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Quick takeaways
- The NFL's success is attributed to a league-first mindset prioritizing competitive balance and revenue sharing.
- The NFL recognized the revenue potential of television and struck deals to broadcast games, establishing television as a significant revenue stream.
- The merger between the NFL and AFL solidified the NFL's position as the premier professional football league in America.
- Joe Namath's signing with the Jets showcased the growth of the AFL and its ability to attract top talent.
- The merger between the NFL and AFL set the stage for the modern NFL and positioned football as the dominant sport in American culture.
- The NFL's strong value capture is evident through multiple media rights deals and the ability to extract revenue from networks and communities
Deep dives
The Birth of Professional Football
The NFL and the AFC were both formed in the early 1900s, with the NFL being the dominant league. The NFL owners embraced a league-first mindset, prioritizing competitive balance and revenue sharing. They implemented strategies like scheduling and the draft to maintain competitiveness. Meanwhile, the AFC struggled due to the dominance of the Cleveland Browns, leading to their eventual merger with the NFL. The NFL began to recognize the potential of television as a revenue stream and made deals to broadcast games, especially away games. The popularity of television broadcasts increased over time, leading to the growth of the NFL and the rise of national televised football games.
Competition with the AFL and the Rise of National TV Contracts
The birth of the American Football League (AFL) brought competition to the NFL. Led by Lamar Hunt, the AFL aimed to challenge the NFL and capitalize on the growing popularity of television. The AFL started with six teams and eventually expanded to eight. The competition between the two leagues led to the rise of national TV contracts, with the NFL adopting a league-first mentality. They recognized the value of television and worked to ensure competitive balance among teams. The AFL eventually merged with the NFL, solidifying the NFL's position as the premier professional football league in America.
The Impact of Television and the Growth of the NFL
The growth of television in the 1950s and '60s played a pivotal role in the expansion and popularity of the NFL. As TV set sales increased, more people had access to watch football games from the comfort of their homes. The NFL recognized the revenue potential of television and struck deals to broadcast games, initially focusing on away games. The televising of games expanded the league's reach and exposure to a wider audience. The NFL's business model shifted as TV revenues began to surpass ticket sales, establishing television as a significant revenue stream for the league. The NFL's successful embrace of television contributed to its growth and established its position as the dominant professional football league in America.
The Merger Negotiations and War
In 1966, negotiations for a merger between the NFL and AFL began in secret, led by NFL Commissioner Pete Rozelle and Dallas Cowboys GM Tex Schramm. Meanwhile, Al Davis became the new commissioner of the AFL. The NFL fired the first shot by signing a player from the AFL, which escalated tensions. Davis retaliated by signing star players from the NFL, including quarterbacks. Eventually, the two leagues agreed to a merger with combined TV contracts and a new pro football world championship game. The NFL maintained its antitrust exemption with the support of President Lyndon Johnson. The AFL franchise owners paid $18 million over 20 years to join the NFL. This merger paved the way for the modern NFL and its dominance in American sports.
The Role of Joe Namath
Joe Namath, quarterback for the New York Jets, became a cultural icon and symbolized the popularity of football for men, women, and children alike. His star power and popularity demonstrated the potential of football as a national event and entertainment. Namath's signing with the Jets showcased the growth of the AFL and its ability to attract top talent. The AFL had successfully positioned itself as a legitimate competitor to the NFL, challenging the traditional dominance of baseball and college football.
Legislative Support and Finalizing the Merger
In October 1966, the merger between the NFL and AFL was officially announced, following the passage of a law granting an anti-trust exemption for the merger. President Lyndon Johnson signed the law, solidifying the legal framework for the combined leagues. The merger allowed for a single common college draft and promised at least four new teams and expanded the league to 28 teams over the coming years. The AFL franchise owners paid $18 million to the NFL owners as part of the merger agreement. The merger set the stage for the modern NFL and positioned football as the dominant sport in American culture.
The rise of the NFL and its strategic foundation
The NFL's success can be attributed to a combination of factors, including national television coverage, post-war prosperity, Madison Avenue's influence, and a league-first mentality.
The impact of fantasy football and sports betting
The popularity of fantasy football and the growth of sports betting have contributed significantly to the success of the NFL, driving fan engagement, viewership, and revenue opportunities.
Challenges and controversies
The NFL has faced challenges and controversies, including the health risks associated with concussions, the handling of the Colin Kaepernick protest, and concerns over player safety and long-term well-being.
The NFL's Cornered Resource and Value Capture
The NFL has a cornered resource in professional football as the only game in town, allowing them to capture an immense amount of value. Their strong value capture can be seen through their reselling of media rights multiple times over and their ability to extract revenue from networks and communities. The NFL's business model relies on scale economies, where the revenue generated from TV deals justifies the high costs associated with producing high-quality games. While concerns remain around player safety, youth participation, and international expansion, the Lindy effect suggests that the NFL's staying power and success will continue for the long term.
The Bull Case for the NFL
The bull case for the NFL lies in its continued dominance and success as a sports entertainment business. Despite challenges and controversies, the NFL has a strong cornered resource with no viable competition, ensuring its stability and relevance. The Lindy effect further supports its long-term prospects, emphasizing that the NFL, with its loyal fan base and cultural significance, will remain a giant and thriving industry. The legalization of sports betting also presents an opportunity for the NFL to generate additional revenue. Despite concerns, the game of football continues to captivate audiences, solidifying the NFL as a resilient and enduring force in the sports world.
93.
The Media Rights Are Worth So Much More When the Number of Audience Impressions Stays the Same
2min
The NFL — it’s almost synonymous with America today. And its history is a fascinating lens to explore the nation’s development over the last 100 years, from WWII to TV and suburbs to the Internet and social media. What began as a quasi-illicit league in small midwestern towns is now the single largest media property in the world today by revenue. And whether you watch football or not, this is one incredible business story. Acquired is ready for some football — let’s kick this Season off right!
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Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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