The Boring Invstr - Your Simple & Digestible Weekly Investing & Finance Newsletter

Few sports teams are publicly traded on stock market exchanges. Last week, the Atlanta Braves split from Liberty Media Group becoming the first publicly traded MLB organization. Many sports organizations are privately owned. Organizations once acquired for thousands of dollars are now drawing multi-billion dollar valuations. While many see massive valuations for the worst sports teams, there are far fewer examples of outperformance for publicly traded teams.

For those traded publicly, many larger holding companies own them. Many of these large holding companies only owe a small percentage of their growth to their sports holdings. This makes quantifying the impact of sports organizations on larger holding companies complex.

Organizations predominantly rely on their fanbases to drive tickets, concessions, and merchandise sales. The sports industry is unlike many others where it is reliant on their fanbase's emotion and passion for their team. In contrast, many publicly traded companies rely on logic. Is the operating margin increasing? Is net profit increasing quarter-over-quarter and year-over-year? Success is not driven by their accolades on the field but by their ability to become more efficient operators.

Despite this, investments in sports have exponentially grown over the past couple of decades. Broadcast media deals as well as valuations continue to break all-time records. Apple recently inked an unprecedented deal with international soccer star, Lionel Messi, by giving him a portion of Apple’s MLS Season Pass. Along with their MLS Season Pass deal, Apple is hoping to tap into the growing fanbase of Formula 1. Starring Brad Pitt, Apple is filming a new F1 movie to increase its streaming business. While most of Apple’s profit and margins come from many of its other products, Apple is hoping to increase its sports footprint.

The same is true for media giant, Liberty Media. Owning both the Atlanta Braves and Formula One, Liberty Media continues to benefit from higher revenues, season fan attendance records, and two growing fanbases. Together, Formula One and the Braves make up approximately 25% of Liberty Media's revenue. Fortunately, both show no signs of slowing fan growth. Formula One continues to add more races in the United States and the Braves hold the best record in baseball.

Popular sports betting platforms such as DraftKings and MGM are also handsomely benefiting from the sports boom. Like many other sports organizations, sports betting platforms saw revenue triple since 2020. Since 2020, DraftKing's revenue growth has grown by 90% (2020), 110% (2021), and 72% (2022). In 2022, BetMGM Sportsbook generated $1.4 billion in revenue, a 71% increase from 2021.

Revenues and valuations will continue to grow for sports franchises over the coming years and decades. Although, the reliability for growth does loom. Will fans' passion and emotions drive stock prices higher? Will the practicality and logic of traditional stock trading affect publicly traded sports organizations? It is also viable to ask how increases in percentages of total revenue in larger holding companies will affect the larger holding companies. From observing the last half-decade, it seems traditional market logic has driven stock prices up. Although, one question remains. How will different market cycles, team rebuilding eras, and decreasing fan viewership and attendance affect sports revenues and profits over a long-term time horizon?

That’s all for this week! I hope you enjoyed this edition! If you have any questions or recommendations feel free to comment down below!

Trey