Six Takeaways from SuperInvestor’s “Investing in Sports” Summit

Last week, Prosek’s Sports Business practice was in Monaco supporting the curation and execution of SuperInvestor’s first-ever event track dedicated to exploring sports as an asset class. From a wealth of deep discussions spanning macro correlation, women’s sports, future fan engagement, opening the doors to retail investors, industry regulation, and more, our team extracted some of the most marking observations made in Monte Carlo.

1. “Sports as an asset class has shown time and time again that it’s largely uncorrelated to geopolitical tensions, economic downturns and very topical today election outcomes. When you combine band loyalty with substantial barriers to entry and the opportunity to create diverse streams of revenue, investors are provided with a road map for value creation that’s unrivaled across many asset classes and media deals.”

– Bridget Walsh, Global Private Equity Leader, EY

Prosek’s Take: Not only did EY chair SuperInvestor’s “Investing in Sports Summit”, but Bridget’s opening remarks also succinctly captured why a) sports is a bona fide asset class and b) such an event was arguably overdue at a leading private equity conference.

 

2. “A lot of what we found is what we term ‘social fitness’…Spend is shifting out of product and more into experiential and social fitness. And what underlies that is this sense of identity, understanding the importance of sports to young people’s identities…Take our latest investment within the climbing industry, 55% of participants consider it extremely important to their identity. That’s double what football is, and football is double what running is. So that allows you to start to overlay things like membership models, where you get a sense of a sense of recurring revenue. What we’re seeing is identity leading into recurring revenues, and the ability to overlay things like media rights and subsidiary revenue lines that make it an attractive and diverse investment opportunity.”

– Ben Black – Executive Director, Verlinvest

Prosek’s Take: Ben’s remarks call attention to the sports investing opportunities outside of professional teams/leagues and technologies. They also illustrate the salient role that sports plays in helping consumers find their true selves and forge social connections – qualities that make this asset class all the more robust.

3. “The new generation of fans is going to be fundamental. Attracting fans at a very young age is going to be key. There have been [attempts at] attracting new generations through [innovations] like the Kings League, turning things on their head, inventing new rules…I think they can be a little bit of a Trojan horse as well for clubs or sports franchises to just bring that new generation in. Sticking to media rights, sponsorship revenues and ticketing is just not going to be sufficient.”

– Fausto Zanetton, Founder & CEO, Tifosy Capital & Advisory

Prosek’s Take: While the narrative of whether emerging professional sports properties can truly compete with established ones has existed for several years, Fausto astutely points out that tenured leagues and teams should be actively experimenting with new game formats alongside traditional ones, if they are to sufficiently pique the interest of next-gen fans. By way of their strong IP and loyal followings, these sport properties can have their cake and eat it too.

4. “I think [sustainable growth] can be done within [the same sports organization] but with sufficient segregation…From a business perspective you focus on where the most value is, so creating a dedicated group within an existing ownership structure enables there to be that required focus on the women’s side. There’s also a different level of maturity on the women’s side, that requires a different skill set. It’s like running an established corporation versus running a startup or growth business.”

– Nicki Boyd, Managing Partner, Sphera Partners

Prosek’s Take: As industry participants debate whether women’s teams should break away from men’s counterparts to continue scaling, Nicki explains that there is real merit to staying attached to a larger organization and all the resources it brings, provided the more nascent women’s side can prop up its own leaders with sufficient autonomy and complementary skill sets.

5. “Earlier this year, we partnered with the Ross School of Business, University of Michigan to create a first-of-its-kind, data driven benchmark of sports franchise performance in North America. We compared [that benchmark] to the performance of major asset classes dating back to the 1960s. What we found was there’s effectively zero correlation with equities on a contemporaneous basis, there is a point two to point three correlation with US equities, but it shows up on a 2-3 year lag, which makes sense, because you get a lot of monetization events happening that are then reflected in public markets. Those monetization events can mean that individuals buy sports teams.”

– Alastair Seaman, Managing Director, Arctos Partners

Prosek’s Take: Tapping into Arctos’ own data science capabilities, Alastair reminds us that the macro correlation argument around sports as an asset class is not binary, it has nuances. Nevertheless, sports exhibits great resilience in times of distress, thanks in large part to devout following and sticky revenue streams.

6. “This [democratized sports investing] train has left the station. The reality is these clubs now have gotten so valuable that very few people can buy these things. You have to allow more participation – clubs are often undervalued because their addressable market is so small. You have franchises like the Washington Commanders selling for about $6 billion and it’s very hard to find others who could go in and stroke that check. There’s only so many people that you can sell this asset to when you concretize it, whether you add private equity, retail investors, accredited investors, whatever it might be. [With democratized investing] you are able to start doing real price discovery and better understand what the true value of that asset is.”

– Andrew Durgee, President, Republic

 

Prosek’s Take: Andrew sheds light on how private investing platforms like Republic are solving for two challenges simultaneously: providing retail/accredited investors with improved access to opportunities in the private markets and bringing more liquidity to professional sports team owners seeking to sell all or part of their equity stakes.

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To learn more about Prosek’s Sports Business practice, see the work we’re doing at the intersection of sports and finance, or simply exchange insights, please reach out to pro-sports@prosek.com.