Why Some Winning NFL Teams Are Worthless
Common sense would suggest that success in the National Football League would dictate the value of an organization. How could it not? Say a particular team is doing work on the field, racking up Ws, and consistently filling its trophy cases with hardware, well then, the obvious assumption is that said franchise would be celebrating all the way to the bank. Right? This makes too much sense not to be true. If only things were that simple.
The good people at Forbes recently released a list of the most valuable NFL teams in 2016, and as is always the case, not every team that wins on the gridiron necessary won off it. Now, for the record, we use the term “won” loosely in a relative sense. After all, according to Forbes, team values are up 19% from 2015 and the average worth of an NFL franchise is $2.34 billion. So, yeah, technically every owner in the league is, in fact, a “winner.” But a team’s value is hardly based on its overall performance on the field of play. No, its value has been calculated by the following:
Forbes team values are enterprise values (equity plus net debt) based on the multiples of revenue of historical transactions, as well as offers to buy and invest in teams currently on the table. The values are adjusted—to the extent we have a handle on the change in economics–for teams moving into new stadiums.
Revenue and operating income (earnings before interest, taxes, depreciation and amortization) are for the 2015 season, net of stadium debt service. Revenue from non-NFL events, like concerts and stadium tours, is included when such revenue is pocketed by the team owner or an entity the owner controls. We gathered our information primarily from the teams, public documents, sports bankers, credit rating agencies, network executives, and media rights experts like SNL Kagan.
While this seems like a lot to process, the truth is that it’s much simpler than it seems. Although it helps the value of an NFL franchise if the team is successful, this detail pales in comparison to the size of the club’s market and the stadium where the franchise resides.
Take the New York Giants for example. Granted, the G-Men won the Super Bowl back in the 2011 season, yet since that time, the organization has experienced just one winning season and failed to make the playoffs in each of the last four years. Despite this lackluster showing on the field, the New York Football Giants generated $444 million in revenue this past year, had an operating income of $133 million, and are currently the third most valuable team in the NFL at $3.10 billion. That, friends, is the power of New York City. As you’ll see, that “energy” doesn’t extend to places like Cincinnati.
Aside from the Bengals’ inability to get things done in the postseason, this organization is among the most successful teams in the NFL over the past five years. Since 2011, Andy Dalton and friends have won at least nine games each year, topped the AFC North on two separate occasions, and been to the playoffs five straight seasons. Yet, none of that changes the fact that the Bengals are worth just $1.68 billion (No. 30 in the league).
Of course, at least the Cincinnati Bengals are winning football games. In the end, there’s only one thing worse than winning football games in a small market, and that’s losing football games in a small market. Fortunately for Rams owner Stan Kroenke, half of that mistake has recently been rectified.
For all we know, the Rams may continue to be a below-average football team — one that fails to ever win more than seven games a season — but from this point on, at least they’ll be able to celebrate their mediocrity with all the sun and fun that the great city of Los Angeles has to offer. Because even in defeat, the Los Angeles Rams, or at least Kroenke, is smiling now that his organization doubled in worth and is currently the No. 6 most valuable team ($2.9 billion) in the National Football League.
Just as relocation helps increase the value of the Rams, the possibility of moving to a bigger market has helped teams like the Oakland Raiders and San Diego Chargers. According to Forbes, the Raiders have the lowest revenue ($301 million) in all of football. Yet, by its calculations, due to the fact that the Raiders are looking at either a new stadium — in Oakland or Las Vegas — or joining the Rams in Los Angeles, the club’s overall value ($2.1 billion) increased 47% in the last year.
A similar prospect — albeit, without the potential of a move to Las Vegas, which is a shame because two teams in Sin City would be freaking sweet — was responsible for the San Diego Chargers seeing a 36% increase in valuation over the past year. Like it or not, this is the life we live in.
Fans of the National Football League just want to witness their favorite team hoist the Lombardi Trophy. Ultimately, team owners want the same thing. Of course, given the popularity of the sport as well as sponsorship deals, stadium revenue, and sheer business acumen (Jerry Jones’ Dallas Cowboys remain the most valuable team in the game at $4.2 billion), these moguls are destined to get paid (a lot) either way. Until further notice, this is the way it goes. And we must accept it.
In the end, the name of the game is simple: market equals money; money equals fancy stadium; fancy stadium equals massive value. If you’re Robert Kraft and the New England Patriots, you also get to experience the cherry on top: winning. Just another reason why, suspension aside, Tom Brady‘s life is better than pretty much everyone’s.
To see Forbes’ complete list of “The Most Valuable NFL Teams in 2016,” check out the gallery starting here.