How the NFL Turned the Super Bowl into a Money Machine

Image

Peter Casey-USA TODAY Sports

Super Bowl 50 is expected to draw a million visitors to the San Francisco Bay Area this week, making it a financial boon — and a logistical headache — for local economies. For a business perspective on America’s Big Game, we sat down with Stanford Graduate School of Business professor George Foster, who pioneered the school’s program in sports management. Ten years ago, Foster wrote a case study on Super Bowl XL; now he’s following up with another study to see how the event has changed. Here he explains how the NFL turned 60 minutes of gridiron action into a marketing juggernaut, how host cities benefit, and who really wins when it comes to the bottom line.

As a commercial enterprise, the Super Bowl is a tremendous success story. And it seems to get bigger and bigger every year.

Absolutely. Fifty years ago it was, well, a football game. But as the pageantry grew up around it, it became a day-long event. Then it ballooned to four days by the 1990s, and now we’re up to 10 days of activities — parties, receptions, concerts, media days, a fan village, appearances by players who aren’t in the game, and so on. It’s like a pop-up theme park. And most of those events are sponsored. Corporations spend enormous sums to be associated with the Super Bowl, and in the process they build the Super Bowl brand itself, making it even more valuable. The league has really managed this well. There’s this huge ecosystem that’s grown up around the game, largely fueled by other people’s money. In the process, it’s evolved from a sporting brand into a sports-entertainment brand, and really now an entertainment-sports brand.

Where the entertainment comes first?

Right, because now it’s this whole tapestry of events. For Super Bowl 50, companies put together weeklong entertainment packages for their clients with lavish parties and trips to Napa for wine-tasting and jaunts down to Pebble Beach for golf — the ability to offer perks like that is now a big criterion in selecting host cities. Some of them get tickets to the game, maybe in luxury suites, but quite a few people will fly home Sunday morning to watch it on TV. Then there’s this whole unreal phenomenon of people intentionally watching the TV commercials so they can be in on the conversation about which is the best ad. Even if you’re not a sports fan, you don’t want to be left out. It’s all part of this mega-event.

With that sprawling ecosystem, there are a lot of ways for things to go wrong. Is there a risk for the NFL in this business model?

If companies want to use the official brands and team logos for an event, they have to apply to the league and pay for it, and that gives the NFL a certain degree of control. But then you get third parties who want to capitalize on it with non-sanctioned events — the Playboy party (at AT&T Park, tickets starting at $1,250) is an example. There’s a whole host of these things where stuff can happen that’s not exactly on-brand. But even with just sanctioned activities, the sheer complexity and the number of constituents makes all this an enormous management challenge.

Who’s responsible for making it a success?

The responsibility is shared, but the local host committee does a lot of the coordination and serves as a liaison with city agencies. As the Super Bowl has grown, the budgets of these host committees have grown increasingly large — you’re talking about hiring top-level people in event management for several years. But again, that’s not a cost to the NFL; the host committee has to get its own funding.

What are some of the main issues they’re concerned with?

Security has become a big issue after the attacks in Paris last November. The percentage of the host committee’s budget going to monitoring, preventive actions, and so on has really increased. And then as far as boots on the ground, that’ll be the local police departments. The cities pay for that.

For Super Bowl 50, news outlets reported that Santa Clara had gotten the NFL to defray some of its security expense while San Francisco didn’t. How do cities cut a good deal with the NFL?

Cities that expect the NFL to pick up the tab will learn very quickly that that’s not the business model. From the league’s point of view, the cities benefit from brand enhancement and added revenue from all the visitors. By hosting a Super Bowl, they get to showcase themselves to the rest of the world. In turn, the league expects them to provide the necessary infrastructure and logistics.

Basically, the NFL has all the power here.

Look, the NFL has something unique that everyone wants a piece of. They’re a very strong negotiator, and they look after their brand very well.

What’s the bottom line? Is it a good deal for the host cities?

Image

Stanford GSB professor George Foster studies the economic impact of mega sporting events like the Super Bowl. | Courtesy

I think it’s pretty clear that this Super Bowl is a solid economic impetus for the San Francisco Bay Area. The NFL has been really smart about this; they’ve avoided the mistakes the Olympics made. You’re seeing a lot of cities withdrawing from bidding for the Olympic Games now because the infrastructure costs are so high. Athens basically went bankrupt. The NFL will only award the Super Bowl to cities that already have the infrastructure in place, so it’s not imposing capital costs on the city.

Is the hope of attracting a Super Bowl part of the calculus when cities pony up to build a new stadium?

It depends. That was clearly on the table when New York built MetLife Stadium. The NFL didn’t guarantee it in writing — the decision is ultimately made by a vote of the team owners. But I think there was an understanding. Certainly, the NFL wants teams to stay at the forefront in terms of facilities, because it reflects on the league’s brand, and the Super Bowl is one of the carrots it can dangle. But it also offers very favorable loan supplements for stadium construction. The truth is, there’s an increasingly small number of cities that can host this mega-event. It has to be a large city, and it helps to be in a place where people want to spend 10 days in the middle of winter. The more opportunities you can provide for sponsor engagement — golf, outdoor venues, an attractive setting, that sort of thing — the better your chances.

In that respect, the Bay Area had a lot of advantages.

Sure, the Bay Area is superb, and the hope here is that it can get on a regular rotation to host future Super Bowls. But in selecting Santa Clara, the NFL was also very aware of the fact that this is the center of the tech industry. The league is keen on building closer links with technology companies, and I think they saw the Super Bowl as a lever, a platform to do better on that than they had in the past. They want Super Bowl 50 to be a forward-looking event, a showcase for new technology.

They’re actually thinking about that consciously?

They’re not just thinking about it. Their recent hiring patterns, their investments — the NFL wants to be a technology leader, to the extent it enhances the game or the fan or sponsor experience. The hope is that by bringing the game to Silicon Valley and making it a good experience for the big tech companies, it can build some lasting partnerships. Now, Microsoft has already made inroads; it’s a major investor in things like tablets on the sidelines. But I think it’s fair to say that companies like Apple, Facebook, and Google have been a little standoffish in the past. So we’ll see what happens. It’s interesting. In a way, the NFL is really the suitor in this. It’s an unusual position for them.