Volume 2, Chapter 5
Financial valuation of sports
franchises
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Value of sports franchises
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Value of sports teams in 4 major professional
leagues in US grown average annual rate of 11.7%
1991-2006
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Growth rate NFL>NBA>NHL>MLB
Avg team value NFL>MLB>NBA>NHL, increasing
disparity among leagues
2010 data
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NFL value 1022 M/team, revenue 8.02 B in 2009
MLB value 491 M/team, revenue 6.6 B in 2009
NBA value 329 M/team, revenue 3.8 B in 2009
NHL value 240 M/team, revenue 3.09 B in 2009
Most valuable teams: Dallas Cowboys (1800 M),
Yankees (1770 M), Knicks (655 M), Toronto Maple
Leafs (521 M)
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Value of sports franchises
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Highest team values in European football,
2006
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England: Manchester United 1373 M
Spain: Real Madrid 1012 M
Italy: AC Milan 921 M
Germany: Bayern Munich 769 M
France : Olympique Lyonnais 208 M
Portugal: FC Porto 106 M
All significant increase from 2004
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Internet sources
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US leagues
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http://www.forbes.com/lists/2011/33/baseballvaluations-11_land.html
http://www.forbes.com/lists/2010/30/footballvaluations-10_NFL-Team-Valuations_Rank.html
http://www.forbes.com/lists/2011/32/basketballvaluations-11_land.html
European football and US leagues
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http://www.rodneyfort.com/SportsData/BizFram
e.htm
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Changes in ownership
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From toys/hobbies to franchise operations
Demand and sales prices for franchises
increased in all 4 leagues
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Valuation methods
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Confidential by Forbes
Value attributable to revenues shared within
league
Value attributable to franchise’s market size
Value attributable to franchise’s
stadium/arena
Value attributable to franchise’s brand
management
Mostly intangible, difficult to approximate
without a rigorous methodology
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Valuation: League issues
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Labor situation
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league-developed revenue streams
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Salary constraints  cost certainty
Labor stability
Total revenue league revenue: TV, internet, sponsorship,
licensing…
degree of revenue sharing
Local revenue sharing
league rules regarding ownership and debt
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Limits on amount of debt a franchise can carry
Availability of financial capital: establish leaguewide
credit facilities for debt at below-market prices/terms in
NFL, MLB, NBA
NFL provide low price debt for new facility construction
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Valuation: specific team issues
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Market size most important
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Arena/stadium situation
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New facility
Lease arrangements, may share revenue with public sector that
founded the facility
Other potential revenues around facility, e.g. real estate
Local media opportunity
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Less significant in NFL and NBA because higher degree of league
and local revenue sharing
At/near end of existing local media deal: chance for bigger deal
Formation of regional sports networks
Previous operation efficiency
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Long-term below-market sponsorship/media deals, significant longterm player salary commitment…
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Valuation methodology:
revenue multiples
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Most industries: consider both profitability and
future growth
Sports franchises: typically valued based on
revenue multiples
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Require minimal information
Intentionally disregards cash flow variability (usually
changes in player salary)
Disparity in average revenue multiple across
leagues
Use the multiple as starting point for negotiation
Not based on rigorous financial analysis, especially
on expense side
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Existing team losses, high payroll…
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Major League Baseball Franchise
Valuations, 2013 by Bloomberg
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http://www.bloomberg.com/infographics/201
3-10-23/mlb-team-values.html
Major League Baseball Franchise
Valuations, 2013 by Bloomberg
http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html
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Major League Soccer franchise
values, 2012 by Forbes
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Major League Soccer franchise
values, 2012 by Forbes
http://www.forbes.com/sites/chrissmith/2013/11/20/major-league-soccers-most-valuable-teams/
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