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.
That always makes me think of Thanksgiving.
It makes me think of, I think it was a jock jams tape that I bought,
or maybe it was like a knockoff jock jams produced by Fox Sports.
But I definitely had that theme song on a sports pump up tape.
Oh my God, jock jams. That needs to make a comeback.
Who got the truth? Is it you, is it you, is it you?
Who got the truth now? Is it you, is it you, is it you?
Sit me down, say it straight, another story on the way.
Who got the truth?
Welcome to Season 12, Episode 1 of Acquired, the podcast about great technology companies
and the stories and playbooks behind them.
I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based
Pioneer Square Labs and our venture fund, PSL Ventures.
And I'm David Rosenthal, and I am an angel investor based in San Francisco.
And we are your hosts.
Today's episode is on the NFL.
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 and 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 now obvious epidemic of CTE among
former football players.
Players are clearly putting their lives at risk.
And from national anthem knees to alleged cheating scandals,
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 extreme cognitive dissonance for me every time I tune in.
And I know many others feel the same.
Indeed.
Talk about cognitive dissonance.
70% of the players in the NFL today are black,
but only two of the head coaches now currently here in January 2023
are black.
And of course, none of the owners are.
This is very emblematic in many ways of America as it was many,
many years ago, sort of painfully still in front of us today.
Yeah.
I mean, gosh, we've told so many stories now on acquired where, you know,
in the research and then telling him like, wow, this is the story of America.
I have never felt more that way than I feel about this story in the NFL
with all the greatness and all of the not so greatness that we're going to get into.
Yes.
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 eye formation today.
We're talking about the business, but we do have some sports.
Thank yous to say one to great friend of the show, former US representative,
Anthony Gonzalez, who caught touchdown passes for the Colts from Peyton Manning,
who we also have to thank because Peyton's places on ESPN plus is awesome.
Highly, highly recommend.
He's so good.
Yeah, it's great.
I think I watched 20 episodes of that.
And we also have a big thank you 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.
All right, listeners, this is a great time to talk about one of our big partners,
ServiceNow.
ServiceNow is the AI platform for business transformation,
helping automate processes, improve service delivery and increase efficiency.
Over 85% of the Fortune 500 runs on them.
And over the past few years, they've joined companies like Microsoft
as one of the most important enterprise technology vendors in the world.
And speaking of Microsoft and ServiceNow,
they just announced a huge expansion of their partnership,
specifically integrating the two companies enterprise AI assistance.
Starting in the fall, customers will be able to interact with ServiceNow's
now assist AI assistant directly within Microsoft CoPilot.
Yeah, it's telling for the magnitude of this partnership
to see Satya Nadella appearing in the keynote
at ServiceNow's big annual event, Knowledge, last month.
Yes, ServiceNow's now assist will be integrated with Microsoft CoPilot
and will be available directly from Office apps,
starting with Microsoft Teams.
The AIs are integrated into one seamless user experience
without actually sharing data.
So if, for example, a user asks CoPilot in Teams
about how the company's laptop policy works,
behind the scenes, CoPilot shares that request and context with now assist.
And now assist accesses internal company policy
with the right permissions for that user
and returns the answer to CoPilot in a rich card
with options for the user to kick off a workflow via now assist.
In the future, Microsoft CoPilot will also be integrated
the other way into now assist so it can automatically generate office files
like PowerPoint presentations and Excel spreadsheets
directly from assets and knowledge in the ServiceNow platform.
It's pretty awesome for both companies
and especially awesome for enterprise users.
So if you want to learn more about the ServiceNow platform
and how it can work with your company's Microsoft services,
go over to servicenow.com slash acquired.
And when you get in touch, just tell them that Ben and David sent you.
Well, after you finish this episode,
come discuss it with the other 14,000 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 New Jersey transit 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 what were they there for?
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, no, no.
It was essentially what today is classified as mob football,
quote unquote, or medieval football.
This had been played for centuries at this point 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.
These are like the elite training institutions for wealthy landed gentry in England.
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 at one point in time.
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 he 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.
And it kind of becomes this character building experience.
It's also still wildly dangerous.
There are like deaths, serious injuries, very, very common through this period.
The first kind of 50 years of football.
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 going to 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?
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
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 where you would pile up as many people as possible
behind somebody who is carrying the ball to push them forward.
And apparently that's how most of the deaths and serious injuries happen.
So they do make the sports 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 differentiated
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 defining characteristic of football.
And to underscore how much this changed things.
Football was exclusively a violent, dirty game to this point in history.
American football.
But when we think about American football today, you're watching one 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 to 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 has 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 warlike activity.
There's this very 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 leaks.
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.
Now that is not to say that professional football didn't exist.
Or like the same period, bootlegging alcohol.
Oh, alcohol is illegal except for this massive industry that lots of people are participating in.
Yes, it's not like demand for professional sports in cities and professional spectator
sports didn't exist.
Look at baseball as exhibit A. 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.
So it's not like professional sports were all like 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.
Finally, we get to the founding of the NFL and started on August 20th,
1920, when the heads of several of these barnstorming,
quasi-professional football teams in the Midwest 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.
That's how you kind of got around the professionalism of this.
Like, oh, no, no, it's like a company amateur football team.
We're just tapping to pay these people.
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 not only have a goal at this meeting, 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 that America is going to tolerate.
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 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.
This was sort of the lesser knock against pro football of like, well, this is like a bunch
of ruffians and barely disguised excuse to beat up on each other.
Yeah.
Not to mention 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 they're 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 show room, 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 sack 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.
Which by the way, that was a huge moment of these all white Ivy league schools think they're better
than everyone else. And Carlisle was really a Reformation school and how to assimilate into
white culture. And so it was this incredible moment of saying, okay, well, as a little bit
of a protest, we're going to literally become the best and then beat you at your own game.
Well, 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. He played in the major leagues, like Dion Sanders, Bo Jackson. He did
all of that and basketball and won gold medals. Wild. So back to the 1912 Olympics, when he
won these gold medals, King Gustav of Sweden was presenting him with the medals famously.
And as he's presenting them to Jim says, you sir, are the greatest athlete in the world.
To which Jim Thorpe famously replies, thanks King. I think that needs to be our next acquired
merch t-shirt. Thanks King. Yes, absolutely. 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 being the
president and the figurehead. 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 twenties and really the thirties too,
it's kind of hard scrabble. 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 Stalies,
the Racine Cardinals, and one we have not talked about yet, the Green Bay Packers. Indeed. And the
Decatur Stalies would become the Bears, Chicago Bears, the Bears. Yes. They became the Chicago
Stalies and then at some point adopted a proper name and became the Bears actually named after
the Cubs. That's right. Cause they played in Wrigley field and Bears are bigger than Cubs. Yep.
So it was an uphill battle for a couple of reasons. One, even despite all their efforts,
the stigma of professional football really does not wear off, especially in the twenties. 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.
The game is robbed of the exhilarating inspiration of achievement merely for achievements sake.
Now, of course he's partisan cause he's a college football coach, but this really was still a lot
of 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. And as you say, these teams in small towns,
almost all of them end up shutting down. Well, that was mostly due to the depression in the
thirties and the dustbowl. It just became completely nonviable 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'd love that. Unfortunately,
in the mid thirties, 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 DC at his
behest, they adopt the same policy as major league baseball and completely kicked 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 screaming 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 have people coming home.
You have people looking for jobs. You have people with lots of free time. And 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
hold 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. 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, as we will see
a couple of times here throughout the episode. 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.
Right. And those eight teams, the Cardinals, of course, they're in Arizona today. You got the
Chicago Bears, you 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, this is crucial, the Cleveland Rams. Yes, the Cleveland Rams
at that point in time 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.
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. The NFL is in some of them, but should be in all of
them. And almost like the NFL had its ace up its sleeve with Jim Thorpe at its founding,
the AAFC has its own ace, which is that 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 AAFC.
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 had bought the Rams in 1941,
even before any of this was on the table. He didn't really want to be in Cleveland anyway.
He saw this opportunity to 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 a hundred percent unanimous approval of all the owners to move a team.
And they didn't want to move the team. 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 AFC and the Browns are coming in and then
the dagger comes right before the 1946 NFL annual meetings in January. Dan Topping,
who owns 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 AFC. So there's major crisis.
First thing they do in the January, 1946 annual meeting is they boot out the
then commissioner that they had hired Elmer Layden, who was a college football star,
but not an effective wartime administrator for the NFL. 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 installed 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 AFC. And they decided it needs to be three
things. One, they need to go meet the AFC where they are, which means where the new America is
post-world war two, which means 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 AFC. And then three, for the first time, they need to do a better job than the AFC
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 the same or 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
Maslin High School in Canton. 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 him 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 in 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. There were not full time
offensive coordinators and defensive coordinators. And I'm not sure he yet established them as that,
but it really was saying, look, we're going to be a team of coaches that coaches a team of players.
And on the racial integration front. So one, the AFC was going to be an integrated league
from the beginning. That's counter positioning right there. That's counter positioning.
The NFL and especially the Redskins didn't have a lot of interest in doing so. But moving the Rams
to L.A. forces the league to integrate because the L.A. Coliseum or the Rams want to play is a
publicly owned building and it's controlled then as now by the L.A. 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 while 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. The Rams were so good at PR. So they agree right away.
Be not only that, they say, great will sign Kenny Washington, who before the war had been a hero in
Los Angeles. He was a huge UCLA star for the UCLA football team. This was a huge PR group for the
Los Angeles area and for the Rams. And all this was helped out by a savvy young intern for the
Rams at their new headquarters in Los Angeles. 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 L.A. 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 AFC 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 L.A. teams. Now you've got an AFC team and a NFL team and the Chicago Rockets.
Yeah. The Dons in L.A. were named after the main owner, Don Amici, the movie star.
Yeah. So you've got the NFL and you've got the upstart AFC that would only last four years,
but would change the game quite a bit. And by forcing this competition, they force 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, but 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 AFC 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,
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
by observing the counter example of boring football, where there's one dominant team,
it kind of has to become a core tenant of our league now to fight these other guys of enough
equality between teams that it is always very competitive. And this is still critical today,
but 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. So 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 in
short number of years here. But back to Burbell, the newly drafted commissioner of the NFL.
This is his great insight that he realizes as he's marshaling 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. We want to thank
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Ben and David sent you. And thanks to friend of the show, Christina, Vanta's CEO, all acquired
listeners get $1,000 of free credit, 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,
pretty immediately after he starts, 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.
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? 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 even then only free agency with
a salary cap, which when it was announced, Michael Ervin, the Dallas Cowboys wide receiver,
famously said free agency with a salary cap is not free agency. But we digress. 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. And 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 formed the nucleus of Burbell and the NFL
strategy that it's had ever since, which comes down to league first, league first, team second,
and some might say players third, if at all. 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 televisions impact on the NFL. So as we said, the AFC only operates for four
years. This plays out. The Browns are too dominant. The AFC 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 fifties
and been just like you said the television installed base is here. It's coming. 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 drew exponentially from there. Oh, I love that you look this up.
By this point in the early fifties, 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. Like,
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 forties and the beginning
of the fifties 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,
62. 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
fifties, 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 whatever your local TV
station is. They would black out all the home games because they would say, we need to fill
the 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 with the blackout
be lifted, it wasn't until after September 11th that blackouts were lifted, even if the home
game wasn't sold out and then they reinstated it. And now it's not the case anymore, but it's a mess.
But Ben, as you say, in the fifties, 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 home games, I think home and away games,
but they put a clause in the deal. Cause they'd seen what had happened with baseball
that Admiral would guarantee revenue back to the Rams for any loss in attendance.
This is a really bad deal for Admiral because attendance declines 50% five zero.
Which is crazy. Like for how bad the broadcasts were, the fact that that as a suitable replacement
to go into 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. 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 by 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. It's a new revenue stream, but it's hurting the golden goose of ticket sales.
And all the way through the fifties, it wouldn't really be a particularly large revenue line.
But as it did start to grow at first, they weren't really listening to the hard one lesson
against the AFC that it needs to be league first. And so 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 fifties, 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 teams 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 antennas 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 streams for the NFL. By the end of the fifties, 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. And in particular, the 1958 NFL
championship game known as the greatest game ever played between the Giants and the Colts led by
a sudden death over time, dramatic win by Johnny Yoo and the Colts 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. Which it is
amazing. I mean, 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 fifties draw to a close, once again, just like towards the end of World War Two in the end
of the 40s, there were a whole bunch more cities and ownership groups that wanted in on this.
There's a clear business opportunity and they're only 12 teams at this point in the NFL. But once
again, the NFL owners are kind of dragging their feet. They're like, 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.
You better believe it. 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 things or change things. No, they did not.
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 Bert
Bell, the NFL, do anything he could to get an expansion team or buy the Cardinals. He just wants
to own a football team. So story goes, he's flying back from seeing the Cardinals and having been
rebuffed. And he has a Eureka moment on the plane. 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 are like,
okay, they're sort of friendly. Like, well, maybe, you know, better to have good relations
with Lamar and the new AFL. Because they're kind of doubtful that it's going to happen. They also
don't want to say anything in the press that makes them look arrogant. And they're sort of
trying to be pretend supportive until it's legit threatening. Yep. But then still 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, unlike the AAFC owners, 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 totally 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 encounter position
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. The likelihood that they would be that receptive to this
in the first place is low, but there was another relatively upstart counter positioned 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 a fourth episode we've talked about Rune Arledge on. What
a legend. So Rune would ultimately become Bob Eicher's mentor and Bob Eicher 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 fifties that nationally televised football games, there's demand for
it. There's a huge opportunity. 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. Right. 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 this was Roon Arledge's and ABC's first huge contribution
to pro football in America and the televising of sports. 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 dollars to the league per year. And that was before the league had played a single
game. This is all before the league launches. 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 and eight and a half million dollar
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
burbell under 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 by day eight or nine. That's sort of
the position that everyone feels like they're in is oh crap. Well, we got to pick someone we can
agree on, but that's not going to be the best person for this job, unfortunately. 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 compromise dark horse candidate, 33 year old third year, general
manager of the Los Angeles Rams, former public relations intern Compton college graduate, Pete
Roselle to be the new young commissioner of this league in crisis and create the NFL that we know
today. And it was totally brilliant. I mean, a Roselle 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, but they had to go to
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 fifties and early sixties. Like 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 fifties and
sixties, 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 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 just as a
small short track record of what Roselle had done before becoming commissioner 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 there 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 sets up the first in-house kind of institutionalized merchandise store for the Rams.
He opens up a Rams merchandise store. He partners with Roy Rogers, Inc. The actor Roy Rogers had
a white label merchandise brand to bring actual high quality branded Rams, jerseys, hats, mugs,
et cetera. 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 AFC. Now they realize they got to go meet the enemy on the field where
they are. So the original plan is to expand to both Dallas and Houston immediately to meet the
AFL there in Texas. The Houston franchise, I think ends up becoming the Minnesota franchise
instead, but they do go to Dallas with the Cowboys immediately. Oh, and meet Lamar Hunt head to head
right on his own turf. I mean, he's leading the AFL effort and the idea of you're just 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 Rosel makes,
remember he's from LA. He gets the importance of media advertising everything. He knows he can't
run the NFL out of Los Angeles, but at this point in time, the league offices were in Philadelphia
because Bert 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 Bert ran it a very
idiosyncratic way too. I mean, he had obviously no computer system, but like he did all of his
business by phone calls. 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, to Midtown, first to Rockefeller center,
and then to Park Avenue where the league is. I believe 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. Yes. 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 like 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 sixties, Sports Illustrated
really becomes the major advocate for the new modern game of football and the NFL. So much so
that in 1963, just three short years later, the magazine Sports Illustrated names Pete Roselle
its Sportsman of the Year, the first ever non athlete that it had ever named Sportsman of the
Year. Think about that, the commissioner of the league being named Sportsman of the Year
by Sports Illustrated. That is just a huge mindset shift. We should also say the end of the fifties,
beginning of the sixties, baseball is still a dominant sport in the US. The dominant football
franchises are college football franchises. The NFL is still an underdog and now they're being
challenged by this new upstart. So they're sort of squeezed in the middle where people don't care
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 it 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 is sure 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 and
helped them get where they are. But like the NFL keeps such a tight grip on the narrative.
Oh, dude, the sideline reporters aren't allowed to talk to anyone. It's kind of silly that we have
sideline reporters today. I mean, just an illustrative example of how tight the NFL
controls the media relationships they have. 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 specifically with the Kennedy family, both John and Bobby, who are big football fans.
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 with ABC.
And importantly, the league wide revenue sharing national deal with the national network.
Now this is not how the NFL operates at this point. No, Roselle within the space of a year
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 to their individual teams. They have to pull
together. This is a continuation of the league first mentality and they have to 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. Uh, no, but ultimately they do say yes. And it really like
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 once he gets authority, 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 three X, 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, I believe, I guess the department of
justice to start an antitrust violation process against the NFL. This is like a potentially clear
use of monopoly power in bargaining. Well, 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. No. 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 and 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 in the White House, 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
in 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. And at this point in time, I think a lot of those arguments
hold water. 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 2,500 X over the next 62 years. Wow. Did you look at what it would be inflation
adjusted? Yes, inflation adjusted. It's about 250 X still pretty good. So on the back of this
landmark TV deal, Roselle does two other really brilliant things for the NFL in the next year.
First comes as kind of a, another accident. So the league every year sold the rights to
the NFL championship game, sold the rights 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, highly real 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 edit
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 5k. He bids $5,000. He wins the auction and
Roselle's like, uh, who is this guy? Like with no experience, what's happening? So Roselle 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, everything,
sideline cameras, really a passion project to make this an incredible piece of content.
Roselle'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 let's say we'll 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, which is that 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, Ed and his son Steve would come on board and work with them and
eventually take over NFL films. 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. Once Roselle
greenlights NFL films, he basically says, okay, there's a lot of people in my organization that
might want to do something with this at some point, but like many successful acquisitions
we've covered on this show, he says, 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, but this is what's so amazing. They did all this as this
investment as a labor of love and passion on the Sables part 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 will put a slight pin on and come back to in just a minute. Yeah. The other thing
that Roselle does in the next couple of 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. It's got to all be the same. And you got to remember the way that the NFL is structured,
Roselle 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. We're going to all the revenues can 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 and L for the league to take over on their behalf.
Yeah. I mean, like, let's take the Browns and Packers. How many pennants do you think
the Browns sold, you know, 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 is 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 and like so fun. 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 got to go see the field. And so I took over on
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 of years
as commissioner is he creates the pro football hall of fame in Canton in 1963. So I've never
been, we got to go. We should do an acquired field trip. We should. That would be fun. So there's
this amazing flywheel. Like it really is like the Disney story that he gets. I don't think he
thought about it in flywheel terms, but 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 going to 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, but with the NFL and now with the new TV model,
there is no ceiling to revenue capacity. So more fan interests, more TV dollars,
more TV dollars shared evenly amongst all the teams, raises the level of play equally amongst
the teams. As the overall level of play goes up, as long as the competitive balance stays intact,
well, that improves the product, which then adds more sheen, which then drives more fan interest,
and it becomes this amazing flywheel. And literally, I mean, there's so much more to the
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. 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 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. Yep. All this stuff has happened in the previous two years.
Roselle opens up the bidding to all three networks. Of course,
CBS wins again, some would argue that it was a rigged bid and Roselle was tipping off his
counterparts at CBS. We may never know. They win 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 three X from the last deal he negotiated
two years before. Pretty freaking incredible. And also just says so much about to the point
with the Kennedys and politics 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 when they get 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. When it just takes time for people to realize the power of a new medium
for the monetization side to grow as the engagement side grows. Okay. So Rosel,
unbelievable first five years in office, literally cannot imagine executing better. The NFL going
from major crisis, death of its owner commissioner, Burpel, to the place it's in in the mid sixties.
Incredible. What about the AFL? We haven't talked about them in a while. What happened to them?
Well, here's what's funny. They're doing pretty great too. Unlike before the war and before
television, if this had played out and something similar did with the AAFC, the AAFC was dead at
this point, you know, four or five years in the AFL would have been dead too, but 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
to shoot the moon strategy. They wanted to come out of the gate with a bang. It's almost like
the soft bank or tiger global analogy where 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 them
and turn them into a superstar that benefited the league. The Jets in the AFL, formerly the Titans,
they're owned by Sonny Worblin, who almost nobody will know that name, but he was one of the coheads
of MCA, the big agency, as discussed on our interview with Michael Ovets. Indeed, indeed.
So just like Roselle gets what's going on in the NFL side, Sonny, even though he's not as much of
a clear leader, 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. So 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. Sonny's like,
Oh no, no, 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 less than half. It's seven and a half million dollars 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. It's not as much as the NFL, but for a five year old upstart league, this is a big success.
So just like you were saying, right on the heels of that, Sunny 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 may be familiar with him a little
bit. I honestly, I only knew it because I saw him on a Brady Bunch episode on a Brady Bunch
episode. It's not like I was alive during the when that was airing, but there's a very famous
episode of the Brady Bunch that I watched because it's like this cultural touch point
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. I mean, he was such a heartthrob.
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 in this realization that football and the NFL would
be made for TV. Joe Namath was the first modern cultural celebrity athlete.
The only thing that was close to probably bigger was Muhammad Ali. He transcended sports.
He transcended football. He's also a heartthrob. There's like millions of teenage women in America
and 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.
But for him, there was nobody like that. 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 started movies in the off season. There were other NFL superstars before
him and even NFL superstars that had gone on to movie careers, but just on a broad cultural basis
across all demographics. Broadway Joe was in.
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 like the first big example where everyone
realized, oh, football totally can be for everyone. Yep. Continuing that thread from earlier,
why I was talking about how CBS had this like hole in their schedule and everyone was skeptical
of sports would fill it. Everyone thought sports were a very male thing and especially sort of
brutish of a sport as football, certainly not in prime time, not even Sunday afternoon slot,
because, you know, it's going to attract the husbands. And Joe Namath is the first big
example where everyone realized, oh, football totally can be for everyone.
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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 for the next year. So it gets pretty crazy. At one point, the NFL
starts what they refer to as a codename as a babysitting program. This is literally a
kidnapping program where they will send agents to colleges and 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 then 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 mind and that contract is valid in the United States.
I don't care what your draft says. This is the battle front. 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. 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 across the league. And at this point in time,
by the beginning of 1966, the NFL, and in particular 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. We got to tell the story. What happens
next is like a mafia movie. It's 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 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. He's the company man.
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 Texas and Dallas,
got him text SRAM to secretly open negotiations with Lamar Hunt. Lamar at this point has moved
the Texans to Kansas city where they become the chiefs, but they have a working relationship.
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 before it gets out, then like all hell's going
to break loose. And oh, by the way, the number one sticking point for the NFL that he tells
Lamar upfront, they will not consider a deal. Otherwise is that Roselle remains commissioner
of the combined league. So Hunt's like, I think we can work together. 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.
Now you might ask why on the NFL side are Roselle and Shram not going to their counterparts on the
AFL side. They're going right to the owners to Lamar. Well, there's a weak lame duck commissioner
at the AFL, a guy named Joe Foss. And especially as the war and the TV money
start escalating between the leagues, the AFL owners, he doesn't have their respect. They don't
trust that he can be the general to lead them to war against the NFL. So right as the negotiations
start happening at the AFL annual meetings, the owners fired Joe. So the commissioners out on the
AFL side, they decide just like the NFL did with the AFC. Hey, we're about to go to war. Things are
getting serious with the NFL. 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 Roselle and Dallas Cowboys, GM texts Shram. 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.
He is the epitome of a mafia. Don, 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 fired our guy. 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. And 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. A Giants owner,
Wellington Mara, they're like, you're throwing this all away over a kicker. So the owner of the
Colts, the quote that is attributed to him. 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 bill's 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 bill's 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
off season until they 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 an action.
This is not the time to speak. I want to steal that word for word for something in the future.
So great. So his first reaction, like any true mafia, Don, is 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, uh, you know, a fish wrapped 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 Roselle'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 gotta escalate.
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 this is where again, the NFL makes another tactical error.
They don't respond to that. They don't come to the table. Nothing happens.
So a few days after that, Davis does unleash all out war talk about antitrust violations.
He literally 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, like Roselle's very
diplomatic man, you know, he would never do anything like this. He doesn't think this way.
And he 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 ladies like, no, no, 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? The Oilers GM says, yes. Davis sits there again, thinks about it,
and says, fuck 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 dumb ass. 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.
And Lamar's like, Oh, yeah. Okay, go ahead. Right. I'm not being incendiary 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. Yup. They announce 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 of course talk about the antitrust and player treatment.
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
a 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, et cetera, everything.
And by the way, immediately, even before they combine the leagues officially in 1970,
they form AFL films for that three year. 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 negotiation started between SRAM 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. Interesting. That makes a lot of sense.
And I'm like pretty sure of that. If anybody listening to this knows that for sure. I know
that was floated. I don't know if that ended up being in the final deal points, but it's basically
an indemnity that I think is how it got written down that 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 when 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 AFC, 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 rule book. And I was like,
does this exist? Or is this like theoretical? Every year the NFL publishes a 1000 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. I would assume somewhere through NFL enterprises,
you can probably buy a pigskin bound version of that. Yes. 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 Roselle 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. Roselle seeking a way to break the log jam
called his friend David Dixon to see if he knew a North Louisiana congressman on the committee.
For someone as sophisticated as Pete, he was rather naive when it came to politics, said Dixon.
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.
And this is how the New Orleans Saints came to exist. Yes. And there's basically a quid pro quo
where Boggs said that he would pass this law and allow this merger to happen.
Whip up the support. Whip up the votes.
Yes. If there was a implicit promise that Louisiana would get a NFL team, I'm going to
quote this again. Walking up the stairs of the rotunda when the vote looked like a sure thing,
Roselle 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 Roselle 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 result took two giant strides after Boggs
turned around him gently and said, it's a deal, Congressman. You'll get your franchise.
Amazing.
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 this innovations,
all this flywheel and also the repetitive cooperation of the US government.
So once this passes Congress and the merger is approved, remember, it won't actually happen
until 1970, but we're now in the 1966 season. There's this little matter of the world
championship game, this super matter. And this is, again, credit to Roselle and I think his
counterparts, you know, like Sonny and the AFL saw that this was an incredible opportunity.
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 United's game, the greatest game ever
played that that drew 40 million people. And that was much earlier in the TVification 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
re-bid 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 a million dollars 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 one 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 had 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 one,
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 and football at this time, 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 commissioners press conference the Friday before the Super Bowl.
Yep. Which is designed to take the pressure off of the coaches and the players who have been
being grilled all week so that they can actually prepare for the game. 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 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.
That's great. So great. The game itself, the Packers end up destroying the Chiefs,
totally validates all the NFL teams, the game on the field. They had a huge superiority complex.
They were like, the AFL is inferior. They'll never win. How did we let these bozos in our league?
The next year in Super Bowl two, the Packers again beat down the Raiders this time.
And if this were a football podcast, we'd be talking about the dynasty of the Packers.
But 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 one or two. And then the one game we will talk about here, Super Bowl three.
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 WAMO Super Bowl. And so in the league discussions were sort of going on about
it, he proposed Super Bowl. But Pete Roselle hated it. He wasn't serious about it. Like,
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 three, 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 three, the Colts versus the Jets, the old Colts,
Johnny Unitas, the 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 heading into the game. 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 where he said like,
wherever he's the sex symbol, he's like in his swim trunks. And there's just all these pressing
cameras and all these women gathered around him, like staring at him. And it was a moment like it
was all over the, you know, 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 Rosenbloom, the Colts owner is like
totally desolate and he comes up to Roselle. He's sobbing and Roselle's like just like so many
conversations here. He's like, Oh, 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. Everything is about the game on the field and nothing is about the game on the
at the same time. 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. Yeah. 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. The network's 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. There is some realignment of the conferences. So some of the NFL teams go
over to the AFC. The combined contract value, it is now a four year contract combined contract
value 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. So David,
take us to Monday night. Oh, let's go to Monday night. So they got CPS, they've got NBC. Remember
ABC, ABC has been out in the cold for several years now since the AFL signed their second deal
with NBC, which is a real shame because you've got run our ledge 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
Roselle has always supposedly always had the inkling that football and the NFL
would do really well in a prime time 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 prime time is showing shows and news and entertainment in prime time. 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 prime time experiment. Indeed. So Roselle is like, this can work.
And Renard Lage 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 prime time 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 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 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. But 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 prime
time 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 run our religion 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, 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 stalking 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 eight and a half 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 or five, six different games. I only have to produce one and it's nationally
broadcast across all my affiliates. This is amazing. We're 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 US households. That is like literally Super Bowl level. I mean, Super Bowl one 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, the newly combined NFL, they invented more football. They invented revenue.
Amazing. And by this point, the NFL is 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. OK, 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. 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.
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 patent's 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. 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. 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.
Yeah. I thought actually that's where you were going with ESPN. I mean, the theme song is 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. OK, 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.
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 kind of
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. There is one interesting
piece of legacy out of all of this. One of my favorite things in preparing for this episode
is discovering all the pieces of the modern deals that are in place that have been lawyered to high
heaven that have their origin in some interesting logistical piece of how the lead used to work.
I think the way that the rights are cut up today includes highlights as a part of the
Monday Night Football package. Oh, interesting. So the way that the rights are sold today,
one network gets the AFC on Sunday, one gets the NFC on Sunday, Amazon now has Thursday Night
Football, ABC, ESPN, Disney has Monday Night Football. And then of course, there's NFL Sunday
ticket, which is another completely different set of rights. I think the way that ESPN has
the rights to all the NFL footage for SportsCenter is because it is bundled into the rights for
Monday Night Football because that is the origin of highlights. No way. Oh, that's super cool.
Yeah. Because I saw a few times in different legal blogs trying to dissect
exactly how the rights package worked. They kept saying Monday Night Football and highlights.
And I was like, Oh, and that's probably also why ESPN is so invested in keeping the Monday Night
Football package because it gives them so much of the value that they get out of SportsCenter.
Oh, yeah. There's so much more value in that specifically for Disney and ESPN versus any other
bidder. Yes. Interesting. If any listeners know this for a fact or have any more color on this,
I would appreciate it. Acquired FM at gmail.com. Oh, yeah. God, I can't believe we're only up to
1970. I know. Well, the good news is this is the good news. Yeah. Yes. 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 you should have been paying more attention to foreign policy and things like that.
Nixon was a nut in many ways. Yes. 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. I think the Bob Newhart show, this was like a plot line of like they go
to a hotel to watch the game. I've heard about this. Yeah, it was a thing.
So Nixon calls Pete Roselle 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 Roselle,
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 Roselle denied the president,
there is actually legislation that was passed in order to force the NFL's hand in broadcasting
away games locally. And what's so cool, there's an amazing Patons Places episode on this because
Nixon recorded everything in the White House. The White House tapes, the Watergate tapes,
all that stuff like this is on tape. Nixon's conversations directing his staff and Congress to
like appease his whims with the NFL, which was good for the country. It's all on tape.
It's an amazing episode. It was wild. And this is one of the things that Roselle 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. The 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 that Disney Plus came out as a very cheap option. 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 television.
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 Roselle era. There was a bunch of stuff to skip like the USFL and all the teams moving
cities and deflate gate to focus really on the strategic moments that created the conditions
of the NFL's business today. Yep. All of those great stories. But like you say,
don't really contribute strategically to where the NFL is today. So probably the biggest impact
decision that happens during the time may be related to like this continued focus on the
gate. The league first mentality kind of gets broken or diluted with the stadiums that you
referred to along the way, because as all the teams start moving into the Baker stadiums,
they start building amenities into the stadiums and the stadium experience totally changes,
which it needed to as television became primary. 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 all local money. Yes. 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. A lot of the local merchandise sold in the
stadiums is local revenue. And so the teams are making more and more money locally and I mean,
more money overall. So it's all good, but 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 you know, 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.
Okay, so 1993 rolls around. 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.
It puts some stuff in for the very first time. And specifically, the players have been really
mad about something called the Roselle rule in the NFL. And I think this actually does get
legally struck down. It's not literally called the Roselle rule, but you know, he was commissioner and
he sort of stood by it. And it basically prohibited free agency. This is the thing where if a player
wanted to move to another team, the team that they were going to would have to reimburse the
team that they were leaving for a negotiated amount. And so it added a lot of friction
to signing a new player. So it had two practical effects. It hurt the players ability to earn the
most money and it decreased the likelihood that a player would move teams. Right. I think,
importantly, the compensation afforded to the team that was losing the player
wasn't just economic to really draft picks could be involved. Yes, that's right. And so 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. So this
was the league saying, OK, fine, but we're going to make sure that I'm pretty sure it was 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 forty eight point eight percent 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
since it is based on the total revenue. If a team makes a whole bunch of local revenue and the
salary cap is the same between them and another team that doesn't make a lot of local revenue
from a fancy stadium, they're going to have no problem making the obligation that they have to
pay the players close to 50 percent because it's a fixed amount and they make a bunch of gravy
locally on top of that amount. 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 OK 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 forty eight point eight percent of league
average could be 90 percent 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. Yeah. And importantly, this collective bargaining
agreement and the advent of this form of free agency for the NFL, I think was the first CBA
that Pete Rizal's successor, Paul Tagliabue, negotiated. So it really was a new era for
the NFL. Yes. 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 percent in 1994 to 21 percent in 2003
and is over 30 percent 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 function
and 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 upfront,
I'm pretty sure the NFL is the largest single media business in the world, not an aggregate
diversified media business. But 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. Yeah, I looked at that bigger than Marvel bigger than
Lucasfilm. Really? Yeah. 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 dollars
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 dollars, 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, 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 dollars 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 dollar 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. Oh,
I assume player names is actually licensed from the Players Association separately.
It's all single negotiated. I believe it's reported that I think 600 million of the 1.6
goes to the players. 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 fifties, sixties and seventies. 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,
deep and 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 their 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. So shocked. I don't know,
it's very similar to how we mentioned prohibition earlier. Despite alcohol being illegal,
there was plenty of it to be found. And in this example, 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 percent of betting age US 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 US. Variety reports,
81 percent of sports betters bet on NFL games versus just over 50 percent for the NBA and
44 percent 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.
Hey you.
Hey you.
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 percent comes from media.
Most of that is the TV from the shared league revenue. 10 percent comes from general seating,
which is regular plastic seats. Another 10 percent 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. Yeah. 10 percent comes from sponsorship and advertising. And then about
nine percent 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 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 and sepalopathy, which is a terrible brain condition that develops from
the many repeated sub concussive 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 football population, or there's been a bunch of research on this or the NFL players
themselves that there was real long-term mental, emotional 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. I feel guilty enjoying football. I think
a lot of people do. I don't know that that's a super widespread. That's probably a west coast.
You live in a city. You read about a lot of this stuff type thing, but 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. One, there's the direct impact, like you're talking about. And I think you're
right. That's probably limited in the broader landscape of the American media diet. But the
second order effects are pretty large from this. One is what you said about parents
allowing and wanting their children to play football. Certainly the statistics are down.
Now youth football remains robust. College football remains robust.
I don't think youth football remains robust. From 2010 to 12, it declined 5% per year. A lot of the
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. Youth sports are like way down.
So all the feeder systems for all pro sports will be dramatically less 20 years from now than they
are now. And come on, football is going to bear the worst of that. Yep, totally. But I think the
real risk, and this is starting to be shown out in the data, is how are future generations going to
the NFL and football? And if you look at the data, US adults as a whole, 33% say the NFL is their
favorite professional sports league. And that's down like maybe a little bit. And I think basketball
is at like 11%, which is where I got the 3x stat for Americans preferred to basketball. Yep.
Soccer has grown a lot. Baseball has declined significantly in the past couple generations.
But if you look at Gen Z, only 23% of Gen Z say that the NFL is their favorite professional
sports. 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, we can talk much more about the broader context of the NFL and analysis. But
this whole thing was just bad period for the NFL. How do you bury these studies? And 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. The betrayal of trust happened on so many dimensions. But also the timing of this
was really bad. This came out at the dawn of the social media era. Had this happened
during say, you know, the 60s, 70s, 80s, like, of course, what it actually was would be just as bad.
But the Rosel NFL approach control the narrative would have worked so much better.
We would not be talking about this in the same way. But it came out at the dawn of
the social media era. And that really was botched by the NFL.
Yeah, that's a great point. It's like the old playbook sort of didn't work anymore
in the social media era. 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.
I don't think this is true. But there was accusations that the NFL created a crappy
Monday Night Football schedule a few years ago to get back at some of the ESPN commentators for
the way that they sort of were critical of the NFL. And then ESPN ended up actually firing
those people and they said it was for unrelated reasons. But I think the NFL wields a lot of
influence over their broadcast partners and thus over how the NFL is talked about.
A, of course they do be that's bad in and of itself. See, again, the timing on this that
I don't think the NFL understood or was prepared for that strategy would have worked really well
30 years ago. But in the social media era where individuals have Twitter accounts and players have
Twitter accounts and all of those fired reporters have Twitter accounts a lot harder to control the
narrative. Yeah. 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 with any obligation to customers the
way the CEO would or a purview over high ranking executives that they can order to do things.
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 interests 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 tax paying
entities and their own businesses. And so 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 Razzell with the representative of the players at the time they're negotiating
contracts and the players are complaining that Pete Razzell isn't being neutral in these
negotiations. The owners 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.
Yeah, he is acting as directed by the owners, which we should say that direction by the owners
includes the two most important powers granted to the NFL front office by the owners. One,
negotiating their revenue share deal with the Players Association, which is the collective
bargaining agreement that we mentioned with the salary cap, and two, their deal with the TV
networks. And of course, this is their largest expense on the player side and their largest
revenue stream on the TV deal side. But back to Colin Kaepernick. Yep. 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 they were super
competitive. The league as itself and thus all the owners were cowboys trying to make it for
themselves in the world and feel the thrill of willing something into existence. 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
a lot of people in the NFL who understood why he was doing it because 70 percent 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 the NFL never explicitly said that all the owners colluded
and agreed nobody should hire him for taking a knee. But let's be real here. The NFL blackballed
Colin Kaepernick after this 100 percent. 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. Yeah. 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. Like they were the command and the control. We own the message. Players do not
have a voice. And like there was no clear example of this. I mean, to your point earlier,
70 percent of the players are black. The players are the core product on the field. They're
effectively your partners. They make forty eight point eight percent of whatever the league makes,
which makes them effectively an equity partner. Oh, yeah. In the very same way that Warren Buffett
always refers to the government as our large silent shareholders. 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 blackballing him and 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.
Yeah. 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 the Paul Tagliabue era and the
Roger Goodell era. I mean, revenues have gone up. Team values have gone up. Games have gone from
standard death to HD to 4K. But you're not particularly more inspired about what the NFL
has done in all these years. And it's sort of no wonder we wanted to spend less time on it,
because it seems like it's just one train wreck after another in terms of mishandling situations.
I don't know. It's certainly 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
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. 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 felt it was important
to open the episode with that. I feel like I'm a slight apologist for still loving football as
much as I do. I was getting ready to tweet that. Wow. Superbowl one looked really fun thing. And I
wonder if I'm going to take heat for people being like, huh, I wonder if I think less of Ben now
because he really likes football. And that's probably overly sensitive. But the fact that
the thought existed is not good for the NFL long term. And I know that I represent a more left
leaning group of people, which would cause me to ask that question to myself that most people
wouldn't even cross their radar, but not good long term that that thought occurred.
Two things. One, I mean, again, that just reinforces the power of the Lindy Effect to me.
The NFL is just fine and it's 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 as to as big a degree as the NFL won
the TV era, but basketball's on the rise. And related to that as 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 U.S. 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 our NBA episode, I mean, basketball's
entire future growth and current sort of groundswell of popularity is young people
and international. It's the second most popular sport in the world and growing
to soccer very, very rapidly. So the NFL has tried NFL Europe, kind of shut that down,
couldn't get the owners to care about it. This whole 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.
It's a very odd sort of fool's errand at international expansion.
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, clearly the flywheel is no longer spinning faster.
It is still operating very efficiently, but like 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 story lines 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 two million dollars. 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 dollar 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, ends up somewhere in the neighborhood of 100 million a
year going to each school. The SEC deal is kind of a bargain. It's 300 million dollars a year
with ESPN. I don't understand how the whole SEC is worth only 300 million a year when the NFL is
worth 12 billion. But that I don't know, just kind of feels like poor negotiating 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. OK, so that's college
football. 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. They'll
last 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 good business decision,
probably doesn't bode well for the players. But 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 tick tock cycle of, you know, 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 watch 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. So without having
thought about it too much, 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. Both in that over time, regardless of what happened
with the media landscape, the NFL would probably be able to run that strategy and capture more of
the profit pool because there's four major competitors now with Fox on the customer side.
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 direct TV, NBC slash universal, the companies that are buying
the rights are massive combinations that can actually afford to generate any margin.
And I didn't dive into look at like, and I'm not sure that you actually could isolate this
of what are the unit economics of buying NFL rights and then selling a bunch of ads against
them. But I have to imagine they're much worse than they used to be. They have to be. I mean,
with these numbers, like there's no way that they can't ever wrote it. And it's pretty genius that
the NFL doesn't do this themselves, that they rely on broadcast partners, because they've 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, it'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 the packaging 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 NFL PA 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. Yep. 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's so many here that we've talked about.
It's just the NFL's sort of for the greater good mindset, getting them to where they are today,
it's going to be so hard for them to keep taking advantage of that going forward.
There is a very interesting one, which is on a revenue basis, 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.
Well, General Mills is a really interesting one. How much of General Mills business is
generated by advertising time on NFL games? Yeah, that's a great point.
I'm sure a very large percentage. Yeah. 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 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 that I want to throw in. 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 four and a half billion for the average NFL team.
We're not talking Cowboys. We're not talking Giants. If those were to change hands.
Yep. We were texting with our friend Andrew Marks, the lead up to preparing for this episode.
You know, he made the point. 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 to
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 evaluation 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. Oh, all right. Well, to see in a few years,
I think they've reached a plateau. I don't think we're going anywhere north of
eight, nine billion in the near future. Oh, I agree. 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. And we should say too, all this is using a combination of estimated data
from Forbes, but also the Green Bay Packers annual reports. 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 to the more applicable lesson, I think for most people listening, although maybe we've got
some people listening who could buy an NFL team, that'll be cool. Include us in the ownership
group. If so, give us a shout acquired FM at gmail.com. 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 that was only half the picture. 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 a hundred
million social media followers, Instagram alone and the two largest NFL players by social media
following our OBJ and Tom Brady, both of which are in the low teens. So like a 10 X difference.
Isn't 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 take away the player's voice, control the message. And that's also reflective of the
sports themselves, right? Like basketball is a team sport, but like on the spectrum of individual
to team, like football is a hundred percent on the side of team. And then there's just obvious
stuff too. Like NFL players wear helmets, basketball players don't wear helmet, you know,
like it's that's little stuff, but it doesn't matter as a business. NFL is fine. They're
totally fine. Yeah. Well, 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 parody 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, 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 turnout,
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 is a league. Great. They're fine.
But the players aid just the direct endorsements, but 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.
Yeah. 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. Well, I think we need to do a Nike episode at some point.
Agree. This is actually a good place to flip to power.
Awesome. For new listeners, this is the section we do an 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 is 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 Roselle era and 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 was able to. 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 a hundred 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, et cetera. 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? 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. And 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.
Oh man. Gosh, I just thought about the Kaepernick stuff. That's got to be playing into the NFL's
thought process here too. Like they need to maintain healthy government and relationship,
not just government, but healthy political relationships with the current political party,
whatever that is. Yup. That's a great point. 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 kinds 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?
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 and 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 a best break even 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 star 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. I think you could totally make that argument. I mean,
you are making that argument here. It's beyond the scope of this episode, but the number
of sitting US presidents that become deeply enmeshed in the then current activities of the NFL,
it's like almost every single president. Totally. How can you put a price on the fun
of a Super Bowl party or texting about an amazing catch with your dad? 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 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
their present happiness value equations, not economic value. Right. As we talked about these
NFL teams are valued more like scarce speech front 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. Hmm. 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 coworkers than they are against each other,
even for players who were 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. I think this has actually been a great development for certainly the pro game, but
football in general too, for so long, I think it's a hangover from all the college stuff that
we talked about at the beginning of the episode and what football was in this 19th and early
20th century American ideal of manhood and character building. But the opponent was the
enemy. This is war. These are bad people that you're fighting against. No, they are the exact
same as you wearing a different uniform. And I think most of those toxic elements are mostly
gone from the game now, or not totally gone, but way more diminished versus what they used to be,
even when I was growing up. There is definitely finally an acknowledgement that they are
entertainers above all else. There's a good amount of camaraderie among we are here to
put on a show and be in the business that the NFL's business is in. That seemed to be the case
for a couple of decades before the players acted like it was the case. And it almost felt like
they were being taken advantage of, which not that they're not being taken advantage of now,
but at least they seem to recognize what's going on. Well, there was a whole institutional
complex around it that started at Pop Warner football and went through high school and went
through college of like, this game is greater than yourself. And this is about an epic struggle,
good and bad. And like, that's just not the case. Yep. I also think is just terribly tragic reading
about the long term impacts on some of these players. One we didn't even talk about is that
seven players from the Patriots 2001 championship have already passed away between the ages of
35 and 50 and 24 total members of that team are afflicted with symptoms of football brain injuries.
2001 wasn't that long ago. I remember watching that Superbowl for the number of people that got
duped into continuing to play football when if they knew the information they probably wouldn't
have is just massively value destructive. This is like I was talking a little bit earlier,
my own experience playing football. If I had known what I know today,
I would have made different decisions for sure. That era of players and before up until
all this news started coming out and even the veterans at that point in time,
like you got to feel so bad for those guys because you didn't know now everybody knows
you're going to have lots of different opinions, but it's all out in the open.
Like, you know what's going on, but yeah, like 2001, those guys didn't know,
like that's crazy. What did you say? Seven players out of their what, 53,
I think on an NFL roster have passed away. Yeah, I have passed away. Wow.
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, frankly, like for the same multiple,
I'd much rather buy an NBA team than an NFL team. But I'm curious to hear your thoughts
on a bull case for the NFL. My bookcase 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 was my opinion. And of course, we haven't even talked about the sports betting, which is
now legal in the United States, which we don't exactly know the ways that that will occur to
the NFL. But you can be very sure the NFL is going to generate a lot more revenue from legalized
sports betting. Indeed. We shall see on that front.
You know, I just want to say too, like doing this episode, it was really fun. And just like on a
personal note, you know, I've had a, I think probably similar relationship to football with
you over the years, more complicated too, because, you know, I talked about here and 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 all together. And it was
really fun doing this, like re-engaging with the game, re-engaging with all the content around
the game, all the entertainment content. Like it is great. The NFL puts out great content.
The quality of the play on the field is great. There are so many problems around it on so many
levels, but it was just really fun to like rekindle a personal relationship with the game
and with the NFL in particular through this episode. So I think the game is going to be
fine. Clearly the business is going to be fine. Whatever either of us thinks. But yeah,
I'm glad we did this. It was fun. Yeah. All this to say, can't wait to watch the playoffs. I'm
going to have some mixed feelings and some cognitive dissonance, but no doubt I'm so
excited to watch the playoffs in the Superbowl. Me too. You ready for some football? I am ready
for some football. All right. 10 seconds carve out on my end. Go watch the menu. It was a
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 plus, which I know we talked about at the
top of the episode, but it's so good. Nostalgia Lindy effect. It's right there. Go watch it.
It's true. All right. With that, after you finish this episode, come talk about it. There are 14,000
other smart members of the acquired community at acquired.fm slash slack. Got a merch store. It's
not as good as the NFL's, but we're working on it. Acquired enterprises coming soon. Acquired.fm
slash store. And if you're looking for more acquired between now and our next episode,
search acquired LP show in the podcast player of your choice. We just did an awesome interview
and not that our part of the interview is awesome, but she was awesome with Megan Reynolds from
Altimeter on building a capital formation function at an investment firm with that listeners. We'll
see you in the next episode.
