Opinion
Beyond the Game
Why sports investments are a new frontier for investors.
Reported by Ryan Byrne
Art by Gus Scott
Investing in sports has evolved far beyond fandom. Today, sports assets—from elite franchises to governing entities—represent compelling opportunities. Whether through private or public avenues, investors can gain exposure to a sector characterized by reliable cash flows; steady, growing revenue; and passionate loyalty.
The sports sector is in the spotlight, and investors can leverage public equities to access the high-growth potential, brand loyalty and revenue resilience of sports and sports-related investments through major players in media, apparel, technology and sports franchises.
Revenue Stability and Growth Potential
Ryan Byrne
Unlike other industries, sports assets benefit from a highly loyal, or “sticky,” fan base that sustains non-contracted revenues, such as ticket sales and merchandise. The New York Knicks, one of the teams owned by Madison Square Garden Sports Corp., consistently rank in the National Basketball Association’s top 10 for attendance despite only seven playoff appearances over the last 23 years. This consistent demand, even when team performance varies, shields revenue from economic downturns and adds to the allure of sports as a stable asset.
Contrary to other consumer sectors, in which products age out of relevancy, professional sports teams maintain a lifelong bond with fans, which translates to recurring revenue from ticket sales, merchandise and engagement with team-related products and services. Teams around the world are monetizing this relationship with their loyal customers.
Cost Controls: Driving Profitability
Effective cost management is a key advantage in sports investing, especially in U.S. leagues, in which player salaries are capped—or excess is taxed (luxury tax in baseball)—through collective bargaining agreements. These measures not only contain costs, but also foster competitive balance, contributing to financial stability across franchises. Leverage restrictions in these leagues further secure equity value, making equity returns on these assets attractive.European soccer is also moving toward cost regulation. Financial Fair Play Regulations were agreed in 2009 and implemented in 2011, aiming to curtail debt, promote sustainable spending and level the playing field. As these leagues align more closely with North American cost structures, we believe the European soccer market is poised for potential profitability growth. This opens a unique investment window in which leagues could prioritize financial discipline or face competitive pressure from more financially motivated leagues. There are numerous publicly listed European soccer teams, including Manchester United, Juventus (Italy), Borussia Dortmund (Germany) and others.
Why Valuations Continue to Climb
Elite franchises like Major League Baseball’s New York Yankees, the National Football League’s Dallas Cowboys and Formula One’s Ferrari are irreplaceable assets with powerful brand equity, rare enough that when they go on the market, they draw considerable interest and high valuations. As Jim Ratcliffe, now part-owner of Manchester United, once quipped, “They ain’t making more Manchester Uniteds.”Additionally, live sports remain sought after by advertisers. With cord-cutting prevalent and streaming services dominating, live sports deliver rare, real-time audience engagement. Sports account for a significant portion of the shrinking live viewership market, which has declined from 95% in the early 2000s to approximately 40% and as low as 25% depending on demographics and time of the year. In 2005, sports accounted for 14% of the 100 most-watched live programs in the U.S.; in 2023, sports dominated the top 100, accounting for 93% of the list, according to data from Statista and Nielsen Media Research.
The scarcity of watched-live content has driven intense bidding wars among streaming giants. Amazon, Apple and Netflix have made forays into sports broadcasting, challenging traditional networks and driving up rights fees. For instance, NBCUniversal’s Peacock streaming service paid $110 million for the rights to broadcast a single NFL playoff game in January (setting a streaming record with more than 23 million viewers), and Netflix secured the rights to two NFL games it will broadcast on Christmas Day for $150 million.
Owning a sports asset often provides lucrative real estate and development potential beyond the team’s core operations. A standout example is Braves Holdings LLC, which owns baseball’s Atlanta Braves. It has diversified its revenues by developing a mixed-use real estate project, The Battery Atlanta, which encompasses 1.56 million leasable square feet of space, ranging from hotels to office buildings, adjacent to the Braves’ new stadium, which opened in 2017 in suburban Cobb County, Georgia. Cobb County issued bonds to fund at least 45% of the cost of building the $672 million stadium but did not contribute to the real estate project, reported to cost about $550 million.
The Public Investment Opportunity
While private equity dominates the most visible sports acquisitions, especially in the months since NFL owners voted to allow private equity funds to buy stakes in its teams, several publicly traded teams and sports-related companies also allow investors to benefit from the financial characteristics of sports assets with the added benefits of liquidity and transparency.Publicly traded sports teams often trade at discounts to their appraised “fair value,” providing a unique entry point for investors. While publications like Sportico or Forbes provide headline valuations, increased liquidity in the asset class offers a more nuanced view of these assets’ worth. This discount to perceived value can offer investors both downside protection and upside potential.
Furthermore, when comparing public valuations to private valuations, institutional investors may recognize that publicly traded teams offer an attractive entry valuation due to market-driven discounts that rarely apply to private sales. For example, Manchester United recently sold a 25% stake, valuing the team at approximately $6 billion, or $33 per share. However, shares quickly returned to around $17, reflecting a nearly 50% discount. This dramatic drop highlighted the unique valuation gap in public markets, allowing institutional investors to potentially capitalize on a lower entry point compared to private valuations, which often command premiums due to scarcity and investor demand.
Beyond team ownership, various public companies capitalize on the sports market. Formula 1 Group, which owns global motorsports assets; TKO Group, which owns mixed martial arts brands Ultimate Fighting Championship and World Wrestling Entertainment; and global golf equipment maker Acushnet Holdings Corp. represent adjacent opportunities with promising growth trajectories. Acushnet, for instance, has tripled in value since its 2019 IPO, showcasing the demand for sports-related products.
Sports assets combine predictable cash flows, unique value appreciation and high consumer engagement, making them increasingly attractive in today’s investment landscape. For long-term, sophisticated investors, sports offer many shots at a very wide goal.
Ryan Byrne is a portfolio manager at Pinnacle Associates.
This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.