The Big Business of Sports

December 16, 2024

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The game is fast-evolving for players in sports – not just for athletes, but the business players that support the ecosystem from team ownership and funding to expanding their reach to the most important stakeholder: the fans. As sports infiltrate cultures of every country, the potential business opportunity is significant.

“The reality is the sports market has an addressable market of just shy of 8 billion people – it touches every corner of world,” says Elis Jones, Goldman Sachs' head of Sports Advisory Investment Banking, on the first episode of “Investing in Sports” (a four part series) on the Goldman Sachs Exchanges podcast.

Jones believes sport is a hugely important pillar to society, and it touches almost everyone in some form or another. This was particularly evident during COVID, when fans weren’t able to watch or participate in sports. And in 2022, nearly 20% of the world’s population watched the World Cup Final.

“I think the spotlight was shone on the industry as a non-cyclical high-revenue generating industry that people wanted more of,” says Jones.

While the industry has historically been a billionaire’s club in terms of who can buy a sports team, what is changing is the diversity of investors finding entry into the sports ecosystem.

Heightened consumer interest, technological advances, and an increasingly diversified media engine have created an expanding sports ecosystem where more investors can find a game that can play to their strength.

How big is the global sports market?

US professional leagues have more restrictions on ownership and distribution of revenues compared to other parts of the world, but the rules are loosening and attracting an array of investors including established private equity (PE) firms, sovereign wealth funds, family offices, and newer sports-dedicated funds, according to Goldman Sachs Investment Banking’s latest report, “Changing the Game: Unlocking New Opportunities in Sports.”

Capital has poured into the sports ecosystem over the last decade, boosting league valuations and generating nearly 430% returns, our Investment Banking team writes.

It’s important to note that the growth of sports is not limited to any one or two continents. For instance, the average cricket team valuation in the Indian Premier League (IPL) has grown from $67 million in 2009 to over $1 billion today – outpacing the growth of NBA and NFL team values.

The overall global sports market value will depend on whom you ask and which portions of the sports ecosystem they include. It can be wide-ranging from $630 billion to $1 trillion and even $3 trillion by some recent reports.

“I think these assets were underappreciated in terms of them being true businesses and were thought of more as a sports franchise,” says Dave Dase, Goldman Sachs' global co-head of Sports Investment Banking on the podcast. He notes that today, many of the owners who have bought in over the last 10 to 15 years see sports franchises as operating businesses, which not only include games and content, but also all the ancillary elements to it.

The rise of sports-adjacent businesses

The sports ecosystem these days is much more than owning a sports team. All the businesses around it, or sports-adjacent businesses, are critical in finding new ways to make money. Beyond game day there are media rights, sports apparel and memorabilia, data analytics, and the booming sports betting segment that can all be potential revenue generators.

Dase believes potential investors should not only think about buying a team but also consider: Would they invest in a stadium alternative? Would they build a city around the stadium or arena? Or if they have more access to fans and data, would they build more direct-to-consumer models?

_{Source: Goldman Sachs Investment Banking}

“The days of just selling tickets and concessions are over; sports are rapidly expanding into 24/7 data management platforms that bring best-in-class customization – helping teams grow and increase the monetization of their fan base across all business verticals,” says Dase.

Not to mention, the technology innovation and disruption is having an enormous impact on how sports is consumed.

New era of sports media rights

Until recently, the ability to multicast a live sports stream was a complicated technological challenge. Major League Baseball Advanced Media were the first to develop and solve the technology.

Now combined with the evolution of content streamers thrown into the mix, consumers for the first time, felt like they can consume what sports content they want, when they want, and in a form that they want to consume it, according to Dase on the second episode of “Investing in Sports” on the Goldman Sachs Exchanges podcast.

“And so those two combination of things made it possible to have these digital platforms that can now stream out to tens of millions of people on a simultaneous basis,” says Dase. According to Goldman Sachs Investment Banking’s analysis, US digital live sports viewership is expected to grow 8.6% CAGR between 2022 and 2027.

This technological disruption has added pressure on legacy media companies – the traditional distributors – where different forms of content and cord cutting have eroded their cable subscribers from 100 million households to about 60 million.

That’s not to say that the leagues are skipping over these media companies, but they are packaging their media rights with traditional and tech streaming companies to give consumers the opportunity to engage with the content however they would like to, which in turn could increase the addressable market – or the number of consumers – they can reach.

The consumer behavior has changed as well – today, fans are watching multiple games across several platforms, and younger generations aren’t even watching the whole game. They prefer to engage with their favorite teams and players through social media clips, highlights, and user-generated-content. Advertisers are well aware of the potential there.

“Brands, advertisers are desperate to find these aggregated audiences, and they're increasingly paying top dollar to do that, which makes the economic system work for the distributors, whether it be traditional or the new streaming platforms, and it certainly makes it for the leagues, the teams and the players,” says Dase.

New opportunities in sports

Focus has also been turning toward opportunities in a historically undervalued part of the sports ecosystem: women’s sports. According to Goldman Sachs Investment Banking, women’s sports are expected to generate more than $1 billion in revenue in 2024.

For instance, the WNBA has seen significant audience growth both on and off the court: An average home game crowd is around 50% higher than in 2019, and the number of teams averaging over 10,000 fans per home game has tripled. Ticket sales ahead of the 2024-25 season were 93% higher than they were in 2023, and media rights value has soared. This watershed moment for women’s sports is not limited to basketball, but also seen in other sports such as soccer as well.

No matter where the opportunity might be in the sports business, Jones reminds investors that sports are community assets – they belong to the people, the fans. It’s important for investors to understand the sport they are investing in and its fans and to be mindful of how quickly they can make a difference.

“People are not necessarily going to be overly happy if a team is underperforming, but there are returns being paid out in dividends to owners,” says Jones. “They want to see their teams perform and you need those people to turn up to the stadium each week.”

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