Finding Value in Minority Sports Team Ownership
The group of Nolan Ryan, Yao Ming, John Elway, Serena Williams and Venus Williams is unique for several reasons. Besides their playing accolades, each of these former and current athletes have something in common — they have an ownership stake in a professional sports team.
After an athlete’s playing career comes to an end, they tend to look for professions or investments they have familiarity with. Considering that an athlete dedicated their entire life to a skill, it only makes sense they remain involved in athletics during their career after sports retirement.
During their playing days, athletes were able to live out their childhood dream all while benefiting the ownership group (s) of the team or teams they played for. After some recent sales of professional sports teams, we are seeing former athletes getting involved in team ownership more and more, and finally receiving their share of the prosperity that comes with owning a sports franchise.
The overarching myth is that team ownership is reserved for only the “super wealthy.”
While that may be the case for the majority owners within the major sports leagues, there are also minority ownership positions available at a relatively affordable entry level cost. These ownership levels include; minority stakes of major league teams, as well as majority or full ownership stakes in a minor league team (MiLB, NBA G-League, etc.).
What is so appealing about owning a sports team?
To start off, there are only so many sports teams out there, which creates an inherent demand. When an owner decides to sell, he/she gets to choose the price because of the scarcity. As we have seen with celebrity owners (the Williams sisters, for example), there are many more minority stakes in team ownership than people understand.
According to Forbes, the average sports franchise value has increased 250 percent since 2000. During the Great Recession, revenues from the big four sports leagues all rose. Now with broadcasting and media deals being made every few years, overall team values have skyrocketed year over year.
Minority owners do not have the same decision-making abilities as the principle owner, but there are still many rewards.
Owners typically see benefits in having exclusive access to the team, luxury suites, invitations to restricted events and much more. When a celebrity or athlete becomes an owner, they are instantly viewed as one of the main faces of the franchise. Using the Los Angeles Dodgers as an example, Guggenheim Partners purchased the majority of the team and Magic Johnson contributed as a minority owner. Reports say Johnson contributed $50 million toward the $2.15 billion purchase of the Dodgers, or a little over 2 percent. Regardless of the small percentage, Johnson is considered the team’s public face.
Most importantly, minority ownership helps somebody get closer to the game they love.
Athletes grew up and trained for the “on-field” product, but there is so much more that goes into running a team. In the long run, minority ownership can even be leveraged toward becoming a majority owner. There is tangible value in owning a sports franchise. It is a unique product to invest in and it is one that has proven over the years to appreciate in value, making it an attractive alternative investment.
This article was written by Jordan Rutner, who produces the Career Services articles from Whitecap Sports for the VIKTRE Career Network.