Pricey NFL, NBA ownership stakes push investors to smaller leagues

A version of this article first appeared with Alex Sherman in the CNBC Sport newsletter, delivering the biggest news and exclusive interviews from the world of sports and media. become a member to receive future editions straight to your inbox.

Last week, the National Women’s Soccer League awarded the award a new expansion franchise — in Columbus, Ohio — to an ownership group led by Haslam Sports Group for a fee of $205 million.

This represents a $40 million jump from the $165 million reported by billionaire Arthur Blank paid the league’s Atlanta franchise in November. And that $165 million itself was a $55 million jump from what was reported. $110 million fee Denver made the payment in January of last year.

Go back to 2022 and the expansion fee for a new NWSL club was: only 2 million dollars.

On the surface, this seems like a story about the growth of the NWSL. Postseason attendance increased 11% last season, according to the league. Approximately 1.2 million people I watched the NWSL finalsThe NWSL said there was a 22% increase from a year ago, including a whopping 70% increase in the 18-to-34 demographic.

Given the league’s growth trajectory, it makes sense for investors to want to participate now.

But according to investors and bankers, there’s something else going on affecting NWSL valuations that has absolutely nothing to do with soccer. This has to do with a trickle-down investment thesis driven by the big businesses of the NFL and NBA.

Wealthy investors have long been interested in sports property and trophy assets, which also offer high returns on investment. The introduction of private equity investment, first adopted in the NFL in 2024, has added to the pool of prospective buyers.

This dynamic is welcome news for the entire professional sports industry, which also benefits from another strategic investment play: anti-AI trading. Betting on live events is a counter strategy for those who want less exposure to technology in a market driven by AI investments.

This helped increase the valuations of the most valuable sports teams in the United States. According to CNBC Sport, the average NFL team is currently worth $7.65 billion. In 2010, NFL teams averaged: about 1 billion dollars.

The average value of an NBA team is now $5.52 billion, 18% higher than a year ago. Fifteen years ago, the average NBA team was worth $369 million. This represents an increase of 1,396%. S&P 500 increased by approximately 422% in the same period.

Ownership stakes in the NBA and NFL are becoming too expensive even at the minority stake level for a class of buyers actively interested in owning a sports team. Former New York Giants quarterback Eli Manning said this in an interview with CNBC Sport last year.

“This is too expensive for me,” Manning said of a potential minority stake in his longtime team. “A 1% stake worth $10 billion turns into a huge number.”

NFL team valuations have increased nearly 17-fold in 25 years, stock research firm Bernstein wrote in a recent note to clients; “The kind of returns that are enough to give any portfolio manager legendary status and easily eclipse the S&P index or any emerging market index on the planet.”

The main reason for the valuation increase is due to the huge size of the league’s media rights. The NFL signed an 11-year, $111 billion media rights deal in 2021 and now it wants even more money. The NBA followed suit with its own 11-year, $77 billion deal, starting with the 2025 season.

Splitting national TV revenues among teams makes even the lowest-revenue teams, such as the NFL’s Arizona Cardinals and the NBA’s Memphis Grizzlies, worth $5.9 billion and $3.75 billion, respectively, according to CNBC estimates.

As the NFL flexes its muscle and demands more from its media partners, there is a fear that “second-tier” sports, including MLB and NHL, could be at risk of losing media rights dollars. The more money goes to the NFL, the less money goes to everyone else.

This dynamic can be expected to negatively impact evaluations of these sports. But according to bankers and investors, this is not happening.

As the NBA and NFL price out buyers, the demand for more affordable sports teams is now on the rise. They say this has helped fuel the recent NWSL surge. There is more liquidity at NWSL team price points, leading to bidding wars and rising valuations.

Even though the most recent buyers — Blank and the Haslams — were already owners of NFL and other sports teams, they had to pay increasingly higher prices to fight off other offers. There are far more buyout groups willing to write $200 million consortium checks than those paying $1 billion or more for minority stakes in the major leagues.

“There’s a lot of demand to get into the sports business, but people can’t write checks to join the big four anymore. So what they’re doing is substituting,” said veteran sports banker Sal Galatioto, president of Galatioto Sports Partners. he said. “When supply stabilizes and demand increases, people will bid more to win. Basic economics are not that important.”

San Diego Padres we are closing a sale $3.9 billion, record for MLB despite team’s regional sports network break a few years ago. While nearly $4 billion is a lot of money, it’s still well below the average value of an NFL or NBA team.

“He came to me and said, ‘I can’t afford the NFL and NBA, what do you have for me in MLB and NHL?'” said a prominent sports banker, who asked not to be named because the discussions are private. “There are investors who say,” he said.

The success of the NBA and NFL goes all the way to the bottom of the sports food chain, said Rick Horow, CEO of Horrow Sports Ventures.

“Major League Cricket was $5 million. Now it’s worth $30.” [million] and we go higher. Major League Pickleball was $5 million two years ago. Now the value is obvious $15 million or higher,” Horrow said.

Some of this resembles a sports investment bubble, where valuations diverge from the underlying financials of the leagues.

Jasmine Robinson, managing partner of Monarch Collective, the largest women’s sports investment fund with $250 million in investment, said this was a real concern for smaller, less established leagues. Robinson said that’s why the Monarchs are focusing most of their funding on the WNBA and NWSL rather than emerging leagues.

“Sports has historically been a big investment, but that’s really only true for the biggest leagues. You’re unlikely to make any sports deals and make money,” Robinson said. “There’s a real scarcity. To make money, you have to be in leagues that can really lead. We don’t bet on every women’s sports league.”

The big question may be what the threshold is for an established league in the event of an economic crisis that turns off the investment spigot. The Monarch believes the WNBA and NWSL are above the line, but WNBA teams have historically never made money and now they must pay players much more money after the end of this year. new collective bargaining agreement.