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Football vs Football
Why the world's most popular sports league is so far from the most lucrative.
A Respite from Frameworks
I’ve spent much more time the past several weeks wading through the relatively esoteric frameworks and philosophies of work. This strain of thinking has been top of mind for me personally because, well, I’m literally building a company in the space, and thus the newsletter became a welcome forum for publicly working through my thinking.
But this newsletter is not, in fact, titled “Innovation Esoterica” – I am ostensibly to be writing about a wider cadre of topics. And thus this week we return to the world of sport, which I’ve written about previously and will continue to write about hereafter.
When thinking about structures of innovation, sport is quite interesting precisely because it is so structured. There is a strict set of rules, objective measurement of success (in the form of goals or points), and (mostly) clear winners and losers at the end. This is very much not like life, especially not in the realm of the Innovation Economy in which I focus!
Life is very much a wicked environment, but sport – sport is quite kind, at least in the Robin Hogarth sense, because there is almost no uncertainty or ambiguity in its manifestations. It is thus a really interesting area in which to discuss and dissect innovation precisely because success is so easily observed.
The NFL is a Valuation Machine
I knew that the NFL was the best sports business in the world, but 30 of the top 50 sports franchises? And just eight coming from UEFA, allegedly the best and most popular set of leagues for the world’s most popular sport? What’s going on here?
Of course the NFL franchises are top, but (almost) all of them? Why aren’t there more from other sports? Why is soccer so under-monetized relative to its global popularity? Is it as simple as “US market big, US Media big, NFL wins”?
After considering these questions for a bit, I did what any normie sports follower does – dove into the public financial records, governing by-laws, and other hyper-compelling documents to better unpack what is both factually true and systemically reinforced. What started as a simple valuation exercise quickly turned into an exploration of the fundamental structures of a sports league.
This ultimately becomes a series about the contrasting styles of sports monetization, between the most lucrative (NFL) and most popular (EPL); between a monopolistic, socialist system (NFL) and a byzantine “free market” system (EPL).
The ultimate question we’re exploring is:
What would need to occur for the EPL to become the most valuable league in the world?
One final note on verbiage – it quickly becomes both cumbersome and annoying to consistently refer to “American football” versus “English football”, so I’ll instead be using the Americanized vernacular: “Football” will always refer to the American game, and Soccer will refer to the English game2.
How large is each league?
Despite the NFL and EPL being two of the greatest drivers of consumer interest (i.e., fandom) in the world, landing on precise financials is quite fraught, as neither the leagues nor the vast majority of teams are public entities. I’ve cobbled together what I believe to be directionally accurate and most certainly incorrect figures throughout the series and, where necessary, generalized from the two teams with annual public filings (Green Bay Packers and Manchester United) for triangulation.
An easy place to start, given how this piece itself began, is with valuation. Let’s assume that the value of each league, if it were listed today, is simply the summation of all club valuations. Through this lens, the NFL absolutely dwarfs the EPL:
EPL Valuation = $30.2B, with a per team average $1.5B and median of $0.4B.
NFL Valuation = $137.7B3, with a per team average of $4.3B and median of $4.0B
Now, this is unfair of course. The NFL has 32 teams and the EPL (currently) has just 20 teams, but even if we adjust the EPL valuation for a fictional 32 team league, the $48.3B value remains just 35% of the NFL’s valuation.
This valuation gap belies the underlying popularity of each sport. The 2023 Super Bowl, the second most-watched in history and the third most-watched program since 1950, attracted 113M viewers in the US and an estimated 40M internationally, for 153M in total.
None of the major European soccer leagues have playoffs, and thus they individually lack a direct Super Bowl analog, but we can still frame the relative popularity against the most popular club tournament. The Champions League boasted a higher global viewership than this year’s Super Bowl…all the way back in 2009, and it’s only grown since then. Soccer and football are simply on different levels of global viewership.
We can expand this even further — in the 2019-2020 season, the EPL was broadcast into 878M global homes and watched by 3.2B total viewers. Compare this to the 185M total viewers for the 2022-2023 NFL season.
And this total addressable audience chasm is just as wide from a social media follower perspective. NFL teams collectively have 185M followers (not de-duped) compared to the 740M of current EPL teams. The most followed team in the EPL (Manchester United) has as many social media followers as all NFL teams combined, and ManU reports to have reached a global audience of 59.8M viewers per game itself4.
Two points should be both obvious and indisputable at this point:
Soccer generally, and the EPL specifically, is far more popular than the NFL.
The NFL and its member clubs are far more valuable than the EPL.
The point of connection between these two is monetization rates. Put simply, the NFL is a monster and the EPL is a mouse.
Revenue Stream Mix
Sports leagues monetize in numerous ways but largely fall into three buckets:
Media Rights - the licensing of league-produced match footage to broadcasters
Match Day/Stadium - revenues derived from attendance at each home game
Commercial - a more diverse catch-all including sponsorships, merchandise, and other items.
Here’s the breakdown:
The NFL drives almost as much revenue ex-media rights as the EPL does overall! If we break this down into the percentage values we get a better sense of the relative composition across each league:
In this view, we see that each league depends on its match day revenues equivalently, but the NFL is much more highly skewed toward its media rights monetization. That said, although the absolute value of media rights has ballooned over time, its relative share has significantly diminished from ~85% in 1994, as teams like the Cowboys have gotten much better at monetizing their team, stadium, and other owned properties.
I have not yet found any reliable data on the geographic distribution (domestic vs. international) of NFL revenues, so we’ll need to roughly estimate:
97% of media revenues are domestic.
90% of commercial revenues are domestic.
100% of Stadium revenues are domestic.
These estimates ultimately get the NFL to about 96% of revenues from its domestic US audience. Let’s be more conservative here and say, with good confidence, that the international audience’s revenue impact on the NFL is likely less than 10% and certainly less than 15%.
The EPL is far more geographically diversified. 2022 marked the first year that international media rights exceeded the value of domestic rights, and that gap is only likely to widen in the coming decade. Match Day revenues are obviously local, and assuming that Commercial revenues are 75% local, non-UK revenues make up 35% of total revenues for the league. As Media Rights take on greater and greater share of total league revenue, I would not be surprised to see non-UK revenues overtake the UK in the next 20 years.
The EPL has grown from $6.2B in 2018/2019 to a projected $7.2B in 2022/2023, a 16% increase over the period, stemming from two years of declining revenue (only one of which was pandemic-related).
Over the same period, the NFL has grown from $16B to $18B - slower growth (12.5%), though not altogether unexpected. As former NFL league exec Jay Kapoor discussed on a Business Breakdowns episode, NFL revenues tend to step change with each 10-year media deal then slowly grow in the intervening decade until the next deal.
Taking a broader time horizon, starting from the EPL’s initial year in existence (1992):
The EPL has grown from about $100M - a 72x increase at a 15.3% CAGR.
The NFL over the same period grew from a base of about $1.5B - a 12x increase at an 8.6% CAGR.
Overall, the EPL has grown almost twice as quickly, but from a base that started 95% smaller. If our goal is to (hypothetically) grow the EPL larger than the NFL, it simply won’t happen in any reasonable time period based on the current growth rates. And a major reason for that challenge is competition.
As we’ll discuss often in this series, the NFL is football - there is no other league in the world that competes with it, and as such, all global football revenues are NFL revenues.
This is very much not the case with soccer, as both major and minor leagues are prominent in every country, the biggest of which reside in Europe.
Amongst the “Big Five”, the EPL reigns supreme. For the pandemic-ravaged 2020-2021 season, during which no Match Day revenues were incurred as matches were played without fans, the EPL drove 83% greater revenues than the second largest league (Germany’s Bundesliga) and almost as much as both Germany and Spain combined. This English soccer dominance is a more recent phenomenon, as league revenue growth (driven primarily from media rights revenues) has significantly outpaced all other leagues:
The “big five” UEFA leagues totaled $16.5B in revenue for 2020/21, roughly equivalent to the NFL but stemming from 100 teams vs. 32.
These five countries represent about 325M people, roughly equivalent to the US.
The EPL earned $5.5B that year, or 33% of the Big 5 (easily the largest).
So we actually see that the Big 5 is a rough analog to the NFL both in revenues and population. This necessarily means that the EPL’s revenues today are substantially harmed by the presence other major leagues.
Though the Big 5 are the dominant soccer leagues, soccer is obviously much larger than just these five countries. In fact, European soccer overall was estimated to have driven $33B in 2020 – twice the size of the NFL – from a population that is roughly equivalent to twice the US.
That is, European soccer monetizes at approximately the same rate as the NFL in America…except that these revenues are highly fragmented across dozens of national leagues. England’s relative revenue dominance thus only translates to 17% market share in Europe and likely less than 10% globally.
We have at least a partial answer for the base question we’re posing in this piece – soccer overall is a far more popular, far more valuable sport than football, but it is highly fragmented. The EPL is the best monetizing soccer league in the world, but it holds at best 10% market share, whereas the NFL has a complete monopoly on the sport of football. As I’ll discuss in future pieces, this market vs. monopoly dilemma is built into the very structure of each sport.
So if the EPL were to overtake the NFL in revenues, one or both of two factors must be true:
Global soccer monetization must increase by a significant clip (at least double and likely more).
The EPL itself must capture greater market share of the global soccer pie.
This, then, is our mission the next few weeks – to explore how the EPL could conceivably overtake the NFL as the most valuable “football” league in the world. It’s ambitious and will certainly upset many of the norms of the “beautiful sport”, but it’s an interesting exercise nonetheless. We’ll pick this up next week.
No, I will not be calling tweets “exes”. This is so categorically dumb and should not be encouraged.
If you want a much longer explanation for why this is not nearly as stupidly American as is typically portrayed, I'd recommend reading the sub-chapter in Soccernomics.
Note that I originally wrote this before Josh Harris made the Washington Commanders(!!) the most expensive sports team purchase in history.
One final note: fewer than 100M in the world play football, compared to the hundreds of millions that play soccer.