The NFL is on the brink of a significant shift in its financial and ownership structure. The league is considering allowing private equity firms to invest in its teams, a move that would mark a departure from its traditional ownership model. Historically, NFL ownership has been limited to individuals or small groups, but the growing value of sports franchises and the need for fresh capital have led the league to explore new avenues. What makes this potential change even more intriguing is that the NFL doesn’t just want to open its doors to private equity – it also wants a piece of the profits when these firms eventually sell their stakes. This could create a substantial new revenue stream for the league, which is already one of the most profitable in the world, generating nearly $13 billion dollars in revenue in 2023.
The NFL’s move comes on the heels of similar decisions by other major sports leagues, which have already embraced private equity investment. For instance, Major League Baseball (MLB) allowed private equity firms to invest in teams starting in 2019. This decision came as team valuations soared, and owners sought new ways to inject capital into their franchises without giving up control. The NBA followed suit, with the league approving private equity investments in teams in 2020. The Golden State Warriors, for example, sold a minority stake to Arctos Sports Partners, a private equity firm, which provided the team with fresh capital while allowing existing owners to maintain control.
Formula 1 offers another compelling example. CVC Capital Partners, a private equity firm, acquired a controlling stake in Formula 1 in 2006 for approximately $2 billion. Under CVC’s ownership, the sport expanded its global reach, and by the time Liberty Media acquired Formula 1 in 2017 for $4.4 billion dollars, the sport had grown significantly in value. These examples demonstrate how private equity can fuel growth and innovation in sports leagues, making them more competitive and profitable on a global scale.
The financial landscape of professional sports has changed dramatically over the past decade, with team valuations reaching unprecedented levels. The Washington Commanders, for instance, sold in 2023 for a record-breaking $6.05 billion, the highest price ever paid for a sports team. This transaction eclipsed the previous record set by the Denver Broncos, which sold for $4.65 billion in 2022. These sky-high valuations reflect the increasing value of sports franchises, driven by factors such as lucrative broadcasting deals, global fan bases, and the unique status of sports teams as both cultural icons and profitable businesses.
These soaring prices have attracted the attention of private equity firms, which have access to vast amounts of capital and are always on the lookout for high-return investments. For example, the NBA’s Phoenix Suns were recently valued at $4 billion, with private equity playing a key role in the ownership structure. In MLB, the New York Mets sold for $2.4 billion in 2020, highlighting the continued upward trend in team valuations. As these examples show, private equity firms are well-positioned to take advantage of the increasing value of sports franchises, making them ideal partners for leagues like the NFL.
If the NFL proceeds with allowing private equity firms to invest in its teams, the implications could be profound. For one, it could lead to a wave of new deals, with entire NFL teams potentially changing hands or private equity firms buying into privately held teams looking to raise capital without selling control. This would inject fresh capital into the league, which could be used to finance new stadiums, enhance player development programs, or expand the league’s international footprint.
The NFL’s plan to take a cut of the profits from these investments could also influence the dynamics of these deals. By aligning its interests with those of private equity investors, the NFL could ensure that it benefits both financially and strategically from these partnerships. This approach could lead to more selective and strategic investments, with the league favoring firms that bring not just capital but also expertise and innovation to the table.
The NFL’s potential decision to allow private equity investment while taking a share of the profits could reshape the league’s ownership landscape. By following the path set by other major sports leagues, the NFL could tap into new capital sources, driving up team valuations even further. This move might lead to the sale of entire teams or minority stakes in existing franchises, ultimately changing the way NFL teams are owned and operated. The league’s involvement in the profits could create a win-win situation that benefits the NFL, its teams, and investors, ensuring that the league remains a dominant force in the world of professional sports.
