By Blake Fortune, Nick Kelly
The “business of sports” has become a focal point for investors around the world. From the birth of NIL legislation to the extension of regular season games in the NFL, sports investors are adjusting to new opportunities in this paradigm. Often overlooked, and increasing in popularity, is sports’ private equity. From retail investors to titans of wall street, the concept of investing in sports has generated tremendous demand.
The objective in private equity (PE) is usually to buy, scale, and sell. In many cases PE firms also provide much needed capital through minority transactions to accelerate growth in scalable business. The success of PE transactions is not new to the sports world; however, sports teams across the world and their owners are adapting to this newfound access to capital markets. Whether it’s launching a new team or buying minority stakes in professional sports leagues, the “business of sports” seems to be here to stay.
In recent years, retail investors have gained access to what have traditionally been closed-off investment avenues (PE, hedge funds, special purpose vehicles, private transactions). This newfound access has helped, in some ways, democratize access for retail investors to allocate capital to professional sports teams, bespoke sports investments, and media opportunities. The emergence of online sports betting across the globe has also fueled significant investor interest in the sports world.
Given the mad dash for liquidity across college sports and the emergence of NIL, sponsors of investment vehicles are looking for ways to capitalize on this investor appetite as well as opportunity for exciting investments. We appear to be in the “wild west” phase of retail sports investing, specifically across the NIL medium. However, more mature markets like professional sports leagues are commanding serious interest from top-level investment managers. So, is it worth taking the plunge?
Here are some considerations:
1). Soaring Valuations:
As recently as 2000, professional sports teams would cost you several hundred million dollars. Today, that ticket price starts around a billion (with a B), and that is for an “entry level” team. In the case of the Dallas Cowboys, the franchise is valued at ~10 billion, which creates a very limited pool of buyers, should Jerry Jones wish to sell. This need for liquidity, along with an easily definable revenue stream, makes this sector potentially ripe for investment.
2). Revenue Growth:
Aside from traditional revenue streams such as ticket and merchandise sales, leagues now have options when it comes to broadcasting and licensing deals.
- Amazon and YouTube are driving up the price of broadcasting games and having exclusive rights to certain days (NFL Prime on Thursdays).
- Apollo owns Yahoo and is eyeing a bid for sports broadcaster Paramount, who has exclusive rights to NFL, UEFA, NCAA basketball, The Masters, and more.
- KKR invested in Skydance Media which is a media/tech company for high-school sports (which is gaining steam country wide as far as NIL legislation is concerned) and invested in sports gambling app FanDuel.
3). Poor Financial Management:
Many sports teams are poorly managed as can be seen in the case of the Oakland Athletics Baseball Club.
- Attendance was ~9,000/game in 2024.
- Lack of stadium upkeep has been apparent for nearly a decade:
- Possum sighting on field with infestation starting in 2014.
- Lack of upkeep on parking facilities.
- Lack of cleanliness across stadium and seating.
- Payroll is under $50 mm, second lowest in the league and lowest it has been since 2003, despite the team being purchased in 2005 for 180 million and now worth around 1.2 billion.
The Oakland Athletics just played their final game in Oakland because of poor management.
Like the tech PE/VC boom in the early 2000s, this new sports model will take years to unfold. Across the NCAA, there have been discussions around how PE can play a role in creating a new “super league”. This project, called “Project Rudy” could inject close to $10 billion in private capital. Given the emotional connections between fans and sports teams, PE could be a major disruptor across the professional and college landscape. Only time will tell how large this new asset class can become.
Game on.
Business-Insider_PE-in-Sports_4.23.24.pdf (redbirdcap.com)
The NFL’s Most Valuable Teams 2024 (forbes.com)
Inside how Oakland A’s long tenure in the Bay Area came to an end (sportsbusinessjournal.com)
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