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Home » US sports boom presents a unique opportunity for European investors without many of the risks of the Old Continent
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US sports boom presents a unique opportunity for European investors without many of the risks of the Old Continent

Paul E.By Paul E.October 29, 2024No Comments5 Mins Read
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In an age of technological disruption, the value of live experiences has increased exponentially, and sports remains a cornerstone of entertainment and human connection.

As US and Middle Eastern investors continue to pour money into European sports, the time has come for European capital to explore lucrative opportunities in the burgeoning US sports industry.

Here’s why investing across the Atlantic could bring a much-needed transformation to European portfolios.

Stability and predictability of US sports franchises

In recent years, investors from the United States and the Middle East have been actively investing in European sport, taking advantage of the rich traditions and passionate fan bases of clubs across the continent. High-profile acquisitions such as Abu Dhabi United Group’s takeover of Manchester City and Qatar Sports Investments’ takeover of Paris Saint-Germain exemplify this trend. Prominent US investments include Fenway Sports Group’s ownership of Liverpool FC and Clear Lake Capital’s majority stake in Chelsea FC.

In times of economic uncertainty, investors seek stability and predictability, qualities inherent in U.S. sports franchises. The NFL, NBA, MLB, NHL, and MLS are more than just sports leagues; they are billion-dollar industries with long histories and passionate fan bases.

The relative scarcity of teams in major U.S. leagues creates a regional monopoly effect, increases valuations, and ensures consistent demand for team-related products and experiences. This scarcity, combined with fans’ emotional attachment to their teams, ensures a steady source of revenue even in economic downturns. For example, in the NFL, which has its own antitrust exemption, team valuations have skyrocketed, with the Washington Commanders being sold last year for a record $6.05 billion.

Sports franchises in the United States benefit from multiple sources of revenue, including ticket sales, broadcast rights, sponsorships, and merchandise. In particular, the NFL and NBA have the world’s largest sports media agreement, with the NFL generating more than $12 billion in annual revenue through exclusive broadcast deals. The NBA has expanded its global reach by having teams play preseason games in markets such as Abu Dhabi, attracting viewers and sponsors around the world.

Structural advantages of US leagues

Investing in sports is not without risk. Volatile team performance, potential scandals, and financial turmoil can affect your bottom line. That’s especially true for European soccer. The financial difficulties faced by some elite teams during the pandemic highlight the vulnerability of sports investments to external shocks. Additionally, the high salaries of star players and the costs associated with maintaining a competitive team can strain resources.

The structural advantages of U.S. sports leagues greatly reduce these risks. For example, the NFL’s salary cap ensures economic equality among teams, while the league’s collective bargaining agreement provides stability and predictability in labor relations.

The perfect storm is brewing in Major League Soccer (MLS), making it an ideal time to invest. MLS has robust salary and debt caps that ensure disciplined cost management, and no promotion/relegation risk, decoupling sporting performance from financial performance. Unlike real estate or stocks, major league sports have proven resilient during market downturns. Soccer is also the fastest growing sport in the United States, with a young, wealthy, and diverse fan base. Its popularity will likely increase significantly during the 2026 World Cup.

With only 30 teams allocated across the United States and potentially only two slots remaining, scarcity drives long-term value. Increased investment from private equity and sovereign wealth funds opens up multiple exit opportunities for legacy owners. Additionally, investors can benefit from networking with an elite group of ultra-high-net-worth team owners from a variety of successful business backgrounds, which is also a big draw.

Currently, many teams in MLS are losing money, creating liquidity constraints. Some owners are no longer willing to handle these losses themselves, and it is now an excellent entry point for new investors.

Why European investors should consider US sports

US sports franchises offer European investors an opportunity to diversify their portfolios and take advantage of the immense growth potential of basketball and soccer, especially where valuations are skyrocketing.

U.S. sports leagues are also at the forefront of integrating technology into the fan experience, from advanced analytics to virtual reality, providing additional revenue streams for investors with technology and media expertise. Masu.

European investors can foster strategic partnerships between U.S. and European sports organizations, create new revenue opportunities and grow global fan bases. The regulatory environment is evolving, with all five major leagues relaxing ownership rules to enable private equity and international investment, and Europe’s This represents a timely opportunity for investors to enter the market.

The time to act is now. With the global sports industry on the brink of unprecedented growth and innovation, European investors are looking to maximize the stability, predictability, and immense growth potential offered by U.S. sports franchises. We must seize the opportunity to make the most of it. This strategic move will secure significant returns and ensure European investors are at the forefront of the next wave of change in sport.

More must-read commentary published by Fortune Magazine:

The opinions expressed in Fortune.com commentary articles are solely those of the author and do not necessarily reflect the opinions or beliefs of Fortune.



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