Josh Harris purchase of the Commanders — an NFL franchise with huge upside opportunity

Forbes recently published an article summarizing the revenue earned by the NFL for the 2022 season. The article said that the league achieved an all-time high of $11.9 billion in national (equally shared) revenue, which was 7% more than in 2021. Of course, each team has revenue from other sources, but, as Forbes points out, the national revenue — which accounts for roughly two-thirds of all league revenue generated — is very significant.

The league’s 32 teams each took in $372 million from national media rights, league sponsorships, merchandising and licensing. The biggest chunk by far came from the NFL’s national television deals with ESPN/ABC, Fox, CBS, NBC and Amazon which totaled $249 million per team, according to league sources. Amazon began its exclusive 11-year, $13.2 billion Thursday Night Football streaming deal with the league last season. Also included in the $372 million is DirecTV’s Sunday Ticket, which averaged $1.5 billion a year.

The NFL’s national bounty will increase again this year as the major networks start their new long-term deals and Alphabet’s YouTube takes over Sunday Ticket from DirecTV at an aveage of $2 billion a year, 50% increase.

National revenue has risen annually for years; on a per-team basis, the figure was $188m in 2013. At $372m in 2022, this amount nearly doubled over the course of the past decade. Business is indeed booming in the NFL!

As mentioned, national media comprises about 67% of the league’s total football-related revenue. According to the Forbes article, teams earned an estimated $200 million in revenue from non-NFL events such as concerts at their stadiums. When it’s all added together, Forbes says that the NFL “likely surpassed $20 billion in revenue, before deducted revenue used to pay down stadium debt”.

As many fans are aware from media reporting, Josh Harris is the general partner of a group of investors who are poised to complete the purchase the Washington Commanders franchise in the coming days, though a report from the Washington Post today cast some doubt on whether the issue of Dan Snyder’s demand for indemnification may threaten the smooth and timely completion of the sale.

At this point, it is unknown whether the reported indemnification issue will delay or threaten completion of the sale, though the fact that Dan and Tanya Snyder have already relocated abroad strongly indicates that the sale will be completed sooner or later. The Washington Post article offered some detail about what the sticking points may be:

According to [one source], part of the complication relates to Snyder’s sister Michele being unwilling to agree to indemnification of the other owners from legal liability in the Gruden case. Michele Snyder is a part-owner of the Commanders, and all limited partners must agree to the provisions in the sale agreement. That person also said Daniel Snyder no longer is willing to sign an affidavit that he did not leak the emails that led to Gruden’s resignation, after previously being willing to do so.

According to a person familiar with the communications between the Commanders and the NFL, the team’s view is that all of the Commanders owners “have agreed to indemnify the league for any damages arising from the actions of the owners and the team.” Such an agreement, however, would not necessarily apply to the actions of Goodell and Pash.

While the issues are not insignificant, it seems unlikely that a $6b sale that has progressed as far as this one has will not be completed. Washington fans probably don’t have to fret that the deal — several months in the making — will fall apart over these late-hour maneuverings. It seems all but certain that Josh Harris and his partners will become the new owners of the Commanders in short order.

Several months ago, Josh Harris put together a prospectus in an effort to raise funds from limited partners in his quest to purchase the Commanders from Dan Snyder — a transaction that is subject to a ratification vote by 31 NFL owners on the 20th of this month (next Thursday). That prospectus summarized the national media deals; the summary from the prospectus was visual and highly informative, including comparisons to other major North American professional sports leagues at the bottom of the graphic.

Harris and his partners believe that the Commanders represent a distressed asset with substantial upside. Back in May, ESPN reported many of the details from the Josh Harris prospectus:

According to a prospectus prepared by Harris Blitzer Sports & Entertainment and its advisers and obtained by ESPN, Harris predicts that the removal of Dan Snyder as owner will boost attendance, ticket sales and sponsorship revenue, as well as the team’s prospects for a new stadium.

The ESPN article went on to provide some interesting detail. The first issue addressed was the likelihood of governmental support for a stadium deal, and in recent weeks there’s been a notable uptick in positive reports about renewed efforts by local authorities to jockey for position to strike a deal with the Harris group with respect to the next stadium.

The prospectus was bullish on the overall outlook for the Commanders franchise.

Last season, the Commanders made $173 million in local revenue — dollars generated from tickets, sponsorships, parking and other team activities, according to the prospectus. In his base estimate, Harris projects that number will more than double to $380 million by the 2031-32 season — and could hit $466 million that year if the team builds a new stadium.

“The Commanders historically ranked top in the league across all local revenue metrics and attendance. However, the team has significantly spiraled as a result of allegations against current ownership,” the prospectus states. “As ownership changes, we see opportunities to substantially drive local revenue and bring the team back to a top NFL market.”

Gate revenue, which has fallen by an inflation-adjusted two-thirds since 2008 to $58 million last season, is projected to rise to $127 million by 2031-32, according to the base estimate in the prospectus. In this outlook, the team’s total revenue, which includes dollars from media rights, would soar from $545 million in 2022 to $959 million in 2032-33 — or $1.05 billion with a new stadium.

Of course, the new owners are not expecting the fans to just magically return to the scene of the last quarter-century of crime. The investment document makes it clear that Josh Harris understands that he needs to spend money as part of reestablishing trust with the fan base, and that he can’t wait several years for the new stadium to improve the fan experience. Per ESPN:

Harris estimates spending about $88 million to “help establish ownership’s commitment to fan/player experience” — including for new videoboards and a locker room update — and says the group is assuming the need for $100 million for “immediate structural repairs” and maintenance to FedEx Field. Harris also estimates spending $43 million to upgrade loge boxes and suites. The document cites that under Harris, the 76ers climbed NBA ticket rankings from 27th in 2014-15 to fifth in 2021-22.

The ESPN article details other revenue opportunities as well. One of the most significant is stadium naming rights, which the article claims could be worth as much as $30m per year. The article also discusses the high-value real estate that Harris takes over with the purchase, as well as future revenue streams related to sports betting, which seems to offer nearly limitless potential.

All in all, while Josh Harris is paying a record-setting $6.05 billion price for the distressed asset that is the Washington Commanders, he is buying into one of the most lucrative businesses in the world, and one that has history of sustained growth and success.

With what appears to be a rubber-stamp vote just over a week away, Josh Harris is about to add a substantial new investment to his sports portfolio, and expand his presence in the exclusive club that is NFL ownership; it’s good work, if you can get it.