1 volume 2, chapter 5 financial valuation of sports franchises
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Volume 2, Chapter 5Financial valuation of sports franchises
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Value of sports franchises Value of sports teams in 4 major professional
leagues in US grown average annual rate of 11.7% 1991-2006 Growth rate NFL>NBA>NHL>MLB Avg team value NFL>MLB>NBA>NHL, increasing
disparity among leagues 2010 data
NFL value 1022 M/team, revenue 8.02 B in 2009 MLB value 491 M/team, revenue 6.6 B in 2009 NBA value 329 M/team, revenue 3.8 B in 2009 NHL value 240 M/team, revenue 3.09 B in 2009 Most valuable teams: Dallas Cowboys (1800 M),
Yankees (1770 M), Knicks (655 M), Toronto Maple Leafs (521 M)
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Value of sports franchises
Highest team values in European football, 2006 England: Manchester United 1373 M Spain: Real Madrid 1012 M Italy: AC Milan 921 M Germany: Bayern Munich 769 M France : Olympique Lyonnais 208 M Portugal: FC Porto 106 M All significant increase from 2004
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Internet sources
US leagues http://www.forbes.com/lists/2011/33/baseball-va
luations-11_land.html http://www.forbes.com/lists/2010/30/football-
valuations-10_NFL-Team-Valuations_Rank.html
http://www.forbes.com/lists/2011/32/basketball-valuations-11_land.html
European football and US leagues http://www.rodneyfort.com/SportsData/
BizFrame.htm
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Changes in ownership
From toys/hobbies to franchise operations Demand and sales prices for franchises
increased in all 4 leagues
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Valuation methods Confidential by Forbes Value attributable to revenues shared within
league Value attributable to franchise’s market size Value attributable to franchise’s
stadium/arena Value attributable to franchise’s brand
management Mostly intangible, difficult to approximate
without a rigorous methodology
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Valuation: League issues Labor situation
Salary constraints cost certainty Labor stability
league-developed revenue streams Total revenue league revenue: TV, internet, sponsorship,
licensing… degree of revenue sharing Local revenue sharing
league rules regarding ownership and debt Limits on amount of debt a franchise can carry Availability of financial capital: establish leaguewide
credit facilities for debt at below-market prices/terms in NFL, MLB, NBA
NFL provide low price debt for new facility construction
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Valuation: specific team issues Market size most important
Less significant in NFL and NBA because higher degree of league and local revenue sharing
Arena/stadium situation New facility Lease arrangements, may share revenue with public sector that
founded the facility Other potential revenues around facility, e.g. real estate
Local media opportunity At/near end of existing local media deal: chance for bigger deal Formation of regional sports networks
Previous operation efficiency Long-term below-market sponsorship/media deals, significant long-
term player salary commitment…
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15Valuation methodology:revenue multiples Most industries: consider both profitability and
future growth Sports franchises: typically valued based on
revenue multiples Require minimal information Intentionally disregards cash flow variability (usually
changes in player salary) Disparity in average revenue multiple across
leagues Use the multiple as starting point for negotiation Not based on rigorous financial analysis, especially
on expense side Existing team losses, high payroll…
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Major League Baseball Franchise Valuations, 2013 by Bloomberg
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http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html
Major League Baseball Franchise Valuations, 2013 by Bloomberg
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http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html
Major League Soccer franchise values, 2012 by Forbes
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Major League Soccer franchise values, 2012 by Forbes
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http://www.forbes.com/sites/chrissmith/2013/11/20/major-league-soccers-most-valuable-teams/