Research

The value of sports continues to soar

Tailgate parties. Fantasy leagues. Promotions at neighborhood bars and restaurants. These are a few of the activities and specials we enjoy during professional sports seasons. Two professors comment on the other thing that gets us into the game spirit.

By David Schwartz

2018-10-04

Tailgate parties. Fantasy leagues. Promotions at neighborhood bars and restaurants. These are a few of the activities and specials we enjoy during professional sports seasons. There’s one more thing that gets us into the game spirit. Forbes list of the World's 50 Most Valuable Sports Teams is a must-see for sports junkies and business people alike.

Even the casual fan can’t help but peek at the tallies rung up by their favorite sports team as they scroll through the list. Then there’s the talk-show fodder it provides for slow sports days.

When one of the nation’s premier media outlets talks about the world’s most valuable sports franchises, two ASU professors say that people listen. If nothing else, just for the fun of it.

“People do pay attention when it comes out,” says Professor of Management and Entrepreneurship Kenneth Shropshire, who is the founding chief executive of the Global Sport Institute. “Most times it’s just for entertainment. You do see it come up in business settings. It’s not something that comes out and gets ignored.”

Shropshire, the inaugural Adidas distinguished global sport professor, says the detailed work done to value each team across a spectrum of different sports provides insight into the bottom-line worth.

“They don’t have all the numbers, so you can’t solely rely on it,” says Shropshire, a sports consultant whose clients have included the NFL and Miami Dolphins. “But it’s a valuable tool if you’re going to understand the industry. It’s some of the best information you can get. The best information you can have is what’s available if you’re a finalist to buy a team and you can go inside the data room.”

NFL rules when it comes to revenue

Taking first place honors on the 2018 list is the Dallas Cowboys, whose signature star of navy blue and silver again continues to translate to green, according to Forbes. The value of so-called “America’s team” was pegged at $4.8 billion, a 14 percent increase over last year. It also marked the third consecutive year the franchise has won the high-profile top slot.

The team, with its massive, retractable-roof stadium in Arlington, rang up the highest revenue with $840 million and earnings of $350 million.

Forbes then takes an international turn, with Manchester United soccer team coming in second place with a value of $4.2 billion, a 12 percent hike over the prior year. Real Madrid with $4.09 million and Barcelona with $4.06 million finished third and fourth, respectively.

Closing out the top five with a $4 billion value is the New York Yankees, who finished second among all teams last year.

Rounding out the top 10 in order are the New England Patriots, New York Knicks, Los Angeles Lakers, New York Giants, Golden State Warriors, and the Washington Redskins. It took a value of $3.1 billion to crack the list of 10, Forbes calculated.

List watchers say there are no real surprises this year as the marquee names and global heavyweights in the field continuing to roll. Big-market teams dominate the list as they have in prior years.

As usual in these annual rankings, the NFL is king, placing 29 teams among the top 50 of the most valuable for the second consecutive year. Next up is the NBA, with eight teams, followed by European soccer with seven teams, and Major League Baseball with six. No hockey, Formula One, or NASCAR teams made the list.

Overall, Forbes estimates that their top 50 global powerhouses are valued at a combined $137 billion. There also were 106 sports franchises worldwide now worth at least $1 billion, 19 more than last year, according to the research from Forbes.

The values were based on equity plus debt, based on existing stadium deals unless a new stadium is pending, the company said in a statement.

The business behind the numbers

Shropshire says there was a point about 15 years ago when those in sports questioned whether the values would continue to rise steeply. Some speculated that the party could be coming to an end. But those concerns quickly disappeared and the outlook generally appears bright — at least in the near future.

There’s the continued flow of money generated by the fans who plunk down ever-increasing dollars to pay for a seat inside their hometown stadium, arena, or another sporting facility. There are the concessions and team merchandise that contribute to a franchise’s revenue stream. Dollars are generated from local sponsorships.

Owner-friendly collective bargain contracts negotiated between players and the various sports leagues also have increased a team’s value.

But by far the biggest driver behind the runaway economic freight train come from media rights, the big-time amounts paid to broadcast sporting events, says Lecturer of Marketing Daniel McIntosh.

McIntosh, who teaches sports business courses, says the networks are willing to pay dearly to get these lucrative rights to capture a live audience. “Why are broadcasters willing to pay? It’s called appointment viewing,” McIntosh says. “If you are going to watch it, you are going to watch it live.”

He says that sporting events comprise 90 to 95 percent of all live viewing and adds that this audience is generally not the one who records an event and then fast-forwards through the commercials.

The days of having to live in the Chicago area to see NBA legend Michael Jordan are long gone, McIntosh says. Now all one has to do is flip on the television to catch a glimpse or more of LeBron James.

“It’s all about getting eyes on the product,” he says. “Media rights are absolutely the driver when it comes to revenue and valuations.”

In addition, McIntosh says team executives are focusing more than ever before on expanding their reach internationally with high hopes of bolstering their revenue. They also are spending time contemplating where the money will come from when the Baby Boomer generation — long a stalwart for professional sports teams — is replaced by others.

Perhaps legalized sports betting is the answer, as it’s expected to generate more money for teams and athletes.

Esports loom over pro leagues

Looming on the not-too-distant horizon is the threat posed by esports, video game tournaments usually played by professional gamers. Experts say the growing industry has roughly 250 million players in a market worth about a billion dollars annually. So, dollars spent on the four major sports and soccer may be at stake.

“Esports is amazingly attractive to the younger demographic,” McIntosh explains. “In esports, you don’t have the barriers to playing. You don’t have to be a certain height, for example. “No matter how hard I try, I can’t perform at that level. But with esports, if you’re willing to put in the time, you can pretty much become a high-performing player. That’s a big attraction for some people.”

Regardless of the challenges ahead, McIntosh and Shropshire say owning a team continues to be an attractive buy for the moneyed crowd.

Management and Entrepreneurship Marketing Sports Business