A week in America | 09 September 2022

This week Martin looks at the business of sport and how US sports investors are able to make the most of their sporting assets.

Martin Liptrot

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Football is back.

This week sees the NFL season kick off and America’s fascination with sport ramps up a few more notches.

Baseball may be the national game, and Basketball and Ice Hockey appeal to distinct parts of this vast nation, but football is king.

Sport in general is big business.

The clubs, the leagues and the championships generate some of the world’s leading global brands and present huge revenue potential.  After all, the world’s most expensive advertising slots are during Superbowl.

Honestly, despite decades watching TV in the US, I am left relatively unmoved by the games themselves – baseball is too slow, Basketball too repetitive, and Football too much stop/start, but the brands are superb and exquisitely managed.

The clubs are often owned by ambitious entrepreneurs, people who love winning, and their influence is morphing and changing the rules of the game – both literally and figuratively.

In Britain, there is a nervousness about the rapidly increasing presence of global sports franchise owners wielding more and more control and influence over our national game, the other football.

I understand why fans are worried about new owners who tinker with their beloved teams and sports.

When the previous Asian-based owners of Cardiff City FC proposed to change the kit colour of ‘the bluebirds’ to red because they believed it was luckier – Everton, Bristol Rovers, Man City and Sheff Wed fans felt their stomachs turn in sympathy.

There is also something uncomfortable about sovereign wealth funds from despotic nations where fair play, level playing fields and Corinthian values are too often in short supply.

But British football fans seem to reserve most of their ire for US owners of their teams.

In some cases, they have been proven right as clubs have been bled-dry with speculative financing deals and leveraged balance sheets.

But perhaps the Brits could learn a lesson or two from how some US sports teams are run and, for the benefit of our national past-time, see how US investors think about the business of sport.

What US sports owners and their management teams excel at is building their brands through compelling content and engagement strategies.

 As someone with a career in advertising and marketing, I have nothing but admiration for the way many US sports teams operate their business. They are bullish. They know they have a product which they can monetise and merchandise to a variety of audiences.  They know they are operating with a brand in a finite marketplace, after all there are very few new sports teams entering their respective competitions, and the authenticity and heritage the clubs have with communities and legions of fans is of great value when looking to grow and expand to new demographics and markets.

Winning is valuable too. The positive association of being champions helps the brand build equity, for sure. Investors focus on teams with momentum, they may not be winning titles now, but investors are looking for brands which have some resonance to grow across huge geographies and a diverse fan base.

Purists may recoil, but those who are successful in growing sports clubs, competitions, franchises or teams talk in terms of ‘content’, ‘product’ ‘assets’ and ‘platforms’

They recognise the future for sport is closely intertwined with technology, the battle for eyeballs, brand loyalty and sustainability.

US sports investors often own teams across various sports. If you see sport as ‘content’ then you’ll want to be able to provide a product to fans and followers all year round. US sports owners have baseball, football, and basketball teams in their portfolio, often in overlapping geographies, simply to give them 52-week, 365-day content.

Some British football teams recognise this challenge too. They go on spurious pre-season tours to the places where their fans are based or growing, competing for meaningless sponsors trophies and cups not because playing in sweltering humid conditions is good sport, it’s just to fill the content void the close season enforces.

TV is a massive part of the game now. In the US, with different time zones and team loyalties scattered across the nation, the clubs negotiate their own Regional Sports Network (RSN) deals. Depending on where you live and who your cable provider is, you will see different games being played. I live in north Florida but our interest is more closely aligned with New Orleans Saints and Atlanta Falcons than the Miami Dolphins or Tampa Bay Bucs. Some sports teams have taken this one step further, New York’s Knicks and Rangers own their RSN the Madison Square Gardens Channel which is available in cable sports packages well beyond Manhattan where they are based.

Currently, British football TV rights are controlled by the English Premier League and the Football League not the clubs. The way these revenues are distributed is massively in the favour of the bigger clubs, but nothing compared to the money US teams negotiate with broadcasters.

The $2billion valuation of a team like the LA Dodgers with only one World Series win in 35 years was largely based on the value of its RSN rights for Southern California and beyond. When the NY Mets owners sold the Queens-based team earlier this year, they kept hold of the media rights, meaning the new owners are only able to negotiate the new deal when this contract expires.

But sports investors know future media opportunities lie beyond TV rights.  Second screen and alternative broadcast platforms have become omni-present, especially with younger fans, and American sports owners recognise the futility of only allowing the fan to access the team through a TV or cable/satellite provider as entirely outdated and due for change soon.

Sports gambling may be the vehicle for that change. In the US, sports gambling is only licensed in some states and only within that state. Nevada has the most liberal interpretation of that but online sports gambling in California remains outlawed. The federal government recently withdrew its blanket-ban and the states are now working out how to tax and monitor betting companies.

The new owner of Chelsea FC, Todd Boehly, also the owner of the LA Lakers and LA Dodgers, owns Draft Kings an online sports book available in states where it is legal. But, wisely, across the rest of the nation, Draft Kings offers fantasy football leagues with prizes which, through a remarkable lens of shade and light, is considered by regulators to be a game of skill not gambling. This is a cute move. Providing the gaming element without the gambling is a sure-fire way to build engagement with fans and with that comes loyalty, the gateway to monetisation.

And finally, US sports investors understand the importance of owning a stadium as an asset. The clubs own them and can define how they are used every day, playing a role in our communities for more than the 90 minutes of action they may see every fortnight. Beyond sport, Dodgers Stadium in Los Angeles was the largest COVID vaccination clinic in America during the pandemic and serves as a polling station for US elections.

Progressive thinkers in the sports business are working out how all these moving parts work to create a giant eco-system. They are planning how to join the classic stadium experience, the marketing and merchandising opportunities, the brand loyalty engagement, the platforms and technology solutions available, with the premium content they are able to provide to passionate fans.

For those traditionalists who are wary of this business-centric view, I say do not fear too much.

Thankfully. what makes sport so compelling to so many people around the world is the fact it is so unpredictable.

You can invest billions, do everything right in the classical sense, but its 11 against 11 at the end of the day and you still might not win.

Martin Liptrot

Martin Liptrot is a Public Affairs, PR and Marketing consultant working with UK, US and Global clients to try and ‘make good ideas happen’.

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