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There used to be a time (OK, the 20th century) when the champions of commerce also owned the local sports champs. Chewing-gum magnate William Wrigley Jr. and his family ruled the Chicago Cubs for decades. In St. Louis, August Anheuser “Gussie” Busch Jr., who built the Anheuser-Busch Companies into the largest brewery in the world by 1957, oversaw the baseball Cardinals.
But those days have gone the way of the hit and run in baseball – distant memories in a landscape of sports franchises owned by families, corporations or billionaires who left the corporate world for the wide world of sports.
Ubiquiti Inc. UI, +0.02% Chief Executive Robert Pera, the majority owner of the Memphis Grizzlies, proved to be the exception until late last year, when Qualtrics International Inc. XM Executive Chairman Ryan Smith purchased the Utah Jazz. In 2019, Joe Tsai, Alibaba Group Holding Ltd.’s BABA, -3.71% co-founder and executive vice chairman, gobbled up the remaining 51% controlling interest of the Brooklyn Nets and its arena, Barclays Center, he didn’t own for $2.35 billion.
Before Tsai’s deal for the Nets, the team sales record came last year after hedge fund manager David Tepper acquired the NFL’s Carolina Panthers for $2.3 billion. Tilman Fertitta, owner of restaurant chain Landry’s Ltd. Inc., which is privately held, paid $2.2 billion to purchase the NBA’s Houston Rockets in 2017.
David Glass, former CEO at Walmart Inc. WMT, +1.51%, sold the Kansas City Royals for about $1 billion to Cleveland Indians’ minority owner John Sherman in November 2019 after buying the team for $96 million in 2000. Glass passed away in January 2020.
The eye-popping deals reveal the ten-figure appeal of pro sports franchises to billionaires, and why we might see more Peras in the NFL, NBA, MLB, and NHL as the value of franchises skyrocket.
“Without question, sports has never been more of a global marketplace than it is today,” Patrick Rishe director of the Sports Business Program at Washington University in St. Louis, told MarketWatch. “Because of technology and the proliferation of social media, you don’t need to have a physical presence full-time on foreign soil to capitalize on global revenue-generating opportunities.”
Pera spotted the potential years ago, especially as leagues looked to expand into China, India, Europe, and South America. In a 2013 interview with this reporter, he pointed to revenue from TV rights, merchandise, and marketing deals.
Tsai and Glass made their fortunes before plunging into the sports world, while Smith and Pera are running a publicly traded company at the same time. Call them the rare team owner/CEO.
But that could change as sports leagues expand abroad, leading to more unique arrangements like Pera oversees, say Rishe and others.
“There may be a continuation of tech-oriented CEOs entering the team ownership space,” David Carter, executive director of USC’s Sports Business Institute, told MarketWatch. “It will provide them an additional outlet to build notoriety for their core business, whether this is with other businesses or consumers.”
There is a downside, Carter cautions. Substantial involvement in team ownership adds a significant level of public scrutiny to the CEO of a public company. Some boards of directors and shareholders may “wonder if [the CEO is] capable of leading an organization and not distracted by their team.”
Former Microsoft Corp. MSFT, -0.58% CEO Steve Ballmer has left the basketball decisions to coach/president of basketball operations Doc Rivers after plunking down $2 billion for the Los Angeles Clippers in 2014, though he remains a voluble presence courtside at games. The same went for his buddy, the late Microsoft co-founder Paul Allen, a super fan who adopted a hands-off approach after he spent a combined $264 million to acquire the Seattle Seahawks and Portland Trail Blazers in 1997 and 1988, respectively. Today, the two teams could fetch about $4 billion, according to sports-management experts.
A quick sports ownership history lesson
The transformation of sports ownership in North American has been largely tied to pure economics and league rules.
Owners in the 20th century “saw themselves as stewards of a public trust. And because costs were contained by reserve clauses which were common in all athlete contracts, making a profit was certainly possible if not likely,” Washington University’s Rishe says.
Free agency changed all that, sending player salaries into the stratosphere and eating into costs. The dynastic Oakland A’s of the early 1970s were ruled by Charles Finley, a successful life insurance salesman from Chicago who had a keen eye for baseball talent but a parsimonious disposition that ruined the team.
As Finley and Wrigley were forced out, corporate owners swooped in – especially MLB. The NFL proved an exception because the league evenly divided TV profits among its franchises in a true act of socialism. The NFL currently hauls in $5 billion annually from its TV contracts.
The financial dynamic changed dramatically with the emergence of lucrative national media deals, cash-producing news sports palaces that teams treated as ATMs, cost containment in the form of salary caps and luxury taxes, greater revenue sharing in most leagues, and real-estate developments tied to stadium deals.
It became “much easier to make a profit from running a pro sports team,” Rishe said, which attracted billionaires who have made their money elsewhere. That has led to a series of record-setting acquisitions the past decade.
Sports ownership usually falls into two categories: family-run businesses and corporations, says Scott Minto, director of the sports MBA program at San Diego State University.
The NFL prohibits corporate ownership but allows for a CEO of a public company to own a team. The other leagues don’t have such restrictions, and MLB in particular gladly invited corporate ownership, which peaked in the 1980s and ‘90s — much to the chagrin of fans of the New York Yankees (then-CBS VIAC, +10.34% ), Los Angeles Dodgers (Fox), Anaheim Angels (Walt Disney Co. DIS, +0.21% ), and Cubs (Tribune Publishing Co. TPCO, +0.06% ), all of whom saw their teams struggle.
Today, only the Atlanta Braves (Liberty Media Corp. LSXMA, -0.04% ) and Toronto Blue Jays (Rogers Communications Inc. RCI, +1.29% ) are owned by conglomerates in baseball. Corporate entities own the New York Knicks and New York Rangers (Cablevision Systems) and Philadelphia Flyers (Comcast Spectacor) in other leagues.
The NFL is typically ruled by families such as the Rooneys (Pittsburgh Steelers) and Jones (Dallas Cowboys), while the NBA seems to be going the way of tech executives and hedge funds. MLB is a mix of families, corporations, and large ownership groups led by a “control person,” who is usually the team’s single-largest investor.
Granted, there have been old-school throwbacks over the years. Ted Turner was CEO of Turner Broadcasting System Inc. when he owned the Atlanta Braves, and the Montreal Expos were owned by Seagram Company Ltd. co-chairman Charles Bronfman in the 1970s and ‘80s. Cleveland Cavaliers owner Dan Gilbert served time as CEO of Quicken Loans when it was owned by Intuit Inc. INTU, -0.81%.
But the trend today is clearly toward highly affluent individuals like tech billionaires and hedge funds as prices for sports franchises skyrocket, says Jonathan Mariner, who was chief financial officer for Wayne Huizenga when the latter owned the then-Florida Marlins in the 1990s. Huizenga, who also owned the Miami Dolphins and NHL Florida Panthers at the same time, simultaneously served as CEO and chairman at Blockbuster Video.
The scenarios of the Warriors, not to mention baseball’s Royals, is “truly a unique scenario for various reasons which is not likely to be replicated anytime soon, and makes one wonder if purchasing a team today has even a remote shot of seeing the same scale of ROI as franchises purchased in the last 10 to 15 years,” Rishe said.
