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Season 12, Episode 1

ACQ2 Episode

January 25, 2023
January 25, 2023

The Complete History & Strategy of the NFL

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!

Here’s the NFL’s playbook (ayohh) on how they built the behemoth:

1) 🎲🏟️ Keep the teams competitive to maximize entertainment value

In the 1940s, one of the NFLs first competitors, the AAFC, had a major problem – one of their teams, the Cleveland Browns, were TOO good! The Browns won almost every game, so it was too predictable…The NFL realized that they needed to maximize competition, and that “on any given Sunday, any team should be able to beat any other team”Learning from their competition, they instituted a) the “stacked schedule” for more competitive matchups and b) the reverse-order draft, with last year’s worst team getting first pick

2) 🎥🏈 Create storylines around the game

After the NFL merged with the upstart competitor AFL, Super Bowl III (1969) matched the NFL’s Baltimore Colts led by Johnny Unitas, against the AFL’s new New York Jets, led by the dynamic Joe Namath.With his fur coats and poolside interviews, Namath was a heartthrob and American sensation. Before the big game he boldly “guaranteed” a Jets victory, which caused over 40 million Americans to tune in. The Jets went on to win - a massive upset!This exemplified that the NFL wasn’t just about the game on the field, it was everything off the field that made it such a compelling story.

3) 📡 📺 Outsource (and commoditize) distribution to the TV networks

The NFL doesn’t broadcast its own games, doesn’t hire its own commentators, and doesn’t sell the commercials… they outsource it all to the networksThe NFL is the ultimate example of a cornered resource – their pricing leverage over the networks continues to grow, and the TV networks (and tech companies) compete and pay ever-higher prices to broadcast gamesThis has enabled the NFL to make the transition to digital on their own terms, generating nearly $4 billion a year now from tech giants Amazon and YouTube!

4) 🤝 💵 Cooperative capitalism: it’s okay to risk short-term pain to grow the pie

In 1961, the NFL negotiated its first national TV deal, convincing all the teams to abandon their individual local TV-rights (which were in some cases more lucrative) for a the national CBS contract, split equally.The NFL has historically shown its ability to think about the long-term success of the league over short-term success of specific teams, improving the entertainment value and spinning the NFL’s flywhee lThere are a dozen more things that make the NFL teams collectively worth over $140B today (fantasy, betting, etc.), which we dive into on the episode!


Carve Outs:



We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Season 1, Episode 26
LP Show
January 25, 2023

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
January 25, 2023


Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

Season 4, Episode 1
LP Show
January 25, 2023

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

Season 1, Episode 11
LP Show
January 25, 2023

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
January 25, 2023

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

Season 1, Episode 23
LP Show
January 25, 2023

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Season 1, Episode 20
LP Show
January 25, 2023

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

Season 1, Episode 7
LP Show
January 25, 2023

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Season 1, Episode 2
LP Show
January 25, 2023

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!


  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Ben: Welcome to season 12 episode one 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.

David: I'm David Rosenthal, and I'm an angel investor based in San Francisco.

Ben: 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 100 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.

David: Wow, that is wild.

Ben: Totally wild. 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. 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 Damar Hamlin to the now obvious epidemic of CTE among former football players, players are clearly putting their lives at risk. From national anthem knees 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 entertaining. But it comes with extreme cognitive dissonance for me every time I tune in, and I know many others feel the same.

David: Indeed. Talking 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 of 2023, are black. And of course, none of the owners are.

Ben: This is very emblematic in many ways of America as it was many, many years ago painfully still in front of us today.

David: Gosh, we've told so many stories now on Acquired, where in the research and then telling them, 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.

Ben: 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. 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 I formation today, we're talking about the business.

David: We do have some sports thank yous to say. One, the great friend of the show, former US Representative Anthony Gonzalez, who caught touchdown passes for the Colts from Peyton Manning, who we also have to thank because Payton's place on ESPN+ is awesome. Highly, highly recommended. He's so good.

Ben: Yeah, he's great. I think I watched 20 episodes of that.

David: We also have a big thank you to Michael MacCambridge, author of America's Game, which provided much of the research for this episode. It's the definitive biography style history of the NFL.

Ben: After you finish this episode, come discuss it with the other 14,000 smart, curious, kind members of the Acquired Slack at acquired.fm/slack. 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?

David: All right. We start on November 6th, 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. What were they there for? They were there to play a game of football. What was football in 1869?

Ben: This is not someone dropping back in the pocket and throwing a 70-yard bomb.

David: No. It was essentially what today is classified as "mob football" or "medieval football". This had been played for centuries at this point in England. Basically, the only goal of the game was for one side, to get a ball to a certain spot on the other side. That was it. There were no rules. Any number of people could participate on either side, you could do anything up to and including maiming and killing people on the other side, or your own, which happened quite frequently.

Ben: Keep in mind, this is four years after the end of the Civil War.

David: Yes. Why were these two groups of Princeton and Rutgers students so interested in playing this game?

Ben: This terribly violent game.

David: Back in England, it was quite popular among public school students. Public schools in England are like private schools in America. These are the elite training institutions for wealthy landed gentry in England, and they were starting to adapt it into an actual sport.

Like any stepchild nation, these American college kids were 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. Around the 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 you received one point.

Ben: Okay, soccer with 25 people on a team?

David: Yes, but that was the start of what would become intercollegiate American football. This becomes, back in England, wildly popular. Over the next five to 10 years, it gets more and more codified and formalized amongst the Ivy League. It comes to be seen as this integral part of the college experience. It becomes this character building experience. It's also still wildly dangerous.

There are deaths, serious injuries, very, very common through this period, the first 50 years of football. Finally, 1905, there were 19 fatalities in intercollegiate football in the US and a serious injury at Harvard to one Theodore Roosevelt Jr., son of sitting president, Theodore Roosevelt. 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 adopt major changes to make the game safer.

Ben: You also have to imagine, of course, it hits close to home for him with his son, but he's viewing this as, hey, the people that our best and brightest are playing this game that is actually hurting the nation. We are cutting down people in their prime and we have to do something about that.

David: It's a fine line. I think the violence is a critical part of this rite of passage. Teddy Roosevelt probably likes it because this is a training ground for future governmental and military leaders of America. 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, hey, you guys got to figure this out or I'm going to outlaw this, in response, they create the NCAA. That is the beginning of the NCAA.

Ben: I didn't realize that.

David: It was to regulate, codify, and make the game of collegiate American football safer. Crazy, right? Following this new institution that becomes the NCAA, they institute the creation of a neutral zone. They abolished the use of wedge formations, where you would pile up as many people as possible behind somebody who is carrying the ball to push them forward. Apparently, that's how most of the deaths and serious injuries happen. They do make the sport safer. There are still a lot of injuries. There's not a lot of protective padding being worn here.

Ben: A lot of this predates even leather helmets. People are just playing this in regular clothes.

David: Yes, but they also made 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, hence why it's called rugby. This role that the NCAA institutes is legalizing the forward pass.

Ben: In 1905.

David: That becomes, obviously, a defining characteristic of football.

Ben: To underscore how much this changed things, football was exclusively a violent, dirty game to this point in the history of American football. But when we think about American football today, and you're watching Monday 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.

David: The beauty and the strategic element too. The offensive playbook, the defensive coverages, the audibles, there's no way a casual fan can understand all of it, and yet the ballet as you say is mesmerizing to watch. Collegiate American football just became wildly, wildly popular and it still is to this day. It is a huge part of the American sports landscape, and it was even more so then.

Ben: All right, the NCAA is formed, we've now got the forward pass. Modern football, does that lead to the NFL?

David: No. Again, very specifically, we're spending a lot of time on the origins of football in college here, but it's so important for understanding the NFL. This is a college thing. This is an American collegiate experience that these elite young men go through this dangerous kind of war-like activity.

There's this very sacred element to it, so much so that while in the early 1900s, some professional teams did start to pop up around the country. These are teams, not league, so these are barnstorming teams that would go around. There's no organized, scheduled play, but they're viewed not only just a second rate to the college game. They're dirty.

Ben: Why are you taking this esteemed thing that our best and brightest participate in and turning it into this entertainment act?

David: 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 often the same people who played in college.

Ben: I see. It's supposed to be amateur.

David: It's supposed to be amateur. This should not be a professional activity. This is a rite of passage for young men. As to the teens and 20s, that was very much the attitude. That is not to say that professional football didn't exist.

Ben: Or the same period bootlegging alcohol. Oh, alcohol is illegal except for this massive industry that lots of people are participating in.

David: 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 MacCambridge 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 unquestioned national pastime, the only game that mattered. Most fans had come to accept baseball's primacy is something immutable 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, Babe Ruth, Lou Gehrig, and all these storied parts of American history. Baseball is very much a professional sport played for money with the goal of teams is to make money and the business model is they sell admission to the games.

It's not like professional sports were all looked down upon, not at all. It was that football was this very special thing. Into this dynamic environment, in 1920 entered the American Professional Football Conference soon in a few years to be renamed the National Football League.

Ben: Finally, we get to the founding of the NFL.

David: Started on August 20th, 1920 when the heads of several of these barnstorming, quasi professional football teams in the Midwest, met at the Jordan and Hupmobile auto showroom in Canton, Ohio. The driving force behind this meeting being called is one George Halas. He is currently in Decatur, Illinois, where he is an employee of the A.E. Staley starch company. His main duty is to organize, coach, and be the star player for the company football team,

Ben: Which of course, is called the Staleys. The sponsorship is so deeply rooted in the NFL that the very first team was actually named that sponsor.

David: They weren't even sponsors. It was the employees of the company who played for the team. Now, Halas had a mandate to go out and recruit employees who happen to be good football players. That's how you got around the professionalism of this. It's like, oh, no, no, it's a company amateur football team, we're just tapping to pay these people.

These folks that come together at Georgia Halas' instigation, they have a goal. They want to legitimize professional football in the eyes of Americans. They not only had a goal at this meeting, they developed a plan for doing so. They think they can really separate the pro game from the college game and make it a legitimate thing that America is going to tolerate.

They have three parts to the plan. (1) They are not going to sign any current college players. There's going to be a strict demarcation between the college game and the pro game. They will not try and get any current college players to come play for a pro team, which would happen under assumed names. You can imagine, these college kids, they want to make money.

Ben: 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 in 100 years. That's the one concession that's been made.

David: (2) Point one, they're not going to read the college game. Point two, they're going to endeavor to play the game at a high ethical and rules based standard. This was the lesser knock against pro football of, well, this is a bunch of ruffians and barely disguised excuses to beat up on each other.

Ben: 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. There are slightly different rule books and slightly different customs that are going on. This is the idea that no, we need to unify these things to set an expectation for fans.

David: Yup, standardize what the game is. (3) Perhaps the most important, they're going to make Jim Thorpe the president of the league. These guys are smart. 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. The meeting happened at the Canton auto show room probably because of this. Jim Thorpe was the goat. He was the greatest athlete that had ever lived to that point in time.

Ben: Which is not to say if you put them through the NFL Combine today, he would win. It's handicapped with all of what we knew about modern sports science of his day.

David: 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. Jim Thorpe was a Native American who was part of the Sac and 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.

Ben: Who, of course, is the person that all of the youth football leagues are named after today, Pop Warner League.

David: He and pop lead this small, tiny Carlisle Indian Industrial School to a national championship while he was playing there against all these big Ivy League powerhouses, Ohio State, and others.

Ben: By the way, that was a huge moment for these all white Ivy League schools that think they're better than everyone else. Carlisle was really a reformation school and how to assimilate into white culture. 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.

David: The deep irony given what was about to happen with professional sports in 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. The first time that he competed in the decathlon was in the 1912 Summer Olympics, and he won the gold medal.

Ben: Wild. Wasn't he also an outfielder with the New York Giants?

David: Yeah, he played in the major leagues. Deion Sanders, Bo Jackson, he did all of that and basketball and won gold medals. Back to the 1912 Olympics, when he won these gold medals, King Gustav of Sweden was presenting him with the medals famously. As he's presenting them to Jim, he says, you, sir, are the greatest athlete in the world. Jim Thorpe famously replies, thanks, King. I think that needs to be our next Acquired merch t-shirt, Thanks, King.

Ben: Yes, absolutely.

David: 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 became the biggest professional football league in America. There's not a lot of stiff competition.

Ben: They consolidated the smaller leagues to create this in the Midwest.

David: Yes. That said, the 20s and really the 30s too, it's hard scrabble. It's an uphill battle, shall we say?

Ben: Yeah. If you look at what 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. The only ones that stood the test of time are the Decatur Staleys, the Racine Cardinals, and one we have not talked about yet, the Green Bay Packers.

David: Indeed, and the Decatur Staleys would become the Chicago Bears.

Ben: The bears. Yes, they became the Chicago Staleys and then at some point, adopted a proper name and became the bears. It's actually named after the Cubs.

David: That's right because they played in Wrigley Field and bears are bigger than cubs. 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. After the NFL is formed and starts getting publicity, in 1922, 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.

He says that, "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 achievement's sake." Of course, he's partisan because he's a college football coach, but this really was still a lot of the prevailing sentiment. The other problems the NFL faces are that most of these teams are based in small towns. They're not in big cities.

Ben: 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.

David: There was no TV, there was no internet. 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.

Ben: They're massively loss making. These teams last two to five years. There's another 15 teams that are formed between the Chicago Bears. Eventually, the New York Giants were formed around 1925 that stand the test of time. It's amazing, all these teams that spin up and spin down within five years of each other in this decade.

David: As you say, these teams in small towns, almost all of them end up shutting down. 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. They all ended up moving to the big city, where they're very much playing second fiddle to the baseball teams.

Ben: Yeah, and most of these don't even end up moving. They just end up closing their doors.

David: The other important thing, though to say about the NFL during this time before World War Two, 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.

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 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.

Ben: He's the star player and the head coach? I'd love that.

David: Unfortunately, in the mid 30s, supposedly, after George Preston Marshall came into the league as owner of the Boston Braves that became the Boston Redskins and then moved to Washington DC, at his behest, they adopted the same policy as Major League Baseball and completely kicked blacks out of the league. It wouldn't be until after World War Two, and for the Redskins, not until 1961.

Ben: 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 fan base in the south, and there weren't a lot of NFL teams at that point in the south. It was both because he was racist and also because he realized he would probably lose a lot of his fan base who were also racist by integrating his team, which was a horrible thing that it was a strategic advantage for him to get that fan base by having an exclusively white team.

David: All this would continue the status quo, the league barely creeping along until after World War Two, when both America and the NFL would change forever and pretty radically. After the war when all the troops came home and there's the GI Bill, there's this new middle class in America that didn't go to these elite private schools, Ivy League institutions or even the Ohio States of the world, or the Carlisle Indian colleges. 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.

Ben: You have people coming home, you have people looking for jobs, you have people with lots of free time, and you have this opportunity to be a new thing in America that people do with their time and dollars. 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 carry the weight the whole time or that your company is going to carry the weight of the team, you're just subsidizing losses. Every single person involved in pro football ownership at this point is not even lip service purely just for the love of the game. Now, interestingly, there's a business opportunity.

David: All these American GIs coming home from the war and their families, they don't have the same hang ups and preoccupations about the college football game that the elite did before the war. There is this big opportunity now after the war for professional football in the NFL to become a much bigger thing. They probably would not have realized it except their hand was forced, as we will see a couple of 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, 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. There were wealthy business people in cities all across America, east coast, midwest, and South Florida, who wanted to add teams and come into the NFL, but the NFL owners weren't interested in expansion.

Ben: Right. Those eight teams, the Cardinals, 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, this is crucial, the Cleveland Rams.

David: Yes, the Cleveland Rams at that point in time owned by the forward thinking, Dan Reeves.

Ben: Yes. This is the first Cleveland team that did not shut down, but instead moved.

David: The other potential ownership groups and other cities across America that want football leagues, at a certain point come 1944, they were just like, well, to hell with you, NFL, we're going to start our own league. A new professional league was founded, the All America Football Conference in 1944.

Ben: The AAFC.

David: 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 Don Ameche in Los Angeles, and wealthy businessmen in San Francisco, New York, Chicago, Miami. The NFL is in some of them, but should be in all of them.

Almost like the NFL had its ace up its sleeve with Jim Thorpe at its founding, the AAFC 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 AAFC Cleveland franchise, named after him, the Cleveland Browns.

Ben: Yes, the man who transformed football, Paul Brown. This is the very first time in 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 AAFC.

David: Yes. 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 too, thought 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, had to have 100% unanimous approval of all the owners to move a team, and they didn't want to move the team.

Ben: It makes a lot of sense. These teams have lost money forever. It's like, we're just on the precipice of having a real business here. Don't make us figure out how to get these other seven teams to LA once every six or seven games.

David: Now the wars are ending, the AAFC 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. The highest profile, wealthiest owner in the NFL defects to the AAFC, so there's a major crisis.

The first thing they do in the January 1946 annual meeting is they booed 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. The owners feel 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 on the inside who's going to be able to marshal everybody together and lead a coordinated response to this existential threat. They installed Bert Bell, 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 AAFC, and they decided it needs to be three things. (1) They need to go meet the AAFC where they are, which means where New America is, post World War Two, which means being nationwide, the West Coast, and going to California. (2) The NFL, if they're going to win, they need to put out a superior product, a better game on the field than the AAFC. (3) For the first time, they need to do a better job than the AAFC or at least as good a job at actually telling America about it. They have to proselytize. They have to win fans and win consumers' hearts and minds.

Fronts one and three are basically all handled by Dan and the Rams. Immediately after Bell comes in as commissioner, he orchestrates approval for the Rams to move out to California. It's a good thing they did because when play eventually started in the 1946 season, the new Browns in Cleveland, for their very first home game, drew 60,000 fans, which is the same or more than the Rams did for the entire season, the year before.

Ben: Paul Brown was quite the anticipated figure in Cleveland. He had coached at Massillon 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. If they failed these written tests about the plays, about the rules, about Paul's strategy...

David: He'd kick them off the team.

Ben: No matter how good they were. 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, recognize patterns and plays, and statistically manually tally. Here's what we have to do against this team and that team, here's what worked for us last year, and here's what didn't work for us this year.

David: Paul Brown was the first modern, not just football coach, but I think sports coach period in America.

Ben: Every human is flawed, so we shouldn't make him out to be the Messiah or something. 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. I'm not sure he has established them yet. But it really was saying, look, we're going to be a team of coaches that coaches a team of players.

David: And on the racial integration front. The AAFC was going to be an integrated league from the beginning.

Ben: That's counter-positioning right there.

David: 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. It's controlled then as now by the LA Coliseum Commission.

When Reeves and the Rams come out to petition their case that they should come and be allowed to play in the Coliseum, 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. This is where the public relations aspect of the Rams becomes clutch.

Ben: The Rams were so good at PR.

David: (1) They agree right away. (2) Not only that, they say, great, we'll 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 coup for the Los Angeles area and for the Rams. All this was helped out by a savvy young intern for the Rams at their new headquarters in Los Angeles, one young Pete Rozelle, who helped craft a lot of this strategy.

Ben: But put a pin in Pete Rozelle for the moment. 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?

David: 1946, the same year that the Rams moved to California.

Ben: The roster of AAFC teams is the Cleveland Browns that we've talked about, the New York Yankees football team, the Brooklyn Dodgers football team.

David: Which defected from the NFL.

Ben: Yes. The Buffalo Bisons, the Miami Seahawks. It's interesting that it has nothing to do with the Seattle Seahawks, they just reused the same name. The San Francisco 49ers, the Los Angeles Dons, so you've got two LA teams. Now you've got an AAFC team and an NFL team, and the Chicago Rockets.

David: Yup. The Dons in LA were named after the main owner, Don Ameche, the movie star.

Ben: You've got the NFL and you've got the upstart AAFC that would only last for years, but would change the game quite a bit. By forcing this competition, they forced the NFL to do a bunch of things that really were in the NFL's best interest, but they wouldn't have done absent competition. This is the first time where we really learn the lesson, the football that people will watch is the most entertaining game.

David: 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. For all that we were just lauding Paul Brown and his legendary, the teams he coached, he was too good. His teams were too good.

The Browns ended up winning all four AAFC championships. They only lose four games in four years, and the game becomes boring. There's no drama. It's a foregone conclusion that the Browns are going to win. If your team is playing the Browns and the Browns do great at home, but when they're on the road, the fans are like, why am I even going to go?

Ben: 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 as a modern Browns fan.

David: The current Browns are not the same Browns as the old Browns.

Ben: 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 whole front office, team, and ownership.

David: That's some serious rewriting of history there by the NFL.

Ben: Yes. To your point, the NFL learns this lesson here of, oh, my gosh, we've been 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 were no Cleveland Browns in our league. It accidentally happened. By observing the counter example of boring football, where there's one dominant team, it 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.

David: 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 Two era, these first few years, five years after the war, the install base of TV was just starting to roll out across America. This is still an in-person game.

The business model of professional sports was ticket sales in person attendance at the games. I don't think the AAFC model of the Browns being dominant would work ever. But at least today, you could watch the games on TV and feel 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 balance.

Ben: Totally. 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. Your goal is to sell 160,000 tickets every single weekend. What you basically need is to make sure that it's always a great game to come watch.

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.

David: I didn't realize it was that long because television is going to come in a big way in a short number of years here. Back to Bert Bell, the newly drafted commissioner of the NFL, this is his great insight that he realizes as he's marshaling the NFL owners in the battle against the AAFC. He adopts this as his mantra that literally, they made a movie with this title.

On any given Sunday, any team in the league should be able to beat any other team. He pushes this through with the owners and gets them all to agree to this. 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 Browns situation.

Ben: Yup. Before we talk about how the AAFC ended and merged into the NFL, this is a great time to talk about one of our favorite companies, pilot.com. 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. We thought, what can we do with a pilot that would be helpful to listeners? This season, we are joined by Waseem Daher, the CEO of Pilot, for tips he has four founders after starting three different companies himself.

David: Our question for you Waseem is around partnerships, and specifically partnerships as a startup. You have lots of experience with this.

Waseem: My strong view is partnerships are a waste of time. Every early stage company out there believes in their heart of hearts that there's a partnership deal that will dramatically accelerate the business, it's just going to totally change the game for them. I hate to tell you this, but this is 100% false. The reason is pretty interesting and structural, which is 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.

There are two problems there, one is velocity and one is leverage. First, big companies move so slowly, far, far more slowly than you could possibly imagine. 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.

David: In a year, your leverage position may completely change.

Waseem: Totally, your needs in a year might be completely different than your needs now. It might still be interesting, it might not. The other reason that partnerships are difficult at this stage is precisely because you are a small startup. Definitionally, you don't have anything interesting.

David: When is the right point to think about partnerships?

Waseem: 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 rates 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. 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.

David: That's going to look great in my next fundraising deck.

Waseem: It's like, well, it would be a nice feature for their customers. The problem is that it's like priority number 2500 for them. They wish they could ever get to that point in the to-do list. They're much more interested in the existential problems facing their business at any given time.

Ben: Our thanks to Pilot. You can click the link in the show notes or go to pilot.com/acquired to get 20% off your finance, accounting, and tax prep needs for your first six months.

David: Thank you, Pilot.

Ben: All right, 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?

David: Any given Sunday, Bert and the NFL do two things. First, pretty immediately after he starts, he completely overhauls the way the schedule works. 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 schedule is actually an incredibly important strategic lever. 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.

The stronger teams from the previous season, play the other stronger teams for the first half of the season. 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. There's going to be drama about who's gonna end up winning, even though the actual level of talent might diverge quite a bit within the league.

Ben: Yup, 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.

David: And the NFL still does this to this day.

Ben: I didn't realize that.

David: Yeah, this is a critical sleight of hand in making the whole thing work, but this is camouflaging. If there is a competitive balance problem underlying everything, this is only camouflaging it. How do you fix it? There's no free agency at this point.

Ben: No, there isn't. 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.

David: I know, which is ridiculous. 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. The NFL and Bert come up with the idea of having a draft of college players. 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.

Ben: 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.

David: It's incredible, the artifice that goes up around this.

Ben: 50 million people watch this thing today.

David: We are watching YouTube videos and research of Taylor Swift was at the NFL draft a few years ago when it was in Nashville. It's a huge event. It was actually the first big coup for ESPN. When ESPN started in 1979, in 1980, it was televising the NFL Draft.

Ben: Genius.

David: These two elements, stacking the schedule, and then the reverse order amateur draft form the nucleus of Bert Bell and the NFL strategy that it has had ever since which comes down to league-first. League first, team second. Some might say players third, if at all.

Ben: 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. 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 lean in harder to this shared mindset. This is before the TV revenues that are shared today. David, maybe this is a time to talk about television's impact on the NFL.

David: As we said, the AAFC only operates for four years, this plays out, the Browns are too dominant. The AAFC folds after four years, only three teams of the AAFC say, come over to the NFL, the Browns, the 49ers, and the Baltimore Colts.

Ben: Who are, of course, now the Indianapolis Colts.

David: Here we are now. It's the dawn of the 50s and Ben. Just like you said, the television installed base is here. It's common. TV set sales in America in 1946. The first year after the war, there were 7000 TV sets sold in America. In 1947, there were 14,000 TV sets sold to the market, doubled. In 1948, there were 172,000 television sets sold and it only grew exponentially from there.

Ben: I love that you looked this up.

David: By this point, in the early 50s, there were 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, thank God the AAFC 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. Also, thank God they beat them by the end of the 40s and the beginning of the 50s because now, the NFL is the only game in town for professional football in America. They're the only national league right as TVs are showing up.

Really, actually, they are the only game in town for national sports television programming period because there are 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 advent of television, the baseball owners thought television was bad, and they ended up fighting it.

Ben: So did the football owners for a while.

David: So did the football owners, but they had a lot less to lose.

Ben: Yeah, because pro football is still an underdog sport here, even in the early 50s. They're 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.

David: Indeed, baseball had a lot to lose. To be fair to all of them, in the early days, I think for a long time, local market, home television airing of home games absolutely depressed in-person attendance.

Ben: 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 whatever your local TV station is, they would block out all the home games. They would say, we need to fill the stadium because until 1977, the stadium, the gate was actually the biggest form of revenue. Why on earth would we cannibalize our experience when someone could just watch it from home? Absolutely not.

David: It would later take a presidential order from Richard Nixon to end the home blackouts. Even then, only if the home games were sold out with the blackout being 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. Ben, as you say, in the 50s, these early television experiments were being run with sports. It is pretty bad.

The LA Rams, they did an individual deal in 1950 with the Admiral television company to broadcast the Rams' home games, I think home and away games. 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. This is a really bad deal for Admiral because attendance declined 50%.

Ben: Which is crazy. For how bad the broadcasts were, the fact that that as a suitable replacement to go into the game, they would put like one camera up on the 50-yard-line, 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.

David: It was in black and white on a tiny screen, 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. Buy this appliance, put it in your home, and it's like a magical window like you have a seat at the game.

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. "Radio whets the appetite, television satiates it." It's a new revenue stream, but it's hurting the golden goose of ticket sales.

Ben: 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 AAFC that it needs to be league-first, so everyone's negotiating individually. It ended up being the case that the New York Giants were making $200,000. This is in 1959 on their TV deal. The Packers were making zero.

David: I think the Packers were making 5000. They did have a TV deal, but I think it was $5000. 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. One of the things that they figure out is, oh, television broadcasts depress the gate at home, but there's strong demand in local markets to see the team's away games when they're traveling. For the first few years, that's the main model of television broadcasts of the NFL, just showing away games, but there's a lot of demand for that.

Ben: 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 black out. It's that your local TV station only had the contract to broadcast the away games, there was nobody within your antenna's reach that was broadcasting that game when it was at home.

David: 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 $1 million in TV revenue annually. Whereas at the beginning of the decade, it was less than $100,000.

It also becomes clear that for certain football games, there's a really big audience on TV for them. In particular, the 1958 NFL championship game known as the "greatest game ever played" between the Giants and the Colts led by Johnny Unitas, a sudden death, over time, dramatic win by Johnny U and the Colts. It garners 45 million TV viewers across the country, including President Eisenhower.

Ben: Was this a national broadcast?

David: National broadcast of the NFL championship game that year.

Ben: Importantly, this is not the Super Bowl. David and I aren't being coy by not calling it that. That is not what this was. We're still missing about half the teams that will end up competing for the Super Bowl.

David: Right. But 45 million viewers, this was unprecedented. There is a huge opportunity for professional football and television, which, once again, the NFL was not the one to totally recognize.

Ben: Which is amazing. Competition does create the best product. The NFL, time and time again, had their hand forced and then reacted really well to a new upstart.

David: Totally. In this case, as the 50s draw to a close, once again, just like towards the end of World War Two in the end of the 40s, there were a whole bunch more cities and ownership groups that wanted in on this. There's a clear business opportunity. They're only 12 teams at this point in the NFL.

Once again, the NFL owners are dragging their feet. They're like, we don't really want to expand. Maybe we'd be open to the Chicago Cardinals, they're struggling. If the ownership group that owns them were to sell, maybe we would allow them to be moved, but go talk to them.

Ben: I really don't think this is a business decision because we don't want more people taking our pie. I think they recognized 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 owned the teams when they were massively loss making, so they kind of don't want to let anyone into their club even if it would be good for business. The NFL, as we know it today, is a business. You better believe it.

At that point in history, each of these teams are 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 have this thing with each other, this fraternal bond.

David: They're willing to submit to this league-first mindset because they know it's good for all of them, but that doesn't mean that they want to expand things or change things.

Ben: No, they did not. David, I am excited we are finally here, the birth of the American Football League.

David: The AFL.

Ben: Yes, their 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.

David: Let's go. 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, and do anything he could to get an expansion team or by the Cardinals. He just wants to own a football team.

Story goes, he's flying back from seeing the Cardinals and having been rebuffed. 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 too, get in line, and this person in this city and that person in that city. 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?

Ben: Yes, and thus begins the most successful attempt to challenge the NFL.

David: By far. In August 1959, he and several other owners formed 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.

Ben: Yes. This one ended very differently than the AAFC did.

David: Very, very differently. At first, Bell and the NFL are like, okay, they're friendly. Maybe better to have good relations with Lamar and the new AFL.

Ben: They're doubtful that it's going to happen. They also don't want to say anything in the press that makes them look arrogant. They're trying to pretend to be supportive until it's legit threatening.

David: Yup. But then still in 1959, right after the new AFL announced that they're going to start their league and commence operations, Bert Bell died suddenly. Once again, back with the AAFC, the league is in crisis and forced to act. Unlike the AAFC, things are going to be a little different this time because of the television aspect.

Ben: Yes, and this is all being led by, you mentioned Lamar Hunt, who was the Dallas Texans owner.

David: People might know them better as the Kansas City Chiefs today. Hunt, unlike the AAFC 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 Rickey 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.

Ben: Independent baseball league.

David: 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 would share all of the revenue from a television deal.

Ben: Pretty crazy.

David: 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 the epitome of the league-first mentality. It'll be great for us and it'll help us compete with the NFL.

Ben: In some ways, it's easy for the upstart to do this in counter-position because they have no existing TV contracts, but they do get laughed out of the room. They go to the TV networks with this. Each of the TV networks are like, oh, cool idea, but who cares about your league? No one's going to watch this. We hear your pitch. We understand that this is very innovative, breakthrough and very different from what the different NFL teams are doing, and we don't really care that much.

David: 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. 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 Roone Arledge.

Ben: This is probably the fourth episode we've talked about Roone Arledge on.

David: What a legend. Roone would ultimately become Bob Iger's mentor. Bob Iger would rise through the ABC Sports ranks in the beginning of his career before taking over Cap Cities and then obviously, all of Disney. This is Roone's big opportunity. It's obvious at this point in time in the late 50s that nationally televised football games, there's demand for it. There's a huge opportunity.

Ben: This is actually shocking. I know to everyone right now, we're like, well, of course. It used to be the case that Sunday afternoons had a hole in their schedule, like CBS had no good programming 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. 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.

David: With those early NFL deals, those were individual deals that teams made with networks and local stations. It was a local thing. It wasn't football Sunday, it wasn't a national event. This was the first nationwide, network wide, contract.

Ben: Networks now had signals that people did want to behave in this way. They could feel safe signing business deals and pursuing this because even though it wasn't what they expected, it turns out there is demand for this product.

David: Yes. This was Roone Arledge and ABC's first huge contribution to pro football in America and televising of sports. ABC signs a league-wide, five-year TV rights deal with the American Football League for $8.5 million over five years. It was by far the single biggest sports rights TV deal in history at the time.

Ben: $1.3 million to the league per year.

David: And that was before the league had played a single game. This is all before the league launches. Here we are now in January 1960, back to the NFL, they don't have a commissioner. They're upstart rivals, the AFL who haven't played a game yet...

Ben: They have a multimillion dollar contract.

David: And 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. Unlike last time where they're like, okay, great, we'll just draft one of our own Bert Bell, owner of the Philadelphia Eagles, to come in and lead us through this. They can't agree on a new commissioner. It takes 11 days and 23 separate votes of the NFL ownership groups in a total knock down drag out negotiation. There are multiple camps backing multiple candidates.

Ben: Yeah, the NFL has just gotten too big. Each of the owners has too many of their own interests to argue for they're in dire need of something or someone to unify them.

David: Indeed. By the end of the process, none of the original candidates are still in it.

Ben: Right. In some ways, it's a tough position to be in because all the most qualified people are out. You have to pick someone that nobody hates, but probably won't be very good. By day, eight or nine. That's the position that everyone feels like they're in. Oh, crap, we got to pick someone we can agree on, but that's not going to be the best person for this job, unfortunately.

David: Fortunately for the NFL, they were very, very, very wrong about that.

Ben: Lucky. It's better to be lucky than good.

David: Yes. They choose as the compromise dark horse candidate, a 33-year-old third year, General Manager of the Los Angeles Rams, former public relations intern, Compton College graduate, Pete Rozelle, to be the new young commissioner of this league in crisis.

Ben: And create the NFL that we know today.

David: It was totally brilliant. Rozelle 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 owners intention. They had to go to this compromise candidate. This young person...

Ben: Who most people hadn't heard of.

David: Anybody else they are considering would have been of a different generation, wouldn't have understood the new America in the late 50s and early 60s. 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.

Ben: 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 to stop doing things that are confusing, cannibalizing each other, or sending mixed messaging, or perhaps put a bad taste in Americans' mouths. 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, our teams, and our players, need to be on the lips of Americans as much as possible.

David: Just as a small short track record of what Rozelle 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 made them into the most profitable team in the league. They actually start making a lot of money because he gets it. They're 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 sets up the first in-house institutionalized merchandise store for the Rams. He opens up a Rams merchandise store. He partners with Roy Rogers Inc, the actor Roy Rogers had a white label merchandise brand, to bring actual high quality branded Rams' jerseys, hats, mugs, et cetera. That becomes a huge revenue line for the Rams that nobody else has, so he's got the right background here.

He comes in. This is pretty crazy. This is a very volatile charged situation with a lot of older and opinionated folks around the league that he's going to have to deal with. Within a year, he completely changed the NFL. 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 pro football to more cities.

The NFL was dragging its feet. Just like back with the AAFC now, they realized they got to go meet the enemy on the field where they are. 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.

Ben: Oh, and meet Lamar Hunt head to head right on his own turf. He's leading the AFL effort and the idea of you're just going to open up a shop and say, we're going to give away the franchise to a new owner of the Cowboys right here in your backyard.

David: Yup, right down the street. Speaking of proximity and right down the street, the next move that Rozelle 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.

Ben: Bert ran in a very idiosyncratic way too. He had obviously no computer system, but he did all of his business by phone calls. Post-it notes and phone calls is how the NFL ran, just not a professional organization.

David: Famously, the stacked scheduling, he would do it with dominoes on his kitchen table. Rozelle is 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, 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. These are relationships we got to cultivate with Madison Avenue.

After he moves the headquarters to New York, Rozelle 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.

Ben: The only way anybody's going to write about us and give us space on the sports page is if we make their job easy and put the stats right in their hands every day.

David: Speaking of writing about the NFL and publishing, the other thing that Rozelle knows is, especially with a game like the NFL which is a weekly drama, it's not just about baseball with getting the daily box scores in the newspaper. You also got to create human stories, arcs, and mythology around the game. He intentionally cultivates a tight relationship with Time Inc and specifically, Sports Illustrated.

Over the course of the 60s, Sports Illustrated really became 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 name's Pete Rozelle as Sportsman of the Year, the first ever non-athlete that it had ever named Sportsman of the Year. Think about that, the commissioner of the league being named Sportsman of the Year by Sports Illustrated. That is just a huge mindset shift.

Ben: We should also say the end of the 50s, beginning of the 60s, baseball is still the 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. They're squeezed in the middle, where people don't care enough yet, but they also have a competitive threat.

Rozelle was having to do some innovative things. David, didn't he hire writers in-house at the NFL to craft the storylines and then send those to all the reporters who 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 it a little bit and publish them?

David: Famously, he did this starting back when he was with the Rams. Even when he was a PR intern there, he would just write the stories for the reporters, which ensured that they would actually get in the papers, but too, 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 advantageous for them and helped them get where they are, but the NFL keeps such a tight grip on the narrative.

Ben: Dude, the sideline reporters aren't allowed to talk to anyone. It's silly that we have sideline reporters today. It's just an illustrative example of how tight the NFL controls the media relationships they have.

David: All this starts with Brazil. 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 are big football fans.

Ben: Yes. This is a perfect lead into what happened in 1961 right after Rozelle was on the job that would change the face of football forever.

David: It's obvious to Rozelle. Once the AFL signs their big deal with ABC, that's the path forward.

Ben: Their $1.3 million a year deal with ABC.

David: Importantly, the league wide revenue sharing national deal with the national network. This is not how the NFL operates at this point. Rozelle, 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. Finally, after wrangling and politicking with the ownership group...

Ben: The reason there's politicking is because Cleveland, Pittsburgh, and Baltimore, actually will end up losing money in the short term because Rozelle was pitching on, I'm going to go negotiate us a big group deal. They're all three saying, we already have very good deals locally. We're very popular teams. We're in great football cities. No, but ultimately they do say yes, and it really 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.

David: Once he gets to 30, Rozelle goes and negotiates with CBS which was the dominant network, both in the country and had the majority of the individual team, NFL deals. He negotiates a two-year deal with CBS at $4.65 million in rights per year to be shared equally among the teams.

Ben: Over 3x the AFL deal.

David: 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 a potentially clear use of monopoly power in bargaining.

Ben: This is the very first question where you say, what is a monopoly and what is antitrust? What is the NFL? What are the teams?  In this situation...

David: Is the NFL the business or are the teams the business? If the teams are the business, then yes, this is antitrust. If the NFL is the business...

Ben: No, this is one entity acting on behalf of itself. There's no collusion. There's no monopoly. Plus in this particular situation, they actually are in a competitive landscape against the AFL. There's a strong argument to be made that this is not antitrust. That argument does not carry the day.

David: No. Pretty immediately, the courts strike down this deal. There's about, I think, a one to two-month period where it's all in limbo. This is where the Kennedy relationships come in clutch for Rozelle and the NFL. Both the President and Bobby Kennedy in Congress, whip up enough support to pass through new congressional legislation.

Ben: A new congressional act, specifically to advantage the NFL.

David: And to allow for national sports contracts on a league wide basis. It's called the Sports Broadcasting Act. It ended 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 hosting a party at the White House for the NFL. This tells you everything you need to know right there. Pete Rozelle, all the owners, are 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.

Ben: It's that, but Roselle 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, a shining example of hard work, 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, 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. If you like the American economy, you should let us have a national TV contract for the NFL.

David: At this point in time, I think a lot of those arguments hold water. This actually was driving a lot of commerce for the nation.

Ben: Totally. Fun aside, I did the math on that $4.65 million per year deal. That value of that contract would grow 2500x over the next 62 years.

David: Wow. Did you look at what it would be if inflation adjusted?

Ben: Yes. Inflation adjusted, it's about 250x.

David: Still pretty good. On the back of this landmark TV deal, Rozelle does two other really brilliant things for the NFL in the next year. First comes another accident. The league every year, sold the rights to the NFL championship game, sold the rights to make a movie out of it.

Ben: They were always bland.

David: Yeah, they were kind of hokey, like a really rudimentary highlight reel type thing. In 1962, they got a bid for the rights. The bidding is a sealed auction. They get a bid that comes in from a guy named Ed Sabol, who has a suburban dad in Philadelphia, who liked to make home movies, particularly home movies of his son Steve's high school football games. This guy, Ed, bids on the rights to make the NFL Championship movie for 1962.

The bids were unsealed and Ed had done a little homework. He found out that the company that had won the past few years only paid $2500 for the rights. He's like, well, I can bid 5000. He bids $5000. He wins the auction. Rozelle is like, who is this guy with no experience? What's happening? Rozelle goes to visit him.

Ed pitches Pete on doing something completely revolutionary for the 1962 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...

Ben: Slow motion, voiceover.

David: Everything, sideline cameras, really a passion project to make this an incredible piece of content. Rozelle is like, well, that sounds great. I don't know if you can do it, but what am I got to lose? He lets Sabol go with it. 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 50-yard-line that pans back and forth.

Ben: 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 broadcast. There's a lot of baseball games and stuff that had 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 Sabol 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 24 frames per second cameras so you get this smooth, beautiful slow motion, it provides this unbelievable archive of the game for which other sports have no archive.

David: Yeah, and that's just the video aspect to it. There's also something that Sabol gets intuitively, the same thing that Rozelle gets, the narrative. It's not just about showing what happened, it's about telling a story. It just completely meshes with Rozelle'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 a drama, this has to be made for TV content.

Ben: It has to be super polished and it has to be super controlled. Ed Sabol's little outfit that would become NFL Films is the ultimate embodiment of Rozelle's mindset. I don't think Roselle could have created this on his own. But when you watch anything from NFL Films, it has Pete Rozelle's personality oozing all over it in terms of what we are creating is entertainment and polish.

David: For two years, Ed and his son Steve would come on board, work with them, and eventually take over NFL Films. They do the championship game. Then in 1965, Ed came to Pete with the idea of, hey, let's make this a core in-house division of the NFL, and they started NFL Films.

Ben: Yeah, you should buy my little film company.

David: 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 Sabols and with NFL Films.

Ben: There's a couple of interesting things to note too. Once Rozelle 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 many successful acquisitions we've covered on the show, he says we want to be hands off. I just don't want your P&L to ever go negative. You can run as a breakeven business as long as you're fulfilling the mission of promoting the very best of the NFL and helping to create lore and story.

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. It's this unbelievable operation to then overnight mail 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.

David: This is what's so amazing. They did all this as this investment was a labor of love and passion on Sabol's part. On Rozelle's part though, the motivation as you're saying, it's not about making money, it's about raising the stature of the league. It's about putting the 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 we'll put a slight pin on and come back to in just a minute.

The other thing that Rozelle does in the next couple of 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.

Ben: We're going to set a quality bar.

David: So anytime a fan, because it's all about the relationship with the fans, it's like a funnel, bringing them in from TV, getting them to the game, getting them to buy merch, they're just deepening the relationship. They have to have a great experience. They can't get some shoddy pennant from the Giants that looks like X and somebody else gets something from the Cardinals that looks like Y. It's got to all be the same.

Ben: You got to remember, the way that the NFL is structured,  Rozelle is not their boss. In fact, he works for the owners. They're all making money. 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. We're going to do this thing as a league and we're going to cut it equally. I don't care if your team's bad and their team's good, all the revenues can be equal just like TV. He's so good at playing the politician with the owners that they keep agreeing to give up revenue generating parts of their P&L for the league to take over on their behalf.

David: Yeah, let's take the Browns and Packers. How many pennants do you think the Browns sold in the city of Cleveland with as big and storied as the Browns are, versus the Packers in a town like Green Bay?

Ben: What is Green Bay? Is it something like the 200th largest media market in the United States? And they've got this NFL team.

David: What Rozelle is saying is just like TV, I don't care how much merchandise you sell, the Packers are getting the same check from enterprises as the Browns are.

Ben: Yup. 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. 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. There are hundreds of thousands of people who have bought this stock, so there's this very distributed ownership group of the Packers.

David: Not with any expectation of financial return, literally just so they can hold a piece of the Packers.

Ben: 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.

David: Yeah, it's such an amazing little quirk and so fun. Have you ever been to Lambeau Field?

Ben: I have not. I really want to.

David: I went once not for a game, but I was at a wedding in Green Bay. I was like, oh my gosh, I got to go see the field, so I took a run. Green Bay is this very quaint little, little town in Wisconsin. There's this giant NFL stadium in the middle of it.

Ben: It's wild. For a lot of the analysis we'll do later, the data comes from the Green Bay Packers annual report because no other team publishes their P&L, but the Packers do.

David: Okay, the last thing Roselle does in this miracle run in his first couple of years as commissioner, is he creates the Pro Football Hall of Fame in Canton in 1963. It's so cool. We got to go, we should do an Acquired field trip.

Ben: We should.

David: That would be fun. There's this amazing flywheel. 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?

Ben: To the shield, one might say.

David: Exactly. His logic is doing that, it will attract more fan interest and deeper fan interest. The more and deeper fans earn interest that you attract, the more TV dollars you're going to make. This is revolutionary too. Back in the day, you were limited to the number of seats you had in your stadium. If you're a Major League Baseball team and a major market where you're selling out your stadium, there's not a strong incentive to keep adding machines to the product, you're at maximum revenue capacity.

With the NFL and now with the new TV model, there is no ceiling to revenue capacity. 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, that improves the product, which then adds more sheen, which then drives more fan interest, and it becomes this amazing flywheel.

Literally, there's so much more to the story, so many twists and turns we'll tell, but that's the core of it. That idea is what leads to—what's the current annual national revenue for the NFL, 10 billion,11 billion?

Ben: That comes through shared agreements. It's $11 billion, and then there's another six or so that comes from local revenue that teams individually generate.

David: Yup, that's per year.

Ben: Right.

David: Just to be clear, that is per year.

Ben: It is this flywheel that makes the NFL teams collectively worth something like $140 billion today.

David: Remember that initial landmark deal off 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. All this stuff has happened in the previous two years.

Rozelle opens up the bidding to all three networks, of course. CBS wins again. Some would argue that it was a rigged bid and Rozelle was tipping off his counterparts at CBS. We may never know. They won another two-year, $28.2 million bid. $14.1 million per year up from 4.6, two years earlier. Every single team in the league now gets $1 million before the season even starts.

Ben: A cool 3x from the last deal he negotiated two years before.

David: Pretty freaking incredible, and also just says so much about to the point with the Kennedys and politics about the commerce that the NFL was driving. The TV networks were getting a great deal here. These were landmark contracts, but the attention, the viewership that the games got, 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.

Ben: You could argue that the TV networks were getting a great deal for many, many, many more years. I think at the end, I want to discuss that they're getting a good deal today. Everyone was getting a pretty good deal here because the fan base was growing so much more quickly. The number of viewers was growing so much more quickly than these deals could get renegotiated.

David: When 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, Rozelle, unbelievable first five years in office. Literally, cannot imagine executing better. The NFL is going through a major crisis. Death of its owner, commissioner Bert 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? Here's what's funny. They're doing pretty great too. Before the war and before television, if this had played out in something similar it did with the AAFC, the AAFC was dead at this point 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.

Ben: The NFL, to put a finer point on what you're saying, they had a shoot-the-moon strategy. They wanted to come out of the gate with a bang. It's almost like the Softbank 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. They could do things like go sign Joe Namath 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.

David: The Jets in the AFL, formerly the Titans. They're owned by Sonny Werblin, who almost nobody will know that name, but he was one of the co-heads of MCA, the big agency.

Ben: As discussed in our interview with Michael Ovitz.

David: Indeed. Just like Rozelle 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. Sonny sees the big second NFL deal come across in 1964. All the other AFL owners are 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, we're going to be just fine. We're going to be great because the NFL did this deal with CBS. There are two other networks out there. There's ABC, who the AFL has the current deal with and then there's also NBC. There are two bidders 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. Who's there to give it to them? The AFL.

Ben: Yup. We'll take second place when there's a bunch of sad people willing to throw money at second place.

David: And throw a lot of money. The very next week, after Rozelle and CBS announced their deal, the AFL and NBC announced that they've just signed a new five-year $37.5 million deal, so a bigger overall dollar number for a longer number of years.

Ben: Even though it's less than half the per year amount.

David: Yeah, it's less than half. It's $7.5 million per year. But by this point in time, the NFL has 14 teams, the AFL still only has eight. 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.

Just like you were 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 Namath. Probably a lot of listeners are going to know the name Joe Namath, maybe familiar with him a little bit.

Ben: Honestly, I only knew it because I saw him in a Brady Bunch episode.

David: On a Brady Bunch episode?

Ben: It's not like I was alive when that was airing, but there's a very famous episode of The Brady Bunch that I watched because it's this cultural touch point, where Joe Namath was so big that he actually appeared on a Brady Bunch episode. That's super unusual for a sports star on that day. He was such a heartthrob.

David: He had his own talk show. It's not just that he was on the Brady Bunch. Everything we were talking about a minute ago with NFL Films, Rozelle and all the brilliance there, and how it's so important in this realization that football and the NFL would be made for TV, Joe Namath was the first modern, cultural celebrity athlete. The only thing that was closer and probably bigger was Muhammad Ali. He transcended sports. He transcended football.

Ben: He's also a heartthrob. There are millions of teenage women in America throwing themselves.

David: This is exactly what I was going to say. He was the first professional athlete that appealed equally to men, women, and children.

Ben: That's a great point.

David: Before him, there was nobody like that. He comes and he's playing in New York, 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 it. He wore white cleats, everybody else wore black high tops.

Famously, he wore a mink coat on the sidelines. It's just amazing. 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 in.

Ben: Continuing that thread from earlier where I was talking about how CBS had this hole on their schedule and everyone was skeptical that sports would fill it, everyone thought sports were like a very male thing. Especially as brutish of a sport as football, they didn't think it would do well, certainly not in primetime, but not even in the Sunday afternoon slot because it's just going to attract the husbands to come and watch it, and it doesn't have a family appeal. Joe Namath is the first big example where everyone realized, oh, football totally can be for everyone.

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.

David: A plucky startup that was on one of our very first Acquired LP episodes.

Ben: You're right. 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. Now, Mystery is building a full-on employee connection platform. In fact, they are the most cost effective way to keep your team connected.

David: This is super important. Just like Pete Rozelle realized that for the media and PR around the NFL and the teams, you had to keep the media connected or they weren't going to write about you. It's the same thing with your employees. On average, teams can improve their employee retention by upwards of 25% just by connecting the right employees within their company, and Mystery helps you do that.

There's so many platforms out there and the people in the HR space that are really just survey tools backed by "people science". Mystery is turning this people science into data science by using AI to help people leaders anywhere improve the connection of their employees in a scalable and systematic way. Instead of distracting your team with all these quarterly or monthly questionnaires, they're always backwards looking and out of date.

Mystery tracks employee interactions that are happening on the platform in real time so you can see which teams are connected and which employees are isolated. Once you get the data, you can actually act on it in real time because Mystery recommends and provides the events, the activities, the introductions, for your teams that build these meaningful relationships. It's like an easy button to just make all of this happen seamlessly within your company. The best part, because it's all now connected in real time with the data on Mystery's platform, you can track your ROI on what you're spending on team events and employee engagement unlike any other of the so called platforms out there.

Ben: Yes, and Mystery has a special offer for all Acquired listeners. If you book a demo of Mystery's insights platform, you can get a free event to engage your team, which is the core product that you all know about from last year. You can go to trymystery.com/acquired or click the link in the show notes to book a demo and get a free Mystery event.

David: Also, because they're such friends of the show, Shane, the founder and CEO of Mystery, will personally give that demo to the first 10 people who sign up, so sign up now.

Ben: Worth it even to get to hang with Shane. Thanks, Mystery.

David: The name assigning is the first big post TV money contract signing in the AFL, NFL war. 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. It gets pretty crazy.

At one point, the NFL starts with what they refer to as a codename 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 to 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.

Ben: They just put up in hotel rooms and then they don't tell anyone where they took them, so nobody can tell the AFL team rep, this is where you can find the star. It's just like, you got him captive till you sign him. The interesting thing too is that the leagues aren't respecting each other's drafts. It doesn't matter if you draft someone in your league, I'm signing him to a contract in mind, and that contract is valid in the United States. I don't care what your draft says.

David: This is the battlefront. 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. They're keeping this to rookies, but still, 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.

At this point in time, by the beginning of 1966, the NFL, and in particular, the owners group in the NFL realizes that, hey, the AFL isn't going away. This is not going to be like last time. We're going to have to play ball with these guys literally.

Ben: It begins a super delicate dance of their sworn enemy, but there are some owners who see the writing on the wall very early and say, we're going to have to combine these. 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? 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 in the other league. It's this fascinating spy game.

David: This is so fun. We got to tell the story. What happens next is like a mafia movie. It's like a Godfather film. A few of the most influential owners came to Rozelle in 1966. 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 have to get to truce, which means we're going to have to merge. We're going to direct you, Rozelle, to go start merger negotiations with the AFL. Rozelle 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 superpowers, the way he's able to achieve all of this, is he really is good at pleasing everybody finding solutions that work for everyone. He says, okay, I'll move forward. He drafts the Cowboys' GM in Texas, in Dallas, a guy named Tex Schramm to secretly open negotiations with Lamar Hunt. Lamar, at this point, has moved the Texans to Kansas City, where they become the Chiefs. They have a working relationship.

Ben: Also, how great is it that the first Cowboys owner is named Tex?

David: I know, it's so great. He was the GM. I don't think he was the principal owner, but I think he had an ownership stake. Tex approaches Lamar in early 1966 and says, hey, I'm the emissary of the NFL. Rozelle sent it to me. I'm here to talk about a merger, but we have to keep this under wraps because if word gets out, then all hell is going to break loose.

By the way, the number one sticking point for the NFL is that he tells Lamar upfront, they will not consider a deal, otherwise Rozelle remains commissioner of the combined League. Hunt's like, I think we can work together. They start working, discussing. There are no notes, there's no written notes. It's just them chatting with each other for a couple of months. As they start, the other owners don't know about it.

Ben: 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, 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. If you and I can get close to agreeing to something, then I can take it to them, but this is all subject to them blowing it up.

David: Yes, a very delicate situation. You might ask, why on the NFL side are Rozelle and Schramm not going to their counterparts on the AFL side? They're going right to the owners, to Lamar. There's a weak, lame duck commissioner at the AFL, a guy named Joe Foss. Especially as the war and the TV money start escalating between the leagues, the AFL owners, he doesn't have their respect. They don't trust that he can be the general to lead them to war against the NFL.

Right as the negotiations start happening at the AFL annual meetings, the owners fire Joe. The commissioner is out on the AFL side. They decide, just like the NFL did with the AFC, hey, we're about to go to war, things are getting serious with the NFL. We need somebody who's going to kick some ass for us. They drafted a fellow owner, head coach GM of the Oakland Raiders, Al Davis, to become the new commissioner of the AFL.

Ben: All right, now we've got this cast of characters to pay attention to. On the NFL side, there's the commissioner, Pete Rozelle, and Dallas Cowboys' GM, Tex Schramm. The AFL side, there's a new commissioner and Raiders owner, Al Davis, and the Chiefs owner, Lamar Hunt. Lamar Hunt, of course, was the guy who started the whole AFL in the first place.

David: 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 a mafia don. You can't trust Al Davis any further than you can throw him. He is the perfect new head of the AFL in this war.

Ben: And basically the head just to go beat them up in negotiation. At this point, it's like, hey, we fired our guy, we understand we're in a negotiation. Just go get the best deal you can. If you have to piss everyone off such that you have no working relationship with the rest of the owners, Al Davis is the kind of guy that's like, oh, I'm totally up for that. That's fine if for the next 30 years, everyone that I have to work with hates me.

David: 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. 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. In May 1966, the Giants in the NFL, broke 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.

Ben: It makes sense as the Giants because they're the most harmed here. They have, in their own city, the Jets with Joe Namath.

David: Once this happens, though, the other NFL owners are just apoplectic at Giants owner, Wellington Mara. They're like, you throwing this all away over a kicker. The owner of the Colts, the quote that is attributed to him, "Goddamnit Mara, if you wanted a kicker, why didn't you just ask me? I'd have given you one."

Ben: Any of the 30 million Americans who play fantasy football can relate to this situation.

David: Davis gets the news that the gentlemen's agreement has been broken. The kicker has been signed. The kicker signing is heard around the world. It happens to be literally in the middle of meeting with the Bills owner, supposedly Davis. He just sits there in his chair, he leans back, and he smiles. He says, well, we just got our merger. The Bills owner's like, what are you talking about? Davis says, because now, we're going to go out and sign all of their players, we will destroy them, and they will come begging to the table.

Ben: Some Dr. Evil shit right there.

David: Totally. That night, the New York Times asked Davis for his comment on all this, which, by the way, you couldn't design better drama, especially during the NFL offseason to keep America interested in football. Amazing. The New York Times asks Davis to comment and he responds. "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."

Ben: I want to steal that word for word for something in the future.

David: It's so great. His first reaction, like any true mafia don, is that he doesn't really want to go into all out war because he knows that's going to end badly for both sides. He wants to send a targeted message like the equivalent of a fish wrapped delivered on the doorstep.

Ben: Or a horse's head in your bed.

David: Exactly. The horse's head that he decides to send is going to target Rozelle's old team, the Rams, and he's going to sign their quarterback away.

Ben: We just went from a kicker to a quarterback. That escalated quickly.

David: You got to escalate. If you're going to send a message, if you're going to  come at the king, you best not miss. Within three days, the Raiders have signed away veteran star quarterback for the Rams, Roman Gabriel.

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. A few days after that, Davis unleashes all out war talking about antitrust violations. He literally directs the GMs of all the AFL teams to go out and sign all of the quarterbacks in the NFL.

Ben: Which, to do this, is an economically negative move.

David: Of course, which is why he didn't want to do it.

Ben: They're already making the maximum amount you should be willing to pay them for what they're bringing to your team or likely close to it.

David: And you're going to have to pay them a lot more to switch leaks. Lamar Hunt of course gets word of what's going on. Meanwhile, he's in secret negotiations with Tex and Rozelle for a merger. Hunt, like Rozelle, is a very diplomatic man. He would never do anything like this. He doesn't think this way.

He gets word from the Oilers from their GM that Davis just instructed him to go sign the 49ers' quarterback. Hunt is talking to the Oilers, he's like, 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 Al Davis and says, hey, Lamar just called me, heard about what we're doing, and 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 Oilers' GM says yes. Davis sits there again, thinks about it, and says, fuck it, sign them anyway. The Oilers go sign the 49ers' quarterback, and that is what makes it all work.

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. Lamar is like, oh, yeah, okay, go ahead.

Ben: Right. I'm not being incendiary against you. This is a weapon for you.

David: Yes. I may be a thug, but I am your thug in this case. Within a couple days, it's all over. On Wednesday, June 8th, 1966, the merger agreement was announced in a press release. Unlike with the AAFC, this is a true merger. All of the AFL teams will join all of the NFL teams. Together, they promise to add at least four totally new teams and cities.

Ben: Right, so there's 24 combined teams and they promised to expand to 28 over the next three, four years.

David: Yup. They announce that, because of the separate TV contracts on the AFL and the NFL side, they will not begin a joint season immediately. Let the new AFL 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. Boy, that would be a super event for television.

Ben: This officially called AFC-NFC world championship game sounds like a doozy. It sounds pretty cool to watch.

David: 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 stuck by the antitrust and player treatment. The players hate this, of course.

Rozelle will remain the commissioner and Al Davis is going to go back to running the Raiders, 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 AFL franchises did collectively pay the NFL owners $18 million to join the league.

Ben: Over a 20-year period.

David: Yes. This though was an enormous victory for the AFL for two reasons. (1) The NFL obviously had the larger TV contracts. That's just like finding money right there. (2) They had all the apparatus. They had NFL Films, NFL enterprises, et cetera, everything.

Ben: By the way, immediately, even before they combined the leagues officially in 1970, they formed AFL films for that three-year gap. NFL Films hires twice as many people and they go film every single AFL game to start immediately.

David: Those are, both in themselves, huge reasons why paying only $18 million was a win for the AFL. Even bigger reason, when the negotiation started between Schramm and Lamar, the NFL's initial asking price was $50 million per team from the AFL as franchise fees. To go from 50 million per team to eight team total paid over 20 years, all thanks to Al Davis. The AFL owners owed Al Davis a big glass of champagne, shall we say?

Ben: That's an incredible leverage shift over the course of the negotiations.

David: It happened in a couple of months.

Ben: There are some other interesting deal points too. 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.

David: Interesting. That makes a lot of sense.

Ben: I'm 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, we now have a problem and we need to compensate you for that.

I think the Giants actually got more because Joe Namath was the other one in their city. 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 what football has become after this merger, modern NFL in America, that's not a suitable place to play football anymore. You either need to build a new stadium or expand your stadium.

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. This is linked in the show notes and our sources. I kept reading about the NFL records and the NFL rulebook. I was like, does this exist or is this theoretical? Every year, the NFL publishes a 1000-page PDF of all of the historical everything, all the scores, all the games.

David: That's awesome.

Ben: It being in PDF form makes it pretty useless, but I assume it's a PDF of a physical book that exists with all the records in it.

David: I would assume somewhere through NFL enterprises, you can probably buy a pigskin bound version of that.

Ben: Yes. This announcement in June of 1966, you would 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? The answer is yet again, the law of the land in the United States.

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. You might say, well, why did they need another one? The merger of two completely different organizations that were competitors, that's a different thing than allowing one ownership group or one trade organization to negotiate on behalf of a bunch of member teams. This actually is a different antitrust issue.

David: Right. It's actual monopoly versus collusion. The first one was collusion. This is creating a monopoly.

Ben: Rozelle 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. Here's the paragraph out of America's Game. "Rozelle, seeking a way to break the logjam, 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," said Dixon. He eventually finds his way to the House Majority Leader, Hale Boggs, who is an old fraternity brother of Dixon's at Tulane. He said, I can find the votes for this.

David: This is how the New Orleans Saints came to exist.

Ben: Yes. It was basically a quid pro quo where Boggs said that he would pass this law and allow this merger to happen.

David: Whip up the support, whip up the votes.

Ben: Yes, if there was an implicit promise that Louisiana would get an NFL team. Walking up the stairs of the rotunda, when the vote looked like a sure thing, Rozelle 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 Orleans gets an immediate franchise in the NFL."

Rozelle says, "I'm going to do everything I can to make that happen."

At that, Boggs stopped and turned on his heels heading back into the committee room. "Well, we could always call off the vote while you—Rozelle took two giant strides after Boggs, turned around him gently and said, "It's a deal, Congressman. You'll get your franchise."

David: Amazing.

Ben: How many presidents and how many congressmen? The NFL requires this perfect storm of postwar America, technology, the growth of television, all these innovations, all this flywheel, and also the repetitive cooperation of the US government.

David: Once this passes 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. Again, credit to Rozelle and I think his counterparts like Sonny in the AFL, saw that this was an incredible opportunity. There has 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.

Ben: Totally. You mentioned before, during the Johnny Unitas game, the greatest game ever played, that drew 40 million people, and that was much earlier in the TV-ification of America. It wasn't really the NFL that we know. There's all these other teams, there's all these other markets. If we can tailor-make a game for national television as this entertainment event, it can be much, much more significant.

David: Not only that, these guys are smart. They're smart business people, they're 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. CBS and NBC are livid because they've already got the rights to the respective leagues.

Ben: They thought they both had a championship game, but it turns out, they both had a semi final.

David: 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. This game is now going to be broadcast to the nation on both CBS and NBC. In addition to them each spending a million dollars for the rights to this one game, they also both pledge to spend $1 million each in promoting it in the lead up to the game. This is unprecedented. There's never been anything like this in media history.

Ben: This ended up actually having a 79% share of American TV, whenever Nielsen measured. It's the share of all the TVs that are turned on at this point because it was on two networks.

David: Incredible. It ended up being watched live by over 65 million people. Super Bowl won at the LA Coliseum.

Ben: You can't call it that, David. This is the AFL-NFL world championship game.

David: I apologize, the world championship game at the LA Coliseum. In 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 attendance live at the game, and it didn't matter at all.

Ben: When I tweeted about Super Bowl I's pictures from it the other day, I didn't realize that you can see there's an area that stands where people aren't sitting. I assumed it was too late or too early. That's during the game. They didn't fill it.

David: That's during the game. They didn't fill the stadium, and everybody got rich anyway. Okay, a few things leading up to this. Again, God, they're so good. Rozelle and football at this time, they're just architecting all of this live.

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. They totally lean into it.

Mediaweek. "That is a deliberate invention by Pete Rozelle and the NFL leading up to the Super Bowl." All the crazy interviews, everything that happens that we take for granted right now, that was intentional. It was designed, it was created that way.          

Ben: The commissioner's press conference, the Friday before the Super Bowl.

David: Yup, which is designed to take the pressure off of the coaches and the players who have been being grilled all week so that they can actually prepare for the game.

Ben: It's about league business. 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.

David: 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 are going to add the gloss and the sheen. Literally, Rozelle'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.

Ben: That's great.

David: It's 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 II, the Packers again beat down the Raiders this time.

Ben: 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.

David: There's a reason it's called the Lombardi trophy now. It wasn't for Super Bowl I or II. Then the one game we will talk about here, Super Bowl III.

Ben: Yes. By this point, the game is formally called the Super Bowl. The press had been looking for something to call it. Lamar Hunt, I think, had been the one who observed his kid playing with a Wham-O Superball. When the league discussions were going on about it, he proposed the Super Bowl, but Pete Rozelle hated it.

David: He wasn't serious about it. I think Lamar was like, oh, it's just a funny placeholder name, but then it just stuck.

Ben: It came out in some press interview, then they just ran with it, and then it was out of league's control.

David: Yup. All rights to Super Bowl III. The narrative leading into the Super Bowl is the old NFL soon to be NFC teams.

Ben: That's real football.

David: That's real football. The AFL is fluff. There's real bad blood between the coaches and the players on the field. Super Bowl II, the Colts versus the Jets. The old Colts, Johnny Unitas, different era, the 1950s against Broadway Joe Namath and the Jets.

Ben: This is still the Baltimore Colts, right?

David: 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. Then during the media week, this is the reason we're talking about this sporting event here in the midst 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. You can't make a 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 on his lap where he said he's the sex symbol. He's in his swimming trunks. There's just all these pressing cameras and all these women gathered around him, staring at him. It was a moment. It was all over the news, all over television all week. What an incredible media event.

During the game, Joe delivers on his guarantee a huge upset. Beats the Colts, the first AFL victory over the NFL. At the after party, Carroll Rosenbloom, the Colts owner, is totally desolate. He comes up to Rozelle. He's sobbing and Rozelle's like, just like so many conversations, he's like, no, no, no, don't worry. This is the best thing that has ever happened to the game and to us. He's so right.

Ben: That seems like one of the obvious playbook themes here. Every time you think you just got beat by some other football team, 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 on winning.

David: Yup. As long as there is drama, as long as there is competition, everybody wins. 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.

Ben: This is 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.

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, taking on more and more sponsorships, sponsoring team jerseys and on-field sponsorships, 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 has lost its way? I think that's the interesting dichotomy between owners these days.

David: Yeah, how far is too far? But at this point in time, they are nowhere near too far.

Ben: Yes, lean way and do it.

David: The next year, the Chiefs beat the Vikings. The pre merger Super Bowl series ends tied, two to two, two victories for the NFL, two victories for the AFL. Again, it 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.

Ben: This feels like it's gonna be a big package.

David: Oh, boy, the network's 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. That is $40 million per year. That's a lot of money.

Ben: This is where the genius starts of the NFL starts realizing, we don't have to just sign one contract. For anybody who's looked at the contracts today, there's a lot of contracts. There's pretty much not a TV distribution company that is not distributing some little shard of what the NFL has carved up. But then realizing here in 1970, we don't just have one deal to sign, we have an AFC package and an NFC package.

David: And we might actually be able to invent some more here too.

Ben: Yes. David, take us to Monday Night.

David: Let's go to Monday Night. 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.

Ben: Which is a real shame because you've got Roone Arledge there. He's a visionary. This is still before ESPN, right?

David: Still before ESPN, well, well before ESPN, 10 years.

Ben: Yeah, that's still far off in the future, but ABC is clearly interested in sports.

David: Yes, clearly interested in something. Rozelle and Rooney start chatting. Rozelle has supposedly always had the inkling that football and the NFL would do really well in a primetime slot. This is crazy. Like you were talking about a little while ago, Sundays were perfect for football, Sunday afternoons, because the network's didn't have anything else to air. The accepted thinking at the time was like, oh, sports are perfect for Sunday afternoons. But the core business of the television networks...

Ben: Right, sports is not primetime.

David: Is showing shows, news, entertainment in primetime, and that is not sports.

Ben: That appeals to the widest range of people and that we still don't know for sure that the NFL is that.

David: 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 a separate thing.

Ben: Just to keep tracking our baseball versus football comparison, this moment in 1970 is right around the time where the NFL is eclipsing baseball to become America's favorite sport. It's been slowly gaining ground over the last 30 years. 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 primetime experiment.

David: Indeed. Rozelle is like, this can work. Roone Arledge is like, yeah, I think this can work. They brainstorm and together come up with the idea for one single game every week with incredibly high production values, broadcast in primetime, in the evening, on Monday nights, after the full slate has concluded on Sunday.

Oh, my gosh, so many advantages to this. On the Sunday games, there always have been so many games that happen on Sunday. You can't watch them all at once. They're all happening concurrently, you're seeing different games in different markets.

Ben: There's not a national event to watch because of the way the local affiliate works, it's still at this point in time where you can't watch a home game at home. Whatever is on TV in your city is wherever your team is playing, if they're playing an away 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.

David: Right, and that's on the viewer's side. But from the production standpoint for CBS and NBC, they're sending each of them five, six, seven TV crews out all across the country. Their resources are getting totally diluted every Sunday. They can't put all their effort into one primetime game.

Ben: The broadcasts other than the Super Bowl, and honestly, even the Super Bowl at this point in time, are pretty bad. We talked earlier about how 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 zooms in and out. The announcers are relying on the fact that you're watching the game, so they're not really commentating that much. They would just help you know that there's audio associated with the broadcast you're watching.

David: 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...

Ben: The lower thirds.

David: The graphics, none of this existed.

Ben: 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.

David: Yes. This whole vision for Monday Night Football that Roone Arledge and ABC can make happen for the NFL and new media rights for the NFL to sell more revenue. They've got it all ironed out, all the details. Right before they're about to sign a deal, Rozelle is like, oh, yeah, by the way, we have these partnerships with CBS and NBC, we got to offer this to our partners first.

Rozelle, he has this reputation and history treats him as incredibly kind, incredibly accommodating. I'm sure that's true, but he had a little bit of Al Davis and 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.

Ben: Yup. He just wanted a stalking 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.

David: Totally. Roone, of course, freaks out. This is his baby. This is his career within ABC.

Ben: He's been pre-selling this to his bosses, so he looks bad if they lose this now.

David: They come in with over the top deal. ABC gets exclusive rights to Monday Night Football for a new deal, new product, $8.5 million per season.

Ben: The other deal was?

David: The other deal was 40 per season for essentially 15x more content, I think.

Ben: Right. Each TV network is paying about 20 to have either the AFC package or the NFC package on Sundays. ABC is coming in and now spending eight and a half just for one game on Monday nights. You might say, whoa, that's terrible. They're way overpaying 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.

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. If I'm ABC, I'm like, those guys, that really sucks for them having to produce four, five, or six different games. I only have to produce one and it's nationally broadcast across all my affiliates? This is amazing. We're going to go hard on costs on the production side to make it the most dazzling possible experience.

David: And we're going to 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 literally Super Bowl level. Super Bowl one was 65.

Ben: They invented a holiday out of nowhere and it's every week.

David: They totally invented a weekly holiday. It's amazing. CBS and NBC must have been pissed.

Ben: Seriously, because they signed the contract thinking between the two of us, we basically have a lock on all the football, and then they invented more football.

David: Exactly. For the NFL, the newly combined NFL, they invented more football. They invented revenue. Amazing.

Ben: By this point, the NFL is starting to wake up to this idea that 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 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.

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. It was brand new for Monday Night Football. In fact, it was Monday Night Football exclusive for 20 or 30 years and in a lot of the cases.

The overriding idea, 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. What are we going to do? We're going to put cameras at field level. We're going to put cameras on people's shoulders. They're actually going to get to 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. It's not just this weird from-the-side angle on it on touchdowns. It's like, we're going to get great footage, head-on, during touchdowns.

Instead of two commentators, we're going to have a three-man booth, and there's going to be real action oriented commentary there. Of course, we can't talk about Monday Night Football without Howard Cosell and his unbelievably unique style of narrating and really injecting himself into the story of the broadcast rather than just being an opinion list, third party observer. He created a little bit of a foil to play off 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 got to know over time and really observed their charisma with each other about the game.

David: That's exactly what I was going to say. It's the same dynamic with podcasts.  It's like they became your friends in the booth.

Ben: Right. It's not just that you're listening to business stories, it's that you're hanging out with David and I while 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 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 the split screens so 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. 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 Peyton's Places' ESPN 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 out in the hallway and built a little custom room to do this in, but the background wasn't good. They put in a green screen and then they would put another camera in the press box, so they would superimpose that the field was right behind them, but it actually wasn't. It's so obvious watching it today.

David: They're floating on the stadium. It's hilarious, but this is revolutionary stuff.

Ben: Yes. There was one other really, really big innovation. This was a thing that would go on to be the predecessor for ESPN as a network for Sports Center as a program. It would create billions and billions of dollars of enterprise value, and that is replays.

David: Yeah, the highlights. Before we talk about highlights, did you say the theme song too?

Ben: No.

David: I thought actually, that's where you're going with ESPN. There were no theme songs before this.

Ben: 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, let's talk about highlights. How could you have possibly watched highlights before Monday Night Football? The games were on Sundays, and that was really the only football that was on all week. We didn't have the internet. There wasn't ESPN, there wasn't a Sports Center, so there really was no place to go and watch highlights.

Football and all sports are unbelievably highlightable events. 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. 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 the NFL has NFL Films and using high quality cameras and film stock, they are capturing great camera angles of every game.

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 broadcasts was happening in so that they could play it at halftime. Howard Cosell 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.

David: I 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.

Ben: Totally.

David: All within 24 hours.

Ben: 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 lawyered 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.

David: Interesting.

Ben: The way that the rights are sold today, one network gets 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.

David: No way. That's super cool.

Ben: I saw a few times in different legal blogs trying to dissect exactly how the rights package works, they kept saying Monday Night Football and highlights. 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.

David: Yeah, there's so much more value in that specifically for Disney and ESPN versus any other bidder. Interesting.

Ben: If any listeners know this for a fact or have any more color on this, I would appreciate it, acquiredfm@gmail.com. God, I can't believe we're only up to 1970.

David: I know. The good news is this is the good news. You can't get any better from this. This is now the fully formed entertainment product of the NFL. They add stuff like Sunday Ticket, Thursday Night Football, and everything else over the years, but the trajectory is set. There were some ups and downs in the 70s, but it's basically just Gonzo for the NFL.

Ben: There's one more presidential intervention in 1973. Nixon really, really, really likes watching the Redskins, but he's sick of taking a helicopter to Camp David to watch their away games, which he actually was doing which is unbelievable.

David: He was a nut. Nixon literally phoned in a play for a Redskins playoff game from the White House.

Ben: Maybe he should have been paying more attention to foreign policy and things like that.

David: Nixon was a nut in many ways.

Ben: Yes. 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. People would go to these hotels and they would get rooms for the day to go watch the games.

David: This dynamic formed plotlines on sitcoms in the 70s and the 80s. I think The Bob Newhart Show, this was a plotline of them going to a hotel to watch the game.

Ben: I've heard about this.

David: It was a thing.

Ben: Nixon calls Pete Rozelle personally, the sitting president of the United States, and says, hey, we're in the playoffs this year. I think it'd be a good idea for you to air playoff games, not every game, but playoff games locally. Pete Rozelle, even in 1973, is pretty dug in on this issue that it's a bad thing and it's cannibalizing our most important thing, our gate revenue, if we do that. He says no to the sitting president.

Nixon goes to Congress and says, will you please draft legislation? Which got known as the blackout ban. Because Rozelle denied the president, there is actually legislation that was passed in order to force the NFL's hand in broadcasting away games locally.

David: What's so cool, there's an amazing Peyton's Places episode on this. Because Nixon recorded everything in the White House, the White House Tapes, the Watergate tapes, all that stuff, this is on tape. Nixon's conversations directing his staff and Congress to appease his whims with the NFL, which was good for the country, it's all on tape. It's an amazing episode.

Ben: It was wild. This is one of the things that Rozelle 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 fueled the flywheel. 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 Disney+ came out as a very cheap option. One of his few strategic flaws, I think, was gating the content for too long.

David: Yup. I don't know if this is directly related, but I think so much of the 70s. The 80s and the 90s were also about just the continued growth trajectory of the incredible marriage of the NFL and television. The money just keeps getting bigger, the stage keeps getting larger, and the viewership goes up, all the things.

Ben: This is probably why 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 Rozelle era. There was a bunch of stuff to skip like the USFL and all the teams moving cities and deflate gates to focus really on the strategic moments that created the conditions of the NFL's business today.

David: Yup, all of those great stories. Like you say, don't really contribute strategically to where the NFL is today. Probably the biggest impact decision that happens during the time may be related to this continued focus on the gate. The league-first mentality 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.

The stadium experience totally changed, which it needed to as television became prime. There had to be a reason to go to the stadium. Stadiums become all about the luxury boxes, the suites, the experiences, the corporate partners, the advertising, the drink sponsors, all of this stuff. That becomes huge money for the NFL, but it's not shared money. It's all local money.

Ben: 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. You look at the local stadium sponsorships, you look at every stadium that is dedicating more and more real estate to luxury suites. A lot of the local merchandise sold in the stadiums is local revenue, so the teams are making more and more money locally. More money overall, so it's all good, but a greater percentage is coming from things the teams are doing on their own. 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 causes them to get unseated in some way.

David: I think the thing that keeps the competitive balance in place, even as revenue diverges, is the salary cap.

Ben: Yeah, this is a great place to talk about that. Let's go to 1993 and talk about the first time free agency and the salary cap came into the NFL, how that's computed, and how that impacts the leverage going forward. First, why don't we think of another one of our very favorite companies here at Acquired, Vanta? Over to you, David.

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Ben: Okay, 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. The 1993 one is unique. It puts some stuff in for the very first time. Specifically, the players have been really mad about something called the Rozelle rule in the NFL. I think this actually does get legally struck down. It's not literally called the Rozelle rule, but he was commissioner and he 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. It added a lot of friction to signing a new player. It had two practical effects. It hurts the player's ability to earn the most money and it decreases the likelihood that a player would move teams.

David: Right. I think importantly, the compensation afforded to the team that was losing the player wasn't just economic too. Draft picks could be involved.

Ben: Yes, that's right. The NFL didn't really have free agency for a while. 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. This was the league saying, okay, fine, but we're going to make sure that it was kept at some fixed percentage of the amount of revenue that the league generates.

That today is actually a pretty high number, 48.8% or something like that. Players are effectively a partner in the league because the league 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 league's overall revenue. How does that work with local and national revenue?

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.

David: You're saying that that fixed amount is a league wide aggregate, including all the local revenue from all of the teams?

Ben: Yes.

David: This potentially could create a big imbalance.

Ben: 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 the 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, so my coaching gets hurt, 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.

David: Yup. 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 Rozelle's successor, Paul Tagliabue negotiated. It really was a new era for the NFL.

Ben: Yes. It's interesting because I think in 93, when the salary cap first came out, it was just of the shared revenue. But now that in the more recent agreements, it includes all league 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. 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 its local market, not from that locked brotherhood of we're all in it together league revenue.

David: 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 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 upfront. I'm pretty sure the NFL is the largest single media business in the world. Not an aggregate diversified media business, but if you consider the league as a single property, then I think it is the largest individual single property in the world.

Ben: It's a good question. The comps would probably be like Marvel or Lucasfilm.

David: Yup. I looked at it bigger than Marvel, bigger than Lucasfilm.

Ben: Really?

David: Yup.

Ben: The NFL does $18 billion a year in revenue right now, which is expected to grow to $25 billion by 2027.

David: Yup. I believe Marvel's not anywhere near that.

Ben: Wow. Yeah, that's wild.

David: Because it's an annual basis. That's every year.

Ben: This TV contract that they just signed, the 10-year deal is for $112 billion across all these entities.

David: It's just wild.

Ben: 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 $2 billion a year, they invented a new skew, the Sunday night package, 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. Of course, then, we just got the news last month that DirecTV has lost the NFL Sunday Ticket and that it is moving to YouTube TV. NFL Sunday Ticket is also a genius move because...

David: You're reselling the same content you've already sold it

Ben: 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 their cameras, they own their 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, and if you want the ability to watch any game at any time. It is incredible to me that that is worth $2 billion, 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.

David: Amazing. There's more now and let's catch up to the present day. There's revenue from the NFL Films division. I think it's probably a couple $100 million, I would expect at this point in time. There are other licensing rights, particularly video games and Madden. 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. Remember that episode we did with a trip on EA back in the day was so fun and talking about the origins of Madden?

Ben: That's a $300 million a year deal. That's a sixth of one of these channels that pays to broadcast the actual NFL. That's what EA pays to just license the use of the player names, team logos, and all that. I assume player names are actually licensed from the Players Association separately.

David: It's all single negotiated. I believe it's reported that I think $600 million of the 1.6 goes to the players. Then there's fantasy, both betting and non betting.

Ben: 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, postwar 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 power the NFL to be such a dominant force in society today is fantasy football and sports betting.

Let's talk about fantasy first. There are $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, families, and coworkers, which means you have to watch football in order to have those conversations with the people that are closest to you in your life.

David: Fantasy is such a great example of driving and adding to the Rozelle flywheel. Better products, deepen fan engagement, more viewership, more advertising, which really now translates to more revenue opportunities. Because there are revenue opportunities from fantasy, Sunday Ticket, that whole package basically was to cater to two audiences, (1) bars and restaurants who want to be able to show multiple games within their establishment. But (2) 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.

Ben: Of course, then there's 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 live.

David: Ben, I'm shocked to find gambling going on in this establishment.

Ben: So shocked. It's very similar to how we mentioned prohibition earlier. Despite alcohol being illegal, there was plenty of it to be found. 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.

David: That's just this year.

Ben: Yeah.

David: Wow.

Ben: People bet on the NFL more than any other sport in the US. Variety 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.

David: You can probably bet on that.

Ben: I guess it's worth pausing to understand the shape of the NFL's business today and how the revenue breaks down. On average, about two thirds of any given team's revenue comes from shared national revenue that we talked about. The remaining 1/3 comes from the local revenue, but again, this is just on average. Some teams are very good at the local revenue like the Dallas Cowboys. Some teams are very bad at this like the Bills or the Lions.

I have some numbers to put that in perspective. This past year, each team got around $350 million from the shared league revenue, but that extra local revenue obviously can cause a gigantic swing in the team's total revenue. Forbes has an estimate that the Cowboys made over $1 billion last year, whereas the lions only made $450 million, so not really much on top of the shared revenue from the league.

David: Wow. So much for the league-first mentality from Jerry Jones there.

Ben: Right? 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. This is essentially answering the question, how does the NFL make money? Sixty-one percent comes from media, most of that is the TV from the shared league revenue. Ten percent comes from general seating, which is regular plastic seats. Another 10% comes from premium seating.

David: That's for the proletariat.

Ben: Yes. The premium seating that we mentioned is the suites and all that stuff. That's a big growing revenue line for the people with nice stadiums.

David: Most of that is corporate, right?

Ben: I think so, that's my best guess. It's super different from city to city. This is probably the most variable. Ten percent 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 lies.

David: Maybe the Madden deal is in there. I don't know if it'd be there in the media.

Ben: That's the shape of the NFL as a business today. Before we 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 lifespans and immense physical harm to players. CTE, as many of you know, is chronic traumatic encephalopathy, which is a terrible brain condition that develops from the many repeated sub concussive hits to the head. The symptoms are devastating.

David: Mental, emotional, suicides, everything.

Ben: The NFL settled a billion dollar lawsuit to pay out victims and families of CTE.

David: It's even worse than that. There's a bunch of dimensions here. I played football all growing up, middle school, high school, college. This was in the 90s and early 2000s. 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.

There was no broader understanding among the 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. Here's what's really bad, the NFL knew it and they covered it up.

The NFL started doing research into long term effects of concussions and other head trauma from playing football in the 90s. They sat on the data for a long time. When they did release it, they claimed that there was absolutely no provable link, no evidence at all, that head injuries from playing football lead to long term damage.

Ben: The NFL didn't acknowledge that until 2016.

David: There's the Will Smith movie, Concussion, about it. We don't need to go into a bunch of the specifics. But I think from the Acquired standpoint and the NFL audience standpoint, this was a major, major trust breaking moment.

Ben: I feel guilty enjoying football. I think a lot of people do. I don't know if that's 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. That was a huge cultural moment.

David: There's the direct impact like you're talking about. I think you're right, that's probably limited in the broader landscape of the American 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.

Ben: 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 it continued. Interestingly, all youth sports are down. I don't think football is down much more than other youth sports about video games, social media, phones.

David: And the pandemic too.

Ben: Yes. Youth sports are way down, so all the feeder systems for all pro sports will be dramatically less 20 years from now than they are now. Football is going to bear the worst of that.

David: Yup, totally. I think the real risk, and this is starting to be shown in the data, is how our future generations are going to view the NFL and football. If you look at the data, US adults, as a whole, 33% say the NFL is their favorite professional sports league. That's down maybe a little bit.

Ben: I think basketball is at 11%, which is where I got the 3x stat for Americans who prefer it to basketball.

David: Yup. Soccer has grown a lot, baseball has declined significantly in the past couple of generations. But if you look at Gen Z, only 23% of Gen Z say that the NFL is their favorite professional sport or 10 points less than the broader population. Basketball in Gen Z is 19%, right there, pretty close to football.

Ben: From a revenue perspective, the NFL today makes twice as much as basketball, but that's a pretty damning trend looking at where Gen Z's interests lie.

David: Yup. We can talk much more about the broader context of the NFL and analysis, but this whole thing was just a bad period for the NFL.

Ben: How do you bury these studies? 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?

David: And it's your players. It is your product on the field. The betrayal of trust happened on so many dimensions. Also the timing of this was really bad. This came out at the dawn of the social media era, had this happened during the 60s, 70s, 80s. Of course, what it actually was would be just as bad, but the Rozelle, NFL approach to controlling 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. That really was botched by the NFL.

Ben: Yeah, that's a great point. It's like the old playbook didn't work anymore in the social media era. It's also interesting to note who wasn't producing content about concussions. 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 broadcasts in the next generation.

I don't think this is true, but there were 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 were critical of the NFL. ESPN ended up actually firing those people, and they said it was for unrelated reasons. I think the NFL wields a lot of influence over their broadcast partners, and thus over how the NFL has talked about.

David: (1) Of course, they do. (2) That's bad in and of itself. (3) Again, the timing on this. 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, players have Twitter accounts, and all of those fired reporters have Twitter accounts, it is a lot harder to control the narrative.

Ben: Yup. Speaking of hard to control the narrative, let's talk about blackballing Colin Kaepernick. I think an interesting place to start is the job of the commissioner. The commissioner is not the president or CEO of football. With any obligation to customers, the way the CEO would, or purview over high ranking executives that they can order to do things, the owners are not their executives. The commissioner's obligation is not to the fans.

The commissioner is hired to do one job, and that job is to speak for and do things that are in the best interests of the owners as a whole. 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 hate was made about the NFL switching in 2015 from a nonprofit to a for profit. The NFL has very little net income. Who cares what its tax filing status is?

David: It all gets distributed out to the teams.

Ben: Right. The teams are their own taxpaying entities and their own businesses. Roger Goodell makes $40-plus million a year to do what the owners want, they hire him to do that, and they will fire him if he doesn't do that.

David: There are these great quotes in America's game where the owners are talking about Pete Rozelle with the representative for the players at the time they're negotiating contracts. The players are complaining that Pete Rozelle isn't being neutral in these negotiations. The owners are like, of course, he's neutral. We pay him damn well to be neutral. The commissioner of the NFL is  the ultimate in shareholder responsibility. In fact, shareholder responsibility is his only responsibility.

Ben: 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. (1) Negotiating their revenue share deal with the Players Association, which is the collective bargaining agreement that we mentioned with the salary cap. (2) Their deal with the TV networks. Of course, this is their largest expense on the player side and their largest revenue stream on the TV deal side.

Back to Colin Kaepernick. In the good old days of football, it was a bunch of reasonably young enterprising 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 has itself, and thus all the owners were cowboys trying to make it for themselves in the world, and feel the thrill of wheeling something into existence. Those people all got old and didn't want to change at all.

David: Most of those people are dead and it's their descendants who are also old, who are on these teams.

Ben: Yes. Now, there's these very interesting artifacts of the league being grown up, old and stodgy, the incumbent, something like that, when they were once a start up, especially when it comes to just acknowledging that a guy can protest the national anthem.

David: Yup. I do think when that happened in 2016, it was a lot more of a radical act than it might seem today. There were a lot of people at the time who were deeply offended by it.

Ben: He was using the NFL's platform to make a very personal argument.

David: There were a lot of people leaving the NFL who understood why he was doing it because 70% of the NFL is black. There was a lot going on here.

Ben: Right. 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 teams signed him. 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.

David: Let's be real here, the NFL blackballed Colin Kaepernick after this 100%.

Ben: Kaepernick filed a grievance and eventually reached a confidential settlement with the NFL. The whole macro thing here is very strange of the owners to let this seemingly minor thing turn into a gigantic media mess the way that they did.

David: Yup. 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. The NFL was the opposite of that. They were the command and the control, we own the message, players do not have a voice. There was no clear example of this.

Ben: To your 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.

David: Yup, which makes them effectively an equity partner.

Ben: Yeah, in the very same way that Warren Buffett always refers to the government as our large silent shareholders. 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 an icon for this thing. 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. He became a national headline for months and months and months.

David: Right, which is emblematic of the NFL not understanding the social media era.

Ben: Yup. All this to say, it was very compelling for you and I to spend a bunch of time talking about the NFL up through 1980 and the Rozelle era. But in the Paul Tagliabue era and the Roger Goodell era, revenues have gone up, team values have gone up. Games have gone from standard def to HD, to 4K, but you're not particularly more inspired about what the NFL has done in all these years. 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. It's certainly the end of the hero's journey at the end of the Rozelle era. It won't hurt their business for a long time, that's the interesting thing.

David: I think this is a good point to transition into analysis. Why don't we play books 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.

Ben: $12 billion a year in revenue from the TV deals alone.

David: 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. No, it's Google and Amazon that are paying them this money.

Ben: They're paying close to $4 billion a year from the biggest tech companies in the world.

David: Yup, the NFL is going to be just fine. That revenue is almost assuredly going to grow at a very healthy clip. Even despite all this, people love their football. I still love watching football.

Ben: 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, the Super Bowl looked like a really fun thing. 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.

That's probably overly sensitive, but the fact that the thought existed is not good for the NFL long term. 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.

David: Two things. (1) Again, that just reinforces the power of the Lindy effect to me. The NFL is just fine, and it's going to be just fine for a very, very long time. I do think the younger generations thing is a real risk. I think related to that is one, basketball definitely won the social media era in a way not to as big a degree as the NFL won the TV era, but basketball is on the rise. Related to that is (2) The NFL has never figured out international, many fits and starts.

Ben: Have you read about these home marketing agreements?

David: No.

Ben: It's really weird. The NFL now, because there's zero international interest in the NFL,  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 somewhere exotic.

David: For God's sake, baseball has a robust international presence.

Ben: Right. As we talked about on our NBA episode, basketball's entire future growth and current groundswell of popularity is young people and international.

David: It's the second most popular sport in the world and growing very, very rapidly.

Ben: The NFL has tried NFL Europe, shut that down, couldn't get the owners to care about it. This whole marketing agreement thing that they're doing is saying that teams have an exclusive right versus other NFL teams to market in certain countries.

David: No way. I didn't see this.

Ben: I think the Cowboys can advertise the Cowboys in Mexico. It's that thing because they want to try to build affinity for teams, where there's some theoretical mapping to that country based on ethnic groups in the area or proximity. It's a very odd fool's errand, that international expansion.

David: That does not seem like a sound international strategy to me.

Ben: No. The question becomes, how can the NFL continue to grow, or can it? 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 been 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. Honestly, I'm having a hard time understanding how they grow the fan base.

David: Clearly, the flywheel is no longer spinning faster. It is still operating very efficiently, but the core to growing, the original NFL flywheel is increasing fan reach and engagement, and that's no longer happening.

Ben: Right. I knew 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. 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. The NFL gets all the benefit of all the development of all of these players in their college years for free.

They benefit from the storylines around them too. 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 Heisman Trophy winner, who you know about what their childhood is like, comes out of NCAA Football.

David: Their storylines are fully baked and ready to go.

Ben: Yeah. College football has been the best thing to ever happen to the NFL for basically its whole existence.

David: Right. It was the worst thing for the first 20 years and then it was the best thing.

Ben: Good point. I think the biggest players getting paid in the NCAA right now with the weird way that the booster stuff works is $2 million. They're not competing for talent. 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 and that these conferences make isn't NFL size, but these are huge deals. The NFL, for comparison, has a $12 billion 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. It ends up somewhere in the neighborhood of 100 million a year going to each school.

The SEC deal is a bargain. It's $300 million a year with ESPN. I don't understand how the whole SEC is worth only 300 million a year when the NFL is worth 12 billion. It just feels like poor negotiating.

All this to say, the business of college football is still much, much smaller than the NFL. It'll be really interesting to see how it, as players, starts to get paid more where it finds its footing in the landscape and if it changes at all from where it is today. Okay, that's college football.

A thing in the 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. It got itself into this trap for a while, where it was negotiating with the networks. It would sign a big deal to get a bunch of revenue and then would quickly have negotiation coming up with the players. They seem to have switched to this thing now, where they signed a collective bargaining agreement for a decade with the players. I think they did that in 2020 that lasts through 2030.

In 2022, that's when they renegotiated the tenure rights for the media. They seem to have switched to this, which is a good business decision. It probably doesn't bode 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. Granted, it's a rev share...

David: It's a percentage basis.

Ben: Right. In that respect, it's fair. But it is quite clever to have gotten off the TikTok cycle of having the players have a bunch of leverage after seeing what the media deal looks like and doing it in this order. The other thing that I've been charting is the media deals go up dramatically in value, but the average viewers stays the same. In 2002, the kickoff game had about 20 million people watch. It rose, it was in the mid 20s, and then it dipped back down below 20. Last year, about 20 million people watched the kickoff game.

David: It's about two decades of audience stagnation.

Ben: Yeah. Why is it that the media writes 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, so they're willing to pay more for the rights.

David: That's a great question. Without having thought about it too much, my first instinct is to say, I think it's a 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.

Ben: Yup, I think that's definitely part of it. Another argument would be, they're finding a way to put more ad slots 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. You're thinking, okay, the audience size is about the same, the number of ad slots is about the same. What else could be going on here?

I think part of it is you're right. The network's 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 need this no matter what. That advantages the NFL on 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 going to accrue all the profit pool now because there's basically nothing else that you'll put on that people want to watch.

David: I think that's probably right, both in that overtime. 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 are four major competitors now with Fox on the customer side. For those networks for the last decade, the counterfactual of the networks no longer had football. They don't exist anymore. This has been life support for them for a decade.

Ben: Here's the interesting thing. You might say, if the margins are razor 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, AT&T/Direct TV, NBC/Universal. The companies that are buying the rights are massive combinations that can actually afford to generate any margin. I didn't dive in to look at, and I'm not sure that you actually could isolate this, 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.

David: They have to be. With these numbers, there's no way that they can have eroded.

Ben: It's pretty genius that the NFL doesn't do this themselves, that they rely on broadcast partners. They've 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.

David: Right, and they can resell it six times over.

Ben: Right. The NFL doesn't have to film the games other than NFL Films. They don't have to have broadcast trucks. They don't have to have a 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. I think they get to keep the vast majority of the profits and will continue to shift that balance in their favor.

David: This is probably a good time to bring up the Amazon deal that we've referred to with Thursday Night Football. News is coming out, this is the first season that Amazon is the exclusive destination for Thursday Night Football, right?

Ben: Correct. 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 RedZone and alternate game broadcasts. But Thursday Night is just Amazon now.

David: News is coming out now right at the end of the season that from an economics perspective for Amazon and an ad basis, it vastly underperformed expectations.

Ben: Yeah, then Amazon is having to do make-goods with the advertisers because Amazon wasn't able to get enough people to watch the streams. Frankly, I think a lot of people want to watch the NFL on TV. It's complicated to figure out how to stream it and watch it through Amazon. 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 what's easier for most people, turning on Channel 3.

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, the coaches, and creating the storyline, is actually where all the value lies? It's interesting to me that the NFLPA 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 collect in the packaging component that the NFL has.

David: Yup. 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. Nobody should ever shed 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.

Ben: Yes. I completely agree with that. There's so many here that we've talked about. It's just the NFL 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 forward.

There is a very interesting one, which is on a revenue basis, it's an $18 billion a year revenue business, the NFL actually owns way more mindshare 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. To contextualize it, who else makes $18 billion in revenue? General Mills, Adobe, and Halliburton. The NFL's share of lips is way higher than any of those company's products.

David: General Mills is a really interesting one. How much of General Mills business is generated by advertising time on NFL games?

Ben: Yeah, that's a great point.

David: I'm sure, a very large percentage.

Ben: 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 it's 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.

David: Yup. I've got one more playbook theme that I want to throw in. Buying any professional sports franchise 10-15 years ago was an incredible trade for two reasons.

Ben: By the way, just to add some numbers to it, the average NFL team value, 1.2 billion in 2012. That's a decade ago, average 1.2 billion. Today, it's 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.

David: Yup. We were texting with our friend, Andrew Marks, to lead up preparing for this episode. 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 the scarcity value. There are a finite number of these things and they're not making more. There are a lot of people that want to own them for a lot of reasons, not all of which are economic. That's one, and that's never going to change.

Ben: The owning an NFL team, it's like a grown up NFT.

David: It is the ultimate NFT.

Ben: If you are a kajillionaire and you want to flex another kajillionaires, 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.

David: That is a net present happiness value positive trade for a lot of billionaires.

Ben: I will say, when you have something that increases in value because of social signaling, desirability, and not tied to underlying cash flows, that is a potential sign of a valuation bubble. Not always. There are luxury watches that have kept their value for centuries, but it should make you wonder. Team values have ballooned to the point where there are very, very few people who can buy one today.

David: Yup, which means that a change in sentiment among that very narrow market will have a huge impact. But for now, I think the valuations are probably safe.

Ben: All right, we'll have to see in a few years. I think they've reached a plateau. I don't think we're going anywhere north of eight, 9 billion in the near future.

David: I agree. I just don't think you're going to see these things.

Ben: You don't think they're going to deflate?

David: No, they're not going to trade at fire sale prices.

Ben: 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 4x to about 8x between 2012 and 2022.

David: Wow, multiple expansion along with the rest of the market,  but I think this is going to be more durable.

Ben: 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.

David: Yup, totally. Okay, that's one. But then two of the more applicable lessons, I think, for most people listening, although maybe we've got some people listening who could buy an NFL team, that'd be cool, include us in the ownership group if so. Give us a shout, acquiredfm@gmail.com.

Point number two is I think there was a narrative around cord cutting 10 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? I think that was only half the picture. I think what I at least and 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. No further proof is needed, then Amazon and Google are the latest people to pay boatloads of money to the NFL.

Ben: Yup, the NFL will make the transition to digital distribution. It's pretty amazing that they didn't need to build it themselves. MLB did the whole BAMTech 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.

David: They'll still be fine.

Ben: They outsourced all the hard parts.

David: And they also completely whiffed on strategy for the social media era, but they're still fine.

Ben: Yeah, it is wild.

David: We talked about this a lot on the NBA episode. But just to recap here because the story hasn't really changed, LeBron has well over 100 million social media followers.

Ben: Instagram alone.

David: The two largest NFL players by social media following are OBJ and Tom Brady, both of which are in the low teens, so a 10 x difference.

Ben: Isn't that interesting that people don't want to follow NFL stars the way they want to follow NBA stars on social media?

David: I think if I remember it, the core thesis of our NBA episode is when 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 on social media, and that's so antithetical.

Ben: And the NFL is taking away the player's voice, controlling the message.

David: And that's also reflective of sports themselves. Basketball is a team sport, but on the spectrum of individual to team, football is 100% on the side of the team. There's just obvious stuff too like NFL players wear helmets, basketball players don't wear helmets. That's little stuff, but it doesn't matter. As a business, the NFL's fine. They're totally fine.

Ben: While we're contrasting leagues, there's this pretty interesting thing that I've been thinking about, which is this cooperative capitalism communism thing that the NFL did. It was really good at creating parody 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.

Of course, it's nowhere near equal pay among players. Yes, it's a bummer that while Aaron Rodgers makes 50 million a year, there's a long tail of players that only play one to three years making league minimum and then churn out, which I think is mid single digit millions of lifetime compensation from football.

David: Still, that's good money.

Ben: Yeah, lifetime though. Players are definitely variably 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, make $127 million 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 smooth the curve more than other sports have.

David: I think this is also related to the social media thing. Really, this is the big divergence between the players, the sports, and the leagues. NFL as a league, great, they're fine, but the players are just the direct endorsements. I think other league players and especially the NBA have been able to build wealth, businesses, and revenue streams, much better than NFL players because they're the platform and the audience value accrues to them so much more.

Ben: Yup, agree.

David: LeBron, I think, is already a billionaire. Especially once his playing days are over, he will be a multi, multi, multi-billionaire because of the influence that he has.

Ben: 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 accounted for in these numbers.

David: Wow. I think we need to do a Nike episode at some point.

Ben: Agree. This is actually a good place to flip to power.

David: Awesome. For new listeners, this is the section where 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. The seven powers are counter-positioning, scale economies, switching costs, network economies, process power, branding, and cornered resources. I think they definitely have a cornered resource. If you want to watch professional football played by this set of athletes, they're the only game in town.

Ben: Yup, they absolutely have a cornered resource.

David: I think this is maybe the most clear cornered resource that we've ever had on the show.

Ben: Yup, completely agree. 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. If we have 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.

David: During the Rozelle 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, it certainly was a hit to them. It wasn't as much of an existential hit in the way it was for Major League Baseball, 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.

Ben: Yeah, certainly. 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 100 years, good luck talking them out of a machine that already works well.

David: Right. There's no way, even in 1949, that the Yankees would have agreed to a league-first mindset, let alone today when they have their own television network, et cetera.

Ben: Yup. 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.

There's a rebooted Xfl, There's a rebooted 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.

David: It all comes back to cornered resources. They have the players.

Ben: Right, exactly.

David: You could maybe put the antitrust exemption. You could shoehorn that into process power.

Ben: Or a cornered resource.

David: Yeah, or cornered resource. Like you said, no new league is going to have that.

Ben: It's 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.

David: Gosh, I just thought about the Kaepernick stuff. That's got to be playing into the NFL's thought process here too. They need to maintain a healthy government and relationship, not just government, but healthy political relationships with the current political party, whatever that is.

Ben: Yup, that's a great point.

David: I think there's definitely scale economies here in the sports entertainment aspect of the product.

Ben: 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.

David: Even a single Sunday game would bankrupt any startup league to put those production values in.

Ben: I think about $44 million per game is effectively what the average broadcast partner is paying the NFL just for one single game.

David: Yeah, and just for the rights.

Ben: Right. If you're the NFL, if you can go make $44 million by making a game happen, and that doesn't include anything on the field, selling tickets, 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...

David: To show up and produce the game.

Ben: Right. Then you can afford to have a whole bunch of costs to make that experience happen. Value creation, value capture. 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. The new Giants, Jets won in New York is funded by the team in the NFL, whereas the Bills won is going to be funded by the state of New York, largely.

Every piece of research you read there is like, yeah, they're a best break even for communities unless it's part of some larger economic redevelopment thing. I think the NFL is 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. NFL teams are very extractive of communities in these stadium deals. I think if you look at the $18 billion a year of revenue, the NFL, if you include the players, captures as much value as it possibly can. They are unbelievably good at value capture.

David: They literally resell the same media rights multiple times over.

Ben: Yes. Value capture pioneers, I believe, is the phrase that we used on another episode.

David: Okay, that's got to be another Acquired merch store t-shirt.

Ben: It is amazing how much mindshare the NFL does own. In my opinion, on top of the actual revenue number, they don't leave a lot of consumer 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 mindshare that does exist on top of any of the revenue they generate.

David: I think you could totally make that argument. You are making that argument here. It's beyond 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 almost every single president.

Ben: Totally. How can you put a price on the fun of a Super Bowl party or texting about an amazing catch with your dad? There's all sorts of things that are hard to value.

David: It's also a little bit similar to the trading value of NFL teams and what price they would actually trade at. Even as the NFL has become this incredible business, they don't trade irrational economic prices because the people buying them are doing their present happiness, value equations, not economic value.

Ben: Right. As we talked about, these NFL teams are valued more like scarce speech front property more so than cash flowing businesses. I'd be curious to hear anyone's thoughts on if the NFL generates more value than $18 billion a year. Interestingly, the NFL today is less about 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. The players are more in it together as coworkers than they are against each other. Even for players who were 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. It's probably a good thing for them to recognize that now, the real reality on the field. At least it means they're going to 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.

David: I think this has actually been a great development for certainly the pro game, but football in general too. 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 what football was in this 19th and early 20th century American ideal of manhood and character building, that the opponent was the enemy, this is war, these are bad people that you're fighting against. No, they are the exact same as you wearing a different uniform. 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.

Ben: There is definitely finally an acknowledgement that they are entertainers above all else. There's a good amount of comradery among us 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 of decades before the players acted like it was the case. It almost felt like they were being taken advantage of, which is not that they're not being taken advantage of now, but at least they seem to recognize what's going on.

David: There was a whole institutional complex around it that started at Pop Warner football and went through high school and went through college . This game is greater than yourself and this is about an epic struggle, good and bad. This is just not the case.

Ben: Yup. It is just terribly tragic reading about the long-term impacts on some of these players. The one 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.

David: This is what I was talking about a little bit earlier, my own experience playing football. If I had known what I know today, I would've 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, 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. You know what's going on. 2001, those guys didn't know. That's crazy. What did you say, seven players out of their 53, I think, on an NFL roster?

Ben: I have passed away, yeah.

David: I have passed away. Wow.

Ben: 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 bears. The cooperative armor that has got them here begins to shatter, youth not playing, player safety issues, the failure of international expansion. Frankly, for the same multiple, I'd much rather buy an NBA team than an NFL team. But I'm curious to hear your thoughts on a bull case for the NFL.

David: My bookcase is what I've been saying here for a while now on analysis, the Lindy effect. I 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.

Ben: I completely agree with you. 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. It's my opinion. Of course, we haven't even talked about sports betting, which is now legal in the United States. We don't exactly know the ways that that will accrue to the NFL, but you can be very sure the NFL is going to generate a lot more revenue from legalized sports betting.

David: Indeed. We shall see on that front. I just want to say, during this episode, it was really fun. Just on a personal note, I've had probably a similar relationship to football with you over the years. More complicated too because as we talked about here, and I played for many years, I had certainly a lot of mixed emotions over the past decade, including many years where I just stopped watching football altogether. 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. 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 rekindle a personal relationship with the game and with the NFL in particular through this episode. I think the game is going to be fine. Clearly, the business is going to be fine, whatever either of us thinks. I'm glad we did this. It was fun.

Ben: All this to say, I can't wait to watch the playoffs. I'm going to have some mixed feelings and some cognitive dissonance, but no doubt, I am so excited to watch the playoffs and the Super Bowl.

David: Me too. Are you ready for some football?

Ben: I am ready for some football. All right, 10-second carve out on my end. Go watch The Menu. It was an unbelievably fun movie, beautifully shot. That's all I have to recommend.

David: My carve out was going to be Peyton's Places on ESPN+. I know we talked about it at the top of the episode, but it's so good. Nostalgia, Lindy effect. It's right there, go watch it.

Ben: 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. Just tell them you heard from Acquired. After you finish this episode, come talk about it. There are 14,000 other smart members of the Acquired community at acquired.fm.slack. We've got a merch store. It's not as good as the NFLs, but...

David: We're working on it. Acquired enterprises coming soon.

Ben: Acquired.fm/store. 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. Not that our part of the interview is awesome, but she was awesome, with Meghan Reynolds from Altimeter, on building a capital formation function at an investment firm. With that, listeners, we'll see you next time.

David: We'll see you next time.

Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

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