Sports Ownership: The Evolution of the Dollar
By: Evan Dupree
When you mention the concept of sports ownership conversationally, the first thought
might go directly towards the massive dollars associated with the purchase, and how there is a short list of possible suitors (take the Broncos for example), and that is certainly understandable, given that ownership of major league sports franchises has traditionally been the playground of the ultra-rich. But is there a change on the horizon? Cue up the private equity sector. Until recently, top sports leagues in the United States refused to allow private equity ownership of teams, fearing that this would cause a potentially unstable and imbalanced ownership structure throughout individual franchises; fast forward to 2021, and we are starting to see a shift in that dynamic. Historically strong returns have attracted institutional investors, but in turn, franchise valuations have entered more rarified air, and the very deep pool of financial resources that PE firms bring to the table have caused leagues to reevaluate the proposition of funds and outside special purpose vehicles joining the fray.
While enterprise values have increased across the board, a simple look at the top teams in
the three largest US major leagues puts into brief context how much these assets have grown and continue to appreciate over time:
1. Dallas Cowboys- Jerry Jones initially purchased the Cowboys for $150 million back in
1989; the team is currently valued at $6.5 billion
2. New York Yankees- George Steinbrenner and Michael Burke purchased the Yankees for
approximately $10 million back in 1973; the team is currently valued at $5.25 billion,
3. New York Knicks- The Madison Square Garden Company purchased the Knicks for $300
million back in 1997: the team is currently valued at $5 billion.
This overall growth has attracted new investors as the asset appreciation has outpaced the
major stock indexes, however, the large multibillion valuations have also reduced the pool of
qualified investors; simply being a billionaire doesn’t automatically pencil you in as a sure bet to acquire a controlling stake in a major league sports franchise. As such, leagues are turning to deeper pockets (i.e., institutional investors) to underpin increasing team values and improve the pool of possible acquirers.
So what is next; can we expect these valuation trends to continue? What about the
proliferation of institutional dollars joining the ranks of major league sports ownership? My
answer would be yes—as the value of each league’s media rights deals continues to climb, and the evolution of legalized sports gambling across the US provides new and meaningful revenue streams throughout the leagues--live sports continue to represent an extremely valuable media asset, and one of the few predictable properties of consumption.