Investing in a Sports Franchise - Post 1
- Dec 6, 2016
Charles Baker of DLA Piper and Rob Tilliss of Inner Circle Sports were the featured speakers. The main topic was the significant valuation uptick of sports franchises and what was driving it. The main driver is the scarcity of teams and that they are looked upon as trophy assets. Also contributing to the uptick is the solid labor relations between leagues, the owners, and the players and unions. Another major factor is that the media is pouring more money into sports because of the anticipated continued growth and reach to the most desirable consumer demographics. The main sources of revenue for leagues and teams are ticket sales, followed closely by media revenue which is expected to equal ticket sales revenue by 2018, sponsorship deals, and merchandising – in that order.
The compound growth rate of the S&P 500 is 3.5% while the compound growth rate of the NFL, MLB, and NBA is approximately 13%, with hockey at 10%. However, the future growth explosion is expected to be MLS since its popularity in the U.S. is rapidly expanding. These are just some of the factors that are contributing to the significant increase in team and league enterprise values. With new wealth generated after the most recent recession, there are many more investors interested in owning a team as a trophy asset. Since teams are considered multi-generational assets, the escalation in enterprise value makes investing in a sports franchise very appealing to those with old and new wealth.
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James A. Jacaruso, Jr.
James A. Jacaruso Jr. is a Private Client Services Group Director with more than 25 years of tax compliance and planning experience focusing on personal and fiduciary income taxation, gift taxation and wealth transfer planning.
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