Is Owning A Sports Team Profitable?
By
Richard Janvrin
Contributor Updated: 16 April 2024
Richard Janvrin Contributor
Richard has been writing about sports since he was a teenager. Still, his first professional role came in 2015, covering all things NFL and fantasy football-related. From there, in December 2018, he started in the sports betting industry, covering sportsbook reviews before arriving to where he is today.
Is Owning A Sports Team Profitable
There are 124 teams in the four major sports in the United States: the National Basketball Association (NBA), Major League Baseball (MLB), National Football League (NFL), and National Hockey League (NHL).
Of those teams, there’s some ownership overlap across the sports, such as Stan Kroenke, who owns the Denver Nuggets, Los Angeles Rams, and Colorado Avalanche, but more or less, there are just over a hundred human beings that can say they own a progressional franchise.
But how do sports team owners make money? Is it a profitable business? Does it have ebbs and flows? Is it more of a “fun” thing for them to do?
Ownership is always a hot topic of discussion, so much so that some NFL gambling sites had odds on the next ownership group of the Washington Commanders in the NFL.
Below, we’ll aim to answer all those questions, including “Are sports teams profitable?” How to invest in a sports team, and more.
Sports Investments: Examining the Richest Owners
Before we dive into the questions posed above, it’s important to gain some context into the world we’re looking into.
It’s hard to determine exactly how much of each owner’s fortune comes from owning a sports team, but according to Front Office Sports, the net worth of these owners will surprise you.
| Owner | Teams Owned | Net Worth |
|---|---|---|
| Steve Ballmer | Los Angeles Clippers | $101 billion |
| Rob Walton | Denver Broncos | $67.4 billion |
| Dan Gilbert | Cleveland Cavaliers | $21.3 billion |
| David Tepper | Carolina Panthers | $20.6 billion |
| Steve Cohen | New York Mets | $19.8 billion |
| Philip Anshutz | Los Angeles Kings, LA Galaxy | $14.8 billion |
| Stan Kroenke | Los Angeles Rams, Arsenal FC, Denver Nuggets, Colorado Avalanche, Colorado Rapids | $14.6 billion |
| Jerry Jones | Dallas Cowboys | $14.5 billion |
| Shahid Khan | Jacksonville Jaguars, Fulham FC | $12.2 billion |
| Robert Kraft | New England Patriots, New England Revolution | $11.1 billion |
Those are some heavy hitters who have large bank account balances. Still, with net worths that high, they could certainly take a financial blow and recover. So, is owning a sports team profitable? Let’s examine below.
- Increased Brand Value
- Is Owning a Sports Team Profitable?
- Sports Investments: How Taxes Play A Role
- Long Term Investments
- Sports Investments Wrap Up
Increased Brand Value
While there may not be an inherent financial advantage with this point, sports investments could result in the ownership group or person seeing their social status stock rise. Depending on the owner, this could trickle down to the team, which could enhance fan engagement, increased visibility, brand deals, and a more international audience, especially if the owner owns a team in another country and more.
Many sports team owners make their initial fortune before owning the team, and by owning the team, they’re far more widely known than before.
Is Owning A Sports Team Profitable?
When examining whether owning a sports team is profitable, it’s important to distinguish between year-over-year profitability and investing in an asset to sell it at a later date.
Alan Kestenbaum, a part-owner of the Atlanta Falcons, believes that NFL team owners are the only ones seeing profits.
So, how do sports team owners make money? According to a study by Sportico, teams generally make their money from national revenue, seating/suites, sponsorships, local media, and concessions/parking/other.
National revenue is important as all teams receive a share of the NFL’s media deals, whereas that’s not necessarily the case in other sports.
If you look at operating income, according to a Forbes study, 13 of the top 25 teams belong to NFL franchises. The Dallas Cowboys led the way with their study, with more than $1.1 billion over a three-year span.
Returning to the question, “Is owning a sports team profitable?” the answer is yes, but it depends on the sport for more short-term profits.
Sports Investments: How Taxes Play A Role
One interesting angle to consider when owning a sports team is how they impact your taxes. A story by ProPublica filed in 2021 reported that Ballmer made $656 million on his taxes but only paid a 12% federal income tax rate.
Because of the U.S. tax code, when someone buys a business, “they can often deduct almost the entire sale price against their income during the ensuing years. That allows them to pay less in taxes. The underlying logic is that the purchase price was composed of assets — buildings, equipment, patents and more — that degrade over time and should be counted as expenses,” the ProPublica piece said.
So, Ballmer and other sports team owners can deduct those assets over time. This allows owners in specific situations to report a loss.
ProPublica is said to have obtained IRS records, and the Clippers reported $700 million in losses as a business. So, in addition to the lack of taxes, he can use the tax write-off to offset his other income.
So, purchasing a sports franchise has obvious tax advantages due to how the U.S. tax code is constructed.
Is it the most honest picture of what’s occurring? No, but you can’t blame someone for taking advantage of a rule that’s in place.
When you wonder how to invest in a sports team, sure, it might require a ton of capital upfront, but there are obvious tax benefits, as mentioned above.
Long Term Investments
Like it or not, sports investments could be considered some of the best over the long term.
For example, the Washington Commanders sold in the NFL in 2023 for a record $6 billion. The previous owner, Dan Snyder, purchased the team for $800 million in 1999.
So, Snyder saw a $5.2 billion payday.
It’s hard to say how much the Commanders cost Snyder over the years, but based on the information we’ve learned, it’s hard to believe he took a $5.2 billion loss over his 20+ years of ownership.
Again, owning a sports team is something only so many people can say they’ve accomplished. Among the richest people on earth, owning a sports team is a prestigious symbol of success.
Sports Investments Wrap Up
We’ve discussed numerous angles, but are sports teams profitable? The answer, overall, seems like a yes, especially if you land an NFL team.
Each league is different with its media contracts and the overall valuation of the teams as the years progress, but there are clearly numerous benefits, namely things involving taxes, that owning a sports team brings.
So, is owning a sports franchise good business? Yes, it certainly is.
Sources:
- https://frontofficesports.com/the-20-richest-american-sports-team-owners-for-2023/
- https://www.propublica.org/article/the-billionaire-playbook-how-sports-owners-use-their-teams-to-avoid-millions-in-taxes
- https://www.sportico.com/feature/how-sports-teams-leagues-make-money-1234766931/
- https://www.forbes.com/sites/mikeozanian/2023/06/02/worlds-most-profitable-sports-teams-cowboys-banked-12-billion-over-the-past-three-years/?sh=2203dc2d6e44
