The Globalization of the NFL

Krista HaswellJason Moore

Joe WeberTom Poe

Dan Rousseau

The NFL is highly successful in the US market. After unsuccessful attempts to expand internationally, how can the NFL generate additional international interest in the sport and the league to increase revenue?

• Why did prior international ventures fail? Were there any successes? Why have other US based professional sports leagues found success internationally while the NFL has not?

• What is the value chain followed by US professional sports leagues? Where does the NFL gain value?

• What does the NFL do to generate revenue? How can their revenue be increased? Should their revenue generating strategy differ domestically versus internationally?

• Does the NFL need to popularize American football to be successful internationally? Does this require the NFL to increase or develop international players, teams, or leagues?

Why did prior international ventures fail? Were there any successes? Why have other US based professional sports leagues found success internationally while the NFL has not?

NFL International League Evolution

Intent

•New league designed to develop NFL players in the spring and spread the game of football•Doesn’t compete directly with NFL

•Partnered with Barcelona Futbol Club

•League evolved to be used as testing grounds for NFL players, coaches, and referees

Effect

•Low game attendance•Best players not sent to league; NFL coaches didn’t want unknown coaches developing talent

•Partnership failed; Barcelona never gained popularity, got into financial trouble, and disbanded in 2003

•League disbanded in 2007 after losing $20 million per year•League never consistently produced star NFL players

•Was the NFL Europe League the same product as the NFL? Did this impact the league success?•Is it possible to have a successful venture that is only intended to produce star players that will eventually move to the NFL?

World League of America

The World League NFL Europe NFL Europa

1991 1994 1997 2006

NFL Europe League Results

1990 1992 1994 1996 1998 2000 2002 2004 2006 20080

5000

10000

15000

20000

25000

30000

Average Game Attendance

•Did the attendance drop off after the first two seasons because the fans noticed it was an inferior product to the NFL?•Does the stagnant attendance growth mean the league failed to build interest in the sport or the product?•Were there any successes in this league?

Concentration of NFL Europe Teams1991-1992 Teams

USACanadaEnglandSpainGermany

2004-2007 Teams

GermanyAmsterdam

•Could the German market be developing to support the NFL fan base? Why is this market different from the others?•Can the German market be expanded further to increase revenues?

International Success of Other US Professional Sports Leagues

MLB NHL NBA0%

5%

10%

15%

20%

25%

30%

35%International Players

•Could a high percentage of international players in a league be the key to international success?•If so, what can the NFL do to generate this level of international players?

International Success of Other US Professional Sports Leagues

Baseball Basketball Hockey Football

International Independent Grassroots Growth

Yes Yes Yes No

•Is grassroots development key to pulling international players to professional leagues?•Have independent development efforts aided in the international success of professional sports?•Does the NFL need to focus on the grassroots level?

International Success of Other US Professional Sports Leagues

MLB NBA NHL

International Strategy

Mixture of broadcasting games internationally and grassroots development

Broadcast games internationally

Play live games internationally

Successful? Yes Yes Yes

•Is a top-down marketing strategy the best way to be successful internationally?•Could the NFL experience the same success by using a strategy comparable to the other professional sports leagues?

What is the value chain followed by US professional sports leagues? Where does the NFL gain its value? Where are the

opportunities for the NFL to gain additional value?

Value Chain for US Professional Sports

•Value is gained in only three specific areas so each is of great importance to the NFL.•Where does the NFL currently gain its value and how is its value proposition impacted by international strategy?

League Value

Step 1: Acquisition of Talent for US Professional Sports

How does talent enter a league?

How are skills developed before entering a pro sport?

Where does talent come from?

Draft In childhood through family interest or participation in organized sport

Domestic Players

Free Agency In high school and/or university team play

International Players

Trades Grassroots efforts to promote sport

Development Leagues

Minor Leagues

Other Pro Leagues

•Acquiring the best talent increases value of the league. The NFL already has the best talent available because there is a lack of international leagues from which to find players. •Are there other opportunities to find talent or should the NFL focus on other steps in the value chain?

Typically not sources for NFL talent

Step 2: Production of the Game for US Professional Sports

Production of the Game

Technology

SeatingTV Broadcast

Mascots and CheerleadersHype

Stadium Amenities

Half-time Shows

•Better fan experience = better value for NFL through increased revenue •The NFL can exploit advancements in technology to bring more of the fan experience to those not in attendance .•In what ways can the NFL enhance game production to appeal to a greater audience abroad?

Opportunities through Technology

NFL

Mobile

Television

Radio

Internet

Video Games

•The NFL can continue to benefit by advancements in technology because technology increases the NFL’s exposure.•Which technology provides the best opportunity to fuel growth? Which generate the most revenue?

Step 3: Sale of Merchandise for US Professional Sports

•Increased stadium generated sales and TV rights could expose the NFL to a greater audience and provide additional value through an increase in sale of team paraphernalia. • With a limited number of games and attendance, is the best way to increase value through increased sales of TV rights abroad?

Television rights(most value for NFL)

Stadium generated sales(Inc. Sales=Inc. Revenue=Inc. Value)

Team paraphernalia

1

2

3

Financial Comparison of US Professional Sports Leagues

Leagu

e Rev

enue

Overal

l Opera

ting Inco

me

Averag

e Tea

m Value

0

1000

2000

3000

4000

5000

6000

7000

MLBNFLNBANHL

Operating Margin

MLB 8.15

NFL 13.2%

NBA 9.9%

NHL 5.9%

•Higher operating margin indicates better profitability. Average team value is also a strength of the NFL. The NFL must consider the impact on both when considering an international strategy.•Why is the NFL’s operating margin so much higher and can it be sustained with international expansion?

Ticket Sales Comparison of Professional Sports Leagues

MLB NFL NBA NHL

Average Game Attendance 32,516 68,034 17,497 17,476

# of Regular Season Games per Team 162 16 82 82

Average Ticket Price $ 25.40 $ 72.20 $ 48.80 $ 48.70

Less games = less costs incurred in production of games throughout the season Less games = ability to demand a higher ticket price

•The number of games directly impacts the value of the NFL. Each game is more important to the NFL than to the other leagues because higher attendance is concentrated in fewer games. •In terms of international expansion, how can the NFL capitalize on the value provided by each game?

What does the NFL do to generate revenue? How can their revenue be increased?

Should their revenue generating strategy differ domestically versus internationally?

NFL Revenue Streams

NFL

Licensing Fees & Merchandising

Sales(Includes Sponsorships)

Television and Media Rights

(National & Local)

Ticket Sales(All stadium-generated

revenues, ex: concessions)

•Should the NFL focus on all three revenue streams , a combination of the three, or just one? •Which revenue stream stands to have the biggest gain from international expansion?

NFL Ticket Sales (includes stadium generated revenues)

NFL MLB NBA NHL

Total Ticket Revenue $1,257,500,000 $2,007,000,000 $1,050,900,000 $1,047,300,000

Total Games Played in Season

256 2430 1230 1230

Average Revenue Per Game

$4,912,109 $825,925 $854,390 $851,463

Average Ticket Price $72.20 $25.40 $48.80 $48.70

NFL Ticket Price Compared to Other

Leagues

n/a 2.85X 1.48X 1.48X

•The NFL is able to generate more revenue per game and demand a higher premium for its tickets by having substantially fewer games than other US professional sports teams. •Adding additional games risks causing the NFL to lose its ticket premium advantage, resulting in little to no revenue increase.

NFL Licensing Fees and Merchandise Sales

International Revenue

12%

Domestic Revenue88%

• The small portion of international sales indicates that the NFL has an opportunity to increase this revenue stream substantially. •To capitalize on this opportunity , the NFL must be exposed to a greater and more attracted international audience.

Total Merchandise Revenue $1.6877B

NFL Broadcasting RevenueBreakdown of Total NFL Revenue

•Broadcasting revenue generated by television provides the most revenue for the NFL and given that there is substantially less international demand, it can be assumed that international broadcasting generates a smaller portion of overall revenue.•By not focusing on the dollar amount of broadcasting revenue generated internationally in the short-term, could trying a “push” strategy, where international TV networks or satellite stations carry all regular season games, have the potential to generate additional interest in the NFL abroad, thereby helping the NFL in the long term?

Broadcast Revenues vs. Number of Games

29.8

9.97 10.5

0.12

NFL MLB NBA NHL

Multi-year Broadcasting Revenues inBillions Number of Games Played Per Season

•As with ticket prices, the NFL is able to demand a premium for its broadcasting rights by having fewer games compared to other US professional sports leagues. Adding additional games might not actually increase revenue. •Does the NFL have any opportunities to increase broadcasting revenues or have revenues in this category topped out? With the NFL sharing all national and local broadcasting revenues among the teams, would an international team be able to contribute at the same level as domestic teams?

Total Revenues of US Professional Sports Leagues

NFL MLB NBA NHL0

1

2

3

4

5

6

7

2009 Revenue - Billion USD

These leagues have a substantially higher portion of international revenues

•The NFL has earned so much revenue without large international positions like its peers.•Does this mean the NFL has maximized US revenues? Does the NFL need to expand internationally with these revenues?

Does the NFL need to popularize American football in order to grow their international presence? Does this require the NFL to increase or develop international players, teams, or leagues?

Timeline of International Exposure

Oct1866

Jan1879

Apr1891

Jul1903

Oct1915

Jan1928

Apr1940

Jul1952

Oct1964

First NFL Football Game Outside of North America

1976

NFL’s first international exhibition game in Canada

1950China introduced to basketball1883

Japan introduced to baseball

1867

Cubans introduced to baseball1866

•How can the NFL expand their product into international frontiers when football itself has been lagging other sports? •Why has it taken so long to internationalize the game of football?

Football Lags in International Exposure

Average Equipment Cost per Player by Sport

Football Hockey Baseball Basketball$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

•Is the high cost associated with playing football hurting the international expansion of the sport? Could this be why the sport isn’t played outside of the US?

International Leagues and TeamsLeague Player Development Source Teams outside US International

player impactMLB •Minor leagues associated with MLB

•College Baseball•US Youth development programs•Professional leagues abroad through free agency (Japan)•Developmental camps (Latin America and South America)

Yes Yes

NBA •College Basketball•Professional leagues abroad (Europe and China)•Development academy/camps (Europe)

Yes Yes

NHL •College Hockey•Professional leagues abroad (Europe, Russia, Canada)

Yes Yes

NFL •Mostly College No No

• Is an existing infrastructure necessary in order for the NFL to gain access to a global talent pool?•Given its success, does the NFL need international players?

NFL International VenturesProduct Description Measures of success Results

Super Bowl Televise single championship game event

800 million viewers across 150 countries watched the 1997 game

Most international viewers are thought to be expatriate Americans; some interest globally to watch the highest level of play

SUCCESS

Preseason/Exhibition Games played abroad

Hold exhibition games outside USA; first game played in Canada in 1950, 1976 in Tokyo, American Bowl 1986-2005

Games of little significance/meaning; no real strategy around expansion of product

FAILURE

The World League/ NFL Europe

Created to spread game beyond USA and develop players, coaches, and officials

After initial introduction in 1991 average game attendance dropped below 20,000 after 1992; championship game attendance was better when rivalry involved (Germany)

Partnership with Barcelona Dragons failed. Barcelona never gained popularity, got into financial trouble, and disbanded in 2003

FAILURE

International Development Practice Squad

Started in 2004 to expose foreign born players to the NFL

Has not developed talent into NFL players

FAILURE

International Series Hold regular season games outside US, introduced in 2005 (Mexico City), 2007-2010 (London)

Record numbers at game in Mexico City and 20% increase in revenue from Mexico; television viewership in UK doubled by 2010

Success in target markets SUCCESS

•International success has only been achieved through single game events showcasing the highest level talent. Should the NFL schedule more regular season games abroad?

NFL Changes Its International Strategy

Mexico

•Played first regular season game in Mexico in 2005

London

• Played regular season games in London between 2007 and 2010

Revenues from Mexico increased

20% in the following years.

Television viewership in

London doubled by 2010.

• Regular season games played abroad = increased international interest where played• How can the NFL duplicate this success?

Germany…Formula For Success?

•Germany is the only other market where there is a significant youth development program for American football, resulting in interest despite the lower quality NFL product offered.•If youth are introduced to the sport of football, will they be more receptive to the NFL?

Youth Develop

mentLeagues

NFL Europe

Professional Games

Higher attendanc

e and increased interest

Strategy for International Success

Increased grassroots developme

nt of American Football

Increased outward exposure

to NFL games

NFL International

Success

Both initiatives are necessary for the NFL to find the highest possible success in international markets. How can the NFL execute this strategy?

Recommendations – Top-DownProposal Value Impacted Benefit

Play a few regular season games in Mexico, England, and Germany

Production of GameSale of Merchandise

Exporting the NFL’s best product (regular season games) provides the best opportunity to increase demand for the game.

Use the internet and mobile devices to bring the NFL to international markets

Production of GameSale of Merchandise

The advancements in mobile technology and widespread use of the Internet provide the NFL an opportunity to market the league without the costs of physically bringing the league to new markets.

Expand NFL TV broadcasts internationally Production of Game Broadcast revenue is a key component of the NFL revenue stream and the NFL should capitalize on additional markets. It is a low cost approach to expanding the reach of the NFL.

Modify production of game to relate to the local international culture

Production of Game Preference of international fans must be taken into account to create a wider appeal.

Don’t add additional NFL games to regular season just to play internationally

Production of Game The NFL generates considerable value through its strategy of high ticket price/low number of games.

Recommendations - GrassrootsProposal Value Impacted Benefit

Invest in youth development of the game of football internationally.

Sale of MerchandiseAcquisition of Talent (Long-term)

By expanding the knowledge and enjoyment of the sport, the NFL could realize increased demand in the broadcasted games and merchandise.

Incentivize independent football ventures internationally

Acquisition of Talent (Long-term)Sale of Merchandise

This is a long-term strategy to build the fan base and provide the possibility of international players.

Refrain from creating International Leagues Acquisition of Talent Previous leagues have not been successful and there is no evidence that indicates that these will be successful in the near future.