North American franchise values climb by a strong 8.0% in the third quarter.
Sports franchises in the Ross-Arctos Sports Franchise Index (RASFI) representing the “Big 4” North American leagues saw robust valuation growth of 8.0%, or 36.2% on an annualized basis, in the third quarter of 2024.
Year-to-date, RASFI performance is 17.4% through the third quarter, continuing to pace above the long-term annual average performance of ~13%. While this represents continued healthy growth post-COVID, RASFI’s 2024 YTD growth slightly trails that of YTD returns for U.S. Equities, which was 22.1% (30.5% annualized), prior to the run-up post-election.
Transaction activity in Q3 picked up across both control and non-control sale activity relative to 1H 2024, and markedly increased from Q3 2023. In Q3 2024, there was a single control transaction involving two Big 4 franchises: Rogers Communications acquisition of a 37.5% and controlling stake in Maple Leaf Sports Entertainment, the holding company for the Toronto Raptors (NBA), Toronto Maple Leafs (NHL), Toronto FC (MLS), and the Scotiabank Arena, for C$4.7 billion. The implied valuation of the transaction, particularly by an insider, reflects the ongoing momentum of Big 4 franchises. This quarter also had two separate non-control NBA transactions – an existing minority owner’s expansion of his stake in the San Antonio Spurs and a new 10% investment in the Milwaukee Bucks. The Bucks transaction involved a tender of minority owner shares last year, which were in turn sold by the franchise to the new minority owner.
We believe a key driver of transactions in this quarter is the residual effect of the step-up in value for the NBA media rights, which was formally announced in Q3 2024. The transaction demonstrates strong demand for premium sports content amongst both consumers and networks. Premium sports remain networks’ most dependable anchor property in terms of viewership and driving advertising revenue; as a result, we believe premium sports will earn a higher marginal share of total video industry economics. Additionally, we believe the importance of sports to legacy media, as well as the significant ‘dry powder’ of Big Tech, should result in ongoing escalating rights fees, and as a result increased revenue and profitability for Big 4 franchises.
Disclosure: The Ross-Arctos Sports Franchise Index (“RASFI") is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any security. RASFI includes data sourced from third parties and reflects market trends and economic forecasts which Arctos Partners, LP ("Arctos") and Stephen M. Ross School of Business at the University of Michigan (“Ross”) believe to be reliable; however, no independent verification has been conducted, and neither Arctos nor Ross warrants the accuracy, fairness, correctness, or completeness of any information provided. Certain statements included herein may be considered forward-looking and involve risks and uncertainties; actual results could materially differ from those projected. Historical trends indicated in RASFI do not assure or imply the continuation of such trends in the future. RASFI estimates historical sports team valuations based on a series of statistical models that may introduce sources of error. While we believe RASFI reflects past estimates of sports team values, they should not be seen as indicative of future performance or profitability. The benchmarks and indices provided herein were selected by Arctos and Ross for illustrative purposes only. Selection of such benchmarks or indices is inherently subjective and others might select other benchmarks or indices based on their assessment of the market. Actual results may differ, perhaps materially, from the trends presented herein.