Why are Prolific Sports Franchises Worth so Much Money?

Competitive sport across the world is a big business draw. This article will evaluate how franchises became so big, and why sports teams are valued so highly in modern times.

The Most Financially Valuable Sports Leagues by Revenue

The USA is top of the list of nations with the highest earning sports leagues. The sports of American Football, Baseball, Basketball and Hockey take four out of the top five places.

  • At number one, the National Football League (NFL) representing American Football teams in the USA is worth at least $13 billion. The winners of the 2020 Superbowl the Kansas City Chiefs are believed to be worth in the region of $2.5 billion.
  • In second place, Major League Baseball brings in $9.5 billion. Famous and highly profitable teams such as the New York Mets ($2.4billion) and Boston Red Sox ($3.3billion) make up valuable franchises.
  • England’s Premier League is another highly profitable sports competition. The home of fantastically wealthy clubs such as Chelsea, Liverpool, and Manchester United is valued at $5.3 billion.
  • Football, or soccer in the US, is a big money draw throughout the world. The richest football club in the world is Real Madrid, currently valued at a whopping $896 million
  • The next two leagues in the global top five earners are Basketball’s NBA, and hockey’s NHL.

Manchester City’s Road to Financial ProfitabilityA well-known English football club that has transformed over recent years is Manchester City.

Over the last ten years, the overall assets of the club increased widely. The full value is made up of valuations of the team, as well as tangible assets such as the stadium and training ground.

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Part of the reason why Manchester City’s value increased so much is that it was still benefitting from its purchase by the Abu Dhabi Group in 2008. The new owners implemented considerable new investments in training facilities and stadium improvements.

Manchester City’s owners have also agreed to sell a highly profitable stake in the franchise to a US private equity firm. The $500 million deal is believed to have made the club the world’s most valuable football group.

What Makes a Sports Franchise so Valuable?

  • Various factors such as TV deals, increased merchandise sales, and fans being willing to pay more for tickets has pushed the price of sporting franchises sky high.
  • Advertising revenue is another big reason for this, with sponsorship deals for shirts and kit worth a huge sum to the clubs.
  • Advertising hoardings in the stadiums also highlight how linked all of the different industries are in making a franchise valuable.

Sporting stadiums are a treasured resource of sporting franchises. Wealthy billionaires have been known to buy up football stadiums to increase their standing and global influence.

Football’s significance in the global financial world shows no signs of diminishing. Stadiums, and any other asset related to a football club, will remain an attractive proposition for those with financial capital to invest.

This is mainly because, as with a property investment, the new owners are not necessarily looking at the day to day running of the club. Rather, they are more concerned with the increase in value over time.

If, at some date in the future, they choose to sell their investment, they will have every chance of making a healthy profit.

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Football itself became a completely different proposition in the UK with the formation of the Premier League in 1992. The subsequent TV deals for screening live games and the sponsorship and advertising that went with it turned the league into an ongoing money-maker.

Why Do Wealthy Investors Buy Football Clubs?

Even with all of the highly profitable deals flying around, many football teams operate at a financial loss. So why do rich businesspeople seek out football clubs and their assets to invest in?

  • Prestige is a strong reason why a wealthy individual might take on an investment in a football team. Buying a football club adds a certain reputation to the figure, making them recognisable in popular media.
  • The wealthy owner of Chelsea FC Roman Abramovich became well-known throughout the world following buying the club in 2003. This may have been an attractive result for him as it would allow access to new global contacts and business opportunities that may have otherwise been unwinnable.
  • Broadcasting contracts and lucrative sponsorship deals add weight to the precarious nature of a sporting team’s success. Investors can concentrate on the business arrangements, and let the coaching staff worry about matchday.
  • Major sports franchises are an appreciating asset, meaning the overall value of the operation is set to increase year upon year.

Sport is the number one leisure activity across the world. 3.5 billion people alone are estimated to watch association football, or soccer, across the world. This, and other sports, are worth a huge amount of money.

This is largely down to the investment opportunities and the ongoing popularity of sporting events. By following the business dealings of wealthy investments into sporting franchises, we can witness the continual rise of these hugely profitable enterprises.

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About the Author: Cory Weinberg

"Alcohol evangelist. Devoted twitter guru. Lifelong coffee expert. Music nerd."

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