Team values are at all-time highs across traditional sports leagues (e.g., the Boston Celtics sold for $6.1 billion).
And with private equity now entering the space — the momentum behind franchise values won’t be slowing down anytime soon.
Here is a fascinating chart showcasing sports teams vs the S&P 500:
Today, we’ll explore what’s driving this appreciation, where the space is headed, and some more data-driven insights.
But first – here’s a chart outlining each league’s private equity ownership rules:
Sports Teams Are a Flywheel
The Flywheel Effect refers to pushing something forward incrementally until the object’s own weight helps momentum build to the point that it gathers speed with little to no effort.
Sports franchises are the perfect example of a flywheel:
- strong brands with fanatical support
- ownership groups who can leverage & monetize the brand in various ways
- league entities that control the supply of available sports franchises and protect the geographical territories of their existing teams
The sports brand itself is just the core of the flywheel.
Old way: the brand was utilized to draw people into stadiums to watch their favorite teams play.
Stadium-specific revenue streams include tickets, premium seats, in-stadium sponsorship, merchandise, food and beverage, and parking.
New way: Increased monetization channels are opening up, creating a similar flywheel effect.
- National media rights
- Out-of stadium merchandise
- Brand partnerships and sponsorships
- Local media rights (radio and television)
- Licensing of data to sports betting companies
- Real estate development projects using the brand of the team and stadium as an anchor tenant
- Live in-person experiences outside the sporting venue itself
- Behind-the-scenes and lifestyle entertainment (Drive to Survive, Welcome to Wrexham, Sunderland Till I Die)
Stacking these monetization channels not only grows top-line revenue but also furthers that depth of connection with the fan.
In reality, the entire web of revenue streams is even more complex, and each of these boxes can be broken down into more specific components.
Thanks to being a publicly traded company, we can analyze the Atlanta Braves.
The unique dynamics of pro sports allow the owners of this brand to monetize it in so many different ways to ultimately generate $640M of revenue annually.
That is how the Atlanta Braves went from a $424M valuation in 2002 to a $2.8B valuation in 2024.
And new monetization options will continue to unfold as sports are increasingly at the center of technological innovations.
Let’s go a layer deeper…
Live Sports
In the post-Netflix era, live sports stand as the final aggregator of concurrent, culture-shaping viewership, drawing the masses together.
Viewership numbers aren’t what they used to be, yet live sports play such a unique role in our culture that they are more valuable than ever:
- The NFL has almost one million fewer weekly viewers today than it did in 2010. However, the value of the media packages is more than double ($113 billion).
- The NHL’s viewership is nearly half of what it was in 2010, yet it recently doubled the value of its live rights package.
- In 2005, 14 of the top 100 most-viewed TV broadcasts were live sports events.
- In 2023, live sports accounted for 96 of the top 100 most-viewed broadcasts.
Global sports media rights are expected to bring in $85 billion annually by 2025, a 75% increase from 2018.
Case Study: Mark Cuban/Dallas Mavs
Mark Cuban bought the Dallas Mavericks for $285M in 2000, and the value of the team has seen steady appreciation for his 23-year holding period.
The chart below by Sweat Ventures shows the annual valuation estimate of the Mavericks through the hold period.
Given the discussed sale price of $3.5B, Cuban had a:
- Total Profit: $3.215 billion
- ROI: 1128.07%
- CAGR: 11.67%
- MOIC: 12.28x
*Note: Three important assumptions for simplicity’s sake:
- Assumed he sold 100% of the franchise
- Used exactly a 23-year holding period
- Ignored additional capital deployments into the team
The 11.67% CAGR compares to a 4.90% CAGR for the S&P 500 during that same timeframe. The difference in CAGR is driven by annual returns in addition to the volatility of those returns.
- The Mavericks (and sports team franchises in general) have experienced relatively steady appreciation without major pullbacks in valuation.
- The S&P 500, on the other hand, has had steady years, boom years, and bust years (like during the tech bubble and the great financial crisis).
This is an important distinction…
Because when losing 50% of the value in an investment, it takes a 100% increase to get back to breakeven, so this downside protection significantly impacts total returns over the long run.
The chart below highlights the hypothetical growth of $1 invested into each asset starting when Cuban bought the team in 2000:
Going one step beyond return metrics, we can compare the two asset classes by evaluating their volatility and excess returns above a risk-free rate given that volatility.
The table below highlights the average 5-year return, the standard deviation (a measure of volatility), and the Sharpe Ratio (risk-adjusted return).
This shows that even though the two investments had similar 5-year average returns, the Dallas Mavericks had better risk-adjusted returns than the S&P 500 because it had lower volatility.
This isn’t a perfect comparison because the Mavericks are not a liquid asset that prices daily, so the volatility is most likely understated, but it still presents an interesting case for investment in sports franchises.
Why did Mark Cuban sell?
It could indicate that he wants to take some chips off the table while the market is hot or potentially foreshadow big development plans for the Mavericks organization – bringing in deep-pocketed investors like Adelson family with operational expertise in the casino and entertainment space.
Final Insights
Sports teams/leagues are continuing to lean more into technology — as new revenue streams drive valuations higher.
As fandom deepens looking for more ways to connect with our favorite sports team, return-driven institutional ownership groups and savvy league management will find new ways to monetize their unique IP.
The long-term, contractual nature of multiple revenue drivers for sports teams drives valuation appreciation.
While the traditional leagues worldwide are pretty stable and becoming commoditized by private equity (NBA, NHL, NFL, NHL, MLS, Euro Soccer, IPL)…
The next great growth opportunities lie in the emerging sports and the leagues/teams that are affiliated with them.
