The NFL has reportedly agreed to a deal with Disney for significant parts of NFL Media, a process that spanned more than half a decade and appears likely to involve multiple facets—live game rights, NFL RedZone, a cable channel and, according to CNBC, up to a 10% stake in ESPN. That equity alone could be worth around $2.4 billion, based on analysts’ valuations.
The deal’s structure will likely inform how much NFL players share in that haul. Typically, money earned from equity investments made by owners isn’t shared under the league’s collective bargaining agreement. Commercial deals, such as the NFL’s billion-dollar TV contracts, however, are shared—making up a large portion of the NFL’s roughly $280 million annual per-team salary cap. So, which is this?
The NFL declined to comment on the ongoing talks, but it has been preparing for this eventuality. During the last round of labor negotiations with the NFLPA in 2020, the league pushed new language that more clearly delineated what gets shared in the event of a sale like this. At the time, league leaders were already considering the possibility of unloading—or seeking outside partners for—its media arm, though the NFL wouldn’t formally hire Goldman Sachs to assist with the process until the following year.
Article 12, Section 1(a)(i)(11)(B) of the CBA is “intended to clarify and set forth the principles to govern the sale of a current or future owned-and-controlled NFL business.” It says proceeds from the sale of an NFL-owned business “(e.g. NFL Films or NFL Network)” would not be shared with players. However, players would continue to receive a cut each year equal to the “fair market value” of the game rights changing hands. In this case, that would likely include a mutually agreed-upon worth for seven exclusive regular season games and NFL RedZone’s whiparound access.
That’s just a piece of what’s being discussed. This all gets more complicated when other assets—such as NFL.com’s fantasy business—are considered, depending on what ESPN ultimately takes ownership of versus what it gains license to in partnership deals. The more elements the NFL retains ownership of, even if ESPN becomes the sole distributor of those offerings for a number of years, the simpler it likely becomes for players to continue receiving a portion of related revenue. The terms of the CBA expressly say that revenues “arising from operation of NFL-affiliated entities” are to be tabulated in revenue-sharing calculations.
Other accounting factors for both Disney and the NFL could play into how the tie-up ultimately comes together. In total, the agreement—which would also probably require regulatory approval—is expected to be complicated. A representative for the union declined to comment on how the organization views a potential ESPN deal’s impact on dollars shared with players. ESPN declined to comment on the state of talks, though an update is expected as soon as Wednesday morning, when Disney executives will speak with investors.
Money is one of the principal tensions between the NFL and its players. That includes what gets shared under what the two sides call “All Revenues,” or AR. That topline figure informs the player share, currently just a shade under 50%. It also helps calculate the salary cap.
But despite its name, All Revenues is not actually all revenue associated with the league. NFL owners bring in other money that is explicitly not shared. Money made from a Beyoncé concert held at MetLife Stadium, the $1.6 billion venue co-run by the New York Giants and New York Jets, doesn’t trickle down to players. Neither does income from mixed-use developments owned by teams around their stadiums. Expansion fees also fall outside of money shared with players, something WNBA stars have pushed to change in their own labor talks. Increasingly, sports leagues are generating revenue from beyond the basic categories of media deals, gameday offerings and merchandise. In a series of transactions, MLB ownership previously sold its advanced media operations to Disney for $3.8 billion. That technology now underpins the ESPN app, which Disney is hoping to bolster with new NFL assets.
In 2013, owners created a venture fund that also does business outside the cap, originally seeded with $1 million from every franchise. Owners have added millions more since. 32 Equity makes strategic investments in businesses that might also benefit from the popularity of American football and the NFL’s success. The money invested is entirely from the owners, who both assume the risk and reap the rewards. 32 Equity investments include Appetize, On Location Experiences, Fanatics, Hyperice and Nobull.
That’s different from another type of equity offering held by the NFL. As part of some of the league’s commercial deals—where companies pay the league for rights of some sort—the NFL has received equity or warrants. The league’s 2006 licensing deal with Under Armour, for example, included warrants to purchase up to 480,000 shares of stock. The league’s 2003 deal with SiriusXM included warrants for 50,000,000 shares. More recently, the NFL’s 2021 data partnership with Genius Sports included 22,500,000 warrants that were worth $450 million at the time of signing. That deal has since been extended, with more equity options added.
Those commercial deals are all shared through the cap via non-cash accounting, according to a source familiar with the process, as laid out earlier in Section 12 in the CBA. The warrants are priced at fair market value on the date of vesting and amortized over 10 years. If the equity instrument is sold before the 10-year period is over, “All Revenues” for that year will include the proceeds minus what was previously recognized.
A movement of NFL Media assets could have elements that fall into both categories (equity investments and commercial deals). On one hand, owners have funded NFL Network’s operations, and the new CBA language that foreshadows any future sale of an NFL-owned business was pushed by owners to ensure they could capitalize on the risk they bore in starting and backing the business. On the other hand, the deal includes significant NFL rights, and NFL Network revenue to date has been shared with players. Plus, it’s hard to imagine Disney and ESPN being interested in this tie-up at all if not for the company’s long-standing Monday Night Football deal.
There is potential precedence for this deeper ESPN tie-up featuring some revenue aspects that get shared with players and others that owners retain completely. Certain companies in the 32 Equity portfolio also have commercial deals with the NFL, which the league has kept separate. Fanatics, for example, was a league licensing partner long before owners invested in 2017, and continues to be. On Location had a similar two-pronged rights-and-equity relationship. Even after this years-in-the-making deal is done and announced, conversations between the league and its players could pick up over how the financial benefits will be divided.
