Every Tuesday afternoon we publish a collection of topics and give our expert opinion about the Equity Markets.

The biggest day on the American sporting calendar was yesterday when the Eagles upset the Chiefs to win Super Bowl LIX. The event highlighted the landscape of elite sports and how it is undergoing a transformative shift, driven by substantial institutional investments and strategic moves by streaming giants. ABSI this week analyses this evolution that is presenting a compelling investment opportunity, underpinned by favorable macroeconomic trends and landmark deals.

Historically, ownership of sports teams and leagues was the domain of wealthy individuals and families. Today, institutional investors, including private equity firms and sovereign wealth funds, are increasingly recognising the lucrative potential of the sports sector. The resilience of sports franchises, characterised by loyal fan bases and consistent revenue streams from media rights, sponsorships, and merchandise, makes them attractive assets.

In 2018, institutional investments in the top five European football leagues totaled US$67 million. By 2023, this figure had surged to US$4.9 billion, reflecting a growing recognition of the sector's investability. This trend is expected to continue as growing pools of private equity seek out alternative investments that can provide defensive and uncorrelated returns. 

A significant macroeconomic driver for surging elite sport valuations is the aggressive acquisition of live sports rights by streaming platforms. In 2024, streaming services invested over $10 billion in sports rights, a substantial increase from $2.8 billion five years prior. This has resulted in the estimated value of global sport media rights surpassing US$60 billion for the first time.

Source: Sport Business

This surge from streamers is fueled by the need to attract and retain subscribers in a competitive market. Live sports offer unique, real-time content that reduces subscriber churn and enhances viewer engagement. Platforms like Amazon Prime Video and Netflix have made significant inroads by securing rights to major sports events, recognising the value of sports in driving subscriptions and advertising revenue.

Major Deals in 2024

The year 2024 witnessed several landmark deals that underscore the growing convergence of sports and institutional capital:

• Netflix's NFL Acquisition: Netflix secured a three-year deal for the global broadcast rights to at least one live National Football League game on Christmas Day, paying US$150 million for two exclusive matchups in 2024.
  
  
• Arctos Partners' Expansion: Arctos Partners, a private equity firm founded in 2019, announced a new US$4.1 billion fund for sports investments in April 2024, bringing its total sports-related assets under management to around US$7 billion. The firm has acquired more than 20 stakes in major sports teams and related businesses, including a minority stake in French soccer champions Paris Saint-Germain.
  
  
• Disney's Streaming Strategy: Disney reported significant success in its streaming services, particularly Disney+ and Hulu, which achieved a US$293 million profit in the last quarter of 2024. The company plans to centralise its streaming offerings within Disney+, integrating sports, news, movies, and TV shows, and launching a new ESPN direct-to-consumer service.
  
• Fox Record Super Bowl Commercial Sale: The Super Bowl is known for its commercials as much as the football. This year’s SuperBowl was broadcasted by Fox and it was reported that they were able to sell 30-second commercials for a record US$8 million.

Source: Arctos

Investors are increasingly allocating capital to elite sports due to its unique combination of financial resilience, pricing power, and the ability to absorb large-scale investments. Unlike traditional asset classes, sports franchises exhibit a low correlation with broader financial markets, offering diversification benefits during economic downturns. Pricing power is another compelling factor—teams and leagues can consistently raise ticket prices, media rights fees, and sponsorship rates due to the unwavering demand from fans and advertisers. 

Finally, sports investments provide a rare opportunity to deploy substantial capital efficiently, as franchise valuations continue to rise, often outpacing inflation. The long-term nature of media rights contracts and collective bargaining agreements also ensures revenue stability, making elite sports an attractive asset class for institutional investors seeking both growth and downside protection.

The infusion of institutional capital into elite sports, coupled with strategic investments by streaming platforms, is reshaping the sports industry. These developments present compelling opportunities for investors seeking to capitalise on the enduring appeal and economic resilience of sports franchises. As the lines between traditional sports ownership and institutional investment continue to blur, the sports sector stands poised for sustained growth and innovation.

Introducing BPC Wealth Management

BPC Wealth Management is dedicated to shaping resilient investment portfolios, empowering you to achieve and sustain your financial aspirations. While the foundation of your portfolio focuses on long-term investments, through BPC, clients will be offered opportunities in equities trading and equity capital markets. This aspect is highly customised, allowing asset flexibility. Discover how our proactive and client-focused approach can help you achieve your financial aspirations by booking your discovery call with James Whelan. 

We offer value-rich content to our BPC community of subscribers. If you're interested in the stock market, you will enjoy our exclusive mailing lists focused on all aspects of the market.

To receive our exclusive E-Newsletter, subscribe to 'As Barclay Sees It' now.