Sports Investment to Buck Economic Headwinds
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Sports investment could be set to buck economic headwinds, attorneys say, as minority stakes, emerging leagues and new media deals diversify opportunities. Fittingly, as the lines separating sports and entertainment become increasingly blurred, Los Angeles could be set to be a major beneficiary of the trend.
“Folks transacting in minority stakes and professional sports franchises, that, to me, is really heating up right now,” said Eric Perlmutter-Gumbiner, a partner in Greenberg Glusker Fields Claman & Machtinger LLP’s Corporate, Finance & Securities Group.
Investors are in part driven by the historical performance of sports team assets – above market for the most part and, in some cases, “truly mind boggling,” according to Perlmutter-Gumbiner.
Fewer rules governing investments also helps. Non-traditional sports leagues have less of the rules surrounding traditional leagues, and established leagues have been loosening their requirements; for example, in 2024, the National Football League approved rules allowing a team to sell up to a 10% stake to multiple private equity funds.
“In the United States, until three or four years ago, institutional investment was not permitted. Now, with the NFL, it’s permitted kind of across the board, in the major men’s and women’s U.S. professional leagues,” said Eric H. Geffner, a partner in Sidley Austin LLP’s Entertainment, Sports and Media practice.
Several major investment firms have already been approved to buy stakes, according to a 2024 report issued by S&P Global.
But it’s not just private equity firms, or even high-networth individuals, driving momentum.
“I’ve seen the ability to get into professional, Big Four professional sports teams for $250,000 in cash and even less in terms of these syndicated investments,” Perlmutter-Gumbiner said.
Disadvantages of minority stake investments, compared to assets like shares, include a lack of liquidity and the inability to make decisions about the direction of the team. But Perlmutter-Gumbiner said this was rarely of concern to investors he dealt with.
Given their historical performance among the top two performing assets in the past 20-30 years, sports investments could even be considered a safe harbor by investors, Geffner said.
“There’s a ton of interest and now, particularly, I think, given the political climate, it’s being viewed as an investment on the safe side of things, in terms of return and long-term hold,” he said.
Despite the headline changes to the NFL’s investment rules, it’s not just traditional leagues grabbing investors’ attention.
Geffner said that non-traditional leagues or formats could be thought of as emerging sports like pickleball and rugby and complementary formats, like World Sevens Football and three-on-three basketball.
While investor interest in the former had “leveled off” recently, he said they still have some way to run.
“I think we talk about sort of being in the early innings with this stuff still, but maybe getting to, like, the third or fourth inning” in five to 10 years, Geffner said. He added, “I think they do show that there’s an interest in sport, beyond the kind of traditional sports, at least, that have gotten the most kind of presence on our TV screens and streaming devices.”
Complementary sports were beginning to “create different sorts of opportunities” for players in terms of compensation, and for traditional sports to expand their exposure “beyond their home territories and even their home countries, to kind of get some international exposure and development of the brand on an international scale,” Geffner added.
Geffner and Perlmutter-Gumbiner both said that one of the biggest areas primed for further growth was broadcast deals and shoulder programming – complementary content paired with larger, more visible events.
That’s an area that Ethan Cohan, a partner with Del Shaw Moonves Tanaka Finkelstein Lezcano Bobb & Dang, is familiar with. He’s represented leagues, production companies and individual talent in the sports programming space.
“I certainly think that there’s unlimited real estate for sports to continue and to continue to grow and continue to be one of the most, if not the most, popular genres on television,” Cohan said.
He cited the success of documentary series such as Drive to Survive, which covers the lives of Formula One stars, and Full Swing, covering golf professionals, as examples.
“The shoulder programming, I think, has unbelievable room, because sports figures, regardless of what the sport is, are people that we watch, but we don’t really know them. And so getting to know them at a different level and getting to understand the sport at a different level and getting that insider’s view is something that I think everybody wants,” Cohan said.
The rise of new media platforms and the resulting blurring of lines between athlete and content creator had turned sports programming on its head, he added.
“If you look at … amateur sports of any type, you could go to YouTube and you could find people setting up boxing rings in their backyard and broadcasting that on YouTube. You can find people, you know, doing skateboard competitions and broadcasting that on YouTube,” Cohan said.
“I think YouTube is probably the biggest incubator. But what’s happening now is people are putting real money, real resources and real production value into that programming. And a lot of the time it’ll stay on YouTube … it goes from YouTube to Roku to Tubi, and then maybe it goes from Roku or Tubi to Netflix and Amazon and Apple and NBC and Fox. At times the progression from YouTube to broadcast is even quicker, as many streamers and networks are ordering or licensing series based on formats that originated on YouTube.”
For example, said Cohan, “Pro Shop in partnership with the PGA tour recognized how much golf content was going on YouTube, how many people there were that were either filming golf tricks or filming their own golf tournaments or filming things about playing golf, and they created something called the Creator Classic, which is on YouTube. It airs on YouTube as a tournament that’s live.”
What the creators “realized is that we can aggregate all these folks who are making all this separate content, we put them all together and let’s just do a tournament,” he said. “What’s the platform that people are watching them on? They’re watching them on YouTube. So, what better platform to actually have the tournament live on than YouTube?”
Apart from this trend, he predicted that a key space to watch in the year ahead was the race to live programming by streaming platforms and the competition they would face from traditional broadcasters.
Could Los Angeles be well positioned to benefit from the convergence of sports and entertainment, given its market size and role as a media hub?
“There’s a huge base of potential future athletes, a huge base of investors. And obviously, the entertainment industry is here,” Geffner said. “I think all of those things make L.A. especially important in terms of the continued growth and development of all this.”
The takeaway? Watch this space.
“Billie Jean King got a star on the Hollywood Walk of Fame, and she was the first [female] athlete to get a star on the Hollywood Walk of Fame. When she was giving her speech, she was talking about how amazing, appreciative and how wonderful this was. But she was like, ‘It’s really crazy though that no athlete has ever gotten one – that people are really starting to look at sports as entertainment and athletes as entertainers.’” said Geffner.
“I thought that was interesting, and it kind of shows you that it’s all kind of happening in real time.”
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