$4.65B touchdown, Broncos! What does it mean for the NFL?

The Denver Broncos made US history on June 8th, 2022. It wasn’t your normal type of sports history— no lengthy winning streak, losing streak, or other game-centric data point. Instead, its sale for $4.65 B to the Walton-Penner family ownership group made history as the largest transaction in the history of US sports. The transaction both doubles the previous NFL record of $2.3 B (2018, Carolina Panthers), and nearly doubles the previous US record of $2.4 B (2020, NY Mets).

Source: Sports Business Journal

The sale is the second-largest sale in history, trailing only the May 2022 $5.3 B sale of Chelsea FC to US investor Todd Boehly and private equity firm Clearlake Capital. In the middle of a highly volatile economic environment, with inflation and geopolitical shocks adding to anxiety,  investors may ask— why did the team command such a high price?

Teams are in high demand with limited supply.

In scarce supply due to league rules, but delivering high returns of over 20% year over year in recent years, featuring plenty of non-financial purchase benefits such as prestige and fun that aren’t normally the case with investments.  NFL teams are often in high demand with little extra supply.

Source: Forbes

They are often considered recession-proof.

Sports teams benefit from skyrocketing media rights revenue industry-wide. The NFL in particular profits on the liabilities-side from long-term salary caps that guarantee cost control. Although studies show that merchandise and ticket price sales can be impacted by recessions, these impacts can be offset by rising at-home viewership ratings and media rights sales. The Walton-Penner group valued the team at a revenue multiple much higher than previous NFL buyers, suggesting that the market is optimistic about sports consumption. The Denver Broncos franchise is considered especially attractive, given its loyal and broad national fanbase and its convenient location near the center of the country.

Source: Forbes

NFL rule changes 

Following the underwhelming sale of the Carolina Panthers in 2018— many predicted the sale would top $3 B— NFL owners decided to institute a set of changes that would improve the value and price of their teams. These include the removal of a prohibition on cross-sports ownership, allowing owners to own teams in multiple sports, a rule that eases the trading and ownership restrictions related to controlling shares, allowing families to retain control of a franchise with as little as 1% equity ownership, and finally a relaxing of debt limits, allowing prospective owners to borrow double the previous amount to finance deals. The Denver Broncos deal is proof that change can be good— expect to see more creative changes in ownership rules, industry-wide.

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While all of the above helps explain the Bronco’s stratospheric sale price, NFL fans may wonder how much their favorite team is worth. It’s true— The Broncos have changed the game. Expect to see higher values of NFL teams across the board. Expect to see more creative financing in sports. Finally, expect sports and entertainment investing to keep fans and investors on the edges of their seats, worldwide. 

Take a look at the most valuable NFL franchises according to the Broncos valuation:

1 Fortune, “Walmart heir to buy Denver Broncos for a reported $4.65 billion in largest-ever purchase of a U.S. sports franchise,” https://fortune.com/2022/06/08/walmart-heir-rob-walton-nfl-denver-broncos-4-65-billion-purchase/
2 Forbes, “The NFL’s Most Valuable Teams 2021: Average Team Value Soars To $3.5 Billion As League Shrugs Off Pandemic Year,” https://www.forbes.com/sites/mikeozanian/2021/08/05/the-nfls-most-valuable-teams-2021-average-team-value-soars-to-35-billion-as-league-shrugs-off-pandemic-year/?sh=6be8f56e654e
3 Sports Business Journal, “Denver Broncos sale: Time to pony up,” https://www.sportsbusinessjournal.com/Journal/Issues/2022/06/13/Upfront/NFL.aspx
4 University of Wisconsin, “The Economic Impact of Recessions on Major League Sports in the United States,” https://www.uwlax.edu/globalassets/offices-services/urc/jur-online/pdf/2014/lisiecki.welton.econ.pdf

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