EVERY SPOKEN WORD
150 min read · 30,012 words- 0:00 – 0:37
Intro
- BGBen Gilbert
So in my headphones, I have, Are You Ready for Some Football?
- DRDavid Rosenthal
Yeah, I was listening to that, too!
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
Yes. Dude, it gets you so pumped up.
- BGBen Gilbert
It totally does. I feel like I grew up on the Fox Sports theme. [singing]
- DRDavid Rosenthal
[singing] It always makes me think of Thanksgiving.
- BGBen Gilbert
It makes me think of, I think it was a Jock Jams tape that I bought.
- SPSpeaker
Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?
- 0:37 – 6:05
Welcome to the Remastered NFL Episode
- BGBen Gilbert
Welcome to this special remastered edition of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
- DRDavid Rosenthal
I'm David Rosenthal.
- BGBen Gilbert
And we are your hosts. Three years ago, in January of twenty twenty-three, we released an episode on the National Football League, which David, I think is absolutely an essential part of Acquired canon.
- DRDavid Rosenthal
Totally agree. We took so much from that episode.
- BGBen Gilbert
But, listeners, a few things have happened since then. One, the NFL has become even more of a juggernaut. Two, Acquired's audience grew a lot, so many of you never heard that episode. And three, the, uh, ultimate Acquired universe crossover happened between the NFL and, uh, Taylor Swift.
- DRDavid Rosenthal
[chuckles] Yes. It was kind of, uh, bad timing when we made this originally, 'cause it was right before that happened.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
But Ben, you forgot the most important thing, which is that this year, in twenty twenty-six, we are hosting the Super Bowl's Innovation Summit at the Super Bowl in San Francisco this year.
- BGBen Gilbert
Yes, we are. Listeners, details on how and when you can watch that are in the show notes. So to help us come up to speed and prepare for that, and to help you get pumped for the Super Bowl, we decided to remaster our NFL episode to today's Acquired production quality standards. We also decided to update the episode with everything that has changed about the league, from streaming on YouTube and Netflix and Amazon and all those deals, to our updated thinking on the international strategy for the NFL, and of course, how, uh, the influx of gambling being legalized has affected the league.
- DRDavid Rosenthal
And at the very end, we have the wild story of how private equity has entered the league, too, so [chuckles] make sure you stay tuned for that, 'cause it is nuts.
- BGBen Gilbert
Yes. We're gonna put all of these updates in a special new section right at the end of the episode. So listeners, it is time to throw it over to myself from twenty twenty-three and onto our remastered episode of the National Football League. Football is America's favorite sport, by far. In fact, football is more than three times as popular as the next highest sport, basketball. The Super Bowl is watched by over a hundred million viewers every year in approximately two-thirds of American households. My favorite Super Bowl stat is that it's the weekend with the fewest weddings planned of the year.
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
It is the NFL's world, and Americans are just living in it, especially the TV networks, which have been reduced from pillars of our nation in their heyday, to largely distribution channels for the NFL today, plus some other lesser programming sprinkled in. Of the top one hundred TV broadcasts aired last year, eighty-two of them were NFL games.
- DRDavid Rosenthal
Wow, that is wild.
- BGBen Gilbert
Totally wild. But how did we get here? How did this game become the most valuable media property in America? The story is one of incredible cooperation, of belief in growing the pie over a century, and just like our benchmark episode, of communist capitalism at its finest. The NFL owners have made bold long-term bets in choosing to divide their revenues equally in a way that no other sports league has. Of course, the NFL hasn't been free of controversy. From the horrible recent on-field collapse of Damar Hamlin to the epidemic of CTE among former football players, players are clearly putting their lives at risk, and the modern fan's relationship with the sport is complicated. I personally love watching football. It has been finely tuned over the years to be maximally, maximally entertaining, but it comes with cognitive dissonance for me every time I tune in, and I know many others feel the same. Whether pro football is your favorite pastime or you think it's a societal ill, there is no denying the incredible role that it plays in all of our lives today. Now, listeners, just like our NBA episode a couple of years ago, this is an episode on the business of football. It's not specifically about things I learned reviewing game film or the merits of the I-formation. Today, we're talking about the business.
- DRDavid Rosenthal
But we do have some sports thank-you's to Michael MacCambridge, author of America's Game, which provided much of the research for this episode, and it's just, like, the definitive biography-style history of the NFL.
- BGBen Gilbert
Well, after you finish this episode, come discuss it with the other smart, curious, kind members of the Acquired Slack at acquired.fm/slack. And listeners, this is not investment advice. David and I may have investments in the companies we discuss. All right, David, take us in. Where are we starting?
- DRDavid Rosenthal
All right. We start on November sixth, eighteen sixty-nine, on the campus of Rutgers University in New Brunswick, New Jersey, just a very short train ride up from Princeton, New Jersey, as I know well from my time there, where, indeed, a group of about twenty-five or so Princeton students were up at Rutgers to visit a similarly sized group of Rutgers students, and they were there to play a game of football.
- 6:05 – 14:34
Origins of Football & the Forward Pass (1869-1905)
- DRDavid Rosenthal
[chuckles] Now, what was football in eighteen sixty-nine?
- BGBen Gilbert
... This is not someone dropping back in the pocket and throwing a 70-yard bomb?
- DRDavid Rosenthal
[laughs] No. No, no, no. It was essentially what today is classified as mob football, quote, unquote, or medieval football. This had been played for centuries in England, and basically, the only goal of the game was for one side to get a ball to a certain spot on the other side, and that was it. There were no rules. Any number of people could participate on either side. You could do anything up to and including maiming and killing people on the other side, or your own, which happened quite frequently.
- BGBen Gilbert
I mean, keep in mind, this is four years after the end of the Civil War.
- DRDavid Rosenthal
Yes. So now why were these two groups of Princeton and Rutgers students so interested in playing this game?
- BGBen Gilbert
This terribly violent game.
- DRDavid Rosenthal
Well, back in England, it was quite popular among public school students. Now, public schools in England are like private schools in America, and they were starting to adapt it into an actual sport. And so like any sort of stepchild nation, these American college kids were kind of trying to keep up with the social elite back in the mother country and do the same thing, bring football in a codified way to schools in America. There were 25 players per team, so 50 people on the field, a round ball that could not be picked up and carried, couldn't be thrown, and the object was to kick the ball through the opponent's goal, for which you received one point.
- BGBen Gilbert
Okay, so it's soccer with 25 people on a team.
- DRDavid Rosenthal
Yes, but that was the start of what would become intercollegiate American football, and this becomes, just like back in England, wildly popular, and over the next five to ten years, it gets more and more codified and formalized amongst the Ivy League. It kind of comes to be seen as this integral part of the college experience, this character-building experience. It's also still wildly dangerous. [laughs] There are, like, deaths, serious injuries, very, very common through this period. Finally, 1905, there are 19 fatalities [chuckles] in intercollegiate football in the US and a serious injury at Harvard to one Theodore Roosevelt Jr, son of sitting President Theodore Roosevelt. So this is a major event. After that happens, Teddy Roosevelt calls a summit of all the major colleges and universities in New York City and says he's gonna outlaw the game in the US unless they adopt major changes to make the game safer.
- BGBen Gilbert
And you also have to imagine, of course, it hits close to home for him with his son, but he's sort of viewing this as, hey, the people that our best and brightest are playing this game that is actually hurting the nation. We are cutting down people in their prime, and we kind of have to do something about that.
- DRDavid Rosenthal
Yeah, and it's a fine line, right? Like, I think the violence is a critical part of this sort of rite of passage, and Teddy Roosevelt probably kind of likes it, 'cause this is a training ground for future-
- BGBen Gilbert
Military
- DRDavid Rosenthal
... governmental and military leaders of America. So I had no idea until doing the research, this summit that Teddy Roosevelt calls, and then he basically tells all the presidents of the universities like, "Hey, you guys got to figure this out, or I'm gonna outlaw this," in response, they create the NCAA. [laughs] Like, that is the beginning of the NCAA.
- BGBen Gilbert
Oh, I didn't realize that.
- DRDavid Rosenthal
Yeah, it was to regulate and codify and make the game of collegiate American football safer.
- BGBen Gilbert
Huh?
- DRDavid Rosenthal
Yeah. Crazy, right? So following that, this new institution that becomes the NCAA, they institute the creation of a neutral zone. They abolish the use of wedge formations. So they do make the sport safer. I mean, there's still, like, a lot of [laughs] injuries. There's not a lot of protective padding being worn here.
- BGBen Gilbert
And a lot of this predates even leather helmets. People are just playing this in regular clothes.
- DRDavid Rosenthal
Yes, but they also make a change to the rules after this summit that would become the defining element of American football and fully differentiate it from soccer and rugby, which rugby itself came from soccer. Rugby is the set of soccer rules that the English public school, Rugby, used, hence why it's called rugby. And this rule that the NCAA institutes is legalizing the forward pass.
- BGBen Gilbert
In 1905.
- DRDavid Rosenthal
And that becomes, obviously, a defining characteristic of football.
- BGBen Gilbert
And to underscore how much this changed things, football was exclusively a violent game to this point in history, American football. But when we think about American football today, you're watching Monday Night Football and the beautiful popping color and all the lights and all the slow-mo, there's a beauty to the game. There's a romanticism. There's a moment where you hold your breath. The world seems to move slowly. It's a ballet. This introduced what would become the counterbalancing force to the incredible violence of football, which is the true beauty of watching it.
- DRDavid Rosenthal
Yeah, the beauty and the strategic element, too. The offensive playbook, the defensive coverages, the audibles, there's no way a casual fan can understand all of it, and yet the ballet, as you say, is mesmerizing to watch. Collegiate American football just becomes wildly, wildly popular, and still is to this day. Like, it is a huge part of the American sports landscape, and it was even more so then.
- BGBen Gilbert
All right, so the NCAA is formed. We've now got the forward pass. So modern football, does that lead to the NFL?
- DRDavid Rosenthal
No. Again, very specifically, we're spending a lot of time on the origins of football in college here, but it's so important for understanding the NFL. This is a college-... thing. This is a American collegiate experience that these elite young men go through, this dangerous kind of war-like activity. There's this sacred element to it, so much so that while in the early 1900s some professional teams do start to pop up around the country, uh, these are teams, not leagues, so these are barnstorming teams [chuckles] that would go around, like, there's no organized scheduled play, but they're viewed not only just as second rate to the college game, they're, like, dirty.
- BGBen Gilbert
Why are you taking this esteemed thing that our best and brightest participate in and turning it into this entertainment act?
- DRDavid Rosenthal
Yeah, it's even more than that. Many people, especially the elite, viewed professional football as actually immoral because it was profaning this thing with money. The gripe that they had against it was the money. It wasn't the game. It wasn't how the game was played. It was the same game, often the same people who played in college.
- BGBen Gilbert
Oh, I see. Like, it's supposed to be amateur.
- DRDavid Rosenthal
It's supposed to be amateur. This should not be a professional activity. This is a rite of passage for young men. So through the teens and '20s, like, that was very much the attitude, and for professional sports, there was one game in town, and that was baseball. Michael MacCambridge has a great quote in the beginning of America’s Game, where he says, "To say that baseball was the number one sport in America is to imply a hierarchy where none existed. Baseball towered above the sporting landscape like a colossus, the unquestioned national pastime, the only game that mattered. Most fans had come to accept baseball's primacy as something immutable, as much a part of the natural order of things as air and water." Of course, this is the era of the New York Yankees and Babe Ruth and Lou Gehrig and all these storied parts of American history. Baseball is very much a professional sport played for money, where the goal of teams is to make money, and the business model is they sell admission to the games. [chuckles]
- BGBen Gilbert
Yep.
- 14:34 – 41:52
The Founding of the NFL (1920)
- DRDavid Rosenthal
So into this dynamic environment, in 1920, enters the American Professional Football Conference, soon, in a few years, to be renamed the National Football League.
- BGBen Gilbert
The founding of the NFL.
- DRDavid Rosenthal
And started on August 20th, 1920, when the heads of several of these barnstorming, quasi-professional football teams meet at the Jordan and Hupmobile auto showroom in Canton, Ohio. Now, the driving force behind this meeting being called is one George Halas, and he is currently in Decatur, Illinois, where he is an employee of the A.E. Staley Starch Company, and his main duty is to organize and coach and be the star player- [laughs]
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
... for the company football team.
- BGBen Gilbert
Which, of course, is called the Staleys.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
The sponsorship is so deeply rooted in the NFL that the very first team was actually named the sponsor.
- DRDavid Rosenthal
They weren't even sponsors. It was the employees of the company- [laughs]
- BGBen Gilbert
[laughs]
- DRDavid Rosenthal
... who played for the team. Now, Halas sort of had a mandate to go out and recruit employees who happened to be good football players. So these folks that come together at George Halas' instigation, they have a goal. They want to legitimize professional football in the eyes of Americans, and they develop a plan for doing so. They think they can really separate the pro game from the college game, make it a legitimate thing, and they have three parts to the plan. One, they are not gonna sign any current college players. There's gonna be a strict, strict demarcation between the college game and the pro game. They will not try and get any current college players to come play for a pro team, which would happen under assumed names. And, you know, you could imagine, these college kids, they wanna make money.
- BGBen Gilbert
This is so ingrained in the NFL that it is basically still true 103 years later. Here we are in 2023, you still can't go to the NFL out of high school. You can only go with the junior year of your graduating class from college. You can go one year early. In 100 years, that's the one concession that's been made.
- DRDavid Rosenthal
So point one, they're not gonna raid the college game. [chuckles] Point two, they're going to endeavor to play the game at a high ethical and rules-based standard.
- BGBen Gilbert
Yeah, these teams that are coming together, some were independent, some were part of the Ohio League, some were part of the New York Pro Football League, so there are sort of slightly different rule books and slightly different customs that are going on, and this is the idea that, "No, we need to unify these things to set an expectation for fans."
- DRDavid Rosenthal
Yep, standardize what the game is.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
And then number three, perhaps the, uh, most important, they're gonna make Jim Thorpe the president of the league. [chuckles] These guys are smart. Now, many of you probably know who Jim Thorpe was, but Jim was, at that point in time, the leader of the Canton Bulldogs, one of the teams that was strategically included in this discussion, and the meeting happened at that Canton auto showroom probably because of this. Jim Thorpe was the GOAT. He was the greatest athlete that had ever lived to that point in time.
- BGBen Gilbert
Which is not to say, like, if you put him through the NFL Combine today, he would win. It's sort of handicapped with all of what we knew about modern sports science of his day.
- DRDavid Rosenthal
The distance between Jim Thorpe as an athlete and any other athlete in the world at that point in time was greater than I think that distance has ever been since. So Jim Thorpe was a Native American who was part of the Sac and Fox Nation.... and ended up playing college football at a small school called the Carlisle Indian Industrial School, which happened to be coached by a guy named Pop Warner. [chuckles]
- BGBen Gilbert
Who, of course, is the person that all of the youth football leagues are named after today, Pop Warner League.
- DRDavid Rosenthal
He and Pop led this small, tiny Carlisle Indian Industrial School to a national championship while he was playing there against all these big Ivy League powerhouses and Ohio State and others. And the deep, deep irony, given what was about to happen with professional sports and the NFL [chuckles] becoming completely white, the first star player, the whole basis of the league, the first president of the league, was a person of color. [chuckles] In addition to playing professional football, the thing that is just unbelievable about Jim Thorpe, he won two gold medals in the 1912 Summer Olympics in Sweden in the pentathlon and the decathlon. He had never competed in the decathlon before. [chuckles]
- BGBen Gilbert
Oh, my God!
- DRDavid Rosenthal
[chuckles] The first time that he competed in the decathlon was in the 1912 Summer Olympics, and he won the gold medal.
- BGBen Gilbert
Wild. Wasn't he also an outfielder with the New York Giants?
- DRDavid Rosenthal
Yeah, and basketball, [chuckles] and won gold medals.
- BGBen Gilbert
Wild.
- DRDavid Rosenthal
So this new league, proto NFL, formed in 1920 with fourteen teams and about as much instant legitimacy as you could get from Jim Thorpe. They pretty quickly become the biggest professional football league in America. There's not a lot of stiff competition.
- BGBen Gilbert
And they consolidated the smaller leagues to create this in the Midwest.
- DRDavid Rosenthal
Yes. But that said, the '20s, and really the '30s, too, it's an uphill battle, shall we say. [chuckles]
- BGBen Gilbert
Oh, yeah. If you look at the, what is it, fifteen teams or so that existed in 1920, there are three franchises that endured out of all of those. The rest of them, the Columbus Panhandles, the Akron Pros, the Chicago Tigers, all went under, and the only ones that stayed the test of time are the Decatur Staleys, the Racine Cardinals, and one we have not talked about yet, the Green Bay Packers.
- 41:52 – 1:03:28
Bert Bell's "Any Given Sunday" Philosophy (1946)
- BGBen Gilbert
right, so David, Bert Bell, the new commissioner of the NFL, adopts this mindset of, "We have to keep the game competitive always." What do they do structurally?
- DRDavid Rosenthal
Any Given Sunday. So Bert and the NFL do two things. First, he completely overhauls the way the schedule works. So in the past, the schedule would be just like, "Yeah, whatever, you know, we're all gonna play each other, you know, in random order." He realizes that the schedule is actually an incredibly important strategic lever, and he looks at the results from last year's season and arranges the schedule such that the weaker teams from last year play the other weaker teams for the first half of the season, and the stronger teams from the previous season play the other stronger teams for the first half of the season. So that way, he can come as close as possible to guaranteeing that roughly everybody's gonna have statistically a relatively even fifty-fifty record going into the midway point in the season. So there's gonna be drama about who's gonna end up winning, even though the actual level of talent might diverge quite a bit within the league.
- BGBen Gilbert
... Yep. Even if you're a great team, if you've only faced great teams for your first several games, you're gonna be, uh, a little banged up coming into the second half of the season.
- DRDavid Rosenthal
And the NFL still does this to this day [chuckles] .
- BGBen Gilbert
Hmm, I didn't realize that.
- DRDavid Rosenthal
Yeah, this is like a kinda critical sleight of hand in making the whole thing work. But this is kinda like camouflaging, if there is a competitive balance problem underlying everything, this is only camouflaging it. How do you fix it?
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Well, there's no free agency at this point.
- BGBen Gilbert
No, there isn't, and that's important because there's no way to just go sign a veteran player whose contract with another team is up to make your team better. You need to get brand-new rookies into the league. It's pretty ridiculous. There actually wasn't a concept of free agency at all until 1993 in the NFL.
- DRDavid Rosenthal
I know, [chuckles] which is ridiculous. And so the NFL and Bert come up with the idea of having a draft of college players, and not just any draft, but a draft in reverse order of where you ended up in the standings in the previous season, so that the worst teams in the league get the first picks for the next season's draft.
- BGBen Gilbert
And also, in doing the draft, we just continue to see over and over and over again the pro game having reverence for the college game because America has reverence for the college game. It's this idea that we will watch the college football game very carefully, and then we will create a day where, on that day, that is when we will be eligible to go and pull the people out of that game and into our league.
- DRDavid Rosenthal
And it's incredible, the, uh, artifice that grows up around this.
- BGBen Gilbert
Oh, 50 million people watch this thing today.
- DRDavid Rosenthal
I mean, we were watching YouTube videos and research of, like, Taylor Swift was at the NFL [laughing] Draft a few years ago when it was in Nashville. Like, it's a huge event, and it was actually the first big coup for ESPN. When ESPN started in 1979 and 1980, it was televising the NFL Draft.
- BGBen Gilbert
Genius.
- DRDavid Rosenthal
So these two elements, stacking the schedule and then the reverse order amateur draft, formed the nucleus of Bert Bell and the NFL strategy that it's had ever since, which comes down to league first. League first, teams second.
- BGBen Gilbert
Yeah, and there is a structural thing that they did, too, which was to create a shared pool of ticket revenue. 60% of that revenue, I get to keep 'cause I'm the home team, and at this point in history, super early on, it was that the other 40% would go to the visitors. Over time, the league would evolve a structural thing so that 40% went into a shared pool that got divided among everyone else to sort of lean in harder to this shared mindset, and this is sort of before the, uh, TV revenues that are shared today. So David, maybe this is a time to talk about television's impact on the NFL.
- DRDavid Rosenthal
So as we said, the AAFC only operates for four years. The Browns are too dominant. The AAFC folds after four years. Only three teams of the AFCs, they come over to the NFL: the Browns, the 49ers, and the Baltimore Colts.
- BGBen Gilbert
Who are, of course, now the Indianapolis Colts.
- DRDavid Rosenthal
Here we are now. It's the dawn of the '50s, and television installed base is here. So TV set sales in America in 1946, the first year after the war, were 7,000 TV sets sold in America. In 1947, there were 14,000 TV sets sold, so the market doubled. In 1948, there were 172,000-
- BGBen Gilbert
Whoa
- DRDavid Rosenthal
... television sets sold, and it only grew exponentially from there.
- BGBen Gilbert
Oh, I love that you looked this up.
- DRDavid Rosenthal
By this point, in the early '50s, there are 25 million homes in America with a television set. Man, did history turn on a knife point. For the NFL's sake, from their perspective, like, thank God, A, the AAFC went into business and forced the NFL into a competitive response to expand, to change the game, and to start to discover and understand this league first mentality.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
And then also, thank God they beat them by the end of the '40s and the beginning of the '50s, because now the NFL is the only game in town for professional football in America, and they're the only national league right as TVs are showing up. And really, actually, they're the only game in town for national sports television programming, period. Because there are other sports, most notably baseball, as we've been talking about, but baseball, if anything, they were a victim of their own success. Because it was the dominant professional sport, they made so much better attendance numbers, they had all the games, a hundred and-
- BGBen Gilbert
62.
- DRDavid Rosenthal
The gate, the ticket sales were so important to baseball that with the advent of television, the baseball owners thought television was bad, [chuckles] and they end up fighting it.
- BGBen Gilbert
Well, so did the football owners for a while.
- DRDavid Rosenthal
Well, so did the football owners, but they had a lot less to lose.
- 1:03:28 – 1:56:34
Pete Rozelle Transforms the League (1960)
- DRDavid Rosenthal
But fortunately, for the NFL, they were very, very, very wrong about that.
- BGBen Gilbert
Lucky. [chuckles] Better to be lucky than good.
- DRDavid Rosenthal
Yes. They choose, as the compromise dark horse candidate, 33-year-old general manager of the Los Angeles Rams, former public relations intern, Compton College graduate, Pete Rozelle, to be the new young commissioner of this league in crisis.
- BGBen Gilbert
And create the NFL that we know today.
- DRDavid Rosenthal
And it was totally brilliant. I mean, A, Rozelle grows into this just incredible leader, visionary, who does so many things that we're gonna enumerate now for the league, for the game, for television, for America, but it was so not the owners' intention. They had to go to this compromise candidate and this young person-
- BGBen Gilbert
Who most people hadn't heard of
- DRDavid Rosenthal
... Anybody else they were considering would've been of a different generation, wouldn't have understood the new America [chuckles] in the late '50s and early '60s. Like, these were all old folks who were running the league at this point in time. But Pete, nobody better embodied everything about America in the '50s and '60s, like young families, suburbs, West Coast, Los Angeles, television, PR, advertising.
- BGBen Gilbert
Yes, coming out of the PR background was the perfect positioning for him 'cause he knew that every foot that we have to put forward has to be really polished. We gotta stop doing things that are confusing or cannibalizing each other, or send mixed messaging, or perhaps put a bad taste in Americans' mouth, and we need to figure out the very best media strategy, the very best strategy to make it so all the newspapers and all the TV stations talk about us all the time. The NFL, and our teams, and our players need to be on the lips of Americans as much as possible.
- DRDavid Rosenthal
And as GM of the Rams, for only two or three years, the Rams were not a successful team on the field, even during his tenure, but he makes them into the most profitable team in the league. They actually start making a lot of money, 'cause he gets it, right? They're in the second-biggest TV market in America, in LA, a very wide, geographically spread out market, where people wanna watch football games on TV.
- BGBen Gilbert
Mm.
- DRDavid Rosenthal
He opens up a Rams merchandise store. He partners with Roy Rogers Inc. The actor Roy Rogers had, like, a white label merchandise brand to bring actual high-quality branded Rams jerseys, hats, mugs, et cetera. That becomes a huge revenue line for the Rams that nobody else has. So he's got the right background here, and he comes in... This is pretty crazy. I mean, this is a very volatile, charged situation with a lot of elder and opinionated folks around the league that he's gonna have to deal with, and within a year, he completely changes the NFL. [chuckles] So the first thing he does when he comes in as commissioner is he ratifies an expansion plan for the NFL to meet the AFL. Remember, one of the big reasons why Hunt and the AFL owners started the league in the first place is they wanted to bring pro football to more cities. The NFL was dragging its feet. Just like back with the AAFC now, they realize they gotta go meet the enemy on the field where they are, so the plan is to expand to both Dallas and Houston immediately to meet the AFL there in Texas.
- BGBen Gilbert
Oh, and meet Lamar Hunt head-to-head, right on his own turf. I mean, he's leading the AFL effort, and the idea of you're just gonna open up shop and say, "Eh, we're gonna give away the franchise to a new owner of the Cowboys right here in your backyard."
- DRDavid Rosenthal
Yep, right down the street. Speaking of proximity and right down the street-... The next move that Rozelle makes, remember, he's from LA, he gets the importance of media, advertising, everything. At this point in time, the league offices were in Philadelphia, 'cause Bert Bell was in Philadelphia, and he had been the owner of the Eagles. He's like, "Philadelphia is not the place [chuckles] where we can run the modern NFL."
- BGBen Gilbert
And Bert ran it a very idiosyncratic way, too. I mean, he had obviously no computer system, but, like, it was Post-it notes and phone calls is how the NFL ran. Like, just not a professional organization.
- DRDavid Rosenthal
Oh, yeah. Famously, the stacked scheduling, he would do it with dominoes on his kitchen table. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
So Rozelle's like, "No, this is not gonna work. We're gonna move league headquarters to New York, to Manhattan, first to Rockefeller Center, and then to Park Avenue," where the league is to this day. "We need to be right there next to the television industry, next to the media industry, and just as important, next to the advertising industry."
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
"These are relationships we gotta cultivate with Madison Avenue." After he moves the headquarters to New York, Rozelle contracts the Elias Sports Bureau, which did professional statistics for Major League Baseball. The NFL, up to this point, didn't have professional statistics arms that would distribute game stats and box scores out to all the newspapers across the country.
- BGBen Gilbert
The only way anybody's gonna write about us and give us space on the sports page is if we make their job easy and put the stats right in their hands every day.
- DRDavid Rosenthal
Speaking of writing about the NFL and publishing, the other thing that Rozelle knows is, especially with a game like the NFL, which is a weekly drama, it's not just about, like baseball, with getting the daily box scores in the newspaper. You also gotta create human stories and arcs and mythology around the game, and so he intentionally cultivates a tight relationship with Time Inc., and specifically, Sports Illustrated. And over the course of the '60s, Sports Illustrated really becomes the major advocate for the new modern game of the NFL. So much so that in 1963, just three short years later, Sports Illustrated names Pete Rozelle its Sportsman of the Year, the first ever non-athlete that it had ever [chuckles] named Sportsman of the Year. Like, think about that, the commissioner of the league being named Sportsman of the Year. That is just a huge mindset shift.
- BGBen Gilbert
We should also say, the end of the '50s, beginning of the '60s, you know, baseball's still a dominant sport in the US. The dominant football franchises are college football franchises. The NFL's still an underdog, and now they're being challenged by this new upstart, so they're sort of squeezed in the middle, where, like, people don't care enough yet, but they also have a competitive threat, and so Rozelle is having to do some innovative things. David, didn't he, like, hire writers in-house at the NFL to craft the storylines and then send those to all the reporters who, like, were too busy to actually go to NFL games-
- DRDavid Rosenthal
Yes
- BGBen Gilbert
... 'cause they didn't respect the NFL enough? But maybe if we send them the stories, then they'll tweak them a little bit and publish them.
- DRDavid Rosenthal
Famously, he did this starting back when he was with the Rams. Even when he was a PR intern there, he would just write the stories for the reporters, which, [laughing] one, ensured that they would actually get in the papers, but two, he could control and craft the narrative. Man, you can totally still see this to this day in the NFL, this ethos. It was so important and strategically advantaged for them. The NFL keeps such a tight grip on the narrative, and all this starts with Rozelle. One other thing that he does immediately after taking over and moving headquarters to New York, that would end up paying huge, huge, huge dividends, is he also starts cultivating political relationships and influence.
- BGBen Gilbert
Yes. So this is a perfect lead-in to what happens in 1961, right after Rozelle is on the job, that would change the face of football forever.
- DRDavid Rosenthal
So it's obvious to Rozelle, once the AFL signs their big deal with ABC, that that's the path forward.
- BGBen Gilbert
Their $1.3 million a year deal.
- DRDavid Rosenthal
The league-wide revenue sharing, national deal with the national network. Now, this is not how the NFL operates at this point.
- BGBen Gilbert
Nope.
- 1:56:34 – 2:09:47
The Creation of the Super Bowl (1966)
- DRDavid Rosenthal
So once this passes Congress and the merger is approved, remember, it won't actually happen until nineteen seventy. There's this little matter of the world championship game, this super matter. There had never been anything like this before. This is the wholesale invention of a new major sporting event for the first time within the TV era. Nothing like this had ever happened. The World Series was created way before the TV era.
- BGBen Gilbert
Totally. And you mentioned before, during the Johnny Unitas game, the greatest game ever played, that that drew forty million people, and that was much earlier in the TV-ification of America. It wasn't really the NFL that we know. There's all these other teams, there's all these other markets. So if we can sort of tailor-make a game for national television as this entertainment event, it can be much, much more significant.
- DRDavid Rosenthal
Not only that, these guys are smart. They're smart business people, they're smart media people. Even though the TV contracts are already in place on the NFL and the AFL side for their respective seasons, including their respective championship games, this is a new game. There's no contract in place yet for this, so they rebid it, the rights to this world championship game, to all the networks, and CBS and NBC are livid 'cause they've already got the rights to the respective leagues.
- BGBen Gilbert
They thought they both had a championship game, but it turns out they both had a semifinal.
- DRDavid Rosenthal
So what ends up happening, they both feel like they can't bear to not win the rights to broadcast this new game. They each end up paying one million dollars for the rights to both broadcast it. So this game now is gonna be broadcast to the nation on both CBS and NBC, and in addition to them each spending a million dollars for the rights to this one game, they also both pledge to spend one million dollars each in promoting it in the lead-up to the game.
- BGBen Gilbert
Wow!
- DRDavid Rosenthal
This is unprecedented. There's never been anything like this in media history. [chuckles]
- BGBen Gilbert
This ended up actually having a seventy-nine percent share of American TV, whatever Nielsen measures. So it's the share of all the TVs that are turned on at this point, because it was on two networks.
- DRDavid Rosenthal
Incredible. It ended up being watched live by over sixty-five million people, Super Bowl I at the LA Coliseum.
- BGBen Gilbert
You can't call it that, David. This is the AFL-NFL World Championship Game.
- DRDavid Rosenthal
I apologize, the World Championship Game at the LA Coliseum, and in, like, such a perfect symbol of the new world order, the new media landscape, largest television event in history, unprecedented, groundbreaking, live in the stadium. The LA Coliseum is pretty big. It seats about ninety-five thousand people. Only sixty-three thousand people showed up live. There was only two-thirds-
- BGBen Gilbert
What?
- DRDavid Rosenthal
... attendance live at the game, and it didn't matter at all.
- BGBen Gilbert
When I tweeted about Super Bowl I, some, like, pictures from it the other day, and I didn't realize, you can see there's an area of the stands where people aren't sitting. I assumed it was, like, too late or too early. That's, like, during the game, they didn't fill it.
- DRDavid Rosenthal
That's during the game.
- BGBen Gilbert
Wow!
- DRDavid Rosenthal
They didn't fill the stadium, and everybody got rich anyway. [chuckles] Okay, so a few things leading up to this. Again, like, God, they're so good, Rozelle, they're just architecting all of this live, so they know this is an incredible opportunity. Nothing has ever happened like this before during the age of TV. They're creating a television event whole cloth, so they totally lean into it. Media week, that is a deliberate invention by Pete Rozelle and the NFL leading up to the Super Bowl. All the crazy interviews, everything that happens that we take for granted right now, like, that was intentional, it was designed, it was created that way.
- BGBen Gilbert
The commissioner's press conference, the Friday before the Super Bowl, and it's about league business, so there's all this news that comes out about the NFL and how it will be changing for the next year right before the Super Bowl to draw all this attention to the NFL right before the Super Bowl.
- DRDavid Rosenthal
And that's just the public-facing stuff. [chuckles] During the week leading up to the Super Bowl, they host parties, they host events, they host concerts, they host experiences, not for the public, but for their partners, for the TV partners, for the advertisers, for the press. It's all about adding the gloss and the sheen to the people who are gonna add the gloss and the sheen. [chuckles]
- BGBen Gilbert
[chuckles]
- DRDavid Rosenthal
Literally, Rozelle's directive to the NFL staff was he wants every media person and partner leaving the Super Bowl to be saying, "Man, this is a lot better than the World Series." [chuckles]
- BGBen Gilbert
That's great. So great.
- DRDavid Rosenthal
The game itself, the Packers end up destroying the Chiefs. The next year in Super Bowl II, the Packers again beat down the Raiders this time.
- BGBen Gilbert
It is worth saying, wow, the dominance of the Packers right around this time, Vince Lombardi winning the first two Super Bowls.
- DRDavid Rosenthal
There's a reason it's called the Lombardi Trophy now. [chuckles] It wasn't for Super Bowl I [chuckles] or II. And then the one game we will talk about here, Super Bowl III.
- BGBen Gilbert
Yes, by this point, the, uh, game is formally called the Super Bowl. The press had been looking for something to call it, and, you know, Lamar Hunt, I think, had been the one who observed his kid playing with a Wham-O Super Ball, and so when the league discussions were sort of going on about it, he proposed Super Bowl, but Pete Rozelle hated it.
- DRDavid Rosenthal
I think Lamar was like, "Oh, it's just kind of a funny placeholder name."
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
But then it just stuck.
- BGBen Gilbert
But it came out in some press interview, and then they just ran with it, and then it was out of the league's control.
- 2:09:47 – 2:37:19
Monday Night Football Invents Modern Sports TV (1970)
- BGBen Gilbert
So David, take us to Monday night.
- DRDavid Rosenthal
Oh, let's go to Monday night. So they got CBS, they've got NBC. Remember ABC? ABC's been out in the cold for several years now.
- BGBen Gilbert
Which is a real shame, 'cause you've got Roone Arledge there. He's a visionary. This is still before ESPN, right?
- DRDavid Rosenthal
Still before ESPN. Well, well before ESPN, ten years.
- BGBen Gilbert
So yeah, that's still far off in the future, but ABC is clearly interested in sports.
- DRDavid Rosenthal
Yes, clearly interested in something. So Rozelle and Rooney start chatting. Rozelle has always had the inkling that football and the NFL would do really well in a prime-time slot, but this is crazy. Like you were talking about a little while ago, Sundays were perfect for football, Sunday afternoons, because the networks didn't have anything else to air. The accepted thinking at the time was like, "Oh, sports are perfect for Sunday afternoons," but, like, the core business of the television networks-
- BGBen Gilbert
Right, sports is not prime time
- DRDavid Rosenthal
... is showing shows, and news, and entertainment, and that is not sports.
- BGBen Gilbert
That appeals to the widest range of people, and that we still don't know for sure that the NFL is that.
- DRDavid Rosenthal
You know, it's very telling that all of these networks had separate sports divisions, [chuckles] and that ABC didn't even have one until they got the first AFL deal. It was a separate thing.
- BGBen Gilbert
And just to keep tracking our baseball versus football comparison, this moment in 1970 is right around the time where the NFL is eclipsing baseball to become America's favorite sport. It's been slowly gaining ground over the last 30 years, and the merger, plus the creation of the Super Bowl, really puts the NFL here squarely in the lead, making it the perfect candidate for this sports prime time experiment.
- DRDavid Rosenthal
Indeed. So Rozelle and Roone Arledge is like, "Yeah, I think this can work." [chuckles] So they brainstorm, and together come up with the idea for one single game every week with incredibly high production values, broadcast in prime time, in the evening, on Monday nights after the full slate has concluded on Sunday. And oh, my gosh, so many advantages to this! On the Sunday games, there always have been so many games that happen on Sunday. You can't watch them all, all at once. They're all happening concurrently, you're seeing different games in different markets.
- BGBen Gilbert
There's not a national event to watch, because the way the local affiliate works, it's still at this point in time where you can't watch a home game [chuckles] at home. So whatever is on TV in your city is wherever your team is playing, if they're playing an away game, and no NFL on Sunday if your team is playing a home game. Either you're going to the NFL game on Sunday, or it's a non-event for you that week.
- DRDavid Rosenthal
Right, and that's on the viewer side. From the production standpoint for CBS and NBC, they're sending each of them, like, five, six, seven TV crews out all across the country. Like, their resources are getting totally diluted every Sunday. They can't put all their effort into one prime time game.
- BGBen Gilbert
And the broadcasts, other than the Super Bowl, and honestly, like, even kind of the Super Bowl at this point in time, are pretty bad. We talked earlier about they got better and they learned. They didn't learn much. They were still referred to around this period of time, 1970, as football in a cathedral. You had no fun camera angles. You probably had three, maybe four cameras in the entire broadcast, and most of it really is just that 50-yard camera that sorta zooms in and out. And the announcers are kinda relying on the fact that you're watching the game, so they're not really commentating that much. They would just sort of help you know that there's audio associated with the broadcast you're watching.
- DRDavid Rosenthal
Yeah, I mean, step back and think about the last NFL game you watched. The transitions between the camera angles, the music, the sound effects, the microphones, the analysis, the sideline reporting-
- BGBen Gilbert
The lower thirds
- DRDavid Rosenthal
... the graphics. None of this existed. [chuckles]
- BGBen Gilbert
The notion that there's play-by-play in color, this idea that there should always be someone talking, saying something interesting while you're watching a game.
- DRDavid Rosenthal
Yes. So this whole vision for Monday Night Football that Roone Arledge and ABC can make happen for the NFL, and new media rights for the NFL to sell, more revenue. They've got it all ironed out, all the details, and right before they're about to sign a deal, Rozelle's like, "Oh, yeah, by the way, we have these partnerships with CBS and NBC. We gotta offer this to our partners first." [laughing]
- BGBen Gilbert
[laughing] Ugh.
- DRDavid Rosenthal
Which, uh, you know, Rozelle-
- BGBen Gilbert
Brutal
- DRDavid Rosenthal
... he has this reputation, and history treats him as, like, a-... incredibly kind, incredibly accommodating, and I'm sure that's true. But he had a little bit of Al Davis in him, too. [chuckles] He knew exactly what he was doing here. He knew that there was no way that NBC and CBS were gonna take this package.
- BGBen Gilbert
Yep. He just wanted a stalking horse. He's like: "I don't wanna leave any money on the table with this. Whatever we're signing here, they have to fear that we're gonna walk."
- DRDavid Rosenthal
Totally. You know, Roone, of course, freaks out. This is his baby, this is his career within ABC.
- BGBen Gilbert
He's been pre-selling this to his bosses, so he looks bad if they lose this now.
- DRDavid Rosenthal
So they come in with a over-the-top deal. ABC gets exclusive rights to Monday Night Football for a new deal, new product, $8.5 million per season.
- BGBen Gilbert
And the other deal was?
- DRDavid Rosenthal
The other deal was 40 per season for essentially 15X more content, I think.
- 2:37:19 – 2:39:28
The NFL's Business Model Explained
- BGBen Gilbert
I guess it's worth pausing to understand the shape of the NFL's business today and how the revenue breaks down. So on average, about two-thirds of any given team's revenue comes from shared national revenue that we talked about. The remaining one-third comes from the local revenue, but again, this is just on average. So some teams are very good at the local revenue, like the Dallas Cowboys, and some teams are very bad at this, like the Bills or the Lions, and I have some numbers to put that in perspective. This past year, each team got right around three hundred and fifty million from the shared league revenue, but that extra local revenue obviously can cause a gigantic swing in the team's total revenue. And Forbes has an estimate that the Cowboys made over a billion dollars last year, whereas the Lions only made four hundred and fifty million, so not really much on top of the shared revenue from the league.
- DRDavid Rosenthal
Wow. [chuckles] So much for the, uh, league-first mentality from Jerry Jones there.
- BGBen Gilbert
Right? So it's also useful, I think, to slice it a different way, rather than just the shared versus local. Here is how the NFL team revenue breaks down purely by product. So this is essentially answering the question: How does the NFL make money? So sixty-one percent comes from media. Most of that is the TV from the shared league revenue. Ten percent comes from general seating, which is regular plastic seats. Uh- [chuckles] ... another ten percent comes from premium seating.
- DRDavid Rosenthal
[chuckles] That's for the proletariat.
- BGBen Gilbert
[chuckles] Yes. The premium seating that we mentioned is the suites and all that stuff. That's a big growing revenue line for the people with nice stadiums.
- DRDavid Rosenthal
And most of that is corporate, right?
- BGBen Gilbert
I think so. That's my best guess. It's super different city to city. This is probably the most variable.
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
Ten percent comes from sponsorship and advertising, and then about nine percent is other, which I'm guessing is where NFL Films and a lot of that stuff sort of lies.
- DRDavid Rosenthal
Maybe the Madden deal is in there. I don't know if it'd be there or in media.
- BGBen Gilbert
Yeah. So that's the shape of the NFL as a business today. So before we kind of finish that out and get into analyzing the business-...
- 2:39:28 – 2:48:36
CTE & the Kaepernick Controversy (2016)
- BGBen Gilbert
I mentioned the complicated relationship that people have with football. In the two thousands, it became clear as day that CTE is very real and caused by playing football, and causes shorter lifespans and immense physical harm to players. And CTE, as many of you know, is chronic traumatic encephalopathy, which is a terrible brain condition that develops from the many repeated subconcussive hits to the head, and the symptoms are devastating.
- DRDavid Rosenthal
Mental, emotional, suicides, everything.
- BGBen Gilbert
I mean, the NFL settled a billion-dollar lawsuit to pay out victims and families of CTE.
- DRDavid Rosenthal
Yeah. You know, it's even worse than that. There's a bunch of dimensions here. Yeah, I played football all growing up, middle school, high school, college. You know, my feeling, and this was in the nineties and early two thousands, you know, my feeling on the matter was, I'm for sure risking my body by playing, but the risk calculation on my mind was all short-term. I could tear an ACL, sure. I could break my arm, sure. I could get a concussion, sure. But in my mind, those were all the same things. Like, there was no broader understanding among general population, or there's been a bunch of research on this, or the NFL players themselves, that there was real long-term mental risk to playing the game. And then here's what's really bad, is the NFL knew it, and they covered it up. So the NFL started doing research into long-term effects of concussions and other head trauma from playing football in the nineties, and then they sat on the data for a long time. [chuckles] And then when they did release it, they claimed that there was absolutely no provable link, no evidence at all, that head injuries from playing football led to long-term damage.
- BGBen Gilbert
The NFL didn't acknowledge that until twenty sixteen.
- DRDavid Rosenthal
Super bad. I mean, there's the Will Smith movie, Concussion, about it. We don't need to go into a bunch of the specifics, but I think, like, from the Acquired standpoint and the NFL audience standpoint, this was a major, major trust-breaking moment.
- BGBen Gilbert
Certainly, it affected it enough for LeBron James to say, "I don't want my son playing football." I mean, that was a huge cultural moment.
- DRDavid Rosenthal
The second-order effects are pretty large from this. One is what you said about parents allowing and wanting their children to play football.
- BGBen Gilbert
Interestingly, all youth sports are down. I don't think football is down much more than other youth sports, but video games, social media, phones-
- DRDavid Rosenthal
And the pandemic, too.
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
But I think the real risk, and this is starting to be shown out in the data, is how are future generations gonna view the NFL and football? And if you look at the data, US adults as a whole, thirty-three percent say the NFL is their favorite professional sports league. But if you look at Gen Z, only twenty-three percent of Gen Z say that the NFL is their favorite professional sport, so ten points less than the broader population. And basketball in Gen Z is nineteen percent, right there pretty close to football.
- BGBen Gilbert
From a revenue perspective, the NFL today makes twice as much as basketball, but that's a pretty damning trend, looking at where Gen Z's interests lie.
- DRDavid Rosenthal
Yeah. This whole thing was just bad, period, for the NFL.
- BGBen Gilbert
How do you deny the existence of these things when people in your organization have been hired to commission this research, and then you're burying it for decades?
- DRDavid Rosenthal
And it's your players, it is your product on the field.
- BGBen Gilbert
It's also interesting to note who wasn't producing content about concussions. I mean, this Will Smith movie came out, that I don't think was through the media channels of any of the NFL's partners. I think the NFL wields a lot of influence in saying, "Oh, uh, you may not be a part of the networks that get our broadcast on the next generation."
- DRDavid Rosenthal
That strategy would have worked really well thirty years ago, but in the social media era, where individuals have Twitter accounts, a lot harder to control the narrative.
- BGBen Gilbert
Yep. Speaking of hard to control the narrative, let's talk about blackballing Colin Kaepernick, and I think an interesting place to start is the job of the commissioner. So the commissioner is not the president or CEO of football. The owners are not their executives, and the commissioner's obligation is not to the fans. The commissioner is hired to do one job, and that job is speak for and do things that are in the best interests of the owners as a whole. And so if the most powerful owners want something, that is what the commissioner does, that is what the message is from the NFL. The NFL itself is a very thin layer on top of a whole bunch of teams that are their own very large businesses. In fact, a lot of hay was made about the NFL switching in twenty fifteen from a nonprofit to a for-profit. The NFL has, like, very little net income. Who cares what its tax filing status is?
- DRDavid Rosenthal
It all gets distributed out to the teams [chuckles] .
- BGBen Gilbert
Right. The teams are their own tax-paying entities and their own businesses. And so, you know, Roger Goodell makes forty-plus million dollars a year to do what the owners want, and they hire him to do that, and they will fire him if he doesn't do that.
- DRDavid Rosenthal
Oh, man, there are these great quotes in America's Game, where the owners are talking about Pete Rozelle with a representative of the players at the time they're negotiating contracts, and the players are complaining that Pete Rozelle isn't being neutral in these negotiations. The owners are like: "Of course, he's neutral. We pay him damn well to be neutral." [chuckles] So yeah, the commissioner of the NFL is, like, the ultimate in shareholder responsibility. In fact, shareholder responsibility is his only responsibility.
- BGBen Gilbert
Back to Colin Kaepernick. So in the good old days of football, it was a bunch of reasonably young, enterprising owners who loved football and owned teams. It wasn't clear if they were gonna be good businesses or not, but the league as itself, and thus all the owners, were-... cowboys trying to make it for themselves in the world, and those people all got old and didn't wanna change at all.
- DRDavid Rosenthal
Now, most of those people are dead, and it's their descendants, who are also old, [chuckles] who own these teams.
- BGBen Gilbert
Yes. And so now there's these very interesting artifacts of the league being grown up, old and stodgy, the incumbent, something like that, when they were once a startup, especially when it comes to just acknowledging that a guy can protest the national anthem.
- DRDavid Rosenthal
Yep. I do think when that happened in 2016, it was a lot more of a radical act than it might seem today, and there were a lot of people at the time who were deeply offended by it.
- BGBen Gilbert
He was using the NFL's platform to sort of make a very personal argument.
- DRDavid Rosenthal
And there were a lot of people in the NFL who understood why he was doing it because 70% of the NFL is Black, so there was a lot going on here. [chuckles]
- BGBen Gilbert
Right, and we should say, what actually happened, Kaepernick in 2016 took a knee during the national anthem to protest police brutality and racial inequality in the US. After that season, he was a free agent, zero teams signed him, and of course, he had some disappointing seasons and injuries.
- DRDavid Rosenthal
But let's be real here, the NFL blackballed Colin Kaepernick after this. [chuckles]
- 2:48:36 – 3:21:04
Analysis: Playbook & 7 Powers Analysis
- BGBen Gilbert
thing.
- DRDavid Rosenthal
I think this is a good point to transition into analysis, and why don't we do Playbook and then do Power? One that just really strikes me through all this is the Lindy Effect. Despite everything you just said, football is bigger than it ever has been. [chuckles]
- BGBen Gilbert
Twelve billion dollars a year in revenue from the TV deals alone.
- DRDavid Rosenthal
A huge amount of revenue, and now diversified those revenue sources. It's not just old line broadcast networks trying to hang on that are paying them this money. Like, no, it's Google and Amazon that are paying them this money. [chuckles]
- BGBen Gilbert
They're paying, what, close to four billion dollars a year from the biggest tech companies in the world.
- DRDavid Rosenthal
Yep, the NFL's gonna be just fine, [chuckles] and that revenue is almost assuredly gonna grow at a very healthy clip. So even despite all this, people love their football. I still love watching football.
- BGBen Gilbert
Totally. Me, too. I feel like I'm a slight apologist for still loving football as much as I do.
- DRDavid Rosenthal
Two things. One, I mean, again, that just reinforces the power of the Lindy Effect to me. The NFL is just fine [chuckles] and is gonna be just fine for a very, very long time. Now, I do think the younger generations thing is a real risk, and I think related to that is, one, basketball definitely won the social media era in a way... Not as, to as big a degree as the NFL won the TV era, but basketball's on the rise. And related to that is, number two, the NFL has never figured out international. Many fits and starts.
- BGBen Gilbert
Have you read about these home marketing agreements?
- DRDavid Rosenthal
No.
- BGBen Gilbert
It's really weird. The NFL now, because there's zero international interest in the NFL, like zero. Like, they go play these other games in other countries, and the people who watch them are people from the US who fly to go watch their favorite team play in somewhere exotic.
- DRDavid Rosenthal
I mean, for God's sakes, baseball has a robust international [chuckles] presence.
- BGBen Gilbert
Right, and as we talked about in our NBA episode, I mean, basketball's entire future growth and current sort of groundswell of popularity is young people and international. So the NFL has tried NFL Europe, kinda shut that down, couldn't get the owners to care about it. This home marketing agreement thing that they're doing is saying that teams have an exclusive right, versus other NFL teams, to market in certain countries.
- DRDavid Rosenthal
[chuckles] Oh, no way. I didn't see this.
- BGBen Gilbert
I think it's like the Cowboys can advertise the Cowboys in Mexico. It's that sort of thing 'cause they wanna try to build affinity for teams where there's, like, some theoretical mapping to that country based on ethnic groups in the area or proximity.
- DRDavid Rosenthal
That does not seem like a sound international strategy to me. [chuckles]
- BGBen Gilbert
No, and the question kind of becomes: How can the NFL continue to grow, or can it? Because the average number of people who watch any given NFL game... Pick your metric. Is it the average Monday Night Football game? Is it the average kickoff game of the season? Is it the average Super Bowl? It's, like, up and down over the last 20 years. It's amazing that it's as high as it is when people don't watch anything else on TV, but I honestly... I'm having a hard time understanding how they grow the fan base.
- DRDavid Rosenthal
... Well, the core to growing the original NFL flywheel is increasing fan reach and engagement, and that's no longer happening.
- BGBen Gilbert
Right. And then you have this interesting question of: Is college football starting to pay players competitive to the NFL or additive? Because college football has fueled the growth of the NFL. I mean, think about it this way, the NBA and Major League Baseball teams have to pay to operate farm teams that no one wants to watch or play in, and the NFL gets all the benefit of all the development of all of these players in their college years for free. [chuckles]
- DRDavid Rosenthal
Right.
- BGBen Gilbert
They benefit from the storylines around them, too. So when someone comes into Major League Baseball and gets promoted out of the minors, everyone's like, "Who cares? I have no idea who that person is." Whereas the Heisman Trophy winner, who you know about what their childhood was like, comes out of NCAA football, out of the, you know-
- DRDavid Rosenthal
Right, the storylines are fully baked and ready to go. [chuckles]
- BGBen Gilbert
Yeah. College football has been the best thing to ever happen to the NFL for basically its whole existence.
- DRDavid Rosenthal
Right. It was the worst thing for the first twenty years, and then it was the best thing. [chuckles]
- BGBen Gilbert
Good point. Yeah. I think the biggest players getting paid in the NCAA right now, with the sort of weird way that the booster stuff works, is, like, two million dollars. They're not competing for talent, and I don't think the NFL will start trying to sign earlier college players, so I don't think they'll be competing directly or in the same order of magnitude. The revenue that big colleges make and that these conferences make isn't NFL size, but these are huge deals. So the NFL, for comparison, has a twelve billion dollar aggregate set of media rights that it sells. The Big Ten deal is a billion dollars a year. They just signed a seven-year deal at a billion dollars a year, which is twice their previous deal from 2016. All this to say, the business of college football is still much, much smaller than the NFL, but it'll be really interesting to see sort of how it, as players start to get paid more, where it finds its footing in the landscape, and if it changes at all from where it is today.
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
A thing in Playbook here that I think is interesting to talk about is the relationship that the NFL has with its players as a supplier and with the networks as a customer. So it got itself into this trap for a while, where it was negotiating with the networks, and so it would sign a big deal to get a bunch of revenue and then would quickly have a negotiation coming up with the players. And they seem to have switched to this thing now where they signed a collective bargaining agreement for a decade with the players. I think they did that in 2020, that'll last through 2030. And then in 2022, that's when they renegotiated the ten-year rights for media. So they seem to have switched to this, which is good business decision. Before anyone knows what the big new revenue contract looks like, they go, and they lock in all the pricing on their suppliers. Now, granted, it's a rev share.
- DRDavid Rosenthal
It's a percentage basis, yeah. [chuckles]
- BGBen Gilbert
Right. So in that respect, it's fair, but it is quite clever to have gotten off the TikTok cycle of, you know, having the players have a bunch of leverage after seeing what the media deal looks like and doing it in this order.
Episode duration: 4:17:17
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