The annual National Football League Player Selection Meeting, commonly known as the NFL Draft, is the largest source of recruitment for professional football players. Over 250 former college football players are drafted, and the league minimum salary for a rookie in the NFL is $403,000.
Professional football players get paid a lot of money, even as rookies, because the NFL gets very high ratings on television. Of the top 10 programs on TV in 2012, NFL programming took the top eight spots, according to Nielsen. Even the draft, the NFL’s biggest off-season event, is more watched than other sport in season such as the NBA, NHL or major league baseball.
Unsurprisingly, advertising to fans is a major revenue generator for the NFL. Advertisers are always working to reach that vaunted 18-45 male demographic — a large portion of NFL viewers. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) is one of the biggest ad spenders, marketing its beers to eager fans. In 2012, the second round of the NFL draft was sponsored by Inbev’s Bud Light.
When Inbev spends tons of marketing money on NFL-related programming, does that create shareholder value? Many who have invested in Inbev in the past few years can’t be complaining: since Anheuser-Busch’s merger with Inbev in 2008, the stock is up 52%. There could become a point of advertising saturation for the company that might prove detrimental. But Anheuser-Busch InBev NV (ADR) (NYSE:BUD)’s strategy of launching new beer products seems to be working on attention-deficit NFL fans. And when spending marketing dollars on NFL programming, Inbev knows that a lot of beer drinkers are watching.
The huge marketing deals that companies sign with draft picks are also big business. Endorsement deals are commonplace, with NIKE, Inc. (NYSE:NKE), Adidas and Under Armour Inc (NYSE:UA) battling in recent years to sign coveted picks. The most marketable draft picks play quarterback, so its no surprise that these sports apparel companies are jostling to sign deals with signal callers.
In 2011, rookie quarterback Cam Newton signed a record contract with Under Armour Inc (NYSE:UA) valued at $1 million per year. Prior to the 2012 draft, quarterback Robert Griffin III signed a deal with Adidas.
But these deals to endorse gear pales in comparison to agreements that decide what equipment is used on the football field during games. NIKE, Inc. (NYSE:NKE) signed a five-year deal with the NFL to be the exclusive provider of on-field apparel. That deal has cost Nike over $1.1 billion. It handily trumps Reebok’s previous ten year NFL apparel deal, which was estimated to cost $250 million (Reebok was purchased by Adidas in 2006).