Since 2019, major North American sports leagues like the MLB, NBA, and NHL have been opening their gates and allowing institutional investors to own stakes in their teams.1 In August, the NFL made headlines announcing that its owners could also start taking on institutional capital, approving select private equity firms to acquire minority equity stakes in its franchises.2
With all of the “Big Four” North American leagues and other emerging and international leagues now in play, advisors have an unprecedented opportunity to allocate to sports, a culturally resonant sector with long-term staying power that appears poised for continued growth.
What Is Sports Investing?
The sports sector is emerging as one of the fastest-growing areas in private equity.3 The sports universe is now estimated to be a more than $500 billion market.4
Until league restrictions began to loosen in recent years, access to ownership in professional sports teams in North America was generally confined to ultra-high-net-worth individuals. With more private markets firms getting involved in team ownership and other sports-adjacent businesses, advisors may see more opportunities to offer exposure to this booming global industry.
There’s now an opportunity for certain firms to acquire minority stakes in teams within all four major North American leagues, including the MLB, NHL, NBA, and NFL.5 Professional soccer leagues, including Major League Soccer (MLS) and the English Premier League, may also present team ownership opportunities.6
Private equity firms are also eyeing ownership stakes in other established leagues like Formula 1, the PGA Tour, and the Indian Premier League.789 Finally, there is a growing collection of emerging leagues, especially in women’s sports, like the WNBA and the National Women’s Soccer League, that are also attracting private equity capital.10
Team ownership for a private equity fund is often restricted to minority, non-controlling stakes, where the funds aim to benefit from growth in the team’s value over time and share in the team’s profits.11
As we’ll cover in the next sections, revenue from sports ownership is broad and diverse; media rights, in particular, have grown into one of the most lucrative revenue streams available in sports.12
How Do Sports Team Owners Generate Revenue?
Revenue streams associated with team ownership in professional sports can include:
Media Rights: Across major sports leagues in the US, national and local media rights generate a substantial percentage of revenue, particularly in the NFL, NBA, and MLB. The mix between national and local revenue can differ. For example, the MLB has a greater share of local media revenue than any other league.13
Ticket Sales and Concessions: Owners get game day income from selling tickets, concessions, parking, and merchandise at the stadium or arena.
Premium and VIP Services: Teams can generate revenue by offering premium seating, skyboxes, VIP memberships, and hospitality packages, which are priced at a significant premium compared to regular tickets.
Merchandising and Licensing: Teams earn money from merchandise sales like jerseys, hats, and other branded apparel, both through official stores and online. Additionally, licensing agreements allow companies to use the team’s logo and branding in exchange for fees.
Sponsorships and Advertising: Corporate sponsors pay teams to advertise their brands in arenas, on uniforms, or through exclusive partnerships. Owners may also strike deals for stadium naming rights and sponsorships from companies that want to associate with the team.
Player Transfers: In some sports, like soccer, team owners can profit from buying and selling players, and clubs make money through transfer fees when a player moves between teams.
Venue and Event Hosting: Some teams own or manage their stadiums, which allows them to host non-sporting events such as concerts, corporate events, generating additional income—especially in their sports’ off-seasons.
Opportunities at the Intersection of Sports, Media, and Entertainment
One of the clearest examples of growth across the sports sector is the increasing value of sports media rights, driven by the importance of live sports content for both traditional broadcasters and streaming platforms.14 In 2022 alone, deals related to sports media rights were collectively valued at more than $50 billion.15
The increase in media rights deals in sports also coincides with the ongoing streaming wars among media platforms, as sports content remains among the most widely consumed worldwide. In 2023, 48 of the top 50 most-watched shows in the US were sports games.16
Teams are also increasingly monetizing their own digital platforms, streaming games and exclusive content through proprietary apps or websites.
What Are the Potential Benefits of Sports Investments?
The Ross-Arctos Sports Franchise Index (RASFI) provides a view on the historical equity returns of sports. When evaluated against the historical returns of other asset classes, we find that team ownership in professional sports has historically generated positive long-term returns with lower risk than other traditional and alternative asset classes.17
Source: Bloomberg, Preqin, Equities represented by the S&P 500 Total Return Index, Fixed Income represented by the Bloomberg Barclays US Aggregate Bond Index TR, Private Equity represented by Preqin Private Equity Index, Private Debt represented by Preqin Private Debt Index, Real Estate represented by Preqin Private Real Estate Index, Infrastructure represented by the Preqin Infrastructure Index, RASFI represented by Ross-Arctos Sports Franchise Index, Risk represented by quarterly annualized volatility, Return represented by quarterly annualized return, as of March 2024.
Sports ownership has historically delivered positive long-term returns with lower risk than some other public and private asset classes
In addition, because correlation with these asset classes tends to be low, sports investments can be a source of portfolio diversification.
Source: Bloomberg, Preqin, Equities represented by the S&P 500 Total Return Index, Fixed Income represented by the Bloomberg Barclays US Aggregate Bond Index TR, Private Equity represented by Preqin Private Equity Index, Private Debt represented by Preqin Private Debt Index, Real Estate represented by Preqin Private Real Estate Index, Infrastructure represented by the Preqin Infrastructure Index, RASFI represented by Ross-Arctos Sports Franchise Index, Correlation measured between December 2007 and March 2024, as of March 2024.
Sports investments have relatively low correlations to other investment strategies
Historical data also suggests that sports franchises have collectively performed well during economic downturns, providing a potential hedge against market volatility.18 This resilience may be attributable to the unique, recurring revenue streams including media rights and corporate sponsorships, deals which are often locked in for multiple years. Because of their cultural importance and loyal fan bases, many established sports franchises in the US have longer lifespans than the average public company, which has been declining.19
The novelty of sports investing can fulfill some non-financial passions or objectives as well. Investors may enjoy participating in a sector that was traditionally accessible only to ultra-high-net-worth individuals. Depending on availability and access, others may seek to invest to support their favorite team or league, deepening their connection to the game while playing a role in its growth.
Sports investments can also provide the opportunity to impact regional community development, as teams often play a significant role in local economies and culture. This blend of personal passion and tangible influence can make sports investing attractive beyond its financial returns.
What Can Drive Differentiated Investment Returns in Sports?
Current team owners across major sports leagues generally turn to private-market investment firms for financing to fund their growth or M&A activity, or to help them exit all or a portion of their ownership positions.20
Demand for Growth Capital – Owners may consider selling additional equity stakes or borrowing to fund growth projects like stadium improvements.21 Specialized private equity firms with experience in sports investing can often help these owners implement best practices and strategies to increase the value of their teams.
Demand for Capital to Support M&A Activity – Incumbent owners may also seek funding from private markets investors to pursue mergers or acquisitions, such as buying teams or incorporating other verticals related to their business.
Liquidity – Control and minority equity holders may consider private equity investments to liquidate a portion of their own holdings, often for personal reasons.
Like in other sectors, sports investments could also vary by the type of return stream as asset managers provide various types of capital to sports entities. Some sports-focused strategies may supply more debt financing to teams, with cash-flow-driven returns more in line with direct lending strategies. Other investments, like owning minority equity in a sports franchise, might be more valuation-driven, focused on team growth and capital appreciation over time.22
Apart from owning a team, other investable business lines exist that tap into the broader sports industry. These businesses may involve sports betting, sports or venue-related technology, youth sports leagues, and sports-related gaming.
Due to league rules historically, the participation of institutional investors has been relatively limited compared to other sectors. Because of this relative novelty, asset managers may not yet have established track records investing in the space. Advisors may benefit from learning more about each manager's team and their experience and relationships in the sports sector.
Risks and Considerations When Investing in Sports
Sports franchises are complex entities with team value driven by a number of revenue drivers mentioned above and sometimes by ownership in real estate, other teams, and ancillary businesses. This complexity can introduce risks, and it’s important to understand the value drivers at both the team and league levels.
At the league level, advisors will want to understand the risks around major drivers of revenue and costs like national media deals and CBA negotiations. Further, each team operates like a business, and profitability varies from one team to another; some teams are even unprofitable.
While national revenue is often shared equally across teams in a league, individual teams can manage other revenue sources, from local media rights to ticketing and suite deals. Management capabilities and fan engagement at the team and league level can lead to significantly different long-term results.
Illiquidity may also be a notable risk related to team ownership, since the barriers to entry remain high and finding a suitable buyer may be challenging.
Advisors should also consider the type of investments—e.g. private equity, private debt, etc.—and type of structures—e.g. evergreen vs. drawdown funds—for each product they consider. It is also important to understand the common risks of each, such as illiquidity, lack of transparency, market volatility, interest rate risk, J-curve effect, management or incentive fees, and more.
