Why Has the Valuation of Sports Franchises In the Past Decade Plus Gon

Sports is less a commercial activity at present rather than a physical activity. In the past, people visualized sports as a physical activity and its purpose was primarily to cultivate joy and enthusiasm in the minds of spectators.

Nowadays, it has changed its aims and purposes drastically because of the intrusion of commercialization. Entrepreneurs all over the world have identified the potential of sports activities in the brand building and sales promotions. As a result of that, a lot of entrepreneurs started to invest in the sports industry and the outcome was the drastic increase in the valuation of sports franchises. Compared to 2016 statistics, the valuation of the world’s most valuable sports franchises increased by 18% in 2017.

Moreover, there are 36 sports franchises worth at least$1 billion and still unable to find a place in the top fifty sports franchise list. All these statistics clearly reveal that the valuation of the sports franchises is skyrocketing in every year. The Dallas Cowboys topped the list of world’s topmost sports franchisers list for the second consecutive year in 2017 at $4.2 billion.

Before it becomes the number one in the world in 2016, the Spanish football club Real Madrid was the number one for three consecutive years. Now Real Madrid with $3.58 billion is placed fifth in the list after New York Yankees ($3.7 billion), Manchester United ($3.69 billion), and Barcelona ($3.64 billion) 2%. It should be noted that all these sports franchises except the Real Madrid have experienced phenomenal growth in 2017 compared to their growth rate in previous years. In short, the competition for becoming the world’s most valuable sports franchise is getting intensified every year.

The core of the sports franchise business model is a diverse revenue stream which includes but not limited to the revenue from Advertising, Sponsorship revenue, Royalties, Ticket Sales, and Endorsements. Sports is one activity which is loved by people of all ages, genders, cast, and races. Therefore, any investment made for the sponsoring of sports events would bring dividends to the companies.

For example, the balls used for the FIFA world cup was sponsored by Adidas. Millions of the people all over the world have seen the Adidas logo and name while football heroes like Lionel Messi, Neymar, and Cristiano Ronaldo play with those balls. Hero worshipping is an inherited trait among many people.

Because of the passion and love towards their heroes, many sports lovers like to imitate their heroes. Adidas received enormous publicity and their products moved rapidly in the market during and after the FIFA event. Apart from product selling, sports events help companies in the brand building also. The Adidas brand became a familiar name all over the world after the FIFA cup. Companies all over the world spend millions of dollars on the brand building process. Sports events have the potential to build the brands silently.

Traditional advertising and brand building channels are less effective compared to modern methods of advertising and brand building activities. Entrepreneurs in the past have concentrated more on print ads whereas the modern entrepreneurs make use of digital ads for the promotion of their products and services.

Television and social media advertising seem to be the most effective advertising channels for modern entrepreneurs. The word of mouth or mouth publicity is more convincing to modern customers compared to print publicity. All these factors prompted business people to seek the services of sports franchises as a mean to reach millions of people all over the world.

It should be noted that the constraints of language or culture are not applicable to sports events. It is possible for an American to enjoy basketball just like an Indian or a Pakistani. The language of sports events is one and the same all over the world and therefore, it is not necessary for the investors in sports franchise to develop different advertising materials to advertise their products in different countries.

To conclude, sports is an activity which does not have the constraints of a language or a culture to communicate a message. The arrival of digital media helped the businesspeople communicate their message effectively to millions of people all over the world.

References

Why are Professional Sports Franchises Increasing in Value So Fast?

https://www.forbes.com/sites/kurtbadenhausen/2017/07/12/full-list-the-worlds-50-most-valuable-sports-teams-2017/#d6312ed4a05c

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