As first appeared in Boxscore
By Aron Solomon
The NFL’s decision on Tuesday to offload 200 employees has raised concerns about its financial health despite its overall success. Perhaps more importantly, for those of us who follow not only the game but the business of football so closely, it raises our collective radar that something is off.
This move comes at a time when the league claims to be facing various challenges, including recovering from the financial impact of the COVID-19 pandemic, rising costs, and the need to adapt to a changing sports and entertainment landscape. While the NFL remains a powerful and influential organization, this massive sunsetting on employees proves that even this behemoth is not immune to the economic realities affecting many industries.
The COVID-19 pandemic significantly disrupted the sports and entertainment industry, leading to revenue losses from ticket sales, merchandise, and live events. The NFL, being a major player in this space, absolutely the impact of these losses. And there is no doubt that the rising costs of operating a professional sports league, including player salaries, stadium maintenance, and administrative expenses, have put pressure on the NFL’s finances.
Yet these layoffs also need to be viewed in the current context of the league’s stunning, massive growth.
The NFL’s revenue has experienced significant growth over the years. Between 2001 and 2019, the total revenue of all 32 NFL teams steadily increased, reaching $15 billion in 2019.
While this in itself isn’t chump change, the league made an estimated $11.9 billion in national revenue during the 2021-2022 season, and Commissioner Roger Goodell targeted a revenue of $25 billion by 2027. Since Goodell became Commissioner in 2006, the NFL has increased its annual revenue by 190%, from $6.54 billion to $19 billion.
Just last year, in 2022, according to NBC Sports, the NFL’s national revenue reached $11.98 billion, reflecting a growth rate of 7.8%. This growth in revenue is attributed to various factors, including TV deals, marketing, and corporate sponsorships.
As Pennsylvania lawyer Matthew Muckler points out, “For those of us who are serious football fans, The NFL’s strong financial success showcases its lasting popularity and effective business strategies. As the league strives for revenue goals, it maintains a dominant position in the global sports market, poised for continued growth and success.”
So with this solid business model in place, I personally think the reason why the league is shedding staff lies in the evolving nature of sports consumption.
The rise of streaming services and digital platforms, has forced traditional sports organizations like the NFL to adapt and invest in new technologies and business models. These investments require significant capital – often in pretty big up-front doses – which may have contributed to the league’s perceived need for cost-cutting measures such as employee layoffs.
So while it’s true that the NFL is a dominant force in the sports industry, the league’s decision to offload 200 employees is absolutely a concerning development that reflects potential unexpected weaknesses in their business model.
The lesson for those of us who follow the business of football is that while the league remains successful, it is not immune to economic realities and must adapt to ensure its long-term viability.
About Aron Solomon
A Pulitzer Prize-nominated writer, Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital and the Editor-in-Chief for Today’s Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in Forbes, CBS News, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo!, ABA Journal, Law.com, The Boston Globe, YouTube, NewsBreak, and many other leading publications.