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Owning Sports Teams Could Become a More Lucrative Game
Steve Ballmer’s $2 billion bid for the LA Clippers raised eyebrows, but pro franchises may have plenty of untapped revenue potential.
At first glance, exMicrosoft Corp. CEO Steve Ballmers recent $2 billion offer to buy the Los Angeles Clippers from disgraced owner Donald Sterling was too rich. Sterling acquired the NBA club in 1981 for $12.5 million; anyone paying $2 billion would have to sell it for $320 billion in 2047 to make the same return.
But if the future economics of pro sports look hazy after several decades of torrid revenue growth from TV broadcasting rights, Ballmer had his reasons for the fat bid, which Sterling is blocking from completion. He and other billionaires regard sports teams as a way to buy celebrity, contends David Berri, a sports economist at Southern Utah University. The broadcasting revenue makes it more popular; if its more popular, billionaires want to own it more, Berri says. If billionaires want to own it more, it drives up franchise values.
Given the limited number of pro teams, a rising ultrawealthy class in emerging markets could make them even more valuable, wagers Temple University economics professor Michael Leeds. Berri sees upside from new viewing platforms, citing the Major League Baseball website, which is so lucrative for MLB owners that the latest contract was signed with no labor dispute. Also, the NBA hasnt cashed in on basketballs status as the worlds No. 2 sport, after soccer. If you can make this into much more of a global game, where everyone gets to participate, theres huge revenue opportunities, Berri says.