No longer just a passion play for the wealthy and those seeking geopolitical influence, professional sports are fast becoming an asset class of their own and creating value opportunities for investors.
Revenues and valuations of major teams and leagues are rising, organizations are maturing, women’s sports are booming, and media rights are soaring — domestic media rights for the English women’s football team, for example, saw a rise of 800% to $65 million in the two years since they won the European Championship.
It is not only major leagues such as the NFL opening their doors to institutional investors. An array of new sports and formats are seeking external investment for the first time. The sector’s resilience — professional sports are viewed as countercyclical — is yet another draw.
As a nascent asset class, however, sports investments need more time to build a solid track record. The landscape is complex, and visibility can be poor or misleading at times. And while the scarcity of premium assets helps drive up valuations, it leaves some investors waiting cautiously on the sidelines for the right moment to move into the sector.
But investors who are ambitious, creative, and well prepared may enjoy an early adopter premium and emerge as winners. The guidelines below can help firms move into the sector for the first time.
Six keys to successful professional sports investing
Expand your search for investment opportunities
Broaden your search and pick the area where you have strong “right to win.” Given the sector’s lumpier deal flow and differentiated return potential, consider the full universe of investment opportunities from media platforms to data and analytics. It is critical to be open minded within target investment characteristics across geographies and asset types, but also to focus on where you have a unique advantage. If you are an expert in investing software, opportunities in tech, data and analytics might be the place to look. If value creation is your strength, transforming professional leagues through strong governance and talent injection might be interesting.
Embrace complexity in professional sport investments
Professional sports are in their infancy as an asset class for value creation. Many assets, especially leagues, competitions, and governing bodies, are considering external investment for the first time. Those deals, therefore, may need more engineering and creativity. On the other hand, it could be a less competitive field as not all funds have the appetite and capability for complex deals. Be aware the transaction process may be lengthier than expected and subject to approvals from a wider variety of stakeholders than usual.
Understand regulation and governance in sports
Regulatory rules and governance requirements are changing frequently. Some are opening new investment avenues, such as in the NFL, while others are revealing which parts of the investment universe are more attractive. It is imperative to stay not only up to date, but ahead of changes through formal channels and industry relationships.
Invest behind the long-term growth trends in the sports sector
An awareness of trends across the sports universe can alert investors to assets with potential for enhanced returns. For example, women’s sports and padel are currently on the rise, while horseracing and rugby are declining. Consumer tastes also are changing, particularly with Gen Z, which is affecting both the popularity of a sport and how fans want to be engaged and monetized.
Build robust sports industry connections
Even though potential investors might have some exposure to sports through adjacent sectors, professional sports remain such a different type of asset that expertise and a robust network in the industry are critical for success. In such a broad and dynamic sector, building relationships with experienced advisors can help keep you stay abreast of trends and uncover opportunities.
Explore the advantages of multi-property ownership
Multi-property sports ownership is often the ultimate ambition. Whether that means holding stakes in several teams in the same sport or building a portfolio of assets that covers a large swath of the investment universe, multi-property ownership allows investors to gain valuable synergies through increased knowledge, greater connections, additional revenue streams, or more efficient asset management.
Numerous factors are converging to transform professional sports from trophy assets for the few to value-creating opportunities for a wider swath of investors. Forces from favorable demographics to governance are expanding the supply of investable assets and improving their odds of growth. For investors committed to understanding the sports universe, building networks, and taking a creative, global approach, professional sports investments may prove a winning bet.
