the other 31 NFL owners: A $400 million-plus check from the league from equally shared revenue.

The sources of how sports teams and leagues make their money has not changed much over the past 40 years. Tickets, sponsorships and broadcast rights continue to be the main buckets of revenue, while concessions, parking, merchandise and non-team events fill out the income statement. Doesn’t matter if you are the NFL’s Dallas Cowboys or MLS’ CF Montreal, which represent the most and least valuable franchises within the five major sports leagues in North America.

But the size of those different buckets has shifted and varies dramatically from league to league, which impacts how bankers and investors value these clubs.

Here is a breakdown of how the major sports leagues and their teams generate their revenue.

NFL

The average NFL franchise is worth $5.14 billion, and the gap between the least valuable (Cincinnati Bengals) and most valuable (Cowboys) is barely two times. It is the narrowest spread of the five major sports leagues—MLB is 7x—and a function of the league’s economic system, whose roots trace to the early 1960s when New York Giants owner Wellington Mara supported TV revenue being shared equally among all teams, despite the market size.

Mara’s decision means that each team will receive roughly $400 million from the NFL in 2023 from league media and sponsorship deals. TV is driving the train, with the most recent set of renewals from ESPN, NBC, CBS, Fox, Amazon and YouTube worth $125 billion.

Each team also gets just over $20 million as part of the NFL’s ticket sharing agreement, which calls for 34% of each team’s ticket revenue to go toward a general pool to be shared equally. The result is 66% of the $18.7 billion in 2022 NFL revenue was distributed in equal allotments to the 32 teams.

NFL teams only have 10 home games a year, including preseason, but they still generate more than $3 billion a year in ticket and suite revenue, or 17% of their total. And while MLB, NBA and NHL teams fret over their regional sports network contracts, the NFL is once again sitting in the catbird seat. Almost all the TV inventory is controlled at the league level—thank you Mr. Mara—and the only local media rights are from radio and preseason games.

MLB

Speaking of fretting about RSNs, no league is more impacted than Major League Baseball. Local media—mostly TV—represented 23% of the $10.9 billion in revenue the 30 teams generated in 2022. The percentage is twice as much as the NHL, and the NBA’s 13% exposure will dip when it completes its next round of national TV deals this year.

During the 2023 season, Diamond Sports Group, which controls the Bally Sports RSNs, dropped its rights deals with the Arizona Diamondbacks and San Diego Padres. Bally Sports is set to broadcast games for 12 MLB teams this year after a bankruptcy judged recently approved agreements that will have games for the Texas Rangers, Cleveland Guardians and Minnesota Twins broadcast through the 2024 season. The jury is out on how many years it will take those teams to make up the economics of the lost rights fees for those deals, which in the Rangers’ case is more than $100 million annually.

Baseball provided a perfect foundation for RSNs as they proliferated through the 1990s and 2000s. The sport delivered a six-month season of highly rated three-hour games, mostly in primetime, along with shoulder programming of pre- and post-game shows.

Baseball RSN ratings remain, and the sport is the No. 1 programming in primetime on cable in most MLB markets. The Boston Red Sox, New York Yankees and many other teams command high rights fees from RSNs that are still profitable.

Local media is a critical revenue stream for MLB, but it still trails tickets (31%) and central revenue (26%) across the 30 clubs. Those percentages should be up in 2023, as the sport’s non-RSN business had a strong year as fans embraced the rule changes that shortened games and introduced more action that led to record ticket and sponsorship revenue.

NBA

The NBA operated for many years like the NHL and MLB, where gate receipts drove the business. NBA Finals games were still shown on tape delay as recently as 1981. But the NBA has started to morph closer to the NFL’s business model with a bigger and bigger check from the league office doled out annually. The move is reflected in the rise of the floor price to buy an NBA team, which is now $2.7 billion, more than double from three years ago.

Central revenue, which is largely derived from the broadcast deals with ESPN and TNT, was 44% of the $10.9 billion in total revenue the 30 teams generated during the 2022-23 season. Most teams are expecting the next round of TV deals to include a 100% to 150% increase on the current $2.6 billion-a-year value. That would push the NBA’s shared revenue even higher.

Ticketing and suites represent 26% of league revenue, which are goosed by $3,000 courtside seats in New York and Los Angeles.

NHL

NFL, NBA, NHL and MLB teams all generate similar amounts from tickets and suites, with the range between $2.9 billion and $3.3 billion for the four leagues, but that total represents a much bigger share of revenue for the NHL, which has smaller TV deals compared to the other three leagues.

The NHL remains a gate-driven league, with the category representing 44% of revenue for the 2022-23 season. A long playoff run can be a bonanza for teams, which get to keep 65% of the ticket revenue in the postseason and typically raise prices each round. NFL playoff ticket revenue almost all goes to the league, while MLB teams send the bulk of their revenue to the league until after the first three or four games of a series.

NHL teams benefit from operating their arenas by capturing revenue from league events, which are included in the “other” category in the pie charts above. The Los Angeles Kings own and operate Crypto.com Arena through AEG. They built four new courtside bunker suites in the arena ahead of this season, and all but one of them were snapped up under long-term contracts at a cost of $5 million per year. Suite-holders will have access to the myriad of concerts and premium events hosted at the arena, such as the Grammy Awards and 2028 Summer Olympics.

MLS

Major League Soccer teams got a shot of rocket fuel last year with the arrival of Lionel Messi, which helped boost total revenue 27% to $2 billion. Seating (39%) and sponsorships (29%) represent the bulk of league revenue, and clubs that operate their buildings also benefit from hosting non-MLS events.

The league’s economics had another transformation in 2023, as local TV rights went away with the arrival of Apple as the league’s broadcast partner. Only a few teams, such as LAFC, had local TV deals that were profitable. Most teams were on the hook for production costs with little rights fees that caused net losses on the broadcast side.

On the league side, it generates revenue from broadcast and sponsorship deals, as well as Soccer United Marketing (SUM). Those revenues are identified within the central revenue category in the pie charts. The reality is that teams don’t actually receive an annual check from MLS, as its single-entity structure means player contracts are “owned” and paid by the league. The cost of players and league operations outstrips central revenue, requiring teams to fund those expenses via an annual assessment.

Global Football

The 20 soccer clubs with the highest revenue are all based in Europe. They generated a total of $11.2 billion in revenue for the 2022-23 season, according to Deloitte. Many European teams are looking to invest in their stadiums to catch up to the American venue model. Tottenham opened its $1.3 billion stadium in 2019, and Real Madrid is wrapping up its own major renovation to Santiago Bernabeu. Chelsea, Barcelona, Inter Milan, AC Milan and Manchester United are among the clubs looking at major stadium renovations or new buildings.

Teams generate most of their money from commercial (42%) and broadcasting (40%), with merchandise sales included in the commercial component. Bayern Munich had the highest commercial revenue last year at $448 million, based on current exchange rates. Manchester United ranks first for broadcast revenue at $368 million, while Barcelona ($178 million) was No. 1 for matchday revenue.