Sports Investing: A Rising Global Opportunity

    Altor Capital

March 2025

The world of professional sports is undergoing a seismic shift, presenting unprecedented opportunities for investors. Previously the exclusive domain of billionaires, sports franchises have emerged as a unique and rapidly growing asset class, driven by robust business models, increasing media rights valuations, and the global appeal of sports as entertainment.

The Explosive Growth of Sports Investments

Sports organisations are becoming increasingly attractive to investors due to their resilient revenue streams, monopolistic market dynamics, and cultural significance. Unlike traditional industries, professional sports have proven to be non-cyclical and resistant to economic downturns. For example, just after the 2008 financial crisis, valuations of major American sports leagues such as the NFL, NBA, MLB, and NHL dropped only 1% collectively-the sole negative year in the past two decades (*Statista).

Key drivers of this growth include:

• Recurring Revenue Streams: Sports teams generate 60-80% of their revenue through annual contracted value (ACV) streams such as media rights (3-10 years), sponsorships (1-2 years), and long-term stadium agreements (up to 30 years).
• Monopolistic Characteristics: Professional teams operate in markets with limited competition, benefiting from regional exclusivity.
• Compelling Entertainment Content: Sports dominate media consumption, with 95 of the top 100 media events and 85 of the next 100 being sports-related.

According to the Ross-Arctos Sports Franchise Index sports team valuations in the US have compounded at over 13% p.a. for over 60 years (*RASFI). Valuations from 2000 have outperformed the S&P500 by over 6x.

The Media Rights Revolution: A Catalyst for Valuation Growth

The growth in media rights deals is one of the most significant drivers of increased valuations for sports franchises. The NFL's annual media rights revenue reached US$10b in 2024, while the NBA secured an 11-year deal worth US$76 billion. This trend has propelled the average value of NBA teams to double since 2021 (*Sportico).

In Australia, the sports market is following a similar trajectory. The National Basketball League (NBL), while not in the same scale as the NBA or NFL, has seen remarkable growth in fan engagement and viewership. By leveraging media rights and innovative broadcast strategies, NBL franchises have a unique opportunity to replicate the success seen in U.S. leagues.

Strategic Ownership: A Key to Unlocking Value

Investors in sports teams have historically faced challenges related to minority ownership stakes, which often come with limited control over operations. In the U.S., minority stakes have traded at discounts of 10-40%. However, as institutional demand grows, Goldman Sachs predict these discounts will diminish over the next decade. Full operational control allows owners to maximize a team's potential, optimizing revenue streams such as ticket sales, sponsorships, and merchandise.

Case Studies: Evidence of Success in Sports Investments

Several recent examples highlight the transformative impact of strategic investments in sports teams:

• Milwaukee Bucks: Former co-owner Marc Lasry sold his stake shortly before a new NBA media rights deal, benefiting from a valuation already pricing in the anticipated revenue growth.
• Kansas City Current: The National Women's Soccer League (NWSL) team's revenue jumped from US$8 million to US$30 million in a single year, driven by a new stadium and increased fan engagement (*SBJ).
• WNBA: The league's media rights deal recently quadrupled from US$50 million to US$200 million annually, reflecting explosive growth in women's sports (*The Guardian).
• Inter Miami: The club doubled its revenue to US$118 million after signing Lionel Messi, with growth seen across multiple facets, including merchandise, tickets, media rights, and sponsorships (*ESPN).

The Rise of Women's Sports

Women's sports are experiencing explosive growth, with increasing participation rates and fan engagement. The National Women's Soccer League (NWSL) has seen a dramatic rise in viewership, leading to a media deal worth US$240 million over four years-a significant increase from its previous deal. Similarly, the WNBA's latest media rights agreement is worth a staggering US$200m per season, considerably higher than their previous US$50m per season (*The Guardian) further solidifying women's sports as a key growth segment.

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Ownership of Venues: Unlocking Additional Revenue Streams

Owning venues provides significant opportunities to generate revenue beyond sports. Many U.S. team owners utilise their stadiums to host concerts, festivals, and other entertainment events during the offseason. This model has proven highly lucrative and offers a roadmap for other markets, including Australia, to diversify income streams.

Australia vs. the U.S.: Comparative Growth Potential

While Australia's sports market is smaller than that of the U.S., it is growing rapidly. Using basketball as an example, the NBL has benefited from increased international visibility and talent development, positioning it as the second most important basketball league in the world.

The relationship between the NBL and NBA has strengthened significantly in recent years, providing a platform for growth and collaboration. The NBL has become a key developmental pathway for aspiring NBA players, with athletes like LaMelo Ball and Josh Giddey using the league as a springboard to NBA success. This connection has elevated the NBL's profile internationally, attracting talent, sponsorships, and media attention.

Additionally, preseason games between NBL and NBA teams have fostered mutual recognition and enhanced fan engagement. These collaborations not only highlight the NBL's growing competitiveness but also position it as a league capable of nurturing top-tier talent. As this relationship deepens, it creates further opportunities for investors to capitalize on the NBL's rising prominence and its alignment with the NBA's global brand.

In a significant step toward strengthening this connection, the NBA recently announced its return to Melbourne for two preseason games in 2025, marking another milestone in the growing relationship between Australian and U.S. basketball (*NBA) These games will provide Australian fans with firsthand exposure to NBA talent while further integrating the NBL into the global basketball ecosystem. This reinforces the investment potential in Australian basketball, as its alignment with the NBA continues to drive visibility and commercial opportunities.

*statista - www.statista.com/statistics/202758/franchise-value-of-us-sports-teams/

*RASFI - michiganross.umich.edu/faculty-research/partnerships/ross-arctos-sports-franchise-index

*Sportico - www.sportico.com/leagues/basketball/2024/nba-team-values-warriors-knicks-lakers-lead-1234820970/

*SBJ - www.sportsbusinessjournal.com/Articles/2024/12/02/cpkc-stadium-kc-current

*The Guardian - www.theguardian.com/sport/article/2024/jul/17/wnba-revenue-set-to-surge-with-200m-a-year-broadcast-rights-deal#:~:text=The%20WNBA%27s%20current%20media%20deals,of%20the%20median%20NBA%20salary.

- www.theguardian.com/sport/article/2024/jul/17/wnba-revenue-set-to-surge-with-200m-a-year-broadcast-rights-deal#:~:text=The%20WNBA%27s%20current%20media%20deals,of%20the%20median%20NBA%20salary.

*ESPN- www.espn.com.au/football/story/_/id/41293395/inter-miami-made-big-bet-messi-paying-off

*NBA - www.nba.com/news/nba-australia-melbourne-games

Funds operated by this manager:

Altor AltFi Income Fund, Altor Emerging Growth Fund

Hedge Clippings | 14 March 2025

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