The National Football League has become the biggest sport in the United States, with TV revenues and annual revenue that far exceed the MLB, NBA and NHL. As the NFL looks for new ways to expand its power and financial backing, several owners are reportedly pushing for a major change.
Current league rules dictate that only individuals are allowed to buy anything greater than 30 percent of a franchise. However, skyrocketing franchise values have created a scenario where the pool of buyers for an NFL team is extremely limited.
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Because of that and a growing desire to drive up franchise values for all 32 teams, some NFL owners are reportedly pushing for a change to one of the NFL’s principle rules.
According to Giles Turner of Bloomberg.com, multiple NFL owners are pushing for a policy change that would allow private equity firms and sovereign wealth funds to buy stakes in franchises.
While no prominent American sports league allows private equity firms to be majority owners of a team, the NFL has different rules than its peers. As highlighted by Front Office Sports, the NHL, MLB, NBA, NWSL, MLS and MLB all allow owners to sell minority stakes in clubs to private firms.
The San Diego Padres, who have one of the highest payrolls in baseball, is one example of a U.S. team who takes advantage of the policy. Ares Management invested in the Padres, leading to an influx of cash that helped the club spend on some of the highest-paid MLB players.
CNBC detailed the rise in private equity firms investing in sports, with the NBA part of the nearly $2 billion spent in pro sports. With many pro leagues already involved and looking to expand their connections, it could be another way for the NFL to increase franchise values and financial support.
It all comes at a time when the sale of the Washington Commanders is looming, with at least one $6 billion offer on the table. However, the rising costs of prices to buy an NFL franchise has resulted in fewer bidders. Opening the door to private equity firms and sovereign wealth funds would inject new sources of cash flow into the NFL and create a wider pool of suitors interested in buying a minority stake in a team.
As we’ve seen in both the NBA and NFL, it can help lead to inflated franchise values. Private equity groups will buy a small percentage of a team, with the cost for that share likely exceeding the estimated value of the club. Higher franchise values are better for NFL owners and the new sources of money could lead to greater long-term spending by teams.
It’s not expected that anything will be voted on or implemented this year. However, offseason meetings between owners this spring could be used to gather support for a potential change in 2024. If it’s implemented, several NFL teams could put minority stakes up for bid soon after.