Hey <<First Name>>,
I couldn’t help but laugh two weeks ago when I saw a video of Knicks owner James Dolan throwing out yet another fan who was badgering him to sell the team. He recently stated that he’d part with the team for a cool $5 billion. While that figure seems somewhat absurd, there might be a smart individual in the room that will call his bluff with a higher offer.
Sports team valuations have always been an interesting conversation because the consensus is that most are currently valued at their peak. How much higher can they really go?
It all starts in 2022, the year we start seeing team valuations escalate as we’ve never imagined. That’s the year the lucrative broadcasting rights for most of the Leagues begin to expire.
There’s an epic clash looming between digital players and TV networks for the future of sports broadcasting. Traditional TV recently suffered its worst subscriber loss in history, as more than 1 million paying customers opted to cut the cord. The competition is at its most cutthroat. Streaming continues its ascension with Netflix, Amazon, and Hulu growing, and Disney, Apple, Warner Media, and Comcast will all be introducing direct-to-consumer streaming options in the near future, and let’s not forget about YouTube and Facebook. The tech giants certainly have pockets deep enough to easily bid up the multibillion-dollar price tags on game packages, putting them beyond the reach of media companies already suffering financially as ratings snag.
NFL Commissioner Roger Goodell had Jeff Bezos conveniently next to him in his suite during the Super Bowl for all the cameras to see. The message was loud and clear, get your wallets ready, the threat is very real!
Five of the top 10 most-watched individual telecasts of 2018 were NFL-related. Now that sport is the linchpin stabilizing their business, as the world moves to streaming, the prices the Networks will be willing to pay the Leagues to stay away from the streaming platforms will be exorbitant. 82% of traditional pay-TV subscribers said they would scale back/cancel their subscription if they no longer needed it to access live sport, according to Bloomberg.
Adding to the boon for teams and owners is the future legalization of sports gambling. The congressional National Gambling Impact Study Commission has suggested a fully developed sports gambling industry in all states would draw close to $400 billion in bets every year. According to Mark Cuban, owner of the Dallas Mavericks, “it’s not hyperbole -- valuations will at least double” when discussing the effect gambling will have on team valuations.
The primary driver will be the potential revenue that leagues will generate from becoming business partners with gaming corporations. Which means that teams will share revenue similar to how they currently do with media profits. There is also a beautiful network effect that gambling creates for sports matches. With gambling, all games count, which results in more eyeballs, which means more advertising dollars, which equals higher media rights revenue! Some owners, including Ted Leonsis of the Washington Wizards, have already considered a future where their arenas double as sportsbooks.
James Dolan continues to spin straw into gold with the NBA’s most valuable team. If you want a team, the time is now, at $5 billion Mr. Dolan is kind enough to be offering a considerable discount!