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Owning and Marketing a Sports Team

I think it's just about every guy's (and many girls' too) dream to one day have enough money to buy their own sports franchise.  I know that I, for one, would love to be the owner of the Chicago Cubs, Chicago Bears, or Detroit Pistons.  How cool would it be to say you own a team, mingle with the players, and watch every game from your luxury skybox?

Unfortunately, only a select few uber-wealthy people will ever be able to afford their own sports franchise.  But you can always dream.  And that's why we've put together the following information about owning a sports franchise.

Be Prepared to Pony Up Lots of $$$

Sports franchises are expensive.  The cheapest franchise is currently valued at about $100 million.  But, remember, most franchises are bought at a premium, so you actually end up paying more than it was valued at.  The reason for this is because owners want to hold onto their teams unless you make a very high offer.  Take the Boston Red Sox for example.  Two years ago, the Red Sox were purchased by John Henry (and a group of partners) for $700 million, which is nearly $200 million above what Forbes had valued it at.

Consider a Sports Team as a Business

Some people think of teams strictly by how many wins and losses they have and how many championships they've won.  But this isn't always a good indicator of how much money the franchise is worth or will make.  Take the Florida Marlins for example.  In the last seven years, they've won two World Series championships.  But even last year, in their miracle season (when they beat my Cubs!), the Marlins lost $20 million in cash.

And because it's a business, you'd want to buy a team that's in a strong market.  Take Dan Snyder for example.  He was criticized heavily for paying so much to buy the Washington Redskins.  But the Redskins are in one of the biggest markets (Washington DC) and he owns nearly the entire stadium (while most stadiums are publicly-owned).  This has helped him make the Redskins the most profitable sports franchise.

Big Tax-Writeoffs are Disappearing

Owners used to love buying sports teams because of the big write-offs they could do on the payroll.  Take Bud Selig, for example.  He purchased the Milwaukee Brewers in 1970 for $10.8 million.  But he was able to write $10.2 million of that off in player salaries.  So he only reported a franchise purchase price of $600,000!  Unfortunately, today the IRS has become slightly more strict and the writeoffs don't have a big enough helping effect against the huge cash losses many baseball and hockey teams are facing.

Basically, if you want to own a sports team, be prepared to spend anywhere from $100 million to $1 billion on it.  That's a lot more money than most of us (realistically) plan to retire with.  But, hey, I suppose you could do anything you set your mind to.

 

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