Dallas Cowboys Top Sportico’s 2020 NFL Franchise Valuations Report
The Cowboys, Patriots and Rams are football’s most valuable franchises as average team worth tops $3 billion.
Bowing to public pressure, the Washington Football Team’s owner, Daniel Snyder, reversed course and permanently retired the Redskins name in July. Most saw the announcement as a culmination for the battered brand, a team whose claimed season ticket waiting list of 200,000 names had dwindled to zero. Others, however, saw an opening: with Snyder’s limited partners clamoring for him to sell, the moment presented a rare chance for entry into the most lucrative sports league on earth.
The average National Football League franchise is worth more than $3 billion, according to data compiled by Sportico. The Dallas Cowboys rank first at $6.43 billion, while the Cincinnati Bengals rank last at $2.12 billion. Collectively, the fair-market value of the NFL’s 32 franchises, including team-related businesses and real estate held by owners, is $99 billion. For comparison, that is more than the current equity value of Ford Motor Company, General Motors and Fiat Chrysler Automobiles, combined. The teams’ $15.83 billion in revenue in the last fiscal year, which represents the 2019 season, was greater than that of 298 companies on the Fortune 500. That averages to about $495 million per team.
Against this backdrop—higher-than-ever valuations and a floundering team in a major market—one of America’s wealthiest individuals sought advice from an existing team owner (in reporting these events, Sportico traded candor for anonymity). “I could have a check for $4 billion to $4.5 billion ready within seven days,” said the would-be owner during the height of Washington’s name-change controversy, “[and even] if I have to invest another $500 million for a stadium in D.C., that’s an opportunity.”
To be sure, that $5 billion “opportunity” far exceeds the franchise’s fair-market value, which Sportico calculates as $3.58 billion (ranking seventh in the NFL); Washington’s valuation includes 13 parcels of land owned by two team subsidiaries that encompass FedEx Field and more than 230 acres of surrounding tracts in Landover, Md. However, the billionaire’s assessment speaks to the strength of the NFL, which, with only 32 franchises, benefits from buyer-demand that in recent years has consistently exceeded supply.
Sustained growth in valuations, a favorable U.S. tax code for claiming depreciation, and cash flows more reliable than any other league are among the reasons revealed to Sportico by nearly two dozen sports bankers, economists, and team executives that make the NFL the best investment in professional sports. However, rising valuations, in conjunction with the league’s stringent ownership requirements, make it difficult for even deep-pocketed, potential buyers to get into the ownership suite.
Too Big To Sell
Cowboys’ owner Jerry Jones has said multiple times in recent years that he “wouldn’t accept anything less than $10 billion” for his team. Well, even if there were a buyer at that astronomical price, a transaction would be virtually impossible unless the league changed its strict ownership requirements, as reviewed by Sportico. Unlike the Washington team, the Cowboys, worth more than $6 billion, are in effect too big to sell.
Among sports teams worldwide, the Cowboys are the second most valuable franchise, behind one of Jones’s business partners, baseball’s New York Yankees (which are in a league of their own—worth well in excess of $8 billion when including all of ownership’s team-related holdings, such as its regional sports network). Jones, Yankee Global Enterprises and New Mountain Capital are partners in Legends Hospitality, a stadium operations company built from leveraging those teams’ expertise. They are also reportedly seeking to cash out for $1 billion.
In 2019, the Cowboys generated an estimated $871 million in revenue, which was 81% greater than the average of the other 31 teams. In other words, even had the team not sold a single hot dog, t-shirt, parking pass or sponsorship, the $300 million the team generated from ticket sales, premium seating and deferred revenue from personal seat licenses alone would still have been greater than the locally-derived revenue of 30 of the NFL’s teams. (The exception: the New England Patriots, which generated $315 million from its stadium, local sponsorships, and net revenue from road games last year.)
Now, here are the issues with even hypothetically buying the Cowboys: The NFL requires a controlling owner to hold at least 30% of a franchise, and teams are limited to $500 million in debt (a threshold raised recently from $350 million). Moreover, the league does not allow corporate or private equity ownership, even in minority stakes; combine that with the practical reality that a limited partner is not going to invest billions of dollars to have no authority over his or her investment, and the universe of potential buyers who can write a check for nearly $6 billion is limited.
Two sports bankers from different firms that work on NFL transactions, unprompted, took Sportico through the same exercise. In reviewing the Bloomberg Billionaires Index—and excluding those 75 years old and above as well as non-U.S. residents (unlike other leagues, NFL ownership is an American clubhouse—hardly a written rule, but to date a fact)—there are only 16 individuals who could afford the Cowboys without committing an unrealistic proportion of their net worth. Most of those names have no known interest in owning a team (think Bill Gates or MacKenzie Bezos). In fact, from this universe only one theoretical buyer even appears plausible, when borrowing at the NFL’s debt limit—computer billionaire and Texan, Michael Dell.
Even if the real-life market to buy the Cowboys is greater than a solitary person, assuredly, it is small. While the league has no direct requirement on a prospective owner’s net worth, the NFL requires that all owners, including minority investors, obtain league-wide approval based on numerous factors, including the vaguely defined “financial wherewithal.” Recognizing the problem inherent in a potential sale of a top-tier team, however, the league is poised to approve a proposal to allow for an additional $1 billion in debt specifically for acquisition purposes, distinct from the $500 million general debt limit, according to a source involved in the process.
For Sportico’s interactive 2020 NFL Franchise Valuations, click here.
In late 2018, the league also eliminated its prohibition against owning a team in another sport in an NFL market, an attempt to entice wealthy owners from other sports.
That change was music to the ears of Stan Kroenke, owner of the Los Angeles Rams, who had put his cadre of other teams (including basketball’s Denver Nuggets and hockey’s Colorado Avalanche) in a family trust before the new rule took effect. Kroenke, who moved the Rams back to Los Angeles from St. Louis in 2016, has spearheaded a 298 acre, eventual mixed-use development that includes SoFi Stadium, the new home to the Rams, Los Angeles Chargers (which rank 22nd in value at $2.67 billion) and the 2028 Olympics’ Opening and Closing Ceremonies.
Team-related real estate in Inglewood, Calif. and a revenue uptick projected from the stadium’s opening next month are among the reasons why the Rams’ total value is third in the league at $4.1 billion. That is behind only the Cowboys and Patriots—whose value of $4.97 billion includes nearly 1,000 acres of land around Gillette Stadium, some of which the team has developed into a retail village called Patriot Place. Last year, only the Cowboys and Patriots generated more from their local markets than through distributions of central league revenues. (The New York Giants—a $4 billion team, ranking fourth overall in value—generated the same amount, an estimated $296 million, from both local and national sources.)
The success of a small number of teams in harnessing their local markets is widening the spread in team values, said Dennis Howard, dean emeritus of the Lundquist College of Business, which houses the Warsaw Sports Marketing Center at the University of Oregon. Historically, the valuations of football teams fell into a relatively narrow range compared to other sports because of the NFL’s large national revenues. Now, “the substantial discrepancy among the teams on local revenues” is driving disparate valuations, Howard said. “The gulf between the have-more and have-less teams of the NFL is notable.”
No matter where a team falls on that widening spectrum, though, their owners have one thing in common—an ability to reap substantial tax savings from Uncle Sam.
Tax Loopholes and Free Rent
When Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes,” he wasn’t talking about the NFL—in fact, for football team owners, paying taxes is no certainty at all. A provision in the tax code that allows for the amortization of goodwill and intangibles enables professional sports team owners to write off the entire purchase price of a team over 15 years, according to a longtime NFL owner (whose group did it over an even shorter period under old IRS rules). This accounting benefit, akin to depreciation, is permitted even though the value of sports franchises have in actuality appreciated for years—the growth of team sale prices has outpaced virtually every other industry or index over at least the last decade.
Add these savings to the reliable cash flows in the NFL, and potential investors see the league as something of a safe haven for their money. National media, sponsorships and net royalties from the league’s licensing and film division, which totaled nearly $9.5 billion in 2019—combined with predictable expenses because of the league’s salary cap—guaranteed an operating profit for every team last season. “NFL teams are virtually running on risk-free auto-pilot,” the late John Vrooman, a longtime Vanderbilt economist, told Sportico in June. (The pioneering figure in sports business, whose research merged macroeconomics and professional sports, passed away in July.)
A member of another ownership group, which still is within the 15-year tax-savings window, tells Sportico that the investment is so secure it ought to be judged against the yields of treasury notes and that owning an NFL team beats today’s low-yield curves every time. Fitch Ratings classifies all 16 NFL-related bond issuances with high credit ratings, A+ or A, some secured by future revenues contractually guaranteed by the league’s national TV partners.
Three teams—Washington, New England and the Miami Dolphins (ranking 11th in value at $3.3 billion)—are able to claim depreciation of their assets even further. As owners of their venues, these teams can write off certain infrastructure costs, according to David Abrams, a professor at the Preston Robert Tisch Institute for Global Sport at New York University. Public documents show that the assessed value of the Patriots’ Gillette Stadium, for instance, decreased by nearly 3.5% to $462.1 million in 2020 (the team owns the stadium, while the town of Foxborough, Mass., owns the land underneath it).
Most teams, however, control their stadiums based on favorable terms negotiated with municipal or state authorities but do not actually own them (the $2.15 billion-valued Buffalo Bills, for example, receive financial benefits from the State of New York that outweigh its rent obligations to Erie County; the team owns a small plot of land adjacent to its stadium complex). In these cases, the benefits provided by advantageous lease agreements factor into Sportico’s valuation of the team itself.
Take the Carolina Panthers, which play rent-free in Charlotte (and rank 21st in value at $2.75 billion). Since 2011, the team has seen revenues grow almost 9%, compounded annually, based on an analysis of its historical financials. Hedge fund manager David Tepper, the newest member of the NFL ownership ranks, bought the Panthers for $2.275 billion in 2018. Similarly, the Super Bowl champion Kansas City Chiefs (ranking 18th in value at $2.83 billion) have experienced almost 6% compound annual growth on revenues since 2010, the year that a largely publicly financed stadium renovation took place, based on an examination of tax documents the team filed with the Missouri Department of Revenue.
That unfettered growth may change, however, given the doubt cast over the 2020 season.
COVID-19 Questions
Since our valuations are as of the last completed season, all data reflects the period that ended with February’s Super Bowl, prior to the substantive spread of COVID-19. However, based on this timeline, an assessment of the economic effects of the virus will factor directly into Sportico’s future franchise valuations.
NFL owners and team operators may disagree with that approach, as those interviewed by Sportico have uniformly viewed the effects of the virus on the market for potential sales as fleeting. Says one owner, citing the bidding process of baseball’s New York Mets, “No one is thinking of Coronavirus during this process. It is an aberration.”
Perhaps. Then again, some of football’s top minds once said the same thing about the forward pass.
Sportico is committed to transparency in our valuations. For detailed information and sourcing, please see the “Methodology” section of Sportico’s interactive 2020 NFL Franchise Valuations.
