For More Than the Fun of It | Chief Investment Officer

Art by Gus Scott

When the National Football League approved in August the potential for minority private equity ownership of its teams, it naturally made big news. Since at least 2019, sports leagues, both established and emerging, in the U.S. have been slowly but steadily opening up their ownership structures to institutional investors. Sports analysts say the move reflects a growing recognition on the part of leagues and owners that sports as a category has unique investment opportunities.

Comprehensive reporting across all sports leagues lags a bit, but according to data from CAIS, deals related to sports media rights were collectively valued at more than $50 billion in 2022 alone. That figure is on pace to increase, as streaming platforms compete against traditional networks for the right to show live games. In 2023, 48 of the 50 most-watched shows in the U.S. were sports games, per CAIS. Teams and even players themselves are also monetizing exclusive content through apps and other platforms. The result is a growing ecosystem of investment opportunities that go beyond simply games on TV or a fantasy league at home.

“We’re in a new era in terms of audience growth,” says Neil Blundell, managing director and head of the investments team at the CAIS. “When we’re thinking about how consumers interact with sports, it’s not just following big games on TV. If you look at the number of followers someone like Lebron James has across platforms, that audience size is bigger than some teams had 20 years ago. Players are recognizing that they can leverage that, but teams and leagues can as well.”

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Sports investments also tend to be relatively uncorrelated to investing in other categories, CAIS data suggest. During the height of the pandemic, sports revenues increased significantly, as more people were at home interacting with sports platforms online or enjoying activities outside when it was less risky than being in groups indoors.

Building an Experience

The growth of the sports investing market means investors have many options in terms of how they construct their exposure to this category. A minority stake in an NFL team, for example, is likely to behave differently and have different drivers of return than an investment in an emerging esports league.

“When you look at who has been approved for NFL investing for example, the pools of capital are incredibly deep, namely sovereign wealth funds or billion-dollar sponsor funds, which would suggest that existing ownership groups are looking for ways to grow their franchises in new, non-traditional ways,” explains Vasu Kulkarni, founder and partner at Courtside Ventures an early-stage sports, gaming, and lifestyle fund. “But that’s going to be a long-term process, which is just now getting started. For new owners coming into these franchises, they are usually minority positions, so they don’t have controlling stakes and have to navigate a large cohort of stakeholders to influence new development. However, in newer and emerging leagues, opportunity to quickly innovate is easier with new ownership groups usually coming in at a controlling position.”

In terms of building an ecosystem, the development of the Premier Lacrosse League, which played its first season in 2019, highlights how investors may be able to play a more proactive role.

The PLL was co-founded by Paul Rabil, a former lacrosse player and investor, and his brother, Mike, a serial entrepreneur and investor. It is backed by an investment group composed of Joe Tsai Sports, the Chernin Group, Arctos Partners, Brett Jefferson Holdings, the Raine Group, Creative Artists Agency, the Kraft Group, Bolt Capital and other investors in sports and media. World Wrestling Entertainment and Kevin Durant’s venture fund have also been involved in funding rounds. The U.S. league, composed of eight men’s teams, has grown rapidly over the past five years, absorbed the predecessor Major League Lacrosse in 2021 and inked a broadcast deal with ESPN in 2022. The PLL also differs from many major sports leagues in that the league itself controls each team and all investment inventory.

The PLL’s first live game broadcast on NBC reported 452,000 total average viewers and a peak viewership of 623,000—the largest recorded broadcast audience for professional outdoor lacrosse. The league is also working on expanding its media presence through scripted and unscripted shows. In 2022, the PLL premiered its first effort, a documentary called “Fate of a Sport” at the Tribeca Film Festival. The documentary was acquired by Disney and ESPN Films for official release and distribution.

The PLL launched with an unusual model wherein all teams traveled to one location per weekend for multiple games, reaching many different markets once per season. For 2024, teams were, for the first time, tied to particular locations, creating geographic markets similar to other major sports and opening up new investment opportunities. In March, Whirlpool Corp. announced it would be the founding sponsor for the Maryland Whipsnakes, paying for game broadcast rights, along with other benefits. The partnership will also support the development of youth lacrosse in Maryland and the surrounding area.

Greg Bettinelli, a partner in the Chernin Group, says the goal of these investments is to continue building broad support for specific sports and also to develop a comprehensive fan experience.

“One of the great things about Premier Lacrosse is that they control the entire league,” Bettinelli says. “So there is an opportunity to be involved with that development very early on, and they really want to support the overall growth of the sport.”

Creating Lifetime Fans

Whirlpool’s plans to support youth lacrosse as part of its work with PLL is also instructive. Bettinelli notes that there is a growing youth sports subcategory that can bring people into particular games early on and create lifetime players and fans.

In March, the Chernin Group invested in Unrivaled Sports, a youth sports platform with 12 facilities serving more than 550,000 athletes and 1.1 million attendees annually. Unrivaled offers baseball, softball, football and action sports experiences to kids. The experiences range from league play to camp-type development opportunities that are a level above what kids might experience in a pickup league or club sport play.

Unrivaled’s baseball division, for example, brings youth baseball teams together to play in Cooperstown, New York, near the National Baseball Hall of Fame and Museum, and immerses players and their teams in the history of the sport.

“We think there are many actionable opportunities there,” Bettinelli says. “On one level, it’s important to keep local and grassroots leagues and teams accessible and not-for-profit, but we also think there is space for families to opt into premium experiences based on their interests. People can be involved in a sport for their entire lives and have meaningful experiences based on those emotional connections—it builds community.”

Wellness Trends

Greg Baker, managing partner in Alumni Ventures, which includes a sports fund among its many offerings, says wearable technology has been a “huge” driver for the wellness market to reach consumers. Wearables can track performance, which may give users confidence to stick with a new exercise routine. Oura Ring, which looks like a piece of jewelry and tracks sleep, fitness and wellness, is one of the fund’s investments.

These devices “help people get past the hump,” Baker says.

Alumni’s Sports Fund recently invested in Shape Scale, which takes a 3D image of a person, allowing doctors and trainers to track the impact of their exercise, diet or fitness routine.

Baker says Alumni will be watching the future impact of glucagon-like peptide drugs, known as GLP-1s, such as Ozempic, on users’ interest in exercise as they lose weight. It might spur greater interest in fitness, although it is too soon to tell, he says.

Sports Equipment, Youth Sports

Sports equipment companies were the traditional way to invest in sports, and they remain a key avenue, says Matt Elberts, a director in RW Baird’s global consumer investment banking group. An increase in women participating in sports and the continued expansion of youth sports beyond school have produced burgeoning markets for sports equipment and other gear.

Elberts points to Baird’s work with Canadian hockey outfitter CCM Hockey, a longstanding brand purchased from adidas in 2017 by Birch Hill Equity Partners; Swedish firm Altor Equity Partners recently agreed to acquire a majority stake in CCM in a deal expected to close by the end of the year. Montreal-based CCM’s valuation grew to between $370 and $444 million from $110 million in those seven years, which included the launch of the first line of apparel and equipment designed specifically for women by a major equipment provider.

Women’s hockey also got a boost in North America in 2023 with the launch of the six-team Professional Women’s Hockey League, intended to be more financially stable than previous women’s hockey leagues, and both women’s soccer and women’s basketball have seen considerable commercial growth in recent years.

Youth sports clubs are also growing, as is the spending required to participate. SeventySix Capital’s Kimmel says parents who want their children to participate in top private clubs may spend up to $20,000 per child per sport.

Elberts notes how Juggernaut Capital Partners and Fiume Capital partnered with 3Step Sports to create what he terms the “largest youth sports operating platform.” Their technology is intended to improve infrastructure that manages logistics such as registration, allowing coaches to focus on the kids rather than on managing a business.

“Businesses like youth sports in particular … [are] recession-resistant in the sense that parents tend to not cut back spending on their children, in part because of the benefits that are associated with team sports,” Elberts says, referring to positive social and emotional effects.

Already big business, youth sports may grow even more commercial due to changes brought by NCAA v. Alston. Allowing students to be paid is expected to have ripple effects beyond college sports. In perhaps the most high-profile example, Bronny James, son of National Basketball Association superstar LeBron James, signed an NIL deal during his senior year of high school.

As student-athletes become more prominent, companies are forming to allow college sports fans to get information about and entertainment from players, who are compensated for their content. Baker says Players’ Lounge, one of Sports Fund’s investments, launched at some colleges and quickly became a go-to source for information about the teams, since it includes stories from journalists and players.

Sports technology is making a mark as well. For example, SeventySix invested in Diamond Kinetics, a baseball and softball technology company that uses sensors attached to bats to improve hitting.

Sports as Entertainment

Kimmel says the growth of sports betting has also changed sports as a business. In the six years since Murphy v. NCAA, sports betting has become legal in 38 states and is worth an estimated $150 billion, up from a $10 billion industry available only in one state, he adds.

Sports are booming, and they are among the few televised programs people still watch live, Baker says. During the few hours the game is on, fans are looking for more ways to engage, whether through fantasy leagues, augmented reality or gambling.

Augmented reality may be the future of fan engagement, Kimmel says. There are numerous ventures exploring augmented, virtual and mixed reality in sports entertainment. For example, Quintar Inc. built PGA Tour Vision, an augmented reality app for golf’s PGA Tour to use on the Apple Vision Pro headset, and the NBA has been broadcasting games in virtual reality since 2016. Baker concurs such launches are just early steps in a larger movement.

“You’re going to see more augmented reality, virtual reality tools that will add to that experience,” he says.

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Tags: Altor Equity Partners, Alumni Ventures, Birch Hill Equity Partners, Greg Baker, Matt Elberts, Murphy v. NCAA, NCAA v. Alston, Pictet Asset Management, RW Baird, SeventySix Capital, U.S. Supreme Court, Wayne Kimmel