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CNN
8 hours ago
- Business
- CNN
Sales prices for sports teams are soaring to record. Here's why, and what that means for fans
The Los Angeles Lakers may not have as many NBA titles as the Boston Celtics, but the Lakers topped their archrival with a record-setting $10 billion franchise price tag this week — just three months after the Celtics held the honor for the highest sale price for a professional sports team at $6 billion. But this record might not last very long. The NFL's New York Giants are in the process of shopping a 10% ownership stake, which could put the team's overall value above $10 billion, according to Marc Ganis, a Chicago-based sports consultant who advises NFL, NBA and MLB clubs. What's clear is that the valuations of sports teams are continuing to climb — and climb rapidly. Victor Matheson, a professor of economics at College of the Holy Cross who specializes in sports business, said in his 30 years of studying sports sales, he can't remember a team selling for less than it was purchased. For example, a 10% stake in the Milwaukee Bucks was sold in September 2024, which valued the small-market NBA team at $4 billion, a windfall from when the team was sold a decade earlier for $550 million. So even if the $10 billion record for the Lakers stands a while longer, other teams will eventually be sold at a hefty premium to their previous purchase price. The impact on fans, meanwhile, can be complicated. Fans often publicly yearn for an owner who is willing to spend what it takes to make the team competitive, yet some of the wealthiest owners have lousy records. In the end, fans are more likely to care about a team's winning percentage than its owner's net worth. Sports franchises have long been considered trophy assets, like luxury properties in short supply. 'The only thing I remember from all those economics courses is when the supply is fixed, and the demand goes up, prices go up. It's as simple as that,' said Sal Galatioto, one of the leading sports investment bankers brokering team sales. 'It is so rare you get a chance to buy control of a premier franchise.' Sports franchises have grown in value over the last decade. Cord-cutting, streaming and DVRs have made it more difficult for advertisers to reach viewers, meaning live sports programming has become more important. Major sporting events have reliably been among the most-watched events on television. 'Sports content is the lifeblood of the media industry and that drives tremendous value for these franchises,' said Lori Bistis, a deals partner and one of the leaders of accounting and consulting firm PricewaterhouseCoopers' sports practice. While cord-cutting has resulted in some regional sports networks falling on to financial hard times in recent years, streaming services have shown increasing interest in broadcasting games. Bistis said it only makes sense to see sports franchise values rise in tandem with that of lucrative television rights deals. 'We're not surprised to see the increase in valuation and all the data points to it continuing,' she said. Another factor: Buyers of professional sports teams know they will have access to valuable data on the demographics and spending behavior of their fans. Bistis said data can be monetized through different viewing experiences, merchandise and events. Galatioto said the increase in sports gaming since it became legal in 2018 is also driving up the interest in sports and sports programming. Deep-pocket investors have lined up to buy even minority stakes in teams and that is helping to drive up the valuations, as well. 'There's a lot of new money coming into the business,' said Galatioto. 'I can always find the high net-worth individuals willing to pay more. An individual gets ego gratification value, gets perks, they get other advantages.' A potential buyer could think, 'I'm willing to pay a premium to be an owner of my favorite team. I'm not willing to pay a premium to be an owner of a bunch of assets,' according to Galatioto. And a greater supply of potential buyers interested in minority stakes in teams can help drive up the prices being paid even more, said sports consultant Ganis. 'The universe of potential buyers of a 5% or 10% stake is much larger than the universe of potential buyers who can buy a 100% stake,' he said. Billionaire businessman Mark Walter, who is now buying a controlling stake in the Lakers with this deal, had been one of those minority owners with a significant stake in a team, Ganis noted. Walter had a nearly 27% stake, so his purchase of about a quarter of the team is all he needed to cross the 50% threshold. He didn't have to put up a full $10 billion in his bid for the Lakers — just a fraction of that amount, according to Ganis. Walter, the CEO of global investment and advisory firm Guggenheim Partners, also leads Guggenheim Baseball Management, which owns a controlling stake in the defending champion Los Angeles Dodgers. Guggenheim Baseball Management has invested heavily in the Dodgers' success. The Dodgers, who have the highest team payroll ($338 million) in baseball, are followed by the New York Mets, at $325 million, according to salary tracker Spotrac. The Mets, who were bought by Wall Street financier Steve Cohen in 2020 and had the highest payroll in 2024, fell to the Dodgers in last year's postseason. But spending big on players, coaches and a front office doesn't necessarily lead to winning titles. Only twice in the last 15 years has the baseball team with the top payroll won the World Series: the Boston Red Sox in 2018 and the Dodgers in 2020. (Major League Baseball is the only American sports league without a salary cap.) There have been champions during that time, such as the Kansas City Royals, whose team payroll in 2015 was just a fraction of the league's top payrolls. The deep pockets of the new class of owners have less of an influence on a team's success in leagues with salary caps, such as the National Football League and National Hockey League. So while baseball fans may get frustrated when their owners are not willing to spend to improve the team's roster, having an ownership of more modest means doesn't necessarily prevent a team from coming out on top. Matheson said he's studied the relationship between winning and payroll in baseball and found that higher payrolls do help teams win, at least during the regular season, but payrolls are only responsible for predicting about 30% of a team's success. The other 70% is due to factors like good management, avoiding injuries and even luck. 'If you're a fan, you're always wanted an owner who spends more money, but just because you have got an owner who does spend more money, that doesn't mean you're winning the whole thing,' he said.
CNN
8 hours ago
- Business
- CNN
Sales prices for sports teams are soaring to record. Here's why, and what that means for fans
The Los Angeles Lakers may not have as many NBA titles as the Boston Celtics, but the Lakers topped their archrival with a record-setting $10 billion franchise price tag this week — just three months after the Celtics held the honor for the highest sale price for a professional sports team at $6 billion. But this record might not last very long. The NFL's New York Giants are in the process of shopping a 10% ownership stake, which could put the team's overall value above $10 billion, according to Marc Ganis, a Chicago-based sports consultant who advises NFL, NBA and MLB clubs. What's clear is that the valuations of sports teams are continuing to climb — and climb rapidly. Victor Matheson, a professor of economics at College of the Holy Cross who specializes in sports business, said in his 30 years of studying sports sales, he can't remember a team selling for less than it was purchased. For example, a 10% stake in the Milwaukee Bucks was sold in September 2024, which valued the small-market NBA team at $4 billion, a windfall from when the team was sold a decade earlier for $550 million. So even if the $10 billion record for the Lakers stands a while longer, other teams will eventually be sold at a hefty premium to their previous purchase price. The impact on fans, meanwhile, can be complicated. Fans often publicly yearn for an owner who is willing to spend what it takes to make the team competitive, yet some of the wealthiest owners have lousy records. In the end, fans are more likely to care about a team's winning percentage than its owner's net worth. Sports franchises have long been considered trophy assets, like luxury properties in short supply. 'The only thing I remember from all those economics courses is when the supply is fixed, and the demand goes up, prices go up. It's as simple as that,' said Sal Galatioto, one of the leading sports investment bankers brokering team sales. 'It is so rare you get a chance to buy control of a premier franchise.' Sports franchises have grown in value over the last decade. Cord-cutting, streaming and DVRs have made it more difficult for advertisers to reach viewers, meaning live sports programming has become more important. Major sporting events have reliably been among the most-watched events on television. 'Sports content is the lifeblood of the media industry and that drives tremendous value for these franchises,' said Lori Bistis, a deals partner and one of the leaders of accounting and consulting firm PricewaterhouseCoopers' sports practice. While cord-cutting has resulted in some regional sports networks falling on to financial hard times in recent years, streaming services have shown increasing interest in broadcasting games. Bistis said it only makes sense to see sports franchise values rise in tandem with that of lucrative television rights deals. 'We're not surprised to see the increase in valuation and all the data points to it continuing,' she said. Another factor: Buyers of professional sports teams know they will have access to valuable data on the demographics and spending behavior of their fans. Bistis said data can be monetized through different viewing experiences, merchandise and events. Galatioto said the increase in sports gaming since it became legal in 2018 is also driving up the interest in sports and sports programming. Deep-pocket investors have lined up to buy even minority stakes in teams and that is helping to drive up the valuations, as well. 'There's a lot of new money coming into the business,' said Galatioto. 'I can always find the high net-worth individuals willing to pay more. An individual gets ego gratification value, gets perks, they get other advantages.' A potential buyer could think, 'I'm willing to pay a premium to be an owner of my favorite team. I'm not willing to pay a premium to be an owner of a bunch of assets,' according to Galatioto. And a greater supply of potential buyers interested in minority stakes in teams can help drive up the prices being paid even more, said sports consultant Ganis. 'The universe of potential buyers of a 5% or 10% stake is much larger than the universe of potential buyers who can buy a 100% stake,' he said. Billionaire businessman Mark Walter, who is now buying a controlling stake in the Lakers with this deal, had been one of those minority owners with a significant stake in a team, Ganis noted. Walter had a nearly 27% stake, so his purchase of about a quarter of the team is all he needed to cross the 50% threshold. He didn't have to put up a full $10 billion in his bid for the Lakers — just a fraction of that amount, according to Ganis. Walter, the CEO of global investment and advisory firm Guggenheim Partners, also leads Guggenheim Baseball Management, which owns a controlling stake in the defending champion Los Angeles Dodgers. Guggenheim Baseball Management has invested heavily in the Dodgers' success. The Dodgers, who have the highest team payroll ($338 million) in baseball, are followed by the New York Mets, at $325 million, according to salary tracker Spotrac. The Mets, who were bought by Wall Street financier Steve Cohen in 2020 and had the highest payroll in 2024, fell to the Dodgers in last year's postseason. But spending big on players, coaches and a front office doesn't necessarily lead to winning titles. Only twice in the last 15 years has the baseball team with the top payroll won the World Series: the Boston Red Sox in 2018 and the Dodgers in 2020. (Major League Baseball is the only American sports league without a salary cap.) There have been champions during that time, such as the Kansas City Royals, whose team payroll in 2015 was just a fraction of the league's top payrolls. The deep pockets of the new class of owners have less of an influence on a team's success in leagues with salary caps, such as the National Football League and National Hockey League. So while baseball fans may get frustrated when their owners are not willing to spend to improve the team's roster, having an ownership of more modest means doesn't necessarily prevent a team from coming out on top. Matheson said he's studied the relationship between winning and payroll in baseball and found that higher payrolls do help teams win, at least during the regular season, but payrolls are only responsible for predicting about 30% of a team's success. The other 70% is due to factors like good management, avoiding injuries and even luck. 'If you're a fan, you're always wanted an owner who spends more money, but just because you have got an owner who does spend more money, that doesn't mean you're winning the whole thing,' he said.
New York Times
21-05-2025
- Business
- New York Times
Down to Business: Valuations are wild, returns are rocky. But women's sports teams are in demand
Everyone loves to gawk at the price tags billionaires pay for sports teams: $250 million for Angel City FC; $110 million in expansion fees for the newest NWSL franchise in Denver; and most recently, $26.5 million paid by Alexis Ohanian for an 8 percent stake in Chelsea Women, which values the team at $326 million (£245 million). Advertisement But what really goes into valuing a sports franchise, especially in women's sports, where the revenue playbook is still being written? I asked a handful of bankers and experts who work closely with investors interested in entering the space, and the answer is equal parts math, real estate and a little bit of storytelling. Welcome to the first edition of Down to Business with Asli Pelit. Every other week, I will take you through the exciting, fast-changing and sometimes confusing world of fans' favorite growth prospect: the business of women's soccer. I can't think of a better place to start than the flashiest numbers on the page, club valuations. Traditionally, sports teams are valued using a variety of methods, including the income approach, market approach and asset-based approach. In short, the value of a sports team is determined by its future prospects (or cash flows), its brand value and its real estate investments. But ultimately, as one of my favorite business school professors and the founder of Galatioto Sports Partners, Sal Galatioto, told me a long time ago, the value of a sports team is determined by scarcity value and by potential investors' willingness to pay. 'It's not just based on valuation, it's based on scarcity, ego gratification and just wanting that asset,' he told me. 'If you grew up as a fan of your favorite team and you have one opportunity that you may never get again to buy that team, you're going to be a very aggressive bidder. You're not focused on the numbers. You're focused on winning.' Despite the scarcity value and a billionaire's willingness to pay, experts use a variety of data to calculate the value of a team. One metric most bankers like to throw around is the revenue multiples. If a team pulls in $10 million in revenue and the average multiple in the league is 10x, you might say it's worth $100 million. Sounds simple? It's not. Advertisement 'Revenue multiples for leagues are informed by real-world transactions,' Sportico valuation expert Kurt Badenhausen said. 'It's not necessarily linear all the way down the line because a big-market team in a brand new stadium is different from a team that plays in a small market and needs significant investment in their facilities, but each deal creates a data point.' The average NWSL team is now valued at $104 million, according to Sportico's 2024 valuations, a 57 percent jump from the previous year. That figure is based on standard metrics used in soccer team transactions. It's a combination of local and national revenues, multiplied by a team-specific revenue multiple. For NWSL franchises, those multipliers range from 5 to 10, with an average of 6.8. By comparison, the WNBA averages a slightly higher multiple at 7.3. These multipliers are calculated based on prior team sales or, if the property has been around for a while, by dividing the market value by revenue. To make things more complicated, revenue multiples don't capture future growth or structural issues a team might still be working through, even in a close league case such as the NWSL. This is especially true for women's teams, where many don't own their stadiums and don't have the same access to sponsorship dollars as men's teams do. This is the main reason NWSL has been prioritizing franchise bids that come with a stadium or a practice facility plan. A stadium is not just a vanity project, it's a value driver. The goal is to turn the team revenue positive as quickly as possible. However, there is a caveat. It only works if the real estate math makes sense in that specific market. Kansas City? Cheap land, no competition, big payoff for the local Kansas City Current's CPKC Stadium. New York City? Not so much. Still, across the sports landscape, owners are willing to spend not only to build stadiums but also entertainment districts around them and arenas that boast restaurants, bars, retail stores, apartments and hotels. These districts expand the reach, impact and opportunity for the stadiums, which can then be used as venues for other events such as concerts, fairs or festivals, generating additional revenue. It also gives owners access to valuable consumer data. An example of this, again, is Kansas City as the team announced in March that it will build a $1 billion project around the stadium that includes mixed-use housing, retail space and public spaces on the waterfront. Advertisement While valuing a sports franchise, bankers examine not only the sports organization's ability to maximize its tangible assets but also evaluate the team's brand value, including winning championships or attracting marquee players. While this rule applies to most established European sports organizations, in the United States, on-field success does not matter as much. The Dallas Cowboys are the most valuable sports franchise in the world at $10.1 billion, according to Forbes' annual list of most valuable sports teams. They last won the Super Bowl in 1996. Across the Atlantic, where women's clubs are mostly bundled with the men's side and where there is a risk of relegation, valuations get trickier. Chelsea untangled its women's side and sold it to another intra-group company, Blueco 22 Properties Limited, in 2022-23 at a £200 million valuation. The most successful women's soccer team in England certainly shows on-pitch success, most recently capturing a treble of trophies with the Women's Super League, League Cup and FA Cup titles. However, financially, it has not been easy to calculate what it can bring to the balance sheet. But brand value is brand value, and Chelsea has that. Since Behdad Eghbali's Clearlake Capital and prominent investor Todd Boehly bought the club in May 2022, the men's side has not won anything, but it is still the world's 10th most valuable club at $3.5 billion, according to Sportico. 'The odds are much greater that the New York Yankees will be here in 100 years than Apple will be here in 100 years,' Galatioto said. No wonder so many venture capitalists are buying sports properties. 'They're a little late. I've been preaching this for 30 years,' Galatioto said. 'Nobody listened for the first 20, but they finally caught on.' Advertisement When it comes to valuations, much of the confusion stems from people mistaking expansion fees for what a team is actually worth. An expansion fee is not the valuation of the team, it's just the price of entry. While the expansion fee plays a small role in the valuation, what really matters is what you build after you're in. How do you convert your investment into a team with a loyal and (hopefully) global fan base, secure sponsorship deals and have the infrastructure to support both? Denver paid $110 million in expansion fees but committed to building a soccer-specific stadium and a high-end training facility, thinking long term and aiming for a valuable franchise in a decade from now. The Current, which joined the NWSL in 2021, paid a $5 million expansion fee when it relocated from Utah in 2020. And after four seasons, the team is worth $182 million, up 141 percent from the year before, because it opened its stadium and has the highest revenue in the league ($36.3 million), according to Sportico's valuations. 'Not all franchises are created equal,' Badenhausen said. 'Certain franchises in the NWSL have struggled to maximize their business opportunities, which is no different than any young sports league, and the same dynamics play out in mature sports leagues, such as the Athletics and Rays in baseball over the past decade or Arizona's NHL franchise.' When valuing a sports team, star power isn't just a footnote, it is a multiplier. Celebrities such as Ryan Reynolds, Natalie Portman, Serena Williams and Alex Morgan don't just bring capital, they bring media attention, sponsorship opportunities and built-in global audiences. Their involvement generates headlines, draws fans who might never have cared about the sport and opens doors to partnerships traditional owners don't have access to. Star power can elevate a team's valuation beyond the balance sheet because fame, when leveraged well, turns attention into revenue. That's the million, sorry, billion-dollar question. The real value of a women's soccer team today is a cocktail of the right market, real estate value, brand potential and celebrity influence. Of course, star talent that brings eyeballs and social media followers isn't bad, either. Revenue multiples are useful, but they can't tell the whole story because the story is still being written. Advertisement Since Michele Kang reset the bar in NWSL by paying $35 million for the Washington Spirit, women's soccer has bolstered growing momentum with no sign of slowing down. Following Kang's (at the time) record-breaking investment, NWSL's team sales and franchise fees skyrocketed by double digits and, most recently, to triple digits. Investors are not hesitating to open their checkbooks, and early investors are happy their bet on the league is paying back. Last year, Ron Burkle sold the San Diego Wave for $120 million to the Levine Leichtman family. Burkle paid a $2 million expansion fee for the Wave to join the NWSL for the 2022 season, similar to Angel City FC, which sold for $250 million to journalist Willow Bay and her husband, Disney CEO Bob Iger. With the right investors and operators, a path to a billion-dollar valuation seems plausible. 'I don't think it's out of the question by any means,' one banker, who wished to remain anonymous because they are actively working on deals in women's soccer, told me. 'It will take time, investment, and execution from strong operators and investors, but I think there's certainly a pathway there.' As Galatioto puts it, sometimes all it takes is one billionaire who wants it badly enough.
