“Investing in rather than simply watching sports seems unusual, but how does it payoff and is it possible without billions of dollars?”
By Oleg Biletsky
Sports. Lots of us love them for the passion and entertainment they generate, but what we don’t often recognize in sports is the investment opportunities that come with them. Many billionaires purchase teams from the NFL, NBA, EPL, MLB, etc. for bragging rights and entertainment, but they also acquire shares of major league teams because of the sizable return on investment that the franchises provide. Sports franchises have proven to be stable sources of revenue over the years, but how profitable is it exactly to invest in sports teams from the major leagues?
Investment Profits from Major League teams
The profitability of sports teams in major leagues is impressive considering how much revenue those major leagues generate and how much some of these teams have grown in value since their last purchase. From the 2015/16 season, the National Football League brought in $13 billion in revenue, more than any other sports league in the world. The closest sports league to the NFL in terms of revenue was Major League Baseball, which took in $9.5 billion. The English Premier League and the NBA followed with revenues worth $5.3 billion and $4.8 billion respectively. The Dallas Cowboys, the #1 ranked team on the 2016 Forbes’s list of most valuable sports teams in the world, is currently valued at $4 billion, while the next two teams on the list, Real Madrid and FC Barcelona, are valued at $3.65 billion and $3.55 billion respectively. And that’s just a few of the major league teams. The profitability of sports teams seems even more astonishing when considering how much some of the owners paid for their teams. The McCaskey family bought the Chicago Bears for just $100 in 1920 ($1,218.02 adjusted for inflation), and the NFL team is now valued at $2.45 billion. In 1973, George Steinbrenner purchased the New York Yankees for $8.7 million (about $48 million adjusted for inflation) and they are now worth $3.4 billion. Owning or investing in a sports team from the world’s major leagues is likely going to give you a stable return for the future, but how possible is it to enter the market of major league sports teams?
Investment Possibilities in the Major Leagues
As far as the franchises from the major sports leagues go, it is difficult at this point to invest your money directly into a team. For NFL teams, the only franchise that offers its shares to the public is the Green Bay Packers, and their last stock offering took place in 2011. The Green Bay Packers stock does not provide dividends or capital appreciation so the best you can hope for is to recover your original investment amount. Thus, to make money from investing in an NFL franchise, you must be willing to invest over a billion dollars or at the very least hundreds of millions of dollars to purchase a majority stake of a team. The case is similar for teams in other major sports leagues. The only NBA team that offers its shares to the public is the New York Knicks, and there are only a few soccer teams from the major leagues in Europe like Manchester United and Juventus FC whose stocks are publicly traded. Thus, most teams from the major sports divisions are privately owned, and investing in those teams takes an incredible amount of money and/or good relationships with owners. So if the teams from the major leagues are so difficult to invest in, how can you put your money into a sports team and get a sizable payoff?
Is Investment in Minor League Teams the Answer?
There are numerous sports teams in lower divisions that don’t offer as expensive shares compared to the main publicly traded sports companies and also have a lot of room to grow and become much bigger and more profitable in the future. For instance, AFC Bournemouth is a soccer club that is currently in the English Premier League, the highest division in England and the most profitable soccer league in the world. Only 7 years ago, the team was in the EFL League 2, the 4th highest division in England and the lowest professional soccer league in the country. In 2011, Russian millionaire Maxim Demin acquired a 50% stake of the club for £850,000, and in just 4 years, the total value of the club rose from £1,700,000 to £104 million, as the club was able to progress through the lower divisions to reach the English Premier League. Thus, by acquiring a team from the lower leagues, Demin was able to profit from his purchase as the club reached promotion to the highest division in England.
The minor soccer leagues, along with the minor leagues in various other sports, allow for opportunities to invest in a team for less money and profit on the investment based on the performances of the team. Thus, one does not need to be worth billions of dollars or a special status to invest in a sports team and get a satisfactory return of that investment. And if £850,000 from our AFC Bournemouth example still seems like a lot of money, there are various teams in even lower divisions or in other minor sports leagues that have a lot of room to grow and are worth less. In England for instance, there exists a division below the EFL League Two called the National League where semi-professional teams have the opportunity to move up to the professional division League Two and build from there to hopefully one day reach the EPL. These semi-professional teams are worth less than the League Two teams such as AFC Bournemouth in 2011, but they have even more room to grow into a major league club. Thus, the opportunities are there for those without a lot of money to invest in sports too; they just have to direct their attention to the minor leagues to see the investment possibilities that hide behind the overlooked part of sports.
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