The miraculous return of Tiger Woods to Augusta National dominated golf’s headlines in April. Regardless of how he performed at the Masters, it’s a tremendous feel-good news story for the sport.
What had been dominating the golf headlines for the last six months was less feel-good — the turmoil caused by the proposed formation of a breakaway golf “super league,” the LIV Golf Invitational Series, spearheaded by former world No. 1 player Greg Norman.
No sport is immune to super league shock waves. Last April, the European soccer world was rocked by the announcement that several powerful clubs were proposing the formation of a European Super League, with permanent membership for 15 of the 20 permitted clubs. Domestic leagues would have suffered in importance, and the UEFA Champions League would no longer be viewed as the sport’s crown jewel. Although public backlash caused this project to become dormant (even if UEFA decided to amend the Champions League format, so two clubs will join the tournament based on “historic performance” rather than merit), the sports landscape is changing in a repeatable pattern whereby each league is trying to make itself a bit more “super.”
Changes in Sports Are Industrywide
It’s not only golf and soccer. We’re seeing format challenges and changes in almost all sports. The proposed changes may not be as drastic as LIV or the European Super League, but they are not to be ignored either. A few examples that have occurred in the past few years include:
■ The MLS and Liga MX partnership
■ College football conference realignment
■ The NFL revising its playoff format
■ MLB amending its rules to increase the pace of the game
■ The WNBA Commissioner’s Cup
■ The NBA revising its playoff format
In isolation, each of these events have varying degrees of impact. Yet, when we step back, we can see the wave of transformation in sports that is only growing in size.
Why These Changes Are Happening Now
There are a few factors permeating the need for these changes in sports. First, there is increased competition. The battle for eyeballs and advertisers is no longer limited to the same tier of competitors. The growth in women’s sports; the ease of access to watch international sports; and the increased popularity of Formula One, lacrosse, cricket, and rugby are all clawing at the available U.S. market share. If we include the additional social media offerings and other forms of entertainment, the battle for viewers has never been this fierce. Thus, leagues have recognized that they cannot relax or rely on the status quo. Audiences are willing to watch other sports if a league’s product isn’t engaging its core members and offering exciting alternatives for new entrants.
Second, sports franchises are still highly desirable assets offering potentially market-beating returns, which are also relatively safe havens even in the face of economic headwinds. Thus, not only have more sophisticated individual investors entered the ownership groups, but private equity investors have also recently become welcome on franchises’ capitalization tables. This recent influx of investors is important in understanding the change occurring in sports because these investors are not legacy owners. Each of them paid a premium to enter the ownership group of their respective franchise and they are also seeking superior returns. This pressure to seek greater returns on investments is magnified when individuals and funds invest in entire leagues, like La Liga (Spain’s top soccer competition, partly owned by British private equity group CVC Capital) and the WNBA (which in February announced a $75 million investment by a group including Nike and Condoleezza Rice). Unless leaguewide change occurs, the prospect of actualizing the expected return on investment becomes a lot more difficult — or, at the very least, substantially longer — to achieve.
Third, there is no ignoring the impact COVID-19 had on the sports industry. Although leagues adjusted and offered innovative solutions during the height of the pandemic, the increased debt load and lack of ticketing revenue still has industrywide implications. Therefore, there is an incentive to consider revamping the product in the hope of driving revenue growth now that fans are permitted back in stadiums and arenas.
Seek Opportunities to Capitalize on the Change
These changes in sports potentially offer an abundance of opportunities for prospective owners, franchises, and sponsorship partners. Now is a great time for prospective owners to see what opportunities are available.
For franchises, it’s really important to make the most of the assets they already have. For example, social media offers a great opportunity to connect with fans and drive revenue. We’ve seen organizations bring high quality, behind-the-scenes coverage of their teams to their fans and ensure their event spaces can handle the changes in demand. And sponsorship partners have an array of exciting platforms (stadiums, jerseys, etc.) to ingratiate their brands with these innovations from the leagues and their franchises.
Like any business, sports will need to constantly reinvent themselves to maintain and grow market share. Fortunately for everyone involved, there may have never been this many opportunities for partnerships, joint ventures, equity transfers, and stadium renovations. So, the next most important thing is choosing the right structure and fit for your league or team.
Matthew E. Eisler is partner and head of the Hogan Lovells Sports group based in the firm’s Denver and New York offices, and CJ Harrington is an associate based in the firm’s Washington, D.C., office.
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