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The sports boom never ends ... does
it?
Posted: Wed September 23,
1998
Stocks are down. Bonds are down. Commodities are down.
Warren Buffett is down. Brazil, Hong Kong and Europe are
down. Even the Powerball jackpot is down. Sports,
however, are up. In the midst of all this recession,
sports just go higher and
higher. Always and
forever.
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Murdoch made a billion-dollar offer for Manchester United.
(AP)
| It's quite amazing, really. So long as the good times
rolled, we could understand how investments in sports—in
leisure—could fly. But what is so confounding now is how
the boom in sports continues smack in the face of a
downturn in virtually every
other part of the world economy.
Where will it all end? Will it? It was only a generation
ago when established major franchises turned over for a
grudging few million dollars. In 1973, George Steinbrenner
paid seven figures for the Yankees. That franchise could
bring in almost 10
figures today. You don't think so? Rupert Murdoch offered
that amount—a billion dollars—for English soccer club
Manchester United precisely at a moment when the lights
were going out all over the financial
world.
Even more amazing, perhaps, a new National Football League
franchise for Cleveland, a modest American city, went for
$530 million. By contrast, in l960, at the start of the
sports boom, the expansion Dallas Cowboys paid an entrance
fee of
$600,000—which means the value of a new NFL team has increased by almost
a thousandfold. And if Cleveland is worth half a billion,
what will the Washington Redskins be worth as the team for
the capital? What will a new franchise in Los Angeles be
worth?
The fees for television rights soar commensurately. NBC
pulled out of the bidding for part of the NFL contract,
which brought in almost $18 billion, calling the prices
insanely over the top.
But, in the sports economy, prudence is always punished.
National Hockey League ratings have gone down on the Fox
network. The best evidence indicates that only the same 37
people were watching NHL games. Sensible experts asked:
Could the NHL even
keep a vastly reduced national contract? So, ESPN promptly
offered to quadruple Fox's fee. It makes no sense, except
that the sports market just always goes up ... and up ...
and up
again.
Of course, often no one can tell where television ends and
franchises begin. Murdoch's billion-dollar offer for
Manchester United was motivated by the same reasons he paid
$311 million for the Los Angeles Dodgers. Different
sports, different nations,
different networks—same principle. Buy a team to assure
what is called "inventory" for telecast. Then
negotiate with yourself—Sky Channel in Europe, Fox
here.
In many respects, too, profit from soccer abroad is even
more assured, because the sport faces less competition
there than
any sport does in the United States. Also in Europe, team
owners are just now discovering luxury boxes. And
everywhere, more and
more women are becoming sports fans, effortlessly doubling
your market.
Ultimately, though, sports is such a good investment
because it simply never goes out of style. Musical
comedies and westerns and sitcoms and Geraldo Rivera will
come and go in fashion. But sports? Why, no matter how
they've tried, the men who run
baseball can't kill it. If you own a sports team—or the
television rights to a sports team—you appear to own
something that people love and want to see, in
perpetuity.
I'm not trying to sell you anything, you understand. It's
just the way of the sports world. Buy high. Sell higher.
These commentaries, which appear each Wednesday on National Public Radio's Morning Edition, are posted weekly by CNN/SI.
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