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Many professional sports franchises are getting more expensive, and it’s narrowing the pool of potential buyers. The average value of an NFL franchise in 2023 was US $5.1 billion, up from $1.2 billion in 2013. If growth continues at that rate, it could mean a potential franchise value of $21.7 billion by 2033. While we’re not predicting that rise, it’s worth keeping in mind that the $5 billion franchises of today seemed unthinkable 10 years ago. The cost of operating an NFL team under traditional structures is becoming too much to manage. But the high return on investment (ROI) potential is attracting new types of investors, with some teams already announcing PE co-investors.
The NFL’s recent rule change to allow private equity (PE) firms to hold up to 10% ownership, with no preferred equity, can be a game changer. Many PE firms are already positioning themselves to invest not just in teams but also in surrounding properties1, such as mixed-use development around stadiums, which can help diversify revenue and provide more stable income streams during economic downturns. For PE, the opportunity goes beyond media rights and game-day sales — it's about creating long-term, resilient value.
Why PE is entering the game
Many PE firms have been building their US-based professional sports portfolios for a few years now. Sports franchises are attractive assets because they have predictable and stable revenue streams, even during recessions. Many media companies are willing to lock in fees and pay increasingly high rates to bring content to their platform that can capture eyeballs and help drive advertising value. This trend isn’t slowing down either. According to Forbes, The NBA recently signed an 11-year $76B deal with Amazon, Disney and NBC Universal, and the NFL signed approximately $110 billion in various media deals spanning 11 years back in 2021. These deals are further complemented by sponsorship dollars, allowing many brands to align with players, teams and events. These revenue streams are also locked into multi-year contracts, further stabilizing revenue for sports teams during otherwise difficult economic times.
And we're already seeing some sports franchises explore new business models to help expand revenue streams outside of media rights, sponsorships, ticket sales and licensing. One way they’re doing this is through venue ownership. In the past, teams negotiated to persuade municipalities to pay for the land and construction of the stadium. Now teams are realizing they can build broader retail, dining and entertainment districts around their venues, and this can help the team drive up the real estate value. The Golden State Warriors were able to do this with the Chase Center, for example. The ownership group privately funded 100% of the arena and has since added apartments, office space, restaurants and retail stores around the stadium. They lease these properties for additional cash flow and retain them as part of a high-value real estate portfolio.
Many teams are realizing they can enhance traditional revenue streams at these new districts through technology upgrades. Smart venues are transforming how people and systems interact by integrating digital technologies to help enhance the fan experience, provide interactive features — and provide real-time data. AI can help improve operations, sensors track everything from fan activity to environmental conditions, and digital twins create a virtual model of the stadium to monitor and improve the overall experience. These innovations offer fans personalized services while enabling stadiums to operate more safely and effectively. Using these technologies can allow teams to quickly capture data from fans, helping increase their ability to deepen both fan relationships and sponsorship efficacy.
The shift from revenue to profitability
PE brings more than monetary benefit to the table. Many PE firms have owned and operated European soccer clubs for years, where they use different strategies than most American sports franchises are accustomed to. In US NFL deals, for example, PE investors wouldn’t have voting power, but they would have common shares — and potential indirect influence. Traditionally, US teams have focused on helping drive revenue and enjoyed large returns in the form of asset growth — with valuations and team goals almost entirely based on revenue multiples. Given the involvement of a large investor class that focuses on this additional lens, we expect PE’s influence to show up in how teams across sports can be incentivized to grow profitability in addition to revenues.
The PE track record abroad
In Europe, many PE firms have acquired majority stakes in clubs, allowing them control over strategic and operational decisions. Fenway Sports Group (FSG) significantly increased Liverpool FC's value and revenues by investing in a new training complex, data analysis and a strong executive team. These investments grew the club's revenue over 100%. Overall, these moves raised its valuation to $5.4 billion since their $478 million purchase in 2010, according to Forbes. CVC Capital Partners transformed Formula One by consolidating its broadcast, sponsorship, and hospitality businesses, restructuring governance, implementing cost controls, and expanding the number of races, resulting in significant revenue growth and a multi-billion sale to Liberty Media.
US dynamics are distinct, however, due to regulatory and league restrictions. For instance, in the NFL, PE firms can own only up to 10% of a team, while other major leagues permit up to 30% ownership. While this limits direct control over team operations, PE firms can still exert substantial influence. Despite these restrictions, we’ve observed that US PE firms can shape strategic outcomes. Collectively, they could hold roughly a quarter of all US sports franchise equity if they increase their buying potential. Private equity firms' collective exits or decisions to sell underperforming sports holdings could significantly impact league economics and team valuations. The NFL has mitigated this risk with a minimum six-year holding period before sales, but, to our knowledge, no other leagues have this stipulation.
When PE firms enter a market, they generally don’t have thoroughly developed valuation strategies, and this can pose a challenge for US teams. Unlike in Europe, where PE firms have typically targeted financially underperforming clubs with clear financial restructuring opportunities, US teams may not present such clear pathways to value creation. Firms should consider adjusting expectations and strategies, accordingly — learning from the European model but recognizing that the constraints in US PE markets may require a more nuanced approach.
The future PE playing field
We expect that private equity investors can have similar success as they take more stakes in US teams. They will likely test new strategies, learn from their exposure to multiple teams, and this will help drive growth in the metrics that are more important to their business model. In other words, we can expect a shifting focus in the industry from valuations (and ownership-driven incentives) based on revenue to those based more on profitability.
So, what does new US PE involvement mean for the sports industry?
There could be significant consequences if your sports organization doesn’t prioritize profitability at the team level. If PE firms acquire substantial stakes across a league and later discover poor financial performance with little effort to improve margins, their exit could be a major blow to team valuations — regardless of whether your team is directly backed by PE. To avoid this scenario, leagues and teams need to act now. Focus on strengthening your financials to help foster stability and long-term growth.
And we do predict growth going forward.
In the long run, private equity’s focus on profitability could also lead to reinvestment, as we have already seen, in key areas like analytics, upgraded facilities and enhanced fan experiences. As these investments pay off, both teams and their fans stand to benefit from a more effective, financially strong — and exciting — sports industry.
1. Belson, Ken. “Expanding the NFL’s Financial Field of Play.” The New York Times. October 13, 2024.
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