What are the key legal issues facing an NFL London franchise? Part 1 – introduction and taxation
Published 20 January 2015 By: Robert Tomback
The history books are set to be re-written as The Seattle Seahawks take on the New England Patriots on the biggest of stages at Super Bowl XLIX in attempt to break the much feared Super Bowl repeat curse which has plagued NFL teams for the past decade. Although the pinnacle of the 2014/15 season is almost here, with the benefit of hindsight, it won't be this spectacle however which leaves the lasting legacy.
The reasoning for this is that on reflection, the 2014/15 season may in time prove to be an incredibly important year for the expansion of the NFL. The Dallas Cowboys win at Wembley Stadium brought down the curtain on the 2014 NFL International Series1 where a record three games were played in the UK. Although this marked the end of the International Series for another year, whether the sell-out crowd at Wembley realised it or not, it is quite possible that what they were actually witnessing was the start of something much bigger - a permanent NFL team in London.
Momentum has gradually been gathering for the NFL to introduce a London based franchise,2 and if the success of the 2014 International Series is anything to go by, this movement may just have reached a critical mass. This article will therefore seek to analyse the arguments surrounding the viability of a London franchise, highlighting the key legal considerations that would need to be addressed in order to make the London franchise possible.
The legal implications of an NFL team calling London home are huge, and a plethora of legal considerations will require addressing. Part 1 of this article will explore one particularly important issue: how a London franchise would interact with UK tax law. Part 2 will explore the wider legal considerations a London franchise would need to take account of.
The NFL franchise model
The NFL acts as a trade association made up of and financed by its 32 teams, whereby each NFL club is granted a franchise. This set up provides a large degree of autonomy (compared to UK sports), allowing teams to even change location in accordance with their owners' wishes, so long as there is consent of three quarters of the member clubs.3 For example Baltimore Colts' fans lost their team to Indianapolis and there is scope for additional teams to be added to the league, if the NFL deems it appropriate (although 32 is widely seen as the optimal number of teams).
The UK has hosted eleven sell out games dating back to 2007 and is now widely seen as the next destination for the NFL to expand into, the expectation being that London will be granted its own franchise.
With the average NFL team in 2014 being valued at $1.43 billion4 and with the league poised to generate in excess of $25 billion by 2027, continuing its dominance as the most lucrative sports league in the world, no one is suggesting the NFL has to count the pennies just yet. However, every market has a ceiling, and although the NFL is hugely profitable, it still has its limitations and significant additional revenue streams are hard to find. A London franchise is particularly attractive as it offers the NFL to a whole new set of fans and serves as a gateway to Europe, acting as a huge commercial boost and further enhancing the value of the League's sponsorship and broadcasting rights.
The demand for a London franchise
Ultimately, a London franchise will only succeed if there is the demand to support it. However, signs so far have been promising. Almost 250,000 tickets were sold in the UK for the 2014 games alone, equating to complete sell out crowds, with more than 33,000 people buying a mini-season ticket for all three games resulting in £25m of gate receipts.5 NFL's international chief, Mark Waller, is certainly optimistic about the future stating, "When we started (with the series in 2007), I reckoned it'd take 15 years to do it,". "That was what I expected, and we're still on course. We're at the midpoint now."6 The fact that in 2007 NFL was the 18th most watched sport on Sky Sports and now it is the 6th, demonstrates that Waller may indeed be proved correct.7
To draw a parallel, Waller notes the global growth in popularity of Champions League football,8 demonstrating the demand from fans and sponsors alike for quality sport action, regardless of its international location. Where historically fans were preoccupied with domestic leagues, increased coverage and accessible technology mean sports fans are increasingly following international sports as well. It is factors like these which have led to support of a London franchise from NFL League Commissioner, Roger Goodell, stating, "The fans are growing very quickly, in big numbers and in really deep passion and when you see that, you want to respond to it and our owners recognise that."9
Practical considerations of a London franchise
Many detailed articles have looked at the practical considerations surrounding the feasibility of a London franchise and it is not necessary to repeat these arguments.10 However, in order to offer context to the legal considerations (below) so that an overall view can be taken as to the viability of a London franchise, a few key practical considerations can be summarised as follows:
- Lack of fans - In a similar way to how Asian and African soccer fans follow a team, it is argued most UK fans already support an NFL team, so will a London franchise attract a significant enough fan base?
- Travel time - No matter how you look at it, London and the US are not geographically close. Some therefore question whether long travel times and jet lag for teams would be prohibitive to a London franchise.11 The scheduling of clusters of games e.g. two home games followed by two away games, could however mitigate the impact of these extended travelling times.
- Venue - A London franchise would not yet have a home stadium. All previous NFL matches have been played at Wembley, but it is unknown if the playing surface would hold up to a full season (whilst still hosting other events) and whether all matches could be scheduled into the busy Wembley calendar.
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- Tags: American Football | Employment Law | England | Finance Act 2012 | Finance Act 2014 | Governance | HMRC | Income Tax (Earnings and Pensions) Act 2003 | Income Tax (Entertainers and Sportsmen) Regulations 1987 | National Football League (NFL) | Regulation | Tax Law | United States of America (USA)
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Rob is a dedicated Sports Lawyer working within the Mishcon de Reya Sports Group. He has wide experience across a range of sports, providing litigious, commercial and regulatory advice to clients. He acts for a range of governing bodies, clubs, players and agents and has represented clients in cases before the Court of Arbitration for Sport and other international sports decision making federations, as well as at domestic arbitral and disciplinary hearings. Rob was named as a Sport Industry NextGen Leader, an initiative 'to identify tomorrow’s sports leaders and celebrate the rising stars of the sports industry'. Rob is the only practicing lawyer to receive this accolade.