Welcome to the Sports Economy

[ASFN Admin]

Hi there! Welcome to the inaugural edition of Yahoo Sports Biz. Glad to have you.

More than ever before, off-field business dynamics are impacting the on-field product across the wild world of sports. We're here to serve as your guide to the evolving sports economy.

In today's edition: Sports emerge as an asset class, Nike's NBA Draft dominance, the World Cup's most expensive team, Fox stock drops, dream job at Augusta, and more.

Plus: Seewhat'strendingontheYahoo Sports Business Hub.


Time to show you the money...


THE RETURN GAME

SPORTS ON THE FINANCIAL FRONTIER​

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(Henry Russell/Yahoo Sports)


The term “asset class” is one with a fascinating power: It reduces the economic output of an expansive ecosystem of millions of employees, customers, and products into a neat compilation of return and volatility figures.

Today, sports are no different. A perpetual parade of rising team valuations and media rights deals has distilled arenas overflowing with passionate fans into a compelling set of numbers capable of raising eyebrows across boardrooms worldwide.

• The Ross-Arctos Sports Franchise Index, a measure of franchise valuation growth for the big four American leagues, has returned 13% annually for the last 60 years.
• Over the last 30 years, the index has delivered annual returns (12.8%) in excess of the broader U.S. equity markets (10.0%). Over the last two decades, it’s nearly on par with private equity.

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Weatherproof returns: While the absolute returns are impressive, more important is the durability of the asset class, even in times of turmoil.

• In the three years spanning 2000 to 2002, RASFI increased in value by nearly 44% with positive returns each year. By comparison, the S&P 500 fell by almost 38% in aggregate.
• In 2008, the S&P 500 fell 37%, while RASFI gained 6.5%.

Why it matters: This remarkable track record has cemented sports’ status as an asset class, not just a passion pursuit or vanity project of the ultra wealthy. That status has attracted demand from a larger horde of ultra-wealthy prospective owners and institutional investors.

All-Pro resume: What is it about sports franchises that makes them such attractive financial assets?

• Scarcity Value: With only 30-32 teams in each major North American league, investment opportunities at the top of the sporting pyramid are limited, and competition for them is stiff. According to Forbes, there are over 3,400 billionaires worldwide. But only a select few will own some of the world’s most prized trophy assets.
• Predictable, Growing Revenue Streams: Scarcity means little without underlying business growth. The major leagues have consistently delivered lucrative and growing streams of revenue that recur with relative predictability over long periods of time, underpinning confidence in the economically durable growth trajectory of teams as businesses.
• Tax Advantages: Sports team owners are able to amortize a significant portion of a team’s acquisition cost, using those paper losses to offset personal income over the course of 15 years to the tune of hundreds of millions of dollars in write-offs.

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(Justin Setterfield/Getty Images)


Great expectations: As the entry prices rise, so too does the importance of unlocking more revenue upside, or else the whole thesis begins to crumble. It's that pressure which is producing the squeeze fans are feeling more acutely everyday, as leagues appear increasingly willing to flirt with the red line where fans won't willingly suffer any further economic extraction.

• Higher ticket prices: Look no further than the unprecedented ticket prices for the 2026 World Cup; FIFA was emboldened to pursue that pricing strategy by North American norms.
• Fragmented viewing experiences: Watching the national NFL package last season required access to CBS, FOX, NBC, ABC, ESPN, NFL Network, Amazon Prime, Netflix, and Peacock.
• Unrelenting commercialization: The Washington Post watched 50 hours of live sports, finding an in-game gambling ad almost every four minutes. It's merely one example, albeit a controversial one, of the commercial vice fans find themselves in.

Bottom line: Sports' track record of 13% annual returns was built on the backs of generations of fans whose passion knew no bounds. The questions that will shape the next 20 years: Do those bounds exist, and where are they?


TOP PICK

THE SWOOSH STRIKES AGAIN​

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(Henry Russell/Yahoo Sports)


When the Wizards selected A.J. Dybantsa with the first pick in Tuesday’s NBA Draft, he became the 12th Nike athlete in the last 20 years to go No. 1 overall — 14th if you include Nike-owned Jordan Brand.

Next gen: The addition of Dybantsa adds young dynamism to an evolving men’s basketball roster at Nike, where the future is in uncertain hands.

• The top of the roster is aging, as LeBron James and Kevin Durant — on the 23rd and 19th iterations of their signature shoes, respectively — near the end of their playing careers.
• Nike added reigning NBA MVP Shai Gilgeous-Alexander as a signature athlete last week, plucking him from Nike-owned Converse to fortify its collection of prime-aged players.
• Ja Morant and Cade Cunningham headline the tier below SGA, but the former’s play has taken a step back, while the latter’s marketability remains a source of skepticism.

Further complicating matters? The presumed face of the next generation, Victor Wembanyama, is an impending sneaker free agent, per Shams Charania. Depending on the Frenchman’s decision, Dybantsa could have size 22 shoes to fill.

Don’t forget the W: While the men’s roster raises question marks, Nike’s trio of signature WNBA players — A’ja Wilson, Sabrina Ionescu, and Caitlin Clark — is formidable. Ionescu’s signature shoe is frequently among the most worn in the NBA, and Clark’s recently revealed Caitlin 1 is arguably the most anticipated in recent memory.

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Caitlin Clark debuts the Caitlin 1. (Andy Lyons/Getty Images)


Dead ball: Despite the company’s dominance in adding the top incoming NBA talents, Nike’s share price is down 68.2% over the last five years.

• In relation to the stock’s weakness, UBS noted in April that basketball, historically an area of strength for the brand, is less relevant among consumers today.
• As Nike tries to reinvigorate the brand’s standing through a “Sport Offense,” its ability to deliver popular signature shoes that offer best-in-class performance and innovation may be more important than ever.

Three stripe counter: The draft’s No. 2 pick, Darryn Peterson, has represented Adidas since he became the first high schooler to sign an NIL deal with the brand. According to Nick DePaula, Peterson’s new long-term agreement with Adidas is among the top-five richest rookie shoe deals in league history.

Looking ahead: Nike reports earnings on Tuesday, June 30. More to come in the July 1 edition of Y! Sports Biz…


MONEY ON THE FIELD

BIG GREEN FOR LES BLEUS​

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(Al Bello/Getty Images)


Through two full rounds of group-stage matches, France’s starting XI against Senegal is the most valuable to take the pitch at this year’s World Cup, totaling $1.04 billion in transfer market value, per data from Transfermarkt.

• Front (L to R): Michael Olise ($171M), Théo Hernandez ($23M), Désiré Doué ($137M), Jules Koundé ($68M), Ousmane Dembélé ($114M), Kylian Mbappé ($205M)
• Back(L to R): Aurelien Tchouamenei ($80M), Adrian Rabiot ($21M), Dayot Upamecano ($80M), Mike Maignan ($23M), William Saliba ($114M)

A little lopsided: The front row alone ($718M) is worth more than almost every other starting lineup in this year’s tournament. The lone exclusions are Spain’s XI against Saudi Arabia ($832M, including $228M for Lamine Yamal) and England’s XIs against both Croatia ($792M) and Ghana ($813M).


JOCK STOCKS

FOX DOWN AMID WORLD CUP BOOM​

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Red line denotes June 12 close of trading before June 15 Roku acquisition announcement. (Yahoo Finance Alphaspace)


On its face, June looks like an outstanding month for Fox. The company’s World Cup broadcasts are attracting record viewership, FIFA’s hydration-break mandate has unlocked significant revenue upside, and Fox just announced the $22 billion acquisition of Roku, a company it views as “beachfront property” in streaming.

Yes, but: Through Tuesday's close, Fox stock is down 24.4% since the June 15 Roku announcement, shedding nearly $4.6 billion in market capitalization as investors loudly voice their concerns about the $8.3 billion in new debt and the equity dilution associated with the deal.

The discovery engine: Having mostly abstained from the streaming wars with deep-pocketed tech companies, Fox has instead targeted the leading connected TV platform in Roku.

• Roku offers immense first-party data and massive reach, with an audience of over 100 million global streaming households and a 44% share of total U.S. hours spent viewing connected TV content.
• The acquisition provides Fox with a valuable discovery platform, which can funnel users to the live sports programming in which Fox invests heavily.

What they’re saying: “It’s going to make it easier for the folks that are on CTV devices all the time to jump in and find Fox’s sports content. That should help increase reach, which will in turn probably increase circulation,” Crakes Media founder and former Fox Sports executive Patrick Crakes shared with JohnWallStreet.

Winning the World Cup: Despite the deal-related noise, the day-to-day sports broadcasting business is enjoying a strong start to this summer’s tournament.

• Through just one leg of the group stage (24 matches), FOX and FS1 logged 20.3 billion total minutes of viewing, exceeding the total for the entirety of 2022’s group stage (18.5 billion minutes in 48 matches).
• According to The Wall Street Journal, Fox was selling 30-second ad spots during the newly created hydration breaks for $200,000 or more during the group phase, rising to $750,000 for USMNT games.
• The incremental revenue from the breaks alone could amount to $250 million, according to a conservative Awful Announcing estimate. Relative to the reported $485 million rights fee paid for this World Cup, a massive bargain, the hydration break haul represents a material coup.

Bottom line: Set against the backdrop of a $22 billion company-changing acquisition, a historic and paradigm-shifting soccer tournament means little — at least in the eyes of the stock market.


INITIATION FEES

EXPANSION'S EXPENSIVE PRICE TAG​

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June 2016: Gary Bettman welcomes Bill Foley to the NHL. (Bruce Bennett/Getty Images)


10 years ago this week, the NHL awarded Las Vegas an expansion franchise, with Bill Foley paying a $500 million expansion fee to bring ice to the desert.

• On Tuesday, Foley announced his intent to enter the NBA’s expansion race, with aspirations of giving the Golden Knights a roommate at T-Mobile Arena.
• Separately, NHL Commissioner Gary Bettman confirmed that the league is exploring expansion in Houston or Austin with the Friedkin family, with the total investment amounting to $3.5 billion between the expansion fee and arena construction.

Yesterday’s price is not today’s price: Foley’s 2016 expansion fee pales in comparison to the Golden Knights’ current valuation ($2.0 billion, per Sportico) and the fees mooted for both NBA and NHL expansion.

• Bidding could reportedly approach the $7 billion to $10 billion range for NBA expansion franchises in Las Vegas and Seattle.
• NHL officials had previously confirmed that a franchise fee would start at $2 billion.

No sticker shock: Expansion fees are intended to compensate the existing owner class for the dilution of revenue that accompanies new franchises. Revenue streams are as robust as ever, the demand for an allocation to one of the economy’s most desirable asset classes is rabid, and the price of entry into these ultra-exclusive clubs is rising fast.


GREEN JACKET, GREEN THUMB

DREAM JOB: APPLY TO AUGUSTA​

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(Jared C. Tilton/Getty Images)


Welcome to the first installment of “Dream Job,” where we explore some of the most fascinating and desirable job opportunities in the sports industry. Along the way, we’ll learn just how diverse the sea of sports opportunities really is.

Each year, millions of people apply for tickets to the Masters, hoping for access to the hallowed grounds of Augusta National. And each year, the vast majority of those people open their inboxes with a faint dash of hope before their hearts sink like an errant shot to the bottom of Rae’s Creek.

Another way in: What if I told you that you could boost your odds of making it to Augusta from a snowball’s chance to 12.5%? All you need is 10 years of experience as a Horticulturist (among other qualifications) to become the club’s Senior Director of Horticulture.

• The position is tasked with providing “optimum tree and ornamental quality standards on the golf course and throughout Augusta National campus.” Given the landscape’s starring role, this position may be overlooked as one of the most important in sports.
• As of today, only eight* people on LinkedIn have clicked apply for the position, posted one month ago. A one-in-eight chance? Those are the best odds most Masters-seeking fans have faced in years.

Play the numbers: Perhaps there’s a hero among you who can deliver the immaculate standards of horticulture that most of us will only see on TV. And what’s a hero without a trusty side kick? Augusta is also looking for an Irrigation Technician.


*One of those eight people was me, but I regret to inform the fine folks at Augusta that my click was for research purposes only: I lack the horticultural expertise to keep the course looking as lush and picturesque as required, and I’m very happy in my current role.


BUCKS' BUCKS

TRADE TRIVIA​

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(Amber Matsumoto/Yahoo Sports)


Giannis Antetokounmpo earned $338 million in contracts during his 13-year tenure with the Bucks, which ended with Monday’s trade to the Heat.

Question: Only two players have ever earned more from a single NBA franchise. Who are they?

Hint: Western Conference.

Answer at the bottom.


CARD OF THE WEEK

TURNING MOMENTS INTO MONEY​

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(Topps)


Topps transformed the lasting image of OG Anunoby’s Game 4 tip-in into a Topps NOW trading card and sold 105,842 copies.

Quick math: While individual cards sold for $11.99, collectors can buy in bulk at lower prices. If you assumed a $10.00 average price, that would mean Fanatics-owned Topps printed (literally) nearly $1.1 million in revenue on one card in mere days.

Just wait… The card’s sales volume was impressive, but the basketball that Anunoby tipped into the basket will make it look modest by comparison when it sells at Sotheby’s next month. Darren Rovell has set his estimate at $3 million.

Congratulations on making it to the bottom of our inaugural edition. Thanks for reading! We'll see you back here on Friday.


Trivia Answer: Stephen Curry ($470 million from the Warriors) and LeBron James ($347 million from the Lakers).

Want more? See what else is trending on the Yahoo Sports Business Hub.


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