The unbelievable rise and continued rise in the value of professional sports teams has been a story well told in this email. Around the world, professional leagues are cashing in on the increasing value of TV rights deals and the owners of professional teams are enjoying the benefits of owning truly scarce assets. There are only 32 NFL teams, only 30 NBA teams and those that want to buy one must pay a premium.
Traditionally the plaything of the ultra-rich, we are now see celebrities get involved either as minority owners or as owners of smaller teams: Ryan Reynolds, David Beckham, Serena Williams.
“Lately, “high-net-worth individuals,” to use the phrase of the bankers and lawyers who buzz around them, have been collecting teams like Monopoly cards, with private equity getting involved in the action—also celebrities, corporations, whole countries. For the past couple of years, Chelsea and AC Milan, two jewels of European football, have belonged, at least in part, to American private-equity firms. McLaren, the famed British F1 team, is controlled by the royal family—of Bahrain. Patrick Mahomes has a piece of an F1 team too. LeBron James is a minority owner of the Red Sox. Tom Brady bought in to pickleball.”
This article from GQ explains how the game is played. It speaks to owners like Ted Leonsis who paid $85 million for the Washington Capitals in 1999 (and sold his AOL stock to do it which a year later plummeted). The Capitals are today valued at $1.4 billion. And to Mark Cuban, the owner of the Dallas Mavericks who bought the team for $285 million and recently sold a majority stake – without surrendering operational control – at a $3.5 billion valuation.
However, the focus of the article is on the bankers and lawyers that manage the sales of these coveted assets.
“In an older, perhaps more romantic era, the singular owner was a dedicated steward to a singular team or a singular community. Now, a highly financialized way of viewing these teams as assets has depersonalized the process; an owner of one team might bid for another, simply because they see a better investment.”
It is a fascinating world and one that hasn’t fully made its way to Australia (while we do have some private ownership of sports teams, the monied frenzy in the United States and Europe hasn’t made its way down under). With the ever increasing value of TV rights (especially with the online streamers led by Amazon now also bidding) and the legalisation and increased social acceptance of sports betting, the value of these professional sports teams is only going to grow. And with it, the heated competition from the ultra-wealthy to own these few, coveted assets.
This is an excerpt from our Thought Starters email. Once a week we send you 5 interesting articles that have caught our attention, to get you thinking. No spam, we guarantee.