Investing in Sports: The Next Trillion Dollar Market?
Nov 15, 2024
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In this engaging discussion, Josh Harris, co-founder of Apollo Global Management and a notable sports franchise owner, shares insights on the surge of institutional investors in professional sports. Dave Dase and Elis Jones from Goldman Sachs delve into the booming sports investment landscape, emphasizing the rising media rights and potential in women's sports. They also explore how Formula One's transformation into an entertainment juggernaut boosts its visibility. The emotional and financial aspects of sports investments are highlighted, showcasing the unique blend of passion and profit.
The shift from individual ownership to institutional investment in professional sports reflects evolving market dynamics and regulatory changes.
Investing in women's sports is emerging as a significant opportunity, driven by rising viewership and the demand for inclusivity in athletics.
Deep dives
Evolution of Sports Ownership
Owning a professional sports team has transitioned from a personal investment dominated by individual owners to a model that increasingly welcomes institutional capital. Historically, ownership in leagues like the NFL was limited to individuals or groups of friends and family, with strict regulations against institutional ventures. However, valuations of NFL teams have surged, rendering the traditional model less feasible as team purchases now require billions in equity. The relaxation of ownership rules, especially after the purchase of the Washington Commanders, marks a significant shift in how teams can be owned, potentially diversifying and increasing the capital available within the industry.
Investment Opportunities in Sports
The sports industry presents a unique blend of opportunities and challenges for investors, characterized by its vast global audience. With nearly 8 billion potential fans worldwide, sports have become an attractive sector for institutional investment, offering revenue potential that often remains uncorrelated to broader market fluctuations. Media rights revenues, particularly for leagues such as the NFL, have skyrocketed, with contracts growing from $2.2 billion annually in 2000 to $10 billion today. This dramatic rise illustrates the financial viability of sports teams, now viewed as businesses that require strategic investment to maximize their valuation and revenue streams.
Women’s Sports and Emerging Trends
Investment in women's sports represents a significant growth area within the broader sports ecosystem, corresponding with the evolving societal trends of inclusivity and diversity. Increased funding and focus on women's sports have prompted a rise in viewership and participation, making it an attractive proposal for investors. As the demand for diverse sporting events grows, strategic investments in women’s leagues can provide fruitful returns alongside traditional men’s leagues. This trend reflects a wider understanding that the sports landscape is expanding, requiring investors to seek opportunities in less established areas that have vast potential.
Challenges and Future Outlook
While the sports investment landscape is evolving, investors should remain aware of potential challenges, including the volatility of media rights revenues and the discrepancies in value generation across different leagues. The increasing valuations of franchises can lead to inflated expectations, and the sustainability of current growth trajectories is an ongoing concern for stakeholders. Additionally, as teams and leagues evolve into global media brands, the competition for market share and audience retention intensifies, necessitating innovative strategies in fan engagement and experience. Investors must balance ambition with pragmatism to successfully navigate these changing dynamics.
The sports ecosystem has exploded as an area of investment, with professional leagues loosening rules on private equity ownership, the value of media rights deals skyrocketing, and the many sports-adjacent businesses taking on new dimensions. In the first episode of a four-part series on the changing dynamics in the business of sports, host Nicole Pullen Ross speaks to Apollo Co-Founder Josh Harris about what it means to own and run professional sports teams in the NBA, NHL, NFL, and English Premier League. She’ll also discuss the scale of the investment opportunity in sports with Dave Dase, Global Co-Head of Sports Investment Banking, and Elis Jones, Head of Sports Investment Banking for EMEA. Nicole Pullen Ross is Head of Sports and Entertainment for Goldman Sachs Private Wealth Management. She is also Head of the Private Wealth Management business for the New York region at Goldman Sachs.