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Wed, 25 Jan 2023 14:46

The NFL — it’s almost synonymous with America today. And its history is a fascinating lens to explore the nation’s development over the last 100 years, from WWII to TV and suburbs to the Internet and social media. What began as a quasi-illicit league in small midwestern towns is now the single largest media property in the world today by revenue. And whether you watch football or not, this is one incredible business story. Acquired is ready for some football — let’s kick this Season off right!


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So on my headphones, are you ready for some football? Yeah, I was listening to that too, yes! Dude, it gets you so pumped up. Totally does. I feel like I grew up in the Fox Sports theme. Da da da da da ba- Da da da da da da ba- It always makes me think of Thanksgiving. It makes me think of, I think it was a Jack James tape that I bought. Or maybe it was like a knocked off Jack James produced by Fox Sports, but I definitely had that theme song on a sports pump up tape. Oh my god, Jack James. That needs to make a comeback. Who got the truth? Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Sit me down, say it straight. Another story on the way. Who got the truth? Welcome to season 12 episode 1 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund PSL Ventures. And I'm David Rosenthal and I am an angel investor based in San Francisco. And we are your hosts. Today's episode is on the NFL. Football is America's favorite sport. By far, in fact, football is more than three times as popular as the next highest sport, basketball. The Super Bowl is watched by over a hundred million viewers every year in approximately two-thirds of American households. My favorite Super Bowl stat is that it's the weekend with the fewest weddings planned of the year. It is the NFL's world and Americans are just living in it. Especially the TV networks, which have been reduced from pillars of our nation in their heyday to largely distribution channels for the NFL today, plus some other lesser programming sprinkled in. Of the top 100 TV broadcasts aired last year, 82 of them were NFL games. Wow, that is wild. Totally wild. But how did we get here? How did this game become the most valuable media property in America? The story is one of incredible cooperation of belief in growing the pie over a century and just like our benchmark episode of communist capitalism at its finest. The NFL owners have made bold long-term bets in choosing to divide their revenues equally in a way that no other sports league has. Of course, the NFL hasn't been free of controversy. From the horrible recent on-field collapse of Demar Hamlin to the now obvious epidemic of CTE among former football players, players are clearly putting their lives at risk. And from national anthem needs to alleged cheating scandals, the modern fans relationship with the sport is complicated. I personally love watching football. It has been finely tuned over the years to be maximally, maximally entertaining. But it comes with extreme cognitive dissonance for me every time I tune in and I know many others feel the same. Indeed, and talk about cognitive dissonance, 70% of the players in the NFL today are black, but only two of the head coaches now currently here in January 2023 are black and, of course, none of the owners are. This is very emblematic in many ways of America as it was many, many years ago, sort of painfully still in front of us today. Yeah, I mean, gosh, we've told so many stories now in acquired where, you know, in the research and then telling them like, wow, this is the story of America. I have never felt more that way than I feel about this story in the NFL with all the greatness and all of the not so greatness that we're going to get into. Yes, whether pro football is your favorite pastime or you think it's a societal ill, there is no denying the incredible role that it plays in all of our lives today. Now listeners, just like our NBA episode a couple of years ago, this is an episode on the business of football. It's not specifically about things I learned reviewing game film or the merits of the eye formation today. We're talking about the business, but we do have some sports thank yous to say one to great friend of the show former US representative Anthony Gonzalez who caught touchdown passes further cults from Peyton Manning who we also have to thank because Peyton's places on ESPN plus is awesome, highly highly recommend. He's so good. Yeah, it's great. I think I watched 20 episodes of that. And we also have a big thank you to Michael McCainbridge author of America's game, which provided much of the research for this episode. And it's just like the definitive biography style history of the NFL. Well, after you finish this episode, come discuss it with the other 14,000 smart, curious kind members of the acquired slack at slash slack. And listeners, this is not investment advice. David and I may have investments in the companies we discuss. All right, David, take us in. Where are we starting? All right. We start on November 6, 1869 on the campus of Rutgers University in New Brunswick, New Jersey. Just a very short New Jersey transit train ride up from Princeton, New Jersey, as I know well from my time there. Where, indeed, a group of about 25 or so Princeton students were up at Rutgers to visit a similarly sized group of Rutgers students. And what were they there for? They were there to play a game of football. Now, what was football in 1869? This is not someone dropping back in the pocket and thrown a 70-year bomb. No, no, no, no. It was essentially what today is classified as mob football, quote-unquote, or medieval football. This had been played for centuries at this point in England. And basically, the only goal of the game was for one side to get a ball to a certain spot on the other side. And that was it. There were no rules. Any number of people could participate on either side. You could do anything up to and including naming and killing people on the other side or your own, which happened quite frequently. I mean, keep in mind this is four years after the end of the Civil War. Yes. So now why were these two groups of Princeton and Rutgers students so interested in playing this game, this terribly violent game? Well, back in England, it was quite popular among public school students. Now, public schools in England are like private schools in America. These are like the elite training institutions for wealthy landed gentry in England. And they were starting to adapt it into an actual sport. And so like any sort of stepchild nation, these American college kids were kind of trying to keep up with the social elite back in the mother country and do the same thing, bring football in a codified way to schools in America. There were 25 players per team. So 50 people on the field at one point in time, a round ball that could not be picked up and carried couldn't be thrown. And the object was to kick the ball through the opponent's goal for which he received one point. Okay. So a soccer with 25 people on a team. Yes. But that was the start of what would become intercollegiate American football. And this becomes just like back in England, wildly popular. And over the next five to 10 years, it gets more and more codified and formalized amongst the Ivy League. It kind of comes to be seen as this integral part of the college experience. And it kind of becomes this character building experience. It's also still wildly dangerous. There are like deaths, serious injuries, very, very common through this period, the first kind of 50 years of football. Finally, 1905, there are 19 fatalities in intercollegiate football in the US and a serious injury at Harvard to one Theodore Roosevelt Jr. son of sitting president, theater Roosevelt. So this is a major event. After that happens, Teddy Roosevelt calls the summit of all major colleges and universities in New York City and says, he's going to outlaw the game in the US unless they adapt major changes to make the game safer. And you also have to imagine, of course, it hits close to home for him with his son, but he's sort of viewing this as, hey, the people that are best and brightest are playing this game that is actually hurting the nation. We are cutting down people in their prime and we kind of have to do something about that. Yeah. And it's a fine line, right? Like, I think the violence is a critical part of this sort of right of passage. And Teddy Roosevelt probably kind of likes it because this is a training ground for future military government, all in military leaders of America. So I had no idea until doing the research. This summit that Teddy Roosevelt calls and then he basically tells all the presidents of the universities like, hey, you guys got to figure this out around my outlaw. This in response, they create the NCAA. Like, that is the beginning of the NCAA. Oh, I didn't realize that. Yeah. It was to regulate and codify and make the game of collegiate American football safer. Huh. Yeah. Crazy, right? So following that, this new institution that becomes the NCAA, they institute the creation of a neutral zone. They abolish the use of wedge formations where you would pile up as many people as possible behind somebody who was carrying the ball to push them forward. And apparently that's how most of the deaths and serious injuries happen. So they do make the sports safer. I mean, there's still like a lot of injuries. It's not a lot of protective padding being worn here. And a lot of this predates even leather helmets. People are just playing this in regular clothes. Yes. But they also make a change to the rules after this summit that would become the defining element of American football and fully differentiated from soccer and rugby, which rugby itself came from soccer. Rugby is the set of soccer rules that the English public school rugby used. And so it's called rugby. And this rule that the NCAA institutes is legalizing the forward pass in 1905. And that becomes obviously defining characteristic of football. And to underscore how much this changed things football was exclusively a violent dirty game to this point in history, American football. But when we think about American football today, you're watching one at night football and the beautiful popping color and all the lights and all the slow mo. There's a beauty to the game. There's a romanticism. There's a moment where you hold your breath. The world seems to move slowly. It's a ballet. This introduced what would become the counterbalancing force to the incredible violence of football, which is the true beauty of watching it. Yeah. The beauty and the strategic element too. The offensive playbook, the defensive coverage is the audible's. There's no way a casual fan can understand all of it. And yet the ballet, as you say, is mesmerizing to watch. Colleagues an American football just becomes wildly wildly popular. But it still is to this day. It is a huge part of the American sports landscape. And it was even more so then. All right. So the NCAA is formed. We've now got the forward pass. So modern football. Does that lead to the NFL? No. Again, very specifically, we're spending a lot of time on the origins of football and college here. But it's so important for understanding the NFL. This is a college thing. This is a American collegiate experience that these elite young men go through this dangerous kind of warlike activity. There's this very sacred element to it. So much so that while in the early 1900s, some professional teams do start to pop up around the country. These are teams not leaks. So these are barnstorming teams that would go around like there's no organized schedule play. But they're viewed not only just as second rate to the college game. They're like dirty. Why are you taking this esteemed thing that our best and brightest participate in and turning it into this entertainment act? Yeah. It's even more than that. Many people, especially the elite viewed professional football as actually immoral because it was profaning this thing with money. The gripe that they had against it was the money. It wasn't the game. It wasn't how the game was played. It was the same game. Often the same people who played in college. Oh, I see. It's supposed to be amateur. It's supposed to be amateur. This should not be a professional activity. This is a right of passage for young men. So it's to the teens and 20s. That was very much the attitude. Now that is not to say the professional football didn't exist. Or like the same period bootlegging alcohol. Alcohol is illegal, except for this massive industry that lots of people are participating in. Yes. It's not like demand for professional sports in cities and professional spectator sports didn't exist. Look at baseball as exhibit A. Michael McCainbridge has a great quote in the beginning of America's game where he says to say that baseball was the number one sport in America is to imply a hierarchy where none existed. Baseball towered above the sporting landscape like a colossus. The unquested national pastime, the only game that mattered. Most fans had come to accept baseball's primacy as something imbutable as much a part of the natural order of things as air and water. Of course, this is the era of the New York Yankees and Babe Ruth and Lou Garig and all these storied parts of American history. Baseball is very much a professional sport played for money where the goal of teams is to make money and the business model is they sell admission to the games. So it's not like professional sports were all looked out of not at all. It was that football was this very special thing. Yes. So into this dynamic environment in 1920 enters the American professional football conference soon in a few years to be renamed the National Football League. Finally, we get to the founding of the NFL and started on August 20th, 1920 when the heads of several of these barnstorming quasi-professional football teams in the midwest meet at the Jordan and Hupp Mobile Auto showroom in Canton, Ohio. Now the driving force behind this meeting being called is one George Hallis and he is currently in Decatur, Illinois where he is an employee of the A.E. Staley's starch company. And his main duty is to organize and coach and be the star player for the company football team, which of course is called the Staley's. Yes. The sponsorship is so deeply rooted in the NFL that the very first team was actually named the sponsor. They weren't even sponsors. It was the employees of the company who played for the day. Now, Hallis sort of had a mandate to go out and recruit employees who happen to be good football players. That's how you kind of got around the professionalism of this. Like, oh, no, no, it's just like a company amateur football team where it just happened to pay these people. So these folks that come together at George Hallis's instigation, they have a goal. They want to legitimize professional football in the eyes of Americans. And they not only have a goal at this meeting, they develop a plan for doing so. They think they can really separate the pro game from the college game, make it a legitimate thing that America is going to tolerate. And they have three parts to the plan. One, they are not going to sign any current college players. It's going to be a strict, strict demarcation between the college game and the pro game. They will not try and get any current college players to play for a pro team, which would happen under assumed names. You know, you could imagine these college kids. They want to make money. This is so ingrained in the NFL that it is basically still true 103 years later. Here we are in 2023. You still can't go to the NFL out of high school. You can only go with the junior year of your graduating class from college. You can go one year early and a hundred years. That's the one concession that's been made. So point one, they're not going to raid the college game point two. They're going to endeavor to play the game at a high ethical and rules based standard. This was sort of the lesser knock against pro football. Well, this is like a bunch of ruffians and barely disguised excuse to beat up on each other. Yeah, not to mention these teams that are coming together. Some were independent, some were part of the Ohio league, some were part of the New York pro football league. So they're sort of slightly different rule books and slightly different customs that are going on. And this is the idea that no, we need to unify these things to set an expectation for fans. Yeah, standardize what the game is. Yes. And then number three, perhaps the most important, they're going to make Jim Thorpe, the president of the league. These guys are smart. Now many of you probably know who Jim Thorpe was, but Jim was at that point in time, the leader of the Canton Bulldogs, one of the teams that was strategically included in this discussion. And the meeting happened at that Ken auto showroom, probably because of this, Jim Thorpe was the goat. He was the greatest athlete that had ever lived to that point time, which is not to say like if you put him through the NFL combine today, he would win. It's sort of handicapped with all of what we knew about modern sports science of his day. The distance between Jim Thorpe as an athlete and any other athlete in the world at that point in time was greater than I think that distance has ever been since. So Jim Thorpe was a native American who was part of the second Fox nation and ended up playing college football at a small school called the Carlisle Indian Industrial School, which happened to be coached by a guy named Pop Warner, who of course is the person that all of the youth football leagues are named after today, Pop Warner league. He and Pop led this small tiny Carlisle Indian industrial school to a national championship while he was playing there against all these big Ivy League powerhouses and Ohio State and others, which by the way, that was a huge moment of these all white Ivy League schools think they're better than everyone else. And Carlisle was really a Reformation school and how to assimilate into white culture. And so it was this incredible moment of saying, okay, well, as a little bit of a protest, we're going to literally become the best and then beat you at your own game. Well, and the deep deep irony given what was about to happen with professional sports and the NFL becoming completely white. The first star player, the whole basis of the league, the first president of the league was a person of color. In addition to playing professional football, the thing that is just unbelievable about Jim Thorpe, he won two gold medals in the 1912 Summer Olympics in Sweden in the pentathlon and the decathlon. He had never competed in the decathlon before. Oh my God. The first time that he competed in the decathlon was in the 1912 Summer Olympics and he won the gold medal. Wild. Wasn't he also an outfielder with the New York Giants? Yeah, he played in the Major leagues. Like Deon Sanders, Bo Jackson, he did all of that and basketball and won gold medals wild. So back to the 1912 Olympics, when he won these gold medals, King Gustav of Sweden was presenting him with the medals famously. And as he's presenting them to Jim says, you sir are the greatest athlete in the world to which Jim Thorpe famously replies, thanks, King. I think that needs to be our next acquired merch t-shirt. Thanks, King. Yes, absolutely. So this new league, Proto NFL formed in 1920 with 14 teams and about as much instant legitimacy as you could get from Jim Thorpe being the president and the figurehead. They pretty quickly become the biggest professional football league in America. There's not a lot of stiff competition and they consolidated the smaller leagues to create this in the Midwest. Yes. But that said, the 20s and really the 30s to it's kind of hard scrap. It's an uphill battle, shall we say? Oh, yeah. If you look at the, what is it? 15 teams or so that existed in 1920. There are three franchises that endured out of all of those. The rest of them, the Columbus Panhandles, the Akron pros, the Chicago Tigers all went under and the only ones that stayed the test of time are the Decatur Staleys, the Racine Cardinals and one we have not talked about yet, the Green Bay Packers. Indeed. And the Decatur Staleys would become dub bears Chicago bears. The bears. Yes, they became the Chicago Staleys and then at some point adopted a proper name and became the bears actually named after the Cubs. That's right because they played in Rigglyfield and bears are bigger than Cubs. Yep. So it was an uphill battle for a couple of reasons. One, even despite all their efforts, the stigma of professional football really does not wear off, especially in the 20s. So after the NFL is formed and starts getting publicity in 1922, then Michigan, sorry Ben Michigan, then Michigan head football coach Fielding Yost gives a very widely reported speech in New York City where he's talking about the new league and he says that quote, pro football robs the great American game of many of its greatest character building qualities. The ideals of generous service, loyalty, sacrifice and wholehearted devotion to a cause are all taken away. The game is robbed of the exhilarating inspiration of achievement merely for achievements. Sick. Now of course, he's partisan, Cassese, college football coach, but this really was still a lot of the prevailing sentiment. Yep. The other problems the NFL face are most of these teams are based in kind of small towns. They're not in big cities. 100% of these teams either fold or move to larger cities except for the Packers. They're the only small market team that stood the test of time. Yeah. There was no TV. There was no internet. Like the market size was not unconstrained for these teams. The market size was quite constrained. They were filling a niche and a demand for football in these towns, but they weren't going to make that much money. And they're massively lost making. I mean, these teams last two to five years, and there's another 15 teams that are formed between the Chicago Bears and eventually the New York Giants are formed around 1925 that stand the test of time. So it's amazing all these teams that spin up and spin down within five years of each other in this decade. And as you say, these teams in small towns almost all them end up shutting down. Well, that was mostly due to the depression in the 30s and the dust bowl. It just became completely non-viable economically for small town teams to survive except for Green Bay. And they all end up moving to the big city where they're very much playing second fiddle to the baseball teams. Yeah. And most of these don't even end up moving. They just end up closing their doors. The other important thing, though, to say about the NFL during this time before World War II is that in the beginning, there was Jim Thorpe, who was the first president of the league. He's a figurehead. He's only president for a year. And then they bring on a real administrator. But, you know, obviously he was Native American. He wasn't a white person. There were several black players in the league at that point in time. And it was like not a big deal. In fact, the first NFL champions in that first season, the Akron pros, the star player and the head coach was a man named Fritz Pollard, who was black. Raise the star player and the head coach. I'd love that. Unfortunately, in the mid 30s, supposedly after George Preston Marshall comes into the league as owner of the Boston Braves that became the Boston Redskins and then moved to Washington, DC. At his behest, they adopt the same policy as Major League Baseball and completely kicked Blacks out of the league. And it wouldn't be until after World War II. And for the Redskins, not until 1961. The Redskins commensurate with keeping that name for as long as they did. They were very, very, very late to integrate the team. I think they had some really big fanbase in the south, and there weren't a lot of NFL teams at that point in the south. And so it was both because he was racist and also because he realized he would probably lose a lot of his fanbase who were also racist by integrating his team, which is like a horrible thing that it was a strategic advantage for him to get that fanbase by having a exclusively white team. So all this would continue kind of status quo the league barely screaming along until after World War II, when both America and the NFL would change forever and pretty radically. So after the war when all the troops come home and there's the GI Bill, there's this new middle class in America that didn't go to these elite private school Ivy League institutions or even the Ohio States of the world or the Carlisle Indian colleges. And they're coming home from the war. They don't have college educations. They may be now getting them through the GI Bill, but they have jobs. They have disposable income. They increasingly have radios and soon to be television sets. They want entertainment. You have people coming home. You have people looking for jobs. You have people with lots of free time. And you sort of have this opportunity to be a new thing in America that people do with their time and dollars. And keep in mind, every owner's experience to this point is subsidizing losses. If you're bringing on other people to try and be co-owners of a team with you or you're deciding that your family is going to sort of carry the weight the whole time or that your company is going to carry the weight of the team, you're just subsidizing losses. So every single person involved in pro football ownership at this point is not even lip service for the love of the game, like purely just for the love of the game. But now interestingly, there's a business opportunity. Yeah. And all these American GIs coming home from the war and their families, they don't have the same hangups and preoccupations about the college football game that the elite did before the war. So there is this big opportunity now after the war for professional football and the NFL to become a much bigger thing. And they probably would not have realized it except their hand was forced, as we will see a couple times here throughout the episode. In 1944, right before the end of the war, a lot of people could see this opportunity. Football was a very compelling game. The NFL was only in what I think eight cities at that point in time to really realize it, you had to expand. You had to be in a lot more cities. And there were wealthy business people in cities all across America, East Coast, Midwest, the South, Florida, who wanted to add teams and coming to the NFL, but the NFL owners weren't interested in expansion. Right. And those eight teams, the Cardinals, and of course, they're in Arizona today. You got the Chicago Bears, you got the Green Bay Packers, the New York Giants, the Detroit Lions, the Boston Redskins had since moved to Washington. You've got the Philadelphia Eagles, the Pittsburgh Steelers. And at this point, and this is crucial, the Cleveland Rams. Yes, the Cleveland Rams. At that point in time, owned by the Forward Thinking Dan Reefs. Yes. And this is the first Cleveland team that did not shut down, but instead moved. So the other potential ownership groups in other cities across America that wanted football leagues at a certain point come 1944. They were just like, well, the hell with you NFL, we'll go start our own league. Yep. So a new professional league gets founded, the All-America Football Conference in 1944. The A-A-F-C. And it's got some pretty serious firepower. It's organized by one of the country's preeminent sports journalists based in Chicago. It's backed by some high power ownership groups, including the famous Hollywood actor Donna Michi in Los Angeles. Well, he businessman in San Francisco, New York, Chicago, Miami. The NFL is in some of them, but should be in all of them. And almost like the NFL had its ace up its sleeve with Jim Thoroughpet, it's founding, the A-A-F-C has its own ace, which is that they have reached a deal with the legendary Ohio State coach Paul Brown. When he's coming home from the war from his service, that he is not going to go back to the college game. He's going to come coach the new A-A-F-C Cleveland franchise, named after him, the Cleveland Browns. Yes, the man who transformed football, Paul Brown. And this is the very first time in sort of the modern NFL era where you have this real threat of two professional football teams that people really want to see in the very same city, the Cleveland Rams, and the soon-to-be Cleveland Browns in the A-A-F-C. Yes. And in a head-to-head war between those two franchises, the writing is on the wall of who's going to win, and it's not going to be the Rams. Now, Dan Reeves had bought the Rams in 1941, even before any of this was on the table. He didn't really want to be in Cleveland anyway. He saw this opportunity to think that the NFL should be on the West Coast and should be truly national, and he wanted to move the Rams to Los Angeles. But the NFL owners, by the bylaws, you had to have 100% unanimous approval of all the owners to move a team, and they didn't want to move the team. And it makes a lot of sense. These teams have lost money forever. It's like we're just on the press piece of having a real business here. Don't make us figure out how to get these other seven teams to LA once every whatever it is, six or seven games. So now the war's ending. The A-A-F-C and the Browns are coming in, and then the dagger comes right before the 1946 NFL annual meetings in January. Dan Topping, who owns the NFL's Brooklyn Dodgers, and also the New York Yankees, the baseball team. So like the highest profile, wealthiest owner in the NFL, defects to the A-A-F-C. So there's a major crisis. Yep. First thing they do in the January 1946 annual meeting is they boot out the then commissioner that they had hired, Elmer Layden, who was a college football star, but not an effective wartime administrator for the NFL. So the owners, they're like, okay, to lead this fight, we can't have somebody from the outside. We need to draft one of our own from the ownership group here in the inside, who's going to be able to marshal everybody together and lead a coordinated response to this existential threat. They install Birkbell, who is the owner of the Philadelphia Eagles, as the new commissioner of the NFL. He's tasked immediately with drafting a competitive response to the A-A-F-C, and they decided it needs to be three things. One, they need to go meet the A-A-F-C where they are, which means where the new America is, post-World War II, which means being nationwide in the West Coast and going to California. Two, the NFL, if they're going to win, they need to put out a superior product, a better game on the field than the A-A-F-C. And then three, for the first time, they need to do a better job than the A-A-F-C, or at least as good a job at actually telling America about it. They have to go proselytize, they have to go win fans and win consumers, hearts and minds. So fronts one and three are basically all handled by Dan and the Rams. So immediately after Birkbell comes in as commissioner, he orchestrates approval for the Rams to move out to California. And it's a good thing they did, because when play eventually starts in the 1946 season, the new Browns in Cleveland, for their very first home game, draw 60,000 fans, which is the same or more than the Rams did for the entire season the year before. Yeah, Paul Brown was quite the anticipated figure in Cleveland. He had coached at Maselin High School in Canton. He had coached at Ohio State. He had coached one of the Navy teams. And he was sort of known for knowing how to whip a football team into shape who would have to know the intellectual side of the game as inside and out as the physical part of the game. It was a huge part of his strategy to make people memorize the playbook and take written tests. And if they failed these written tests about the plays, about the rules, about Paul strategy, he'd kick them off the team. No matter how good they were. And it's the first time someone really looked at the game and said, sure, it's a game, but actually this could be a science. He was almost like the first money baller. One of the first innovations he did was he was one of the first coaches to really review film and recognize patterns in plays and statistically manually tally. Here's what we have to do against this team and that team. And here's what worked for us last year. And here's what didn't work for us this year. Paul Brown was the first modern, not just football coach, but I think sports coach period in America. And you know, every human is flawed. So we shouldn't make him out to be the Messiah or something. But he was basically the first coach to start racial integration of the team and recognize that if we have the best players, then we're going to win. So we just need to do whatever it takes to get the best players on our team. The other thing that he did, he employed an entire staff of assistant coaches year round. I think it was six people in addition to him. No other team did that. There were not full time offensive coordinators and defensive coordinators. And I'm not sure he yet established them as that. But it really was saying, look, we're going to be a team of coaches that coaches a team of players. And on the racial integration front. So one, the AFC was going to be an integrated league from the beginning. That's counter positioning right there. That's counter positioning. The NFL and especially the Redskins didn't have a lot of interest in doing so. But moving the Rams to LA forces the league to integrate because the LA Coliseum where the Rams want to play is a publicly owned building. And it's controlled then as now by the LA Coliseum Commission. And when Reeves and the Rams come out to petition their case that they should come be allowed to play in the Coliseum. Well, the commission says, okay, we'll let you play here. But we're not going to allow any segregated home teams to use our stadium as their home stadium. So you're going to have to integrate the team. And this is where the public relations aspect of the Rams becomes clutch. Oh, the Rams were so good at PR. So a they agree right away. B not only that, they say great will sign Kenny Washington who before the war had been a hero in Los Angeles. He was a huge UCLA star for the UCLA football team. This was a huge PR group for the Los Angeles area and for the Rams. And all this was helped out by a savvy young intern for the Rams that their new headquarters in Los Angeles. One young Pete Rosal, who helps craft a lot of this strategy. But put a pin in Pete Rosal for the moment. So for a quick review of where we are right now, you've got the NFL. It's an eight team league. The Rams have just moved from Cleveland to LA. And then you've got this AFC that's starting to play. What year do they actually start? 1946. Same year that the Rams moved to California. And the roster of AFC teams is the Cleveland Browns that we've talked about. The New York Yankees football team, the Brooklyn Dodgers football team. Which defected from the NFL. Yes. The Buffalo Biscons, the Miami Seahawks, which is interesting that has nothing to do with the Seattle Seahawks. They just reuse the same name. The San Francisco 49ers, the Los Angeles Donz. So you've got two LA teams. Now you've got an AFC team and a NFL team and the Chicago Rockets. Yep. The Donz in LA were named after the main owner Don and me to the movie star. Yeah. So you've got the NFL and you've got the upstart AFC that would only last four years. But would change the game quite a bit. And by forcing this competition, they forced the NFL to do a bunch of things that really was in the NFL's best interest, but they wouldn't have done absent competition. And this is the first time we really learned the lesson. The football that people will watch is the most entertaining game. Yes. Because this is something that would not be obvious, I think, for running this experiment. What is the most entertaining game? It's the most competitive game on the field. And for all that we were just lauding Paul Brown and he's legendary. The teams he coached. He was too good. His teams were too good. So the Browns end up winning all four AFC championships. They only lose four games in four years. And the game becomes boring. There's no drama. It's a four gun conclusion that the Browns are going to win. If your team is playing the Browns, the Browns do great at home. But when they're on the road, they're like, well, the fans like, why am I even going to go? Right. Watch my team get destroyed by the Browns. Why would I want to do that? By the way, those words have never come out of my mouth before growing up on my Browns fan. Well, the current Browns are not the same Browns as the old Browns. They actually are the same. Importantly, the franchise and records stayed with Cleveland. The Baltimore Ravens are a brand new team that started in the 90s, not a relocated Cleveland team, despite the fact that they took the hold front office and team and ownership. That's some serious rewriting of history there by the NFL. Yes. So to your point, the NFL learns this lesson here of, oh my gosh, we've been sort of fortunate that this didn't happen in our league. But it's really nothing intentional that we did. There's nothing structural that we did to ensure there was no Cleveland Browns in our league. It sort of accidentally happened. Then by observing the counter example of boring football where there's one dominant team, it kind of has to become a core tenant of our league now to fight these other guys of enough equality between teams that it is always very competitive. And this is still critical today. But it's even more important back then because there was radio, but there wasn't really TV yet. Even though we're in the post-World War II era, these first few years, five years after the war, the install base of TV was just starting to roll out across America. So this is still an in-person game. And so the business model of professional sports was ticket sales in-person attendance at the games. So I don't think the AFC model of the Browns being dominant would work ever. But at least today, you could watch the games on TV. I think you're like, oh, I'm always going to see a show when the Browns are playing. That wasn't the case back then. You had to get butts in seats. That was the only way you were going to make money. This becomes a feedback loop. If you don't make money as a team, you can't afford to put a quality level of play on the field, which further tips the competitive dynamic out of balance. Totally. And if you have a league that figures out how to make sure that it's always competitive. And when I say always competitive, what that translates into it from a business perspective is let's say every stadium has 40,000 seats. And you have eight teams. That means you have the capability to sell 160,000 seats every weekend. And your goal is to sell 160,000 tickets every single weekend. And so what you basically need is to make sure that it's always a great game to come watch. And to your point that the business model is around the gate or ticket sales rather than TV, that actually stayed the case until 1977. That was the first year that the NFL made more money from television revenue than from ticket sales. That is a full 30 years later than the time period we are talking about here. I didn't realize it was that long. Yeah. Because television's going to come in a big way in short number of years here. But back to Berbel, the newly drafted commissioner of the NFL, this is his great insight that he realizes as he's marshalling the NFL owners in the battle against the AFC. He adopts this as his mantra that literally, I mean, they made a movie with this title on any given Sunday, any team in the league should be able to beat any other team. And he pushes this through with the owners and gets them all to agree to this of like, hey, the only way we're going to survive and prosper is if we agree that none of our teams can get so dominant that we end up with a Cleveland Brown situation. Yep. Well, before we talk about how the AFC ended and merged into the NFL, this is a great time to talk about one of our favorite companies, And we're doing something different this season. You probably already know that pilot is the largest startup focused accounting firm in America with over 1700 clients. They have now scaled with companies that have grown 50X since becoming customers of pilot, including of course, their finance accounting, bookkeeping and tax prep product. So we thought what could we do with pilot that would be helpful to listeners? Well, this season we are joined by Wasim Dahar, the CEO of Pilot for tips he has for founders after starting three different companies himself. Our question for you is around partnerships and specifically partnerships as a startup. You have lots of experience with this. My strong view is partnerships are a waste of time. And every early stage company out there believes in their heart of hearts that there's a partnership deal that will dramatically accelerate the business that's just going to totally change the game for them. And I hate to tell you this, but this is 100% false. And the reason is pretty interesting and structural, which is look, in general, the reason you're excited about partnership is because you want to work with some bigger company that's going to distribute you or otherwise promote you to your customer base. That's the aspiration. And there are two problems there. One is velocity and one is leverage, which is the first big companies move so slowly far, far more slowly than you could possibly imagine. And so even if you are successful in inking some kind of partnership deal with them, it's going to take literally multiple years before something happens. In a year, your leverage position may completely change. Well, totally your needs in a year might be completely different than your needs now. Like it might still be interesting. It might not. The other reason the partnerships are difficult at the stage is precisely because you are a small startup. Definitionally, you don't have anything interesting. When is the right point to think about partnerships? The only case where I've seen where a partnership can actually work successfully for a startup is when you the startup are solving a critical business problem for the partner. Meaning if the partner can't grow at the rate they'd like to grow or if they're losing sales because they lack a certain capability and you have that capability, then something interesting might happen. And that's actually not about your size or stage or their size or stage. Necessarily, it's you're doing something that's actually really critical for their business outcomes. I think the problem though is the average startup founder isn't even thinking that deeply about this. They're like, well, it would really be great if Stripe promoted my stuff. That's going to look great in my next fundraising deck. It's like, well, it would be a nice feature for their customers. But the problem is that's like priority number 2500 for them. They wish they could ever get to that point that you do list. They're much more interested in the existential problems facing their business at any given time. All right, thanks to Pilot. You can click the link in the show notes or go to slash acquired to get 20% off your finance, accounting, and tax prep needs for your first six months. Thank you, Pilot. All right. So David, Bert Bell, the new Commissioner of the NFL adopts this mindset of we have to keep the game competitive always. What do they do structurally? Any given Sunday. So Bert and the NFL do two things. First, pretty immediately after he starts, he completely overhauls the way the schedule works. So in the past, the schedule would be just like, yeah, whatever, we're all going to play each other in random order. He realizes that the schedule is actually an incredibly important strategic lever. And he looks at the results from last year's season and arranges the schedule such that the weaker teams from last year play the other weaker teams for the first half of the season and the stronger teams from the previous season play the other stronger teams for the first half of the season. So that way he can come as close as possible to guaranteeing that roughly everybody's going to have statistically a relatively even 50-50 record going into the midway point in the season. So there's going to be drama about who's going to end up winning even though the actual level of talent might diverge quite a bit within the league. Yeah. Even if you're a great team, if you've only faced great teams for your first several games, you're going to be a little banged up coming into the second half of the season. And the NFL still does this to this day. I didn't realize that. Yeah, this is like a kind of critical slate of hand to making the whole thing work. But this is kind of like camouflaging. If there is a competitive balance problem underlying everything, this is only camouflaging it. How do you fix it? Yeah. Well, there's no free agency at this point. No, there isn't. And that's important because there's no way to just go sign a veteran player whose contract with another team is up to make your team better. You need to get brand new rookies into the league. It's pretty ridiculous. There actually wasn't a concept of free agency at all until 1993 in the NFL. I know, which is ridiculous. And even then, only free agency with a salary cap, which when it was announced, Michael Irvin, the Dallas Cowboys wide receiver famously said, free agency with a salary cap is not free agency. But we digress. And so the NFL and Bert come up with the idea of having a draft of college players and not just any draft, but a draft in reverse order of where you ended up in the standings in the previous season so that the worst teams in the league get the first picks for the next season's draft. And also in doing the draft, we just continue to see over and over and over again, the pro game having reverence for the college game because America has reverence for the college game. It's this idea that we will watch the college football game very carefully. And then we will create a day where on that day, that is when we will be eligible to go and pull the people out of that game and into our league. And it's incredible. The artifice that goes up around this 50 million people watch this thing today. I mean, we were watching YouTube videos and research of like Taylor Swift was at the NFL draft a few years ago when it was in Nashville. Like it's huge event. And it was actually the first big coup for ESPN when ESPN started in 1979 and 1980 was televising the NFL draft. Genius. So these two elements stacking the schedule and then the reverse order amateur draft form the nucleus of Birp Bell in the NFL strategy that it's had ever since which comes down to league first, league first team second. And some might say players third if at all. Yeah. And there is a structural thing that they did too, which was to create a shared pool of ticket revenue 60% of that revenue I get to keep because I'm the home team. And at this point in history, super early on, it was that the other 40% would go to the visitors over time. The league would evolve a structural thing so that 40% went into a shared pool that got divided among everyone else to sort of lean in harder to this shared mindset. And this is sort of before the TV revenues that are shared today. So David, maybe this is a time to talk about televisions impact on the NFL. So as we said, the AFC only operates for four years. This plays out. The Browns are too dominant. The AFC folds after four years, only three teams of the AFCs come over to the NFL. The Browns, the 49ers and the Baltimore Colts who are of course now the Indianapolis Colts. Here we are now. It's the dawn of the 50s and been just like you said, the television installed base is here. It's coming. So TV set sales in America in 1946, the first year after the war, or 7,000 TV sets sold in America. In 1947, there were 14,000 TV sets sold to the market doubled. In 1948, there were 172,000 televisions set sold in an only drew exponentially from there. I love that you look this up. By this point in the early 50s, there are 25 million homes in America with a television set. Man, did history turn on a knife point for the NFL's sake from their perspective. Like thank God, A, the AFC went into business and forced the NFL into a competitive response to expand, to change the game and to start to discover and understand this league first mentality. And then also thank God they beat them by the end of the 40s in the beginning of the 50s because now the NFL is the only game in town for professional football in America and they're the only national league right as TVs are showing up. And really actually, they are the only game in town for national sports television programming period because they're other sports, most notably baseball as we've been talking about. But baseball, if anything, they were a victim of their own success because it was the dominant professional sport. They made so much better attendance numbers. They had all the games 162. The gate, the ticket sales were so important to baseball that with the admin of television, the baseball owners thought television was bad and they ended up fighting it. Well, so did the football owners for a while. Well, so did the football owners, but they had a lot less to lose. Well, yeah, because pro football is still an underdog sport here, even in the early 50s. They're like up and coming. They're trying to get more people to go to games and baseball generates a ton of stadium revenue from filling their 40,000 person stadiums. Indeed, baseball had a lot to lose. And to be fair to all of them in the early days, and I think for a long time, local market home television airing of home games absolutely depressed in person attendance. Totally. When the very first NFL TV deals were signed, and of course, these were individual local deals signed by team ownership and their local television broadcasting affiliate. It wasn't with CBS Broadly. It was with you know, whatever your local TV station is. They would black out all the home games because they would say, we need to fill this stadium because until 1977, the stadium, the gate was actually the biggest form of revenue. And so why earth would we cannibalize our experience when someone could just watch it from home? Absolutely not. It would later take a presidential order from Richard Nixon and the home blackouts. And even then, only if the home games were sold out with the blackout be lifted, it wasn't until after September 11th that blackouts were lifted, even if the home game wasn't sold out. And then they reinstated it. And now it's not the case anymore, but it's a mess. But Ben, as you say, in the 50s, these early television experiments are being run with sports. And like it is pretty bad. So the LA Rams, they do an individual deal in 1950 with the admiral television company to broadcast the Rams home games, I mean, home and away games. But they put a clause in the deal because they'd seen what had happened with baseball that admiral would guarantee revenue back to the Rams for any loss in attendance. And this is a really bad deal for admiral because attendance declines 50% 50. Which is crazy. Like for how bad the broadcasts were, the fact that that as a suitable replacement to go into the game, I mean, they would put like one camera up on the 50 yard line and they wouldn't do like any microphones. And they would just be like, all right, this is the game. And maybe they'd have some commentators. Oh, and it was in black and white on a tiny screen like, yeah, all of these things. But the industry was new. Everybody was figuring everything out. The TV set manufacturers, the networks, the content, the sports leagues. One of the big marketing messages was the game comes to you. You don't have to leave by this appliance, put it in your home. And it's like a magical window like you have a seat at the game. And it really did depress attendance. A saying ends up being developed in baseball that sadly for baseball, they stuck to for a very, very long time that radio wets the appetite, television, satiate it. It's a new revenue stream, but it's hurting the golden goose of ticket sales. And all the way through the 50s, it wouldn't really be a particularly large revenue line. But as it did start to grow, at first, they weren't really listening to the hard one lesson against the AFC that it needs to be leaked first. And so everyone's negotiating individually, it ended up being the case that the New York Giants were making $200,000. And this is in 1959 on their TV deal. The Packers were making zero. I think the Packers were making 5K. They did have a TV deal, but I think it was $5,000. This is the thing. Football, even amongst the individual teams, kept experimenting to the early 50s, whereas baseball basically shut it down and turned away from TV. And one of the things that they figure out is, oh, television broadcasts depress the gate at home, but they're strong demand in local markets to see the teams away games when they're traveling. And so for the first few years, that's the main model of television broadcasts of the NFL is just showing away games. But there's like a lot of demand for that. And it's funny, because now we refer to this as a blackout. But at the time, because they were only selling to local affiliates, it's not that it was a blackout. It's that your local TV station only had the contract to broadcast the away games. There was nobody within your antennas reached that was broadcasting that game when it was at home. So this becomes a pretty meaningful revenue stream. Even though as you say, it would be a long time before TV would surpass the gate in revenue streams for the NFL, by the end of the 50s, the league as a whole with all the 12 separate contracts was making over a million dollars in TV revenue annually, whereas at the beginning of the decade, it was less than $100,000. And it also becomes clear that certain football games, there's like a really big audience on TV for them. And in particular, the 1958 NFL championship game known as the quote greatest game ever played between the Giants and the Colts led by Johnny Unitus, a sudden death overtime, dramatic win by Johnny U and the Colts. Garner's 45 million TV viewers across the country, including President Eisenhower. So there was this a national broadcast, national broadcast of the NFL championship game that year. Importantly, this is not the Super Bowl. David and I aren't being coy by not calling it that like that is not what this was. And we're still missing about half the teams that will end up competing for the Super Bowl. Right. But 45 million viewers. This was unprecedented. There is a huge opportunity for professional football and television. Yes. Which once again, the NFL was not the one to totally recognize. Which it is amazing. I mean, competition does create the best product. And the NFL time and time again has had their hand forced and then reacted really well to a new upstart. Totally. So in this case, as the 50s draw to a close once again, just like towards the end of World War II and the end of the 40s, there were a whole bunch more cities and ownership groups that wanted in on this. It's a clear business opportunity. And there are only 12 teams at this point in the NFL. But once again, the NFL owners are kind of dragging their feet. They're like, we don't really want to expand. You know, maybe we'd be open to the Chicago Cardinals. They're kind of struggling. If the ownership group that owns them were to sell, maybe we would allow them to be moved. But you know, go talk to them. And I really don't think this is like a business decision of we don't want more people taking our pie. I think they sort of recognize that there could be more money made if you have more cities. But it was more that the NFL owners at this point are a tight knit fraternity of people who all think the same way, who respect the game, largely who own the teams when they were massively lost making. And so they kind of don't want to let anyone into their club, even if it would be good for business. And the NFL, as we know it today, is a business. You better believe it. But at that point in history, it was really like each of these teams are kind of on their own island. They're deeply competitive against other players. They don't think of those people as fellow employees of the league. It's more like we each have our own club. But the owners of each club sort of have this thing with each other, this fraternal bond. They're willing to submit to this league first. Mindsack, because they know it's good for all of them. But that doesn't mean that they want to expand things or change things. No, they did not. And David, I'm excited. We are finally here. The birth of the American football league. The AFL. Yes. They're competition with the NFL. And really the era of national TV contracts. This is the story of how the NFL became the league that we know today. Let's go. So the story goes that one of the potential new professional football team investors, a gentleman named Lamar Hunt, who is a young heir to a very large Dallas, Texas oil fortune kept trying to talk to Bert Bell, the NFL, do anything he could to get an expansion team or buy the Cardinals. He just wants to own a football team. Yep. So story goes, he's flying back from seeing the Cardinals and having been rebuffed. And he has a Eureka moment on the plane. He's been hearing that there are all these other people who want to buy the Cardinals to and get in line and this person in this city and that person in that city. And Lamar says, wait a minute. I don't need the NFL. I don't need the Cardinals. I've got a list of all these other wealthy people who also want to have professional football teams. Why don't I call them and we'll start our own league. Yes. And thus begins the most successful attempt to challenge the NFL by far. So in August 1959, he and several other owners form the American football league with six teams soon to become eight, the Dallas Texans, Boston Patriots, Buffalo Bills, Houston Oilers, Miami Dolphins, New York Titans soon to be changed to the New York Jets, the Denver Broncos, the LA Chargers and the Oakland Raiders. You've probably heard of most of those teams. Yes. This one ended very differently than the AAFC did. Very, very differently. So at first, Bell and the NFL are like, okay, they're sort of friendly. Like, well, maybe you know, better to have good relations with Lamar and the new AFL. Because they're kind of doubtful that it's going to happen. They also don't want to say anything in the press that makes them look air again. They're sort of trying to be pretend supportive until it's legit threatening. Yep. But then still in 1959, right after the new AFL announces that they're going to start their league and commence operations, Bert Bell dies suddenly. And so once again, just like back with the AAFC, the league is in crisis and forced tact. And unlike the AFC, things are going to be a little different this time because of the television aspect. Yes. And this is all being led by you mentioned Lamar Hunt, who was the Dallas Texans owner. People might know them better as the Kansas City Chiefs today. Yes. So Hunt, unlike the AFC owners, he's been studying the NFL. He knows about the league first mentality. He's also been studying baseball. He's been meeting with baseball owners, including Branch Ricky of Brooklyn Dodgers and Jackie Robinson fame, who at that point in time was out of Major League Baseball and was trying to start a third independent league. Independent baseball league. A third independent baseball league. Yes. With some pretty radical ideas really borrowing from the NFL and the league first mentality, he wanted to embrace television in this new baseball league and have a radical solution where all the clubs in the league, which share all of the revenue from a television deal. Pretty crazy. So Lamar Hunt and the new American football league, the AFL, they take this cast aside idea from baseball and they totally run with it. Hunt says, we'll just centrally negotiate one national television contract for the entire AFL and then we'll split the revenue completely equally amongst all the teams. This is like the epitome of the league first mentality. It'll be great for us and it'll help us compete with the NFL. And in some ways, it's easy for the upstart to do this encounter position because they have no existing TV contracts, but they do kind of get laughed out of the room. They go to the TV networks with this and each of the TV networks are like, oh, cool idea. But like, who cares about your league? Who no one's going to watch this? So we hear your pitch. We understand that this is very innovative and breakthrough and very different than what the different NFL teams are doing and we don't really care that much. And the two major networks at the time, CBS and NBC, had deals with NFL teams. The likelihood that they would be that receptive to this in the first place is low. But there was another relatively upstart counter positioned TV network out there, ABC. And they were the perfect match. So Hunt goes to ABC and they find a young executive there. ABC doesn't even have a sports division at this point in time. But a young executive within ABC named Roon Arlidge. This is probably the fourth episode we've talked about Roon Arlidge on. What a legend. So Roon would ultimately become Bob Iker's mentor and Bob Iker would rise through the ABC sports ranks in the beginning of his career before ticking over cap cities and then obviously all of Disney. So this is Roon's big opportunity. He sees it's obvious at this point in the late 50s that nationally televised football games. There's demand for it. There's a huge opportunity. This is actually shocking. Like I know to everyone right now we're like, well, of course. But it used to be the case that Sunday afternoons kind of had a hole in their schedule. Like CBS had no good programming. And so that's why they would originally agree to like sure we'll broadcast some NFL games. But no one expected the American public in their living rooms to take to football as an event as an entertainment form delivered over the air to the living room the way that it did. And so the NFL sort of rebranded Sundays in America and turned it into a completely different way that people spend their time. And that was shocking. What end with those early NFL deals? It was like those were individual deals that teams made with networks and local stations. So it was like a local thing. It wasn't football Sunday. It wasn't a national event. Right. This was the first nationwide network wide contract. The networks now had signal that people did want to behave in this way. And they could feel safe sort of signing business deals and pursuing this because even though it wasn't what they expected turns out there is demand for this product. Yeah. So this was Rune Arlige's and ABC's first huge contribution to pro football in America and the televising of sports. So ABC signs a league wide five-year TV rights deal with the American football league for eight and a half million dollars over five years. It was by far far the single biggest sports rights TV deal in history at the time. $1.3 million to the league per year. And that was before the league had played a single game. This is all before the league launches. So here we are now in January 1960 back to the NFL. They don't have a commissioner. Their upstart rivals the AFL who haven't played a game yet. They have a multi-million dollar contract. An eight and a half million dollar five-year TV deal with a national network that the NFL doesn't have. This is a real existential crisis. And unlike last time where they're like okay great we'll just draft one of our own burp bell under the fill of eagles to come in and lead us through this. They can't agree on a new commissioner. So it takes 11 days and 23 separate votes of the NFL ownership groups in a total knockdown dragout negotiation. There's multiple camps backing multiple candidates. Yeah the NFL has just gotten too big. Each of the owners has too many of their own interests to argue for their entire need of something or some one to unify them. Indeed by the end of the process none of the original candidates are still in it. Right so in some ways it's a tough position to be in because all the most qualified people are out. So you kind of have to pick someone that nobody hates but probably won't be very good by day eight or nine that's sort of the position that everyone feels like they're in is oh crap. Well we got to pick someone we can agree on but that's not going to be the best person for this job unfortunately. But fortunately for the NFL they were very very very wrong about that. Lucky. It better to be lucky than good. Yes they choose as the compromise Dark Horse candidate 33 year old third year general manager of the Los Angeles Rams former public relations intern Compton College graduate Pete Rosal to be the new young commissioner of this league in crisis and create the NFL that we know today and it was totally brilliant. I mean a Rosal grows into this just incredible leader visionary who does so many things that we're going to enumerate now for the league for the game for television for America. But it was so not the owner's intention but they had to go to this compromise candidate and this young person who most people hadn't heard of anybody else they were considering would have been of a different generation wouldn't have understood the new America in the late 50s and early 60s like these were old folks who were running the league at this point in time but Pete nobody better embodied everything about America in the 50s and 60s like young families suburbs west coast Los Angeles television PR advertising yes coming out of the PR background was the perfect positioning for him because he knew that every foot that we have to put forward has to be really polished we got stopped doing things that are confusing or cannibalizing each other or send mixed messaging or perhaps put a bad taste in Americans mouth and we need to figure out the very best media strategy the very best strategy to make it so all the newspapers and all the TV stations talk about us all the time the NFL and our teams and our players need to be on the lips of Americans as much as possible and just as a small short track record of what Rosal had done before becoming commissioner as GM of the Rams for only two or three years the Rams were not a successful team on the field even during his tenure but he makes them into the most profitable team in the league they actually start making a lot of money because he gets it right there in the second biggest TV market in America in LA a very wide geographically spread out market where people want to watch football games on TV he he sets up the first in house kind of institutionalized merchandise store for the Rams he opens up a Rams merchandise store he partners with Roy Rogers Inc the actor Roy Rogers had like a white label merchandise brand to bring actual high quality branded Rams jerseys hats mugs etc that becomes a huge revenue line for the Rams than nobody else has so he's got their way background here and he comes in this is pretty crazy I mean this is a very volatile charged situation with a lot of elder and opinionated folks around the league that he's going to have to deal with and within a year he completely changes the NFL so the first thing he does when he comes in as commissioner is he ratifies an expansion plan for the NFL to meet the AFL remember one of the big reasons why hunt and the AFL owners started the league in the first place is they wanted to bring profile to more cities the NFL was dragging its feet just like back with the aFC now they realize they got to go meet the enemy on the field where they are so the original plan is to expand to both Dallas and Houston immediately to meet the AFL there in Texas the Houston franchise I think ends up becoming the Minnesota franchise instead but they do go to Dallas with the Cowboys immediately oh and meet Lamar hunt head to head right on his own turf I mean he's leading the AFL effort and the idea of you're just going to open up shop and say we're going to give away the franchise to a new owner of the Cowboys right here in your backyard yep right down the street speaking of proximity and right down the street the next move that Roselle makes remember he's from LA he gets the importance of media advertising everything he knows he can't run the NFL out of Los Angeles but at this point in time the league offices were in Philadelphia because Bert Bell was in Philadelphia and he had been the owner of the Eagles he's like Philadelphia is not the place where we can run the modern NFL and Bert ran at a very idiosyncratic way too I mean he had obviously no computer system but like he did all of his business by phone calls he was posted notes and phone calls is how the NFL ran like just not a professional organization oh yeah famously the stacked scheduling he would do it with dominoes on his kitchen table so Roselle's like no this is not going to work we're going to move league headquarters to New York to Manhattan to Midtown first to Rockefeller Center and then to park Avenue where the league is I believe to this day so we need to be right there next to the television industry next to the media industry and just as important next to the advertising industry yes these are relationships we got to cultivate with Madison Avenue after he moves the headquarters to New York Roselle contracts the Elias sports bureau which did professional statistics for Major League baseball the NFL up to this point didn't have professional statistics arms that would distribute game stats and box scores out to all the newspapers across the country the only way anybody's going to write about us and give us space on the sports pages if we make their job easy and put the stats right in their hands every day speaking of writing about the NFL and publishing the other thing that Roselle knows is especially with a game like the NFL which is a weekly drama it's not just about like baseball with getting the daily box scores in the newspaper you also got to create human stories and arcs and mythology around the game and so he intentionally cultivates a tight relationship with time ink and specifically sports illustrated and over the course of the 60s sports illustrated really becomes the major advocate for the new modern game of football and the NFL so much so that in 1963 just three short years later the magazine sports illustrated names p.o's ellets sportsman of the year the first ever non athlete that it had ever named sportsman of the year like think about that the commissioner of the league being named sportsman of the year by sports illustrated that is a huge mindset shift we should also say the end of the 50s beginning of the 60s you know baseball still a dominant sport in the US the dominant football franchises are college football franchises the NFL still an underdog and now they're being challenged by this new upstart so they're sort of squeezed in the middle where like people don't care enough yet but they also have a competitive threat and so Roselle is having to do some innovative things David didn't he like higher writers in house at the NFL to craft the storylines and then send those to all the reporters who like were too busy to actually go to NFL games because they didn't respect the NFL enough but maybe if we send them the stories then they'll tweak him a little bit and publish them famously he did this starting back when he was with the Rams even when he was a PR and turned there he would just write the stories for the reporters which one is sure that they would actually get in the papers but to he could control and craft the narrative man you can totally still see this to this day in the NFL this ethos it was so important and strategically advantaged for them and help them get where they are but like the NFL keeps such a tight grip on the narrative oh dude the sideline reporters aren't allowed to talk to anyone it's kind of silly that we have sideline reporters today I mean just an illustrative example of how tight the NFL controls the media relationships they have and all this starts with Rosal, one other thing that he does immediately after taking over and moving headquarters to New York that would end up paying huge huge huge dividends is he also starts cultivating political relationships and influence specifically with the Kennedy family both John and Bobby who were big football fans yes so this is a perfect lead into what happens in 1961 right after Rosal is on the job that would change the face of football forever so it's obvious to Rosal once the AFL signs their big deal with ABC that that's the path forward there 1.3 million dollar a year deal with ABC and importantly the league wide revenue sharing national deal with the national network now this is not how the NFL operates at this point no Rosal within the space of a year corrals all the NFL owners and gets them to realize that the NFL has to do the same thing they have to give up their individual TV rights to their individual teams they have to pull together this is a continuation of the league first mentality and they have to fight the AFL so finally after wrangling and politicking with the ownership group and the reason there's politicking is because Cleveland Pittsburgh and Baltimore actually will end up losing money in the short term on this because Rosal is pitching on I'm going to go negotiate us a big group deal and they're all three saying we already have very good deals locally we're very popular teams were in great football cities no but ultimately they do say yes and it really like speaks to the thing that has made the NFL successful which is saying no to growing my slice of the pie to grow the greater pie so once he gets authority Rosal goes into go sheets with CBS which was the dominant network both in the country and had the majority of the individual team NFL deals in a go sheet a two year deal with CBS at four point six five million dollars in rights per year to be shared equally among the teams over three X the AFL deal a huge shot across the bow to the AFL fortunately and unfortunately they immediately encounter political pressure in response to this this triggers I believe I guess the Department of Justice to start an antitrust violation process against the NFL this is like a potentially clear use of monopoly power in bargaining with this is the very first question where you say well what is a monopoly and what is antitrust and what is the NFL right and what are the teams and in this situation is the NFL the business or are the teams the business right if the teams of the business then yes this is antitrust if the NFL is the business no this is one entity acting on behalf of itself there's no collusion there's no monopoly plus you know in this particular situation they actually are in a competitive landscape against the AFL so there's strong argument to be made that this is not antitrust that argument does not carry the day no so pretty immediately the courts strike down this deal and there's about I think a one to two month period where it's all in limbo and this is where the Kennedy relationships come in clutch for rozel and the NFL so both the president and Bobby Kennedy in Congress whip up enough support to pass through new congressional legislation a new congressional act specifically to advantage the NFL and to allow for national sports contracts on a league wide basis it's called the sports broadcasting act it ends up getting passed towards the end of 1961 the day after the bill is passed and signed by john f kennedy in the white house he's literally hosts a party at the white house for the NFL which is like this tells you everything you need to know right there p.o. all the owners there invited to the white house to celebrate this new antitrust exemption that has been passed through congress to allow them to negotiate this landmark deal because the president wants to watch his football it's that but rozel also makes the strong case that this is good for america for a game that is growing in popularity and a game that unites communities they're really starting to lean into this idea that this brings a lot of people together in a city it is a shining example of teamwork and a shining example of hard work and celebrating sportsmanship and this is a great thing that we should spread to more of america and make it easier for more people to consume they're starting to make arguments about the economy around you know it's good for people to have gathering points both at stadiums but around stadiums with hotels for people to throw parties at their houses all of this is goodness and if you like the american economy you should let us have a national tb contract for the NFL yep and at this point in time i think a lot of those arguments hold water yep this actually was driving a lot of commerce for the nation totally a fun aside i did the math fun uh that four point six five million dollar per year deal that value of that contract would grow twenty five hundred x over the next sixty two years well did you look at what it would be inflation adjusted yes inflation adjusted it's about two hundred and fifty x still pretty good so on the back of this landmark tv deal well rezel does two other really brilliant things for the NFL in the next year first comes as kind of a another accident so the league every year sold the rights to the NFL championship game sold the rights to make a movie out of it and they were always like kind of bland yeah they were kind of hokey like a really rudimentary highlight real type thing in nineteen sixty two they get a bid for the rights the bidding is a sealed auction they get a bid that comes in from a guy named ed sable who is a suburban dad in Philadelphia who like to make home movies particularly home movies of his son steves high school football games this guy ad bids on the rights to make the NFL championship movie for nineteen sixty two so the bids are unsealed and added on a little homework he found out that the company that had won the past few years only paid twenty five hundred dollars for the rights so he's like why can bid five k he bids five thousand dollars he wins the auction and rezel's like who is this guy like with no experience what's happening so rezel goes to visit him and and pitches peat on doing something completely revolutionary for the nineteen sixty two championship he wants to make it like an actual movie not a hokey sports movie a real movie with montages with cuts with professional Hollywood quality cinematography slow motion voice over everything sideline cameras really a passion project to make this an incredible piece of content rezel's kind of like well i mean that sounds great i don't know if you can do it but it's like what have i got to lose so he lets say well go with it and the movie he makes totally revolutionizes sports video content i think this is another thing that we just take for granted today it's like air and water that sports content sports video is not just like a fixed camera at the fifty yard line that pans back and forth not only does this film get great acclaim but it's a revolution to go and create recordings of sports not to be broadcast the broadcasters weren't recording tapes of everything they ever broadcasts there's a lot of like baseball games and stuff that have been lost to history because there was no recording of it made meanwhile the NFL for this championship game and for other things that ed sable and his crew would film after this it is high quality film not videotape recording not over the air broadcast film stock recording from a bunch of different angles and some at high frame rate cameras and some at twenty four frames per second camera so you get this smooth beautiful slow motion it provides this unbelievable archive of the game for which other sports have no archive yeah well and that's just the video aspect to it but there's also something that sable gets intuitively is the same thing that razzell gets the narrative it's not just about showing what happened it's about telling a story and it just completely meshes with razzell's philosophy and what's going to carry the NFL into what it becomes today which is that we can't just show these games we have to tell a story this has to be drama this has to be made for TV content and it has to be super polish and it has to be super controlled and ed sable's little outfit that would become NFL films is the ultimate embodiment of razzell's mindset i don't think razzell could have created this on his own but when you watch anything from NFL films it has Pete razzell's personality oozing all over it in terms of what we are creating is entertainment and polish so for two years ed and his son Steve would come on board and work with him and eventually take over NFL films they do the championship game and then in 1965 ed comes to Pete with the idea of like hey let's make this a core in house division of the NFL and they start NFL films yeah you should buy my little film company what a radical idea the NFL should become a movie producer this is huge remember there's no ESPN there's not going to be an ESPN for 15 years all of this content that we're just bombarded with today it all starts here with the sables and with NFL films yeah there's a couple interesting things to note to once razzell green lights NFL films he basically says okay there's a lot of people in my organization that might want to do something with this at some point but like many successful acquisitions we've covered on this show he says we want to be hands off i just don't want your p and l to ever go negative so you can run as a break even business as long as you're fulfilling the mission of promoting the very best of the NFL and helping to create lore and story and they build this completely full fledged film studio that is actually the customer who buys the most film from kodak other than the us army in the entire country super high volume film studio because they start sending full film crews to every single NFL game every single week and it's this unbelievable operation to then overnight male or drive themselves back all this footage to start editing it right away so that they can use it for what we will talk about soon but for many purposes but this is what's so amazing they did all this as this investment as a labor of love and passion on the saples part on razzell's part though the motivation as you're saying it's not about making money it's about raising the stature of the league yes about putting the most highest gloss sheen on the product that we are producing and the product is the game on the field they couldn't even foresee how important this would become that will put a slate pin on and come back to in just a minute yeah the other thing that razzell does in the next couple years is the merch idea the store that he was doing back with the rams he brings that in house on a league wide basis and starts NFL enterprises again totally radically he goes to all the owners all the teams and says whatever you're doing on merch whatever you're doing on branded opportunities you are no longer doing that individually we're going to bring it centrally collectively in house under NFL enterprises we're going to standardize the merch the jerseys the hats we're going to set a quality bar so that anytime a fan because it's all about the relationship with the fans it's like a funnel bring them in from TV get them to the game get them to buy merch they're just deepening the relationship they have to have a great experience they can't get some shoddy pen in from the giants that looks like x and somebody else gets something from the cardinals that looks like why like it's got to all be the same and you got to remember the way that the NFL is structured razzell is not their boss in fact he works for the owners so they're all making money and he's going to them saying hey just like TV I want you to give up the rights to make money on your own even though some of you are doing a pretty good job at it and we're going to do this thing as a league and we're going to cut it equally so I don't care if your teams bad and their teams go we're going to all the revenues can be equal just like TV and he's so good at playing the politician with the owners that they keep agreeing to give up revenue generating parts of their PNL for the league to take over on their behalf yeah I mean like let's take the browns and packers how many pennants do you think the browns sold you know in the city of Cleveland with his big and storied as the browns are versus the packers in a town like green bay what is green Bay is something like the 200th largest media market in the United States and they've got this NFL team and what razzell is saying is just like TV I don't care how much merchandise you sell the packers are getting the same check for enterprises as the browns are yep we should probably take a 60 second aside but the unique structure of the packers is totally amazing they are owned by a publicly owned nonprofit corporation and so what that means is rather than one individual who could just decide to uproot the team and leave them the ownership of the team lies in this entity that is theoretically a publicly owned entity anytime they want to raise money they go and sell more shares more stock in the green bay packers and there's hundreds of thousands of people who have bought this stock so there's this very distributed ownership group of the packers not with any expectation of financial return literally just so they can hold a piece of the packers or control because nobody can own more than a certain number of shares but this mechanism has kept the packers in green bay even while capitalist forces and individual whims of billionaires have moved many other teams around yeah it's such an amazing little quirk and like so fun have you ever been to lambo field i've not i really want to i went once not for a game but i said a wedding in green bay and i was like oh my gosh i got to go see the field and so i took over done green bay is this very quaint little little town in Wisconsin and there's this giant NFL stadium in the middle of it wild and for a lot of the analysis will do later the data comes from the green bay packers annual report because no other team publishes their pnl but the packers do okay so the last thing rozel does in this miracle run in his first couple years as commissioner as he creates the profile hall of fame in can in 1963 so cool i've never been we got to go we should do an inquired field trip we should that would be fun so there's this amazing flywheel like it really is like the disney story that he gets i don't think he thought about it in flywheel terms but the most important thing everything he's doing is through the lens of how do we raise the stature of the league not a team but the league the NFL as a league how do we add higher gloss sheen to the product to the shield one might say exactly exactly and his logic is doing that will attract more fan interest and deeper fan interest and the more and deeper fan interest that you attract the more tv dollars you're going to make and this is revolutionary too back in the day you are limited to the number of seats you had in your stadium so if you're like a major league baseball team in a major market where you're selling out your stadium there's not a strong incentive to keep adding sheen to the product you're at maximum revenue capacity right but with the NFL and now with the new tv model there is no ceiling to revenue capacity yep so more fan interest more tv dollars more tv dollars shared evenly amongst all the teams raises the level of play equally amongst the teams as the overall level of play goes up as long as the competitive balance stays intact well that improves the product yep which then adds more sheen which then drives more fan interest and it becomes this amazing flywheel and literally I mean there's so much more to the story so many twists and turns will tell but that's the core of it that idea is what leads to what's the current annual national revenue for the NFL like 10 billion 11 billion that comes through shared agreements is 11 billion dollars and then there's another six or so that comes from local revenue that teams individually generate yep that's per year right just to be clear that is per year it is this flywheel that makes the NFL teams collectively worth something like 140 billion dollars today so remember that initial landmark deal that they got the antitrust exemption from congress for in 1961 for the 1962 season that was two years the AFL is locked up for five years the NFL gets to renegotiate every two years yep all this stuff has happened in the previous two years Rosal opens up the bidding to all three networks of course CBS wins again some would argue that it was a rigged bid and Rosal was tipping off his counterfights at CBS we may never know they win another two year 28.2 million dollar bid 14.1 million dollars per year up from 4.6 two years earlier so every single team in the league now gets one million dollars before the season even starts a cool three X from the last deal he negotiated two years before pretty freaking incredible and also just says so much about to the point with the Kennedys and politics about the commerce that the NFL is driving like the TV networks were getting a great deal here these were landmark contracts but the attention the viewership that the games got and then the advertising units that were sold and then the ultimate products that were moved as a result of those ad units this was a steal and you could argue that the TV networks were getting a great deal for many many many more years and I think at the end I wanted to discuss when they get a good deal today but everyone was getting a pretty good deal here because the fan base was growing so much more quickly and the number of viewers was growing so much more quickly than these deals could get renegotiated well it just takes time for people to realize the power of a new medium for the monetization side to grow as the engagement side grows okay so Rozole unbelievable first five years in office literally cannot imagine executing better the NFL going from major crisis death of its owner commissioner burp bell to the place it's in in the mid 60s incredible what about the AFL we haven't talked about them in a while what happened to them well here's what's funny they're doing pretty great too unlike before the war and before television if this had played out in something similar did with the aFC the aFC was dead at this point you know four or five years in the AFL would have been dead too but they're thriving and it's all because of television even though the NFL is doing great there's still a lot of demand for football on TV and the AFL to put a finer point on what you're saying they had to shoot the moon strategy they wanted to come out of the gate with a bang it's almost like the soft bank or tiger global analogy where they wanted to burn real hot and under the right circumstances have that go really well for them and they had the exact right circumstances it was the boom of TV in America so they could do things like go sign Joe name if for the jets to a gigantic contract and just have New York and half of America fall in love with them and turn them into a superstar that benefited the league the jets in the AFL formerly the Titans their owned by Sonny Wurblin who almost nobody will know that name but he was one of the co-heads of MCA the big agency as discussed on our interview with Michael Ovitz indeed indeed so just like Rozele gets what's going on in the NFL side Sonny even though he's not as much of a clear leader he's the media guy for the AFL and he totally gets it too so Sonny sees the big second NFL deal come across in 1964 so all the other AFL owners are like despairing the NFL just got this huge deal how are we ever going to compete they're going to have so much more money we'll never be able to sign any players this is the end Sonny's like oh no no no we're going to be just fine we're going to be great because the NFL did this deal with CBS well there two other networks out there there's ABC who the AFL has the current deal with and then there's also NBC and so there are two bitters out there who are going to be very very very sad that they just lost out on the most compelling content on television professional football and who's there to give it to them the AFL yep we'll take second place when there's a bunch of sad people willing to throw money at second place and throw a lot of money so the very next week after Rozele and CBS announced their deal the AFL and NBC announced that they've just signed a new five year 37.5 million dollar deal so bigger overall dollar number for a longer number of years even though it's like less than half the per year amount yeah it's less than half it's seven and a half million dollars per year but by this point in time the NFL has 14 teams the AFL still only has eight so on a per team basis it's pretty close it's not as much as the NFL but for a five year old upstart league this is a big success so just like you're saying right on the heels of that Sonny and the Jets they know what to do with that money they turn around and they give a huge chunk of it to Broadway Joe nameeth and probably a lot of listeners are going to know the name Joe nameeth maybe familiar with him a little bit I honestly I only knew it because I saw I'm on a Brady Bunch episode on a Brady bunch episode it's not like I was alive during the when that was airing but there's a very famous episode of the Brady Bunch that I watched because it's like this cultural touch point where Joe nameeth was so big that he actually appeared on a Brady Bunch episode and that's super unusual for a sports star in that day and he was such a heartthrob dude I mean he had his own talk show it's not just that he was on the Brady Bunch so everything we were talking about a minute ago with NFL films and Rosal and all the brilliance there and how it was so important in this realization that football and the NFL would be made for TV Joe nameeth was the first modern cultural celebrity athlete the only thing that was close today probably bigger was Muhammad Ali he transcended sports he transcended football he's also a heartthrob there's like millions of teenage women in America like throwing themselves this exactly what I was going to say he was the first professional athlete that appealed equally to men women and children that's a great point before him there was nobody like that so he comes and he's playing in New York right in the biggest market the brightest lights right there with the TV industry right there with the advertising industry he knew exactly how to play he wore white cleats everybody else wore black high tops famously he wore a mink coat on the sidelines just like amazing amazing like he started movies in the offseason there were other NFL superstars before him and even NFL superstars that had gone on to movie careers but just on a broad cultural basis across all demographics Broadway Joe was it well continuing that thread from earlier where I was talking about how CBS had this like hole in their schedule and everyone was skeptical that sports would fill it everyone thought sports were like a very male thing and especially as sort of brutish of a sport as football they didn't think it would do well certainly down in prime time but not even sort of in the Sunday afternoon slot because you know it's just going to attract the husbands to come and watch it and it doesn't have a family appeal and Joe name it is like the first big example where everyone realized oh football totally can be for everyone yep continuing that thread from earlier where I was talking about how CBS had this like hole in their schedule and everyone was skeptical sports would fill it everyone thought sports were very male thing and especially sort of a brutish of a sport as football certainly not in prime time not even Sunday afternoon slot because you know it's going to attract the husbands and Joe name it is the first big example where everyone realized oh football totally can be for everyone and listeners this is a great point we have another one of our favorite companies to tell you about mystery for those of you who don't know mystery they were once a plucky startup a plucky startup that was on one of our very first acquired L.P. episodes oh you're right that this plucky startup pivoted from having an app that plans surprise date nights out to a virtual team event marketplace during the pandemic that has become insanely successful and now mystery is building a full-on employee connection platform in fact they are the most cost effective way to keep your team connected this is 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of mystery will personally give that demo to the first 10 people who sign up so sign up now worth it even to get to hang with Shane thanks mystery so the name of signing is the first big post TV money contract signing in the AFL NFL war but it starts a whole wave now of competition between the two leagues to go sign all the college superstars coming out for the next year so it gets pretty crazy at one point the NFL starts with they refer to as a code name as a babysitting program this is literally a kidnapping program where they will send agents to colleges and to top college athletes who are seniors about the graduate and literally keep them out of the hands of AFL teams not allow them to sign contracts and pressure them into signing with the NFL first they just put up in hotel rooms and they don't tell anyone where they took them so nobody can tell the AFL team rap this is where you can find the star it's just like you got him captive to the sign them the interesting thing too is that the leagues aren't respecting each other's drafts so it doesn't matter if you draft someone in your league I'm signing him to a contract in mine and that contract is valid in the United States I don't care what your draft says this is the battle front it's with rookies and the draft what they don't do yet is start signing each other's players that's like hitting the nuclear button option right so they're keeping this to rookies but still like pretty quickly contracts for rookies get into the close to million dollar range which is way more than the veterans are making it starts causing all these problems across the league and at this point in time by the beginning in 1966 the NFL and in particular the owners group in the NFL realizes that hey the AFL isn't going away and this is not going to be like last time we're going to have to play ball with these guys literally and it begins a super delicate dance of their my sworn enemy but there's some owners who see the writing on the wall very early and say we're going to have to combine these and it's probably not actually legal for us to combine them but we're going to kill each other if we both keep going so what do we do and so it begins this multi tiered negotiation where certain people at the top don't know they're negotiating meanwhile certain owners are forming side deals with other people who own teams and the other league it's this fascinating spy game oh this is so fun we got to tell the story what happens next is like a mafia movie it's like a godfather film so a few of the most influential owners come to Rosal in 1966 and they say the way things are going with the AFL we're not going to beat them this draft situation with the rookies is out of control the contracts we're paying we're losing too much money this is going to kill the league if we keep the war going we've got to get to a choose which that means we're going to have to merge so we're going to direct you Rosal to go start merger negotiations with the AFL Rosal doesn't want to do it he thinks they can win he wants to fight but he's like okay I work for you he's the company man one of his super powers the way he's able to achieve all of this is he really is good at pleasing everybody finding solutions that work for everyone and so he says okay I'll move forward so he drafts the cowboys GM in Texas and Dallas got him text shramp to secretly open negotiations with Lamar Hunt Lamar at this point has moved the Texans to Kansas City where they become the chiefs but they have a working relationship also how great is it that the first cowboys owner is named Tex I don't so great he was the GM I don't think he was the principal owner but I think he had an ownership stake so Tex approaches Lamar in early 1966 says hey I'm the emissary of the NFL you know Rosal sent me I'm here to talk merger but we got to keep this under wraps because if Ford gets out then like all hells gonna break loose and oh by the way the number one sticking point for the NFL that he tells Lamar up front they will not consider a deal otherwise is that Rosal remains commissioner of the combined league so hunts like I think we can work together so they start working discussing there no notes there's no written notes it's just like them chatting with each other for a couple months as they start the other owners don't know about it which is hard because when you're not the designated representative you can't say I'm coming to you with something I know will work you're saying hey enemy I know you can't know for sure that I can get this done but you have to trust me enough that I'm pretty sure I know my fellow owners enough that they would agree to this so if you and I can kind of get close to agreeing to something then I can take it to them but this is all subject to them blowing it up yes very delicate situation now you might ask why on the NFL side are Rosal and Shramp not going to their counterparts on the AFL side they're going right to the owners to Lamar well there's a weak lame duck commissioner at the AFL guy named Joe Foss and especially as the war and the TV money start escalating between the leagues the AFL owners he isn't up their respect they don't trust that he can be the general to lead them to war against the NFL so right as the negotiations start happening at the AFL annual meetings the owners fire Joe so the commissioners out on the AFL side they decide just like the NFL did with the AFC hey we're about to go to war think it again serious with the NFL we need somebody who's going to kick some ass for us they draft fellow owner head coach GM of the Oakland Raiders al Davis to become the new commissioner of the AFL all right so now we've got this cast of characters to pay in touch into on the NFL side there's the commissioner Pete Rosal and Dallas Cowboys GM text Shramp and on the AFL side there's new commissioner and Raiders owner al Davis and the chiefs owner Lamar hunt and Lamar hunt of course was the guy who started the whole AFL in the first place and al Davis legendary there's a quote about him in America's game outside of Oakland it was not certain where al Davis would finish in a popularity contest among sharks the mumps the income tax and himself if the voters were the other American League football coaches Davis would probably be third edging out the income tax in a thriller he is the epitome of Amafia Don you can't trust al Davis any further than you can throw him and he is the perfect new head of the AFL in this war and basically the head just to go beat him up in negotiation I mean at this point it's like hey we fired our guy we understand we're in a negotiation just like go get the best deal you can and if you have to piss everyone off such that you have no working relationship with the rest of the owners al Davis is a kind of guy that's like oh I'm totally up for that that's fine it for the next 30 years everyone that I have to work with hate to me they don't let him know about the merger negotiations they don't actually want him to negotiate they just want him to start a war and improve their negotiating leverage I see in literally one of the most incredible unforced errors of all time the NFL fires the first shot in the new war as soon as Davis takes over so in May 1966 the giants in the NFL break the gentleman's agreement they go over and they poach a veteran from the bills in the AFL a kicker literally a kicker they start a war over a kicker and it makes sense it's the giants because they're the most harmed here I mean they have in their own city the jets with Joe name it once this happens though the other NFL owners are just apoplectic a giant sonar Wellington Mara they're like you're throwing this all away over a kicker so the owner of the cults the quote that is attributed to him God damn it Mara if you wanted a kicker why didn't you just ask me I'd have given you one so any of the 30 million Americans who play fantasy football can relate to this situation so Davis gets the news that the gentleman's agreement has been broken and the kicker has been signed the kicker signing heard around the world while he happens to be literally in the middle of meeting with the bills owner supposedly Davis he just sits there in his chair and he leans back and he smiles and he says well we just got our merger and the bills owner is like what are you talking about and Davis says because now we're going to go out and sign all of their players and we will destroy them and they will come begging to the table some doctor evil shit right there totally that night the New York times asks Davis for his comment on all this which by the way you couldn't design better drama especially doing the NFL offseason to like keep America interested in football amazing the New York Times asks Davis to comment and he responds quote this is something I've been aware of and I anticipated the probability but you don't make threats at a time like this our answer will be an action this is not the time to speak ooh I want to steal that word for a word for something in the future so great so his first reaction like any true mafia Don he doesn't really want to go into all our war because he knows that's going to end badly for both sides he wants to send a targeted message like the equivalent of you know a fish raft delivered on the doorstep or a horse's head in your bed exactly the horse's head that he decides to send is he is going to target Roselle's old team the Rams and he's going to sign their quarterback away we just went from a kicker to a quarterback that escalated quickly well you got to ask a lady you can ascend a message you're going to come at the king you best not miss yes so within three days the readers have signed away veteran star quarterback for the Rams Roman Gabriel and this is where again the NFL makes another tactical error they don't respond to that they don't come to the table nothing happens so a few days after that Davis does unleash all out war talk about anitrust violations he literally directs the GMs of all the AFL teams to go out and sign all of the quarterbacks in the NFL which to do this is an economically negative move of course which is why he didn't want to do it they're already making the maximum amount you should be willing to pay them for what their brandy or team or likely close to it and you're going to have to pay them a lot more to switch leagues so Lamar hunt of course gets word of what's going on in meanwhile he's in secret negotiations with Texan Rozele for a merger and hunt like Rozele's very diplomatic man you know he would never do anything like this he doesn't think this way and he gets word from the oilers from their GM that Davis just instructed him to go sign the 49ers quarterback and hunt is talking to the oilers like no no no no this is too far stand down i'm canceling Davis's orders don't go do this the oilers GM gets off the phone with hunt calls up out Davis and says hey Lamar just called me heard about what we're doing he told me to stop Davis supposedly sits there for a second and asks did you give Lamar your word that you wouldn't do it the oil is GM says yes Davis sits there again thinks about it and says fuck it sign him anyway so they do the oilers go sign the 49ers quarterback and that is what makes it all work so Davis hangs up with the oilers calls hunt and he's like you dumb ass why on earth would you stop me from doing this i know you're working on a merger i am your best weapon that you have i am giving you leverage of course i need to do this and Lamar is like oh uh yeah okay go ahead right i'm not being in sydnary against you this is a weapon for you yes i may be a thug but i am your thug in this case so within a couple days it's all over on Wednesday, June 8th, 1966 the merger agreement gets announced in a press release unlike with the a a fc this is a true merger all of the a fl teams will join all of the NFL teams together they promise to add at least four totally new teams and cities right so there's 24 combined teams and they promise to expand a 28 over the next three four years yep they announce that because of the separate tv contracts on the a f l and the NFL side they will not begin a joint season immediately they'll let the new a fl tv contract play out which will go through the 1969 season the first fully combined season will be in 1970 but in the interim they will start hosting a new pro football world championship game between the winners of the two leagues starting in the 1966 season and boy that would be a super event for television this officially called a fc nfc world championship game sounds like a doozy sounds pretty cool to watch some other points to the deal there will be a single common college draft starting immediately no more of these separate drafts no more babysitting no more ridiculous contracts which of course took by the antitrust and player treatment the players hate this of course rozel will remain the commissioner and al davis is going to go back to running the readers which davis is fine with that's all he really wanted anyway not announced but included this I believe only came out much much later the a fl franchises did collectively pay the NFL owners 18 million dollars to join the league over a 20 year period yes this though was an enormous victory for the afl for two reasons one the NFL obviously had a the larger TV contracts so that's just like found money right there b they had all the apparatus they had NFL films NFL enterprises et cetera everything and by the way immediately even before they combine the leagues officially in 1970 they form afl films for that three or a minute and NFL films hires twice as many people and they go film every single afl game to starting immediately so those are both in themselves huge reasons why paying only 18 million dollars was a win for the afl the even bigger reason when the negotiations started between shram and Lamar the NFL's initial asking price was 50 million dollars per team from the afl as franchise fees so to go from 50 million per team to 18 total paid over 20 years all thanks to al davis the afl owners owed al davis a big glass of champagne shall we say that's an incredible leverage shift over the course of the negotiations and it happened in like a couple months yeah there are some other interesting deal points to one of them is that the 18 million actually didn't go to all the NFL teams they went to the giants and the 49ers because those were the two teams most affected by now having another NFL team in their city interesting that makes a lot of sense and I'm like pretty sure of that if anybody listening to this knows that for sure I know that was floated I don't know if that ended up being in the final deal points but it's basically an indemnity that I think is how it got written down that because the existence of this merger now causes one of the league ownership rules to be in violation which is no two teams can be in the same media market well we now have a problem we need to compensate you for that and I think the giants actually got more because joe nameth was the other one in their city and so what you also start to see because of this deal is the real modernization of the NFL they decided that anyone with less than a 50,000 seat stadium needs to change that they said that for what football has become after this merger modern NFL in America that's not a suitable place to play football anymore and so you either need to build a new stadium or expand your stadium and then the other final thing that is a consolation prize for the AFL is that they actually got to bring their records over whereas the aFC I don't think they did I don't think those counted as NFL records I did find this is linked in the show notes in our sources I kept reading about the NFL records and the NFL rulebook and the end house like does this exist or is this like theoretical every year the NFL publishes a 1000 page PDF of all of the historical everything all the scores all the games oh that's awesome it being in PDF for makes it pretty useless but I assume it's a PDF of a physical book that exists with all the records in it I would assume somewhere through NFL enterprises you can probably buy a pigskin bound version of that yes so this announcement in June of 66 you would sort of think okay this now just clears the way the next few decades are just laid out in front of us there's one league there's no real competitors what could possibly challenge football and the answer is yet again the law of the land in the United States so in October congress actually passed a law to allow this merger and grant yet another antitrust exemption this time Lyndon Johnson signed it into law and you might say well why did they need another one well the merger of two completely different organizations that were competitors that's kind of a different thing then allowing one ownership group or one trade organization to negotiate on behalf of a bunch of sort of member teams so this actually is a different antitrust issue right it's actual monopoly versus collusion the first one was collusion right this is creating a monopoly and so resell and the NFL are calling on all the favors they can get but the bill that will allow them to do this is stuck in committee and so here's the paragraph out of america's game rosell seeking a way to break the log jam called his friend david dixon to see if he knew a north Louisiana congressman on the committee for someone as sophisticated as pete he was rather naive when it came to politics at dixon and so he eventually finds his way to the house majority leader hail boggs who is an old fraternity brother of dixon's at Tulane and he said I can find the votes for this and this is how the new orland saints came to exist yes and there's basically a quid pro quo where boggs said that he would pass this law and allow this merger to happen whip up the support whip up the votes yes if there was a implicit promise that Louisiana would get a NFL team I'm going to quote this again walking up the stairs of the rotunda when the vote looked like a sure thing resell was ever his usual humble self congressman boggs I don't know how I can ever thank you enough for this this is a terrific thing you've done what do you mean you don't know how to thank me he said new orlands gets an immediate franchise in the NFL and rosell says I'm going to do everything I can to make that happen at that boggs stopped in turn on his heels heading back into the committee room well we can always call off the vote well you result took two giant strides after boggs turned around him gently and said it's a deal congressman you'll get your franchise amazing so it's like how many presidents and how many congressman and how many like the NFL requires this perfect storm of post war America technology the growth of television all these innovations all this flywheel and also the repetitive cooperation of the US government so once this past is congress and the merger is approved remember it won't actually happen until 1970 but we're now in the 1966 season there's this little matter of the world championship game this super matter and this is again credit to rosell and I think it's counterparts you know like sunny in in the AFL saw that this was an incredible opportunity there'd never been anything like this before this is the wholesale invention of a new major sporting event for the first time within the TV era nothing like this had ever happened the world series was created way before the TV era totally and when you mentioned before during the Johnny and I this game the greatest game ever played that that drew 40 million people and that was much earlier in the TV effication of America it wasn't really the NFL that we know there's all these other teams there's all these other markets so if we can sort of tailor make a game for national television as this entertainment event it can be much much more significant not only that these guys are smart their smart business people their smart media people even though the TV contracts are already in place on the NFL and the AFL side for their respective seasons including their respective championship games this is a new game there's no contract in place yet for this so they rebid it the rights to this world championship game to all the networks and CBS and NBC are living because they've already got the rights to the respective leagues they thought they both had a championship game but it turns out they both had a semi final so what ends up happening they both feel like they can't bear to not win the rights to broadcast this new game they each end up paying $1 million for the rights to both broadcast it so this game now is going to be broadcast to the nation on both CBS and NBC and in addition to them each spending a million dollars for the rights to this one game they also both pledge to spend one million dollars each in promoting it in the lead up to the game this is unprecedented there's never been anything like this in media history this ended up actually having a 79% share of American TV whatever Nielsen measures so it's the share of all the TVs that are turned on at this point because it was on two networks incredible it ended up being watched live by over 65 million people super bowl one at the LA Coliseum you can't call it that David this is the AFL NFL world championship game I apologize the world championship game at the LA Coliseum and in like such a perfect symbol of the new world order the new media landscape largest television event in history unprecedented groundbreaking live in the stadium the LA Coliseum is pretty big it seats about 95,000 people only 63,000 people showed up live there was only two-thirds what attendance live at the game and it didn't matter at all when I tweeted about Super Bowl one some like pictures from it the other day and I didn't realize you can see there's an area that stands where people aren't sitting I assumed it was like too late or too early that's like during the game they didn't fill it that's during the game wow they didn't fill the stadium and everybody got rich anyway okay so a few things leading up to this again like God they're so good Rosal and football at this time they're just architecting all of this live so they know this is an incredible opportunity nothing has ever happened like this before during the age of TV they're creating a television event whole cloth so they'll totally lean into it media week that is a deliberate invention by Pete Rosal and the NFL leading up to the Super Bowl all the crazy interviews everything that happens that we take for granted right now like that was intentional it was designed it was created that way the commissioners press conference the Friday before the Super Bowl yep which is designed to take the pressure off of the coaches and the players who have been being grilled all weeks so that they can actually prepare for the game and it's about league business so there's all this news that comes out about the NFL and how it will be changing for the next year right before the Super Bowl to draw this attention to the NFL right before the Super Bowl and that's just the public facing stuff during the week leading up to the Super Bowl they host parties they host events they host concerts they host experiences not for the public but for their partners for the TV partners for the advertisers for the press it's all about adding the gloss and the sheen to the people who we're going to add the gloss and the sheen literally Rosal's directive to the NFL staff was he wants every media person and partner leaving the Super Bowl to be saying man this is a lot better than the World Series it's great so great the game itself the Packers end up destroying the chiefs totally validates all the NFL teams the game on the field they had a huge superiority complex they were like the AFL is inferior they'll never win how do we let these bozos in our league the next year in Super Bowl 2 the Packers again beat down the Raiders this time and if this were a football podcast we'd be talking about the dynasty of the Packers but it is worth saying wow the dominance of the Packers right around this time Vince Lombardi winning the first two Super Bowls there's a reason it's called Lombardi trophy now it wasn't for Super Bowl 1 or two and then the one game we will talk about here Super Bowl 3 yes by this point the game is formally called the Super Bowl the press had been looking for something to call it and you know Lamar Hunt I think had been the one who observed his kid playing with a WAMO Super Bowl and so in the league discussions were sort of going on about it he proposed Super Bowl but Pete Rosal hated it he wasn't serious about it like I think Lamar was like it's just kind of a funny placeholder name yeah but then it just stuck but it came out in some press interview and then they just ran with it and then it was out of the league's control yep all right so Super Bowl 3 the narrative leading into the Super Bowl is the old NFL soon to be NFC teams that's real football that's real football the AFL you know it's fluff and there's like real bad blood between the coaches and the players on the field Super Bowl 3 the Colts versus the Jets the old Colts Johnny United's different era the 1950s against Broadway Joe Namath and the Jets and this is still Baltimore Colts right Baltimore Colts yes in the lead up to the game the Colts are 19 point favorites heading into the game nobody thinks the AFL can compete they've been destroyed the last two years and then during the media week this is the reason we're talking about this sporting event here in the VITS of this business podcast it's just like oh my gosh you can't design this any better Broadway Joe guarantees an AFL victory during media week during a press conference like you can't make for better TV drama than that there's this very famous photograph that will link to in the show notes of Broadway Joe at the pool during media week with the playbook in his laughter he's in like you know every's the sex symbol he's like in his you know swim trunks and there's just all these pressing cameras and all these women like gathered around him like staring at him and it was a moment like it was all over the you know news all over television all week like what a incredible media event and then during the game Joe delivers on his guarantee huge upset beats the Colts the first AFL victory over the NFL at the after party Carol Rosenblum the Colts owner is like totally desolate he comes up to Rozele he's sobbing and Rozele is like just like so many conversations here he's like oh no no don't worry this is the best thing that has ever happened to the game and to us and he's so right that seems like one of the obvious playbook themes here is every time you think you just got beat by some other football team or entity or personality it ends up being so good to raise the profile for the game that everybody wins it turns out the answer is most of the time everybody just keeps winning yep as long as there is drama as long as there is competition everybody wins yep I mean this is the great paradox of the NFL everything is about the game on the field and nothing is about the game on the field at the same time what it is about is making sure the game on the field is compelling whoever wins they all win well and this is kind of the debate today between the new group of owners and the old group of owners the original owners are so steadfast in this is about football and we make a great entertainment product but there's football at the core and the thing that they're all a little bit nervous about what the new group of owners who are so excited about building these unbelievable businesses and taking on more and more sponsorships and sponsoring team jerseys and on field sponsorships and building the spectacle around every game and what if we had a super bowl halftime show at every game it's like are we not a football product anymore are we some kind of entertainment franchise that is lost its way and I think that's the interesting dichotomy between owners these days yeah how far is too far but at this point in time they are nowhere near too far yes lean way and do it the next year the chiefs beat the Vikings and the pre merger super bowl series ends tied two to two two victories for the NFL two victories for the afl again could not be better for pro football and the newly combined NFL because that leads right into the first joint fully integrated TV negotiations for the 1970 season this feels like it's going to be a big package oh boy of the networks going to have to pay up and pay up they do they decide to keep both CBS and NBC essentially with their same packages CBS airing the NFC games and NBC airing the AFC games there is some realignment of the conferences so some of the NFL teams go over to the AFC the combined contract value it is now a four year contract combined contract value of 156 million dollars that is 40 million dollars per year that's a lot of money and this is where the genius starts of the NFL realizing we don't have to just sign one contract and for anybody who's looked at the contracts today there's a lot of contracts and there's pretty much not a TV distribution company that is not distributing some little shard of what the NFL has carved up but them realizing here in 1970 we don't just have one deal to sign we have an aFC package and an NFC package and we might actually be able to invent some more here too yes so David take us to Monday night oh let's go to Monday night so they got CBS they've got NBC remember ABC ABC has been out in the cold for several years now since the AFL signed their second deal with NBC which is a real shame because you've got runer lich there he's a visionary this is still before ESPN right still before ESPN well well before ESPN 10 years so yeah that's still far off in the future but ABC is clearly interested in sports yes clearly interested in something so Rozele and Rooney start chatting Rozele has always supposedly always had the inkling that football and the NFL would do really well in a prime time slot but this is crazy like you were talking about a little while ago Sundays were perfect for football Sunday afternoons because the networks didn't have anything else to air the accepted thinking at the time was like oh sports a perfect for Sunday afternoons but like the core business of the television networks right sports is not prime time is showing shows and news and entertainment in prime time and that is not sports that appeals to the widest range of people and that we still don't know for sure that the NFL is that you know it's very telling that all of these networks had separate sports divisions and that ABC didn't even have one until they got the first AFL deal it was the separate thing and just to keep tracking our baseball versus football comparison this moment in 1970s right around the time where the NFL is a clipsing baseball to become America's favorite sport it's been slowly gaining ground over the last 30 years and the merger plus the creation of the Super Bowl really puts the NFL here squarely in the lead making it the perfect candidate for this sports prime time experiment indeed so Roselle is like this can work and Renar Lidges like yeah I think this can work so they brainstorm and together come up with the idea for one single game every week with incredibly high production values broadcast in prime time in the evening on Monday nights after the full slate has concluded on Sunday and oh my gosh so many advantages to this on the Sunday games they're always have been so many games that happen on Sunday you can't watch them all all at once they're all happening concurrently you're seeing different games in different markets there's not a national event to watch because the way the local affiliate works it's still that this point in time where you can't watch a home game at home so whatever is on TV in your city is wherever your team is playing if they're playing in a way game and no NFL on Sunday if your team is playing a home game either you're going to the NFL game on Sunday or it's a non event for you that week right and that's on the viewer side but from the production standpoint for CBS and NBC they're sending each of them like five six seven TV crews out all across the country like their resources are getting totally deluded every Sunday they can't put all their effort into one prime time game and the broadcasts other than the Super Bowl and honestly like even kind of the Super Bowl at this point in time are pretty bad we talked earlier about they got better and they learned they didn't learn much they were still referred to around this period of time 1970 as football in a cathedral you had no fun camera angles you probably had three maybe four cameras in the entire broadcast and most of it really is just that 50 yard camera that sort of zooms in and out and the announcers are kind of relying on the fact that you're watching the game so they're not really commentating that much they would just sort of help you know that there's audio associated with the broadcast you're watching yeah I mean step back and think about the last NFL game you watched the transitions between the camera angles the music the sound effects the microphones the analysis the sideline reporting the lower thirds the graphics none of this existed the notion that there's play by play in color this idea that there should always be someone talking saying something interesting while you're watching a game yes so this whole vision for Monday night football that Rune our religion ABC can make happen for the NFL and new meteorites for the NFL to sell more revenue they've got it all ironed out all the details and right before they're about to sign a deal Rosal's like oh yeah by the way we have these partnerships with CBS and NBC we got to offer this to our partners first which you know Rosalindle he has this reputation and history treats him as like a incredibly kind incredibly accommodating and I'm sure that's true but he had a little bit Al Davis in him too he knew exactly what he was doing here he knew that there was no way that NBC and CBS were going to take this package yeah he just wanted a stocking horse he's like I don't want to leave any money on the table with this whatever we're signing here they have to fear that we're going to walk totally you know Rune of course freaks out this is his baby this is his career within ABC he's been pre-selling this to his bosses so he looks bad if they lose this now so they come in with the over the top deal ABC gets exclusive rights to Monday night football for a new deal new product 8.5 million dollars per season and the other deal was the other deal was 40 per season for essentially 15x more content I think right each TV network is paying about 20 to have either the AFC package or the NFC package on Sundays and ABC is coming in and now spending 8.5 just for one game on Monday nights and you might say whoa that's terrible they're way over paying for the amount of content that is but actually what you want to be paying for is the smallest amount of content possible that gets distributed to the widest audience possible so you actually should be willing to pay up to 20 million as long as the aggregate number of viewers that you get on that day is the same because if I'm ABC I'm like wow those guys that really sucks for them having to produce 4 or 5 6 different games I only have to produce one and it's nationally broadcast across all my affiliates this is amazing we're gonna go hard on costs on the production side to make it the most dazzling possible experience and we're gonna make it back boy did they ever the first Monday night football game that airs that season is watched by 60 million US households that is like literally super bowl 11 I mean super bowl one was 65 they invented a holiday out of nowhere and it's every week they totally invented a weekly holiday it's amazing CBS and NBC must have been pissed seriously because it's also you know they signed the contract thinking we between the two of us we basically have a lock on all the football and then they invented more football exactly and for the NFL the newly combined NFL they invented more football they invented revenue amazing and by this point the NFL starting to wake up to this idea that you know they're still not willing to play with the blackouts at all but maybe people watching on TV can be better than people coming into the stadiums maybe there's enough money in this that for us to be nationally broadcast on a Monday night I still think it was blacked out in the home market but they recognize the value of everyone else watching and how that's even more important than the stadium itself okay so I made a list of things that Monday night football invented that was not a part of your typical football NFL broadcast before Monday night football and it is astonishing this is everything that you expect in every NFL and frankly every college game that you watch now and it was brand new for Monday night football and in fact was Monday night football exclusive for 20 or 30 years in a lot of the cases but the overriding idea that we are going to cover a football game like show business this is not a sport or broadcasting this is showbiz and we will make you feel like that so what are we going to do we're going to put cameras at field level we're going to put cameras on people's shoulder and they're actually going to get to sort of run around and get up close footage of people while they're celebrating touchdown dances or when they're running back in from the sideline we're going to put cameras on the 20 yard lines in addition to the 50 yard line so that we can get a straight down view when they're in the red zone that's not just sort of this weird sort of from the side angle on it on touchdowns like we're going to get great footage head on during touchdowns instead of two commentators we're in a three man booth and there's going to be real action oriented commentary there and of course we can't talk about my night football without Howard Coussell and his unbelievably unique style of narrating and really injecting himself into the story of the broadcast rather than just being a sort of opinionless third party observer he created a little bit of a foil to playoff of for the other commentators where there was real relationship and you were tuning in not just to watch whatever the football was but to watch these announcers who you sort of got to know over time and really observed their charisma with each other about the game that's exactly what I was going to say it's the same dynamic with podcasts now it's like they became your friends in the booth right it's not just that you're listening to business stories it's that you're hanging out with David and I well we talk about business stories it's one of the first examples ever of realizing the power of that they went from the four cameras that typically would cover a Sunday broadcast to nine cameras and then eventually up to 17 cameras they invented the parabolic microphone coverage that you always see on the sideline those sort of clear plastic microphones that are aimed at gathering the sound from on the field they had 40 engineers they had 20 production people they invented these split screens you could watch two cameras concurrently cover the game they had on field interviews shots of cheerleaders to add a little bit of a sex appeal to the game for the first time and they also used green screens which is so funny to watch some of these early I guess they didn't have room in the booth according to the patents places yes pn video that we watched about this where for the three man booth they needed more space than they had in the press box so they ended up putting them like out in the hallway and built a little custom room to do this in but the background wasn't good so they put in a green screen and then they would put another camera in the press box and so they would superimpose that the field was right behind them but it actually wasn't it's so obvious watching it today like floating on the stadium it's hilarious yes but this is revolutionary stuff yes and there was one other really really big innovation and this was a thing that would go on to be the predecessor for ESPN as a network for sports center as a program and it would create billions and billions of dollars of enterprise value and that is replays yeah the highlights before we talk highlights did you say the theme song too no yeah I thought actually that's where you're going with ESPN I mean the theme song is like there were no theme songs before this right this notion you're actually tuning into a program that has an associated pump up song that is built for that franchise is unique okay so let's talk about highlights so how could you have possibly watched highlights before my night football well the games were on Sundays and that was really the only football that was on all week you know we didn't have the internet there wasn't ESPN there wasn't sports center so there really was no place to go and watch highlights now football and all sports are unbelievably highlightable events that if you string together a bunch of the very best plays it's really really interesting and really entertaining especially if they're covered by great cameras now compare this to baseball where not only was there no place to go watch them but there was no one capturing the footage to even highlight it but NFL has NFL films and using high quality cameras and film stock they are capturing great camera angles of every game and so between Sunday and Monday the NFL films team would go and take all of the footage from the game the previous day cut up a highlight reel and as soon as possible get that to whatever city the Monday night football broadcast was happening in so that they could play it at halftime and Howard Coacel could give his commentary often having never seen the footage while the highlight reel is playing in the background and really invents this idea of for the first time we're going to watch highlights of yesterday's games I kind of imagine the highlight reel was literally being slid into the machine as they were getting ready to broadcast it because think about the logistics in that you get the film stock back from all the games all around the country back to NFL films they produce the highlight reel they get that finished reel back to the Monday night football location which is another location somewhere around the country totally all within 24 hours it's really amazing there is one interesting piece of legacy out of all of this one of my favorite things in preparing for this episode is discovering all the pieces of the modern deals that are in place that have been layered to high heaven that have their origin in some interesting logistical piece of how the lead used to work I think the way that the rights are cut up today includes highlights as a part of the Monday night football package oh interesting so the way that the rights are sold today one network it's the aFC on Sunday one gets the NFC on Sunday Amazon now has Thursday night football ABC ESPN Disney has Monday night football and then of course there's NFL Sunday ticket which is another completely different set of rights I think the way that ESPN has the rights to all the NFL footage for sports center is because it is bundled into the rights for Monday night football because that is the origin of highlights no way oh that's super cool yeah because I saw a few times in different legal blogs trying to dissect exactly how the rights package worked they kept saying Monday night football and highlights and I was like oh and that's probably also why ESPN is so invested in keeping the Monday night football package because it gives them so much of the value that they get out of sports center oh yeah there's so much more value in that specifically for Disney and ESPN versus any other better yes interesting and if any listeners know this for a fact or have any more color on this I would appreciate it acquire at FM at oh yeah god I can't believe we're only up to 1970 I know well the good news is this is the good news yeah yes you can't get any better from this I mean this is now the fully formed entertainment products of the NFL and they add stuff like Sunday ticket and Thursday night football and everything else over the years but the trajectory is set there's some ups and downs in the 70s but it's basically just like Gonzo for the NFL there's one more presidential intervention in 1973 Nixon really really really likes watching the redskins but he's sick of taking the helicopter to camp David to watch their away games which he actually was doing which is unbelievable he was a nut Nixon literally phoned in a play for a redskins playoff game from the White House maybe should have been paying more attention to the forward policy and things like that Nixon was not in many ways yes but camp David is sufficiently 75 miles away by the way there was this whole cottage industry that sprouted up of hotels that were outside of the 75 mile radius and there were buses so people would go to these hotels and they would get rooms for the day to go watch the games this dynamic formed like plot lines on sitcoms in the 70s in the 80s I think the Bob Newhart show this was like a plot line of like they go to a hotel to watch the kid have heard about this yeah it was a thing so Nixon calls Pete Rozel personally the president the sitting president United States and says hey we're in the playoffs this year you know I think it would be a good idea for you to air playoff games not every game but playoff games locally and Pete Rozel even in 1973 is pretty dug in on this issue that it's a bad thing and it's cannibalizing to our most important thing our gate revenue if we do that so he says no to the sitting president and so then Nixon goes to Congress and says will you please draft legislation which got known as the blackout ban and so because Rozel denied the president there is actually legislation that was passed in order to force the NFL's hand in broadcasting away games locally and what's so cool there's an amazing patents places episode on this because Nixon recorded everything in the White House to the White House tapes the Watergate tapes all that's that like this is on tape Nixon's conversations directing his staff and Congress to like appease his whims with the NFL which was good for the country it's all on tape it's an amazing episode it was wild and this is one of the things that Rozel got super wrong the right thing was as soon as possible the NFL to get as much distribution as possible because the TV rights would become the most important revenue line but also the thing that most fuel the flywheel that more people watching the games is better for everything for continued fandom it's like how Disney wants you to consume the content so that you go to the parks and you buy the merch so that Disney plus came out as a very cheap option it was one of his few strategic flaws I think was gaining the content for too long yeah and I don't know if this is directly related but I think so much of the 70s and the 80s and the 90s were also about just like the continued growth trajectory of the incredible marriage of the NFL and television and the money just keeps getting bigger and the stage keeps getting larger and the viewership goes up and you know all the things yeah and this is probably we're saying that we aren't going to go blow by blow on the NFL timeline past 1970 the way we did during the Rozel era there's a bunch of stuff to skip like the usfl and all the teams moving cities and deflate gate to focus really on the strategic moments that created the conditions of the NFL's business today yep all of those great stories but like you say don't really contribute strategically to where the NFL is today so probably the biggest impact decision that happens during the time may be related to like this continued focus on the gate the league first mentality kind of gets broken or diluted with the stadiums that you referred to along the way because as all the teams start moving into the bigger stadiums they start building amenities into the stadiums and the stadium experience totally changes which it needed to as television became prime is there had to be a reason to go to the stadium stadiums become all about the luxury boxes the sweets the experiences the corporate partners the advertising the drink sponsors all of this stuff and that becomes huge money for the NFL but it's not shared money it's all local money yes this is my biggest criticism the thing that got them here this league first mentality is eroding because of the way that the revenue splits are happening so you look at the local stadium sponsorships you look at every stadium is dedicating more and more real estate to luxury suites a lot of the local merchandise sold in the stadiums is local revenue and so the teams are making more and more money locally and I mean more money overall so it's all good but a greater percentage is coming from things the teams are doing on their own and you got to wonder if that individualistic I'm Jerry Jones and the cowboys deserve all the revenue mindset will be the thing that eventually kind of causes them to get unseated in some way and you know I think the thing that keeps the competitive balance in place even as revenue diverges is the salary cap yeah this is a great place to talk about that well let's go to 1993 and talk about the first time free agency and the salary cap comes into the NFL how that's computed and how that impacts the sort of leverage going forward and first why don't we think another one of our very favorite companies here at acquired Vanta over to you David yes Vanta as many of you know is the leading security compliance company on the internet they automate up to 90% of the work for the most sought after compliance standards like sock two ISO 27001 and they get you audit ready in weeks instead of months when you use Vanta to help enable your security compliance audits you get up to 400 hours of your team's time back and 85% cost savings this is incredibly important for two reasons especially as we head into the operating environment in 2023 one having security compliance and audits enables revenue right can sell to bigger customers to bigger customers to large customers to an entity like I don't know the NFL they're not going to work with you if you're a software vendor or any type of vendor unless you're sock two compliant at a minimum and probably many other things if you want to sell to the healthcare industry you got to be hip-hop compliant and as for any company but especially for startups and especially in this operating environment do you want to take your teams time and resources to do everything that's required to reach those compliance standards absolutely not you should use Vanta and make this way easier and more efficient well for a limited time and this is new acquired listeners and get a thousand dollars off of Vanta so go to slash acquired or click the link in the show notes to get started thanks Vanta thanks Vanta okay so 1993 rolls around the league has been negotiating with the players association for a while I think since the 60s in various collective bargaining agreements but the 1993 one is unique it puts some stuff in for the very first time and specifically the players have been really mad about something called the Roselle rule in the NFL and I think this actually does get legally struck down it's not literally called the Roselle rule but you know he was commissioner and he sort of stood by it and it basically prohibited free agency this is the thing where if a player wanted to move to another team the team that they were going to would have to reimburse the team that they were leaving for a negotiated amount and so it added a lot of friction to signing a new player so it had two practical effects it hurt the players ability to earn the most money and it decreased the likelihood that a player would move teams right I think importantly the compensation afforded to the team that was losing the player wasn't just economic too readily draft picks could be involved yes that's right and so the NFL didn't really have free agency for a while and in 1993 players finally got it at least as long as a player had been in the league for four years in exchange there was a salary cap put in so this was the league saying okay fine but we're going to make sure that I'm pretty sure it was capped at some fixed percentage of the amount of revenue that the league generates right so that today is actually a pretty high number it's 48.8% or something like that so players are effectively a partner in the league because the league's success ends up being their success not necessarily evenly distributed among all players by any means in fact quite the opposite but at least players are virtually guaranteed in whole to make close to half of the leagues overall revenue but how does that work with local and national revenue well since it is based on the total revenue if a team makes a whole bunch of local revenue and the salary cap is the same between them and another team that doesn't make a lot of local revenue from a fancy stadium they're going to have no problem making the obligation that they have to pay the players close to 50% because it's a fixed amount and they make a bunch of gravy locally on top of that amount and you're saying that that fixed amount is a league wide aggregate including all the local revenue from all of the teams yes so this potentially could create a big imbalance right it's okay as long as the local revenue doesn't become too big of a part but at some point you have to imagine that what is 48.8% of league average could be 90% of what I make as a team in a small market with a crappy stadium and then because I have to pay players so much there's no way I can pay for other stuff and so you know my coaching gets hurt or the production for fans gets hurt or something that makes me a less competitive team even if the players on the field are paid just as much as the players on the field from other teams yep and importantly this collective bargaining agreement and the advent of this form of free agency for the NFL I think was the first CBA that Pete Resells successor Paul Taglibe negotiated so it really was a new era for the NFL yes and it's interesting because I think in 93 when this salary cap first came out it was just of the shared revenue but now that in the more recent agreements it includes all the revenue and local revenue is actually growing as a portion of the overall revenue for the top teams unshared revenue for teams grew from 12% in 1994 to 21% in 2003 and is over 30% today so there's definitely a meaningful and ever growing part of NFL team revenue that really does come from just the team itself and what it can do in his local market not from that sort of locked brotherhood of world in it together league revenue yeah it is a serious threat to this magical flywheel that has made the NFL function and succeed well beyond any other sport on a revenue basis in the world given though football and the NFL is not the most popular sport in the world it is by far the highest monetized and largest sport by revenue I think actually I don't know if we said this up front I'm pretty sure the NFL is the largest single media business in the world not an aggregate diversified media business but like if you consider the league as a single property then I think it is the largest individual single property in the world it's a good question the cops would probably be like Marvel or Lucasfilm yeah I looked at that bigger than Marvel bigger than Lucasfilm really yep because the NFL does 18 billion a year in revenue right now which is expected to grow to 25 billion by 2027 yep I believe Marvel's not anywhere near that wow yeah that's wild because it's an annual basis that's every year I mean this TV contract that they just signed the 10-year deal is for a hundred and twelve billion dollars across all these entities just wild and just to share what that specifically looks like CBS broadcasts a Sunday afternoon package for 1.85 billion a year Fox has a Sunday afternoon package for two billion a year they invented a new skew the Sunday night package and they invented this a while ago but NBC has that for 1.7 billion a year Disney owns Monday Night Football as we mentioned for 2.55 it is a single game per week and it's the most expensive package it's incredible Amazon has Thursday night football for 1.3 billion a year and of course then we just got the news last month that direct TV has lost NFL Sunday ticket and that is moving to YouTube TV NFL Sunday ticket is also a genius move because you're reselling the same content you've already sold it's the same content it's the content that is exclusive to CBS Fox NBC that those networks produce I'm pretty sure it's even like their cameras there on our talent all that but the NFL it has the exclusive right to bundle all that together and sell it as a package directly to a consumer if you want access to all the games if you don't just want the ones that are on TV near you if you want the ability to watch any game at any time and it is incredible to me that that is worth two billion dollars given the NFL is actually not doing the work to produce it the people who are doing the work to produce it are the people who are paying for the privilege to cover those games amazing and then there's more now and let's catch us up to the present day there's revenue from the NFL films division I think it's probably a couple hundred million dollars I would expect at this point in time there's other licensing rights particularly video games and madden so I don't think it's public but it was reported that the latest madden licensing deal with EA was a total of $1.6 billion for a five-year rights wow which man remember that episode we did with trip on EA back in the day was so fun and talking about the origins of madden that's a three hundred million dollar a year deal so that's like a sixth of what one of these channels pays to broadcast the actual NFL that's what EA pays to just license the use of the player names and team logos and all that yep oh I assume player names is actually licensed from the players association separately it's all single negotiated I believe it's reported that I think six hundred million of the 1.6 goes to the players then there's fantasy both betting and non betting yeah and this is a good point to fully bring us to today I think it is totally reasonable to say that the things that powered the rise of the NFL were national TV post war prosperity the rise of the middle class the Madison Avenue explosion and the league first mentality but all of this is in the 50s 60s and 70s the thing that powered the NFL to be such a dominant force in society today is fantasy football and sports betting so let's talk about fantasy first great there's like 30 or 40 million people a year in the United States that play fantasy football thus making it the way that the centerpiece of conversation with their closest friends and families and co-workers which means you have to watch football in order to have those conversations with the people that are closest to you in your life fantasy is such a great example of driving and adding to the rosel flywheel better products deep and fan engagement more viewership more advertising which really now translates to more revenue opportunities because there's revenue opportunities from fantasy Sunday ticket that whole package basically was to cater to two audiences one bars and restaurants who want to be able to show multiple games within their establishment but two and even bigger the fantasy crowd they're going to be willing to pay a lot of money to see all the games live and then that feeds back into the product and the flywheel spins and of course then their sports betting which is now becoming legalized in lots of states but has been a force for a long time of course you could bet legally in Las Vegas but obviously tons of people have bookies that can just place bets for them no matter where they lived and I'm shocked shocked to find gambling going on in this establishment so shocked I don't know it's very similar how we mentioned prohibition earlier despite alcohol being illegal there was plenty of it to be found and in this example when you've got money riding on a game you are absolutely going to tune in I looked it up just to put a number on this the current estimates are that 46 million Americans or 18% of betting age US adults bet on the NFL this year and that number continues to grow that's just this year yeah wow people bet on the NFL more than any other sport in the US riding reports 81% of sports bettors bet on NFL games versus just over 50% for the NBA and 44% for Major League Baseball interestingly the NFL doesn't generate meaningful revenue from betting yet though I am sure they will in the future yeah you can probably bet on that hey you so I guess it's worth pausing to understand the shape of the NFL's business today and how the revenue breaks down so on average about two thirds of any given teams revenue comes from shared national revenue that we talked about the remaining one third comes from the local revenue but again this is just on average so some teams are very good at the local revenue like the Dallas Cowboys and some teams are very bad at this like the bills or the lions and I have some numbers to put that in perspective this past year each team got right around 350 million from the shared league revenue but that extra local revenue obviously can cause a gigantic swing in the teams total revenue and Forbes has an estimate that the Cowboys made over a billion dollars last year whereas the lions only made 450 million so not really much on top of the shared revenue from the league wow there's so much for the league first mentality from Jerry Jones there right so it's also useful I think to slice it a different way rather than just the shared versus local here is how the NFL team revenue breaks down purely by product so this is essentially answering the question how does the NFL make money so 61% comes from media most of that is the TV from the shared league revenue 10% comes from general seating which is regular plastic seats another 10% comes from premium seating for the proletariat yes the premium seating that we mentioned is the sweets and all that stuff that's a big growing revenue line for the people with my stadiums and most of that is corporate right I think so that's my best guess it's super different city to city this is probably the most variable yeah 10% comes from sponsorship and advertising and then about 9% is other which I'm guessing is where NFL films and a lot of that stuff sort of lies maybe the madden deal isn't there I don't know if it'd be there or in media yeah so that's the shape of the NFL as a business today so before we kind of finish that out and get into analyzing the business I mentioned the complicated relationship that people have with football in the 2000s it became clear as day that CTE is very real and caused by playing football and causes shorter life spans and immense physical harm to players and CTE as many of you know is chronic traumatic and sepulopathy which is a terrible brain condition that develops from the many repeated sub-concussive hits to the head and the symptoms are devastating mental emotional suicides everything I mean the NFL settled a billion dollar lawsuit to pay out victims and families of CTE yeah you know it's even worse than that there's a bunch of dimensions here yeah I played football all growing up middle school high school college you know my feeling in this was in the 90s and early 2000s you know my feeling on the matter was I'm for sure risking my body by playing but the risk calculation on my mind was all short term I could tear an ACL sure I could break my arm sure I could get a concussion sure but in my mind those were all the same things like there was no broader understanding among general football population or there's been a bunch of research on this or the NFL players themselves that there was real long-term mental emotional risk to playing the game and then here's what's really bad is the NFL knew it and they covered it up so the NFL started doing research into long-term effects of concussions and other head trauma from playing football in the 90s and then they sat on the data for a long time and then when they did release it they claimed that there was absolutely no provable link no evidence at all that head injuries from playing football led to long-term damage the NFL didn't acknowledge that until 2016 super bad I mean there's the well-spread movie concussion about it we don't need to go into a bunch of the specifics but I think like from the acquired standpoint and the NFL audience standpoint this was a major major trust-breaking moment I feel guilty enjoying football I think a lot of people do I don't know that that's a super widespread that's probably a west coast you live in a city you read about a lot of this stuff type thing but certainly it affected it enough for LeBron James to say I don't want my son playing football I mean that was a huge cultural moment one there's the direct impact like you're talking about and I think you're right that's probably limited in the broader landscape of the American you know media diet but the second order effects are pretty large from this one is what you said about parents allowing and wanting their children to play football certainly the statistics are down now youth football remains robust college football remains robust I don't think youth football remains robust from 2010 to 2012 it declined 5% per year a lot of the data is showing that continued interestingly all youth sports are down I don't think football is down much more than other youth sports but video games social media phones and the pandemic too yes youth sports are like way down so all the feeder systems for all pro sports will be dramatically less 20 years from now than they are now and come on football is going to bear the worst of that yep totally but I think the real risk and this is starting to be shown out in the data is how our future generations going to view the NFL and football and if you look at the data US adults as a whole 33% say the NFL is their favorite professional sports league and that's down like maybe a little bit and I think basketball is at like 11% which is where I got the 3x stat for Americans prefer to basketball yep soccer has grown a lot baseball has declined significantly in the past couple generations but if you look at Gen Z only 23% of Gen Z say that the NFL is their favorite professional sports are 10 points less than the broader population and basketball in Gen Z is 19% right there pretty close to football from a revenue perspective the NFL today it makes twice as much as basketball but that's a pretty damning trend looking at where Gen Z's interest lie yeah we can talk much more about the broader context of the NFL and analysis but this whole thing was just bad period for the NFL how do you bury these studies and how do you deny the existence of these things when people in your organization have been hired to commission this research and then you're burying it for decades and it's your players it is your product on the field the betrayal of trust happened on so many dimensions but also the timing of this was really bad this came out at the dawn of the social media era had this happened during say you know the 60s 70s 80s like of course what it actually was would be just as bad but the Rozele NFL approach control the narrative would have worked so much better we would not be talking about this in the same way but it came out at the dawn of the social media era and that really was botched by the NFL yeah that's a great point it's like the old playbook sort of didn't work anymore in the social media era it's also interesting to note who wasn't producing content about concussions I mean this will Smith movie came out that I don't think was through the media channels of any of the NFL's partners I think the NFL wields a lot of influence and saying oh you may not be a part of the networks that get our broadcast in the next generation I don't think this is true but there was accusations that the NFL created a crappy Monday night football schedule a few years ago to get back at some of the ESPN commentators for the way that they sort of were critical of the NFL and then ESPN ended up actually firing those people and they said it was for unrelated reasons but I think the NFL wields a lot of influence over their broadcast partners and thus over how the NFL's talked about a of course they do be that's bad in and of itself see again the timing on this that I don't think the NFL understood or was prepared for that strategy would have worked really well 30 years ago but in the social media era where individuals have Twitter accounts and players have Twitter accounts and all of those fired reporters have Twitter accounts a lot harder to control the narrative yeah speaking of hard to control the narrative let's talk about blackballing calling cavernick and I think an interesting place to start is the job of the commissioner so the commissioner is not the president or CEO of football with any obligation to customers the way the CEO would or a purview over high ranking executives that they can order to do things the owners are not their executives and the commissioner's obligation is not to the fans the commissioner is hired to do one job and that job is speak for and do things that are in the best interests of the owners as a whole and so if the most powerful owners want something that is what the commissioner does that is what the message is from the NFL the NFL itself is a very thin layer on top of a whole bunch of teams that are their own very large businesses in fact a lot of hay was made about the NFL switching in 2015 from a nonprofit to a for-profit the NFL has like very little net income who cares what it's tax filing status is it all gets distributed out to the teams right the teams are their own tax paying entities in their own businesses and so you know Roger Gnell makes 40 plus million dollars a year to do what the owners want and they hire him to do that and they will fire him if he doesn't do that oh man there are these great quotes in America's game where the owners are talking about p-resel with the representative of the players at the time they're negotiating contracts and the players are complaining that p-resel isn't being neutral in these negotiations the owners like of course he's neutral we pay him damn well to be neutral so yeah the commissioner of the NFL is like the ultimate in shareholder responsibility in fact shareholder responsibility is his only responsibility yeah he is acting as directed by the owners which we should say that direction by the owners includes the two most important powers granted to the NFL front office by the owners one negotiating their revenue share deal with the players association which is the collective bargaining agreement that we mentioned with the salary cap and two their deal with the TV networks and of course this is their largest expense on the player side and their largest revenue stream on the TV deal side but back to Colin Kaepernick yeah so in the good old days of football it was a bunch of reasonably young and our pricing owners who loved football and owned teams it wasn't clear if they were going to be good businesses or not but they were super competitive the league as itself and thus all the owners were cowboys trying to make it for themselves in the world and feel the thrill of willing something into existence and those people all got old and didn't want to change at all now most of those people are dead and it's their descendants who are also old who on these teams yes and so now there's these very interesting artifacts of the league being grown up old and stodgy the incumbent something like that when they were wants to start up especially when it comes to just acknowledging that a guy can protest the national anthem yep I do think when that happened in 2016 it was a lot more of a radical act than it might seem today and there were a lot of people at the time who were deeply offended by it he was using the NFL's platform to sort of make a very personal argument and there were a lot of people even the NFL who understood why he was doing it because 70% of the NFL is black so there was a lot going on here right and we should say what actually happened Kaepernick in 2016 took a knee during the national anthem to protest police brutality and racial inequality in the US after that season he was a free agent zero team signed him and of course he had some disappointing seasons and injuries but the NFL never explicitly said that all the owners colluded and agreed nobody should hire him for taking a knee but let's be really the NFL black ball and Kaepernick after this 100% oh Kaepernick filed a grievance and eventually reached a confidential settlement with the NFL I mean the whole macro thing here is very strange of the owners to let this seemingly minor thing turn into the gigantic media mess the way that they did yeah and I think the interesting thing for the purposes of our discussion here about this I don't think this ever would have happened or happened in the same way in the NBA the NBA embraced both social media and the strategy of letting players have their own platforms be their own voices and promote the league through that and the NFL was the opposite of that like they were the command and the control we own the message players do not have a voice and like there was no clear example of this I mean tier point earlier 70% of the players are black the players are the core product on the field they're effectively your partners they make 48.8% of whatever the league makes up which makes them effectively an equity partner oh yeah in the very same way that Warren Buffett always refers to the government as our large silent shareholders but bottom line the NFL wildly mishandled this let it get completely out of hand this is the way that we know of Colin Kaepernick now he's sort of like an icon for this thing so I mean if what the NFL wanted to do was not amplify his protest by blackballing him and making him not able to play it totally blew up in their face and he became a national headline for months and months and months right which is emblematic of the NFL not understanding the social media era yep so all this to say it was very compelling for David you and I to spend a bunch of time talking about the NFL up through 1980 and the Roselle era but the Paul Tagliaboo era and the Roger Gadelle era I mean revenues have gone up team values have gone up games have gone from standard death to HD to 4k but you're not particularly more inspired about what the NFL has done in all these years and it's sort of no wonder we wanted to spend less time on it because it seems like it's just one train wreck after another in terms of mishandling situations I don't know it's certainly the end of the heroes journey sort of happened at the end of the Roselle era yeah and it won't hurt their business for a long time that's the interesting thing I think this is a good point to transition into analysis and why don't we do playbook and then do power one that just really strikes me through all this is the Lindy effect despite everything you just said football is bigger than it ever has been $12 billion a year in revenue from the TV deals alone a huge amount of revenue and now diversified those revenue sources it's not just old line broadcast networks trying to hang on that are paying them this money like no it's Google and Amazon that are paying them this money they're paying what close to $4 billion a year from the biggest tech companies in the world yeah the NFL is going to be just fine and that revenue is almost a surely going to grow at a very healthy clip so even despite all this people love their football guys don't love watching football totally me too I felt it was important to open the episode with that I feel like I'm a slight apologist for still loving football as much as I do I was getting ready to tweet that wow super bowl one looked really fun thing and I was like I wonder if I'm going to take heat for people being like huh I wonder if I think less of Ben now because he really likes football and that's probably overly sensitive but the fact that the thought existed is not good for the NFL long term and I know that I represent a more left-leaning group of people which would cause me to ask that question to myself that most people wouldn't even cross their radar but not good long term that that thought occurred two things one I mean again that just reinforces the power of the lindia effect to me the NFL is just fine and it's going to be just fine for a very very long time now I do think the younger generations thing is a real risk and I think related to that is one basketball definitely won the social media era in a way not as to his bigot degree as the NFL won the TV era the basketballs on the rise and related to that is number two the NFL has never figured out international many fits and starts have you read about these home marketing agreements no it's really weird the NFL now because there's zero international interest in the NFL like zero like they go play these other games in other countries and the people who watch them are people from the US who fly to go watch their favorite team play in some more exotic I mean for god's sakes baseball has a robust international presence right and as we talked about our NBA episode I mean basketballs entire future growth and current sort of grounds wall popularity is young people and international it's the second most popular sport in the world and growing to soccer very very rapidly so the NFL has tried NFL Europe kind of shut that down couldn't get the owners to care about it this home marketing agreement thing that they're doing is saying that teams have an exclusive right versus other NFL teams to market in certain countries oh no way I didn't see this I think it's like the cowboys can advertise the cowboys in Mexico it's that sort of thing because they want to try to build affinity for teams where there's like some theoretical mapping to that country based on ethnic groups in the area or proximity it's a very odd sort of fools air and that international expansion that does not seem like a sound international strategy to me no and the question kind of becomes how can the NFL continue to grow or can it because the average number of people who watch any given NFL game pick your metric is it the average Monday night football game is it the average kickoff game of the season is it the average Super Bowl it's like up and down over the last 20 years it's amazing that it's as high as it is when people don't watch anything else on TV but I honestly I'm having a hard time understanding how they grow the fan base well clearly the flywheel is no longer spinning faster it is still operating very efficiently but like the core to growing the original NFL flywheel is increasing fan reach and engagement and that's no longer happening right and then you have this interesting question of is college football starting to pay players competitive to the NFL or additive because college football has fueled the growth of the NFL I mean think about it this way the NBA and major league baseball teams have to pay to operate farm teams that no one wants to watch or play in and the NFL gets all the benefit of all the development of all of these players in their college years for free right they benefit from the storylines around them too so when someone comes into major league baseball and gets promoted out of the minors everyone's like who cares I have no idea who that person is whereas the high smithrofy winner who you know about what their childhood is like comes out of NCA football out of the story lines are fully baked and ready to go yeah college football has been the best thing to ever happen to the NFL for basically its whole existence right it was the worst thing for the first 20 years and then it was the best thing good point yeah I think the biggest players getting paid in the NCAA right now with the sort of weird way that the booster stuff works is like two million dollars they're not competing for talent and I don't think the NFL will start trying to sign earlier college players I don't think they'll be competing directly or in the same order of magnitude the revenue that big colleges make in that these conferences make isn't NFL size but these are huge deals so the NFL for comparison has a 12 billion dollar aggregate set of meteorites that it sells the big 10 deal is a billion dollars a year they just signed a seven year deal at a billion dollars a year which is twice their previous deal from 2016 ends up somewhere in the neighborhood of a hundred million a year going to each school the SEC deal is kind of a bargain it's three hundred million dollars a year with ESPN I don't understand how the whole SEC is worth only three hundred million a year when the NFL is worth 12 billion but that I don't know just kind of feels like poor negotiating all this to say the business of college football is still much much smaller than the NFL but it'll be really interesting to see sort of how it as players start to get paid more where it finds it's putting in the landscape and if it changes it all from where it is today yep okay so that's college football a thing in playbook here that I think is interesting to talk about is the relationship that the NFL has with its players as a supplier and with the networks as a customer so it got itself into this trap for a while where it was negotiating with the networks and so it would sign a big deal to get a bunch of revenue and then would quickly have a negotiation coming up with the players and they seemed to have switched to this thing now where they sign a collective bargaining agreement for a decade with the players I think they did that in 2020 that last through 2030 and then in 2022 that's when they renegotiated the 10 year rights for media so they seem to have switched to this which is good business decision probably doesn't bowed well for the players but before anyone knows what the big new revenue contract looks like they go and they lock in all the pricing on their suppliers now granted it's a rev share it's a percentage basis yeah right so in that respect it's fair but it is quite clever to have gotten off the TikTok cycle of you know having the players have a bunch of leverage after seeing what the media deal looks like and doing it in this order yep the other thing that I've been sort of charting is the media deals go up dramatically in value but the average viewers kind of stays the same like in 2002 the kickoff game had about 20 million people watch and it rose and it was in the mid 20s and then it dipped back down below 20 and last year about 20 million people watch the kickoff game so we're in about two decades of audience stagnation yeah so why is it that the media rights are worth so much more when the number of audience impressions stays the same I'm curious where your head is on that I have some theories but on a cpm basis it seems like the advertisers are all just paying more money now or at least the TV networks believe that they can make more money from something and so they're willing to pay more for the rights that's a great question so without having thought about it too much my first instinct is to say I think it's scarcity value and that I don't think there's in the modern media world anywhere else except live football where you can hit a huge amount of people all at once across demographics yep I think that's definitely part of it another argument would be well they're finding a way to put more ads lots into the same amount of media but that's not true they've actually held flat or in some cases even decreased the number of commercials over the last 15 years in NFL broadcasts so you're thinking okay the audience size about the same the number of ads lots is about the same so what else could be going on here I think part of it is your right is that the networks are quickly getting into a place where they're like we don't really have any other content that people want to watch so we kind of need this no matter what and that advantages the NFL and the negotiation where they come in and they say look I know you used to be super profitable on buying these rights from us and then your business on the back end was selling all these advertisements against it we think you should just compete against each other until your margins are zero and we're gonna accrue all the profit pool now because there's basically nothing else that you'll put on that people want to watch I think that's probably right both in that over time regardless of what happened with the media landscape the NFL would probably be able to run that strategy and capture more of the profit pool because there's four major competitors now with Fox on the customer side for those networks for the last decade run the counterfactual of the networks no longer head football they don't exist anymore this has been life support for them for a decade so here's the interesting thing is you might say like well if the margins are raised or thin they need a ton of volume because effectively what is happening here is the profit is getting reallocated to a different part of the supply chain there's no more value in distribution and all the value is accruing to the content creator you could make an analogy to the airline industry where no one was willing to pay for a better experience on a flight all the margin got competed away between all the airlines so all the airlines had to merge because you had to have massive massive scale that's also what happened to these media companies that are distributing the content I mean AT&T slash direct TV NBC slash universal the companies that are buying the rights are massive combinations that can actually afford to generate any margin and I didn't dive in to look at like and I'm not sure you actually could isolate this of what are the unit economics of buying NFL rights and then selling a bunch of ads against them but I have to imagine they're much worse than they used to be they have to be I mean with these numbers like there's no way that they can't ever road it and it's pretty genius that the NFL doesn't do this themselves that they rely on broadcast partners because they basically observed that they can get all these people to do all this work and pay them all this guaranteed money and the NFL still gets to keep all the profits right and they can resell it like six times over right the NFL doesn't have to film the games other than NFL films they don't have to you know have the broadcast trucks they don't have to have the relationship with the consumer and do all the direct marketing to the consumer to onboard to their direct video platform they don't have to sell the ads to the advertisers they somehow have outsourced and commoditized all of that and I think they get to keep the vast majority of profits and will continue to shift that balance in their favor this is probably good time to bring up the Amazon deal that we've referred to with Thursday night football and news is coming out this is the first season that Amazon is the exclusive destination for Thursday night football right correct yeah they used to air Thursday night football also on Fox and on the NFL network which is the NFL's own channel to do mostly non-game programming but some experimental stuff themselves like red zone and alternate game broadcasts but Thursday night is just Amazon now and news is coming out now right at the end of the season that from a economics perspective for Amazon and an ad basis it vastly underperformed expectations yeah so then Amazon is having to do make goods with the advertisers because Amazon wasn't able to get enough people to watch the streams because frankly I think a lot of people want to watch the NFL on TV and it's kind of complicated to figure out how to stream it and watch it through Amazon and I know it can just happen on my little set top box in my Apple TV install the app and this that and the other thing but you know it's easier for most people turning on channel three so it's totally fascinating watching the balance of power in the value chain you might think huh well is the packaging component that the NFL does the packaging of the talent and the coaches and creating the storylines actually were all the value lies it's interesting to me that the players the NFL PA has managed to negotiate for half the revenue good on the players association for getting that big a piece of the pie because they've actually done a pretty good job of managing to shift some of the value from the NFL even further upstream to the NFL suppliers rather than letting it all sort of collect in the packaging component the NFL has yeah doing this whole episode has made me really realize that there is a huge amount of value add that the NFL and their partners bring to the products beyond the players now nobody should ever share a tear for the NFL and the owners at the expense of the players ever but if you were to make an argument that the players are everything they are the product the game on the field that they play is the product full stop they should get much more I don't think that's a fair argument they play a football game but the NFL's product is sports entertainment yes completely agree with that there's so many here that we've talked about it's just the NFL's sort of for the greater good mindset getting them to where they are today it's going to be so hard for them to keep taking advantage of that going for there is a very interesting one which is on a revenue basis you know it's an 18 billion dollar a year revenue business the NFL actually owns way more mind share than its revenue would illustrate a strange statement to make is the NFL is an oddly small business for how large a role it plays in our lives and to contextualize who else makes 18 billion dollars in revenue general mills a doby and halibut the NFL's share of lips is way higher than any of those companies products what general mills is a really interesting one how much of general mills business is generated by advertising time on NFL games yeah that's a great point i'm sure a very large percentage yeah i continue to think that networks are just on this treadmill where they're just going to keep paying more and more and more for NFL rights until is actually non economic for them to do so but then they'll be in so deep that it's pretty hard to recover from that yeah i've got one more playbook theme that i want to throw in buying any professional sports franchise 10 to 15 years ago was an incredible trade for two reasons by the way just to add some numbers to it the average NFL team value 1.2 billion in 2012 so that's a decade ago average 1.2 billion and today is about 4.5 billion for the average NFL team we're not talking cowboys we're not talking giants if those were to change hands yep we're texting with our friend Andrew Marx the lead up to preparing for this episode you know he made the point those are based on Forbes valuations you can't trust those valuations i think any actual trade would have to be higher than that reason number one is just scarcity value there a finite number of these things and they're not making more and there are a lot of people that want to own them for a lot of reasons not all of which are economic yep so that's one and that's never going to change the owning an NFL team it's like a grown up NFT i just the ultimate NFT if you are a gajillionaire and you want to flex on other gajillionaires this is a way that at least is very likely to have a lot of durable value for you to get to keep doing that regardless of its underlying cash flows that is a net present happiness value positive trade for a lot of billionaires but i will say when you have something that increases in value because of social signaling and desirability and not tied to underlying cash flows that is a potential sign of evaluation bubble no not always there's luxury watches that have kept their value for centuries but it should make you wonder i mean team values have ballooned to the point where there are very very few people who can buy one today yep which means that a change in sentiment among that very narrow market will have a huge impact totally but for now i think the valuations are probably safe oh all right well to see in a few years i think they've reached a plateau i don't think we're going anywhere north of eight nine billion in the near future oh i agree i just don't think you're going to see these things you know they're going to deflate no they're not going to trade it fire sell prices yeah and we should say too all this is using a combination of estimated data from Forbes but also the green bay packers annual reports the average revenue multiple in 2012 of a team went from about four x to about eight x between 2012 and 2022 wow see a multiple expansion along with the rest of the market but i think this is going to be more durable potentially justified by the fact that most people don't actually own these things for their cash generating characteristics anyway it's a very fancy gem yep totally okay so that's one but then two the more applicable lesson i think for most people listening other maybe we've got some people listening who could buy an NFL team that would be cool include us in the ownership group if so give us a shout acquired fm at point number two is i think there was a narrative around court cutting ten years ago that was linear broadcast television is dead live sports and especially football at the last bastion but who knows how long this will last and i think that was only half the picture i think what i at least know a lot of people didn't see back then is that these leaks the NFL especially are going to be totally fine in a post linear tv era and no further proof is needed then amazon and google are the latest people to pay both loads of money to the NFL yep the NFL will make the transition to digital distribution and it's pretty amazing that they didn't need to build it themselves mlb did the whole bam tech thing the NFL has built basically no technology basically no distribution and basically no direct relationship with the audience and they'll still be fine they'll still be fine outsourced all the hard parts and they also completely whipped on strategy for the social media era but they're still fine yeah it is wild we talked about this a lot in the NBA episode but just to recap here because the story hasn't really changed lebron has well over a hundred million social media followers instagram alone and the two largest NFL players by social media following our obj and tom brady both of which are in the low teens so like a ten x difference is that interesting that people don't want to follow NFL stars the way they want to follow NBA stars on social media i think if i remember at the court thesis of our NBA episode is what they got so right through the social media era was give the players the voice give the players the platform the individual person is the hero and social media and that's so antithetical and the NFL is take away the player's voice control the message and that's also reflective of the sports themselves right like basketball is a team sport but like on the spectrum of individual to team like football is a hundred percent on the side of team and then there's just obvious stuff to like NFL players wear helmets basketball players don't wear helmet you know like it's that's little stuff but it doesn't matter as a business NFL is fine they're totally fine yep well we're contrasting leagues there's this pretty interesting thing that I've been thinking about which is this cooperative capitalist communism thing that the NFL did it was really good at creating parity among teams to be the most competitive but let's take it to the level of the players interestingly enough the NFL has been the best of any of the leagues at creating the narrowest band of player compensation in the same philosophy that they applied to the league competition now of course is nowhere near equal pay among players and like yes it's a bummer that while Aaron Rogers makes fifty million dollars a year there's a long tail of players that only play one to three years making league minimum and then turn out which I think is mid single digit millions of lifetime compensation from football so still that's good money yeah lifetime though so players are definitely veryably rewarded based on their value to any given team but the NBA and the MLB are way less equal than the NFL the superstars in the NBA like LeBron James including sponsorships makes a hundred and twenty seven million dollars a year there is no one in the sport of football that comes close there are three basketball and three soccer players at the top of the list before any football players the NFL has managed to sort of smooth the curve more than other sports have well I think this is also related to the social media thing and really this is like the big divergence between the players and the sports and the leagues NFL is a league great they're fine but the players a just the direct endorsements but I think other league players and especially the NBA have been able to build wealth and businesses and revenue streams much better than NFL players because they're the platform and the audience value accrues to them so much more yeah agree LeBron I think is already a billionaire and especially once his playing days are over he will be a multi-multi-multi-billionaire because of the influence that he has apparently LeBron James has signed some secret deal with Nike for the rest of his lifetime that's something crazy high that is just not even a counter for in these numbers wow well I think we need to do an Ikea episode at some point agree this actually a good place to flip to power awesome for new listeners this is the section we do an analysis based on the great book by Hamilton Helmer where we run through each of his seven powers that a business could have to earn long-term differential profits versus its competitors and the seven powers are counter-positioning scale economies switching costs network economies process power branding and corned resource all right I think they definitely have a corned resource if you want to watch professional football played by this set of athletes they are the only game in town yep they absolutely have a corned resource yeah I think this is like maybe the most clear corned resource that we've ever had on the show yep completely agree and clearly this is why the fight with the AFL is worth it we need the greatest players on earth to play this game and we can't have them spread across two leagues competing against each other we've all the best players then we get to do all the incredible things that the NFL has gotten to do like the media rights negotiations yep I think during the Rossell era and the dawn of the TV era I think they were counter-positioned against Major League Baseball in that while decline in revenue from the gate by adding TV certainly was a hit to them it wasn't as much of an existential hit in the way it was for Major League Baseball and so the NFL was more able and willing to experiment with the new business model of TV as the primary revenue source than baseball was able to yeah certainly and I think generalizing from that I agree with even more that this for the greater good mindset was easier to do when everyone's individual franchise was smaller but when you've got these teams that have already been around for a hundred years like good luck talking them out of a machine that already works well right there's no way even in 1949 that the Yankees would have agreed to a league first mindset yes let alone today yep when they have their own television network etc yep you know I've been thinking about branding I actually don't think this one has branding power because the definition of branding power is if somebody offers you the same thing with a different brand on it will you pay more the thing about getting multiple congressional antitrust exemptions is that there isn't another game in town I mean there's sort of a rebooted XFL there's sort of a reboot in USFL but it's not that people don't care about those because the NFL brand isn't there people don't care about them because it's not good football it all comes back to cornered resource they have the players right exactly you could maybe put the antitrust exemption you could kind of shoehorn that into process power or a cornered resource yeah or cornered resource like you said no to league is going to have that it's like totally fascinating that the government thinks it's good enough for the country to issue an antitrust exemption it's like well having a big popular sports league is good for us so let's enable that to be as big as possible oh man gosh I just thought about the cavernic stuff that's got to be playing into the NFL's thought process here too like they need to maintain healthy government and relationship not just government healthy political relationships with the current political party whatever that is yep that's a great point I think there's definitely scale economies here in the sports entertainment aspect of the product yeah there's no way you could spend the amount of money it takes to produce a good NFL game without the audience that they have to justify that level of cost even a single Sunday game would bankrupt any startup league to put those kind of production values in right I think it's about 44 million dollars per game is effectively what the average broadcast partner is paying the NFL just for like one single game yeah and just for the rights right if you're the NFL if you can go make 44 million dollars by making a game happen and that doesn't include anything on the field selling tickets or that's revenue just from piping that game to a TV network or they're not even doing the piping allowing a TV network to come on the field to show up and produce the game yeah right then you can afford to have a whole bunch of costs to make that experience happen yep value creation value capture and the way that I want to do value creation value capture here is of the value created by the NFL in the world how much of it do they capture there's a thing we didn't talk about which is taxpayer funded stadiums all the research you read about new stadiums that are funded by taxpayers and not every stadium is funded by taxpayers like the new giants jets one in New York is funded by the team in the NFL whereas like the bills one is going to be funded by the state of New York largely and every piece of research you read there is like yeah they're a best break even for communities unless it's part of some like larger economic redevelopment thing so I think the NFL has they're now unbelievably extractive of the networks they've historically been very extractive of players but now the players seem to have a pretty good or at least better deal than they ever had before and NFL teams are very extractive of communities in the stadium deals and I think if you look at the 18 billion dollars a year of revenue the NFL if you include the players captures as much value as it possibly can they're unbelievably good at value capture I mean they literally resale the same meteorites like multiple times over yes value capture pioneers I believe is a phrase that we used on another episode okay that's got to be another acquired merch start t-shirt but it is amazing how much mind share the NFL does own in my opinion on top of the actual revenue number they don't leave a lot of consumers surplus in dollars but given our earlier conversation that 18 billion isn't that much revenue compared to other companies we've covered on this show maybe there is some kind of unquantifiable consumer mind share that does exist on top of any of the revenue they generate I think you could totally make that argument I mean you are making that argument here let's be on the scope of this episode but the number of sitting us presidents that become deeply enmeshed in the then current activities of the NFL it's like almost every single president totally how can you put a price on the fun of a super bowl party or texting about an amazing catch with your dad or you know there's all sorts of things that are hard to value well it's also a little bit similar to the trading value of NFL teams in like what price would they actually trade at even as the NFL has become this incredible business they don't trade a rational economic prices because the people buying them are doing their present happiness value equations you know not economic value right as we talked about these NFL teams are valued more like scarce speech front property more so than cash flowing businesses yep I'd be curious to hear anyone's thought on if the NFL generates more value than 18 billion dollars a year hmm interestingly the NFL today is less about sort of what it was in the 40s 50s and 60s this team of guys who really hates another team and wants to destroy them at all costs and they're led by this fearless leader who's probably also their owner and maybe a player on the team at this point the players seem to recognize that they're all basically employees and the players are more in it together as co-workers than they are against each other even for players who are on opposite teams the way that before and after a game they'll come and hug each other or rekindle a relationship with another player at the end of the day they all work for the owners and so it's probably a good thing for them to recognize that now the real reality on the field and at least it means they're gonna be better at arguing what's fair for them from a business that demands an immense amount and maybe even years off their lives for a lot of people I think this has actually been a great development for certainly the pro game but football in general too like for so long I think it's a hangover from all the college stuff that we talked about at the beginning of the episode and like what football was in this sort of 19th and early 20th century American like ideal of manhood and character building but the opponent was the enemy this is war these are bad people that you're fighting against like no they are the exact same as you wearing a different uniform and I think most of those toxic elements are mostly gone from the game now or not totally gone but way more diminished versus what they used to be even when I was growing up there is definitely finally an acknowledgement that they are entertainers above all else there's a good amount of camaraderie among we are here to put on a show and be in the business that the NFL's business is in that seemed to be the case for a couple decades before the players acted like it was the case and it almost felt like they were being take advantage of which not that they're not being taken advantage of now but at least they seem to recognize what's going on well there was a whole institutional complex around it that started at pop one or football and went to high school and went to college of like this game is greater than yourself and this is about an epic struggle good and bad and like this is just not the case yep I also think is just terribly tragic reading about the long term impacts on some of these players when we didn't even talk about is that seven players from the Patriots 2001 championship have already passed away between the ages of 35 and 50 and 24 total members of that team are afflicted with symptoms of football brain injuries 2001 wasn't that long ago I remember watching that Super Bowl for the number of people that got duped into continuing to play football when if they knew the information they probably wouldn't have is just massively value destructive this is like I was talking a little bit early you know my own experience playing football if I had known what I know today I would have made different decisions for sure that era of players and before up until all this news started coming out and even the veterans at that point in time like you got to feel so bad for those guys because you didn't know now everybody knows you can have lots of different opinions but it's all out in the open like you know what's going on but yeah like 2001 those guys didn't know like that's created what did you say seven players out of their what 53 I think on an NFL roster have passed away yeah have passed away wow so let's not end on that note let's close with what's the bear case and what's the bull case for the NFL going forward we've talked about a lot of the bears the cooperative armor that has got them here begins to shatter youth not playing player safety issues the failure of international expansion frankly like for the same multiple I'd much rather by an NBA team than an NFL team but I'm curious to hear your thoughts on a bull case for the NFL my bookcase is what I've been saying here for a while now on analysis is the lindia effect I kind of think all this is noise from a business standpoint for the NFL and a staying power standpoint it's not going anywhere it's one of the most incredible cornered resources in the world it's going to be completely fine I completely agree with you and it's funny all the negative stuff we've talked about the NFL will continue to be a ginormous successful and growing business for a long time was my opinion and of course we haven't even talked about the sports betting which is now legal in the United States which we don't exactly know the ways that that will occur to the NFL but you can be very sure the NFL is going to generate a lot more revenue from legalized sports betting indeed we shall see on that front I you know I just want to say to like doing this episode it was really fun and just like on a personal note you know I've had a I think probably similar relationship to football with you over the years more complicated to because you know I talk about here and I played for many years yeah I had you know certainly a lot of mixed emotions over the past decade including many years where I just stopped watching football all together and it was really fun doing this like re-engaging with the game re-engaging with all the content around the game all the entertainment content like it is great the NFL puts out great content the quality of the play on the field is great there are so many problems around it on so many levels but it was just really fun to like rekindle a personal relationship with the game and with the NFL in particular through this episode so I think the game is going to be fine clearly the business is going to be fine whatever either of us thinks but yeah I'm glad we did this it was fun yeah all this to say can't wait to watch the playoffs I'm gonna have some mixed feelings and some cognitive dissonance but no doubt I am so excited to watch the playoffs and Super Bowl me too you ready for some football I am ready for some football all right 10 second carve out on my end go watch the menu it was a unbelievably fun movie beautifully shot that's all I have to recommend David my carve out was going to be patents places on the SPM plus which I know we talked about at the top of the episode but it's so good nostalgia Lindy effect it's right there go watch it it's true all right with that huge thank you to pilot mystery and Vanta links are in the show notes go take advantage of their discounts and just tell me heard from acquired after you finish the episode come talk about it there are 14,000 other smart members of the acquired community acquired dot FM slash slack got a merch store it's not as good as the NFL's but we're working about it acquired enterprises coming soon acquired dot FM slash store and if you're looking for more acquired between now and our next episode search acquired LP show in the podcast player of your choice we just did an awesome interview and not that our part of the interview is awesome but she was awesome with Megan Reynolds from altimeter on building a capital formation function at an investment firm with that listeners we'll see you next time we'll see you next time