Posted by John Vrooman on Monday, February 5, 2018 in National Football League.

Interview with Philadelphia Biz Report. 

I am hoping to get a comment from you on what (finally) winning a Super Bowl will do for the valuation of the Philadelphia Eagles.

In the short run, NFL values are a simple function of market size and the certainty of cash flow from luxury seat cash cow venues.

The Eagles are ranked 10^th in club value and so they are valued at about $2.65 billion which is roughly 60 percent (Rank ^-.25) of the NFL’s most valuable Dallas Cowboys franchise at $4.8 billion. (Forbes values are usually slightly below market value).  

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The difference between the top and bottom values of the NFL clubs is much smaller than other major sport leagues because of extensive revenue sharing (two-thirds of NFL revenue is shared equally) and the relative certainty of franchise cash flow (much like a perfectly diversified stock portfolio). A new luxury venue can alone increase value by 25 percent to 30 percent.

Given the relative recent performance of the Eagles and Cowboys teams it is easy to see that the difference in franchise value has more to do with the cash flow of Jerry’s World compared to the Linc than the actual quality of the teams between the lines—in the short run.

Winning in the short run, like an isolated one and done SB victory, could increase the franchise value, but only if it solidifies the certainty of the season-ticket corporate ticket and sponsorship base. Most evidence suggests than winning in the short run is largely an insignificant fleeting factor unless it translates into a consistent sustained long-run winning tradition or reputation. So the Eagles need to keep on flying to increase in value relative to the rest of the League.

The arch-rival Cowboys are a perfect but twisted example of the most valuable sports franchise in the world fielding a mediocre .500 team since 2000. Also consider the second most valuable New England Patriots who have built this cap-defying dynasty since 2000. Ironically, the Patriots were the least valuable NFL franchise at the beginning of the salary cap era in 1994.

Here is my estimate of the variation in rich and poor NFL values by market size. The redline distribution is flatter than other sports leagues because the NFL is a revenue sharing syndicate.

These value estimates are straight from Forbes:

The red line in this graph indicates the variation in franchise value with respect to market size in terms of #TV households. The clubs above the line have a winning rep while the clubs below do not. The Eagles’ value is neither helped or hurt by their winning tradition because they are on the line. In 2015 there was a major division of the League above (9 clubs) and below the threshold of $2.5 billion in value.

This is a multiple regression equation where the magnitude of the Win% coefficient (B) measures the significance of winning on value creation over periods of different lengths (shifting the red line up or down in the above graph) . The TVHH coefficient indicates the relationship between value and market size (the slope of the red line in above graph).

Value = Base + B (win%) + C (TVHH)

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