Professional sports are now considered a non-correlated asset class, which means their value doesn’t rise or fall with the market. Talk about an investment opportunity that can withstand market-driven fluctuations and remain steady even when the economy takes a dip.
Of course, no investment can guarantee positive growth or long-term stability, but investing in sports offers the next best thing: market independence. To succeed in the investment game, or, in other words, to avoid getting knocked out, you need to reinforce your portfolio with assets that go against the grain, or the market. That’s what you call diversification.
Investing in the professional sports industry gives you the diversification every investor desires, adding an extra layer of safety to your portfolio. It’s like having a chocolate egg in a basket full of plain, old chicken eggs. And not just any chocolate, it’s the finest kind: incredibly valuable and in high demand.
The Sports Opportunity Spectrum
Diversity is what adds strength to an investment portfolio, and within the investment space, diversity in asset types is what makes the sector or an ecosystem more resilient. In sports, a wide range of asset types is now available, each with its own business model, revenue streams, and value-creation levers.
For simplicity, you can break the sector into two broad categories: core sports and sport-adjacent assets.
Core sports include sports and services, infrastructure, and sporting goods. Sports and services entail leagues, competitions, teams, sports academies, talent agencies, and governing bodies. Infrastructure refers to venues and services responsible for managing and hosting professional sporting events. Sporting goods include businesses that provide sporting equipment and apparel.
Sport-adjacent opportunities, on the other hand, involve technology, data, analytics, and media and entertainment. These include digital solutions for scouting, ticketing, and player performance evaluation. In media and entertainment, opportunities lie in platforms focused on content creation and distribution.
This wide array of asset classes and investment pathways is what makes the sports industry such an exciting and dynamic space to be involved in. As an investor, you can choose the opportunity you know best or find the most promising and become an informed, active stakeholder in a rapidly evolving sector today.
Understanding Returns
The value of assets within the professional sports industry varies for different reasons, and understanding the factors affecting your investment valuation is key to securing maximum returns.
Importantly, the value of different assets fluctuates for different reasons. Say you invested in a sports team. In that case, the most crucial factor would be the team’s performance. The value of a team stuck in a losing streak simply won’t rise. On the other hand, a lesser-known or underdog team climbing the ranks could see a dramatic increase in its value.
Team performance matters most because it dictates the revenue they generate, the sponsors they attract, and the level of global interest and fan engagement. Yes, other factors like a change in ownership can influence a team’s long-term valuation, but in the short term, performance remains the most significant driver.
That said, other factors like brand size or a team’s pre-existing fan base can help soften the blow of poor or underwhelming performance, but this typically applies only to a select few, top-tier teams. Take Manchester United, for example.
In the eighteen years between their last and most recent acquisition, the club’s value increased by 4.3x, despite significantly underperforming over the past decade, especially since the departure of Sir Alex Ferguson.
That’s how significant the team’s fanbase and global status matters. In other words, teams with good reputations and history are the safest bets, while those with underwhelming reputations and no real history are riskier but also more rewarding ones.
Moreover, beyond individual teams, the factors affecting the value of sports leagues and competition revolve around their ability to land lucrative media and entertainment contracts. Global interest is the deciding factor here. Competitions that are working to secure better media contracts to expand their reach and focus on improving the competition levels rise the fastest.
Peeking Into the Future
There’s no shortage of investment opportunities in the world of professional sports. Investing in teams is one option, but it’s far from the only one. Beyond sports teams, other lucrative sectors within the industry are emerging rapidly.
Some of the fastest-growing investments lie in areas adjacent to sports, particularly in digital solutions and media and entertainment. For sports investors, this abundance of options is a promising sign. It highlights how the industry is evolving and entering a new era of prominence.
You can learn more about the most lucrative or fastest-rising opportunities in sports by exploring Stryde. Invest now or wait; it’s your choice. Just remember, it’s always better to catch an industry on the rise than to jump in after it’s already peaked.
