Professional Sports Teams Continue To Increase In Value

Despite Major League Baseball seeing a $7B decline in revenue last year, individual team valuations continue to rise.

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Friends,

Sports business publication Sportico spent the last few months interviewing more than two dozen sports bankers, media experts, economists, and team executives involved with Major League Baseball.

The result?

Despite a once in a generation pandemic crumbling financial expectations across all major professional sports leagues, experts predict that Major League Baseball’s 30 teams are now collectively valued at $66 billion (Source).

At an average valuation of $2.2 billion per MLB franchise, that’s an 18% increase from the $1.85 billion Forbes estimated last year. Different valuation services and grading criteria, but you get the point — pro sports valuations continue to increase.

Here is the full list of MLB valuations (Source):

Whether you want to look at Major League Baseball as a whole or on an individual team-by-team basis, the result is still the same — 2020 was an extremely difficult year.

This one stat tells you all you need to know.

Combined MLB Franchise Revenue

  • 2019: $10.3 billion

  • 2020: $3.4 billion

That’s a 67% decline in revenue on a year-over-year basis, which shouldn’t come as much of a surprise given teams didn’t sell a single ticket, hot dog, beer, or parking pass (Source).

Furthermore, big market teams like the Yankees, Dodgers, and Mets all saw operating losses of more than $100M. That isn’t good.

So why do franchise valuations keep increasing?

Here’s my take…

Major US professional sports franchises, including the NFL, MLB, NBA, and NHL, have consistently proven to be premium, scarce assets with a strong record of value appreciation. A pandemic won’t change that, even with a $7B revenue decline.

While most of the increasing value of US professional sports teams can be broken down by simple supply and demand economics, there are certainly other forces at work also.

The shift from linear television to streaming has introduced more bidders for league-wide media rights. Amazon Prime paying more than $1 billion annually for exclusive rights to Thursday Night Football is just one example. Another would include estimates that suggest global sports media rights will bring in $85 billion annually by 2025, a 75% increase from 2018.

Another tailwind for the US professional sports industry includes the continued legalization of sports betting.

Think about this — Only 27% of the US population currently has access to legal mobile sports betting in their state, which Macquaries believes will move all the way to 96% by 2025.

As sports betting continues to be legalized across the country, new revenue opportunities for professional sports teams and leagues will become available.

As for baseball specifically?

In addition to team/operator partnerships and more, the length of time between pitches provides a massive opportunity for in-game betting.

Pandemic or not, professional sports arent going anywhere. New revenue streams are popping up, with existing ones expanding in value. Institutional investors are pouring money into the space, increasing demand on a limited, fixed supply asset.

In the end, that’s what will continue to drive franchise valuations higher.

Have a great weekend, and we’ll talk Monday.

If you want to read the full Sportico MLB valuations report, you can check it out here.

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