A remarkable element of the professional sports scene over the last few decades has been a seemingly-constant rise in franchise prices. NFL, NBA, and MLB teams in particular continue to be sold for more and more. And a large part of that is driven by media rights contracts, which have also gone up and up.
But there are big questions on if that will continue to happen. And while that’s particularly true around regional sports network uncertainty for the NBA and MLB (and also the NHL), RedBird Capital founder and managing partner Gerry Cardinale said recently at Sports Business Journal‘s Intercollegiate Athletics Forum in Las Vegas even NFL franchise values (and the media rights deals that play key roles there) may not continue to climb indefinitely. SBJ’s John Ourand wrote up key takeaways from Cardinale’s comments Monday, and the thoughts there on franchise values particularly stand out:
Cardinale referenced Mark Cuban’s decision to sell the Mavericks to the Adelson family as an eye-opening move that leads to questions about whether the sports market is overvalued.
“Look at the RSN dislocation, and look at the next media contract,” Cardinale said. “Are we ever going to get to the point where our current trade is worse than the last trade? What would happen in the NFL if the next NFL team to sell got less than $6 billion?”
Over the summer, a group led by Josh Harris bought the Commanders for a record-high price of $6.05 billion. The problem is that while Cardinale still sees a lot of enthusiasm around buying into professional sports, it’s becoming harder to develop a business plan that works.
“I keep hearing the facile notion that it always goes up,” he said. “You guys are students of history. That’s not sustainable. That’s never been the case. … This is fascinating to me because this thing is exploding and there’s no foundation for doing it the right way. And now it’s the Wild West with all this money piling in, so I think all sports is overvalued.”
It’s certainly interesting to see this kind of skepticism from a prominent investor. Notable RedBird investments include Fenway Sports Group (parent of the Boston Red Sox, Liverpool FC, the Pittsburgh Penguins, NESN, the new SportsNet Pittsburgh, and more), AC Milan, the XFL (so now, the merged XFL-USFL), YES, the EverPass Media venture with the NFL for Sunday Ticket commercial distribution, and Front Office Sports (through RedBird IMI, with Jeff Zucker’s UAE-backed International Media Investments).
So this is coming from someone who has investments in teams, leagues, RSNs, and more. And it’s unusual to see this kind of criticism of the permanent-growth assumption from inside the house. But there is some precedent for it; it’s notable to see Cardinale mentioning Cuban, who expressed his own TV-growth skepticism before selling his majority share.
Now, Cardinale does still think there’s some opportunity in sports. Elsewhere in that discussion, he referenced how he thinks college broadcasting rights could grow even more if big conferences unified their contracts. And he also spoke about how he’s seeing some stabilization in the pay-TV bundle. But it is significant to have a prominent sports investor display such notable skepticism on if media rights and franchise values will keep rising. And we’ll see if his prediction comes true.
