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Volume 2, Chapter 5 Financial valuation of sports franchises

Volume 2, Chapter 5 Financial valuation of sports franchises. US Franchise valuations - Forbes. http://www.forbes.com/mlb-valuations/ http://www.forbes.com/nfl-valuations/#f29ee0746cb8 http://www.forbes.com/nba-valuations/ http://www.forbes.com/nhl-valuations/#4179a9563ece

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Volume 2, Chapter 5 Financial valuation of sports franchises

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  1. Volume 2, Chapter 5Financial valuation of sports franchises

  2. US Franchise valuations - Forbes • http://www.forbes.com/mlb-valuations/ • http://www.forbes.com/nfl-valuations/#f29ee0746cb8 • http://www.forbes.com/nba-valuations/ • http://www.forbes.com/nhl-valuations/#4179a9563ece • http://www.forbes.com/sites/chrissmith/2016/09/07/major-league-soccers-most-valuable-teams-2016-new-york-orlando-thrive-in-first-seasons/#3e5c2448266a

  3. MLB franchise valuations - Forbes http://www.forbes.com/mlb-valuations/

  4. European Soccer Franchise valuations - Forbes • http://www.forbes.com/soccer-valuations/

  5. Valuation methods • Confidential by Forbes • Value attributable to revenues shared within league • Value attributable to franchise’s market size • Value attributable to franchise’s stadium/arena • Value attributable to franchise’s brand management • Mostly intangible, difficult to approximate without a rigorous methodology

  6. Valuation: League issues • Labor situation • Salary constraints  cost certainty • Labor stability • league-developed revenue streams • Total revenue league revenue: TV, internet, sponsorship, licensing… • degree of revenue sharing • Local revenue sharing • league rules regarding ownership and debt • Limits on amount of debt a franchise can carry • Availability of financial capital: establish leaguewide credit facilities for debt at below-market prices/terms in NFL, MLB, NBA • NFL provide low price debt for new facility construction

  7. Valuation: specific team issues • Market size most important • Less significant in NFL and NBA because higher degree of league and local revenue sharing • Arena/stadium situation • New facility • Lease arrangements, may share revenue with public sector that founded the facility • Other potential revenues around facility, e.g. real estate • Local media opportunity • At/near end of existing local media deal: chance for bigger deal • Formation of regional sports networks • Previous operation efficiency • Long-term below-market sponsorship/media deals, significant long-term player salary commitment…

  8. Value of sports franchises • Value of sports teams in 4 major professional leagues in US grown average annual rate of 11.7% 1991-2006 • Growth rate NFL>NBA>NHL>MLB • Avg team value NFL>MLB>NBA>NHL, increasing disparity among leagues • 2010 data • NFL value 1022 M/team, revenue 8.02 B in 2009 • MLB value 491 M/team, revenue 6.6 B in 2009 • NBA value 329 M/team, revenue 3.8 B in 2009 • NHL value 240 M/team, revenue 3.09 B in 2009 • Most valuable teams: Dallas Cowboys (1800 M), Yankees (1770 M), Knicks (655 M), Toronto Maple Leafs (521 M)

  9. Valuation methodology:revenue multiples • Most industries: consider both profitability and future growth • Sports franchises: typically valued based on revenue multiples • Require minimal information • Intentionally disregards cash flow variability (usually changes in player salary) • Disparity in average revenue multiple across leagues • Use the multiple as starting point for negotiation • Not based on rigorous financial analysis, especially on expense side • Existing team losses, high payroll…

  10. Value of sports franchises • Highest team values in European football, 2006 • England: Manchester United 1373 M • Spain: Real Madrid 1012 M • Italy: AC Milan 921 M • Germany: Bayern Munich 769 M • France : Olympique Lyonnais 208 M • Portugal: FC Porto 106 M • All significant increase from 2004

  11. Changes in ownership • From toys/hobbies to franchise operations • Demand and sales prices for franchises increased in all 4 leagues

  12. http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.htmlhttp://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html Major League Baseball Franchise Valuations, 2013 by Bloomberg

  13. Major League Baseball Franchise Valuations, 2013 by Bloomberg http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html

  14. Major League Soccer franchise values, 2012 by Forbes

  15. Major League Soccer franchise values, 2012 by Forbes http://www.forbes.com/sites/chrissmith/2013/11/20/major-league-soccers-most-valuable-teams/

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