It is the new golden age of American sports, which even allowed the entry of investment funds for the first time. Its entry, accelerated by the covid-19 crisis, was already planned in the short term, due to the immediate need to find financing for franchises due to the pandemic.
In the first place, because the constant increase in its audiovisual income, sponsorship and ticketing also led to higher spending. The latest agreements signed with the NBA, NFL and MLB player unions guarantee a distribution of benefits linked to income close to 50% between athletes and owners, depending on each league. In addition, the new agreements contemplate salary improvements and more spending on other items.
On the other hand, it is precisely the growth of its business lines that caused the value of franchises to skyrocket in the last ten years. But that has had another consequence: fewer and fewer entrepreneurs can pay to have a team and much less make it profitable. There is more to see the latest corporate movements. Most of the new owners are among the great fortunes and have links with the most economically powerful sectors, mainly in the technological field.
Revaluation
This is the case of Steve Ballmer, former CEO of Microsoft, who acquired the Los Angeles Clippers of the NBA in 2014 for 2,000 million; David Tepper, founder of the Appalosa Management fund, which bought the NFL’s Carolina Panthers for $2.275 million in 2018; or, more recently, Ryan Smith, founder and CEO of Qualtrics, which acquired the Utah Jazz for $1.66 billion.
The constant revaluation of the franchises had caused many owners to not want to part with an asset on the rise. However, the pandemic and rising costs forced many millionaires to step aside or look for investment partners that would allow them to obtain some liquidity without completely divest of the franchise. Unlike in European sport, the top shareholders of the teams are still individual investors.
Also the minority partners, who are diluted and without real decision-making power over the direction of the teams, causing part of the capital to be stagnant and without real value. Hence the entry of funds as a solution, at a time when it is once again expected to expand more of the market as more sectors such as betting, marijuana and other activities that can have a great impact on US sports are liberalized.
The league that grew the most in valuation is the NBA. Its average growth multiplied its value up to six times in relation to the average it managed in 2012, going from 392 million dollars to 2,580 million dollars.
The growth of the NFL is lower than the rest of the leagues, since it had a dominant position in the market. However, movements such as that of the Broncos and the new audiovisual contract for a total value of 100,000 million in 10 years suggest that it will skyrocket in the event of new sales in the coming years.
Example
On the other hand, the average growth of the MLB and the NHL was similar in both leagues, growing between three and four times in the average value of their franchises. In the case of the MLB it stands at 2,200 million dollars and in the NHL it amounts to 934 million dollars.
The NBA is the one that has grown the most in relation to the rest of the leagues due to the television contract, that of Nike or other commercial partners since 201 and this influences the sporting success of some of its franchises. The main example is the Golden State Warriors, which have established themselves as the club that has appreciated the most: they went from being worth 450 million dollars to 6,030 million dollars, almost fourteen times more.
The Warriors or the Knicks, in fact, are already close to what has historically been the most valued franchise in the United States: the NFL’s Dallas Cowboys, owned by Jerry Jones. Ten years ago its appraisal was 2,100 million dollars) and in this period it multiplied by almost three, reaching 6,900 million dollars.
Finally, when establishing the valuation of a franchise, not only sports success stands out, but also the market in which it is located. This is demonstrated by the New York Knicks and Rangers, both owned by Madison Square Garden Sports, without any sporting success in decades. They are not an exception.
Despite the changes between the franchises, there are six cities that continue to dominate among the ten most valued in each league: New York, Los Angeles, Chicago, San Francisco, Boston and Dallas. The market exception can only be seen in the NHL, where its main franchises come from Canada. The Montreal Canadiens and the Toronto Maple Leafs lead as the most valuable, in addition to being the two most successful.
Source: Ambito
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