October 12, 2023
Andrew Petcash

Sports Is Being Revolutionized From Top Down

Profitability, legitimacy, and fame.

That’s what global investment groups are trying to accomplish through sports.

Sports is an interesting place right now because:

restructuring is taking place at the top
innovation is bubbling at the bottom

Let’s Dive In 👇

Sports Is Attracting New Money

The sports industry is an asset class gaining increased love from investment firms.

This is seen in 5 major trends:

Sovereign wealth funds, venture capital giants, investment banks, and family groups have made the industry more sophisticated.
Capital flows are looking beyond just traditional team assets — real estate, broadcasting rights, sponsorship, betting, and international joint ventures.
The diversity of investment is greater today than ever before, with emerging leagues popping up everywhere.
Big capital is beginning to show interest in women’s sports, which are growing in popularity.
Sports are moving downstream thanks to NIL legislation, and major leagues are placing investment dollars both horizontally and vertically into the ecosystem.

Macro Bad, Micro Good

The hike in interest rates to combat inflation has made financing more expensive while lowering the valuation of many assets.

However, the impact of the central banks’ decisions hasn’t been felt in the sports industry:

2021: $10B in deals
2022: $17B in deals
2023: expected to be even higher

The great beneficiaries of this new economic boom are athletes (salaries and sponsorships are skyrocketing).

Highest-paid athletes in the world:

Cristiano Ronaldo, $136 million.
Lionel Messi, $130 million.
Lebron James, $120 million.

So why is this?

Athletes Make You Look Better

Companies and countries are looking to gain legitimacy, counter negative news, and create an emotional appeal through the use of athletes.

Countries

Prince Mohamed Bin Salman says that his goal is to bring the 300 best players in the world to Saudi Arabia’s soccer league.

The Public Investment Fund manages a portfolio worth $600 billion and has acquired 75% of four national soccer clubs (Al-Ittihad, Al-Ahli, Al-Nassr, and Al-Hilal).

saudi pro league transfer spend football

Saudi Arabia knows that sport is an accelerator for its economic transformation projects (and for international tourism).

It’s both an internal and external operation:

Internal: 70% of Saudis are under 35 years old and it is necessary to provide them with entertainment and access to Western modernity.
External: sports tourism moves over $600 billion annually and the PIF’s agenda for “Vision 2030” lays out that the tourism sector should contribute 10% of GDP (it now stands at 3%).

Investing in sports has become a way to gain prestige — and has a powerful geopolitical dimension.

Companies

Entire sectors — even volatile ones like crypto — are seeking to make themselves better known by attaching themselves to athletes and sports.

Artificial Intelligence companies are certainly next in line for sponsorship…

These industries want to pull in new believers.

It’s why FTX paid $130M to put its name on the Miami Heat’s basketball court until 2040 (oops).

Money Likes Sports More and More

Today, there are sports teams such as Manchester United and Juventus that are listed on the stock market (they tend to experience a drop when titles are lost).

I am certain this will move downstream as fractionalization and decentralization become more prevalent.

Teams, leagues, and companies will open up crowdfunding rounds long before they go public.

The cost of broadcasting rights is growing as new investors enter the bidding war. Streaming platforms — such as Apple, Amazon, and Netflix — are trying to snap up as many rights as possible.

In a market like sports, it feels as if you only need money to be profitable.