The sports business is growing faster than you can imagine.

However, this spring, changes in the sports world have become even more profound. digitalization. Gambling; NIL (name, image, likeness) market for college athletes. globalization. And the rise of women's sports is reshaping the sport at a breakneck pace, much of which was front and center at the World Sports Leaders Conference in Kiawah Island, South Carolina, earlier this month. “All of these changes are driving even more interest in sports,” said George Pyne, CEO of investment firm Bruin Capital, which produces the event with Jay Penske's Sportico. Pine added that sports is “an underrated category.” As things progress, we will see more sophisticated capital coming in, including sovereign wealth funds and private equity. ”

The numbers for this vast multi-trillion dollar business, which includes sporting events, broadcast rights, gaming, merchandise and apparel, are already impressive. According to Forbes magazine, the world's 50 most valuable sports teams now have a combined value of $256 billion, an increase of more than 15% from the previous year. Highlighted by Josh Harris, co-founder of Apollo Global Management, purchasing the Washington Commanders for a record $6 billion. Paid for sports teams. The National Football League, which dominates the list with 30 teams, is outpacing any league in the world, with the average value of its top franchises doubling over the past five years to $5.1 billion.

S&P500 index.

Athletes are also reaping the benefits, with the 50 highest-paid athletes of all time earning a combined $35.5 billion, according to Sportico. The superstars hail from 17 countries, but 32 are American, led by Michael Jordan, who has earned $3.75 billion in career earnings, much of it from his Nike shoe contract.

Now in its third year, the Kiawah Conference features sports figures including commissioners from the four major sports leagues, as well as heads of other leagues and college conferences, approximately 50 teams from myriad sports, and those in bold. will gather. Owners (Steve Cohen, Greg Maffei, Ted Leonsis, Joe Tsai) and top executives in television sports.

However, this show is not about sports. Attendees will be there to hear panel discussions and fireside chats with former U.S. presidents (George W. Bush and Barack Obama). presidential candidate. central banker. General. Fortune 100 CEOs (Hans Vestberg, Brian Moynihan). Prominent market players (Mohamed El-Erian, Cathie Wood). scientist. And the doctors.

The real action happens after a session over aged bourbon or lunch with crab soup, on the resort's famous sandy beaches, or on one of its five golf courses. Here, like any great “clash of the elephants,” partnerships are formed, investments are made, and mega-deals are made, such as the sale of an NFL team.

There's a lot to trade. Consider gambling. Citigroup's sports advisory team reports that the sports betting sector ( DraftKings
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Flutter Entertainment — owns FanDuel — Churchill Downs
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and Entain) are up 25% in the past 12 months, and with a market cap of $21 billion, DraftKings is one of the most highly valued publicly traded sports companies.

This makes sense, since Americans bet a record $119.84 billion on sports in 2023, up 27.5% from 2022, according to the American Gaming Association. Of course, sports gambling is not without its pitfalls.as Barons reported that parlay betting (where people can bet on several things happening at the same time) reduces the odds of winning. “Prop” bets (bets tied to a specific player's performance in a specific game) have been condemned by the National Collegiate Athletic Association, and the National Basketball Association is investigating players for multiple betting irregularities. . What's more, a former interpreter for Los Angeles Dodgers superstar Shohei Ohtani is accused of stealing millions of dollars to pay off gambling debts to illegal sportsbooks, according to a federal affidavit.

When it comes to women's sports, Deloitte predicts revenue will reach $1.28 billion this year, “at least 300% higher than the last time we wrote a forecast on the subject in 2021.” Yes, there is a Caitlin Clark effect. Iowa State basketball stars drove the women's national championship game to a record 18.9 million viewers, the most viewers of any college or professional basketball game since 2019, according to ESPN Did. For the first time, it surpassed the men's championship game, which was watched by 14.8 million people. Clark is also shaking up the still-turbulent NIL world, ranking fourth on On3 NIL's projected annual value list with $3.4 million, along with Arch Manning and Bronny James.

Clark is expected to be drafted by the Indiana Fever, who will face the New York Liberty in their home opener on May 18th. Liberty owner Joe Tsai, chairman of Alibaba Group Holding and owner of the Brooklyn Nets, told me about its ticket sales. The game is “on fire”.

But it's not just the Clark effect. Last August, a women's volleyball game at the University of Nebraska drew 92,003 people, a record for a women's sporting event. Coco Gauff elevates women's tennis, a new women's professional hockey league is born, and the WNBA and Women's World Cup Soccer are drawing record crowds. Meanwhile, the valuations of teams in the National Women's Soccer League have gone through the roof, from $5 million a few years ago to a recent $113 million hit by billionaire Ron Burkle of the San Diego Wave. The sales price has increased to 50%. LA's Angel City FC, part-owned by Reddit founder Alexis Ohanian, Natalie Portman and many other celebrities, is currently on the market and could fetch $180 million.

This is still a far cry from the Angels' stadium mate, the Los Angeles Football Club, the first American soccer team estimated to be valued at over $1 billion. Sure, Forbes says the Dallas Cowboys are worth $9.1 billion, but, well, the football team doesn't have Jerry Jones as its owner.

Investing in sports is difficult for the average Joe.

madison square garden sports
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Managed by James Dolan, owner of the New York Knicks and New York Rangers. Forbes magazine estimates that the Knicks are worth $6.1 billion and the Rangers (hockey's most valuable franchise) are worth $2.2 billion. So why is MSGS' market value $4.4 billion? The 53% difference is said to be due to the “Dolan discount.” Dolan is not considered a good manager, and he has been reluctant to accept offers to sell the team or a minority stake.

While famous European soccer teams like Manchester United are publicly traded, MSGS is one of only two publicly traded sports teams in the U.S., along with the Atlanta Braves, managed by John Malone's Liberty Media. One of them.Despite the Braves winning their division six years in a row (and the World Series in 2021) and being in first place this season, Atlanta Braves Holdings' Series C
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It was spun off from Liberty Media last July for $50.15 and currently trades at $39. (Perhaps Ronald Acuña Jr. should also serve as chief financial officer?)

Although there has been little activity in public stocks, private equity group Arktos Partners has amassed 70% in two funds with direct and indirect stakes in dozens of teams, including the Boston Red Sox, Golden State Warriors, and Boston Red Sox. Raised $1 billion. New Jersey Devils. The only league that still prohibits private equity from investing in teams is the NFL.

“North American sports clubs are unique in terms of their league structure and the durability and predictability of their business,” says Ian Charles, co-founder and co-managing partner of Arctos. “Historically, North American club stocks have performed as well as stocks and private equity, with much lower leverage, very low volatility, and no correlation.”

The rapid digitization of sports is leveraging gambling, fantasy, gaming, analytics, wearables, and fitness. And don't forget about digital streaming. Of Americans who currently watch sports, 51% say they have switched to streaming-only sports. Digital media is also driving the globalization of sport. Philadelphia 76ers All-Star and league MVP Joel Embiid, a native of Cameroon, learned how to hit 3-point shots by watching YouTube. The popularity of England His Premier League (Soccer) in the United States, and conversely the popularity of US Soccer in England and Germany, has accelerated with videos His clips now flowing easily across the Atlantic. .

“We started to understand how to enter markets in different parts of the world,” said Frank McCourt, former owner of the Los Angeles Dodgers and current manager of iconic French soccer team Olympique de Marseille. I just happened to be there,” he says. “What I learned by owning these big, iconic brands is that I now own unlimited brands.” [global audience]”

CBS Sports Chairman Sean McManus goes a step further. “Sports is the best content in the world, the best gathering mechanism in the world for people to come together and support each other and support each other,” said McManus, who is retiring after 27 years as the division's maestro. he says. His network is broadcasting the Masters. “It’s a great distraction from what’s going on in the world today.”

When I asked McManus about his accomplishments, he talked about what he helped build at CBS and the landmark NCAA men's tournament basketball deal with Warner Bros. Discovery.
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As for his No. 1, “I would say from a single contract standpoint, bringing the NFL back to CBS is certainly the thing I'm most proud of.”

Sports, especially the NFL, has put together its fair share of pay-TV bundles, so it's no wonder he cites this as a career highlight. The top 10 TV shows in the first quarter were all NFL games, each of which drew more than 30 million viewers. And most non-sports programs are in the top 50. tracker and 60 minutes, Proximity to NFL games helped.

It all goes back to McManus' point about sports as the ultimate collective mechanism. With so much discord and division in our lives right now, it's no surprise that raw, heart-stopping competition is more valuable than ever. There is a tendency to feel certain.

Fix and amplify

DraftKings has a market capitalization of $21 billion. A previous version of this column incorrectly stated that his market capitalization was $39 billion.

Write destination Andy Serwer (andy.serwer@barrons.com) and apply His At Barons Podcast