Off the beaten track: Investing in sports
[SINGAPORE] The financial world loves a good metaphor. Some popular ones include 'a rising tide lifts all ships', and 'don't try to catch a falling knife'. They are a pithy way to get one's point across but can sometimes fail to capture nuance. A rising tide might lift all ships, but some ships are more buoyant than others.
The ongoing trade war and the expected economic downturn is one such example. Yes, there will be tariff-related pains, but there are spots of brightness. Markets are betting on uncertainty amid US President Donald Trump's volatile, solipsistic approach to policymaking. Gold surged in April as the Vix index, a measure of expected market volatility, saw its largest spike since the pandemic.
Beyond looking at the winners and losers of this chaos, we also consider what can bulwark a portfolio.
Rising valuations
One such play is sport investment, which we called for at the start of 2025. This is a theme that proved compelling even before the recent tariff blues, with the soaring valuations of professional sports teams fuelled by a combination of scarcity and demand. Teams in a US major league such as the National Football League (NFL) or National Basketball Association (NBA) are highly coveted. The average value of US sports franchises has grown at an compound annual growth rate (CAGR) of 11.8 per cent between 2002 and 2023.
Access to ownership of these teams has also become much easier in recent times due to the recent involvement of private equity (PE). While the major leagues were once closed to PE due to the latter's previous reputation for aggressive acquisition strategies and a short-term approach, things have evolved greatly since the 1980s.
Today's PE funds have demonstrated the ability to add sustainable value via expertise and connections, and major league franchises have consequently become more receptive to PE investments. Major League Baseball (MLB) paved the way in 2019 by allowing up to 30 per cent of a franchise to be owned by funds. This was followed by the NBA, Major League Soccer, NHL, and most recently the NFL – the most valuable of all the major leagues, with over US$23 billion in revenue in 2024.
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Source of resilience
Far beyond the prestige of owning a professional sports team, many of the factors that make them attractive investments also hold up well during instability. Chiefly, it is the fact that broadcasting rights, a major source of revenue for professional sports, are contracted for the long term, thus guaranteeing cash flow. These rights, which are negotiated at the league level, are the bread and butter of the sports sector. US revenues are expected to grow at a CAGR of 6.3 per cent to hit US$34.7 billion by 2027.
The most salient example here is a suite of agreements that the NFL signed with media outlets including ESPN and Amazon, granting them media rights over 11 years in exchange for roughly US$110 billion – making it the largest media rights deal in US history.
Not far behind are the deals that the NBA has inked with Disney, NBC, and Amazon Prime for 2025 to 2036, which amount to US$76 billion. Once the sole domain of cable television, sports broadcasting rights are increasingly being snapped up by the key entertainment players of today – Big Tech. With cash to spare and an ever-increasing share of audience, streaming platforms have more than quadrupled their spend on sports media rights since 2020, reaching close to US$10 billion in 2024.
The fact that firms are even willing to sign such long-term deals highlights the fact that the sports sector enjoys a low-to-negative correlation with the wider markets. Anecdotally, fans do not stop supporting their favourite sports teams because the markets are down. Unlike the relatively dispassionate act of downtrading brand-name detergent for a generic label during a slowdown, emotions run high when it comes to sports – no riot has ever been started over detergent – influencing fan loyalty that adds buoyancy to the sector.
While an economic slowdown will no doubt affect brand sponsorships and discretionary spending like ticket sales or concession purchases, the higher-end segment of the sports sector which includes luxury suites, VIP packages, or even the trading of sports teams among the ultra-high net worth, are likely to remain relatively inelastic.
Diversity within a theme
Exposure to the sports theme goes beyond the obvious. Many major-league teams own or are strongly affiliated with stadiums that double up as live entertainment venues. The New York Knicks (NBA) and New York Rangers (NHL), for example, are owned by the same company that owns and operates the Madison Square Garden Arena. Other similar associations include the Miami Dolphins (NFL) and Hard Rock Stadium, and the Boston Red Sox (MLB) and Fenway Park.
Exposure to entertainment also promises resilience thanks to the emotional connection that people have to music. Festivals boomed across Europe in 2024 despite cost-of-living pressures, while Spotify saw strong subscriber growth in Q1 25 amid tariff turbulence. Particularly telling is the recent data – at a time when pandemic-era savings have long depleted – where 60 per cent of Coachella attendees financed their tickets using the festival's buy-now-pay-later scheme, proving the secular nature of the millennial and Gen-Z preference for experiences.
From a holistic point of view, the sports sector also offers the opportunity for a barbell-type strategy. While contracted media rights, stadium revenue, and sponsorships provide income at varying levels of stability, areas like women's sports offer significant growth potential. Between 2019 and 2023, total attendance at the Fifa Women's World Cup rose 75 per cent, in stark contrast to the consolidated numbers that the men's Fifa World Cup has had since the 1990s.
According to a Deloitte study, revenue from women's sports has grown exponentially, having passed the US$1 billion mark in 2024. If revenue for 2025 hits its US$2.35 billion, it spells a growth of about 340 per cent in just four years.
Another high-growth area is in the realm of sports analytics. A combination of increasing AI-driven efficiency and growing demand from teams has seen the market surge. Mordor Intelligence projects sports analytics to grow at a CAGR of 30.04 per cent, increasing from US$2.87 billion in 2024 to US$13.93 billion in 2029.
Nelson Mandela said, 'Sports has the power to change the world. It has the power to inspire, the power to unite people in a way that little else does.'
For many, sport is far more than entertainment, it is a way of life, and it should come as little surprise that such a force has profound implications for investing.
The writer is chief investment officer, DBS Bank
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