So
you’re an investor and you love sports. Can you feed your passion by getting
financially involved with a sporting entity and still maintain the fiscal
discipline that made you a good investor in the first place? The answer is yes,
and the key is to have a clear idea of what to look for and what to expect.
If
you love sport, some of your return will be non-monetary. You’re going to enjoy
feeling a part of a team, or moving your favorite sport forward, or seeing your
investment on television, or interacting with elite athletes, or rewarding your
hometown’s loyal fans. Those are worth a lot, but you’d still like to recover
your investment, too.
I’m
a sports business guy, not an investment guy, but I’ve been on the inside of a
lot of teams and media outlets and seen what worked and what didn’t. If you’re
an experienced investor, you know how to assess rate of return and the
intricacies of the finance world. The sports business is different from every
other industry, however, and being a sports fan doesn’t necessarily equate to
mastery of the sport management trade. Here then, are some insider insights
into what to look for.
Let’s
start high profile. If you buy into a major league team, you’re looking to win
and you’ll pay for it. Expect cash calls for the purpose of bettering the team
on the field, especially in non-salary-cap sports like Major League Baseball
and European football (soccer). You may make some money during your ownership
experience, but the monetary return most likely comes when you sell. NASCAR has
historically been an exception, with team sales yielding little value, though
that may change with proposed new ownership rules.
Minor
league sports represent a low-margin business. You’ve got to truly love the
game, but also realistically assess how much that love means to you and how
much you can afford to lose feeding it. At the lower levels in the U.S.,
franchises have historically moved and folded frequently. The right situation
can still be a fun and profitable investment, but you have to approach it
realistically.
Whether
you buy a big or small team, quick cash probably isn’t what you should expect.
You
don’t have to buy into a pro team to get into sports, of course. Marketing
agencies, television/media projects, and a host of ventures aimed at those who
play, attend, and work at sports have the potential to produce value. In fact,
many feel a sports background is ideal preparation for becoming an
entrepreneur. For what should you look at in the wider sports world?
Connections : If the venture
requires an entrée into the world of big-time sports to work, do the organizers
have them? If they just have a good idea but not the ability to reach busy
decision-makers, this might not be the place to sink your money.
The Smell Test : Even if you’re not an
experienced sports businessperson, your sense of sport from the fan’s
perspective still counts for something. Does the idea sound cool? Is it
something you’d like to see happen? Is it something you’d be passionate about?
Because some of your return comes from your enjoyment of the project, passion
for the concept counts for something.
Content : Does the venture have
the ability to tap into the huge content engine that is sport? We’ve all read
about some of the huge TV deals teams and leagues have signed recently. In a
fragmented media world, sports retains the ability to deliver the eyeballs of
desirable demographic groups. Does the venture have a television and/or radio
presence? Can it effectively tap into the digital content space?
Growth Potential : Sports is a saturated
market, but there are still profitable niches to be found. Digital technology
has pushed the envelope in sport as it has in every other industry. As the
world shrinks, international sports initiatives become more viable. Finding
untapped markets or disrupting current ones has never been easier (not that
it’s easy, by any means).
You
may have a passion to grow your favorite sport and see its popularity increase,
be it cricket, rugby (union or league), pickleball, jai alai, sumo, or whatever.
Is there a venture that furthers that goal while also potentially turning a
profit?
Value You Can Add : Can your background
or expertise make the venture more viable? It’s important to realize what you
don’t know, of course. You shouldn’t take over the draft room or coach the
defense just because you bought the team, But if your, say, finance or
technical background can help the endeavor grow, that might make it even more
enjoyable to be a part of (while also reducing risk). The likes of Mark Cuban,
Ted Leonsis, and Bill Veeck brought more than a checkbook to their franchises.
Any
investment carries monetary risk (I think I’m supposed to say that somewhere
here in case you make your investment decisions based on emails retrieved from
your spam folder). That’s true in sports as anywhere else. Luckily, sports also
provides a psychic satisfaction that’s hard to reproduce elsewhere. It’s why
those of us who have made it our careers invest time, money, and passion into
it. At some level or other, we’re all invested - hopefully this article helped
you decide which kind of investment might work for you.
Rush Olson has spent two
decades directing creative efforts for sports teams and broadcasters. He currently
creates ad campaigns and related creative projects for sports entities through
his companies, FourNine Productions and Rush Olson Creative & Sports. If
you’d like to further discuss points raised in this post, email him any time at
rush@rusholson.com.
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