Key facts
- The Los Angeles Lakers recently achieved a record valuation of $12.5 billion.
- Billionaires are forming partnerships to invest in high-priced sports teams.
- Returns from sports team ownership have historically outperformed the S&P 500.
- Factors such as lucrative TV contracts and revenue sharing contribute to team profitability.
- NBA franchises have experienced the highest average annual value growth among major sports leagues.
The escalating cost of professional sports teams, exemplified by the Los Angeles Lakers' recent $12.5 billion valuation, is driving billionaires to collaborate on acquisitions. This trend highlights the significant financial allure of sports franchises, which have demonstrated returns often surpassing traditional investments like the S&P 500.
Factors contributing to the attractiveness of sports team ownership include favorable player union agreements, structured revenue-sharing models, modern stadiums with premium seating, and a strong focus on customer experience. Furthermore, lucrative television and sponsorship contracts provide a consistent revenue stream, while league expansion fees offer additional income for owners. These elements combine to make sports franchises a robust investment.
Historically, professional basketball has offered the most substantial returns, with NBA franchises experiencing an average annual value increase of 22.66% between 2010 and 2016. Major League Soccer teams have also seen significant growth, rising nearly as steeply at 22.3% annually since 2008. Major League Baseball, the National Football League, and the National Hockey League have also provided strong returns, with annual value increases ranging from 14.6% to 17.6%.
Jimmy Haslam's acquisition of the Cleveland Browns for $1 billion in 2012 serves as an illustration of these lucrative opportunities. Within four years, his investment had reportedly yielded an estimated $850 million, representing a 16.6% annualized return, significantly outperforming the S&P 500's 10.6% return over the same period. The sale of teams is relatively infrequent, making Forbes' valuations a key metric for assessing team worth, with estimates historically showing an average deviation of less than 16% from actual sale prices.