The Business of Sports is Booming

Steven Brod Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Private equity's increasing role in sports franchises presents financial advisors with a compelling investment opportunity. Explore how investing in sports franchises can be a good portfolio diversifier and generate attractive returns.

This year’s Super Bowl was the most-watched program in television history. Advertisers paid over $7 million for a 30-second spot,1 thousands of fans bought tickets, and the Kansas City region benefited from $993 million of football-related spending.2 There is an immense investment opportunity in the business of sports. The owner of the Chiefs and chairman of the NFL’s finance committee, Clark Hunt, announced that private equity is a potential source of capital for franchises. 3

There has been a perceivable shift in the ownership of sports franchises from single individual and family structures to private funds. Last year, 20 of the 30 teams in the NBA had private equity capitalization (valued at an estimated $74.2 billion4), and private equity invested significant capital in other sports throughout the year. For instance, Arctos Sports Partners invested in the Tampa Bay Lightning at a valuation of $1.4 billion5 and in Paris Saint-Germain with a valuation of $4.3 billion.6 A similar picture is taking place around the world as investment firms own 17% of soccer clubs in Europe’s most significant leagues.7

For the franchises, alternative investment firms have been shown to bolster revenue, returns, and popularity for teams. The English Premier League team Newcastle United had a valuation increase of 63% over a period of two years after a substantial investment from the Saudi Public Investment Fund.8 While the S&P experienced a decline of 16% in 2022, the average NBA franchise experienced valuation increases of 16% over the same period.9 Substantial financial backing has allowed many investment firms to improve their teams, attract top-tier talent and management, and spend capital on operations and marketing efforts.