October 3, 2023
Andrew Petcash

The New Form of Sports Ownership: Attach Athletes

The NBA and NBPA recently agreed to a deal allowing players to invest in teams within their own league.

We saw over 40+ athletes invest in pickleball teams in the last 6 months.

Male players are jumping into the women’s game — like Patrick Mahomes and Kevin Durant who bought NWSL stakes.
Female players are jumping into the men’s game — like Alex Morgan and Michelle Wie who bought TGL stakes.

So why the shift to ownership for players?

It’s a mix of impact, community, and protecting their own pockets.

Let’s Dive In 👇

The Billionaire Owner Playbook

I don’t remember the exact tweet but I saw something on X the other day that said…

“You can either complain about high taxes or do your research and find ways to outsmart them”.

It’s certainly not that simple, but it gets easier for wealthy people who own assets like sports teams, businesses, and real estate.

Most of this has to do with the fact that income is taxed at a higher percentage than capital gains.

income taxes vs capital gains — Warren Buffett pays a lower tax % than his secretary.

Good example:

Stadium worker: $45k income, ~14% in federal taxes
Lebron James: $47M income, ~37% in federal taxes
Owner of Clippers: $656M income, ~12% in federal taxes

In relation to sports team owners, the reason is amortization — which is the ability to write off depreciating nonphysical assets as losses (such as player salaries).

And now athletes are starting to steal this playbook (we’ll get to that in a second).

Another example is the Pegulas, who own the Buffalo Bills.

buffalo bills owners stadium funded by taxpayers

They got taxpayers in the state of New York to fund $850 million of the $1.4B new stadium (roughly 60%).

Build assets on the backs of taxpayers and own all of the equity upside — it’s a hell of a deal for them (especially when they exit in the future).

Quick Sidenote

Listen…

It’s for you to make your judgment on the tax structure, all I will say is the government rewards ownership because it provides economic stability.

In theory, Lebron James and the stadium worker don’t have jobs if it’s not for the owner of the team that took the risk.

The one thing I will say…

Is that we need to be careful about how much private equity we let into the ownership of professional sports teams — I think in the short term they’ll grow the assets, but in the long term they could damage them.

Athletes Jump to Pro Sports Leagues

Highly compensated athlete employees are starting to see the benefits of not just salaries and endorsements, but also ownership.

The thing is though…

Major sports leagues like the NFL, NBA, MLB, and NHL are too expensive to buy into.

valuation of sports teams through the years

So athletes are using their money, influence, and networks to build ownership stakes in sports leagues of the future.

Athlete owners are abundant within:

Athletes Unlimited
United Soccer League (USL)
TGL League by TMRW Sports
Major League Pickleball (MLP)
National Cycling League (NCL)
Premier League Lacrosse (PLL)
National Women’s Soccer League (NWSL)
Pro Volleyball Federation & League One Volleyball

It’s only natural that athletes are trying to do the same thing as the owners of the teams they play for.

I still think some of them need to be careful because endorsements are worth money here and now.

While equity is worth $0 until an exit event — which may or may not occur in these startup sports leagues.

Endorsement to Enterprises

I know the natural inclination is to get mad at these billionaire owners and now athletes…

But wouldn’t you do the exact same thing if you were in their shoes? They’re playing the game, based on the rules of the game.

Capitalism favors “owners” — they take the risk and provide jobs, housing, and support for employees.

As many financial books regurgitate — it’s better to be an owner than a highly compensated employee.

Rich Dad Poor Dad chart — Chart from “Rich Dad Poor Dad”

The one thing that does raise an eyebrow is…

How many people now see the power, leverage, and influence of these athletes and are using them once again as “assets” to push forward investment deals.

10 years ago there were only a select few athletes that owned pro sports teams (Magic Johnson and Michael Jordan come to mind).

Today, there are hundreds of athletes who own pro sports teams.

And now we even have executives trying to utilize the power of athletes.