Yesterday the parties to the transaction announced that a new ownership group would be buying the Washington Commanders, a National Football League team. The announced price tag for the transaction is a staggering $6.05 billion–a new record for the sale of a professional sports team. The proposed deal now goes to NFL owners for approval,
The Commanders have been pretty dismal lately. The team hasn’t won a playoff game in 18 years, and the franchise, and its owners, have been mired in controversy. Nevertheless, the eye-popping $6.05 million price tag for the team blows the previous record for an NFL team–set by the 2022 sale of the Denver Broncos for $4.65 billion–out of the water. If you’re an NFL owner, you’d presumably be highly motivated to approve the proposed sale, if only to establish a new comparable that can be cited when you decide you are ready to cash in and put your team on the market. If an underperforming team like Washington commands that kind of price, just imagine how much might be paid for more successful franchises, like the Kansas City Chiefs or the New England Patriots?
In case you’re interested, the group that is selling the Commanders paid $800 million for the Washington pro football franchise in 1999. In less than 25 years, the market value of their ownership interest has increased by a factor of more than six–and that doesn’t account for any amounts the ownership group has received from TV contracts, ticket sales, and merchandising deals during the period of their ownership. Seeing the market value of an investment increase more than six times is a pretty good return.
It’s not just NFL teams that have been gold mines at the auction block lately, either. The $6.05 billion price tag for the Commanders edges out the prior record for a professional sports team, which was $5.3 billion paid for the Chelsea F.T. club in the English Premier League last year. Billions of dollars also have been paid for teams in the NBA and Major League Baseball over the past few years.
So, there’s no doubt that professional sports teams have been a pretty good investment recently–but you wonder how long this can last, and whether we’re simply witnessing a huge sports franchise bubble, like the crazed spike in home purchases that helped produce the sub-prime mortgage collapse that led to the Great Recession, or the infamous Dutch tulip market bubble in the Netherlands in the 1600s. It’s not as if sports franchises have lots of tangible assets or obvious intrinsic value, and the continued success of the NFL, which has been bedeviled by concerns about concussions and general player safety problems, among other issues, is by no means assured.
At some point, will liability concerns cause regulation of the sport that changes it so significantly that its current broad appeal falls off–and the owners who paid billions to sit in the owners’ box and wear gear with team logos are left with a stadium, some player contracts, and logos for merchandise that no one wants to buy? If that happens, the ownership of the Commanders could end up being like possession of a fistful of costly and unwanted tulip bulbs in Amsterdam centuries ago.