The Owner's Box: Taking a Deeper Dive into the Business Side of Professional Sports

Professional sports are a tremendous part of our lives. In simply rooting for our favorite teams and star-studded athletes, devoted fans always find a sense of gratifying belonging and identification, from both local to global levels, which helps to promote and encourage a powerful yet optimistic and meaningful means of unity across all borders and boundaries.

It is imperative to note that, at the heart of each professional sports team and franchise, lies a unique business model. Each specific organization works relentlessly to ensure that they create, maintain, and preserve a foundation for their team, alongside affiliated team, staff, players, and fans to ensure a sense of uplifting values and compassionate leadership, promoting the well-being of all employees involved. After all, the ultimate goal is to run a successful organization, well above and beyond the performance on the field or court.

?As Tony Dungy once said, “the secret to success is good leadership, and good leadership is all about making the lives of both your teammates and workers better.” This quote exemplifies the focal point of importance when being at the forefront of a professional sports organization: leadership. Owners of professional teams and franchises have been put in the spotlight, now more so than ever, with valuable opportunities to purchase professional teams and work towards making a positive change for the organization, further promoting, and encouraging success for today, tomorrow, and generations to come. ?

?There has been a myriad of recent potential team sales that have been highlighted in the news, which makes it even more important to discuss the key components that are involved when buying a team or franchise. From the beginning steps, all the way to the leadership transition and ultimate takeover of the business, it is a complex, extensive and intricate process where each stage of the process should be handled with care.

?At Vios Advisors, there are two specific niche target populations that we focus on in this realm, including both athletes and entertainers as well as executive business owners. Our wealth management model can also be a resourceful guideline in understanding the business transaction in its entirety and breaking down the complexities that could potentially arise in these specific high caliber situations, alongside high-profile names.

?One specific team sale that has stolen the show in recent weeks has been the Denver Broncos. For nearly a decade, the Broncos have experienced volatile times. Although they were triumphant as Champions during the Super Bowl in 2015, the Broncos have experienced a seven-year losing streak, unable to return to the playoffs for an extensive period. In addition, substantial changes have also occurred both on and off the field, which have added to further internal frustration. Prior to the recent turbulent years, the Broncos experienced almost 50 consecutive years of winning due to the renowned leadership under Pat Bowlen.

?Overall, it is evident to see that the Broncos are yearning for a more positive and optimistic future. Welcome, Rob Walton, as the sixth owner of the franchise. Walton and his family agreed to pay $4.65 billion to take ownership of the franchise, which marks the most expensive price ever paid for a U.S. sports team, more than doubling the $2.275 billion David Tepper paid for the Carolina Panthers in 2018. For further perspective, Chelsea FC, perennial Premier League power and worldwide adored soccer club, sold for $3.1 billion to an American ownership group led by Todd Boehly.

?Although the sale is still yet to be approved by NFL’s finance committee and by a majority of league owners, the sale is expected to be approved. With a new owner, an energetic new coach, and a new star quarterback, the future looks bright for the Broncos. But, is it easier said than done? Amidst the excitement for change and opportunity comes in the fear of the unknown, and how vital is it for the new ownership to adapt to best practice and ideals for business management, culture, and organization, well above the concept of having enough money to run the day-to-day operations.

?It is evident to see that there is a rigorous due diligence process entailed with selecting the right buyer, similarly to how players are selected and drafted to continue their dreams of playing professional sports in their respective sport. Broncos are a high-value team franchise. There is an immense amount of prestige that comes with having access to and owning one of the top 10 franchises in the NFL, and those looking for that kind of reputation of will try to cash their chips to own a top-tier NFL team. According to Forbes, Rob Walton is the 19th richest man in the world and is the richest owner of an NFL team, second richest tin American sports after Steve Ballmer. Money is powerful, but it is imperative to lead with a wholistic perspective in mind when taking on this role, harnessing the profit motive and investor’s faith to promote and encourage a positive culture, a winning record, and a devoted fan base, all for the betterment of the people and the community.

In seeing the recent sale, there are a few essential factors that need to be considered when examining the business side of professional sports, as well as keys to success in landing a professional sports franchise in a unique market. I have been intrigued by the business side of the transaction as I felt as though many of the components that I will touch on below are core differentiators of our own business model, in managing wealth through the “Arc of the Career”, highlighting specific phases and corresponding priorities to assist in navigating unpredictability in athletes and entertainers’ careers, both in regards to earnings and longevity.

Planning and Preparation of Leadership Transition

This is the most complex phase of the leadership transition and ownership takeover. It is an extensive, cumbersome process that involves in-depth planning and analysis to ensure a smooth transition for all involved.

In creating a comprehensive, effective plan, the new owner can efficiently work on reshaping, consolidating, and refining the business to the best of their abilities.

With professional sports, owners also surrender a substantial amount of control to their players, as the team’s success is ultimately the success of the organization. In learning and understanding this dynamic, creating a culture that promotes inclusion and positivity leads to increased productivity and motivation.

?Multi-Generational Family and Legacy Planning

Our business, similar to Rob Walton’s values, is a family office. It is a special component of our business, which has helped us succeed in building trust, maintaining meaningful relationships, and managing wealth from generation to generation.

Finding the right financial advisor, alongside a holistic and human approach to leadership to assist in preserving your legacy for future generations, is a core component to being a companion, considering both financial and non-financial assets alike.

Wealth is Not Knowledge – Importance of Education and Financial Literacy ?

The power of wealth does not translate into immediate knowledge of the key elements needed to understand owning a business.

The ability to understand the pros and cons of financial decisions, as well as focusing on providing resources to support and educate all affiliated individuals is a vital component to success when leading a business.

Often, the only way leaders can see a net gain in the sports world is by selling the team a few years down the road. In addition, people who are brilliant in one business often get into the sports world and have a more challenging time thinking through the focal issues surrounding the team. It is imperative to stay humble, stay educated and realize that, even mega-rich owners with money to burn might feel some losses.

Forward Looking: Being Proactive rather than Reactive

The ability to inject life into the organization, rather than problems, is essential to success.

When business owners are proactive, they are ultimately in better control, and express increased levels of productivity and motivation to lead an organization for the betterment of the team and the organization.

Assisting Players through “Arc of the Career” Model

In managing wealth for professional athletes through our “Arc of the Career” Model, our proprietary process seeks to maximize compensation, endorsement income and other wealth before, during and after the peak earnings of the athletes.

In planning through the “Arc of the Career”, we are focusing in on core components and priorities of each specific phase of our model, from the education and introductory phase, all the way to the post-career transition. The model highlights the importance of longevity and how, even amidst unpredictability stemming from timeline of career and volatility based upon unforeseen circumstances.

Ultimately, the professional sports business is unlike any other business today, particularly for team owners. From revenue recognition and expenses, all the way to deciphering the appropriate player contracts and navigating additional challenges, team owners are tasked with the difficult responsibility of leading the organization and revamping the surrounding community by promoting economic growth, increasing job opportunities, and boosting overall civic pride and moral for community involvement. Sports have always had the tremendous power of unifying individuals across all diverse backgrounds and have also provided devoted fans with a special sense of belonging into a community in an ever changing and dynamic world. The business side of professional sports is both imperative and intriguing, and its core components develop into the heartbeat of both the team and the organization.

Under Rob Walton’s leadership, this recent business transaction signifies an important step to an exciting new chapter in Broncos history. Along with the excitement, comes expectations, and we look forward to observing the organization in their efforts to earn both the confidence and support of the NFL as they take the next steps towards finalizing the deal, which we are hopeful will be an example of success for future teams to follow as we move forward. ?