Many franchise values have outpaced several asset classes in recent years. In 2022, the world’s 50 most valuable sports teams — mostly in the NFL — were worth a combined $222.7 billion, a 30% increase over the prior year. Indian Premier League cricket is also among the world’s most popular sports enterprises, with more than 600 million global viewers in 2024. In 2009, the average value of an Indian Premier League cricket franchise was $67 million. By 2022, the league had an average team value of $1 billion. Over the same period, the average National Basketball Association (NBA) team’s value grew by 16% annually to $2.9 billion.

“Prior to 2019, none of the major U.S. leagues allowed private equity ownership, and franchise values were not of much interest to private equity investors,” says Ed Teagan, director of corporate private placements at MetLife Private Capital Investors, which has a lending portfolio of more than $4 billion invested in U.S. sports teams and more than $1 billion in European teams. “But those rules changed. And as franchise values took off, you saw increased investor interest, and many owners were looking for liquidity.”

Driving New Revenue

The rapid growth of franchise values has been driven largely by shifts in the media landscape. Professional sports offer one of the last opportunities for advertisers to reach large audiences. This media shift has been a boon for sports leagues. In 2021, the NFL renegotiated media rights in a deal worth more than $110 billion — a more than 75% jump from its previous agreement. Meanwhile, the NBA’s new 11-year media deal is worth more than $75 billion, triple the $24 billion deal the league inked in 2014

At the same time, professional sports teams are finding other ways to increase and diversify revenues. Event attendance has rebounded in the wake of the pandemic, with live sports and entertainment events commanding higher ticket prices amid an increased interest in premium experiences.

“Some recent major renewals have shown a plateauing of domestic media rights, so expanding reach internationally is an area of increasing focus.” —Alex George, Associate Director, Corporate Private Placements, MetLife Private Capital Investors

New stadium designs offer teams opportunities to expand and diversify their revenue streams, among them immersive fan experiences, increased concert and other event programming, and real estate developments adjacent to stadiums, including “sports cities” that offer housing and training facilities.

“On the European side, football teams lost billions during COVID, and they started to seek innovative ways to make up for some of those losses,” says Kashif Khan, director of infrastructure and project finance at MetLife Private Capital Investors. “That’s created this opportunity for investors to get involved.”

Research Is the Star Player

Investors can participate in professional sports markets through lending to teams, stadiums or leagues. They can also take ownership of franchises through private equity placements. A recent rule change by the NFL allows private equity funds to own up to 10% across all funds per franchise, with a 3% minimum investment per fund per franchise. According to the new rules, approved funds can invest in a maximum of six teams, and the investment must be held for a minimum of six years. In other pro sports leagues, private equity firms are allowed to own even larger stakes in teams^.1

“We believe the recent trends driving returns in this space could continue, even in the event of an economic downturn.” —Ed Teagan, Director, Corporate Private Placements, MetLife Private Capital Investors

One potential benefit for investors: Recent returns for franchise investments have shown little correlation to traditional stock and bond benchmarks, according to Teagan. Team values may be recession-resistant as well, with Teagan noting data from live events shows great consistency. “We believe the recent trends driving returns in this space could continue, even in the event of an economic downturn,” he says.

Trends and investment considerations are regional, and investors need to be selective about how they deploy capital. Although European football clubs are among the most valuable sports franchises, domestic media rights growth has slowed in recent years.

“Some recent major renewals have shown a plateauing of domestic media rights, so expanding reach internationally is an area of increasing focus,” says Alex George, associate director of corporate private placements at MetLife Private Capital Investors.

European leagues also come with the risk of relegation, whereby the worst-performing teams across the season are relegated to the league below — an event that can have a severe impact on a team’s cash flow.

Khan says this makes due diligence vital for would-be sports investors. “Many clubs aren’t run like corporations — decisions may be made by one or two important people,” he says. “You have to do careful evaluation of governance and decision-making and study how successful and economically sustainable a club might be, assess what the revenue opportunities are, and look at how the team might fare under stress. Being successful in this space requires expertise in sports, media, real estate, investment analysis and more.”

Source:

^1. “Private Equity Ownership Is Coming to the NFL,” The Wall Street Journal, August 27, 2024. https://www.wsj.com/sports/football/nfl-privateequity-rules-owners-meeting-vote-222887b7?mod=hp_lead_pos8

Disclaimer
This material is intended solely for Institutional Investors, Qualified Investors and Professional Investors. This analysis is not intended for distribution with Retail Investors. This document has been prepared by MetLife Investment Management (“MIM”)¹ solely for informational purposes and does not constitute a recommendation regarding any investments or the provision of any investment advice, or constitute or form part of any advertisement of, offer for sale or subscription of, solicitation or invitation of any offer or recommendation to purchase or subscribe for any securities or investment advisory services. The views expressed herein are solely those of MIM and do not necessarily reflect, nor are they necessarily consistent with, the views held by, or the forecasts utilized by, the entities within the MetLife enterprise that provide insurance products, annuities and employee benefit programs. The information and opinions presented or contained in this document are provided as of the date it was written. It should be understood that subsequent developments may materially affect the information contained in this document, which none of MIM, its affiliates, advisors or representatives are under an obligation to update, revise or affirm. It is not MIM’s intention to provide, and you may not rely on this document as providing, a recommendation with respect to any particular investment strategy or investment. Affiliates of MIM may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned herein. This document may contain forward-looking statements, as well as predictions, projections and forecasts of the economy or economic trends of the markets, which are not necessarily indicative of the future. Any or all forward-looking statements, as well as those included in any other material discussed at the presentation, may turn out to be wrong.

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¹. MetLife Investment Management (“MIM”) ¹ is MetLife, Inc.’s institutional management business and the marketing name for subsidiaries of MetLife that provide investment management services to MetLife’s general account, separate accounts and/or unaffiliated/ third party investors, including: Metropolitan Life Insurance Company, MetLife Investment Management, LLC, MetLife Investment Management Limited, MetLife Investments Limited, MetLife Investments Asia Limited, MetLife Latin America Asesorias e Inversiones Limitada, MetLife Asset Management Corp. (Japan), and MIM I LLC, MetLife Investment Management Europe Limited and Affirmative Investment Management Partners Limited.
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