Episode Details

In the last year or two, we have seen a wave a stories about sports with mind-boggling numbers, from Al Hilal's attempt to sign Mbappe for $ 1 billion for a one-year contract to the sale of the Washington Commanders, an NFL team, for $ 6 billion. As we all try to explain these numbers with fundamentals, it is worth noting that professional sports franchises have increasingly become trophy assets for billionaires looking for toys. In this session, I build a case for this thesis by first noting the rise in pricing of sports franchises, both in transaction and prices, and then showing that the pricing rise has vastly exceeded any increases in revenues from sports, primarily from broadcasting rights. I also note the change in ownership composition at sports franchises, with wealthy individuals replacing old-time owners, who may have run sports teams as businesses. Viewed as trophy assets, the pricing of sports franchises will continue to deviate from value, with no catalyst for correction. As long as the number of billionaires exceeds the number of desirable sports franchises in the world, this pricing game will continue.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/SportsFranchises.pdf
Blog Post: https://aswathdamodaran.blogspot.com/2023/08/money-in-sports-trophy-asset-effect.html
Valuation of the Washington Commanders: https://pages.stern.nyu.edu/~adamodar/pc/blog/Commanders.xlsx

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