by Nick Goggans
Almost no industry will be left untouched by the growing use of big data. Sports is a prime example.
Big data is disrupting nearly every industry. From banking to retail to sports, the power of numbers and analytics at scale is truly revolutionizing marketing, advertising and overall enterprise valuations. In the sports industry, an industry long obsessed with statistics and data, this data-driven revolution is raising some serious questions about how exactly current valuations are determined. Here, we’ll look at both the NFL and global soccer organizations to get a good idea of who is currently worth what and where the problems are in such thinking. You’ll quickly see that current standards of measuring don’t add up, and that an economy-wide move toward data-driven decision making will soon change the financial aspect of these games – for the advertisers who want to reach their fans, at least.
To begin, a quick question for you: how much should you pay to put your logo on a footballer from one of the top ten teams globally? Yes, you can look at market comps; but just consider you can’t for a moment. What are you buying and what data supports this?
For large corporations, a significant portion of growth is global. So global reach should be a priority for organizations. That said, how does sport sponsorship play into these efforts? How do changes in the global consumption of media possibly affect the present market in sponsorship?
Let’s begin with a rudimentary review on some of the recent Forbes data and simply run some comparisons on the NFL versus the top 20 international soccer teams.
Digging Into the Data
Let’s begin with a quick analysis of the NFL data. Forbes gave an analysis of the 2013 gross revenues and then posted a larger valuation calculation based on their analysis. What is interesting is the consistency and high value on the multiple of gross revenue, which for the top 20 teams averages a 5.19x multiple on 2013 gross revenue over a high / low of (6.08 / 4.42). The top 5 teams average at 5.85x.
We can conjecture and debate on what causes these valuations to be so large, but it’s likely about the consistent broadcast revenue licensing deals. The flat valuations across teams is also indicative of the revenue sharing in the league, so that particular teams in good media markets aren’t too far ahead from others (i.e. Green Bay vs. New York City).
The NFL’s Top Five Teams (in terms of gross revenue and multiple)
- Dallas Cowboys ($3.2 billion valuation / $560 million 2013 gross revenue / 5.71x multiple)
- New England Patriots ($2.6 billion / $428 million / 6.07x)
- Washington Redskins ($2.4 billion / $395 million / 6.08x)
- New York Giants ($2.1 billion / $353 million / 5.95x)
- Houston Texans ($1.8 billion / $339 million / 5.46x)
Average Top Five NFL Franchise: $2.4B / $415m / 5.85x
Average Top 20 NFL Franchise: $1.6B / $322m / 5.19x
The Top Five Money Teams in Soccer
Now to contrast, let’s review the top 20 global football, or soccer, teams. In this case, we see much more volatility, which accounts for the independence of each team but also much lower valuations as a whole. The gross revenue is generally higher.
- Real Madrid ($3.4 billion / $675 million / 5.1x)
- Barcelona ($3.2 billion / $627 million / 5.1x)
- Manchester United ($2.8 billion / $551 million / 5.1x)
- Bayern Munich ($1.85 billion / $561 million / 3.3x)
- Arsenal ($1.3 billion / $370 million / 3.6x)
Average Top 5 Soccer Franchise: $2.5B / $557m / 4.44x
Average Top 20 Soccer Franchise: $1.0B / $350m / 3.0x
What may be interesting is how little value the soccer franchise gets for their conceivably larger audiences. Sponsors have proven, as in the case of GM’s sponsorship of Manchester United, that they are willing to pay significantly for the global reach of a top tier football team (particularly in Asia since Chevy has pulled out of the EU). GM paid $559 million to reach 659 million fans globally. With a global reach that is over twice the size of the United States, why isn’t Manchester United valued more than every NFL team? And why are the second tier teams considered less valuable than their NFL counterparts?
Here’s another question that should be addressed with the GM sponsorship — what did they actually pay for? Is the brand affinity equal across these global fans? Are the Asian fans also United loyalists, or are they fair-weather fans who might instead be supporting Manchester City? How do they measure the adjusting swings in this audience? This is not to say GM overpaid — in fact they very well may have significantly underpaid. But using just the “global reach” metric and television rating projections, it is impossible to tell.
At the end of the day, teams and leagues do not know their audiences as well as they could. In a broadcast world, you let the networks, advertisers and maybe some focus groups and surveys define your audience demographics and composition. They are so much more now than mere demographics. But as the relationship of fans is growing well beyond the blast radius of the stadium, the key to increased revenue must come from a franchise building its membership directly and at massive scale.
Let’s consider a quick review of some digital fan data of some of these top teams.
Facebook Fans (of top five NFL and top five soccer teams) from August 2014
Ave Top 5 NFL: 3.8 million
Ave Top 5 Soccer Team: 49.9 million
- Real Madrid – 71.6 million
- Barcelona – 73.4 million
- Manchester United – 56.2 million
- Byern Munich – 19.8 million
- Arsenal – 28.2 million
- Dallas Cowboys – 7.2 million
- New England Patriots – 5.2 million
- Washington Redskins – 1.6 million
- New York Giants – 3.5 million
- Houston Texans – 1.6 million
If these are indicators of a digital audience, how might this also impact potential on valuations and revenue gains?
We are not saying that NFL franchises are over-valued — in fact, the recent purchase of the Clippers for $2 billion would suggest that they are quite undervalued — but rather that there might be a significant gap between the metrics we use to value these teams and their actual value (in terms of commercial and broadcasting potential).
And what about individual athletes? Why does Cristiano Ronaldo only make $28 million in endorsements as he is approaching 100 million Facebook followers (more than any team in sports)?
Right now, our company is focusing on continuing to research and refine how to bring fan data into the equation of valuations. We also want to reduce risk to sponsors by ensuring their brand is getting the highest value association with its partner — and with ways to measure impact over time.
A version of this post originally appeared on the author’s blog.
Nick is the co-founder and chief strategy officer at Umbel, a data rights management platform that helps companies ethically and securely own, control, and access consumer-centric data.