Sports Team Ownership: Vanity or Opportunistic?
By: Sean Mahoney
Being in the business of advising on the acquisition of professional sports teams, I often get asked the question, “is this simply a vanity play?” It is certainly a fair question, as some of the basic elements of owning a pro sports team – typically long holding periods, limited liquidity and unpredictable distributions may create the appearance of the only positive being able to say you own the team (or part of it). But like everything else, it is complicated, and there is more there than meets the eye…
Numbers Don’t Lie
There is most certainly a valid argument to be made for the economic benefits of pro sports ownership. While an alternative asset class by nature, the industry has historically offered a level of stability and ultimate appreciation that has outpaced many traditional asset classes for the better part of the past 20 years. From 2010-2019, the average CAGR (Compound Annual Growth Rate) for the Big 4 Leagues was 11.2%, with the NBA leading the pack for that 10 year span with an average change in team value of 476%, followed by MLB at 262%, NHL 192% and NFL 179%!
Stability AND Growth
Despite the potentially uneven and unpredictable annual returns or distributions, which vary from team to team, the reality is that these have been fundamentally solid businesses that are poised for continued growth due to a number of factors (new and evolving media rights deals, globalization, and the seismic shift in legalized betting just to name a few). Combine that with the deep pockets (and general smart business sense) of most teams’ majority owners, and you can see how this alternative asset class begins to appear less and less speculative.
Another point to consider when contemplating the financial soundness of major league pro sports ownership is that there is now a tidal wave of institutional dollars attempting to pave their way towards sports ownership, and those investment committees do not commit based on vanity.
At the end of the day, it certainly is nice to sit in the owners’ box, get a championship ring, or enjoy any ancillary benefits that you may be able to access, but the truth is that the most common profile of those investing in pro sports is that of an experienced, sophisticated businessperson, who believe that the economic argument for investing in professional sports is a strong one. However, no asset class or value proposition is right for anyone simply because they have the resources; investment criteria, time horizon, portfolio construction, and suitability ultimately weigh most heavily.