Valuations soar, NFL team sales likely stall

The Seattle Seahawks could be the next NFL team to be sold, but beyond that, who knows when another franchise will change ownership.

Former Seahawks owner and Microsoft co-founder Paul Allen died in 2018. Since his death, the team has been managed by a trust run by Allen’s sister, Jody. Allen’s estate hopes to eventually sell the team and donate the proceeds to charity, but there is no clear timeline for a transaction to occur.

Allen’s faith gives him reason to wait, and it’s the same reason other team owners might not sell anytime soon.

NFL valuations will likely continue to rise over the next few years due to the league’s media rights deals, expansion and more games, said Mark Ganis, a sports consultant who advises NFL Commissioner Roger Goodell and the league’s owners. Owners risk missing out on big profits if they sell teams now.

“We’re still nowhere near the market leader that the NFL is,” Ganis said, “which is still in its growth phase in terms of valuation and net revenue.”

According to CNBC’s “Official 2024 NFL Team Valuations,” the average value of an NFL team is currently $6.49 billion, with no team worth less than $5.25 billion. Seven of the last 10 NFL teams to be sold have outperformed the S&P 500 on a percentage basis since the sale.

Growth in league-wide media, sponsorship and licensing deals (divided among all 32 teams) helped franchises generate average revenue of $640 million last year and operating profit of $127 million, according to people familiar with each team’s finances.

The NFL’s new media rights deal began in earnest last year. It’s an 11-year contract that runs through 2033. The total amount is more than $110 billion, an 80% increase from the league’s previous contract, and includes a clause allowing the league to opt out of the entire package. DisneyThe Disney contract is set to expire at the end of the 2028-2029 season, but the NFL has a clause to opt out of the deal after 2030.

The option gives owners another chance to cash in after the National Basketball Association nearly tripled the value of its media rights in July. Amazon, Netflix and alphabetYouTube could lead to a surge in the value of the NFL’s most-watched games. Television ratings continue to climb: The 2023-24 season saw a 7% year-over-year increase in viewership, finishing with the second-highest viewership since data was first tracked in 1995.

“The NFL is the largest and most valuable audience in the U.S. for advertisers,” said Neil Pilson, former president of CBS Sports and founder and president of Pilson Communications. “The NBA deal will be a benchmark, but even if the NFL declines to renew it, it will be in the past when it comes time for renewal, which is still four years away. We all know how successful the NBA has been, but at the end of the day, the NFL rights deal will be driven by that audience and the revenue third parties think they can get by partnering with them.”

Ganis said the planned addition of 18 regular-season games over the next few years, as well as Goodell’s interest in increasing the NFL’s international popularity by adding games in Spain, Germany and Brazil, should also lead to increased revenue and higher valuations for the league.

“The NFL is still just scratching the surface with overseas revenue,” he said.

According to Ganis, an NFL team is sold roughly every 3.5 years, and because those sales are usually triggered by a team’s death or scandal, it’s hard to predict when the next team will be sold.

The last NFL team to be sold was the Washington Commanders, a deal that was finalized in 2023 after league owners effectively forced head coach Daniel Snyder to give up the team amid allegations of sexual harassment and a toxic work environment. Josh Harris, who also owns the NBA’s Philadelphia 76ers and the National Hockey League’s New Jersey Devils, bought the Commanders for a record $6 billion.

The last four sales of NFL teams have all set new records and illustrated rising valuations: Billionaire businessman Terry Pegula and his wife Kim bought the Buffalo Bills after Bills’ death in 2014 for $1.4 billion. The franchise’s founding owner, Ralph Wilson. That amount was surpassed in 2018 by hedge fund manager David Tepper’s purchase of the Carolina Panthers for $2.3 billion. The Panthers were sold after the NFL fined former owner Jerry Richardson for workplace misconduct.

Rob Walton: Walmartled the group that bought the Denver Broncos for $4.65 billion in 2022 after the death of Pat Bowlen.

These investments ballooned in just a few years. According to CNBC’s 2024 valuations, the Bills are now worth $5.35 billion, the Panthers $5.9 billion and the Broncos $6.2 billion.

The NFL wants a multi-decade owner who will prioritize long-term decisions over short-term profits, Ganis said, with a modernized estate plan to reduce taxes. It’s a tradition passed down from generation to generation in the family, he said.

This caused a further decline in overall franchise sales. The NFL requires all teams to have a written succession plan in case of the death of an owner. The Chicago Bears are currently owned by Virginia Halas McCaskey, 101-year-old daughter of team founder George Halas. As planned, if McCaskey dies, ownership of the Bears will be distributed among her children, who will then be controlled by her eighth child, 68-year-old George McCaskey, who currently serves as the team’s president.

“The decision-makers in the league have a tremendous responsibility to the game,” Ganis said. “They’re not paid employees with a vote. They’re making choices that are generational in nature.”

Low franchise turnover and soaring valuations have led Goodell to support allowing private equity ownership for the first time. NFL owners voted last week to allow select private equity firms to buy up to 10% of teams. Each fund or consortium can do deals with up to six teams.

The Miami Dolphins, Bills and Los Angeles Chargers are among the teams likely to consider selling minority stakes to private equity, according to people familiar with the matter, with the Bills considering selling up to a combined 25% stake in the team.

Spokespeople for all three teams declined to comment.

The first firms approved to invest are Ares Management, Sixth Street Partners and Arktos Partners. but also The consortium includes Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners and Rudis, a platform founded by investor and former NFL running back Curtis Martin. Tracy Gallagher, head of private investments at digital asset management platform Alta Finance, said the list is likely to grow over time.

“The NFL clearly has made liquidity a top priority,” Gallagher said. “This is the first of many steps to provide more options for buyers.”

The league is treading cautiously and taking small steps regarding private equity ownership: The NBA, NHL and Major League Baseball allow up to 30% ownership by private equity firms. The NFL plans to limit ownership by any given company to 10% and take a percentage of what’s called carry – the profits that fund managers keep after they hit limited partner return thresholds.

“I think our league is unique in that we still have 32 owners,” Robert Kraft, owner of the NFL’s New England Patriots, said in an interview with CNBC on Aug. 28. “We have a very special culture, and I want to keep in mind that we’re not doing anything that’s going to change the essence of what makes our league great.”

“Some ownership groups are really struggling with liquidity,” he says. “They’re large families and they’re having to solve a lot of unusual problems. So we thought this was a great source of capital and something that could be done in a way that was very functional and didn’t impact their assets. [team] “It’s a strategy,” he added.

Kraft told CNBC that the league is hesitant to allow more than 10% private equity ownership because it wants to emphasize the team’s role in the local community rather than making money.

“From our perspective, limiting investment to 10 percent is a way to curb that,” he said.

Still, despite a clear upward trend in the value of NFL franchises, the league’s onerous regulations could limit investment interest, Gallagher said.

“These are valuable assets, but at the end of the day, private equity managers get rich off of carry,” Gallagher said. “If you take away some of that, there’s no incentive to buy these assets.”

Gallagher also noted that other standard private-equity investments offer downside protection and board seats if valuations plummet. The NFL has no current plans to give governance powers to private-equity firms.

“It will be very interesting to see what exactly the fund is buying and how it is protected to benefit the end investor,” Gallagher said.

WATCH: New England Patriots owner Robert Kraft discusses the NFL’s new private equity rules