From Rags to Riches: A Financial History of the NFL

From a group of four rickety Midwestern football teams to a $14 billion-a-year financial juggernaut, The NFL has come a long way since it was founded in 1920.

With the Super Bowl less than two weeks away, we thought it would be a good time to look back at the financial side of the NFL’s almost century-long history. Turns out that before they struck it big on TV, the National Football League was anything but a sure bet.

The NFL’s early years saw financial instability and high turnover.

If you had told the founders of the NFL that one day the league would be a financial juggernaut–raking in $14 billion a year and counting—they’d have been surprised, to say the least. When the NFL was formed in 1920 in an auto showroom in Canton, Ohio, it was nothing more than four Ohio-based football teams banding together to make things a little easier for themselves.

Those original four teams were the Akron Pros, the Canton Bulldogs, the Cleveland Indians, and the Dayton Triangles. And when the American Professional Football Association (as it was then known) played its first season later that year, those four teams were joined by ten others, all of them based in the Midwest and almost all of them from small to mid-sized towns like Muncie and Rock Island.

Only two of those teams are still with us today. The Decatur Staleys later moved to Chicago and became the Bears, while the Racine Cardinals eventually ended up in Arizona after long stops in Chicago and St. Louis. The Green Bay Packers joined the league in 1921. The following year, the league officially changed its name to the NFL.

Those early years were rough going from a financial perspective. Making money from professional football games wasn’t exactly easy, and most of the teams had payrolls held together with spit and rubber bands. As such, teams dropped in and out of the league or outright folded with astonishing regularity. The NFL roster fluctuated year to year with a high of 22 teams; it wasn’t until 1936 that league roster saw zero turnover from the previous season.

Moving east improved the NFL’s prospects, but baseball and college football still ruled.

After years of instability, the league decided to install some quality control. In 1927, they restricted their membership to twelve teams, all of whom were (relatively) financially stable. Not all of those franchises would survive, but the ones that replaced them were in larger, Eastern cities like Boston, New York, and New York. With the exception of Green Bay, the league’s small-town Midwestern origins were being left behind in favor of the bustling eastern seaboard.

Green Bay, by the way, is actually a publicly owned non-profit corporation. Instead of a single owner, they issue “shares” in the team, which are owned by thousands upon thousands of loyal fans. If you’re wondering how they managed to stay in Green Bay all these years, that’s why. Not an Al Davis or Art Modell in sight. (Okay, league-wide revenue-sharing has also helped, but we haven’t gotten to that part yet.)

This Eastern migration did help the early NFL draw in more revenue and gain more financial stability. Still, even as the league made slight gains throughout the 1930s, it still struggled, both financially and culturally.

One of the biggest problems was the fact that it was completely overshadowed by the college game. Many college football stars saw joining the NFL as a step down from the game they’d played in school. And without high enough salaries to overcome those concerns, many of those same stars choose jobs in regular industries over playing football professionally.

World War II saw many NFL players serve overseas, which meant that some teams temporarily merged until they returned. Once the war was over, the national economic boom of the 1950’s lifted the NFL’s prospects as well. Still, it remained a distant second (maybe even third or fourth) next to America’s real pastime: baseball. As the 1960s dawned it seemed like the NFL was doomed to be a cultural and financial also-ran.

The modern NFL is born, all thanks to one man (and millions of TV sets).

Enter Pete Rozelle. When the NFL commissioner Bert Bell died in 1959 of a heart attack, the 33 -year-old Los Angeles Rams executive was elected commissioner early the following year—though only after a whopping 23 ballots. Rozelle understood one thing above all else: The future of football didn’t lie in gate receipts (i.e. money from ticket sales to live games). No, the future of the NFL lay in TV.

This might seem like a “no duh” kind of revelation nowadays, but back then it was pretty revolutionary. It was something that the NFL’s main competition, the American Football League (AFL) understood as well. In 1960, the AFL negotiated a two-year contract with ABC worth under $2 million annually to broadcast its games.

NFL owners, on the other hand, were skeptical. After all, tickets were their main source of revenue. How were they supposed to make money by broadcasting games on TV, which meant that people no longer had to buy tickets in order to see their favorite teams play? And besides, wouldn’t TV money end up turning the big-market teams like New York and Chicago into financial powerhouses, making it impossible for small-market teams like Green Bay to catch up?

As it turns out, the AFL also had a slightly revolutionary solution to this problem: Taking the revenue from that TV contract and sharing it equally between all its teams. This promoted financial stability and gave every one of its teams a real chance to succeed. At the very least, it ensured that every team started the year with money in the bank. Revenue-sharing was such a good idea, in fact, that Rozelle wanted to steal it wholesale for the NFL.

After the moving the NFL’s headquarters from the tiny Pennsylvania town of Bala-Cynwyd all the way to New York City’s Rockefeller Center, Rozelle set to work negotiating the NFL’s new TV deal. What he came away with was a two-year deal with CBS to broadcast every game of the NFL’s 1961 and 1962 seasons. The total price tag? $9.3 million split evenly between the league’s 14 teams.

Here’s what happened next: The CBS deal got blocked in court under the Sherman Anti-Trust Act. Undeterred, Rozelle started lobbying Congress and the Kennedy administration to get an exemption. After only three months, the Sports Broadcasting Act was passed and signed into law by Kennedy himself. The new law exempted professional football, baseball, basketball, and hockey leagues from antitrust regulations on their broadcast deals.

In 1966, the NFL and the AFL announced a merger. While it would take until 1970 for the two leagues to fully combine their operations, some other changes would start immediately. Namely, The 1966 season would be the first one in which the winners of each league played each other for ultimate football supremacy. The name of this game would be … The Super Bowl.

The modern NFL is so profitable, its teams might not need actual fans.

Last season, the NFL brought in a staggering $8.1 billion in league-wide revenue; add in local revenue, and the total topped $14 billion. Most of that money comes from TV, although the league’s merchandising arm, NFL Properties—another Pete Rozelle invention—has also been a massive moneymaker.

In its earliest days, NFL teams struggled to make money. Many were lucky if they could get a couple hundred fans to show up to their game. Nowadays, the importance of TV revenue has made ticket sales something closer to an afterthought. So what if only a few hundred fans show up? When it comes to the Los Angeles Chargers, in fact, the league might accidentally be conducting an experiment to see whether a team can be profitable without any fans at all!

To read more about the financial side of history, sports, and pop culture, check out these related posts and articles from OppLoans:

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