AlternativesNovember 1, 2024

For More Than the Fun of It

Established and emerging sports leagues are opening up and attracting institutional investors to a range of opportunities.

Reported by Bailey McCann

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.”

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.”