Can the N.F.L.’s Rules for Team Ownership Survive its Skyrocketing Valuations?

If you watch the Super Bowl on Sunday, you will probably watch it live. That’s becoming increasingly rare in today’s era of cord cutting, and it’s one of the reasons valuations of football teams — along with those in nearly every other sport — have skyrocketed. With teams no longer viewed as merely trophies, the money has flowed in from investors who are rushing to own a piece of the action.

As valuations rise, more potential team buyers are being priced out. Major League Baseball, the National Basketball Association and the National Hockey League have responded by changing their rules to allow private equity firms to invest. (The N.B.A. now allows sovereign wealth money, too.) The question on every sports insider’s mind is when — and if — the National Football League will follow.

Football teams are the “Rolls-Royce of American sports leagues,” said Salvatore Galatioto, whose company has advised investors on buying and selling professional sports franchises. They bring in the most money, and they have, on average, the highest valuations — which are quickly growing, as sale prices over the past decade make clear:

Buffalo Bills (2014): $1.4 billion.
Carolina Panthers (2018): $2.22 billion.
Denver Broncos (2022): $4.65 billion.

The N.F.L. requires that an incoming general partner buy at least a 30 percent stake in the team. It also limits the amount of debt a buyer can use to finance the deal to $1 billion. That means the Washington Commanders, which hired Bank of America late last year to explore a sale, would need a buyer with about $1 billion in cash to match the Broncos’ valuation in 2022. Given the team’s popularity, and because Washington is a bigger market than Denver, any deal would very likely value the team much higher than that.

But N.F.L. owners aren’t flinging open the doors. Many have passed ownership down from generation to generation. It’s a close-knit bunch, and one that could be shaken by allowing institutional investors into its ownership group. “When you bring in sort of more anonymous entities, or at least ones that have larger swaths of decision makers, you create some reduction in that feel that this is an exclusive club,” said Alex Michael, a managing director at LionTree. Ryan Nece, a former N.F.L. linebacker and co-founder of Next Play Capital, told DealBook that, “given my conversations with N.F.L. team owners, it doesn’t appear to be something they are considering embracing today.”

Closed ownership affects more than deal flow. The lack of diversity among owners, who are overwhelmingly white, has been cited as one reason for the N.F.L.’s slowness in diversifying its ranks. “Owners still look a certain way,,” Richard Sherman told The New York Times in 2020 when he was a cornerback for the San Francisco 49ers. “They still come from a very old background.” On the N.F.L.’s diversity issues, he said: “They could not care less.”

Private equity, of course, has its own challenges with diversity, but new investors could expand the options. The N.F.L., for its part, passed a resolution in 2022 to increase diversity among its ownership. In August, three Black investors took minority stakes in the sale of the Broncos to the Walton-Penner ownership group.

There’s likely only one thing that will change the N.F.L.’s mind, say investors active in sports deal making. Gerry Cardinale, the founder of RedBird Capital Partners, put it like this: “If they have to have an auction for a team, or a sale process for a team, and a Jeff Bezos or a David Tepper or a Rob Walton doesn’t show up, I think they’re going to have to start to look at that.”

HERE’S WHAT’S HAPPENING

Americans are expected to bet $16 billion on the game, according to the American Gaming Association. That number is in legal and illegal bets and is more than twice the value of last year’s estimated wagers. It’s the first time the Super Bowl will be played in a state that has legalized sports betting.

Anheuser-Busch won’t be the only alcohol brand running national commercials for the first time since 1989. The parent company of Budweiser and Stella Artois still plans to air three minutes of national ads, but its competitors will also be allowed to join in Another longtime sponsorship ending this year? The halftime show, which has been sponsored by PepsiCo since 2013, is now backed by Apple Music, which signed a $250 million five-year deal.

Rihanna returns from a nearly four-year hiatus from live performances. The halftime show will be a high-stakes comeback for the pop star, who has been busy building three companies that helped make her the youngest self-made billionaire, according to Forbes. Her company Savage X Fenty has sold out of special edition T-shirts reading, “Rihanna Concert Interrupted by a Football Game, Weird but Whatever.”

Two Black quarterbacks face off in the Super Bowl for the first time. Jalen Hurts and Patrick Mahomes, the starting quarterbacks of the Philadelphia Eagles and Kansas City Chiefs, have both called the milestone “historic.”

The pregame

For most of America, the Super Bowl starts on Sunday evening. But for the deal makers who use the event as a backdrop for doing business, the real game starts days before kickoff.

It’s not uncommon to attend exclusive dinners and parties during the week, and then jet out of town before the opening kickoff. “Once the game starts, it’s just a game,” said George Foster, a professor at Stanford Business School who directs the school’s sports management initiative. “It’s much more effective to get extended time fairly focused on the business relationship on Thursday, Friday and Saturday.”

Michael Rubin, the founder of the sports merchandising company Fanatics, hosted a business lunch on Friday along with the sports agent Casey Wasserman. He said about 10 of the 100 guests, who included three state governors and about half of the N.F.L.’s team owners, flew to Phoenix just for that event. “That gives you a sense of how important it was,” he said. “People fly in and out just for an event.”

Deal makers take advantage of having big players in one place. “There’s C.E.O.-to-C.E.O. contact, which is unique in sports,” said George Pyne, the founder of Bruin Capital, a sports investment company, who has hosted a party with the agent Sandy Montag before each of the past 15 Super Bowls. “The N.B.A. Finals, you never know where and when it is, so you can’t go to that. Same with the N.H.L. Same with the World Series. There’s no other event that galvanizes sports business leaders in a way that the Super Bowl does.”

Rubin, who in addition to Friday’s lunch is hosting an 800-person, invite-only party Saturday night headlined by the Chainsmokers, said his deal to sell an online services company that he founded to eBay for $2.4 billion in 2011 largely came together during the days before a Super Bowl game. Fanatics, he says, has also done major deals with the N.F.L. at the game. “We’ve done billions of dollars of business at the Super Bowl over the years,” he said.

The pregame is growing. “The Super Bowl used to be a one-day event,” Foster said. “Now, it’s a week to two-week-long event.” Even so, luxury tickets to the actual game are still in demand. Stadium suites that can accommodate 18 to 26 people for this year’s game begain selling for $700,000 to $1 million, according to Suite Experiences, which allows companies with long-term suite leases to rent out their luxury boxes on the platform. “They want to watch the game for sure,” Pyne said, referring to deal makers, “but they’re there to conduct business.”

A $1 billion Super Bowl?

Another Super Bowl, another record.

According to Fox, the broadcaster for Super Bowl LVII, a bidding war has pushed up the price for the game’s most coveted 30-second ad slots to more than $7 million — further proof that a lousy economy and a steep downturn in ad spending is no match for the big game’s appeal.

Fox has raked in about $600 million in advertising revenue from the Super Bowl — yep, a record — as brands aim to reach what is likely to be the biggest TV audience of the year: an expected 100 million viewers (not a Super Bowl record). Over the past five years, the price of ads has spiked up and up, all but guaranteeing the exclusive broadcaster a lucrative payday at a time when media giants are laying off staff and cutting back on programming.

Question: How close are we to the first billion-dollar Super Bowl?

Answer: Probably 2027, according to the Kantar Group, a brand consulting and media analytics firm, which says that broadcast revenues for the event have been rising by $100 million each year.

Many viewers could care less about the Eagles or the Chiefs. Or the Rihanna halftime show. They want to see the buzzy ad creations that will liven up the roughly four-hour broadcast. In the YouTube era, advertisers now put the best spots online early. Here are some of DealBook’s favorites:

Pop Corners. The snack food brand has reunited the Breaking Bad characters Jesse Pinkman, Walter White and Tuco in a desert standoff. What could go wrong? Crunch.

Busch Beer. OK, this one is just weird. The Canadian singer Sarah McLachlan makes a cameo with what appears to be a wolf, and other woodland creatures.

Michelob Ultra. Yes, another beer ad. Like so many Super Bowl ads this year, this one plays on our nostalgic side; it riffs on “Caddyshack.” It features Serena Williams teeing off against Brian Cox of “Succession” fame. Stay for the final putt.

Sex work, sex trafficking and the Super Bowl

In December, Gov. Doug Ducey of Arizona, like many government officials preparing to host the Super Bowl before him, announced a statewide campaign to raise awareness of human trafficking, including sex trafficking, ahead of the big game. Though the claim that increased sex trafficking and sex work occurs during major sporting events like the Super Bowl has been debunked over and over and over and over and over again, anti-human trafficking campaigns often target these events.

Campaigns by cities have been criticized by advocates for sex workers, who say such efforts often rely on law enforcement “raids.” More patrolling can lead to more arrests of sex workers who are not being trafficked, they say, as well as the possibility that victims of trafficking will be arrested.

It’s also unclear whether campaigns to raise awareness about sex trafficking are effective at addressing it. “If we want to protect people who are being trafficked, we need to protect sex workers because they are the most vulnerable for that happening to them next,” Kristen DiAngelo, executive director of the Sex Workers Outreach Project in Sacramento, told The Washington Post ahead of last year’s Super Bowl.