In recent years, a notable trend is emerging with various wealthy nations showing interest in acquiring sports teams. Have you noticed how recently Saudi Arabia, Bahrain, Abu Dhabi, Kuwait, and Qatar are interested in buying sports teams? Why? Why do you care about golf, NBA, MLB, soccer? Do they know something we don’t know? Are they running a printing machine over there that we don’t know about? Is it just something they’re throwing their money away on, or is it an investment they’re making? How did UFC, when they bought it in 1993 for two million dollars, become a 12 billion dollar organization? The person that bought the Cowboys in 1964 for one million dollars, and now the Cowboys are the most expensive franchise at eight billion dollars. It’s a lot of money being made here. What are the next sports you ought to think about? Is there money in alternative assets? Can you get involved in it? We’re going to talk all about that today. If you get value out of this video, give it a thumbs up, subscribe to the channel.
This personal journey highlights the significant financial potential in the sports and collectibles markets. Look, if you’re like me, when you first started watching sports, you just loved the game. You watch baseball saying, ‘What a cool game.’ Then you bought your first pack of cards and sold one for 28 dollars from a seven-dollar purchase. That’s a huge percentage return. The same way you made money with baseball cards is the same way these billionaires are making money.
The story of investing in collectible cards underscores the broader trend of sports-related investments yielding high returns. Insurance and Media tycoon, Patrick Bet David, claims he was able to buy two cards for 540,000 dollars and sell them eighteen months later for 2.2 million dollars, a 300% return.
“This guy calls me saying, ‘Are you interested in Wayne Gretzky rookie cards?’ The two best ones out there, PSA 10. I ended up buying these two cards for 540,000 dollars. Eighteen months later, we sold it for 2.2 million dollars, a 300% return.”
These personal experiences are further validated by the impressive returns seen in owning sports teams.
“Recently, I became a minority owner of the Yankees. According to Forbes, the Yankees already in 2022 made 18% more value in less than a year of my ownership,”
PBD’s comments about the performance of his alternative asset, the New York Yankees
The rapid appreciation in sports team valuations highlights their lucrative potential as investments. Sports teams’ valuations have been rising rapidly. In 2003, the Yankees were worth 730 million dollars; today they’re worth 7.1 billion dollars, an increase of 872%. The Cowboys went from 851 million dollars in 2003 to 8 billion dollars, an increase of 840%. The Warriors went from 176 million dollars in 2003 to 7 billion dollars today, an increase of 3877%.
Even less valuable teams have seen substantial growth, further indicating the lucrative nature of sports investments. Let’s look at the least valued teams in each sport. MLB’s Pirates were worth 163 million dollars, now 1.3 billion dollars, a 697% return. NFL’s Lions were worth 509 million dollars, now 3 billion dollars, a 489% return. NHL’s Kings were worth 259 million dollars, now 2 billion dollars, a 672% return. Coyotes were worth 150 million dollars, now 450 million dollars, a 200% return.
Comparing sports investments to traditional assets reveals their superior performance. Comparing this to the S&P 500 since 2000, sports teams have outperformed by a landslide. The S&P 500 has returned about 324%, while leagues such as the NBA and MLB have done 2.5 times and 1.6 times that respectively. Apart from the Coyotes, every sports team listed above individually outperformed the S&P 500 by at least double the amount. This justifies the massive hype behind alternative investments compared to more traditional ones.
So what’s caused this increased valuation in these organizations over the last 10 years? Well, we look at four things that determine the revenue of a franchise: media rights, gate revenue, sponsorships, and merchandising. If you look at this year in 2013, look at what was the lowest. The lowest was that blue color which represents media rights, then it was merchandising, then it was sponsorship, then gate revenue. But look at what happened today: media rights went from last to first, merchandising is now last, then you have sponsorship, which was second, now it’s third, and gate revenue has remained at second.
So the reality of it is you have to sit there and say, the money today, if you’re the commissioner of a league, how can I make sure these franchises continue to increase in valuation so we can all participate in it? So in the last 10 years, what we see is, media rights continue to go higher and higher, which means more and more people are watching. We see a bigger focus on digital presence, we see a bigger focus on gate revenue, and all the other things.
The rise of massive media rights deals illustrates the growing financial stakes in sports. Sports media rights deals are massive. The NFL signed a 113 billion dollar deal with Amazon, ESPN, Fox, CBS, and NBC, making it the largest media rights deal in sports history. MLB signed a 30 billion dollar deal with Fox, Turner Sports, and ESPN, making it the largest media deal in MLB history. The NBA signed a 24 billion dollar deal with ESPN, Turner Sports, and Amazon. The NHL signed a 4.9 billion dollar deal with ESPN, TNT, and Hulu.
The expansion of OTT spending on sports further indicates a growing interest in sports investments. OTT spending on sports has grown significantly, from 100 million dollars in 2016 to an estimated 8.5 billion dollars in 2023. The more interesting thing to note is that from the year 2022 to 2023, the amount of money spent on OTTs within North America more than doubled while Western Europe remained widely the same. This is a serious point of concern for cable companies, in North America, as they try to innovate and maintain their decade-old share of the market.
The explosive growth in sports betting adds another layer to the financial dynamics of sports investments. Sports betting has seen explosive growth since the U.S. Supreme Court struck down the federal ban in May 2018. It grew from 4.3 Billion dollars in 2020 to almost doubling at 7.5 billion dollars in 2022. With sports betting at a record high, sports teams can expect much larger viewership and unbelievable ticket sales. In fact, Major League Baseball is projected to gain 1.1 billion dollars from legal sports betting, the NFL 2.3 billion dollars, the NBA 585 million dollars, and the NHL 216 million dollars, all adding to the value these alternative investments provide.
Sovereign wealth funds investing in sports illustrate the global nature of this financial trend. Sovereign wealth funds from countries like Qatar, Saudi Arabia, Bahrain, and Abu Dhabi are investing heavily in sports teams. Here are some fairly recent examples.
- Qatar Investment Authority acquired a five percent stake in Monumental Sports (Owns Washington Wizards, Washington Capitals, Washington Mystics).
- Saudi Arabia’s Public Investment Fund acquired a controlling stake in Newcastle United in 2022.
- Bahrain Mumtalakat Holding Company acquired a minority stake in the Cleveland Cavaliers, in 2022.
- Abu Dhabi United Group acquired Manchester City in 2002.
- Kuwait Investment Authority acquired a minority stake in the Los Angles Dodgers, in 2019.
- Live Golf has paid some players 800 million dollars to leave the PGA Tour to join its team.
Looking ahead, emerging sports and leagues may offer new investment opportunities. The question becomes, what’s left? There are other sports and leagues emerging. For instance, the average MLS team was worth 10 million dollars in 1996 and is now worth 550 million dollars. In fact, people are paying almost 12 times the top-line revenue ($45 Million) of MLS teams to purchase them. Another league is Esports. Esports grew from 350 million dollars in 2018 to 1.4 billion dollars today. Pickleball teams are selling for five million dollars, and the sport has 36.5 million players in America. Pickleball is expected to average a 7.7% growth rate through 2028 after averaging 158.6% in the last 3 years. Some other key sports include Rugby, LaCrosse. This isn’t something that will slow down but actually compound over time.
Exploring alternative assets such as sports teams, art, and emerging sports can provide lucrative investment opportunities. The key takeaway is to pay attention to alternative assets. Whether it’s cards, teams, art, or other investments, even if you can’t invest at a high level, there are many opportunities to explore.