NFL team sales likely to stagnate as valuations soar

The Seattle Seahawks could be the next National Football League team to be sold. Beyond that, no one knows when another franchise will change hands.

Former Seahawks owner and Microsoft co-founder Paul Allen died in 2018. Since his death, the team has been controlled by a trust run by Allen's sister, Jody. Allen's estate envisions the team being sold at some point, with the proceeds going to charity. But there's no clear timeline for the transaction to take place.

Allen's confidence has reason to hope, and it's the same logic that other team owners might not sell in the near future.

According to Marc Ganis, a sports consultant who advises NFL Commissioner Roger Goodell and league owners, NFL valuations will likely continue to rise in the coming years because of the league's broadcast rights deal, expansion and the addition of games. Owners risk losing out on big profits if they divest teams now.

“We're not even close to the top of the NFL market,” Ganis said. “The NFL is still in a growth phase in terms of appreciation and in terms of net revenue.”

According to CNBC’s official 2024 NFL team valuations, the average value of an NFL team is now $6.49 billion and no team is valued at less than $5.25 billion. Seven of the last 10 NFL teams that were sold outperform the S&P 500 in terms of percentage gain since sale.

Fueled by growth in media, sponsorship and licensing deals across the league (which are split among the 32 teams), the average franchise had $640 million in revenue and $127 million in operating income last year, according to people familiar with team finances.

The NFL's new broadcast rights deal went into effect last year. It's an 11-year deal that runs through 2033 and is worth more than $110 billion, an 80% increase from the league's previous deal. There is also a clause allowing the league to opt out of all packages except Disney'It's at the end of the 2028-2029 season; the NFL has an opt-out clause for the Disney deal after 2030.

That option will give owners another chance to cash in on their profits after the National Basketball Association nearly tripled the value of its own broadcast rights in July. Hypothetical future deals from deep-pocketed tech companies like Amazon, Netflix and AlphabetYouTube usage can lead to increases in the value of the most-watched NFL games. Television ratings continue to rise: ratings for the 2023-24 season were up 7% from the previous year and finished as the second-highest since record-keeping began in 1995.

“The NFL is the largest and most valuable audience in the U.S. for advertisers,” said Neal Pilson, former president of CBS Sports and founder and chairman of Pilson Communications. “The NBA deal will be a benchmark, but it will also be ancient history when the NFL renews, even if it chooses not to. That's still four years away. Everyone knows how well the NBA did. But in the end, the NFL's rights deal will be based on its audience and the revenue that third parties think it can generate by being a partner.”

The expected addition of an 18th regular-season game in the coming years and Goodell's interest in increasing the NFL's popularity internationally by adding games in Spain, Germany and Brazil should also lead to increased league revenue and higher valuations, Ganis said.

“The NFL has only just begun to get a glimpse of international revenue,” he said.

Ganis said an NFL team is sold about once every three and a half years. Those sales are typically driven by a death or scandal, making it difficult to predict when another team might change hands.

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

Each of the last four NFL team sales has set a new record, demonstrating the rising valuations. Billionaire businessman Terry Pegula and his wife, Kim, acquired the Buffalo Bills in 2014 for $1.4 billion after Pegula's death. Ralph Wilson, the franchise’s founding owner. That sum 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 previous owner Jerry Richardson for workplace misconduct.

Rob Walton, member of the family that owns Walmartled a group that purchased the Denver Broncos for $4.65 billion in 2022 after the death of Pat Bowlen.

These investments have skyrocketed in just a few years. Today, the Bills are worth $5.35 billion, the Panthers are valued at $5.9 billion and the Broncos' value has risen to $6.2 billion, according to CNBC's 2024 Valuations.

The NFL prefers to have owners who last decades because they will favor long-term decision making over short-term gains, Ganis said. Modernized estate planning to reduce taxes has led to more Family transfers occur from one generation to the next, he said.

This has further reduced sales of entire franchises. The NFL requires each team to have a written succession plan in case its owner dies. The Chicago Bears are currently owned by 101-year-old Virginia Halas McCaskey, the daughter of team founder George Halas. As planned, when McCaskey dies, ownership of the Bears will be distributed among her children and controlled by her eighth-oldest son, 68-year-old George McCaskey, who is currently the team's president.

“The decision makers in the league have a lot at stake,” Ganis said. “They're not paid employees with voting rights. They're making decisions in generational terms.”

Limited franchise turnover and high valuations have led Goodell to favor private equity ownership for the first time. Last week, NFL owners voted to allow certain private equity firms to buy up to 10 percent of a team's stock. Each fund or consortium will be able to do business with up to six teams.

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

Spokespeople for those three teams declined to comment.

The initial companies approved to invest are Ares Management, Sixth Street Partners and Arctos Partners, as well as as well as a consortium that includes Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners and Ludis, a platform founded by investor and former NFL running back Curtis Martin. That list is likely to grow over time, said Tracy Gallagher, director of private investments at Arta Finance, a digital wealth management platform.

“The NFL has clearly put liquidity at the forefront,” Gallagher said. “This is the first of many steps toward adding more options for buyers.”

The league is proceeding cautiously and taking small steps when it comes to private equity ownership. The NBA, NHL and Major League Baseball allow private equity firms to own up to 30% stakes. The NFL has limited ownership to 10% with select firms and intends to keep a percentage of the so-called carry, the profit that fund managers keep after reaching breakeven thresholds for their limited partners.

“I think our league is unique in that we still have 32 individual 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 we wanted to be mindful that we didn't do anything to change the essence of what makes our league so great.”

“Some of the ownership groups have real liquidity problems,” he said. “They have large families and they have to solve a lot of problems that are not typical. So we thought this was a great source of capital and that it could be done in a way that was very functional and didn't affect the business.” [team] operation,” he added.

Kraft told CNBC that the league's hesitation to allow private equity participation above 10% was intended to highlight the teams' role in their local communities rather than making money.

“Limiting investment to 10% is a way to keep it under control, from our point of view,” he said.

Still, onerous league restrictions may limit investor interest, even when NFL franchises have a clear upward valuation trajectory, Gallagher said.

“These are crown jewel assets, but at the end of the day, private equity managers are getting rich off the carry,” Gallagher said. “If you take away a portion of that, you take away the incentive to buy these assets.”

Gallagher also noted that other standard private equity investments have downside protection and offer board seats in case valuations plummet. The NFL has no plans to allow governance rights to private equity firms at this time.

“It will be very interesting to see exactly what the funds are buying and how they are protected to deliver returns to their end investors,” Gallagher said.

VIDEO: New England Patriots owner Robert Kraft speaks out on NFL's new private equity rules