March 25, 2017

NFL Fan Cost Index

In two tables within Chapter 3 of my book Football Fortunes, there is some financial information about American sports leagues and their teams. One table contains these leagues’ Fan Cost Index (FCI) and Average Ticket Price (ATP) for 10 years (or seasons) beginning in 1991, while the other table denotes the FCIs of all NFL teams during this period.

A sports marketing publishing company named Team Marketing Report (TMR) prepared and listed this data, which I read online and then copied from the company’s website. To my knowledge, TMR is the only business organization in the world that publishes this type of information each year from surveys of sports leagues and teams, and statistics from media reports.

As developed by TMR, a FCI consists of four average ticket prices, two small draft beers, four small soft drinks, four regular-size hot dogs, parking fee for one car, two game programs, and two least expensive, adult-size adjustable caps. As such, it measures what a family of four sports fans spent for tickets and other items to attend a regular-season game played by professional baseball, basketball, football, and hockey teams of specific leagues.

In the following tables, I list two different types of data: Table 1 provides the FCIs, when calculated and available, of four leagues for alternate sports seasons and these seasons’ averages during the 1990s and early 2000s, and Table 2 indicates costs of seven items in the NFL’s FCIs and their season totals. To be consistent across sports leagues and seasons, amounts in tables appear in rounded even or odd dollars and not fractions of dollars. For example, the NFL’s FCI was $151 per game in 1991 while the costs of two programs for a family of four were equal to $6 or $3 per program.  Based on this information, what do these tables reveal about trends and the expenditures of fans at games?

 

Table 1

Fan Cost Indexes, by Sports League, Selected Seasons

 

Seasons

League  1991  1993  1995  1997  1999  2001  2003  2005  2007  2009  2011
MLB       76    90    97   105   121   145   148   164   176   196   197
NBA      141   168   192   214   266   277   261   267   281   289    NA
NFL      151   173   206   221   258   303   301   329   367   412   427
NHL       NA    NA   203   228   267   274   256   249   282   300   326
Avg       NA    NA   174   192   228   249   241   251   276   299    NA

 

Note: The leagues are Major League Baseball (MLB), the National Basketball Association (NBA), the National Football League (NFL), and the National Hockey League (NHL). Amounts are in nominal (unadjusted for inflation) United States dollars. Avg is the average FCI each season except in 1991, 1993, and 2011. NA means FCIs were not available from TMR for these leagues. 

Source: Team Marketing Report, a company based in Wilmette, Illinois, that organizes and reports the FCIs of these sports leagues and their teams.

 

According to Table 1, the percentage growth in FCIs ranged from a high of 183 percent for the NFL (1991–2011) to a low of 60 percent for the NHL (1995–2011). This large difference in percentages between the leagues indicates, in part, that NFL teams and vendors of beer and other items sold at games had relatively more pricing power and demand for their products from fans than their counterparts did in the other leagues.

Second, MLB’s FCIs increased throughout seasons while the other three leagues had their FCIs decline in 2003 relative to 2001, and the NHL in 2005 relative to 2003. Simply put, these changes occurred primarily during the early 2000s because of an economic recession in America, decreases in consumer confidence and thus spending due to higher unemployment and underemployment in the labor force, and declining prices in stock markets.

Third, differences in their FCIs significantly increased after 1999 between the NFL and other leagues. Indeed, NFL teams in regular-season games and playoffs became increasingly competitive within divisions of conferences, and therefore they were very popular among sports fans and the broadcast and print media. In addition, there were various scandals associated with athletes and other problems in MLB and the NBA, while a player’s strike and owner’s lockout cancelled a season in the NHL. In short, these reasons reveal why FCIs increased in dollars in the NFL more than in other leagues during the 2000s and likely in sports seasons of the 2010s and 2020s.

 

Table 2

Total Cost of Items in FCIs, NFL Games, Selected Seasons

 

Seasons

Item         1991  1993  1995  1997  1999  2001  2003  2005  2007  2009  2011
Tickets (4)   101   114   136   150   182   215   211   234   268   300   309
Beers (2)       6     7     8     8     9    10    11    12    12    13    14
Drinks (4)      6     7     9     9     9    11    12    13    14    16    17
Hot Dogs (4)    7     8     9    10    11    12    13    14    15    17    19
Parking (1)     6     6     7    10    11    14    14    15    17    24    26
Programs (2)    6     7     9     9    10    11    10    10    10    10     9
Caps (2)       19    24    28    25    26    30    30    31    31    32    33
Total         151   173   206   221   258   303   301   329   367   412   427

 

Note: Like FCIs, prices of items are in nominal (unadjusted for inflation) United States dollars. According to TMR, the average number of items a family of four fans purchased at an NFL regular-season game appears in parentheses.   

Source: Team Marketing Report, a company based in Wilmette, Illinois, measures the costs of these items each season for sports leagues and their teams.

 

Regarding the data listed in Table 2, there were interesting changes among specific items in the NFL’s FCIs. One, football teams’ ATP rose by $208 or more than 200 percent from the 1991 to 2011 season, and as a proportion of their total FCIs, they increased from 66 percent in 1991 to 72 percent in 2011. For sure, NFL franchises charged fans higher ticket prices for general admission to home games but also for premium and club seats, and any seats in skyboxes and suites in their stadium.

Two, there were major changes besides ticket prices in the costs of other items for fans who attended NFL games. From the most to least amounts in 1991 to 2011, they were $20 or 333 percent for parking, $14 or 74 percent for caps, $12 or 171 percent for hot dogs, $11 or 183 percent for drinks, $8 or 133 percent for beers, and $3 or 50 percent for programs. Interestingly, these six items were $50 or 34 percent of the NFL’s FCI in 1991 and $118 or 28 percent in 2011.

If trends in costs continue as they did in the 1990s and early 2000s, a family of four will pay approximately $800 to attend an NFL game in 2031. Of that amount, four tickets to one regular-season game will average $636. In response to these prices, a number of football fans living in such metropolitan areas as Boston, Chicago, Dallas, New York, San Francisco, and Washington D.C. may decide to buy fewer beers and other items when they attend home games while other fans will simply subscribe to the NFL Network and see their teams perform on television or the Internet.              

 

NFL Business Overview

In a study of the NFL that Jake Fisher completed while enrolled in an economics class at Harvard University, the author provides a business model of this popular and prosperous American football organization, and therewith discusses its marketing strategies, team (franchise) values and such financial data as revenues, operating expenses, and profits. Based on variables contained in the model, this professional league’s economic success occurs primarily because it centrally generates and equally shares national revenue streams from the media and merchandising, controls the distribution and quality of its product and thus stabilizes consumer demand for football, allocates risk proportionately among 32 franchises, restricts the long-term growth in players’ compensation, and maintains competitive parity.[1]

To denote some real-world consequences of the model, since 1998 Forbes magazine reports information about the business of the NFL and financial facts of its various franchises. For example, staff writer Kurt Badenhausen researched the economics and operations of the league and its teams during early-to-mid-2011 and then reported his results in September of that year in an article titled “The NFL’s Most Valuable Teams.” The following are important highlights of Badenhausen’s research.

First, the average NFL team was worth approximately $1.04 billion. In fact, teams’ estimated market values ranged from $1.85 billion for the Dallas Cowboys to $725 million for the Jacksonville Jaguars. Furthermore, 15 (or 46.8 percent) of the 32 football clubs had values greater than $1 billion.

Second, from 2010 to 2011, the values of 19 (or 59.4 percent) NFL teams increased while 8 (or 25 percent) decreased and 5 (or 15.6 percent) remained the same. More specifically, the greatest increase in value was 10 percent for the New York Giants with the steepest decline in value equaling 5 percent for the Tampa Bay Buccaneers.

Third, relative to their debt/value ratios, the largest ratio was 61 percent for the New York Jets with the smallest being 2 percent for the Green Bay Packers.

Fourth, franchises averaged $261 million in revenue for the league’s 2010 season with the Cowboys ranked first at $406 million and the Oakland Raiders ranked 32nd at $217 million.

Fifth, NFL clubs averaged $30.6 million in operating income that season. These amounts varied from $119 million for the Cowboys to a $7.7 million operating loss for the Detroit Lions. In short, the differences in dollars across the league reflect how the league’s teams performed financially both as a group and individually during the period.

As sports enterprises, what are the reasons that caused NFL franchises to realize different amounts with respect to their estimated market values and annual changes in values, debt ratios, revenues, and operating incomes? Besides their performances in regular season games and perhaps later in the playoffs and Super Bowl, and expansion in the size and purchasing power of their fan base, these reasons included such factors as capacities of their stadiums and prices of club seats, personal seat licenses, suites, and general admission at home games.

Meanwhile, other factors were monies teams received from advertising, merchandise deals, naming rights, partnerships and sponsorships, and any payments from revenue sharing. Undoubtedly, these factors and amenities from playing home games in relatively new or renovated stadiums contributed to improvements in the earnings of the New York Jets, New England Patriots, and Indianapolis Colts in the American Football Conference, and to the Dallas Cowboys, Washington Redskins, and New York Giants in the National Football Conference.

During the next decade, the NFL is likely to become more powerful and wealthier from a business perspective and therefore continue to dominant professional sports in America. Indeed, the league signed a new 10-year collective bargaining agreement with the NFL Players Association that, in part, increases franchise owners’ share of revenue from 49 to 53 percent. Moreover, between 2014 and 2022 the league will receive approximately $28 billion from television contracts with the FOX, CBS, and NBC networks and additional billions in broadcast revenue from DirectTV, ESPN, and Westwood One Radio. Consequently, NFL teams must share about $6 billion each season in media fees beginning in 2014.

Despite the league’s current popularity and lucrative business prospects, Green Bay Packers Chief Executive Officer and President Mark Murphy identified some potential problems in an August 2011 interview with Matthew Kaminski, a member of the Wall Street Journal editorial board. According to Murphy, there are five major problems. One,  concerns about the safety of the game and long-term effects of concussions and other serious injuries to teams’ players; two, concerns that bad or negative publicity in the media about safety and injuries may scare parents and thus cause their children and teenagers to ignore the game and not play football; three, an increase in ethical problems like recruiting scandals and cheating by coaches and other officials in college football programs; four, almost zero growth of participation in the sport among the Hispanic population living in America; and five, the league’s limited success to expand the game abroad especially in Asian and European countries.

In future essays, I plan to analyze a number of specific topics about the business, economics, and history of the NFL and/or the operations of college football. For more details of franchises as business organizations and competitors in the league, see Chapter 3 in Football Fortunes: The Business, Organization and Strategy of the NFL published by McFarland & Company, Inc. in 2010.                    


[1] Fisher, Jake I. “The NFL’s Current Business Model and the Potential 2011 Lockout.” Student requirement for Economics 1630: The Economics of Sports and Entertainment, Harvard University, May 2010.