Exclusive: Leaked Documents Show Operating Profits For NFL Ventures Rose 29 Percent Last Year

NFL Ventures, the league's billion-dollar, all-but-the-kitchen-sink wing that oversees sponsorships, marketing, media properties, sales, and satellite rights, saw its operating profit grow by 29 percent from 2009 to 2010. This was along about the time that owners began claiming the business of professional football had become intolerably stagnant. That an arm of the NFL would rake in so much money shouldn't come as a surprise — a lot of the multi-platform success of the league over the past two decades can be glimpsed in Ventures' unruly portfolio — but looking at the sunny picture offered by the audited financial statements below, you can't help but wonder what the lockout is really all about.

NFL Ventures, which Roger Goodell ran before becoming commissioner, comprises four wholly owned subsidiaries: NFL Enterprises ("advertising, publicizing, promoting, marketing and selling broadcasts of NFL games"), NFL Properties ("licensing, sponsorship and marketing"), NFL Productions ("produces NFL-related programming for the NFL and its Member Clubs"), and NFL International ("marketing, publicizing, promoting, licensing, distributing and developing the NFL's international business"). This covers everything from the customized replica alternate jersey you buy at the team store to the wonderful old NFL Films propaganda you watch at 3 a.m. on ESPN. When the NFL buys stock in Under Armour, it's done through NFL Ventures. (Take a look at page 21 below. Under a deal struck in 2006, the league has warrants to buy up to 480,000 shares at $36.99 per. Under Armour, which has 51.7 million shares, is now trading at $78 or so.)


In 2010, Ventures accounted for $1.8 billion of the league's $8 billion in revenue, or nearly a quarter. (Click image to enlarge.) Fifteen years ago, says Roger Noll, a sports economist at Stanford, Ventures' share of overall revenue would've been 1 or 2 percent.

The gains over 2009 come mainly from NFL Enterprises, which governs Sunday Ticket, RedZone, the NFL Network and the like. Check out pages 39 and 40. In 2009, Enterprises recorded an operating income of $685 million. In 2010, that figure rose to $935 million — this despite whatever losses presumably were incurred by the NFL Network. (In 2009, the Philadelphia Daily News reported that the network "is losing about the same amount of money right now as NFL Europe was when the owners pulled the plug," which is at least partly attributable to the league's inability to strong-arm cable companies into placing the network on basic channel packages.) Those losses are not a minor issue, either. They come out of the revenue the league shares with the players, which means that, in a roundabout way, Ray Lewis pays for Rich Eisen to run around the NFL combine in wingtips.


Also note that disbursements to the member clubs — a payment, in the form of an annual license fee, from NFL Ventures to the individual teams — rose from $904 million to $1.26 billion, which Noll says accounts for the drop in net income. That's money moving from one pocket to another.

If you want an idea of Ventures' annual profit, Noll says, take "operating income" (which doesn't include the payments to the clubs) and add "other income." That gives you a profit of $955 million in 2009 and $1.295 billion in 2010. Noll writes in an email:

However, almost all of the change in "other income" is that the NFL recovered its losses in the stock market. Its losses in 2009 were $36 million, but in 2010 it gained $20 million, for a $54 million turnaround. This is relevant to the point that the NFL was in much better financial health in 2010 than in 2009.


Why is this important? The NFL has three sources of revenue: Ventures; TV (minus satellite), representing the largest bucket; and local/team (mostly in-stadium income, Noll says, but also rights fees for radio broadcasts). We see here that Ventures grew, and we know that broadcast fees have nudged upward. "So if they experienced declining revenue," Noll says, "it would have to be local because the other two sources grew." The notion that local revenue has fallen or even flattened, Noll adds, is "extremely unlikely." Without seeing the teams' books, we'll never know for sure.

The broader point, though, is that looking for the NFL's red ink is a mug's game. The lockout, as Noll says, was never about the league's financial straits. "It was about, 'They want more,'" he says.


Last week, we posted audited financials for the NFL league office, which administers the G-3 stadium fund, offering low-interest loans to teams that are building stadiums. The money ran dry in 2007 after a decade-long stadium-building boom, and the case could be made that the real dispute at the heart of the lockout lay between the owners who'd exploited the G-3 program to build bright new revenue-generating stadiums and those who hadn't and now couldn't because their peers had burned through the fund. In this light, the lockout looks like something else entirely — less a battle between management and labor and more a proxy war in which the owners, unwilling to fight each other for money, decided to extract it from the players instead.


NFL Ventures, 2009 & 2010 [Download as PDF]


EARLIER: Audited financials for the NFL league office

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