Why Professional Sports Team Values ​​Are Only Rising

Professional Sports Team Ratings are governed by the law of scarcity, regardless of geography or game.

The big picture: This is a collection of luxury toys on a level above yachts or private islands. Mega-billionaires — and, increasingly, institutions — are getting into everything from the NFL to the NBA to European soccer.

By the numbers: The all-time record for sales of professional sports teams has been broken twice in the past month: first when American businessman Todd Boehly bought Premier League club Chelsea FC for £3, $1 billion, then again when Walmart heir Robb Walton struck a $4.65 billion deal for the NFL’s Denver Broncos.

  • There have also been a host of other team selling processes, including football clubs in Italy, France and Spain. Plus, the Washington Nationals baseball franchise is on the block.

Process the math: Team selling is as much art as science, but bidders tend to start with a multiple of revenue (rather than profit).

  • The health of the league and the size of the media market can add a premium. If the team has its own stadium ownership and media rights, even better.
  • Many professional teams are unprofitable. But a professional sports investor told Axios: “The idea that valuations keep going up has led everyone to complacency.”

What has changed : Institutional capital, including private equity, has become a major player in team auctions over the past five years – competing with the traditional pool of wealthy people who want to own their childhood obsession.

  • A growing number of individuals and institutions are also trying to buy multiple teams, across different markets and leagues.

Be smart: Increased demand meets static supply, hence price appreciation.

  • The resulting dynamic of increasing numbers is very attractive for private equity.

The bottom line: A professional sports team owner told Axios that “if you look at history, what you see is incredible performance and a lack of correlation to markets. Additionally, the continued growth of media opportunities, such as streaming and international expansion. It’s a very good business to be.”

Go further: Axios Markets plays moneyball

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