Pro sports became a strong buy for investors
RLB’s significant return is reflective of a new reality in which sports teams are increasingly a strong investment.
Last spring, the NFL’s Washington Commanders were sold for $6bn, setting a record for US professional sports. This sale was a 750% profit for longtime owner Dan Snyder, who purchased the team for $800m in 1999. The year before, billionaire Mat Ishiba purchased the NBA’s Phoenix Suns for $4 billion, giving former owner Robert Sarver a 1,000% profit from his initial purchase in 2004.
These are not isolated occurrences. Between 2012 and 2021, the value of the average NBA team grew by 387%, while the average NFL team’s value grew by 215%, and the average NHL team’s value increased by 207%. During that time frame, the rate of return across all five major men’s sports leagues far outpaced the S&P 500.
Why are teams exploding in value?
This was not always the case. For much of the 20th century, sports teams were often operating in the red. For example, when businessman Jerry Buss purchased the Lakers in 1979 for $67.5m, the now-dominant NBA franchise could hardly sell out its stadium.
But Buss saw the Lakers’ potential as a media property and entertainment juggernaut. The same year he bought the team, ESPN was launched as the first cable channel dedicated to cable news. Consumers’ sudden access to live games across the country ushered in a new reality for pro sports.
Quickly, with cable’s help, regional teams like the Lakers became entertainment for a national audience. This helped turn major market teams like the Lakers and the Yankees into cultural symbols, ushering in decades of extreme growth for all the major sports leagues. It brought about an explosion in the value of media licensing deals for live broadcasts, which are the main driver of increasing value for professional sports teams. According to Sportico, the largest single-year increase in average franchise value for the NFL and NHL both happened the same years the leagues renegotiated their media deals.
This has also been true for the valuation of NBA teams. In 2011, just two years before he died, Buss negotiated a $3.6bn licensing deal with Time Warner Cable. Before that deal, the Lakers were worth $643m. The year after, the team was worth $900m. And now, just over a decade later, the Lakers are worth about $6bn, a mind-boggling 8,789% increase for Buss’s initial investment.
Source: Quartz
