01 Dec 2013
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Faster, Bigger, Stronger: Supersizing the NFL

The world's premier league of spectacle and sport has an ambitious plan for growth. But some formidable challenges—everything from player safety to globalization—are standing in the way.
Re: Jonathan Kraft (MBA 1990); Bob Kraft (MBA 1965); Ben Schlatka (MBA 2005); David Icke (MBA 1994)
by Garry Emmons

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by Garry Emmons

It's December, and outside the weather is frightful in many of America's 32 National Football League cities as teams gear up for the playoff season.

But no matter how adverse conditions may get both on and off the field, the sun always seems to be shining on the NFL. Already reaping some $10 billion in annual revenues, the NFL wants more—lots more. Its goal is to boost that number to $25 billion annually by 2027.

Getting there may not be easy. The league's focus on expansion relies on gaining ground with new US fan segments while successfully entering soccer-first European markets where American football has no grassroots presence. Ongoing concerns include players' use of performance-enhancing drugs and off-field misbehavior and the PR and internal challenges they pose. And then there is the mounting evidence of the game's destructive impact—from worn-out knees to head trauma—on players' long-term health, a complex issue that could affect the league's growth.

In other words, the league has to play both strong offense and stellar defense to achieve its $1 billion-a-year growth-rate goal. But fans can rest assured: The NFL has a game plan.

First and 10

At NFL headquarters in New York, one of the executives charged with growing the league's reach and revenues is Peter O'Reilly (MBA 2002), vice president, fan strategy & marketing. "My focus is on strengthening our year-round calendar for our more than 185 million fans, while attracting new fans as the demographics of America shift," he explains. With a relatively short season compared to other sports leagues, the NFL has scored by developing the off-season draft and scouting combine into days-long, high-powered media events. This could well inspire similar extravaganzas "to bring passionate NFL fans together before the season," O'Reilly says. Guided by its extensive customer research, fan polling, and tracking of fan-engagement data across all its platforms, the NFL "gets smarter every day in terms of what our different fan segments want."

To build up its support base, O'Reilly says the NFL is focusing on and expecting major growth with younger fans (especially ages 6–13), US Hispanics ("more of whom watched the last Super Bowl than the last World Cup final"), and women ("a strong group and getting stronger"). To reach the first two groups, the league has undertaken innovative media deals with Nickelodeon and Univision. "We know," O'Reilly observes, "that other entertainment and sports interests are competing for these groups and that we can never rest on our laurels." Innovation can mean basics like reducing parking and traffic hassles as well as adding perks such as in-stadium-only video, all to improve the at-the-game experience and to keep pace with the coverage enjoyed by fans at home.

To achieve its 2027 target, all existing revenue streams will have to grow, says NFL executive vice president Eric Grubman (MBA 1987). A 10-year veteran of the league, who in 2013 was ranked the ninth most powerful man in the NFL by Sports Illustrated, Grubman says the league must add millions of new international fans; develop new methods of media and content consumption (e.g., mobile, direct-to-consumer); and realize gains through theNFL Investment Fund, its recent partnership with Providence Equity Partners.

Grubman is also heavily involved in the process of investigating whether new markets could support an NFL franchise, with an eye to a new stadium in Los Angeles, a lucrative media market long devoid of an NFL team. Meanwhile, games in England have drawn huge crowds, and three regular season contests are scheduled for London next year. Backed by coordinated media and sponsorship strategies, this is the NFL's new overseas approach after exhibitions and NFL Europa, a de facto minor league, failed to establish a viable Continental presence for the league. Longer term, the NFL will look at London and other foreign markets to determine whether a franchise could be supported.

"Like certain other American pop culture exports, we think we can benefit from the 'cool' aura around our product," notes Grubman. "You don't have to play football to become a fan."

But HBS associate professor Juan Alcacer, coauthor of a case titled "The Globalization of the NFL," forecasts headwinds for the league's plans to expand overseas, especially to Europe. "The NFL has the difficult task of trying to introduce a sport that people don't understand, into cultures where soccer is an obsession," Alcacer notes.

"For MLB, the NBA, and the NHL, the globalization strategy was to bring in stars like Ichiro Suzuki, Yao Ming, or Alex Ovechkin who were products of countries where those sports were already widely popular and enjoyed high-caliber infrastructure and player-development systems. The success of these star imports to North America created demand back home, and globally, for their TV broadcasts and team merchandise, boosting not only the North American leagues' revenues but also the exporting countries' infrastructures. By contrast, to establish solid franchises overseas, the NFL has to create a supply of foreign homegrown players and support systems in order to build the local, passionate fan base needed for financial success."

As for the promise held out by its foray into private equity, Grubman notes, "We're leveraging on Providence Equity's investment scale to invest in businesses we understand and where we can add value. For example, we have looked at investments in ticketing platforms and event hospitality. These are large industry segments that depend on the NFL."

Surveying the league's 32 franchises, Grubman observes that each has arguably become a global brand in its own right."The size and complexity of the local franchise as a business has exploded in the past 10 years," he says. "It is a critical component of league strategy to develop 32 franchises that are strong in their markets and appealing as national and international brands."

One such mega-franchise is the New England Patriots, led by owner Robert Kraft (MBA 1965) and his son Jonathan (MBA 1990), the Patriots' president. Winners of three Super Bowls in this century, the Patriots are said by Forbes magazine to be worth $1.8 billion. Robert Kraft, whom Sports Illustrated recently declared is the second-most powerful person in the NFL after the commissioner, has been instrumental to the league's success as well, particularly through his leadership of the league's broadcasting committee and the securing of lucrative TV contracts, and for helping forge peace between players and owners during heated labor negotiations in 2011.

Goal to Go

While expanding its fan base and finding new markets are the keys to the league's offense, it also has to play defense internally and in the public spotlight. Along with reports of players' pharmacological and off-field transgressions (behaviors also found in other professional sports leagues), the NFL has had to address new medical research into football's deleterious health effects on players, so it can ensure that the game continues to thrive.

With research (some being financed by the NFL) and understanding still in their early stages, the issue of concussions in football has become a paramount concern, with recent findings suggesting that traumatic brain injuries can induce lasting cognitive disabilities and degenerative neurological conditions. (In one of several such tragic incidents, in 2011, 10-year NFL veteran Dave Duerson (OPM 30, 2001)—who had been suffering from a deteriorating mental state—instructed his family before committing suicide to request that his brain be used for research into the links between concussions and dementia. Researchers later found that Duerson was suffering from the degenerative brain disease chronic traumatic encephalopathy, thought to be the result of hits from his playing days.)

The issue has already affected every level and corner of the game, with the NFL prominently committing itself to player safety. Rules have been changed to that end, as with advancing the spot of kick-offs to reduce the number of runbacks and the huge collisions they produce. (This season's all-star game, the Pro Bowl, will have no kick-offs after touchdowns, one of several changes driven by Domonique Foxworth [HBS 2015], president of the NFL Players Association.) New technology, equipment improvements, and reduced-contact practices may also help. In addition, enhanced safety could come from changes in blocking and tackling rules and techniques.

The NFL seems well aware of the potential ramifications if the player-safety issue is not resolved satisfactorily. "At the NFL level, it's a priority to make the game better and safer through rule and equipment improvements," O'Reilly declares. He speaks proudly of his role overseeing the league's corporate responsibility initiatives, including Heads Up Football, a partnership with youth-sports organization USA Football, that teaches youngsters how to play the game safely. ("See what you hit, keep your head out of the play" is the new mantra.) "We know that great change can happen by impacting the next generation of players," O'Reilly notes. "There are 10,000 youth football leagues across the country, and our goal is that all coaches be certified and that each league has a designated player-safety coach."

Despite such steps, inadvertent head blows and hard contact with the ground remain inevitable. Newly emerging research suggests that even sub-concussive blows, in their aggregate, can over time be as damaging as a string of concussion-level hits. And NFL team reports suggest head injuries may actually be on the increase.

This new research push underlies a class action lawsuit against the NFL, recently settled for $765 million, pending a judge's approval. The plaintiffs included more than 4,500 former NFL players, for whom an average career, their union asserts, lasts less than four years (the league disputes that). The players claimed the league deceived them about its knowledge of the severity and scope of football-induced concussions and head trauma.

"There's a fine line with violence in football," says former linebacker Isaiah Kacyvenski (MBA 2011), who suffered his share of head and other injuries during his eight-year NFL career. (See "A Source of Power" below) "Football can't be seen as grotesque, with mangled bodies tortured over time. For all of us—the league, its players, and its fans—who love the sport, the solution is not to take away the game of football but to work together to make it safer."

Meanwhile, questions remain. What will happen to the fan base and talent pool if worried parents (including former NFL players) increasingly discourage their children from playing football and point them to other team sports that are relatively collision-free? How will die-hard football fans in the United States react if safety concerns and rule changes create a watered-down, less-attractive product on the field? And will new overseas markets—as well as possible partners and competitors—be receptive as the NFL seeks to make inroads among well-established sports audiences on their home turf? And what about all the other non-football diversions and entertainment options vying for fans' attention?

The National Football League believes it has a winning game plan. In the end, however, the outcome of the league's drive for growth, like the outcome of the NFL's slate of games on any given Sunday, is anybody's guess.


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