How To Invest In Sports

How To Invest In Sports
Theodora Lee Joseph, CFA

29 days ago5 mins

  • There’s no brand loyalty quite like sports brand loyalty. It’s why this industry can generate so much income from merchandise, media deals, and new ventures like esports.

  • Investing in sports isn’t limited to the super-rich. So even if you don’t have billions to burn on buying a whole team, you could invest in publicly traded teams, sports broadcasting, fantasy sports, online betting, and sponsorship.

  • If you’re thinking of investing, think about doing a little pre-game workout, or research. Many of the investment options in sports, such as media companies or betting platforms, get their income from multiple sources, not just sports, so you’ll want to know a little bit about their business models and market positions.

There’s no brand loyalty quite like sports brand loyalty. It’s why this industry can generate so much income from merchandise, media deals, and new ventures like esports.

Investing in sports isn’t limited to the super-rich. So even if you don’t have billions to burn on buying a whole team, you could invest in publicly traded teams, sports broadcasting, fantasy sports, online betting, and sponsorship.

If you’re thinking of investing, think about doing a little pre-game workout, or research. Many of the investment options in sports, such as media companies or betting platforms, get their income from multiple sources, not just sports, so you’ll want to know a little bit about their business models and market positions.

Mentioned in story

It’s often good advice to invest in what you’re passionate about. And if you can’t seem to stop talking about Lewis Hamilton’s move from Mercedes to Ferrari, or the point spread for this year’s Chiefs versus 49ers Super Bowl, sports investing just might be your thing. Sports are big business, as you’re no doubt aware, and getting bigger all the time. But if you’re looking for a way to profit from it, you’re going to need a game plan. Here’s what you need to know…

Why invest in sports?

It isn’t just for die-hard fans – there are some pretty cool characteristics to sports that you just don’t find in many places.

First off, sports teams and leagues are ideal playing fields for brand loyalty and visibility – two key ingredients of a super industry. Fans are wild about their teams, passing down their love for generations. And this fan frenzy translates into some sweet cash flow from stuff like merchandise sales, tickets, and sponsorships. Teams also can score big bucks with media rights deals, which provide a stable long-term source of income.

Second, adding some sports action to your investment mix can help put your portfolio in goal. That’s because the sports scene tends to flex its muscles and stand apart from the crowd, dancing to its own economic beat. So it could give you a bit of a break from the usual market chaos.

And third (yep, it’s a hat trick), the sports industry isn’t sitting still. It’s expanding globally, conquering digital platforms, and diving into new revenue streams like esports and sports betting. American leagues like the National Basketball Association (NBA) and National Football League (NFL) are even scanning Europe for fresh opportunities – looking to unlock new money-making opportunities. And that’s driving fresh growth.

Value of global sports market by year, in US dollars. Sources: Statista, NPD.
Value of global sports market by year, in US dollars. Sources: Statista, NPD.
Average franchise value of different US sports leagues over time. Source: Statista.
Average franchise value of different US sports leagues over time. Source: Statista.

So how do you give your portfolio, well, a sporting chance?

Investing in sports leagues might sound like a slam dunk, but it’s not easy for everyday investors to get in on the action. You usually can’t grab a piece of your favorite team unless you’re sitting on billions of dollars – most teams are privately owned, not publicly traded like company stocks.

And, sure, there are exceptions. There’s a handful of publicly traded sports teams out there, for example, the New York-listed Manchester United (MANU), the Atlanta Braves (BATRK), the London-listed Rangers International Football Club (RFC), and the Milan-listed Juventus Football Club (JUVE). There’s also Madison Square Garden Sports (MSGS), whose sports business includes the New York Knicks and New York Rangers, and Liberty Media (FWONK), which has ownership stakes in Formula 1 (F1) and baseball’s Atlanta Braves.

But, for the most part, if you want to give your portfolio a pro athlete’s edge, you’re going to have to look for sport-adjacent plays. These are the three big ones:

1. Broadcast and media companies

Here’s the good news, moneybags: when it comes to investing in sports, you don’t need to own a team. A lot of the big media companies have enormous exclusive deals with major sports leagues. Heavyweights like Amazon, ESPN (part of Disney), Fox, CBS (part of ViacomCBS), and NBC (part of Comcast) seem to be signing bigger and bigger deals each year, which highlights the growing influence – and profitability – of sports broadcasting.

The latest on that score says it all: there’s talk now that the NFL might join forces with Disney by acquiring a stake in ESPN. If this deal goes through, it could potentially pitch Disney into the ranks of major streaming players, challenging the likes of Netflix.

2. Fantasy sports and betting

The world of sports betting and fantasy sports is booming – alongside sports itself. And the companies operating in these betting and fantasy spaces provide a way to invest in all of it.

Sports betting was legalized in the US in 2018, and the industry’s been on a rapid rise ever since. Projections indicate an annual growth rate of over 13%, with the market expected to reach a staggering $15.75 billion by 2028. The betting firms have also established partnerships with major US sports leagues, bolstering their credibility and visibility.

The top players in this arena include FanDuel (owned by Flutter Entertainment) and DraftKings, boasting market shares of 45.1% and 32% respectively in 2023. Other key players to keep an eye on include Penn Entertainment, Caesars Entertainment, and MGM Resorts International’s BetMGM.

3. Sponsorship and advertising

Companies pay big to sponsor teams, leagues, and events, just to get their brands in front of those massive fan bases. This includes buying commercial air time, sure, but also stadium naming rights, team sponsorships, and event-specific partnerships. Companies that become official sponsors of the NFL or other leagues often see a boost in sales from all the marketing exposure they get. Some MVP examples include Nike for the NBA, PepsiCo for the NFL, Rolex for Formula 1, Adidas for the NHL, and T-Mobile for MLB. Auto brands like Ferrari, Mercedes, and Aston Martin, meanwhile, are all over F1.

Outside of the stadiums and arenas, there are also some hugely profitable licensing agreements that companies can strike to sell merchandise, video games, and other products branded with the leagues’ and teams’ logos. Video game maker Electronic Arts holds licensing agreements to produce the Madden NFL, NHL, and F1 series. And Take-Two Interactive produces the NBA 2K series.

So what’s the big post-game takeaway here?

It’s still early innings for investing in sports, especially for retail investors. But as the game progresses, more opportunities are likely to open up. In the meantime, consider those adjacent plays, but be aware that they might not offer direct exposure to the game since their sales tend to come from a variety of other sources. Before you invest, be sure to take a look at those.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG