No Match Found
In 2020, the New York Mets sold for a record $2.5 billion dollars. Since then, the team’s payroll has more than doubled to around $384 million (now MLB’s highest by a significant margin), and plans have been announced to develop the entertainment district surrounding Citi Field. At first blush, this outlay of capital to purchase and revamp the Mets and its community may seem excessive, but this strategy of spending big up front is quickly becoming the norm.
Why? In the last few years, multiple sports leagues have opened up ownership opportunities, including minority interests, to new buyers beyond ultra-high-net-worth individuals — specifically private-equity firms, pension funds and sovereign wealth funds. But the number of teams available for purchase has remained relatively static. As a result of this limited supply coupled with growing demand, owners have seen the market value of their teams soar to levels unthinkable just a decade ago.
But it’s more than just scarcity that is driving up team valuations. Franchises are also seeing a measurable growth in lucrative media opportunities that outstrip other available revenue streams. In this environment, a team’s prestige, star power and cultural relevance can be far more important metrics in determining its value than how many tickets it sells.
The Phoenix Suns’ current valuation offers a case study in this new math. In 2019, the franchise generated an estimated $42 million dollars in operating income and was valued at $1.5 billion by Forbes. Over the next three years, the team’s operating income fell to just $15 million — in part due to a massive bump in payroll. But that investment in players paid off. The Suns made multiple playoffs and an NBA Finals appearance — and in 2022 the team was valued at $4 billion. Since then, the NFL’s Denver Broncos — yet another successful team that has invested heavily in its players and facilities — set a record, selling for $4.65 billion in 2022.
As team valuation becomes more important, creating a seamless fan experience becomes essential. Across the sports landscape, owners are spending to create entertainment districts in and around their stadiums and arenas that boast restaurants, bars, retail stores, apartments and hotels. These districts expand the reach, impact and opportunity for the stadiums, which can then be used as venues for other events like concerts, fairs or parties, generating additional revenue. It also gives owners access to valuable consumer data that encompasses an entire entertainment ecosystem of which their team is the centerpiece.
The Mets may have set a precedent by spending big and focusing on franchise value. Other teams appear to be following suit. Looking ahead, that will likely mean attracting the best players while navigating the limits set by league salary caps and other rules. It will also mean building a community around those players that amplifies and reflects back the franchise’s core values, growing its footprint and deepening its relationships with fans. Those relationships — and a team’s potential to draw more customers into its orbit, even fans overseas — will likely continue to lead to higher valuations. Those higher valuations, in turn, will help attract ownership interests with more capital available to spend on salaries and facilities.