Pro Sports Ownership
Discover the benefits of owning a minority stake in a professional sports team(s)
“I don’t know which SAAS (software as a service) company will be around in 5 years, but I know that 50 years from now, there will be a World Series in October.”Explore our funds— Ian Charles, Arctos Sports Partners
Strategy Overview
For many decades, owning a sports team was the ultimate trophy asset for the ultra-wealthy. In late 2019, a series of rules changes by the major leagues (MLB, NHL, NBA and MLS) have allowed for certain investment groups to take a minority interest in their respective teams. Sports as an asset class has grown to become an attractive (and entirely uncorrelated) investment.
Between 2012 and 2022, the S&P 500 returned approximately 11% annually. The Russell 2000 (an index comprised of small cap stocks) returned 8% annually. Over the same period, the big four leagues (NBA, MLB, NFL, and NHL) combined for 18% percent compounded returns. Between 2002 and 2021, the average price for an NBA team rose 1057%. By comparison, the S&P 500 returned a total of 458% percent over that period.
Over the past hundred years, the North American major leagues have survived pandemics, lockouts, world wars, player strikes, depressions, recessions, and everything in between. Sports team have shown to be very durable assets. Let’s explore the many ways that modern Professional Sports teams generate revenue and value for its owners/investors.
League Revenue & More
League Revenue – Each team receives a pro-rata share of profits generated by the league itself. If there are 32 teams, each team receives 1/32 of the total. The league is responsible for selling media rights, sponsorships and more. The media rights have gone up tremendously in value in the past couple decades. TV Networks and their advertisers are becoming increasingly desperate as “cord cutting” is eroding their ability to reach their target customers via cable television. In 2019, ninety-two of the top one hundred highest-rated programs on TV were sporting events. Another force behind surging league revenues is the streaming wars. Apple, Amazon, Netflix, and YouTube are battling it out to become the dominant streaming player, and all of them covet the rights to live sports.
In addition to league revenue, the teams generate their own revenue from various sources…
Local Media
Teams will often partner with local TV stations or even create their own networks.
Live Events
Many teams own their venue and pick up all the additional revenue from concerts, events, e-sports etc.
Real Estate
Many teams have wisely purchased much of the surrounding real estate from parking garages to hotels to apartments to retail.
Licensing/Sponsorships
Local business sponsorships generate revenues while furthering local loyalty.
Tickets/Concessions
From merchandise to food and beverage, these are significant revenue sources that have become increasingly maximized with retail analytics and efficient logistics.
Luxury Boxes
Premium seating experiences have become another significant source of corporate revenues as local companies use them for entertaining etc..
Highlights
- In 2023, the Phoenix Suns sold for a record $4 billion to mortgage mogul Mat Ishbia.
- In 2023, Milwaukee Bucks owner Marc Lasry sold a minority stake that put a $3.5 billion value on the team.
- Michael Jordan sold his majority stake in the Charlotte Hornets for $3 billion (while still holding on to a small minority position!). His original investment was $275 million, made in 2010.
