The NFL

So in my headphones, I have, are you ready for some football? Yeah, I was listening to that too. Yes. Dude, it gets you so pumped up. It totally does. I feel like I grew up on the Fox Sports theme. It always makes me think of Thanksgiving. It makes me think of, I think it was a Jock Jams tape that I bought. Welcome to this special remastered edition of Acquired, the podcast about great companies and the stories and playbooks behind them.

I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Three years ago, in January of 2023, we released an episode on the National Football League, which, David, I think is absolutely an essential part of Acquired Canon. Totally agree. We took so much from that episode. 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 ultimate Acquired universe crossover happened between the NFL and Taylor Swift. Yes. It was kind of bad timing when we made this originally. It was right before that happened. But Ben, you forgot the most important thing, which is that this year, in 2026, we are hosting the Super Bowl's Innovation Summit at the Super Bowl in San Francisco this year. 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 the influx of gambling being legalized has affected the league.

And at the very end, we have the wild story of how private equity has entered the league too. So make sure you stay tuned for that because it is nuts. Yes. We're going to 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 2023 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 100 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. 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 100 TV broadcasts aired last year, 82 of them were NFL games. Wow, that is wild. 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 fans' 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. But we do have some sports thank yous to Michael McCambridge, 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. Well, after you finish this episode, come discuss it with the other smart, curious, kind members of the Acquired Slack at acquired.fm slash 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? All right. We start on November 6th, 1869, 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 25 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. Now, what was football in 1869? This is not someone dropping back in the pocket and throwing a 70-yard bomb. 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. I mean, keep in mind, this is four years after the end of the Civil War.

Yes. So now, why were these two groups of Princeton and Rutgers students so interested in playing this game? This terribly violent game. 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. Okay, so a soccer with 25 people on a team. 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 10 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. There are like deaths, serious injuries, very, very common through this period. Finally, 1905, there are 19 fatalities 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 the 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.

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 are 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. 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 because this is a training ground for future... Military. ...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 going to outlaw this. In response, they create the NCAA. Like, that is the beginning of the NCAA. Oh, I didn't realize that.

Yeah, it was to regulate and codify and make the game of collegiate American football safer. Huh. 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 injuries. There's not a lot of protective padding being worn here. And a lot of this predates even leather helmets.

People are just playing this in regular clothes. 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. In 1905. And that becomes, obviously, a defining characteristic of football.

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.

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. It still is to this day. Like, it is a huge part of the American sports landscape. And it was even more so then. All right. So the NCAA is formed. We've now got the forward pass.

So modern football, does that lead to the NFL? 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.

These are teams, not leagues. So these are barnstorming teams that would go around. Like, there's no organized schedule of play. But they're viewed not only just as second rate to the college game. They're, like, dirty. Why are you taking this esteemed thing that our best and brightest participate in and turning it into this entertainment act? 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. Oh, I see. Like, it's supposed to be amateur. It's supposed to be amateur. This should not be a professional activity. This is a rite of passage for young men. So to 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 McCambridge 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. Yep. So it's not like professional sports were all licked down upon. Not at all. It was that football was this very special thing. Yes. 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.

The founding of the NFL. 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 Hallis. 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 for the company football team.

Which, of course, is called the Staley's. Yes. The sponsorship is so deeply rooted in the NFL that the very first team was actually named the sponsor. They weren't even sponsors. It was the employees of the company who played for the team. Now, Hallis sort of had a mandate to go out and recruit employees who happen to be good football players. So, these folks that come together at George Hallis' 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 going to sign any current college players. There's going to 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.

You know, you could imagine. These college kids, they want to make money. 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. So, point one, they're not going to raid the college game.

Point two, they're going to endeavor to play the game at a high ethical and rules-based standard. 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.

Yep. Standardize what the game is. Yes. And then number three, perhaps the most important, they're going to make Jim Thorpe the president of the league. 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. 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. 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. Who, of course, is the person that all of the youth football leagues are named after today, Pop Warner League. 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 becoming completely white, the first star player, the whole basis of the league, the first president of the league was a person of color. 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.

Oh my god. The first time that he competed in the decathlon was in the 1912 Summer Olympics and he won the gold medal. Wild. Wasn't he also an outfielder with the New York Giants? Yeah, and basketball and won gold medals. Wild. So this new league, proto-NFL formed in 1920 with 14 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.

And they consolidated the smaller leagues to create this in the Midwest. Yes. But that said, the 20s and really the 30s too, it's an uphill battle, shall we say. Oh yeah. If you look at the, what is it, 15 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 Stalys, the Racine Cardinals, and one we have not talked about yet, the Green Bay Packers.

The Decatur Stalys would become the Bears, Chicago Bears. The Bears. Yes. Actually named after the Cubs. That's right, because they played in Wrigley Field and Bears are bigger than Cubs. Yep. So, it was an uphill battle for a couple reasons. One, even despite all their efforts, the stigma of professional football really does not wear off, especially in the 20s. So, after the NFL is formed and starts getting publicity, in 1922, then Michigan, sorry Ben, Michigan, then Michigan head football coach Fielding Yost gives a very widely reported speech in New York City where he's talking about the new league and he says that, quote, pro football robs the great American game of many of its greatest character building qualities.

The ideals of generous service, loyalty, sacrifice, and wholehearted devotion to a cause are all taken away. Now, of course, he's partisan because he's a college football coach, but this really was still the prevailing sentiment. Yep. The other problems the NFL face are most of these teams are based in kind of small towns. They're not in big cities. 100% of these teams either fold or move to larger cities except for the Packers. They're the only small market team that stood the test of time.

Yeah. There was no TV. There was no internet. Like, the market size was not unconstrained for these teams. The market size was quite constrained. They were filling a niche and a demand for football in these towns, but they weren't going to make that much money. And they're massively loss-making. I mean, these teams last two to five years and there's another 15 teams that are formed between the Chicago Bears and eventually the New York Giants are formed around 1925 that stand the test of time.

So it's amazing all these teams that spin up and spin down within five years of each other in this decade. It just became completely non-viable economically for small town teams to survive except for Green Bay and they all end up moving to the big city where they're very much playing second fiddle to the baseball teams. Yeah, and most of these don't even end up moving. They just end up closing their doors. The other important thing though to say about the NFL during this time before World War II is that in the beginning there was Jim Thorpe who was the first president of the league.

He's a figurehead. He's only president for a year and then they bring on a real administrator. But you know, obviously he was Native American. He wasn't a white person. There were several Black players in the league at that point in time and it was like not a big deal. In fact, the first NFL champions in that first season, the Akron Pros, the star player and the head coach was a man named Fritz Pollard who was Black.

Wait, he's the star player and the head coach? I love that. Unfortunately, in the mid-30s, supposedly after George Preston Marshall comes into the league as owner of the Boston Braves that became the Boston Redskins and then moved to Washington, D.C., at his behest, they adopt the same policy as Major League Baseball and completely kick Blacks out of the league. And it wouldn't be until after World War II and for the Redskins, not until 1961. The Redskins, commensurate with keeping that name for as long as they did, they were very, very, very late to integrate the team.

I think they had some really big fan base in the South and there weren't a lot of NFL teams at that point in the South. And so it was both because he was racist and also because he realized he would probably lose a lot of his fan base who were also racist by integrating his team, which is like a horrible thing that it was a strategic advantage for him to get that fan base by having a exclusively white team.

So all this would continue kind of status quo, the league barely is creeping along until after World War II when both America and the NFL would change forever and pretty radically. So after the war when all the troops come home and there's the GI Bill, there's this new middle class in America that didn't go to these elite private school Ivy League institutions or even the Ohio States of the world or the Carlisle Indian colleges and they're coming home from the war.

They don't have college educations. They may be now getting them through the GI Bill, but they have jobs. They have disposable income. They increasingly have radios and soon-to-be television sets. They want entertainment. You sort of have this opportunity to be a new thing in America that people do with their time and dollars. And keep in mind every owner's experience to this point is subsidizing losses. If you're bringing on other people to try and be co-owners of a team with you or you're deciding that your family is going to sort of carry the weight the whole time or that your company is going to carry the weight of the team, you're just subsidizing losses.

So every single person involved in pro football ownership at this point is not even lip service for the love of the game, like purely just for the love of the game. But now, interestingly, there's a business opportunity. Yeah. And all these American GIs coming home from the war and their families, they don't have the same hangups and preoccupations about the college football game that the elite did before the war because they didn't go to college during their younger formative years.

So there is this big opportunity now after the war for professional football and the NFL to become a much bigger thing. And they probably would not have realized it except their hand was forced. In 1944, right before the end of the war, a lot of people could see this opportunity. Football was a very compelling game. The NFL was only in, what, I think, eight cities at that point in time. To really realize it, you had to expand.

You had to be in a lot more cities. And there were wealthy business people in cities all across America, East Coast, Midwest, the South, Florida, who wanted to add teams and come into the NFL, but the NFL owners weren't interested in expansion. And those eight teams, the Cardinals, of course, they're in Arizona today. You've got the Chicago Bears, you've got the Green Bay Packers, the New York Giants, the Detroit Lions, the Boston Redskins had since moved to Washington.

You've got the Philadelphia Eagles, the Pittsburgh Steelers, and at this point, and this is crucial, the Cleveland Rams. Yes, the Cleveland Rams, owned by the forward-thinking Dan Reeves. Yes, and this is the first Cleveland team that did not shut down, but instead moved. So the other potential ownership groups in other cities across America that wanted football leagues, at a certain point, come 1944, they were just like, well, the hell with you, NFL. We'll go start our own league.

Yep. So a new professional league gets founded, the All-America Football Conference in 1944. The AAFC. And it's got some pretty serious firepower. It's organized by one of the country's preeminent sports journalists based in Chicago. It's backed by some high-power ownership groups, including the famous Hollywood actor Don Amici in Los Angeles, wealthy businessmen in San Francisco, New York, Chicago, Miami, and they have reached a deal with the legendary Ohio State coach Paul Brown when he's coming home from the war from his service that he is not going to go back to the college game.

He's going to come coach the new AAFC Cleveland franchise named after him, the Cleveland Browns. Yes, the man who transformed football, Paul Brown. And this is the very first time in sort of the modern NFL era where you have this real threat of two professional football teams that people really want to see in the very same city, the Cleveland Rams and the soon-to-be Cleveland Browns in the AIFC. Yes, and in a head-to-head war between those two franchises, the writing is on the wall of who's going to win and it's not going to be the Rams.

Now, Dan Reeves thought that the NFL should be on the West Coast and should be truly national and he wanted to move the Rams to Los Angeles. But the NFL owners, by the bylaws, you had to have 100% unanimous approval of all the owners to move a team and they didn't want to. And it makes a lot of sense. These teams have lost money forever. It's like we're just on the precipice of having a real business here.

Don't make us figure out how to get these other seven teams to LA once every whatever it is, six or seven games. So now the war's ending, the AAFC and the Browns are coming in, and then the dagger comes right before the 1946 NFL annual meetings in January. Dan Topping, who owned the NFL's Brooklyn Dodgers and also the New York Yankees, the baseball team. So like the highest profile, wealthiest owner in the NFL defects to the AAFC.

So there's major crisis. Yep. First thing they do in the January 1946 annual meeting is they boot out the then commissioner. So the owners, they're like, okay, to lead this fight, we can't have somebody from the outside. We need to draft one of our own from the ownership group here in the inside, who's going to be able to marshal everybody together and lead a coordinated response to this existential threat. They install Burt Bell, who is the owner of the Philadelphia Eagles, as the new commissioner of the NFL.

And he's tasked immediately with drafting a competitive response to the AAFC. And they decided it needs to be three things. One, they need to go meet the AAFC where they are, being nationwide and the West Coast and going to California. Two, the NFL, if they're going to win, they need to put out a superior product, a better game on the field than the AAFC. And then three, for the first time, they need to do a better job than the AAFC, or at least as good a job at actually telling America about it.

They have to go proselytize, they have to go win fans and win consumers' hearts and minds. So fronts one and three are basically all handled by Dan and the Rams. So immediately after Bell comes in as commissioner, he orchestrates approval for the Rams to move out to California. And it's a good thing they did because when play eventually starts in the 1946 season, the new Browns in Cleveland, for their very first home game, draw 60,000 fans, which is more than the Rams did for the entire season the year before.

Yeah, Paul Brown was quite the anticipated figure in Cleveland. He had coached at Ohio State, he had coached one of the Navy teams, and he was sort of known for knowing how to whip a football team into shape who would have to know the intellectual side of the game as inside and out as the physical part of the game. It was a huge part of his strategy to make people memorize the playbook and take written tests.

And if they failed these written tests about the plays, about the rules, about Paul's strategy, he'd kick them off the team. No matter how good they were. And it's the first time someone really looked at the game and said, sure, it's a game, but actually this could be a science. He was almost like the first money baller. One of the first innovations he did was he was one of the first coaches to really review film and recognize patterns and plays and statistically manually tally, here's what we have to do against this team and that team and here's what worked for us last year and here's what didn't work for us this year.

Paul Brown was the first modern, not just football coach, but I think sports coach period in America. And you know, every human is flawed, so we shouldn't make him out to be the messiah or something, but he was basically the first coach to start racial integration of the team and recognize that if we have the best players, then we're going to win, so we just need to do whatever it takes to get the best players on our team.

The other thing that he did, he employed an entire staff of assistant coaches year-round. I think it was six people in addition to him. No other team did that. And on the racial integration front, the AAFC was going to be an integrated league from the beginning. That's counter positioning right there. The NFL, and especially the Redskins, didn't have a lot of interest in doing so, but moving the Rams to LA forces the league to integrate because the LA Coliseum, where the Rams want to play, is a publicly owned building.

And it's controlled then as now by the LA Coliseum Commission. And when Reeves and the Rams come out to petition their case that they should come be allowed to play in the Coliseum, well, the commission says, okay, we'll let you play here, but we're not going to allow any segregated home teams to use our stadium as their home stadium, so you're going to have to integrate the team. And this is where the public relations aspect of the Rams becomes clutch.

Ugh, the Rams were so good at PR. So A, they agree right away. B, not only that, they say, great, we'll sign Kenny Washington, who, before the war, had been a hero in Los Angeles. He was a huge star for the UCLA football team, and all this was helped out by a savvy, young intern for the Rams, one young Pete Roselle, who helps craft a lot of this strategy. But put a pin in Pete Roselle for the moment.

So for a quick review of where we are right now, you've got the NFL, it's an eight-team league, the Rams have just moved from Cleveland to LA, and then you've got this AFC that's starting to play. What year do they actually start? 1946, same year that the Rams moved to California. And the roster of AAFC teams is the Cleveland Browns that we've talked about, the New York Yankees football team, the Brooklyn Dodgers football team. Which defected from the NFL.

Yes. The Buffalo Bisons, the Miami Seahawks, which is interesting, that has nothing to do with the Seattle Seahawks, they just reuse the same name, the San Francisco 49ers, the Los Angeles Dons, so you've got two LA teams. Now you've got an AAFC team and a NFL team and the Chicago Rockets. So you've got the NFL and you've got the upstart AAFC that would only last four years but would change the game quite a bit. And by forcing this competition, they forced the NFL to do a bunch of things that really was in the NFL's best interest but they wouldn't have done absent competition.

And this is the first time where we really learned the lesson, the football that people will watch is the most entertaining game. Yes. Because this is something that would not be obvious, I think, for running this experiment. What is the most entertaining game? It's the most competitive game on the field. And for all that we were just lauding Paul Brown and he's legendary, the teams he coached, he was too good. His teams were too good. So the Browns end up winning all four AAFC championships.

They only lose four games in four years. And the game becomes boring. There's no drama. It's a foregone conclusion that the Browns are going to win. If your team is playing the Browns, the Browns do great at home, but when they're on the road, they're like, well, the fans like, why am I even going to go? Right. Watch my team get destroyed by the Browns? Why would I want to do that? By the way, those words have never come out of my mouth before, growing up a modern Browns fan.

Well, the current Browns are not the same Browns as the old Browns. They actually are the same. Importantly, the franchise and records stayed with Cleveland. The Baltimore Ravens are a brand new team that started in the 90s, not a relocated Cleveland team, despite the fact that they took the whole front office and team and ownership. That's some serious rewriting of history there by the NFL. Yes. So to your point, the NFL learns this lesson here of, oh my gosh, we've been sort of fortunate that this didn't happen in our league, but it's really nothing intentional that we did.

There's nothing structural that we did to ensure there was no Cleveland Browns in our league. It sort of accidentally happened. And by observing the counterexample of boring football, where there's one dominant team, it kind of has to become a core tenet of our league now to fight these other guys of enough equality between teams that it is always very competitive. competitive. And it's even more important back then because there was radio, but there wasn't really TV yet.

Even though we're in the post-World War II era, these first few years, five years after the war, the install base of TV was just starting to roll out across America. So this is still an in-person game. And so the business model of professional sports was ticket sales, in-person attendance at the games. I don't think the AAFC model of the Browns being dominant would work ever. But at least today, you could watch the games on TV. They'd be like, oh, I'm always going to see a show when the Browns are playing.

That wasn't the case back then. You had to get butts in seats. That was the only way you were going to make money. This becomes a feedback loop. If you don't make money as a team, you can't afford to put a quality level of play on the field, which further tips the competitive dynamic out of balance. Totally. And if you have a league that figures out how to make sure that it's always competitive, and when I say always competitive, what that translates into it from a business perspective is, let's say every stadium has 40,000 seats and you have eight teams, that means you have the capability to sell 160,000 seats every weekend.

And your goal is to sell 160,000 tickets every single weekend. And so what you basically need is to make sure that it's always a great game to come watch. And to your point that the business model is around the gate or ticket sales rather than TV, that actually stayed the case until 1977. That was the first year that the NFL made more money from television revenue than from ticket sales. That is a full 30 years later than the time period we are talking about here.

I didn't realize it was that long. Yeah. Because television is going to come in a big way. But back to Burt Bell, the newly drafted commissioner of the NFL, this is his great insight that he realizes as he's marshalling the NFL owners in the battle against the AFC. And he adopts this as his mantra that literally, I mean, they made a movie with this title. On any given Sunday, any team in the league should be able to beat any other team.

And he pushes this through with the owners and gets them all to agree to this of like, hey, the only way we're going to survive and prosper is if we agree that none of our teams can get so dominant that we end up with a Cleveland Browns situation. Yep. All right. Well, listeners, this is a great time to thank our longtime friend of the show, Vanta, the leading agentic trust platform that helps you automate compliance and manage risk.

And David, I caught up with Christina and the Vanta team to get the latest on this one. Oh, nice. Yes. So listeners, you probably know that Vanta started by focusing on compliance automation, you know, helping companies get SOC 2 and ISO 27001 and GDPR and HIPAA. Their big insight was they could build a system that would monitor all your compliance and risk continuously, not just once a year for your audit. So you can feel confident in your security posture all of the time.

But they've realized that the business they're really in is making it easier for you to earn the trust of your customers. Yes, exactly. So when you start scaling, you end up with more compliance and more security requirements and more tools, which can get very chaotic. And Vanta has become the always on AI powered security expert that scales with you. And as they like to put it, they are the best security hire you will never have to make.

Which makes total sense. Vanta has really evolved beyond compliance automation to actually building trust with your customers better than you could on your own. And that trust is what closes deals. Yeah, which is why the fastest growing companies in the world like Cursor and Snowflake and Replit and Linear and Ramp and Writer use Vanta to build trust with their customers and spend 82% less time on audits. That is a lot of time back for their engineers to focus on growth.

Yes. So if your company is ready to join Vanta's now more than 14,000 customers around the globe, just head on over to Vanta.com slash acquired and tell them that Ben and David sent you here in 2026 and you will get $1,000 of free credit. That's Vanta.com slash acquired. All right. So David, Burt Bell, the new commissioner of the NFL, adopts this mindset of we have to keep the game competitive always. What do they do structurally? Any given Sunday.

So Burt 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 going to 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 going to have statistically a relatively even 50-50 record going into the midway point in the season. So there's going to be drama about who's going to end up winning, even though the actual level of talent might diverge quite a bit within the league. Yeah. Even if you're a great team, if you've only faced great teams for your first several games, you're going to be a little banged up coming into the second half of the season.

And the NFL still does this to this day. Hmm. I didn't realize that. Yeah. This is like a kind of critical sleight of hand in making the whole thing work. But this is kind of like camouflaging. If there is a competitive balance problem underlying everything, this is only camouflaging it. How do you fix it? Yeah. Well, there's no free agency at this point. 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. I know, which is ridiculous. And so the NFL and Burt 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.

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. And it's incredible the artifice that grows up around this.

Oh, 50 million people watch this thing today. I mean, we were watching YouTube videos and research of like Taylor Swift was at the NFL draft a few years ago when it was in Nashville. Like it's a huge event. It was actually the first big coup for ESPN when ESPN started in 1979 and 1980 was televising the NFL draft. Genius. So these two elements, stacking the schedule and then the reverse order amateur draft form the nucleus of Burt Bell and the NFL strategy that it's had ever since, which comes down to league first.

League first, team second. 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 because 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 TV revenues that are shared today. So David, maybe this is a time to talk about television's impact on the NFL. 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 eight come over to the NFL. The Browns, the 49ers, and the Baltimore Colts. Who are, of course, now the Indianapolis Colts. 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 television sets sold and it only grew exponentially from there. Oh, I love that you looked this up. 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, thank God, A, the AFC 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. 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 are 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, 162. The gate, the ticket sales were so important to baseball that with the admin of television, the baseball owners thought television was bad and they end up fighting it.

Well, so did the football owners for a while. Well, so did the football owners, but they had a lot less to lose. Well, yeah, because pro football is still an underdog sport here. Even in the early 50s, they're like up and coming. They're trying to get more people to go to games. And baseball generates a ton of stadium revenue from filling their 40,000 person stadiums. Indeed. Baseball had a lot to lose. And to be fair to all of them, in the early days, and I think for a long time, local market home television airing of home games absolutely depressed in-person attendance.

Totally. When the very first NFL TV deals were signed, and of course, these were individual local deals signed by team ownership and their local television broadcasting affiliate. It wasn't with CBS broadly. It was with, you know, whatever your local TV station is. They would black out all the home games because they would say, uh, we need to fill this stadium because until 1977, the stadium, the gate was actually the biggest form of revenue. And so why on earth would we cannibalize our experience when someone could just watch it from home?

Absolutely not. It would later take a presidential order from Richard Nixon to end the home blackouts. And even then, only if the home games were sold out would the blackout be lifted. It wasn't until after September 11th that blackouts were lifted, even if the home game wasn't sold out. But it's a mess. But Ben, as you say, in the 50s, these early television experiments are being run with sports. And like, it is pretty bad. So the LA Rams, they do an individual deal in 1950 with the Admiral Television Company to broadcast the Rams games.

But they put a clause in the deal because they'd seen what had happened with baseball that Admiral would guarantee revenue back to the Rams for any loss in attendance. And this is a really bad deal for Admiral because attendance declines 50%, 5-0. Which is crazy. Like, for how bad the broadcasts were, the fact that that is a suitable replacement to going to the game. I mean, they would put like one camera up on the 50-yard line and they wouldn't do like any microphones.

And they would just be like, all right, this is the game. And maybe they'd have some commentators. Oh, and it was in black and white on a tiny screen. And like, yeah, all of these things. But the industry was new. Everybody was figuring everything out. The TV set manufacturers, the networks, the content, the sports leagues. One of the big marketing messages was, the game comes to you. You don't have to leave. Buy this appliance. Put it in your home.

And it's like a magical window. Like, you have a seat at the game. And it really did depress attendance. A saying ends up being developed in baseball that, sadly, for baseball, they stuck to for a very, very long time. That radio wets the appetite. Television satiates it. Hmm. It's a new revenue stream, but it's hurting the golden goose of ticket sales. And all the way through the 50s, it wouldn't really be a particularly large revenue line.

But as it did start to grow, everyone's negotiating individually. It ended up being the case that the New York Giants were making $200,000. And this is in 1959 on their TV deal. The Packers were making zero. I think the Packers were making 5K. They did have a TV deal, but I think it was $5,000. This is the thing. Football, even amongst the individual teams, kept experimenting through the early 50s, whereas baseball basically shut it down and turned away from TV.

And one of the things that they figure out is, oh, television broadcasts depress the gate at home, but there's strong demand in local markets to see the team's away games when they're traveling. And so for the first few years, that's the main model of television broadcasts of the NFL is just showing away games. But there's like a lot of demand for that. And it's funny because now we refer to this as a blackout. But at the time, because they were only selling to local affiliates, it's not that it was a blackout.

It's that your local TV station only had the contract to broadcast the away games. There was nobody within your antenna's reach that was broadcasting that game when it was at home. So this becomes a pretty meaningful revenue stream, even though, as you say, it would be a long time before TV would surpass the gate in revenue for the NFL. By the end of the 50s, the league as a whole, with all the 12 separate contracts, was making over a million dollars in TV revenue annually.

Whereas at the beginning of the decade, it was less than $100,000. And it also becomes clear that certain football games, there's like a really big audience on TV for them. In particular, the 1958 NFL championship game known as the greatest game ever played between the Giants and the Colts, led by Johnny Unitas. A sudden death overtime dramatic win garners 45 million TV viewers across the country, including President Eisenhower. So was this a national broadcast? National broadcast of the NFL championship game that year.

Importantly, this is not the Super Bowl. David and I aren't being coy by not calling it that. Like, that is not what this was. And we're still missing about half the teams that will end up competing for the Super Bowl. Right. But 45 million viewers. This was unprecedented. There is a huge opportunity for professional football and television. Yes. Which, once again, the NFL was not the one to totally recognize. Competition does create the best product. And the NFL, time and time again, has had their hand forced and then reacted really well to a new upstart.

Totally. So in this case, as the 50s draw to a close, once again, just like towards the end of World War II and the end of the 40s, there were a whole bunch more cities and ownership groups that wanted in. There's a clear business opportunity. And there are only 12 teams at this point in the NFL. But once again, the NFL owners are kind of dragging their feet. They're like, ah, we don't really want to expand.

You know, maybe we'd be open to the Chicago Cardinals. They're kind of struggling. If the ownership group that owns them were to sell, maybe we would allow them to be moved. But, you know, go talk to them. And I really don't think this is like a business decision of we don't want more people taking our pie. I think they sort of recognize that there could be more money made if you have more cities. But it was more that the NFL owners at this point are a tight-knit fraternity of people who all think the same way, who respect the game, largely who owned the teams when they were massively loss-making.

And so they kind of don't want to let anyone into their club, even if it would be good for business. And the NFL as we know it today is a business. But at that point in history, it was really like each of these teams are kind of on their own island. They're deeply competitive against other players. They don't think of those people as fellow employees of the league. It's more like we each have our own club.

But the owners of each club sort of have this thing with each other, this fraternal bond. They're willing to submit to this league first. Mindset because they know it's good for all of them. But that doesn't mean that they want to expand or change things. And David, I am excited we are finally here. The birth of the American Football League. The AFL. Yes. Their competition with the NFL and really the era of national TV contracts. This is the story of how the NFL became the league that we know today.

Let's go. So the story goes that one of the potential new professional football team investors, a gentleman named Lamar Hunt, who was a young heir to a very large Dallas, Texas oil fortune, kept trying to talk to Burt Bell, the NFL, do anything he could to get an expansion team or buy the Cardinals. He just wants to own a football team. Yep. So he's flying back from seeing the Cardinals and having been rebuffed. And he has a eureka moment on the plane.

And he's been hearing that there are all these other people who want to buy the Cardinals too and get in line and this person in this city and that person in that city. And Lamar says, wait a minute. I don't need the NFL. I don't need the Cardinals. I've got a list of all these other wealthy people who also want to have professional football teams. Why don't I call them and we'll start our own league? Yes.

And thus begins the most successful attempt to challenge the NFL. By far. So in August 1959, he and several other owners form the American Football League with six teams, soon to become eight, the Dallas Texans, Boston Patriots, Buffalo Bills, Houston Oilers, Miami Dolphins, New York Titans, soon to be changed to the New York Jets, the Denver Broncos, the LA Chargers, and the Oakland Raiders. You've probably heard of most of those teams. Yes, this one ended very differently than the AAFC did.

Very, very differently. So at first, Bell and the NFL... They're sort of trying to be pretend supportive until it's legit threatening. Yep. But then in 1959, right after the new AFL announces that they're going to start their league and commence operations, Burt Bell dies suddenly. And so once again, just like back with the AAFC, the league is in crisis and forced to act. And unlike the AAFC, things are going to be a little different this time because of the television aspect.

Yes. And this is all being led by, you mentioned Lamar Hunt, who was the Dallas Texans owner. People might know them better as the Kansas City Chiefs today. Yes. So Hunt, he's been studying the NFL. He knows about the league first mentality. He's also been studying baseball. He's been meeting with baseball owners, including Branch Rickey of Brooklyn Dodgers and Jackie Robinson fame, who at that point in time was out of Major League Baseball and was trying to start a third independent league.

Independent baseball league. A third independent baseball league. Yes. With some pretty radical ideas, really borrowing from the NFL and the league first mentality. He wanted to embrace television in this new baseball league and have a radical solution where all the clubs in the league would share all of the revenue from a television deal. Pretty crazy. So Lamar Hunt and the new American Football League, the AFL, they take this cast aside idea from baseball and they run with it.

Hunt says, we'll just centrally negotiate one national television contract for the entire AFL and then we'll split the revenue completely equally amongst all the teams. This is like the epitome of the league first mentality. It'll be great for us and it'll help us compete with the NFL. And in some ways, it's easy for the upstart to do this in counterposition because they have no existing TV contracts, but they do kind of get laughed out of the room.

They go to the TV networks with this and each of the TV networks are like, oh, cool idea. But like, who cares about your league? No one's going to watch this. So we hear your pitch. We understand that this is very innovative and breakthrough and very different than what the different NFL teams are doing. And we don't really care that much. And the two major networks at the time, CBS and NBC, had deals with NFL teams.

But there was another upstart TV network out there, ABC, and they were the perfect match. So Hunt goes to ABC and they find a young executive there. ABC doesn't even have a sports division at this point in time. But a young executive within ABC named Rune Arledge. This is probably the fourth episode we've talked about Rune Arledge on. What a legend. So Rune would ultimately become Bob Iger's mentor and Bob Iger would rise through the ABC sports ranks in the beginning of his career before taking over Cap Cities and then obviously all of Disney.

So this is Rune's big opportunity. He sees it's obvious at this point in time in the late 50s that nationally televised football games. There's demand for it. This is actually shocking. Like, I know to everyone right now, we're like, well, of course. But it used to be the case that Sunday afternoons kind of had a hole in their schedule. Like, CBS had no good programming. And so that's why they would originally agree to like, sure, we'll broadcast some NFL games.

But no one expected the American public in their living rooms to take to football as an event, as an entertainment form delivered over the air to the living room the way that it did. And so the NFL sort of rebranded Sundays in America and turned it into a completely different way that people spend their time. And that was shocking. Well, and with those early NFL deals, it was like those were individual deals that teams made with networks and local stations.

So it was like a local thing. It wasn't football Sunday. It wasn't a national event. This was the first nationwide, network-wide contract. The networks now had signal that people did want to behave in this way and they could feel safe sort of signing business deals and pursuing this because even though it wasn't what they expected, it turns out there is demand for this product. Yeah. So ABC signs a league-wide five-year TV rights deal with the American Football League for eight and a half million dollars over five years.

It was by far, far the single biggest sports rights TV deal in history at the time. $1.3 million to the league per year. And that was before the league had played a single game. So here we are now in January 1960, back to the NFL. They don't have a commissioner. They're upstart rivals, the AFL, who haven't played a game yet. They have a multi-million dollar contract. An $8.5 million five-year TV deal with a national network that the NFL doesn't have.

This is a real existential crisis. And unlike last time where they're like, okay, great, we'll just draft one of our own Burt Bell, owner of the Philadelphia Eagles, to come in and lead us through this. They can't agree on a new commissioner. So it takes 11 days and 23 separate votes of the NFL ownership groups in a total knockdown, drag out negotiation. There's multiple camps backing multiple candidates. Yeah, the NFL has just gotten too big. Each of the owners has too many of their own interests to argue for.

They're in dire need of something or someone to unify them. Indeed. By the end of the process, none of the original candidates are still in it. Right. So in some ways, it's a tough position to be in because all the most qualified people are out. So you kind of have to pick someone that nobody hates, but probably won't be very good. But fortunately for the NFL, they were very, very, very wrong about that. Lucky. Better to be lucky than good.

Yes. They choose as the compromised 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. And create the NFL that we know today. And it was totally brilliant. A. Rozelle grows into this just incredible leader, visionary, who does so many things that we're going to enumerate now for the league, for the game, for television, for America.

But it was so not the owner's intention. They had to go to this compromised candidate and this young person, who most people hadn't heard of, anybody else they were considering would have been of a different generation, wouldn't have understood the new America in the late 50s and early 60s. 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.

Yes. Coming out of the PR background was the perfect positioning for him because he knew that every foot that we have to put forward has to be really polished. We've got to 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. 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 because 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 want to watch football games on TV.

He opens up a Rams merchandise store that 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, etc. 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 going to have to deal with.

And within a year, he completely changes the NFL. 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 places they wanted to bring pro football to more cities. The NFL was dragging its feet. Just like back with the AAFC now, they realized they got to 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. Oh, and meet Lamar Hunt head to head right on his own turf. He's leading the AFL effort and the idea of you're just going to open up shop and say, we're going to give away the franchise to a new owner of the Cowboys right here in your backyard. Yep. Right down the street. Speaking of proximity and right down the street, the next move that Roselle 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 because Burt Bell was in Philadelphia and he had been the owner of the Eagles. He's like, Philadelphia is not the place where we can run the modern NFL. And Burt ran it a very idiosyncratic way too. I mean, he had obviously no computer system, but like it was posted notes and phone calls is how the NFL ran. Like just not a professional organization.

Oh yeah. Famously, the stacked scheduling. He would do it with dominoes on his kitchen table. So Roselle's like, no, this is not going to work. We're going to 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. These are relationships we got to cultivate with Madison Avenue.

After he moves the headquarters to New York, Roselle 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. The only way anybody's going to 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.

Speaking of writing about the NFL and publishing, the other thing that Roselle knows is, especially with a game like the NFL, which is a weekly drama, it's not just about baseball with getting the daily box scores in the newspaper. You also got to 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 Roselle Sportsman of the Year, the first ever non-athlete that it had ever 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. We should also say the end of the 50s, beginning of the 60s, you know, baseball's still a dominant sport in the U.S. 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 Roselle 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 because 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. 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, 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 Roselle. 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. Yes. Yes. So this is a perfect lead into what happens in 1961 right after Roselle is on the job that would change the face of football forever.

So it's obvious to Roselle, once the AFL signs their big deal with ABC, that that's the path forward. Their $1.3 million a year deal. The league-wide revenue sharing national deal with the national network. Now, this is not how the NFL operates at this point. Nope. Roselle corrals all the NFL owners and gets them to realize that the NFL has to do the same thing. They have to give up their individual TV rights. They have to pull together and fight the AFL.

So finally, after wrangling and politicking with the ownership group. And the reason there's politicking is because Cleveland, Pittsburgh, and Baltimore actually will end up losing money in the short term on this. Because Roselle is pitching on, I'm going to go negotiate us a big group deal. And they're all three saying, we already have very good deals locally. We're very popular teams. We're in great football cities. No. But ultimately, they do say yes. And it really speaks to the thing that has made the NFL successful, which is saying no to growing my slice of the pie to grow the greater pie.

So Roselle goes and negotiates with CBS, which was the dominant network, both in the country and had the majority of the individual team NFL deals. He negotiates a two-year deal with CBS at $4.65 million in rights per year to be shared equally among the teams. Over 3x the AFL deal. A huge shot across the bow to the AFL. Fortunately and unfortunately, they immediately encounter political pressure in response to this. This triggers the Department of Justice to start an antitrust violation process against the NFL.

This is like a clear use of monopoly power. But this is the very first question where you say, well, what is a monopoly? And what is antitrust? And what is the NFL? And what are the teams? And in this situation... Is the NFL the business? Or are the teams the business? Right. If the teams are the business, then yes, this is antitrust. If the NFL is the business... No. This is one entity acting on behalf of itself.

There's no collusion. There's no monopoly. Plus, you know, in this particular situation, they actually are in a competitive landscape against the AFL. So there's strong argument to be made that this is not antitrust. That argument does not carry the day. So pretty immediately, the courts strike down this deal. And there's about, I think, a one to two month period where it's all in limbo. And this is where the Kennedy relationships come in clutch for Roselle and the NFL.

So both the president and Bobby Kennedy in Congress whip up enough support to pass through new congressional legislation. A new congressional act specifically to advantage the NFL. And to allow for national sports contracts on a league-wide basis. It's called the Sports Broadcasting Act. It ends up getting passed towards the end of 1961. The day after the bill is passed and signed by John F. Kennedy, he literally hosts a party at the White House for the NFL.

Which is like, just tells you everything you need to know right there. Pete Roselle, all the owners, they are invited to the White House to celebrate this new antitrust exemption that has been passed through Congress to allow them to negotiate this landmark deal. Because the president wants to watch his football. It's that. But Roselle also makes the strong case that this is good for America. For a game that is growing in popularity and a game that unites communities.

They're really starting to lean into this idea that this brings a lot of people together in a city. It is a shining example of teamwork and a shining example of hard work and celebrating sportsmanship. And this is a great thing that we should spread to more of America and make it easier for more people to consume. They're starting to make arguments about the economy around, you know, it's good for people to have gathering points both at stadiums, but around stadiums with hotels for people to throw parties at their houses.

All of this is goodness. And if you like the American economy, you should let us have a national TB contract for the NFL. Yep. And at this point in time, I think a lot of those arguments hold water. Yep. This actually was driving a lot of commerce for the nation. Totally. A fun aside, I did the math on that $4.65 million per year deal. That value of that contract would grow 2,500x over the next 62 years.

Wow. Did you look at what it would be inflation adjusted? Yes. Inflation adjusted, it's about 250x. Still pretty good. So on the back of this landmark TV deal, Rozelle does two other really brilliant things. First comes as kind of another accident. So the league every year sold the rights to the NFL championship game to make a movie out of it. And they were always like kind of bland. Yeah, they were kind of hokey, like a really rudimentary highlight reel type thing.

In 1962, they get a bid for the rights. The bidding is a sealed auction. They get a bid that comes in from a guy named Ed Sable, who was a suburban dad in Philadelphia who liked to make home movies, particularly home movies of his son Steve's high school football games. This guy, Ed, bids on the rights to make the NFL championship movie for 1962. So the bids are unsealed. And Ed had done a little homework. He found out that the company that had won the past few years only paid $2,500 for the rights.

So he's like, well, I can bid $5,000. He wins the auction. And Rozelle's like, uh, who is this guy? Like with no experience, what's happening? So Rozelle goes to visit him. And Ed pitches Pete on doing something completely revolutionary for the 1962 championship. He wants to make it like an actual movie. Not a hokey sports movie, a real movie with montages, with cuts, with professional Hollywood quality cinematography. Slow motion, voiceover. Cover everything, sideline cameras, really a passion project to make this an incredible piece of content.

Rozelle's kind of like, well, I mean, that sounds great. I don't know if you can do it, but it's like, what have I got to lose? So he lets Sable go with it. And the movie he makes totally revolutionizes sports video content. I think this is another thing that we just take for granted today. It's like air and water that sports content, sports video is not just like a fixed camera at the 50 yard line that pans back and forth.

Not only does this film get great acclaim, but it's a revolution to go and create recordings of sports not to be broadcast. The broadcasters weren't recording tapes of everything they ever broadcast. So there's a lot of like baseball games and stuff that have been lost to history because there was no recording of it made. Meanwhile, the NFL for this championship game and for other things that Ed Sable and his crew would film after this, it is high quality film, not videotape recording, not over the air broadcast film stock recording from a bunch of different angles and some at high frame rate cameras and some at 24 frames per second cameras.

So you get this smooth, beautiful slow motion. It provides this unbelievable archive of the game for which other sports have no archive. Yeah, well, and that's just the video aspect to it. But there's also something that Sable gets intuitively. It's the same thing that Roselle gets. The narrative. It's not just about showing what happened. It's about telling a story. And it just completely meshes with Roselle's philosophy and what's going to carry the NFL into what it becomes today.

We can't just show these games. We have to tell a story. This has to be drama. This has to be made for TV content. And it has to be super polished and it has to be super controlled. And Ed Sable's little outfit that would become NFL films is the ultimate embodiment of Roselle's mindset. I don't think Roselle could have created this on his own. But when you watch anything from NFL films, it has Pete Roselle's personality oozing all over it in terms of what we are creating is entertainment and polish.

So for two years, they do the championship game. And then in 1965, Ed comes to Pete with the idea of like, hey, let's make this a core in-house division of the NFL. And they start NFL films. Yeah. You should buy my little film company. What a radical idea. The NFL should become a movie producer. This is huge. Remember, there's no ESPN. There's not going to be an ESPN for 15 years. All of this content that we're just bombarded with today, it all starts here with the Sables and with NFL films.

Yeah. There's a couple of interesting things to note, too. So once Roselle greenlights NFL films, he basically says, OK, there's a lot of people in my organization that might want to do something with this at some point, but we want to be hands off. I just don't want your P&L to ever go negative. So you can run as a break-even business as long as you're fulfilling the mission of promoting the very best of the NFL and helping to create lore and story.

And they build this completely full-fledged film studio that is actually the customer who buys the most film from Kodak other than the U.S. Army in the entire country. Super high-volume film studio because they start sending full film crews to every single NFL game every single week. And it's this unbelievable operation to then overnight mail or drive themselves back all this footage to start editing it right away so that they can use it for what we will talk about soon, but for many purposes.

This is what's so amazing. They did all this as this investment, as a labor of love and passion on the Sables' part. Right. On Roselle's part, though, the motivation, as you were saying, it's not about making money. It's about raising the stature of the league. Yes. About putting the most highest gloss sheen on the product that we are producing, and the product is the game on the field. They couldn't even foresee how important this would become that we'll put a slight pin on and come back to in just a minute.

Yeah. The other thing that Roselle does in the next couple years is the merch idea, the store that he was doing back with the Rams. He brings that in-house on a league-wide basis and starts NFL Enterprises. Again, totally radically. He goes to all the owners, all the teams, and says, whatever you're doing on merch, whatever you're doing on branded opportunities, you are no longer doing that individually. We're going to bring it centrally, collectively, in-house under NFL Enterprises.

We're going to standardize the merch, the jerseys, the hats. We're going to set a quality bar. So that any time a fan, because it's all about the relationship with the fans, it's like a funnel. Bring them in from TV, get them to the game, get them to buy merch. They're just deepening the relationship. They have to have a great experience. They can't get some shoddy pennant from the Giants that looks like X, and somebody else gets something from the Cardinals that looks like Y.

Like, it's got to all be the same. And you've got to remember, the way that the NFL is structured, Rizal is not their boss. In fact, he works for the owners. So they're all making money, and he's going to them saying, hey, just like TV, I want you to give up the rights to make money on your own, even though some of you are doing a pretty good job at it. And we're going to do this thing as a league, and we're going to cut it equally.

So I don't care if your team's bad and their team's good. All the revenue is going to be equal, just like TV, and he's so good at playing the politician with the owners that they keep agreeing to give up revenue-generating parts of their P&L for the league to take over on their behalf. Yeah, I mean, let's take the Browns and Packers. How many pennants do you think the Browns sold in the city of Cleveland with as big and storied as the Browns are versus the Packers in a town like Green Bay?

What is Green Bay? It's something like the 200th largest media market in the United States, and they've got this NFL team. And what Roselle is saying is, just like TV, I don't care how much merchandise you sell, the Packers are getting the same check from enterprises as the Browns are. Yep. We should probably take a 60-second aside, but the unique structure of the Packers is totally amazing. They are owned by a publicly-owned nonprofit corporation. And so what that means is, rather than one individual who could just decide to uproot the team and leave them, the ownership of the team lies in this entity that is theoretically a publicly-owned entity.

Anytime they want to raise money, they go and sell more shares, more stock in the Green Bay Packers. And there's hundreds of thousands of people who have bought this stock. So there's this very distributed ownership group of the Packers. Not with any expectation of financial return, literally just so they can hold a piece of the Packers. Or control, because nobody can own more than a certain number of shares. But this mechanism has kept the Packers in Green Bay, even while capitalist forces and individual whims of billionaires have moved many other teams around.

Yeah, it's such an amazing little quirk. Have you ever been to Lambeau Field? I have not. I really want to. I went once, not for a game, but I was at a wedding in Green Bay. And I was like, oh my gosh, I gotta go see the field. And so I took a run. Green Bay is this very quaint little, little town in Wisconsin. And there's this giant NFL stadium in the middle of it. It's wild.

And for a lot of the analysis we'll do later, the data comes from the Green Bay Packers annual report. Because no other team publishes their P&L, but the Packers do. Okay, so the last thing Roselle does in this miracle run in his first couple years as commissioner is he creates the Pro Football Hall of Fame in Canton in 1963. Ah, so cool. I've never been. We gotta go. We should do an acquired field trip. We should.

That would be fun. So there's this amazing flywheel. It really is like the Disney story that he gets the most important thing. Everything he's doing is through the lens of how do we raise the stature of the league? Not a team, but the league. The NFL as a league. How do we add higher gloss sheen to the product? To the shield, one might say. Exactly, exactly. And his logic is doing that will attract more fan interest and deeper fan interest.

And the more and deeper fan interest that you attract, the more TV dollars you're gonna make. And this is revolutionary too. Back in the day, you were limited to the number of seats you had in your stadium. So if you're like a major league baseball team in a major market where you're selling out your stadium, there's not a strong incentive to keep adding sheen to the product. You're at maximum revenue capacity. Right. But with the NFL and now with the new TV model, there is no ceiling to revenue capacity.

Yep. So more fan interest, more TV dollars, more TV dollars shared evenly amongst all the teams raises the level of play equally as the overall level of play goes up as long as the competitive balance stays intact. Well, that improves the product. Yep. Which then adds more sheen, which then drives more fan interest, and it becomes this amazing flywheel. And there's so much more to the story. But that's the core of it. That idea is what leads to what's the current annual national revenue for the NFL, like 10 billion, 11 billion?

That comes through shared agreements is 11 billion dollars. And then there's another six or so that comes from local revenue that teams individually generate. Yep. That's per year. Right. Just to be clear, that is per year. It is this flywheel that makes the NFL teams collectively worth something like 140 billion dollars today. So remember that initial landmark deal that they got the antitrust exemption from Congress for in 1961? For the 1962 season, that was two years.

The AFL is locked up for five years. The NFL gets to renegotiate every two years. Roselle opens up the bidding to all three networks, of course. CBS wins again. Another two-year. $28.2 million bid. $14.1 million per year, up from 4.6 two years earlier. So every single team in the league now gets $1 million before the season even starts. A cool 3x from the last deal he negotiated two years before. Pretty freaking incredible. And also just says so much about the commerce that the NFL was driving.

Like, the TV networks were getting a great deal here. These were landmark contracts, but the attention, the viewership that the games got, and then the advertising units that were sold, and then the ultimate products that were moved as a result of those ad units, this was a steal. And you could argue that the TV networks were getting a great deal for many, many, many more years. And I think at the end I want to discuss, are they getting a good deal today?

But everyone was getting a pretty good deal here because the fan base was growing so much more quickly, and the number of viewers was growing so much more quickly than these deals could get renegotiated. Well, it just takes time for people to realize the power of a new medium. Okay. Okay. So, Roselle, unbelievable. First five years in office. Literally cannot imagine executing better. The NFL going from major crisis, death of its owner commissioner, Burt Bell, to the place it's in in the mid-60s.

Incredible. What about the AFL? What happened to them? They're doing pretty great too. They're thriving. And it's all because of television. Even though the NFL is doing great, there's still a lot of demand for football on TV. And the AFL, to put a finer point on what you're saying, they had a shoot the moon strategy. They wanted to come out of the gate with a bang. They wanted to burn real hot and, under the right circumstances, have that go really well for them.

And they had the exact right circumstances. It was the boom of TV in America. So, they could do things like go sign Joe Namath for the Jets to a gigantic contract and just have New York and half of America fall in love with him and turn him into a superstar that benefited the league. The Jets in the AFL, formerly the Titans. They're owned by Sonny Werblin. He was one of the co-heads of MCA, the big agency.

As discussed on our interview with Michael Ovitz. Indeed, indeed. So, just like Roselle gets what's going on in the NFL side, Sonny, he's the media guy for the AFL and he totally gets it too. So, Sonny sees the big second NFL deal come across in 1964. All the other AFL owners are like despairing. The NFL just got this huge deal. How are we ever going to compete? They're going to have so much more money. We'll never be able to sign any players.

This is the end. And Sonny's like, oh, no no. We're going to be just fine. We're going to be great. Because the NFL did this deal with CBS. Well, there are two other networks out there. There's ABC, who the AFL has the current deal with. And then there's also NBC. And so, there are two bidders out there who are going to be very, very, very sad that they just lost out on the most compelling content on television.

Professional football. And who's there to give it to them? The AFL. Yep. We'll take second place when there's a bunch of sad people willing to throw money at second place. And throw a lot of money. So, the very next week after Roselle and CBS announced their deal, the AFL and NBC announced that they've just signed a new five-year $37.5 million deal. So, bigger overall dollar number for a longer number of years. Even though it's like less than half the per year amount.

Yeah. It's $7.5 million per year. But, by this point in time, the NFL has 14 teams. The AFL still only has eight. So, on a per-team basis, it's pretty close. For a five-year-old upstart league, this is a big success. So, just like you were saying, right on the heels of that, Sonny and the Jets, they know what to do with that money. They turn around and they give a huge chunk of it to Broadway Joe Namath.

And probably a lot of listeners are going to know the name Joe Namath. I honestly, I only knew it because I saw him on a Brady Bunch episode. It's like this cultural touchpoint where Joe Namath was so big that he actually appeared on a Brady Bunch episode. And that's super unusual for a sports star in that day. Dude, I mean, he had his own talk show. It's not just that he was on the Brady Bunch. So, everything we were talking about a minute ago with NFL Films and Roselle and all the brilliance there and how it was so important and this realization that football and the NFL would be made for TV.

Joe Namath was the first modern cultural celebrity athlete. He's also a heartthrob. There's like millions of teenage women in America like throwing themselves. That's exactly what I was going to say. He was the first professional athlete that appealed equally to men, women, and children. That's a great point. So, he comes and he's playing in New York, right? In the biggest market, the brightest lights, right there with the TV industry, right there with the advertising industry. He knew exactly how to play it.

He wore white cleats. Everybody else wore black high tops. Famously, he wore a mink coat on the sidelines. Just like amazing. Amazing. Like he starred in movies in the offseason. Broadway Joe was it. Well, continuing that thread from earlier where I was talking about how CBS had this like hole in their schedule and everyone was skeptical that sports would fill it. Everyone thought sports were like a very male thing. And especially as sort of brutish of a sport as football, they didn't think it would do well, certainly not in prime time, but not even sort of in the Sunday afternoon slot.

Because, you know, it's just going to attract the husbands to come and watch it and it doesn't have a family appeal. And Joe Namath is the first big example where everyone realized, oh, football totally can be for everyone. Yep. All right, listeners. Well, now is a great time to thank some new friends of the show we are very excited about, Sierra. Yes, we're pumped to be working with Brett, Clay, and the whole team over there. And a fun fact for this NFL episode, Sierra works with Wilson, the official exclusive manufacturer of NFL footballs since 1941.

1941. I know. It's so cool. But wait, David, we should explain why we are so excited about Sierra first. So one thing we've learned from making Acquired is that a great company is often defined by its customer experience. Yes. But of course, always being great is hard. Talking to customers is expensive. And while websites and apps are great, they're also slow and clunky. Your customers have to learn them. They don't learn you. Sierra changes all that.

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With Sierra, you can deploy it everywhere within weeks. So think on the phone, in chat, SMS, WhatsApp, chat GPT, email, all in over 30 languages. And with their unique and insanely aligned outcomes-based pricing model, you only pay for when Sierra delivers a tangible business outcome, like resolving a customer ticket or completing an upsell. Yep. Ben and I think so highly of Sierra that we even invested in the company. That we did. So to find out how you can build better, more human customer experiences with AI, visit sierra.ai slash acquired and just tell them that Ben and David sent you.

So the name of signing is the first big post-TV money contract signing in the AFL-NFL war, but it starts a whole wave now of competition between the two leagues to go sign all the college superstars coming out. So it gets pretty crazy. At one point, the NFL starts what they refer to as a babysitting program. This is literally a kidnapping program where they will send agents to top college athletes who are seniors about to graduate and literally keep them out of the hands of AFL teams, not allow them to sign contracts and pressure them into signing with the NFL first.

They just put them up in hotel rooms and they don't tell anyone where they took them. So nobody can tell the AFL team rep. This is where you can find the star. It's just like you got him captive till you sign him. The interesting thing, too, is that the leagues aren't respecting each other's drafts. So it doesn't matter if you draft someone in your league. I'm signing him to a contract in mine and that contract is valid in the United States.

I don't care what your draft says. This is the battlefront. It's with rookies and the draft. What they don't do yet is start signing each other's players. That's like hitting the nuclear button option. Right. So they're keeping this to rookies. But still, pretty quickly, contracts for rookies get into the close to million dollar range, which is way more than the veterans are making. It starts causing all these problems. And by the beginning of 1966, the owners group in the NFL realizes that, hey, the AFL isn't going away.

And this is not going to be like last time. We're going to have to play ball with these guys, literally. And it begins a super delicate dance of they're my sworn enemy. But there's some owners who see the writing on the wall very early and say, we're going to have to combine these. And it's probably not actually legal for us to combine them. But we're going to kill each other if we both keep going. So what do we do?

And so it begins this multi-tiered negotiation where certain people at the top don't know they're negotiating. Meanwhile, certain owners are forming side deals with other people who own teams in the other league. It's this fascinating spy game. Oh, this is so fun. What happens next is like a godfather film. So a few of the most influential owners come to Roselle in 1966. And they say, the way things are going with the AFL, we're not going to beat them.

This draft situation with the rookies is out of control. The contracts we're paying, we're losing too much money. This is going to kill the league if we keep the war going. We've got to get to a truce, which that means we're going to have to merge. So we're going to direct you, Roselle, to go start merger negotiations with the AFL. Roselle doesn't want to do it. He thinks they can win. He wants to fight, but he's like, okay, I work for you.

One of his superpowers, the way he's able to achieve all of this is he really is good at pleasing everybody, finding solutions that work for everyone. And so he says, okay, I'll move forward. So he drafts the Cowboys GM in Dallas, a guy named Tex Schram, to secretly open negotiations with Lamar Hunt. Lamar at this point has moved the Texans to Kansas City where they've become the Chiefs. And also, how great is it that the first Cowboys owner is named Tex?

I know. So great. He was the GM. I don't think he was the principal owner, but I think he had an ownership stake. So Tex approaches Lamar in early 1966, says, hey, I'm the emissary of the NFL. You know, Roselle sent me. I'm here to talk merger, but we got to keep this under wraps because if Ward gets out, then like all hell's going to break loose. So they start working, discussing. There are no notes. There's no written notes.

It's just like them chatting with each other for a couple months. As they start, the other owners don't know about it. Which is hard because when you're not the designated representative, you can't say, I'm coming to you with something I know will work. You're saying, hey, enemy, I know you can't know for sure that I can get this done, but you have to trust me enough that I'm pretty sure I know my fellow owners enough that they would agree to this.

So if you and I can kind of get close to agreeing to something, then I can take it to them. But this is all subject to them blowing it up. Yes, very delicate situation. And especially as the war and the TV money start escalating between the leagues, the AFL owners, they decide we need somebody who's going to kick some ass for us. They draft fellow owner, head coach, GM of the Oakland Raiders, Al Davis, to become the new commissioner of the AFL.

All right, so now we've got this cast of characters to pay attention to. On the NFL side, there's the commissioner, Pete Rozelle, and Dallas Cowboys GM, Tex Schramm. And on the AFL side, there's new commissioner and Raiders owner, Al Davis, and the chief's owner, Lamar Hunt. And Lamar Hunt, of course, was the guy who started the whole AFL in the first place. And Al Davis, legendary. There's a quote about him in America's Game. Outside of Oakland, it was not certain where Al Davis would finish in a popularity contest among Sharks, the Mumps, the income tax, and himself.

If the voters were the other American League football coaches, Davis would probably be third, edging out the income tax in a thriller. You can't trust Al Davis any further than you can throw him. And he is the perfect new head of the AFL in this war. And basically the head just to go beat him up in negotiation. I mean, at this point, it's like, hey, we understand we're in a negotiation. Just like, go get the best deal you can.

And if you have to piss everyone off such that you have no working relationship with the rest of the owners, Al Davis is the kind of guy that's like, oh, I'm totally up for that. That's fine if for the next 30 years, everyone that I have to work with hates me. They don't let him know about the merger negotiations. They don't actually want him to negotiate. They just want him to start a war and improve their negotiating leverage.

I see. In literally one of the most incredible unforced errors of all time, the NFL fires the first shot in the new war as soon as Davis takes over. So in May 1966, the Giants in the NFL break the gentleman's agreement. They go over and they poach a veteran from the Bills in the AFL. A kicker. Literally a kicker. They start a war over a kicker. And it makes sense it's the Giants because they're the most harmed here.

I mean, they have in their own city, the Jets with Joe Namath. Once this happens, though, the other NFL owners are just apoplectic at Giants owner Wellington Mara. They're like, you're throwing this all away over a kicker. So the owner of the Colts, the quote, God damn it, Mara, if you wanted a kicker, why didn't you just ask me? I'd have given you one. So any of the 30 million Americans who play fantasy football can relate to this situation.

So Davis gets the news that the gentleman's agreement has been broken and the kicker has been signed. The kicker signing heard around the world while he happens to be literally in the middle of meeting with the Bills owner. Supposedly, Davis, he just sits there in his chair and he leans back and he smiles and he says, well, we just got our merger. And the Bills owner is like, what are you talking about? And Davis says, because now we're going to go out and sign all of their players and we will destroy them and they will come begging to the table.

Some Dr. Evil shit right there. Totally. That night, the New York Times asks Davis for his comment on all this, which, by the way, you couldn't design better drama, especially during the NFL offseason to keep America interested in football. Amazing. The New York Times asks Davis to comment and he responds, quote, this is something I've been aware of and I anticipated the probability, but you don't make threats at a time like this. Our answer will be in action.

This is not the time to speak. Ooh, I want to steal that word for word for something in the future. So his first reaction, he doesn't really want to go into all out war because he knows that's going to end badly for both sides. He wants to send a targeted message like the equivalent of, you know, a fish raft delivered on the doorstep. Or a horse's head in your bed. Exactly. The horse's head that he decides to send is he is going to target Rozelle's old team, the Rams, and he's going to sign their quarterback away.

We just went from a kicker to a quarterback that escalated quickly. Well, you're going to send a message. You're going to come at the king. You best not miss. Yes. So within three days, the readers have signed away veteran star quarterback for the Rams, Roman Gabriel, and the NFL makes another tactical error. They don't respond to that. They don't come to the table. So a few days after that, Davis does unleash all out war. Talk about antitrust violations.

And he directs the GMs of all the AFL teams to go out and sign all of the quarterbacks in the NFL. Which to do this is an economically negative move. Of course. Which is why he didn't want to do it. They're already making the maximum amount you should be willing to pay them for what they're bringing to your team or likely close to it. And you're going to have to pay them a lot more to switch leagues.

So Lamar Hunt, of course, gets word of what's going on. And meanwhile, he's in secret negotiations with Tex and Roselle for a merger. And Hunt gets word from the Oilers, from their GM, that Davis just instructed him to go sign the 49ers quarterback. And Hunt is talking to the Oilers like, no no. This is too far. Stand down. I'm canceling Davis's orders. Don't go do this. The Oilers GM gets off the phone with Hunt, calls up Al Davis and says, hey, Lamar just called me.

Heard about what we're doing. He told me to stop. Davis supposedly sits there for a second and asks, did you give Lamar your word that you wouldn't do it? But the Oilers GM says, yes. Davis sits there again, thinks about it and says, F it. Sign him anyway. So they do. The Oilers go sign the 49ers quarterback. And that is what makes it all work. So Davis hangs up with the Oilers, calls Hunt and he's like, you dumbass.

Why on earth would you stop me from doing this? I know you're working on a merger. I am your best weapon that you have. I am giving you leverage. Of course I need to do this. I'm not being insidinary against you. This is a weapon for you. Yes. I may be a thug, but I am your thug in this case. So within a couple of days, it's all over. On Wednesday, June 8th, 1966, the merger agreement gets announced in a press release.

Unlike with the AAFC, this is a true merger. All of the AFL teams will join all of the NFL teams. Together, they promise to add at least four totally new teams and cities. Right. So there's 24 combined teams and they promise to expand to 28 over the next three, four years. Yep. They announced that because of the separate TV contracts on the AFL and the NFL side, they will not begin a joint season immediately. They'll let the new AFL TV contract play out, which will go through the 1969 season.

The first fully combined season will be in 1970. But in the interim, they will start hosting a new pro football world championship game between the winners of the two leagues starting in the 1966 season. And boy, that would be a super event for television. This officially called AFC-NFC World Championship game sounds like a doozy. Sounds pretty cool to watch. Some other points to the deal. There will be a single common college draft starting immediately. No more of these separate drafts.

No more babysitting. No more ridiculous contracts. Which the players hate this, of course. Roselle will remain the commissioner and Al Davis is going to go back to running the Raiders. Which Davis is fine with. That's all he really wanted anyway. Not announced, but included. This, I believe, only came out much, much later. The AFL franchises did collectively pay the NFL owners $18 million to join the league. Over a 20-year period. Yes. This, though, was an enormous victory for the AFL for two reasons.

One, the NFL obviously had the larger TV contracts. So that's just like found money right there. B, they had all the apparatus. They had NFL films, NFL enterprises, etc. Everything. And by the way, immediately, even before they combined the leagues officially in 1970, they form AFL films for that three-year gap. Oh, I didn't know that. And NFL films hires twice as many people and they go film every single AFL game to starting immediately. So those are both in themselves huge reasons why paying only $18 million was a win for the AFL.

The even bigger reason, when the negotiations started between Schramm and Lamar, the NFL's initial asking price was $50 million per team from the AFL as franchise fees. So to go from $50 million per team to $18 total paid over 20 years, all thanks to Al Davis. The AFL owners owed Al Davis a big glass of champagne, shall we say. That's an incredible leverage shift over the course of the negotiations. And it happened in like a couple of months.

Yeah. There are some other interesting deal points, too. One of them is that the $18 million actually didn't go to all the NFL teams. They went to the Giants and the 49ers because those were the two teams most affected by now having another NFL team in their city. That makes a lot of sense. Because the existence of this merger now causes one of the league ownership rules to be in violation, which is no two teams can be in the same media market.

Well, we now have a problem and we need to compensate you for that. And I think the Giants actually got more because Joe Namath was the other one in their city. And so what you also start to see because of this deal is the real modernization of the NFL. They decided that anyone with less than a 50,000 seat stadium needs to change that. They said that for what football has become after this merger, modern NFL in America, that's not a suitable place to play football anymore.

And so you either need to build a new stadium or expand your stadium. And then the other final thing that is a consolation prize for the AFL is that they actually got to bring their records over. Whereas the AAFC, I don't think they did. I don't think those counted as NFL records. I did find, this is linked in the show notes in our sources, I kept reading about the NFL records and the NFL rulebook. And I was like, does this exist or is this like theoretical?

Every year, the NFL publishes a 1,000 page PDF of all of the historical everything, all the scores, all the games. Oh, that's awesome. It being in PDF form makes it pretty useless. But I assume it's a PDF of a physical book that exists with all the records in it. So this announcement in June of 66, you would sort of think, okay, this now just clears the way. The next few decades are just laid out in front of us.

There's one league. There's no real competitors. What could possibly challenge football? And the answer is yet again, the law of the land in the United States. So in October, Congress actually passed a law to allow this merger and grant yet another antitrust exemption. This time, Lyndon Johnson signed it into law. And you might say, well, why did they need another one? Well, the merger of two completely different organizations that were competitors, that's kind of a different thing than allowing one ownership group or one trade organization to negotiate on behalf of a bunch of sort of member teams.

So this actually is a different antitrust issue. Right. It's actual monopoly versus collusion. The first one was collusion, right? This is creating a monopoly. And so Rozelle and the NFL are calling on all the favors they can get. But the bill that will allow them to do this is stuck in committee. And so here's the paragraph out of America's Game. And so he eventually finds his way to the House Majority Leader Hale Boggs, who is an old fraternity brother of Dixon's at Tulane.

And he said, I can find the votes for this. I'm going to quote this again. Walking up the stairs of the rotunda when the vote looked like a sure thing, Rozelle was ever his usual humble self. Congressman Boggs, I don't know how I can ever thank you enough for this. This is a terrific thing you've done. What do you mean you don't know how to thank me? He said, New Orleans gets an immediate franchise in the NFL.

And Rozelle says, I'm going to do everything I can to make that happen. At that, Boggs stopped and turned on his heels, heading back into the committee room. Well, we could always call off the vote while you. Rozelle took two giant strides after Boggs turned around him gently and said, it's a deal, Congressman. You'll get your franchise. Amazing. So it's like, how many presidents and how many congressmen and how many, like, the NFL requires this perfect storm of post-war America, technology, the growth of television, all these innovations, all this flywheel, and also the repetitive cooperation of the U.S. government.

So once this passes Congress and the merger is approved, remember, it won't actually happen until 1970. 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. Totally. And you mentioned before, during the Johnny Unitas game, the greatest game ever played, that that drew 40 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. 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 living because they've already got the rights to the respective leagues. They thought they both had a championship game, but it turns out they both had a semifinal. 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 $1 million for the rights to both broadcast it.

So this game now is going to be broadcast to the nation on both CBS and NBC. And in addition to them each spending $1 million for the rights to this one game, they also both pledge to spend $1 million each in promoting it in the lead up to the game. This is unprecedented. There's never been anything like this in media history. This ended up actually having a 79% 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.

Incredible. It ended up being watched live by over 65 million people, Super Bowl I, at the LA Coliseum. You can't call it that, David. This is the AFL-NFL World Championship game. 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 95,000 people.

Only 63,000 people showed up live. There was only two-thirds attendance live at the game. And it didn't matter at all. 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 that 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. That's during the game. Wow. They didn't fill the stadium and everybody got rich anyway.

Okay. So a few things leading up to this. Again, like, God, they're so good. Roselle. 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 Roselle 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. 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. And that's just the public-facing stuff. 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 going to add the gloss and the sheen. Literally, Roselle'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.

It's great. So great. 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. It is worth saying, wow, the dominance of the Packers right around this time. Vince Lombardi winning the first two Super Bowls. There's a reason it's called the Lombardi Trophy now. It wasn't for Super Bowl I or II. And then the one game we will talk about here, Super Bowl III.

Yes. By this point, the 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 whammo Super Bowl. And so when the league discussions were sort of going on about it, he proposed Super Bowl, but Pete Roselle hated it. I think Lamar was like, oh, it's just kind of a funny placeholder name. Yeah.

But then it just stuck. 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. Yep. All right. So Super Bowl III. The narrative leading into the Super Bowl is the old NFL, soon to be NFC teams. That's real football. That's real football. The AFL, you know, it's fluff. And there's like real bad blood between the coaches and the players on the field. Super Bowl III, the Colts versus the Jets.

The old Colts, Johnny Unitas, a different era, the 1950s against Broadway Joe Namath and the Jets. And this is still Baltimore Colts, right? Baltimore Colts. Yes. In the lead up to the game, the Colts are 19 point favorites. Nobody thinks the AFL can compete. They've been destroyed the last two years. And then during the media week, this is the reason we're talking about this sporting event here in the midst of this business podcast. It's just like, oh my gosh, you can't design this any better.

Broadway Joe guarantees an AFL victory during media week, during a press conference. Like you can't make for better TV drama than that. There is this very famous photograph that we'll link to in the show notes of Broadway Joe at the pool during media week with a playbook in his lap. He said like, you know, he's the sex symbol. He's like in his, you know, swim trunks. And there's just all these pressing cameras and all these women like gathered around him, like staring at him.

And it was a moment like it was all over the news, all over television, all week. Like what a incredible media event. And then during the game, Joe delivers on his guarantee. Huge upset, beats the Colts, the first AFL victory over the NFL. At the after party, Carol Rosenblum, the Colts owner is like totally desolate. And he comes up to Roselle, he's sobbing and Roselle's like, oh, no, no, no, don't worry. This is the best thing that has ever happened to the game and to us.

And he's so right. That seems like one of the obvious playbook themes here is every time you think you just got beat by some other football team or entity or personality, it ends up being so good to raise the profile for the game that everybody wins. It turns out the answer is most of the time, everybody just keeps winning. Yep. As long as there is drama, as long as there is competition, everybody wins. Yep. I mean, this is the great paradox of the NFL.

Well, everything is about the game on the field and nothing is about the game on the field. What it is about is making sure the game on the field is compelling. Whoever wins, they all win. Well, and this is kind of the debate today between the new group of owners and the old group of owners. The original owners are so steadfast in this is about football and we make a great entertainment product, but there's football at the core.

And the thing that they're all a little bit nervous about with the new group of owners who are so excited about building these unbelievable businesses and taking on more and more sponsorships and sponsoring team jerseys and on-field sponsorships and building the spectacle around every game. And what if we had a Super Bowl halftime show at every game? It's like, are we not a football product anymore? Are we some kind of entertainment franchise that has lost its way?

And I think that's the interesting dichotomy between owners these days. How far is too far? But at this point in time, they are nowhere near. Too far. Yes. Lean way into it. The next year, the Chiefs beat the Vikings and the pre-merger Super Bowl series ends tied two to two. Two victories for the NFL, two victories for the AFL. Again, could not be better for pro football and the newly combined NFL because that leads right into the first joint, fully integrated TV negotiations for the 1970 season.

This feels like it's going to be a big package. Oh boy, are the networks going to have to pay up. And pay up, they do. They decide to keep both CBS and NBC essentially with their same packages, CBS airing the NFC games and NBC airing the AFC games. The combined contract value, it is now a four-year contract of $156 million. That is $40 million per year. That's a lot of money. And this is where the genius starts of the NFL realizing we don't have to just sign one contract.

And for anybody who's looked at the contracts today, there's a lot of contracts. And there's pretty much not a TV distribution company that is not distributing some little shard of what the NFL has carved up. But them realizing here in 1970, we don't just have one deal to sign. We have an AFC package and an NFC package. And we might actually be able to invent some more here too. Yes. But first, listeners, now is a great time to tell you about one of our absolute favorite companies, Crusoe.

That's C-R-U-S-O-E. Many listeners will recognize that name since we have been longtime fans and partners and investors. You may remember that we talked about them first when their CEO, Chase Lockmiller, joined ACQ2. And they have come a long, long way since they were setting up those shipping containers full of GPUs in oil fields years ago. Crusoe is now one of the most important foundational layers of the AI world today. They built and operate some of the largest AI data centers in the entire world.

They have over a million GPUs in their fleet, and they're valued at over $10 billion. Their data center in Abilene, Texas is a massive 1.2 gigawatts. This is the flagship site for Project Stargate, and it's where Oracle hosts the massive compute clusters that power ChatGPT for OpenAI. They just announced another gigantic 1.8 gigawatt project in Wyoming, and they have several more for an astonishing total of 45 gigawatts in their pipeline. And on top of sourcing all the energy, building, and operating these data centers, Crusoe has built a huge amount of software and orchestration tooling on top to make it easy for developers to build AI applications, something that many people struggle with when using traditional hyperscalers.

Yeah, Crusoe is a new type of cloud built from the ground up specifically for companies in the AI generation. Their aim with Crusoe Cloud is to build the world's favorite AI cloud by streamlining the experience and eliminating complexity. So no need to build or scale your own infrastructure. Just recently, they launched Managed Inference to make it even more turnkey for developers delivering up to 10 times faster time-to-first token, ensuring end users get a great experience. And they also have a second offering, which is their data center business, where they handle all the physical build-out and operations for the very largest AI companies in the world.

including many of the tools that you use every day. But their real secret weapon is speed. While the industry average to bring a data center online is seven years, Crusoe has compressed that entire lifecycle down to just one year. Crazy. So if this sounds interesting and you want to learn more, head on over to crusoe.ai slash acquired. That's C-R-U-S-O-E dot A-I slash acquired. And just tell them that Ben and David sent you. So David, take us to Monday night.

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. Which is a real shame because you've got Rune Arledge there. He's a visionary. This is still before ESPN, right? Still before ESPN. Well, well before ESPN. 10 years. So yeah, that's still far off in the future. But ABC is clearly interested in sports. Yes, clearly interested in something. So Roselle and Rooney start chatting.

Roselle has always had the inkling that football and the NFL would do really well in a primetime 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. Sports is not primetime. Is showing shows and news and entertainment.

And that is not sports. That appeals to the widest range of people. And that we still don't know for sure that the NFL is that. You know, it's very telling that all of these networks had separate sports divisions. And that ABC didn't even have one until they got the first AFL deal. It was a separate thing. 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 primetime experiment. Indeed. So Roselle and Rune Arledge is like, yeah, I think this can work. So they brainstorm and together come up with the idea for one single game every week. With incredibly high production values broadcast in primetime 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 at once. They're all happening concurrently. You're seeing different games in different markets. 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 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. 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 primetime game.

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 sort of zooms in and out.

And the announcers are kind of 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. 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. The lower thirds. The graphics. None of this existed.

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. Yes. So, this whole vision for Monday Night Football that Rune Arledge and ABC can make happen for the NFL and new meteorites 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, Roselle's like, oh yeah, by the way, we have these partnerships with CBS and NBC.

We got to offer this to our partners first. Which, you know, Roselle... Brutal. He has this reputation and history treats him as like incredibly kind, incredibly accommodating. And I'm sure that's true. But he had a little bit of Al Davis in him, too. He knew exactly what he was doing here. He knew that there was no way that NBC and CBS were going to take this package. Yep. He just wanted a stocking horse. He's like, I don't want to leave any money on the table with this.

Whatever we're signing here, they have to fear that we're going to walk. Totally. You know, Rune, of course, freaks out. This is his baby. This is his career within ABC. He's been pre-selling this to his bosses, so he looks bad if they lose this now. So they come in with an over-the-top deal. ABC gets exclusive rights to Monday Night Football for a new deal, new product, $8.5 million per season. And the other deal was... The other deal was $40 per season for essentially 15x more content, I think.

Right. Each TV network is paying about $20 to have either the AFC package or the NFC package on Sundays. And ABC is coming in and now spending $8.5 just for one game on Monday nights. And you might say, whoa, that's terrible. They're way overpaying for the amount of content, that is. But actually, what you want to be paying for is the smallest amount of content possible that gets distributed to the widest audience possible. So you actually should be willing to pay up to $20 million as long as the aggregate number of viewers that you get on that day is the same.

Because if I'm ABC, I'm like, wow, those guys, that really sucks for them having to produce four, five, six different games. I only have to produce one, and it's nationally broadcast across all my affiliates. This is amazing. We are going to go hard on costs on the production side to make it the most dazzling possible experience. And we're going to make it back. Boy, did they ever. The first Monday night football game that airs that season is watched by 60 million U.S. households.

That is like Super Bowl level. I mean, Super Bowl I was 65. They invented a holiday out of nowhere. And it's every week. They totally invented a weekly holiday. It's amazing. CBS and NBC must have been pissed. Seriously. Because it's also, you know, they signed the contract thinking we, between the two of us, we basically have a lock on all the football. And then they invented more football. Exactly. And for the NFL, they invented more football.

They invented revenue. Amazing. And by this point, the NFL's starting to wake up to this idea that, you know, they're still not willing to play with the blackouts at all. But maybe people watching on TV can be better than people coming into the stadiums. Maybe there's enough money in this that for us to be nationally broadcast on a Monday night, I still think it was blacked out in the home market. But they recognize the value of everyone else watching and how that's even more important than the stadium itself.

Okay, so I made a list of things that Monday night football invented that was not a part of your typical football NFL broadcast before Monday night football. And it is astonishing. This is everything that you expect in every NFL and, frankly, every college game that you watch now. And it was brand new for Monday night football and, in fact, was Monday night football exclusive for 20 or 30 years in a lot of the cases. But the overriding idea that we are going to cover a football game like show business.

This is not a sport we're broadcasting. This is showbiz. And we will make you feel like that. So what are we going to do? We're going to put cameras at field level. We're going to put cameras on people's shoulder and they're actually going to get to sort of run around and get up close footage of people while they're celebrating touchdown dances or when they're running back in from the sideline. We're going to put cameras on the 20 yard lines in addition to the 50 yard line so that we can get a straight down view when they're in the red zone.

It's not just sort of this weird sort of from the side angle on it on touchdowns like we're going to get great footage head on during touchdowns. Instead of two commentators, we're going to have a three man booth and there's going to be real action oriented commentary there. And of course, we can't talk about Monday Night Football without Howard Cosell and his unbelievably unique style of narrating and really injecting himself into the story of the broadcast rather than just being a sort of opinionless third party observer.

However, he created a little bit of a foil to play off of for the other commentators where there was real relationship and you were tuning in not just to watch whatever the football was, but to watch these announcers who you sort of got to know over time and really observe their charisma with each other about the game. That's exactly what I was going to say. It's the same dynamic with podcasts now. It's like they became your friends in the booth.

Right. It's not just that you're listening to business stories. It's that you're hanging out with David and I while we talk about business stories. It's one of the first examples ever of realizing the power of that. They went from the four cameras that typically would cover a Sunday broadcast to nine cameras and then eventually up to 17 cameras. They invented the parabolic microphone coverage that you always see on the sideline, those sort of clear plastic microphones that are aimed at gathering the sound from on the field.

They had 40 engineers. They had 20 production people. They invented these split screens. You could watch two cameras concurrently cover the game. They had on field interviews, shots of cheerleaders to add a little bit of a sex appeal to the game for the first time. And they also used green screens, which is so funny to watch some of these early. I guess they didn't have room in the booth, according to the Patons Places ESPN video that we watched about this, where for the three man booth, they needed more space than they had in the press box.

So they ended up putting them like out in the hallway and built a little custom room to do this in. But the background wasn't good. So they put in a green screen and then they would put another camera in the press box. And so they would superimpose that the field was right behind them, but it actually wasn't. And it's so obvious watching it today. They're like floating on the stadium. It's hilarious. Yes. But this is revolutionary stuff.

Yes. And there was one other really, really big innovation. And this was a thing that would go on to be the predecessor for ESPN as a network, for SportsCenter as a program. And it would create billions and billions of dollars of enterprise value. And that is replays. Yeah, the highlights. Before we talk highlights, did you say the theme song too? No. No. Yeah. I thought actually that's where you were going with ESPN. I mean, the theme songs, like there were no theme songs before this.

Right. This notion you're actually tuning into a program that has an associated pump up song that is built for that franchise is unique. Okay. So let's talk about highlights. So how could you have possibly watched highlights before Monday Night Football? Well, the games were on Sundays and that was really the only football that was on all week. You know, we didn't have the internet. There wasn't ESPN. There wasn't SportsCenter. So there really was no place to go and watch highlights.

Now, football and all sports are unbelievably highlightable events that if you string together a bunch of the very best plays, it's really, really interesting and really entertaining, especially if they're covered by great cameras. Now, compare this to baseball, where not only was there no place to go watch them, but there was no one capturing the footage to even highlight it. But NFL has NFL films. And using high quality cameras and film stock, they are capturing great camera angles of every game.

And so between Sunday and Monday, the NFL films team would go and take all of the footage from the game the previous day, cut up a highlight reel, and as soon as possible, get that to whatever city the Monday Night Football broadcast was happening in so that they could play it at halftime. And Howard Cosell could give his commentary, often having never seen the footage, while the highlight reel is playing in the background and really invents this idea of, for the first time, we're going to watch highlights of yesterday's games.

I got to imagine the highlight reel was literally being slid into the machine as they were getting ready to broadcast it, because think about the logistics in that. You get the film stock back from all the games all around the country, back to NFL films. They produce the highlight reel. They get that finished reel back to the Monday Night Football location, which is another location somewhere around the country. Totally. All within 24 hours. It's really amazing.

God, I can't believe we're only up to 1970. I know. Well, you can't get any better from this. I mean, this is now the fully formed entertainment product of the NFL. And they add stuff like Sunday Ticket and Thursday Night Football and everything else over the years. But the trajectory is set. There's some ups and downs in the 70s, but it's basically just like gonzo for the NFL. There's one more presidential intervention. In 1973, Nixon really, really, really likes watching the Redskins, but he's sick of taking the helicopter to Camp David to watch their away games, which he actually was doing, which is unbelievable.

He was a nut. Nixon literally phoned in a play for a Redskins playoff game from the White House. Maybe should have been paying more attention to foreign policy and things like that. But Camp David is sufficiently 75 miles away. By the way, there was this whole cottage industry that sprouted up of hotels that were outside of the 75-mile radius, and there were buses. So people would go to these hotels, and they would get rooms for the day to go watch the games.

This dynamic formed like plot lines on sitcoms in the 70s and the 80s. So Nixon calls Pete Rozelle personally, the president, the sitting president of the United States, and says, Hey, we're in the playoffs this year. You know, I think it would be a good idea for you to air playoff games. Not every game, but playoff games locally. And Pete Rozelle, even in 1973, is pretty dug in on this issue that it's a bad thing, and it's cannibalizing to our most important thing, our gate revenue, if we do that.

So he says no to the sitting president. And so then Nixon goes to Congress and says, Will you please draft legislation, which got known as the blackout ban? And so because Rozelle denied the president, there is actually legislation that was passed in order to force the NFL's hand in broadcasting away games locally. And this is one of the things that Rozelle got super wrong. The right thing was, as soon as possible, the NFL to get as much distribution as possible, because the TV rights would become the most important revenue line, but also the thing that most fueled the flywheel.

More people watching the games is better for everything, for continued fandom. It's like how Disney wants you to consume the content so that you go to the parks and you buy the merch. So it was one of his few strategic flaws, I think, was gating the content for too long. Yeah. And I don't know if this is directly related, but I think so much of the 70s and the 80s and the 90s were also about just like the continued growth trajectory of the incredible marriage of the NFL.

And the money just keeps getting bigger and the stage keeps getting larger and the viewership goes up and, you know, all the things. Yeah. And this is probably worth saying that we aren't going to go blow by blow on the NFL timeline past 1970 the way we did during the Rozelle era. There's a bunch of stuff to skip, like the USFL and all the teams moving cities and Deflategate, to focus really on the strategic moments that created the conditions of the NFL's business today.

Yep. So probably the biggest decision that happens during the time, the league first mentality kind of gets diluted with the stadiums that you referred to. Because as all the teams start moving into the bigger stadiums, they start building amenities into the stadiums and the stadium experience totally changes, which it needed to as television became primacy. There had to be a reason to go to the stadium. Stadiums become all about the luxury boxes, the suites, the experiences, the corporate partners, the advertising, the drink sponsors, all of this stuff.

And that becomes huge money for the NFL, but it's not shared money. It's local money. This is my biggest criticism. The thing that got them here, this league first mentality, is eroding because of the way that the revenue splits are happening. So you look at the local stadium sponsorships. You look at every stadium is dedicating more and more real estate to luxury suites. The local merchandise sold in the stadiums is local revenue. And so the teams are making more and more money locally.

So a greater percentage is coming from things the teams are doing on their own. And you've got to wonder if that individualistic, I'm Jerry Jones and the Cowboys deserve all the revenue mindset will be the thing that eventually kind of causes them to get unseated in some way. And I think the thing that keeps the competitive balance in place, even as revenue diverges, is the salary cap. Yeah, this is a great place to talk about that.

Let's go to 1993 and talk about the first time free agency and the salary cap comes into the NFL, how that's computed and how that impacts the sort of leverage going forward. The league has been negotiating with the Players Association for a while, I think since the 60s, in various collective bargaining agreements. But the 1993 one is unique. The NFL didn't really have free agency for a while. And in 1993, players finally got it, at least as long as a player had been in the league for four years.

In exchange, there was a salary cap put in, capped at some fixed percentage of the amount of revenue that the league generates. Right. So that today is actually a pretty high number. It's 48.8% or something like that. So players are effectively a partner in the league because the league's success ends up being their success, not necessarily evenly distributed among all players by any means. In fact, quite the opposite. But at least players are virtually guaranteed in whole to make close to half of the league's overall revenue.

But how does that work with local and national revenue? Well, since it is based on the total revenue, if a team makes a whole bunch of local revenue, they're going to have no problem making the obligation that they have to pay the players. And you're saying that that fixed amount is a league-wide aggregate, including all the local revenue from all of the teams. Yes. So this potentially could create a big imbalance. Right. It's okay as long as the local revenue doesn't become too big of a part.

But at some point, you have to imagine that what is 48.8% of league average could be 90% of what I make as a team in a small market with a crappy stadium. And then because I have to pay players so much, there's no way I can pay for other stuff. And so, you know, my coaching gets hurt or the production for fans gets hurt or something that makes me a less competitive team. Even if the players on the field are paid just as much as the players on the field from other teams.

And it's interesting because I think in 93, when the salary cap first came out, it was just of the shared revenue. But now that in the more recent agreements, it includes all league revenue and local revenue is actually growing as a portion of the overall revenue for the top teams. Unshared revenue for teams grew from 12% in 1994 to 21% in 2003 and is over 30% today. So there's definitely a meaningful and ever-growing part of NFL team revenue that really does come from just the team itself and what it can do in its local market, not from that sort of locked brotherhood of we're all in it together league revenue.

Yeah, it is a serious threat to this magical flywheel that has made the NFL succeed well beyond any other sport on a revenue basis in the world. Even though football and the NFL is not the most popular sport in the world, it is by far the highest monetized and largest sport by revenue. I think, actually, I don't know if we said this up front, I'm pretty sure the NFL is the largest single media business in the world.

Not an aggregate diversified media business, but like if you consider the league as a single property, then I think it is the largest individual single property in the world. It's a good question. The comps would probably be like Marvel or Lucasfilm. Yep. I looked at that bigger than Marvel, bigger than Lucasfilm. Really? Yep. Because the NFL does $18 billion a year in revenue right now, which is expected to grow to $25 billion by 2027. Yep. I believe Marvel's not anywhere near that.

Wow. Yeah, that's wild. Because it's an annual basis. That's every year. I mean, this TV contract that they just signed, the 10-year deal, is for $112 billion across all these entities. Just wild. And just to share what that specifically looks like, CBS broadcasts a Sunday afternoon package for $1.85 billion a year. Fox has a Sunday afternoon package for $2 billion a year. They invented a new SKU, the Sunday night package. And they invented this a while ago, but NBC has that for $1.7 billion a year.

Disney owns Monday Night Football, as we mentioned, for $2.55. It is a single game per week, and it's the most expensive package. It's incredible. Amazon has Thursday Night Football for $1.3 billion a year. And, of course, then we just got the news last month that DirecTV has lost NFL Sunday ticket, and that is moving to YouTube TV. NFL Sunday ticket is also a genius move because you're reselling the same content you've already sold. It's the same content.

It's the content that is exclusive to CBS, Fox, NBC that those networks produce. I'm pretty sure it's even, like, their cameras, their on-air talent, all that. But the NFL, it has the exclusive right to bundle all that together and sell it as a package directly to a consumer if you want access to all the games. If you don't just want the ones that are on TV near you, if you want the ability to watch any game at any time.

And it is incredible to me that that is worth $2 billion, given the NFL is actually not doing the work to produce it. The people who are doing the work to produce it are the people who are paying for the privilege to cover those games. Amazing. And then there's more now, and let's catch us up to the present day. There's revenue from the NFL Films Division. I think it's probably a couple hundred million dollars I would expect at this point in time.

There's other licensing rights, particularly video games at Madden. So I don't think it's public, but it was reported that the latest Madden licensing deal with EA was a total of $1.6 billion for a five-year rights. Wow. Which, man, remember that episode we did with Trip on EA back in the day was so fun and talking about the origins of Madden. That's a $300 million a year deal. So that's like a sixth of what one of these channels pays to broadcast the actual NFL.

That's what EA pays to just license the use of the player names and team logos and all that. Yep. Then there's fantasy, both betting and non-betting. Yeah. And this is a good point to fully bring us to today. I think it is totally reasonable to say that the things that powered the rise of the NFL were national TV, post-war prosperity, the rise of the middle class, the Madison Avenue explosion, and the League First mentality. But all of this is in the 50s, 60s, and 70s.

The thing that powered the NFL to be such a dominant force in society today is fantasy football and sports betting. So let's talk about fantasy first. Great. There's like 30 or 40 million people a year in the United States that play fantasy football, thus making it the way that the centerpiece of conversation with their closest friends and families and coworkers, which means you have to watch football in order to have those conversations with the people that are closest to you in your life.

Fantasy is such a great example of driving and adding to the Roselle flywheel. Better products, deepen fan engagement, more viewership, more advertising, which really now translates to more revenue opportunities because there's revenue opportunities from fantasy. Sunday ticket, that whole package basically was to cater to two audiences. One, bars and restaurants who want to be able to show multiple games within their establishment. But two, and even bigger, the fantasy crowd, they're going to be willing to pay a lot of money to see all the games live.

And then that feeds back into the product and the flywheel spins. And of course, then there's sports betting, which is now becoming legalized in lots of states, but has been a force for a long time. Of course, you could bet legally in Las Vegas, but obviously tons of people have bookies that can just place bets for them no matter where they lived. And I'm shocked, shocked to find gambling going on in this establishment. And when you've got money riding on a game, you are absolutely going to tune in.

I looked it up just to put a number on this. The current estimates are that 46 million Americans, or 18% of betting age U.S. adults, bet on the NFL this year. And that number continues to grow. That's just this year. Yeah. Wow. People bet on the NFL more than any other sport in the U.S. Variety reports 81% of sports bettors bet on NFL games versus just over 50% for the NBA and 44% for Major League Baseball.

Interestingly, the NFL doesn't generate meaningful revenue from betting yet, though I am sure they will in the future. Yeah, you can probably bet on that. Eww. Eww. So 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 $350 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 $450 million.

So not really much on top of the shared revenue from the league. Wow. So much for the league-first mentality from Jerry Jones there. 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 61% comes from media. Most of that is the TV from the shared league revenue.

10% comes from general seating, which is regular plastic seats. Another 10% comes from premium seating. That's for the proletariat. 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. And most of that is corporate, right? I think so. That's my best guess. It's super different city to city. This is probably the most variable. Yep. 10% comes from sponsorship and advertising. And then about 9% is other, which I'm guessing is where NFL films and a lot of that stuff sort of lies.

Maybe the Madden deal is in there. I don't know if it'd be there or in media. 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, I mentioned the complicated relationship that people have with football. In the 2000s, 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. Mental, emotional, suicides, everything. I mean, the NFL settled a billion-dollar lawsuit to pay out victims and families of CTE. Yeah. You know, it's even worse than that. There's a bunch of dimensions here. I played football all growing up. Middle school, high school, college. You know, my feeling, and this was in the 90s and early 2000s, 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 90s, and then they sat on the data for a long time.

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. The NFL didn't acknowledge that until 2016. 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.

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. The second-order effects are pretty large from this. One is what you said about parents allowing and wanting their children to play football. 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. And the pandemic, too. Yes. But I think the real risk, and this is starting to be shown out in the data, is how are future generations going to view the NFL and football?

And if you look at the data, U.S. adults as a whole, 33% say the NFL is their favorite professional sports league. But if you look at Gen Z, only 23% of Gen Z say that the NFL is their favorite professional sport, so 10 points less than the broader population. And basketball in Gen Z is 19%, right there, pretty close to football. 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.

Yeah. This whole thing was just bad, period, for the NFL. 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? And it's your players. It is your product on the field. 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 and saying, oh, you may not be a part of the networks that get our broadcast in the next generation. That strategy would have worked really well 30 years ago. But in the social media era, where individuals have Twitter accounts, a lot harder to control the narrative. 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 interest 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 2015 from a nonprofit to a for-profit. The NFL has, like, very little net income. Who cares what its tax filing status is? It all gets distributed out to the teams. Right. The teams are their own taxpaying entities and their own businesses. And so, you know, Roger Goodell makes 40-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.

Oh, man. There are these great quotes in America's Game where the owners are talking about Pete Rizal with the representative of the players at the time they're negotiating contracts, and the players are complaining that Pete Rizal isn't being neutral in these negotiations. The owners are like, of course he's neutral. We pay him damn well to be neutral. So, yeah, the commissioner of the NFL is, like, the ultimate in shareholder responsibility. In fact, shareholder responsibility is his only responsibility.

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 going to 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 want to change at all. Now, most of those people are dead, and it's their descendants who are also old who own these teams.

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. 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.

He was using the NFL's platform to sort of make a very personal argument. 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. 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 U.S. After that season, he was a free agent. Zero teams signed him.

And, of course, he had some disappointing seasons and injuries. But let's be real here. The NFL blackballed Colin Kaepernick after this. Oh, Kaepernick filed a grievance and eventually reached a confidential settlement with the NFL. I mean, the whole macro thing here is very strange of the owners to let this seemingly minor thing turn into the gigantic media mess the way that they did. And I think the interesting thing for the purposes of our discussion here about this, I don't think this ever would have happened or happened in the same way in the NBA.

The NBA embraced both social media and the strategy of letting players have their own platforms, be their own voices, and promote the league through that. And the NFL was the opposite of that. They were the command and the control. We own the message. And there was no clearer example of this. But bottom line, the NFL wildly mishandled this. Let it get completely out of hand. This is the way that we know of Colin Kaepernick now. He's sort of like an icon for this thing.

So, I mean, if what the NFL wanted to do was not amplify his protest by making him not able to play, it totally blew up in their face. And he became a national headline for months and months and months. Right. Which is emblematic of the NFL not understanding the social media era. Yep. So, all this to say, it was very compelling for David, you and I, to spend a bunch of time talking about the NFL up through 1980 and the Roselle era.

But, I mean, revenues have gone up. Team values have gone up. Games have gone from standard def to HD to 4K. But the end of the hero's journey sort of happened at the end of the Roselle era. Yeah. And it won't hurt their business for a long time. That's the interesting thing. 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. $12 billion a year in revenue from the TV deals alone. 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. They're paying, what, close to $4 billion a year from the biggest tech companies in the world.

Yep. The NFL is going to be just fine. And that revenue is almost assuredly going to grow at a very healthy clip. So even despite all this, people love their football. I still love watching football. Totally. Me too. I feel like I'm a slight apologist for still loving football as much as I do. Two things. One, I mean, again, that just reinforces the power of the Lindy effect to me. The NFL is just fine and is going to 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 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. Have you read about these home marketing agreements? No. 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. I mean, for God's sakes, baseball has a robust international presence. Right. And as we talked about on 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, kind of 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. Oh, no way. I didn't see this. I think it's like the Cowboys can advertise the Cowboys in Mexico. It's that sort of thing because they want to 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. That does not seem like a sound international strategy to me.

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. Well, the core to growing the original NFL flywheel is increasing fan reach and engagement. And that's no longer happening. 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. Right. 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...

Right. The storylines are fully baked and ready to go. Yeah. College football has been the best thing to ever happen to the NFL for basically its whole existence. Right. It was the worst thing for the first 20 years. And then it was the best thing. 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 $2 million. 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 $12 billion 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. Yep. 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 sign a collective bargaining agreement for a decade with the players. I think they did that in 2020. That lasts through 2030. And then in 2022, that's when they renegotiated the 10-year rights for media.

So they seem to have switched to this, which is a 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. It's a percentage basis. Yeah. Right. So in that respect, it's fair. But it is quite clever to have gotten off the TikTok cycle of having the players have a bunch of leverage after seeing what the media deal looks like and doing it in this order.

Yep. The other thing that I've been sort of charting is the media deals go up dramatically in value, but the average viewers kind of stays the same. Like in 2002, the kickoff game had about 20 million people watch and it rose and it was in the mid-20s and then it dipped back down below 20. And last year, about 20 million people watched the kickoff game. So we're in about two decades of audience stagnation. Yeah. So why is it that the media rights are worth so much more when the number of audience impressions stays the same?

I'm curious where your head is on that. I have some theories, but on a CPM basis, it seems like the advertisers are all just paying more money now, or at least the TV networks believe that they can make more money from something. And so they're willing to pay more for the rights. That's a great question. My first instinct is to say, I think it's scarcity value in that I don't think there's in the modern media world anywhere else except live football where you can hit a huge amount of people all at once across demographics.

Yep. I think that's definitely part of it. Another argument would be, well, they're finding a way to put more ad slots into the same amount of media, but that's not true. They've actually held flat or in some cases even decreased the number of commercials over the last 15 years in NFL broadcasts. So you're thinking, okay, the audience size is about the same. The number of ad slots is about the same. So what else could be going on here?

I think part of it is you're right, is that the networks are quickly getting into a place where they're like, we don't really have any other content that people want to watch. So we kind of need this no matter what. And that advantage is the NFL and the negotiation where they come in and they say, look, I know you used to be super profitable on buying these rights from us. And then your business on the back end was selling all these advertisements against it.

We think you should just compete against each other until your margins are zero. And we're going to accrue all the profit pool now because there's basically nothing else that you'll put on that people want to watch. I think that's probably right. For those networks for the last decade, run the counterfactual of the networks no longer had football. They don't exist anymore. This has been life support for them for a decade. So here's the interesting thing is you might say like, well, if the margins are razor thin, they need a ton of volume because effectively what is happening here is the profit is getting reallocated to a different part of the supply chain.

There's no more value in distribution and all the value is accruing to the content creator. You could make an analogy to the airline industry where no one was willing to pay for a better experience on a flight. All the margin got competed away between all the airlines. So all the airlines had to merge because you had to have massive, massive scale. That's also what happened to these media companies that are distributing the content. I mean, AT&T slash DirecTV, NBC slash Universal.

The companies that are buying their rights are massive combinations that can actually afford to generate any margin. What are the unit economics of buying NFL rights and then selling a bunch of ads against them? I have to imagine they're much worse than they used to be. They have to be. And it's pretty genius that the NFL doesn't do this themselves, that they rely on broadcast partners because they basically observed that they can get all these people to do all this work and pay them all this guaranteed money.

And the NFL still gets to keep all the profits. Right. And they can resell it like six times over. Right. The NFL doesn't have to film the games other than NFL films. They don't have to, you know, have the broadcast trucks. They don't have to have the relationship with the consumer and do all the direct marketing to the consumer to onboard to their direct video platform. They don't have to sell the ads to the advertisers. They somehow have outsourced and commoditized all of that.

And I think they get to keep the vast majority of the profits and will continue to shift that balance in their favor. This is probably a good time to bring up the Amazon deal that we've referred to with Thursday Night Football. And news is coming out. This is the first season that Amazon is the exclusive destination for Thursday Night Football, right? Correct. Yeah. They used to air Thursday Night Football also on Fox and on the NFL Network, which is the NFL's own channel to do mostly non-game programming, but some experimental stuff themselves like Red Zone and alternate game broadcasts.

But Thursday Night is just Amazon now. And news is coming out now right at the end of the season that from an economics perspective for Amazon and an ad basis, it vastly underperformed expectations. Yeah. So then Amazon is having to do make goods with the advertisers because Amazon wasn't able to get enough people to watch the streams. Because frankly, I think a lot of people want to watch the NFL on TV. And it's kind of complicated to figure out how to stream it and watch it through Amazon.

And I know it can just happen on my little set top box and my Apple TV install the app and this, that, and the other thing. But you know what's easier for most people? Turning on channel three. So it's totally fascinating watching the balance of power in the value chain. You might think, huh, well, is the packaging component that the NFL does of the talent and the coaches and creating the storylines actually where all the value lies.

It's interesting to me that the players, the NFLPA has managed to negotiate for half the revenue. Good on the Players Association for getting that big a piece of the pie because they've actually done a pretty good job of managing to shift some of the value from the NFL even further upstream to the NFL suppliers rather than letting it all sort of collect in the packaging component that the NFL has. Doing this whole episode has made me really realize that there is a huge amount of value add that the NFL and their partners bring to the product beyond the players.

Now, nobody should ever shed a tear for the NFL and the owners at the expense of the players ever. But if you were to make an argument that the players are everything, they are the product, the game on the field that they play is the product full stop, they should get much more. I don't think that's a fair argument. They play a football game, but the NFL's product is sports entertainment. Yes, completely agree with that. There is a very interesting one, which is on a revenue basis, you know, it's an $18 billion a year revenue business.

The NFL actually owns way more mindshare than its revenue would illustrate. A strange statement to make is the NFL is an oddly small business for how large a role it plays in our lives. And to contextualize who else makes $18 billion in revenue, General Mills, Adobe, and Halliburton. The NFL's share of lips is way higher than any of those companies' products. I continue to think that networks are just on this treadmill where they're just going to keep paying more and more and more for NFL rights until it is actually non-economic for them to do so.

But then they'll be in so deep that it's pretty hard to recover from that. Yeah, I've got one more playbook theme. Buying any professional sports franchise 10 to 15 years ago was an incredible trade for two reasons. By the way, just to add some numbers to it, the average NFL team value, $1.2 billion in 2012. So that's a decade ago, average $1.2 billion. And today is about $4.5 billion for the average NFL team. We're not talking Cowboys.

We're not talking Giants if those were to change hands. Yep. Those are based on Forbes valuations. You can't trust those valuations. I think any actual trade would have to be higher than that. The reason number one is just scarcity value. There are a finite number of these things and they're not making more. And there are a lot of people that want to own them for a lot of reasons, not all of which are economic. Yep. So that's one.

And that's never going to change. The owning an NFL team, it's like a grown-up NFT. It is the ultimate NFT. If you are a gajillionaire and you want to flex on other gajillionaires, this is a way that at least is very likely to have a lot of durable value for you to get to keep doing that, regardless of its underlying cash flows. That is a net present happiness value positive trade for a lot of billionaires. But I will say, when you have something that increases in value because of social signaling and desirability and not tied to underlying cash flows, that is a potential sign of a valuation bubble.

No. Not always. There's luxury watches that have kept their value for centuries, but it should make you wonder. I mean, team values have ballooned to the point where there are very, very few people who can buy one today. Yep. Which means that a change in sentiment among that very narrow market will have a huge impact. Totally. But for now, I think the valuations are probably safe. Ooh. All right. We'll see in a few years. I think they've reached a plateau.

I don't think we're going anywhere north of $8, $9 billion in the near future. Oh, I agree with it. I just don't think you're going to see these things. You don't think they're going to deflate? No, they're not going to trade at fire sale prices. Yeah. The average revenue multiple in 2012 of a team went from about 4x to about 8x between 2012 and 2022. Wow. So yeah, multiple expansion along with the rest of the market.

But I think this is going to be more durable. Potentially justified by the fact that most people don't actually own these things for their cash generating characteristics anyway. It's a very fancy gem. Yep. Totally. Okay. So that's one. But then point number two is I think there was a narrative around cord cutting 10 years ago that was linear broadcast television is dead, live sports, and especially football at the last bastion. But who knows how long this will last.

And I think what I at least a lot of people didn't see back then is that these leagues, the NFL especially, are going to be totally fine in a post-linear TV era. And no further proof is needed than Amazon and Google are the latest people to pay boatloads of money to the NFL. Yep. The NFL will make the transition to digital distribution. And it's pretty amazing that they didn't need to build it themselves. MLB did the whole BAM tech thing.

The NFL has built basically no technology, basically no distribution, and basically no direct relationship with the audience. And they'll still be fine. They'll still be fine. They outsourced all the hard parts. And they also completely whiffed on strategy for the social media era. But they're still fine. Yeah. It is wild. We talked about this a lot on the NBA episode, but just to recap here, because the story hasn't really changed. LeBron has well over 100 million social media followers.

Instagram alone. And the two largest NFL players by social media following are OBJ. and Tom Brady, both of which are in the low teens. So like a 10x difference. Is that interesting that people don't want to follow NFL stars the way they want to follow NBA stars on social media? I think if I remember it, the core thesis of our NBA episode is what they got so right through the social media era was give the players the voice, give the players the platform.

The individual person is the hero on social media. And that's so antithetical. And the NFL is control the message. And that's also reflective of the sports themselves, right? Like NFL players wear helmets. Basketball players don't wear helmets. You know, like that's little stuff. But it doesn't matter. As a business, NFL's fine. They're totally fine. Yep. While we're contrasting leagues, there's this pretty interesting thing that I've been thinking about, which is this cooperative capitalist communism thing that the NFL did.

It was really good at creating parity among teams to be the most competitive. But let's take it to the level of the players. Interestingly enough, the NFL has been the best of any of the leagues at creating the narrowest band of player compensation in the same philosophy that they applied to the league competition. Now, of course, it is nowhere near equal pay among players. And like, yes, it's a bummer that while Aaron Rodgers makes $50 million a year, there's a long tail of players that only play one to three years making league minimum and then churn out, which I think is mid-single-digit millions of lifetime compensation from football.

So still, that's good money. Yeah. Lifetime, though? So players are definitely variably rewarded based on their value to any given team. But the NBA and the MLB are way less equal than the NFL. The superstars in the NBA, like LeBron James, including sponsorships, makes $127 million a year. There is no one in the sport of football that comes close. There are three basketball and three soccer players at the top of the list before any football players.

The NFL has managed to sort of smooth the curve more than other sports have. Well, I think this is also related to the social media thing. And really, this is like the big divergence between the players and the sports and the leagues. NFL as a league, great, they're fine. But the players, I think other league players and especially the NBA have been able to build wealth and businesses and revenue streams much better than NFL players because they're the platform and the audience value accrues to them so much more.

Yep. I agree. LeBron, I think, is already a billionaire. And especially once his playing days are over, he will be a multi, multi, multi-billionaire because of the influence that he has. Apparently, LeBron James has signed some secret deal with Nike for the rest of his lifetime. That's something crazy high that is just not even accounted for in these numbers. Wow. This is actually a good place to flip to power. Awesome. For new listeners, this is the section we do in analysis based on the great book by Hamilton Helmer where we run through each of his seven powers that a business could have to earn long-term differential profits versus its competitors.

And the seven powers are counter-positioning, scale economies, switching costs, network economies, process power, branding, and cornered resource. All right. I think they definitely have a cornered resource. If you want to watch professional football played by this set of athletes, they are the only game in town. Yep. They absolutely have a cornered resource. Yeah. I think this is like maybe the most clear cornered resource that we've ever had on the show. Yep. Completely agree. And clearly this is why the fight with the AFL was worth it.

We need the greatest players on earth to play this game and we can't have them spread across two leagues competing against each other. If we have all the best players, then we get to do all the incredible things that the NFL has gotten to do, like the media rights negotiations. Yep. I think during the dawn of the TV era, I think they were counter-positioned against Major League Baseball in that while decline in revenue from the gate by adding TV certainly was a hit to them.

It wasn't as much of an existential hit in the way it was for Major League Baseball. And so the NFL was more able and willing to experiment with the new business model of TV as the primary revenue source than baseball. Yeah, certainly. And I think generalizing from that, I agree with even more that this for the greater good mindset was easier to do when everyone's individual franchise was smaller. But when you've got these teams that have already been around for 100 years, like good luck talking them out of a machine that already works well.

Right. There's no way, even in 1949, that the Yankees would have agreed to a league-first mindset. Yes. Let alone today. Yep. When they have their own television network, etc. Yep. You know, I've been thinking about branding. I actually don't think this one has branding power because the definition of branding power is if somebody offers you the same thing with a different brand on it, will you pay more? Or the thing about getting multiple congressional antitrust exemptions is that there isn't another game in town.

I mean, there's sort of a rebooted XFL. There's sort of a rebooted USFL. But it's not that people don't care about those because the NFL brand isn't there. People don't care about them because it's not good football. It all comes back to cornered resource. They have the players. Right. Exactly. You could maybe put the antitrust exemption, you could kind of shoehorn that into process power. Or a cornered resource. Yeah, or a cornered resource. Like you said, no new league is going to have that.

It's like totally fascinating that the government thinks it's good enough for the country to issue an antitrust exemption. It's like, well, having a big popular sports league is good for us. So let's enable that to be as big as possible. I think there's definitely scale economies here in the sports entertainment aspect of the product. Yeah, there's no way you could spend the amount of money it takes to produce a good NFL game without the audience that they have to justify that level of cost.

Even a single Sunday game would bankrupt any startup league to put those kind of production values in. Right. I think it's about $44 million per game is effectively what the average broadcast partner is paying the NFL just for like one single game. Yeah. And just for the rights. Right. If you're the NFL, if you can go make $44 million by making a game happen, and that doesn't include anything on the field, selling tickets or that's revenue just from piping that game to a TV network.

Or they're not even doing the piping, allowing a TV network to come on the field to show up and produce the game. Yeah, right. Then you can afford to have a whole bunch of costs to make that experience happen. Yep. Value creation, value capture. And the way that I want to do value creation, value capture here is of the value created by the NFL in the world, how much of it do they capture? However, there's a thing we didn't talk about, which is taxpayer funded stadiums. All the research you read about new stadiums that are funded by taxpayers, and not every stadium is funded by taxpayers.

Like the new Giants-Jets one in New York is funded by the team in the NFL, whereas like the Bills one is going to be funded by the state of New York, largely. And every piece of research you read there is like, yeah, they're at best breakeven for communities, unless it's part of some like larger economic redevelopment thing. So I think the NFL has, they're now unbelievably extractive of the networks. They've historically been very extractive of players, but now the players seem to have a pretty good or at least better deal than they ever had before.

And NFL teams are very extractive of communities in the stadium deals. And I think if you look at the $18 billion a year of revenue, the NFL, if you include the players, captures as much value as it possibly can. They are unbelievably good at value capture. I mean, they literally resell the same meteorites like multiple times over. Yes. Value capture pioneers, I believe, is a phrase that we used on another episode. Okay, that's got to be another acquired merch store t-shirt.

But it is amazing how much mindshare the NFL does own, in my opinion, on top of the actual revenue number. They don't leave a lot of consumer surplus in dollars. But given our earlier conversation that $18 billion isn't that much revenue compared to other companies we've covered on this show, maybe there is some kind of unquantifiable consumer mindshare that does exist on top of any of the revenue they generate. How can you put a price on the fun of a Super Bowl party or texting about an amazing catch with your dad?

Or, you know, there's all sorts of things that are hard to value. Well, it's also a little bit similar to the trading value of NFL teams and like what price would they actually trade at? Even as the NFL has become this incredible business, they don't trade at rational economic prices because the people buying them are doing net present happiness value equations, you know, not economic value. Right. As we talked about, these NFL teams are valued more like scarce beachfront property, more so than cash flowing businesses.

Yep. I'd be curious to hear anyone's thought on if the NFL generates more value than $18 billion a year. Interestingly, the NFL today is less about sort of what it was in the 40s, 50s, and 60s, this team of guys who really hates another team and wants to destroy them at all costs. And they're led by this fearless leader who's probably also their owner and maybe a player on the team. At this point, the players seem to recognize that they're all basically employees and the players are more in it together as co-workers than they are against each other.

Even for players who are on opposite teams, the way that before and after a game, they'll come and hug each other or rekindle a relationship with another player. At the end of the day, they all work for the owners. And so it's probably a good thing for them to recognize that now, the real reality on the field. And at least it means they're going to be better at arguing what's fair for them from a business that demands an immense amount and maybe even years off their lives for a lot of people.

So let's not end on that note. Let's close with what's the bear case and what's the bull case for the NFL going forward. We've talked about a lot of the bears. The cooperative armor that has got them here begins to shatter. Youth not playing, player safety issues, the failure of international expansion. But I'm curious to hear your thoughts on a bull case for the NFL. My bull case is what I've been saying here for a while now on analysis is the Lindy effect.

I kind of think all this is noise from a business standpoint for the NFL and a staying power standpoint. It's not going anywhere. It's one of the most incredible cornered resources in the world. It's going to be completely fine. I completely agree with you. And it's funny, all the negative stuff we've talked about, the NFL will continue to be a ginormous, successful and growing business for a long time. That's my opinion. And of course, we haven't even talked about the sports betting, which is now legal in the United States.

Because I just want to say, too, doing this episode, it was really fun. And just on a personal note, I've had a, I think, probably similar relationship to football with you over the years. More complicated, too, because I played for many years. Yeah. I had, you know, certainly a lot of mixed emotions over the past decade, including many years where I just stopped watching football altogether. And it was really fun doing this, like reengaging with the game, reengaging with all the content around the game, all the entertainment content.

Like, it is great. So I think the game is going to be fine. Clearly, the business is going to be fine. I'm glad we did this. All this to say, can't wait to watch the playoffs. Me too. You ready for some football? I am ready for some football. All right. 10-second carve-out on my end. Go watch The Menu. It was an unbelievably fun movie, beautifully shot. That's all I have to recommend. David? My carve-out was going to be Peyton's Places on ESPN+.

Oh, it was so good. Which I know we talked about, but it's so good. Nostalgia. Lindy effect. It's right there. Go watch it. It's true. All right, listeners. Hello again from January of 2026. David and I are back. Hello, Ben. From the present in our time-traveling NFL episode. We have some updates to where we left things here in our NFL episode. And I am staring at a lot of notes that I have taken from a bunch of conversations that I've had over the last week and a half with folks in and around the league, reading a bunch of news stories and press releases of the earth-shattering things that have happened that have really changed the NFL's trajectory over the last three years.

Me too. Can't wait to get into it. So we talked a little bit about international, and we were very sort of negative and poo-pooing of the league's prospects internationally. I think when we recorded, there was just games in London and Germany, or maybe we were one year off from that. But there are now seven international games across five countries, and they have publicly stated that there is a goal to get to 16 international games per year.

They're not backing away from this. Yes, this is full steam ahead on this strategy. And as we've seen in the past, when the NFL decides that something is its strategy, they tend to see it through. And this past season, I think it was kickoff weekend, right? Was the Sao Paulo game in Brazil streamed by YouTube for free in front of the paywall globally? Yes, exclusively on YouTube. Yeah, that was huge. If you had told us in 2023 that that would be happening a few short years later, even with all we talked about, about how streaming and the tech companies and digital being ahead for NFL, I don't think we would have believed it.

Yeah, they are starting to build some local fan bases there. Well, I think maybe next season we got to do a boondoggle and go to one of these games. For sure. Okay, my second one, viewership has hit an all-time high. And we sort of talked about how it topped out and it flattened and, you know, the NFL is already saturated. It did grow. The regular season had its best TV ratings in 36 years. The league posted an average delivery of 18.7 million viewers per game.

That is a 10% gain year over year. But if you look back 15 years to 2011, the number was 17.5 million compared to the record 18.7 this year. So if you look at it just over the last few years, it looks like this great growth rate. But if you look at it over the last 20, it kind of tells the story of we've hit this saturation number. Yeah, actually it dipped for a while and now it's back.

Right. The Super Bowl, though, did legitimately hit an all-time high. 127 million viewers. And that is after the previous year was also an all-time high. This is the ultimate appointment viewing thing to watch on TV. It is the premier TV flagship event and it only gets more and more and more premiere each year. Well, we might have a little more to say on this, but certainly the Taylor Swift crossover helped with Super Bowl viewership numbers over the last couple years.

Yes. One other point that I did miss while we're in TV broadcast land on the episode. David, I don't know if you knew this. Structurally, TV networks actually get paid in two ways. When we were sort of talking about, oh, the viewership has sort of stagnated, so why do they get to charge more and more and more for ads? And the networks buy the rights. You know, Fox or NBC buys a rights package. They show the game.

I assumed they were only getting compensated with ad revenue and then sort of indirectly for like retaining those viewers for whatever programming they also had on the network. There is a second very large revenue stream called retransmission fees. Did you know about this? Ah, yes. Oh, man. Going back to my days as a media investment banker. Yeah. So starting in the mid-late 2000s, that's at least when they kind of got material, the networks started being able to charge cable companies for the right to retransmit stuff that they have the rights to.

Yeah, this is NBC, ABC, Fox charging the cable companies to bring those broadcast networks onto the cable companies, even though they are also available for free over the air to consumers. Right. But if you have a cable package and in your cable package you choose to go to the NBC station, then NBC gets paid by the cable company for bringing you as a viewer. I think that revenue stream was almost as large as the advertising revenue stream.

So they have these two big pillars of their business, the direct subscription revenue that comes from retransmission fees and the advertising revenue. Obviously, retransmission is sort of dwindling as cable dwindles. But the belief is, well, hey, with Peacock or with Fox Sports or any of these apps, we have our own direct monetization. Or even, you know, if we're included in YouTube TV. One way or another, we're getting the equivalent of a subscriber fee for this, too.

And obviously, that's a subscription that is paid for all of the network's programming. But as we talked about on the episode, basically, it's the NFL that matters here. Yeah, sports and in particular premium sports and in particular particular the NFL is really where ad spend is sort of shifting on TV spend. It's the reason consumers reach into their wallet. Yes. And sports are sort of eating a larger and larger percentage of the pie of TV ad revenue.

And you could make an argument they were sort of under-earning for many years. But as the last thing that you actually watch on TV is these premium live sports, they are definitely commanding the revenues that they long deserved. So why has viewership increased so much? Or why have people been really wanting to pay attention to NFL games over the last couple of years? What could have possibly changed that would make people pay attention? Well, we said earlier in the episode that if you got money riding on a game, you are much more likely to care about it, even if you don't care about any of these teams gambling.

So the Supreme Court decision came down, I believe made it a state's rights issue of what type of gambling, sports gambling to allow. I think that's correct. Many states made it legal. And so in the episode, we said 46 million Americans bet on the NFL three years ago. Estimates are that this year that number has grown to 76 million Americans. Yeah. I mean, this is a huge new revenue stream for the NFL. And it drives the flywheel, too.

It's not just directly participating through their relationships with the gambling companies, but also this drives Sunday ticket subscriptions. This drives engagement with the game. Yes. It's a giant win for driving viewership. Yeah. I mean, that's like another incremental 30-ish million people that are now betting on the NFL versus a couple of years ago. Versus the 46 from a couple of years ago. Yeah. That's a lot more people that now care a lot more about what's happening on Sundays and Mondays and Thursdays.

Isn't it funny that if something is illegal, but people really want to do it, they do it. But then if you make it legal, a lot more people do it. Sort of like a lot of people use Napster. But then when you let people buy songs on iTunes, easy beats free, a hell of a lot more people started actually buying music than ever pirated it. Yep. Let's actually quantify it. The estimates are that the NFL's gambling-related sponsorships are about $200 million a year between DraftKings, FanDuel, and Caesars.

And then there's these companies that they don't have a partnership with, but obviously drive a ton of interest with Polymarket and Kalshi, these prediction markets that have popped up. So you might say like, oh, $200 million a year, that's nothing compared to the NFL's top line revenue. But Nielsen estimated the indirect impact, like we were talking about, on the league and in every way that it helps the flywheel to be about $2.3 billion per year that the league benefits from from the legalization of sports betting.

I mean, that's basically what, like another Sunday ticket package-ish on top of the existing revenue streams? Each of the packages is in the sort of $2 billion neighborhood. So that's exactly right. And then while we're talking about revenue, revenue, it just grew even more than they expected. So there's now, I think when we did the episode, we said something about $18 billion a year. The league now does over $23 billion per year across all teams that's on track to surpass $25 billion, which was their goal by 2027.

They're going to easily beat this number. I mean, I thought when we were recording, wow, by 27, they really think they're going to surpass $25 billion. But if they're already at $23 billion, yeah, they'll beat it easily. The wild thing is Roger Goodell made that estimate in 2010. Wow. Revenue was only $8 billion then. Wow. I think the takeaway is the league is extremely good at predicting what this revenue is going to look like. And because of the structure that we've talked about all episode with the way that the salary cap and the TV deals interplay and the length of the TV deals, it's just extremely knowable what the future of the league looks like.

Also, we should say, too, that is a superlative management performance to set a target like that and hit it. Yeah. Purely as a, like, business manager, management team, the owners collectively, and, you know, Roger Goodell and the office of the NFL. Yeah, they're good at their job. They're very good at their jobs. Okay, so listeners, this is a great moment to talk about one of our favorite companies here at Acquired, Sentry. That's S-E-N-T-R-Y, like someone's standing guard.

And fittingly for this NFL episode, they are doing something very fun next week for the Super Bowl experience in San Francisco. On Friday, February 6th, Sentry and another friend of the show, Vercel, are having a huge party at Joyride Pizza right in the heart of the fan zone in Yerba Buena Gardens. Visit luma.com slash SliceLab to get on the list. And we'll put that in the show notes. And while they're not setting up parties in San Francisco outside the Super Bowl, Sentry helps developers debug errors and latency issues.

So pretty much any software problem that you encounter, and then, of course, fix them before users get mad. And as their homepage puts it, it's considered not bad by millions of software developers. Yep. So one great example is how Anthropic uses them. Anthropic used to have some older infrastructure monitoring in place. But as their massive scale and complexity just skyrocketed, they instead adopted Sentry to help them find and fix issues faster. Crashes can be a massive problem in AI.

If you're running a big compute job, like training a model, and one node fails, it can affect hundreds or thousands of servers. So Sentry helped them detect bad hardware so they could quickly reject it before causing a cascading problem. Sentry enabled them to debug massive issues in hours instead of days so they can get back to their training runs. And today, Anthropic relies on Sentry to track exceptions, assign errors, and analyze failures in real time, whether it's Python or Rust or C++, anything.

We love Sentry. They've got an incredible customer list, including not only Anthropic, but Cursor, Vercel, Linear, and more. So if you want to fix broken code like the over 150,000 organizations that use Sentry, from indie hobbyists all the way up to some of the biggest companies in the world, you can check out sentry.io slash acquired to learn more. And they're offering two months free to all acquired listeners. That's S-E-N-T-R-Y dot I-O slash acquired. And just tell them that Ben and David sent you.

Okay, so before I throw it over to you, I want to talk about streaming, because we alluded to that. It has become much more prominent as a strategy for the NFL and as a way to consume games. And it has gone much better than we expected. So we were sort of poo-pooing the Amazon Prime partnership and saying, oh, they weren't hitting targets and they had to do make goods. No more of those. That's not happening anymore.

So in the 2025 season, Thursday Night Football on Prime averaged 15.33 million viewers in the highest ever average for Thursday Night Games across its 20-year history. So that's still slightly underperforming the average game viewership throughout the season. But it's Thursday night and it's only available streaming. Yeah, I mean, compared to the Thursday nights on the NFL Network days, which we will get into in a sec, it's a big increase. And plus we had a century of training people that you watch football on Sundays and you watch it on a broadcast network.

And the fact that we're already close to parody with this completely different channel is wild. 122 million unique people watch Thursday Night Football. That's up 50 million people since 2022. And on the Black Friday game on Prime, that was up 21% year over year. And probably the biggest sign either that it's working or part of the reason it's working is Thursday Night actually has great games on now. I don't think I've missed a Thursday night all season.

Yeah, same. There was the YouTube exclusive game that we alluded to. This is just a very interesting prediction for the future. It was week one. It was their international game. And it was exclusively available on YouTube. Globally. Yeah. So that's the sort of big thing here is YouTube is an expansion opportunity for the NFL. It's the way to reach a global audience. And that is the NFL's ability to expand. We sort of talked about how they've saturated America.

So it's all these new eyeballs in exactly the markets where they're trying to expand to. It's different demographics, excuse younger. And again, David, your comment on the big bet to put it free in front of the paywall. That's sort of a tenet of the NFL is if you are a fan of a team, then you should be able to watch all of their games for free the entire year. But this is even one step further, which is that everyone in any market can watch this game for free, which is very different than how they approach most of their media rights.

Yeah. I mean, if the NFL can figure this out together with YouTube and then also Netflix now they have the Christmas games with Netflix. Netflix is also a global streaming platform. I'm going to make everything else look quaint. You know, Fox or CBS in America. How many households is that going to? 100, 120, 130. How many users does YouTube have? A couple billion. That is a massive unlock. Yep. And Netflix just announced they have 325 million paying subscribers.

Right. But yeah, I mean, if they can figure out YouTube and global and Netflix, of course, be part of that, too. You can understand why they have been steadfast in investing internationally and investing in technology. Yes. Isn't it crazy to think that the growth governor for the NFL was the reach of the national television networks? Yes. That's the thing holding them back from having more of an addressable audience. And now with these tech platforms, you actually do have a globally addressable audience, one single platform that aggregates all these people from all these different places.

And you can distribute your content wider. But I keep going back to the saturation point. It's nuts that CBS and NBC's reach was the problem with the NFL's growth targets. Right. Right Right. Oh, amazing. So last add on, you mentioned Netflix. The Netflix Christmas games averaged 30 million people. Oh, wow. Yeah, that's significantly larger than an average game on network TV. Yeah, the 18 billion figure. But the NFL completely overtook the NBA to be the Christmas tradition.

Right, right. Well, hey, NBA's got a new big meteorites deal. Nobody should shed a tear for them. Yes. Well, speaking of networks and meteorites, one thing that we touched on briefly in the episode was that the NFL owned and operated its own cable network. Curiously, for a while. Sort of counter to their strategy. Yeah, a little bit of strategy conflict there. Well, it looks like that strategy conflict is going to be resolved, I think, in a huge win way for the NFL.

So August 2025, the NFL reached a deal with Disney and ESPN to essentially sell the NFL network, the NFL's cable network, and the NFL's official fantasy app to ESPN for a 10% equity stake in all of ESPN in return for this swap. This is awesome for all sides, assuming this deal goes through. It's in regulatory review right now. And the strategy that they have with everything else is just so genius. Oh, we don't have to do the operational cost of producing the games.

Which I saw an estimate that over the course of a season, a broadcaster spends over $400 million rolling out cameras, paying cameramen and production trucks and everything. And it is funny that the NFL a little bit got into that business and built out to TV studio and had commentators. I think this deal is awesome, assuming it goes through. The NFL, like we're saying, realized they don't really want to be in the business of operating a linear TV channel.

This is just pure non-strategic overhead costs that they're offloading. Similarly, though, it's not like Disney and ESPN are just taking this off their hands as a favor. They also know that they need to shift out of the linear cable TV business. And so the timing of this coincided right with launching the full ESPN direct-to-consumer over-the-top streaming service, ESPN Unlimited. Which is, for people who don't know, there used to be or there is a thing called ESPN Plus, which actually was basically ESPN Minus.

Yeah, it was like a neutered version of ESPN. It's like all the ESPN stuff except the stuff you want to watch because you need to subscribe to a cable bundle for that because we make so much freaking money on the cable bundle that we're not going to give it to you direct. Yeah, no SportsCenter, no live NFL games, blah, blah, blah. No Monday Night Football. And now they have like actual ESPN that you can get over the top in an app.

Streaming. Yeah. So this is now like a hole dumping all of the NFL media rights for some games, but also all of this ancillary content and NFL films content right as Disney is now going out and making the pitch to consumers. Hey, in addition to Disney Plus and Hulu, also subscribe to ESPN Unlimited and your new digital streaming cable bundle, essentially. Yep. Now here's where it gets really interesting for the NFL. Well, already their rights partners were moving to much more of a tech company digital mix than cable networks and broadcast networks with Google, Netflix, with Amazon, etc.

In doing this deal, they're now essentially helping stand up another digital bidder for future media rights with this new ESPN standalone streaming service. Like it is vastly in the NFL's interest for a standalone digital ESPN streaming service to be viable to then also be a bidder on their future media rights. So they're helping make sure that that happens and they're getting a 10% equity stake in the whole thing, too. So this is a great deal. It is a great deal.

I mean, giving a 10% ownership stake of ESPN to one sports league really does establish how important the NFL is to ESPN. And to be clear, it's not like the NFL is just getting a 10% stake in the new ESPN streaming service. They're getting a 10% stake in ESPN, the whole thing. Yeah, fascinating deal. So some other things I wanted to follow up on. We made some pretty hefty points around Gen Z and their love for the NBA and how the NFL doesn't really hold a candle.

This is really messy data. I realize the only real way to do this is ask Amazon. They stream the NBA. They stream the NFL. They have logged in accounts where they know people's demographic information. Right. That would be the real way to answer this question. But I do kind of want to walk back some of my concerns about the NFL's future because Gen Z likes the NBA more. I think the data is just actually not that clear on that.

And we also talked a lot, even not with Gen Z, just about the rise of the NBA and popularity and fame and all this stuff. If you just look at the numbers, the Super Bowl draws 127 million viewers, and that is growing. The NBA Finals per game draws just 10 million viewers, down from its peak in the 25 to 30 million during the Michael Jordan era in the 90s. Wow. And if you look at viewership during the regular season, that tells a similar story.

We threw out the 18 million number for the NFL per game. Even the NBA's national broadcast, not just the regional sports networks, but the national ones on ESPN and TNT, those average one to two million fans. This is everything we talked about in the episode. The NFL is the most perfectly designed league, maybe with the exception of IPL now that we've done that. That's right. The most perfectly designed American league for a media product. Listeners, even if you don't care about cricket, if you like thinking about the design of sports leagues, that episode was very fun to do.

Very, very fun. But that said, even now, a couple years later, and even now after the Taylor Swift crossover, the social media gap between players in the NFL and players in the NBA absolutely still persists. So I believe Travis Kelsey is the active NFL player for now with the highest number of Instagram followers these days. He has just under 8 million followers on Instagram. Patrick Mahomes has 6.5. Tom Brady has 15. Obviously, he's retired. LeBron James has 157 million Instagram followers.

And it's not just LeBron. Steph Curry has 60. There are a bunch of NBA players with 20 to 30. You know, you can debate the value of all this, but like, it's wild that number one in the NFL is under 8. And one in the NBA is 157 and number two is 60. Yes, the difference is staggering. I bet this is true when you look at follower counts. But if you think about it a different way, which is how much social media stuff do I get about NFL versus about NBA?

Most of the time when you follow LeBron, it's not like he's putting up game footage three times a day. So you're watching highlights. But I bet if you try to look at football content on social media versus basketball content on social media, it becomes clear that the follower counts are more due to like celebrity status versus engagement around the game. That's what I was going to say. Back when we originally made this episode, I think these numbers and the difference mattered a lot more.

These days, you know, whatever inning we're in in social media, like we've shifted away from follower counts and more towards algorithm and more tick tockification of everything. So, yeah, I think pure follower counts is not a great measure. And I think also, you know, an unmeasurable thing is just cultural relevance. And to me, it feels undeniable that the NFL's cultural relevance has grown a lot in the last few years. Well, yes, and a thing that's extremely measurable is how much money people make and using that as a proxy.

So we were sort of ripping on the fact that LeBron makes $127 million a year in disclosed deals between his contract and all of his sponsorships. And no one in the NFL even comes close. That's just not true anymore. Pat Mahomes is making $90 annually. And about half of that is his chief's deal and about half of that is other endorsements. State Farm, Adidas, Oakley, Head & Shoulders, equity ownership. And then it's not just him, too.

You got Josh Allen at $75 million, Lamar Jackson, Joe Burrow, Aaron Rodgers. There's real comparable dollar amounts for sponsorships with these guys. Even just to stick on Travis Kelsey here for a minute, I mean, the New Heights podcast reportedly signed a $100 million plus deal with Amazon. And that's right there for, you know, one show. Forget everything else that Travis and Jason are doing, etc. That's putting a dollar amount on cultural relevance, for sure. Yes, exactly.

I also just feel it in my life, too. I mean, like, my wife, Jenny, couldn't care less about football. But especially since Taylor and Travis, she knows whether Taylor's going to the games or not. She knows that Kyle Juszczyk on the 49ers, that his wife designed the jacket that Taylor wore to the playoffs last year. All of this might not be directly monetizable for the NFL, but it is growing the status and cultural relevance of the game.

All right, so let's go to Taylor and Travis. So I spent a long time really trying to find longitudinal, directly causal studies, data, anything on this. The answer is very, very likely. There was a massive increase from Taylor on the NFL in viewership and engagement and attention and new fans. But what we do know for sure is there's heavy correlation on lots of little data points. So here are a few of them just to throw around at your next cocktail party.

I love that you did this, by the way. I was wondering how quantitative you would get with this. So in the first year of the relationship, September of 23 to September of 24, the NFL added 4 million female fans. The Chiefs were 3.4 million of those. Wow. Okay. That is the Taylor effect right there. Again, correlation, but... Yeah, yeah, yeah. I'm not a statistician, but I think that's significant. The biggest demographic or sub-demographic of those 4 million is women under 35, which is a traditionally very weak demographic for the NFL.

It's one of the few areas of the U.S. where they actually had room to expand. Another data point, Super Bowl 58 in February of 24 had a 24% increase in 18 to 24-year-old women and a 9% increase across all women. And then lastly, Clark Hunt, the owner of the Kansas City Chiefs, went on the Pat McAfee show, and he said that before Taylor, the Chiefs fan base was about 50-50, male-female, which in itself is amazing. I mean, the league...

That's surprising, yeah. ...has just done a lot of work to make it a sort of family sport, a household sport. But post-Taylor, the fan base at the Chiefs is 57% women, 43% men. Oh, that's amazing. And obviously, this is all really fun, and it's like the ultimate crossover for us because we did our Taylor Swift episode on the business of Taylor Swift a couple years ago. But having done our IPL episode last year, obviously, we're not saying that the NFL strategy team designed this relationship.

Negotiated this relationship. Right, right. But if you look at IPL, this strategy was part of their plans from the very beginning, and it's how they made it a huge global sport and the biggest sport in India was make Bollywood an integral part of the product. Yep. I'm sure the NFL has been watching that and has leaned into this opportunity in a way that they might not have a decade ago. I'm fascinated that the NFL tried to take kind of a hands-off approach at first.

And the first couple broadcasts, there was a lot of heat for stop showing Taylor Swift in the box. And so they sort of leaned away, but then the NFL definitely made a decision at some point that, okay, we trust this now. We're in on this. I mean, to me, that's one of the huge lessons from IPL is the more culturally relevant you can make your sport in your league, the better it's going to be for everything, including and especially meteorites.

Yep. A thing that I paid zero attention to that was brought to my attention is the rise of flag football. Yeah. Have you seen any stats on this? No, but I hear about it. So it's the way that a lot of women get into the game because girls actually play flag football now as kids and they were never playing tackle football before. The NFL actually has leagues or sponsors leagues, like local flag football leagues where they all are named after NFL teams.

And it's getting a lot more kids into the game, especially as tackle football sort of wanes in popularity due to the concussion risk and injury risk. So from 2019 to 2023, tackle football decreased 5% for the youngest age group playing, but flag football increased by 16%. So this is, I believe, the fastest growing youth sport in America. It's growing really fast internationally as well, which this is the 30-year win for the NFL because if kids are playing flag football in other countries, it's only a short number of years before we see a meaningful presence of NFL stars who are not from America because they sort of grew up playing flag.

And then when they hit 13, 14, 15, started playing tackle football. And that's going to be huge for the international growth of the game. Yeah, I mean, that feels like one of the last, if not the last remaining big needle moving piece for the NFL. You know, if you look at the NBA, if you look at MLB, if you look at Formula One, if you look at IPL, the fact that so many of the stars came from other countries and bring that fan base along with them is huge.

And that has never happened in the NFL. Yep. But we're a short number of years away from, I think, seeing a giant breakout star who started in flag football because it was a part of their school or YMCA program from another country. Also, flag football is going to be in the Olympics. Yeah. And the Pro Bowl has been flag football for the last several years, right? Yep. Well, speaking of lower levels of football, we made a big deal early in the episode about the origins of American football and being intertwined with this elite rite of passage American collegiate experience.

The NCAA is an absolute mess right now. You could not have made it more disorganized and done more of a disservice to their sport, their game, than how this has all played out. I mean, if your goal is pay the players, there are a thousand better ways to do it than the way it has actually played out. Seriously. So, yeah, what actually happened? Okay, so forever, college football, it was illegal to pay players because they were amateurs and they can't receive gifts or cars or endorsement deals or anything.

And then there was a Supreme Court ruling a few years ago where name, image, and likeness became legal to monetize. And what sort of ended up happening is these booster groups popped up where groups of alumni or people with vested interests in the school. Yes, would pool money, not through the school, completely different than the school. And they had funny sounding named organizations and LLCs and websites that looked a lot like the school's colors but weren't actually affiliated.

And they would do these weird deals where they would tell the AD, the athletic director, or the coach of a team, hey, we've raised X money. Go tell that high school recruit that if that recruit plays for you, then we will do a private side deal with them to pay them money while they come and play for your team. So you have this strange structure happening at the very same time that they created the transfer portal, which for a very long time, the college game had this role where if you're going to change schools, you have to sit out for a year.

So it was a big penalty. You actually had people who were sort of like loyal to their schools, who would play for their schools for three or four years before going to the NFL, who would sort of build a reputation with that alumni fan base. And with the transfer portal, every year, people just decide willy-nilly to enter it. I'm going to go where I'm going to either make the most money or have the best shot at NFL draft prospects by getting more playing time.

The interesting thing is next year is when the schools actually will start being able to pay the players directly. And there's like a salary cap of sorts. The reality is right now, I think it's all still too messy and in flux to definitively say what the impact of all this will be on the NFL. But to me, it's just sort of like the final formal nail in the coffin that football in America is the NFL these days in a way that when the NFL was starting, football in America was the collegiate experience.

That's interesting. So it's now like come full circle and fully flipped that like the legitimate football league is the NFL and the Wild West illegitimate who knows what's going on is the NCAA. Uncoordinated, everybody just acting in their own short-term best interest, including the schools, the way that the super conference alignment happened and the Pac-12 completely blew up. It's been, it's just so sad to watch as someone that was a, is a really big fan of college football.

One interesting take you and I both heard from separate people is that it's actually been good for the NFL because now that players can make money in college, there's not as much of an incentive to get thrust into the NFL before they're ready. They can sort of develop longer mentally and physically before coming to the NFL. So we may have sort of better rookie classes out of the draft in future years as you sort of see more sort of mature players coming out.

Yeah, our teams can be more analytically confident in the draft choices that they're making as a result of this. That said, it's all still too chaotic right now to tell. Yes. All right. So our big ultimate thing here, team valuations have gone up way more than I would have predicted. Yeah, it's funny. You know, we spent the whole original episode and now this whole update section talking about all the business drivers of the NFL and all the trends and all the things that are going on that theoretically should increase the value of the league and its teams.

And it's ironic that probably the one really big glaring area in the original episode that we didn't cover at all was the dynamics of team ownership and thus collectively in aggregate league ownership of the NFL. Now, this is actually probably good because this is also the single biggest thing that changed in the NFL since we made the original episode. Right. Okay. So what has happened over the last couple of years? The NFL has long had a pretty strict code around team ownership.

So other sports leagues have regulations too about who can own teams and what ownership groups can exist, etc. But the NFL has always had the strictest set of regulations around this. So with the one grandfathered exception of the Green Bay Packers, which are a publicly owned nonprofit corporation. Sort of. Sort of. Except for them. Every other team in the NFL must be controlled by a single principal owner who is a natural person and not a corporation.

And that person and their family must have a minimum equity stake in their franchise of 30%. And that must be pure equity, like funded with cash or by appreciation of, you know, the value of your ownership of the team by one person, one family. You are allowed to have debt in your capital structure, but the league imposes a ceiling. That ceiling is currently $800 million with one exception. Oh, they denote it as a number. Yeah, yeah, yeah.

It's not a percentage because it's debt. So in your capital structure, you can have a maximum of $800 million of debt that you carry. You can have about twice that if you are buying a team. So they let you go double it in the process of purchasing to have more debt to finance the deal. But obviously still, you know, double that to $1.5, $1.6 billion. That's not going to buy you a lot of an NFL team these days.

No. And we'll get to the real numbers, but at most, that's probably what a quarter of what a team would cost. Maybe for like the Bengals or somebody, you know, not for a real team. No, Bengals are great. Okay, so that's the principal owner needs this 30% stake funded with cash. In addition to the principal owner, that person is allowed to have up to 24 other minority owners as part of their ownership group. But those 24 other people must be silent with no operational control.

And the way they actually structure this is hilarious. They structure it like an investment fund. It's a GPLP entity. So the principal owner is the general partner. And then all the minority partners are limited partners. Can they take fees and carry on their LPs? Or is it a... We'll get back to that in a minute. Okay. So, okay, for a long time, this ownership structure and ownership code was actually, I think, a key part to the NFL's strategy working.

It might have actually been the single biggest driver of this whole architecture that we've talked about all episode working. Permanent capital individually held by highly motivated, passionate individuals not thinking like a pool of capital would. Exactly. These are real flesh and blood people, not corporations. They have enormous skin of the game. A huge portion of their family's wealth is invested in the clubs. They run them personally. They make the decisions. They are, you know, effectively the CEOs of these organizations.

And you're able to get all 32 of these people, or, you know, 31 plus the Packers, into a room a couple times a year. And they can hash out and say, like, hey, these are the things, you know, collective capitalism. These are the things we're going to do that are going to be good for the league and putting teams second, like negotiating central national media rights, etc., etc., etc. Yeah. So all of this worked great until the summer of 2023, when the Washington Commanders, formerly until recently at that point known as the Washington Redskins, stumbled into a distressed situation.

We don't need to get into all the details here, but most folks who are followers of the NFL probably know that then-principal team owner Dan Snyder, who had owned the team for almost a quarter century, essentially got brought down by a whole series of scandals. There was sexual harassment. There was workplace harassment. There was financial improprieties. There was the fact that he steadfastly refused to change the name of the team for, like, a decade, even after it's kind of untenable what the name was.

Yeah. You needed an ownership change, and suddenly you needed it fast. Yeah. If you go to Dan Snyder's Wikipedia page, it literally says on his Wikipedia page, Snyder is widely considered to be one of the worst owners in the history of North American professional sports, and has a whole train of citations after that. This ultimately ends up in 2021, 2, 3, in a U.S. congressional investigation into the Redskins slash commanders and Dan Snyder's ownership of them.

And at the end of 22, as these investigations are ongoing, the rest of the owners in the NFL finally decide, like, enough. We need to kick this guy out of the league and force him to sell the team, which they can do by the NFL's bylaws. If there is a super majority vote of at least 24 of the other principal team owners, they can force one of the other owners to divest the team. So it doesn't actually come down to a vote, but just by virtue of having that leverage, in 2023, Snyder finally steps down, stops fighting, says, okay, I will bow to the pressure and initiate a sale process here.

Well, the good news, bad news for the NFL is that because they've been so successful and the Washington football team is a great franchise, great stadium rights, etc. Key market. This is an extremely valuable asset. So, yes, on the one hand, that's great news. It's validation of the NFL's, you know, whole strategy for the past hundred years. On the other hand, they've kind of become hostages of their own success because of all those strict ownership rules that they have.

They now need to come up with a new principal owner candidate who has enough liquid cash to cover an emergency purchase of 30 percent, at least, of the Washington football team. And the most recent purchase was the year before? When the Walton family bought the Broncos, I think, for $4.65 billion. Yes. So you already have this new very high watermark and you already found the family behind Walmart. So, like, okay, you need to keep going down your list of where can we find liquid principal family-owned capital.

So just to put some numbers on this, the commanders ultimately sell for just north of $6 billion. So the minimum required cash equity check here is at least $1.8 billion that you need somebody who just has that liquidity lying around that they could, in a fast process, invest in an NFL team. And, oh, yeah, they also have to fit the Venn diagram of want to own an NFL team based in Washington, D.C. This is not a large pool of buyers here.

So, ultimately, they do find a buyer. Josh Harris, who is the co-founder of the huge private equity firm Apollo and already owned the Philadelphia 76ers in the NBA and the New Jersey Devils in the NHL. He comes in as the principal owner of the new ownership group of the Washington football franchise along with 20 other limited partners. Because, oh, yeah, that's the other problem here. You also need this person to have enough friends who are willing to throw in that can cough up another, like, $3 to $4 billion in cash here.

Because, like, yes, there's the $1.5 billion in debt, but that still means you need $4.5 billion in cash. So it's kind of a miracle that this all happens. It started impacting the game, too. It's like, because this is all during the offseason that this is going down. What's going to happen to the commanders? Are they going to continue operations? It's crazy. Uncertainty is not good for the league. No, definitely not. They forecast revenue 15 years in advance.

Yes. Yes. So once all the dust settles, the owners are like, all right, we can never have this happen again. We know we need to change something here. So the next offseason in summer of 2024, they vote to allow private equity into the NFL. Ba-da-da. Basically, all the other major sports leagues around the world had already done this, and the NFL was the last holdout. And again, you can understand why. Like, having these strong principal owners that can all get in a room and negotiate, think long-term, have a huge part of their family's net worth be the team.

Yeah. It all makes sense. But private equity desperately wants to get in, and more than ever, you now need private equity's money. But the NFL still has leverage. It's still the cream of the crop thing to own, and they've watched private equity go wrong in all these other sports leagues. So this is where the NFL proves once again that they truly are N of one. So they meet with a bunch of private equity firms, talk amongst the ownership group, hammer out a new set of ownership regulations for NFL teams.

And here are the four major rules that they draw up. Number one, the NFL will approve a set list of private equity firms, large private equity firms, who have the opportunity, the option, the ability to invest in league franchises. That list is vetted by the NFL, subject to change, and if you are not on that list, you are not allowed in. And that set of firms right now is only four. Four very large private equity firms that have the anointed ability to invest in NFL teams.

Number two, those private equity firms are now allowed to own up to 10% of the equity in NFL franchises, but no more than 10% under any circumstances. That is the smallest cap of any major sports league out there, if they have caps at all, on private equity ownership. Yep. Three, these private equity firms will be fully silent, limited partners in the ownership group with no control and no rights. Perry pursue exactly the same effectively as all of the previous individual limited partners in the ownership groups.

If you're a random movie star who happens to own a little tiny bit of a team, you have the same rights as a PE firm who owns 10%. Yep. You have the same rights as Aries Management or 6th Street or Carlisle or, you know, the small set of firms. And then number four, this is the kicker. Upon any eventual sale or monetization of the ownership stake that private equity would have in an NFL franchise, a portion of the returns on that investment get skimmed off the top and go back to the NFL and then get distributed equally among all 32 NFL team ownership groups.

This is wild. So you texted me this. I couldn't believe it, but suddenly everything makes sense. Yes. That's why there's an anointed set of four. It's not just there's only four PE firms we trust. It's there's four PE firms that we went and we did a deal with where if they buy into our league, we effectively get carry on their investment because when they sell, we get some of the profits. It's funny. You asked about carry and the ownership structures.

I don't know mechanically and legally how this actually works, but in practice, this is exactly what it is. The NFL invented a way to charge carry on investor ownership on franchises in the league. It feels like the ultimate pinnacle of the collective capitalism mindset and ethos of the NFL. Now, one interesting thing, a way to look at this is that it is the NFL pulling yet another lever at their disposal to achieve competitive parity. The league is using the fact that PE firms want desperately to be in as a way to redistribute the wealth from increases in these incredibly high value teams that private equity is buying into and distributing that out to all of the other 31 owners.

Yes, exactly. That's what I was going to say. And I think this was one of the big sticking points that emerged in the owner meetings as they were contemplating how to do this, which is that only a subset of the teams are going to avail themselves of the private equity option, either through sales of the franchises or through minority stake investments that have been happening a lot. Right. If you do that, we all get paid. Right.

But it would have created an imbalance, right? Some subset of the teams have embraced private equity, gotten these big liquidity stakes, had their valuations get reset, and the other set of teams hadn't for whatever reason. They decide the family wants to keep 100% or near 100% ownership, et cetera, et cetera. This is just brilliant. Yeah. So quick, interesting math. So as of today, Forbes estimates the average team is worth $7.1 billion, up from $4.5 billion when we did the episode.

Team valuations now are $228 billion in total, up from $140 billion when we recorded the episode. That's up 62%. And again, these are estimates because these are mostly not liquid assets, but interesting to know that. Well, it's funny you say mostly not liquid assets. A large number of them have become liquid assets. Have opened up sales to minority owners. Yeah. Because what's basically happened, there have been no full team sales since the commander's transaction that precipitated all of this.

But a large number of teams have used this as a way either with private equity or interestingly, more often without private equity, usually with family offices, to sell minority stakes in the franchises and get liquidity for the ownership group. But private equity being able to buy in, since they're a bidder, drives up the valuation. So even though they're opening up sales to all these individual people. The prices are set, yeah, by institutional capital. So the Dolphins, Bills, Chargers, Giants, Eagles, 49ers, Raiders, Browns, and Patriots have all sold minority stakes over the last, call it, two years.

And all at extremely higher valuations than they would have had this not happened. I also heard from some wealth managers that advise people who are buying into teams that they are allocating this to people's fixed income portfolio. That buying into an NFL team, you almost treat it like... Like an annuity. An annuity, yeah. I just know that it's going to spit off this much cash each year and it's like buying a bond. I mean, everything we've talked about in this update have basically all been extremely positive developments for the NFL and its business.

But nothing we talked about until now would have caused 60% asset value appreciation in three years, except for this. Oh, multiple expansion is crazy. Forbes now estimates the annual revenue multiple in the NFL is 10.7x, which is up from 9x in 2024 and 6.4x five years ago. So in five years, it went from 6.4x to 10.7. It's funny how supply and demand will do that. Yeah, investors either think there's much more durability and growth in these franchises than they did before, or they just don't care and they want to own a scarce asset.

Well, the NFL ownership group had so constrained the buyer-investor market before to like such a tiny, tiny narrow window that buyers and investors actually had a lot of leverage. And this has opened that window much, much, much wider. It is funny to just do the quick math on what the sort of carry is on the carry type thing. So at 10% stake of a team that's worth eight-ish billion dollars, so you're putting up $800 million as a private equity firm.

Let's say that goes up 30% before you exit your position. That's a gain of $240 million. I have no idea what the SPF is or the carry. Let's assume it's 10%. I don't know if that's conservative or not, but it's less than 20%. That 10% would be $24 million that the rest of the owners just get for free as a little thank you for letting private equity participate in our league here. Which, hey, in the context of the revenue of the NFL, that's not a lot.

But that's just for a transaction around an individual team. Collectively, the transaction potential is 32 of those. Right. So my last comment on valuations and how each of these teams are doing as businesses. Give you a couple other data points here. Forbes now estimates the Cowboys are worth $13 billion. The Cowboys are the high-water mark because the Cowboys have an exceptional amount of local revenue that they produce, as we mentioned earlier on the episode. The estimated 2024 revenue of the Cowboys was $1.2 billion while posting an operating income of $630 million.

That's actually a reasonable valuation. You're talking about 10x revenue and 20x operating income? But to my point on the disparity here between the most thriving team and the least thriving, sure, the Cowboys can spit off $630 million in profit. The average team spits off $127 million in profit. And the least profitable team only generates $21 million in profit. So a couple points here. One, NFL teams are now just always reliably profitable businesses. That's not true in most sports, and it wasn't true in the NFL's history.

But if you own an NFL team, you are going to get, I believe, get a dividend check every year since they're cash-generative. But two, this league-first mentality is going to be really tested in the coming years with these enormously profitable teams at the top and these teams at the bottom. I mean, $21 million, that really illustrates why a $24 million payday coming from private equity, every individual million that you stack on top of that 21 is very impactful to your profitability as a business overall.

So even though valuations have become stratospheric and the NFL is a better business than ever, the team disparity, especially on the bottom line thing, I continue to be concerned about that. That remains the bear case for the NFL going forward. Yep. All that said, for the moment at least, communist capitalism is alive and well in the NFL. Yes. And the answer to the question we had three years ago of could the NFL grow from here is resoundingly abso-freaking-lutely.

Yeah. If by asset value, if nothing else. Yep. And that is a great place to leave it. Well, we have some thank yous, especially to folks that helped us with the follow-up research. My biggest one goes to Jeff Dunn, the chief strategy officer of the Seattle Seahawks, who I spent a good amount of time with prepping for this, especially while we are here on our playoff run. We are recording this right ahead of the NFC championship.

So sorry, David. Oh, he's driving the knife in. Oh. Well, my thank yous are to all of our many friends in the 49ers organization who, sadly, I felt less bad about emailing this week after your Seahawks. Yeah, they had some free time. Yeah, yeah, yeah. Knocked us out of the playoffs last week. They're great. Every single person we've worked with the 49ers and talked to to help prep and just gotten to know over the last few years has been great.

They've been immensely helpful, become good friends. And we also have them to thank for helping bring Super Bowl 60 back to the Bay Area and launching the Innovation Summit and having us be part of it. I know. It's funny that we talked about the whole creation of Super Bowl Media Week as this big innovation and all the gloss and sheen that it adds to the game. And now we get to be part of the gloss and sheen.

Acquired as part of the gloss and sheen. If you had told us that three years ago, I don't know what we would have said. Absolutely not. Well, a huge thank you to our partners on this episode, to Vanta, Sierra, Sentry, and Crusoe. You can click the link in the show notes to learn more about any of them. As always, all of our sources for this episode, including updated sources, are linked in the show notes. And for any of our partners, you can click the link in the show notes to learn more about any of them.

For the Super Bowl Innovation Summit, you will, after the Super Bowl, be able to watch everything that we did on stage at the Innovation Summit. Links to more information on that are in the show notes as well. If you want to discuss this, please come to the acquired Slack. That is acquired.fm slash Slack. We have a thriving, thoughtful community going there discussing this in every past episode. If you liked this episode, check out our episodes on the NBA, IPL cricket, and recent ones on Coca-Cola and Trader Joe's that were super, super fun.

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