The Sports Business Is Growing Faster Than Anyone Imagined

This spring, though, shifts in the sports world are of a more seismic nature. Digitization; gambling; the NIL (name, image, likeness) market for college athletes; globalization; and the rise of women’s sports are reshaping sports at a breakneck pace—much of which was front and center at the global sports leader conference on Kiawah Island, S.C., earlier this month. “All of these changes are generating even more interest in sports,” says George Pyne, CEO of investment firm Bruin Capital, which produces the event with Jay Penske’s Sportico. Sports, adds Pyne, is an “undervalued category. You’ll see more sophisticated capital—sovereign-wealth funds, private equity—come in as things evolve.”

The numbers in this sprawling trillion-dollar business, which includes sports events, broadcast rights, gaming, merchandise, and apparel, are already eye-popping. The world’s 50 most valuable sports teams are now worth a combined $256 billion, up more than 15% from a year ago, according to Forbes—highlighted by Apollo Global Management co-founder Josh Harris buying the Washington Commanders for $6 billion, the most ever paid for a sports team. The National Football League, which dominates the list with 30 teams, has seen the average value of its top franchises double over the past five years to $5.1 billion, outpacing the

S&P 500 index.

Athletes are benefiting, too, with the 50 highest-paid ones of all time cumulatively reaping $35.5 billion, according to Sportico. The superstars come from 17 countries, though 32 are Americans, led by Michael Jordan and his career haul of $3.75 billion, much of that from his Nike shoe deal.

The Kiawah confab, now in its third year, brings together a who’s who of the sports world, including the commissioners of the Big Four sports leagues plus heads of other leagues and college conferences and nearly 50 teams from myriad sports—as well as boldface team owners (Steve Cohen, Greg Maffei, Ted Leonsis, Joe Tsai) and top TV sports executives.

The program isn’t about sports, however. Attendees are there to listen to panels and fireside chats by former U.S. presidents (George W. Bush and Barack Obama); presidential candidates; central bankers; generals; Fortune 100 CEOs (Hans Vestberg, Brian Moynihan); high-profile market players (Mohamed El-Erian, Cathie Wood); scientists; and doctors.

The real action comes after the sessions over aged bourbon, or at lunch over she-crab soup, or on the resort’s famous packed-sand beach, or on its five golf courses. Here, like any great “elephant bumping” ground, alliances are struck, investments made, and megadeals, such as the sale of an NFL team, go down.

There is much to transact over. Take gambling. Citigroup’s sports advisory team reports that the sports gambling sector (

DraftKings
,

Flutter Entertainment

—which owns FanDuel—

Churchill Downs
,

and

Entain

) is up 25% over the past 12 months, with DraftKings, at a $21 billion market cap, being one of the most highly valued publicly traded sports companies.

Which makes sense, as Americans wagered a record $119.84 billion on sports in 2023, up 27.5% from 2022, according to the American Gaming Association. Sports gambling isn’t without pitfalls, of course. As Barron’s has reported, parlay betting—which allows people to wager on several things happening together—reduces the odds of winning. “Prop” bets—wagers tied to a specific player’s performance in a given game—have come under fire by the National Collegiate Athletic Association, while the National Basketball Association is investigating a player for multiple instances of betting irregularities. To top it off, the former interpreter for Los Angeles Dodgers superstar Shohei Ohtani stands accused of stealing millions of dollars to pay off gambling debts to an illegal sportsbook, according to a federal affidavit.

As for women’s sports, Deloitte estimates that revenue will hit $1.28 billion this year, “at least 300% higher than when we last wrote our prediction on this topic in 2021.” Yes, there is the Caitlin Clark effect, where the Iowa basketball star drove viewership of the women’s national championship game to a record 18.9 million, the most viewers for any basketball game, college or pro, since 2019, according to ESPN—and for the first time exceeding the men’s championship game, which drew 14.8 million viewers. Clark is rocking the still-messy NIL world, too, having ranked No. 4 on On3 NIL’s list of projected annual value at $3.4 million, up there with Arch Manning and Bronny James.

Clark is expected to be drafted by the Indiana Fever, which plays the New York Liberty in that team’s home opener on May 18. Liberty owner Joe Tsai, chairman of Alibaba Group Holding and owner of the Brooklyn Nets, told me that ticket sales for that game are “on fire.”

It isn’t just the Clark effect, though. Last August, a women’s volleyball game at the University of Nebraska drew 92,003—a record for a women’s sporting event. Coco Gauff is elevating women’s tennis, there’s a new professional women’s hockey league, and the WNBA and women’s World Cup soccer are drawing record crowds. Meanwhile, valuations for teams in the National Women’s Soccer League have been going through the roof, up from $5 million a few years ago to a recent record $113 million sale by billionaire Ron Burkle of the San Diego Wave. L.A.’s Angel City FC, partly owned by Reddit founder Alexis Ohanian, Natalie Portman, and a host of other celebs, is now for sale and could fetch $180 million.

That’s still a far cry from the Angels’ stadium-mate Los Angeles Football Club, the first American soccer team estimated to be valued at more than $1 billion. Sure, Forbes says the Dallas Cowboys are worth $9.1 billion, but hey, the soccer teams don’t have Jerry Jones as an owner.

Investing in sports for ordinary Joes is tricky.

Madison Square Garden Sports
,

controlled by James Dolan, owns the New York Knicks and New York Rangers. Forbes estimates that the Knicks are worth $6.1 billion and that the Rangers (hockey’s most valuable franchise) are worth $2.2 billion. So, how come MSGS has a market value of $4.4 billion? The 53% differential is said to be due to “the Dolan discount,” as he isn’t considered a great operator and has been loath to entertain offers to sell the teams or even minority stakes.

A handful of high-profile European soccer teams like

Manchester United

are publicly traded, but MSGS is one of only two U.S. publicly traded sports teams, along with the Atlanta Braves, controlled by John Malone’s Liberty Media. Even though the Braves have won their division six years in a row (and the World Series in 2021) and are in first place this season,

Atlanta Braves Holdings Series C
,

spun off from Liberty Media last July at $50.15, currently trades at $39. (Perhaps Ronald Acuña Jr. should double as the chief financial officer?)

While there isn’t much action in public equities, private-equity group Arctos Partners has raised $7 billion in two funds that have direct and indirect stakes in a couple of dozen teams, including the Boston Red Sox, the Golden State Warriors, and the New Jersey Devils. The only league that still prohibits private equity from investing in teams is the NFL.

“North American sports clubs are unique because of the league structures and the durability and predictability of these businesses,” says Ian Charles, co-founder and co-managing partner of Arctos. “Historically, equity in the North American clubs has performed on par with equities and private equities, with a lot less leverage, very low volatility, and no correlation.”

The mushrooming digital side of sports taps into gambling, fantasy, gaming, analytics, wearables, and fitness, and let’s not forget digital streaming; 51% of Americans who watch sports now say they have made the switch to streaming-only sports viewing. Digital media is also fueling the globalization of sport: Philadelphia 76ers all-star and league MVP Joel Embiid, who hails from Cameroon, learned how to shoot three-pointers by watching YouTube. Soaring popularity of the English Premier League (soccer) in the U.S., and conversely U.S. football in England and Germany, is fueled by the ease with which video clips now flash across the Atlantic.

“We’re just beginning to understand how to tap into the marketplace in different parts of the world,” says Frank McCourt, former owner of the L.A. Dodgers, who now controls iconic French soccer team Olympique Marseille. “What I learned owning these big iconic brands is that you now have an unlimited [global audience].”

CBS Sports Chairman Sean McManus takes it a step further. “Sports is the best content in the world, and the best gathering mechanism in the world for people to get together and root for each other and root against each other,” says McManus, maestro of his division for 27 years and set to retire after his network broadcasts the Masters. “It’s a great distraction from what’s going on in the world today.”

I asked McManus about his accomplishments, and he mentioned what he helped build at CBS and the landmark NCAA men’s tournament basketball deal he crafted with

Warner Bros. Discovery
.

As for his No. 1: “I would say bringing the NFL back to CBS certainly was what I’m most proud of in terms of a single deal.”

Small wonder he cites this as his career highlight, as sports and the NFL in particular are to a great degree keeping the pay TV bundle together. All of the top 10 TV shows in the first quarter were NFL games, each garnering more than 30 million viewers. And most nonsports shows in the top 50, such as Tracker and 60 Minutes, were boosted by being adjacent to NFL games.

It all goes back to McManus’ point about sports as the ultimate gathering mechanism. With so much discord and divisiveness in our lives right now, it makes a world of sense that live, heart-stopping competition becomes ever more valuable. There’s a trend that looks like a sure bet.

Corrections & Amplifications

DraftKings has a $21 billion market capitalization. An earlier version of this column incorrectly said that its market cap was $39 billion.

Write to Andy Serwer at andy.serwer@barrons.com and subscribe to his At Barron’s podcast