The effects of NFL revenue loss

The Covid-19 pandemic has had a huge impact on every aspect of our lives, and the world’s economy. The effect has been particularly pronounced in the hospitality and leisure sectors.

For instance, casinos across North America have had long spells of closure and many stringent conditions have been applied when they have reopened. And while many customers of casinos and hospitality businesses have moved online, where it has still been possible to play games through online payment-funded sites such as Interac casino Canada and others, in some sectors this is not an option.

The NFL is one of the most significant examples of a multibillion-dollar organization that has been hit by Covid-19. According to some reports, NFL teams combined may have missed out on as much as $4bn during the 2020-21 season, due directly and indirectly to pandemic restrictions.

Those figures were in line with initial projections made during 2020 that the cost of the pandemic could be as much as $100m for each of the 32 organizations in the NFL.

The majority of the losses were caused by reduced game turnout. In-person attendance at NFL games was under 1.2 million, plummeting from around 17 million in a regular season. Due to a drop in ticketing, box income, food, beverage, parking and corporate sales, almost all NFL franchises ended the season up to $100m down on where they would usually expect to be. That dramatic drop had consequences, one of the most noticeable of which was the drop in the salary cap.

Salary cap cut

The National Football League officially set the salary cap for this current 2021 season at a significantly lower level, stating that each team would have $182.5m cap space to spend upon player wages, down roughly 8% from 2020. The salary cap in 2020 reached $198.2m, a new high for the league.

This decrease in the NFL cap was predicted, and franchises had time to adjust to it. Despite this, NFL teams had about $16m less in funds to pay their players in 2021 than in 2020, which undoubtedly affected how general managers deployed their more constrained budgets.

The return of fans to stadiums for the 2021 season and an upturn in NFL income means that the next salary cap will be significantly higher. For 2022, it should be around $208.2m, a new high, and the effects of veering from a lower cap to a much higher one will be felt for many seasons to come, and could lead to some unexpected changes in the pecking order of the league.

Longer season

The Covid-19 virus had another important effect: with a new extended regular season, NFL owners authorized the inclusion of a 17th match this off-season, marking the first substantial regular-season calendar alteration since 1978.

The adjustment took a year to come about, as the freedom to increase the season was included in the preceding Collective Bargaining Agreement, but while it had been predicted for many years, the lost revenue due to the pandemic undoubtedly encouraged owners to act, thus changing the structure of the regular season in a significant way.

Recovering revenue

Yet the global phenomenon that is the NFL remains a robust product in the US market and while the 2020/21 losses were significant, the bulk of the franchises’ income is through broadcast rights deals, which were not affected by the absence of fans in the stadiums.

Revenue from that source is also likely to increase over the coming months as several new contracts are signed that will ease some of the financial pressures on franchises.

During the next few years, the revenue from such transactions is anticipated to expand by between 50 and 100%, providing a windfall that would likely increase the pay cap dramatically in future years. ESPN’s deal to show Monday night matches and Fox’s contract to air Thursday night contests both automatically expire when the 2021 season ends. In addition, following the end of the 2022 season, the league’s existing deals with CBS and NBC, as well as other broadcasters, will expire.

Summary

The NFL took a hit in 2020 and has been dealing with the fallout throughout 2021. Some of the effects of the loss of revenue, such as the yo-yoing salary cap and the extended season, will be felt for many years to come. Yet in coming through what we hope is the worst of the pandemic and rebounding so successfully in 2021, the NFL has shown remarkable resilience and should be able to recover fully over the next few months.