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When Jon Ledecky bought the New York Islanders for a reported $485 million in 2014, some people thought he overpaid. Fast forward to today, and the same hockey team is approaching an estimated value of $2 billion.
This growth isn’t limited to the NHL – in fact, valuations for professional sports teams are skyrocketing across the board, with the Los Angeles Lakers recently fetching a record $10 billion price tag.
To discuss what’s behind this phenomenon, Ledecky joined Anthony Di Santi, head of Sports Banking at City National, for a wide-ranging conversation about his ownership philosophy, valuations trends and why he thinks prices are only going up from here.
Why Own a Team?
A successful entrepreneur who has owned stakes in multiple sports franchises, Ledecky had a deeper motivation for the Islanders deal: “I wanted to get involved with something where I could make a difference in the community.”
For Ledecky, “sports are a public trust.” UBS Arena, the Islanders’ brand-new home, proudly received no public funding, and the team entered a public-private partnership to help build a new Long Island Railroad stop to enhance transit access in the community. The team further committed that 50% of arena jobs would go to local residents, and a portion of every game is dedicated to fundraising or awareness for a charitable cause.
“You can do really well by doing good,” Ledecky said.
Drivers in Valuation
Looking across the industry, Ledecky identified the changing face of ownership as one driver of rising team valuations.
For many years, traditional owners have benefitted from a U.S. tax code provision allowing them to amortize a team’s purchase price over 15 years. This allows owners to deduct the sale price against their income while they wait for the asset to appreciate.
Many sports leagues – including the NFL, NBA, MLB and NHL – recently changed their ownership rules to let private equity acquire minority stakes. As a result, private equity funds have entered the sports world in search of the same financial and tax benefits as individual owners. This significant new source of capital funds franchise growth.
In parallel, owners are exploring new and creative revenue streams that go beyond ticket sales. Teams are now creating value through mixed-use sports developments, sponsorship deals, merchandising, sports betting, and sports technology. These activities are supported by a red-hot media environment where spending on U.S. sports rights has grown 122% over the last decade as broadcast, cable and streaming companies look to sports as one of the last drivers of live, engaged audiences.
Sports valuation now incorporates future growth across all these channels in a model where teams are ultimately judged not by current profits but by how revenue multiplies over time. “This is a business where no one asks you how much money you make or lose,” Ledecky explained. “It's all about revenue multiple.”
Women's Sports & Meeting Demand
Ledecky has a longtime interest in women’s sports due to Katie Ledecky, who is both his niece and the most decorated female swimmer in history. He argued that Katie Ledecky, Caitlin Clark and other standout women athletes are “driving eyeballs through excellence.” Investors have, in turn, set their sights on women’s sports as a relative bargain with rising superstars to serve as faces of their leagues.
As sports valuations become “like trying to catch a bird flying away,” Ledecky identified the WNBA as a bellwether of where women’s sports might be headed; Sportico recently reported that the Golden State Valkyries are the first $500 million women’s pro sports team, and the value of every WNBA team has increased more than 100% over the last year.
“There’s a real feeling that women’s sports teams will go up to $1 billion in basketball,” Ledecky said.
The Future of Valuations
How much higher can valuations go?
Ledecky remains bullish. For one, sports teams are a “non-correlated asset” that largely perform independent of the overall market. Many thought the uncertainty of “black swan” events like the September 11 terrorist attacks, 2008 financial crisis and Covid-19 pandemic would spell doom for live sports. In each case, Ledecky pointed out, the fans still showed up and tuned in. Deals get bigger year after year as sports assets prove their resilience.
Even more, cryptocurrency and artificial intelligence are minting a fresh crop of billionaires in the United States. Sports teams can represent a “trophy asset” for these wealthy individuals, and skyrocketing valuations are, at least in part, a classic supply-demand response as more people compete for a limited number of sports franchises.
“They want that recognition,” Ledecky said. “Just being another rich person in the city that they’re in – no bueno, right? Owning a piece of a sports team – very bueno.”
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.
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