Is Owning a Sports Team a Lucrative Financial Investment?

Owning a sports team can be a complex and sometimes risky financial investment. Whether it's a good investment depends on several factors, from potential appreciation in value to community influence. However, for those who can navigate the complexities involved, it can also be a lucrative opportunity.

Potential Benefits

Appreciation in Value: Many sports teams have witnessed significant appreciation in value over time. For instance, the value of NFL and NBA teams has appreciably increased over the past few decades. This appreciation can result in substantial returns for investors.

Revenue Streams: A sports team can generate income through various sources, including ticket sales, merchandise, sponsorship and advertising deals, and broadcasting rights. Each of these streams can contribute significantly to the financial health of the team.

Tax Benefits: Depending on the ownership structure and local tax laws, there can be tax advantages associated with owning a sports team. These benefits can reduce the overall financial burden of the investment.

Community and Brand Influence: Owning a team can enhance personal and business brand visibility and influence within the community. This can be particularly valuable for individuals looking to leverage their brand for future opportunities.

Risks and Considerations

High Initial Investment: The cost to purchase a sports team is typically extremely high, often in the billions for major leagues. This high initial investment can be a significant barrier for many potential investors.

Operational Costs: Teams incur significant ongoing expenses, including player salaries, facility maintenance, and operational costs. These expenses can sometimes exceed revenue, especially during lower-performing seasons.

Market Fluctuations: The sports market can be volatile, influenced by factors such as player performance, fan engagement, and economic conditions. These fluctuations can impact the team's financial performance.

Regulatory and Legal Risks: Owners must navigate league regulations, labor agreements, and other legal complexities that can impact their investment. These risks can be significant and deterrent for some investors.

Limited Liquidity: Selling a sports team can take time, and the return on investment may not be immediate or guaranteed. This lack of liquidity can be a challenge for investors who are looking for quick financial gains.

Strategic Investment Opportunities

If managed well, owning a sports team can be highly profitable. The landscape has evolved in recent years, with strategic restructuring and innovative models becoming increasingly popular.

Multi-Club Ownership Model: This model has emerged as a game-changer, particularly in Europe. American venture capitalists (VC’s) have played a significant role in driving this trend. By owning multiple clubs within a single structure, these entities can benefit from economies of scale and increased market leverage.

Asset Creation: Successful multi-club owners often invest in player development, a process referred to as "asset creation." This involves discovering and nurturing young talents with the goal of selling them at a profit. Deloitte reports that there are now more than 70 multiclub ownership groups in football, many built on the same thesis of smart scouting and player trading.

Listings on U.S. Stock Exchange: European clubs are now listed on the U.S. stock exchange, opening up new opportunities for investors. For example, Brera Holdings has been able to buy clubs at bargain prices, restructuring their ownership and listing them on the U.S. market.

John Textor's Strategy: John Textor, a US-based investor, has achieved significant success through a buy-and-hold strategy into multi-club outfits. He sees public markets as a form of ownership that closely approximates community ownership, different from traditional wealthy state or individual control.

Textor's strategy has involved merging his companies with US sports streamers, such as fuboTV, to create a "Netflix of soccer." While not everyone will achieve the same level of success as Textor, his story provides a valuable case study for prospective investors.

Conclusion

Owning a sports team can be a profitable investment for those who can manage the initial costs and navigate the complexities involved. However, it also carries significant risks and requires a long-term commitment. Prospective owners should conduct thorough due diligence and carefully consider their financial situation, goals, and the specific market conditions of the sport and team they are interested in.

With the right strategy and management, owning a sports team can offer substantial financial rewards. However, it is crucial to approach this investment carefully, taking into account all the potential risks and benefits.