Consistent revenues, popularity among advertisers, and loyal fan bases make global sports an asset class with significant upsides. Over the past 18 months, the launch of dedicated investment funds that focus solely on sports, from athlete-led initiatives like APEX Capital to funds dedicated to women's sports, signal an even greater deployment of capital and the rise of sports as an investment class. In fact, over 60% of sports executives believe that private investment in the sector will accelerate over the next 5-7 years. As far as investor typology is concerned, 39% of sports executives see institutional private equity dominating sports properties, followed by 35% who believe sovereign wealth funds will lead investments in sports.
Investors can find new ways… [to] create an ecosystem that has a good floor of guaranteed revenues for clubs, but works with upside sharing so incentives between clubs, rights owners, and broadcasters are better aligned.
— SVP of Strategy & Business Development, Media Company
Eager for growth, these new investors have been quick to launch products and test partnerships designed to attract fans, expand reach, and optimize monetization. Liberty Media Group's 2016 acquisition of Formula 1 resulted in new Grand Prix events in Miami and Las Vegas, as well as IP expansions in the form of a buzzy Netflix series, leading to an increase in revenue and visibility. While investors are typically drawn to established leagues, emerging sports with niche fan bases, like drone racing, are seen as interesting long-shot bets to attract venture capital-style investment.
As private equity firms and sovereign wealth funds continue to invest in sports, league management will shift away from traditional models. The emerging generation of sports investors can optimize revenues by:
- Adopting a portfolio-management approach that leverages synergies in areas like media, technology, intellectual property, and analytics
- Identifying areas for expansion to grow the fanbase and improve distribution
Growth in the global sports industry and recent deal activity show no signs of slowing down. U.S. sports franchises have an enterprise value that's tenfold of their current revenues, and European football clubs have the potential for a fivefold enterprise valuation. As the industry becomes more global, investors should expand the ecosystem through targeted investments in leagues and adjacencies in technology and media.
