The Privatization of Sports

Image courtesy of Fenway Sports Group (FSG) and Live Nation, representing the MGM Music Hall at Fenway, next to Fenway Park, home of the Boston Red Sox (MLB).  
Image courtesy of Fenway Sports Group (FSG) and Live Nation, representing the MGM Music Hall at Fenway, next to Fenway Park, home of the Boston Red Sox (MLB).  

At first glance, one might be thinking, but sports are already private endeavors.  Furthermore, privatization normally means moving a business or industry from being nationalized, government, or publicly controlled to something else with fewer regulations.  What is happening in sports is a phenomenon not seen before.  Sports have always been private entities, but they are beginning to act more like private non-sports companies looking for investment opportunities to add more revenue.  Not a bad idea considering how 2020-2021 wreaked havoc in terms of a lack of in-person venue revenue.  Sports entities are simultaneously looking to add labor and union principles to allow for consistent revenue opportunities by sharing or guaranteeing revenue streams.

In college sports, many universities and their athletic departments are public schools and entities subject to further federal and state regulations as well as private institutions where they receive federal grants.  However, the push of college athletics into NIL and NFT opportunities will only exasperate the growth of college sports beyond traditional education.  The reduction of minor league baseball teams and cutting of the MLB Draft rounds by half may also lead to more baseball players who might be drafted to play college baseball (meaning more talent in the college ranks) for additional broadcast, NIL, and NFT revenue streams.   

Some sports teams are even allowing cryptocurrency in exchange for tickets to attend games.  Other executives are leaving executive level jobs at sports teams and leagues for roles in private capital through investment opportunities and vehicles.  It is also well known that 2020 and 2021 have been the years of SPACs, special purpose acquisition companies, which might as well be renamed to sports purpose acquisition company.  Private investment and technology have invaded the sports space, bringing professional sports teams away from mostly privately-controlled endeavors into much more of a public-type of investment through raising of funds and stock options. 

There has simultaneously been a call for the Americanization of sports in other leagues not named the MLB, NBA, NHL, or NFL through labor and union principles of parity.  The Super League effort in European soccer was reportedly led by the interests of American team owners looking to stabilize league and team profits.  Major League Soccer just added another division to stabilize its minor league development.  Meanwhile, China is changing its investment interests in European soccer to sustain growth in the Mainland for its stated goal of becoming the sport’s powerhouse.    

To increase investment opportunities in individual competition sports like NASCAR, the parent organization has introduced “charter distributions” for teams and their private investors.  The aforementioned deals guarantee revenue streams like the labor and union rules in other sports for racing teams by reducing the percentage of winnings each week for drivers that place.  The “Next-Gen” racecar/stockcar is also developed to stabilize part pricing therefore adding predictability to the balance sheet for each season and beyond.  As interest and viewership grows, so do the rights fees to broadcast races, thus increasing revenue streams.  Even entertainment experiences are becoming so complex in an effort to increase engagement that internal department planning is now being extended to major outside companies to handle logistics. 

Whether or not the USFL returns successfully or Apple gets into sports streaming to keep up with the competition is yet to be seen.  Women’s collegiate and professional sports are growing in viewership as sponsors, advertisers, broadcasters, and streamers see room for financial growth.  All of these things are aimed at stabilizing an industry, while adding strength in numbers down the road. The growth of sports betting partnerships in the United States will only bring investment principles in the non-sports world more involved with sports teams and leagues.

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