Denver Broncos’ new ownership and the growing interest in buying sports franchises.

The Denver Broncos have been sold to an investment group led by Walmart heir Rob Walton for $4.65 billion, a record price for a US sports franchise. The previous owner, Pat Bowlen, bought the Broncos for $78 million in 1984.

In 1998, the Denver Broncos legend John Elway had a chance to buy 20% of the franchise for $36 million while he was still playing. He did not invest; with the team being sold for $4.65 billion, his 20% would be worth about $930 million.

The Broncos’ sale price more than doubles the previous record sum paid for an NFL franchise. This is the list of the Top 5 franchise sale prices.

-?????????Chelsea (Premier League), $5.3 billion (2022)

-?????????Denver Broncos (NFL), $4.65 billion (2022)

-?????????New York Mets (MLB), $2.4 billion (2020)

-?????????Brooklyn Nets (NBA), $2.35 billion (2019)

-?????????Carolina Panthers (NFL), $2.275 billion (2018)

The Broncos and Chelsea deals accentuate an emerging investment trend in sports teams. And nowadays, are not just billionaires interested in sports franchises; in the last years, the number of investor groups interested in buying clubs has increased.

There are many reasons than explain this tendency. The billionaires are looking to diversify their portfolio and offer another revenue stream, and many team owners don't seek profits but an increase in value. Owning a team can also open the door to other business opportunities because it is?a popular and visible asset that boosts their profile and image.

Amid market uncertainty, sports teams have emerged?as assets that show?consistent growth,?insulated from market conditions.?According to Pitchbook, since 2002, all four major U.S. sports leagues have performed better than the S&P 500, and in some cases by an extensive margin. Here are the leagues’ respective returns over the past 20 years:

-?????????NBA: 1057%

-?????????MLB: 669%

-?????????NFL: 558%

-?????????NHL: 467%

-?????????S&P 500: 458%

According to Forbes, the average U.S. sports franchise valuation is rising annually:?

-?????????NFL increased 14%?year-over-year and had a?$3.5 billion?average value.

-?????????NBA 4%?and?$2.2 billion

-?????????MLB 9%?and has?$2.1 billion?on average.

-?????????NHL 32%?and?$865 million?in value.?

-?????????MLS $500 million average valuations.

Let′s go outside the USA to give a broader context. The English Football Premier League has 7 clubs valued at over $2 billion. The Cricket Indian Premier League′s most valuable franchise, the $1.3 billion Mumbai Indians, is now worth more than six MLB teams, 27 NHL teams and every MLS team. And 7 teams are valued at over 1 billion.

These leagues all have revenue-sharing agreements with their respective teams. Additionally, they and other major sports leagues have already implemented policies that enable institutional investors like multi-billion-dollar private equity firms to acquire minority equity stakes in multiple franchises throughout their leagues.

One of the main reasons for the high sports franchise values is their leagues’ relevance in broadcast deal revenues. These are some examples:

-?????????The NFL's new television 11-year deal?will provide them with a total of $113, which runs through the 2033 season.

-?????????The Premier League’s income from broadcasting deals will give them $13.5 billion over the next three seasons (2022-2025).

-?????????The NBA’s deal is seeking a $75 billion rights package, up from its current $24billion deal, which runs through the 2024-25 season.

-?????????The Cricket IPL expects to get around $6 billion to $7 billion over five years when the current $2.4 billion over five years finish this year.

Why is this happening? For instance, in the USA during 2021, 95 of the Top 100 telecasts on linear have been sports-related, the most-ever on record.?To have a dimension of this, in 2011, only 51 of the Top 100 telecasts were sports-related.

The sports investment tendency is growing, and it seems it has just started. They have a strong combination of top-line revenue growth, brand loyalty and diversification. The billionaires know where to invest their money, and sports franchises are turning into attractive assets to buy.?