Football season is kicking off! So starting opening day (September 7th) the ADS ARE COMING!
Sponsorships in the NFL are big business, in 2016 sponsorship revenue generated $1.25 billion for the year. That was a 4.3% increase over 2015 despite NFL ratings issues (source). Spread out, $1.25 billion was spent over 256 games in regular season and then playoffs.
Who is spending this money?
Would it be a surprise if I said the beer industry spent the most money on NFL sponsorships in 2016? Led by Anheuser-Busch (BUD), beer companies spent 5.5 times more on NFL properties than the average sponsor during the 2016-2017 season according to IEG research.
The second largest category was the auto-industry with new NFL sponsor Ford (FORD) helping out. Ford becoming the official truck of the NFL.
Here is a list of NFL Sponsors
To give you an idea of the companies sponsoring the NFL.
How does Advertising help these companies?
The 185 million fans of the NFL is the kind of audience that any brand would want to influence. So much so that the NFL can charge big bucks to tap the audience.
- Build Brand Awareness - Any sponsorship is highly visible to the NFL audience and those brands can leverage the fandom power of the country's favorite players, teams, leagues.
- Increase Sales - That brands being sponsored by athletes or teams are highly visible by their fans and those recommendations carry weight
- Drive Brand Excitement - Beyond creating awareness, these brands can utilize the NFL's reach to launch new products or events. Football excites fans and brands can become synonymous with that excitement.
- Reach a New Audience - The NFL has partnerships in 32 large cities (32 teams) plus all over the country. Most of the companies that sponsor the NFL have a national presence and utilize that network to reach their national audience or grow it.
Stock Price too is affected
Researchers at the University of Connecticut published a paper called the "Critical Finance Review" that discovered up to a 127 basis point abnormal return for sponsors of winning NFL teams. They reviewed 3,399 games between 1997 and 2013 studying the stock of stadium sponsors. As of 2013, 62% of team's stadiums in the four major US league sports (football, baseball, basketball & hockey) were sponsored by publically traded companies.
The study found that a stadium sponsor traded 50-80 basis points higher after a win than a loss in the next trading day and that stock increase held over the next few days.
“Outcomes of NFL games could serve as a reasonably exogenous instrument for investor sentiment,” is the conclusion drawn by the researchers, Assaf Eisdorfer, a finance professor at UConn, and Elizabeth Kohl ’15 Ph.D. (source)
They discovered 82 basis points higher for a stadium sponsor win in the post season over a loss when averaged out over six models. Monday night games also generated an abnormal return of 50 basis points higher.
You don't have to be an NFL sponsor to get air time
NFL Sponsors have exclusive rights in the NFL world, but other companies can still run ads during commercial breaks. That's why you'll see Coca-Cola (KO) ads during a Superbowl game even though Pepsi (PEP) is the official sponsor of the NFL.
If you're considering shelling up the millions to run an ad, there's likely a spot. The NFL in 2016 ran nearly 70 (30-second) commercials during the 2016 regular season (source). That is 6 more 30-second commercials or 3 minutes more of commercials than was shown previously in 2008. Source
The future of NFL Sponsorships
The future isn't cheap. Roger Goodell, the NFL Commissioner, went on record saying that the NFL expects to achieve $25 billion in annual revenue by 2027 (source). That means if these companies currently sponsoring the NFL expect to continue to reach the growing 185 million fans of the NFL and seeing a surge in their stock price for game wins, they'll have to pay up big bucks.
Disclosure: I am/we are long VZ, MSFT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: My full portfolio is here: http://walletsquirrel.com/portfolio/