Seattle Seahawks: Why are NFL franchises selling for $10bn?
Just days after winning their first Super Bowl in over a decade the owners of the Seattle Seahawks – the Allen family – put the NFL franchise up for sale.
Paul Allen was a co-founder of Microsoft, and “The Estate of Paul G. Allen” has now begun a formal sale process of the franchise due to a directive in the American’s will which would see his sports businesses sold with the proceeds going to charity.
But the generous donations expected from the sale of the Seattle Seahawks are set to continue a trend of NFL franchises being valued around the $10bn mark or above.
The Dallas Cowboys ($13bn), the Los Angeles Rams and New York Giants (both $10bn) have breached the 11-figure threshold recently with other teams hovering at around that level too.
But why is a NFL franchise able to command such a price when other teams in other sports outside of the United States struggle to be worth half that?
Seattle Seahawks pulling factor
“The Seattle Seahawks situation involves several factors,” MSQ Sport+ Entertainment founding partner Steve Martin tells City PM.
“The purchase of an NFL franchise is ultimately a billionaire’s vanity acquisition, and the Seahawks are also benefiting from a long period of consistent organisational success.
“The reason valuations for NFL teams are so high is scarcity: there are only 32 franchises, and changes of ownership are relatively rare, particularly in this case, with the team being sold by the Allen family.”
Adds Professor Rob Wilson: “We need to remember that when you buy into a NFL team, you don’t just buy the individual team, you become a shareholder in a highly coordinated league product. In sport, you can’t produce a product alone.
“The quality of competition depends on your rivals. In economic terms we call this the joint nature of production. The NFL’s collective sale of media rights, revenue sharing and salary cap are designed to preserve competitive balance, keeping games uncertain and fans engaged.
“That balance protects the league’s overall appeal and drives stable and predictable revenues. Ultimately investors are buying into a scarce, cooperative so-called cartel that consistently generates billions of dollars. So when the opportunity arises to buy a club, the values keep climbing.”
Activity ramping up
The increase in activity surrounding NFL franchise ownership comes at a time when the league admitted private equity stakes for the first time, and when US family offices are taking an increasing interest in European sport – where relegation replaces the safety of franchise leagues, but where multi-club opportunities provide their own advantages.
When the Seahawks won the Super Bowl this month, they beat the Sixth Street-backed New England Patriots in San Francisco.
Private equity in the NFL is not a year old yet, but up to 10 per cent of each club can be sold off to any number of Arctos Partners, Ares Management Corporation, Sixth Street, and a consortium group including Blackstone, Carlyle, CVC, Dynasty Equity, Fortress and Ludis.
The Seahawks’ new ownership structure could feature some of this equity.
New rules for NFL
“New ownership rules require that teams be owned by an individual rather than a charitable foundation, which is shaping how this sale proceeds,” adds Martin. “Scarcity is a big play of rising values, but it is reinforced by the underlying strength and consistency of the NFL business model.
“The result is very strong, steady income streams from multiple sources, often amounting to hundreds of millions, which supports the elevated valuations, even if they appear somewhat toppy at present.
“Within this context, the Seahawks themselves are punching above their weight as a franchise but continue to perform consistently well. There is also a significant West Coast play in the Seattle market that attracts considerable interest from tech businesses.
“Taken together, these factors help explain why the team can command such a high valuation and why, on closer inspection, the numbers broadly add up.”