As Trump’s Tariffs Rock The Market, Sports Team Owners Have Nothing To Fear

Key Concepts

• Team valuation resilience during economic downturns
• Impact of tariffs and potential recession on the broader market
• Long-term contracts (media rights, sponsorships, premium seating) as revenue stabilizers
• Scarcity and "fun value" as drivers of team valuation
• Comparison of sports franchise growth vs. S&P 500

Impact of COVID-19 on Sports Teams

• Revenue Decline: The Boston Red Sox experienced a significant revenue drop of nearly 71%, from $519 million in 2019 to $152 million in 2020, due to the COVID-19 pandemic. The MLB average also saw a substantial decrease, falling from $346 million to $122 million.
• Team Value Appreciation: Despite the revenue losses, MLB franchises appreciated by an average of 3% from 2020 to 2021, reaching an estimated $1.9 billion, and further increased by 9% the following year to $2.1 billion. The Red Sox outperformed the average, with a 5% increase followed by a 13% jump, reaching a valuation of $3.9 billion in 2022 and an estimated $4.8 billion currently, ranking third in baseball.
• Tom Werner's Perspective: Tom Werner, chairman of Fenway Sports Group, acknowledged the short-term financial hit during COVID-19 but emphasized the importance of patience and long-term investment strategy. He stated, "If you look at 2008 or during co in 2020 you had to fasten your seat belt and know that in the short run you're going to take a financial hit but that's part of being an investor right everything took a financial hit during CO and you just have to ride it out and be patient."

Economic Uncertainty and Tariffs

• Market Volatility: President Trump's tariff policies have introduced uncertainty into the market. As of early May 2025, the S&P 500 index had dropped 4% and was down 15% before a rebound triggered by a pause in tariffs.
• Recession Probability: JP Morgan economists estimate a 60% chance of the US entering a recession this year, while Goldman Sachs puts the odds at 45%.
• Sports Teams' Resilience: Despite the potential economic downturn, sports team owners are well-positioned to weather the storm due to the historical trend of team values remaining stable or increasing during economic downturns.

Historical Performance of Sports Franchises

• Long-Term Growth: Team values in the four major North American leagues have increased by approximately 2,000% on average since 1998, when Forbes began valuing sports franchises. This growth rate is more than double the S&P 500's growth over the same period.
• Performance During Crises:
  • Following the 9/11 terrorist attacks (2000-2002), team values appreciated by 20%.
  • During the subprime mortgage crisis (2007-2008), team values increased by 7% and remained steady in 2009.
• Artos Sports Franchise Index: The Ross Artos Sports Franchise Index, tracking quarterly data from December 1960 to June 2024, shows declines in team values in only 39 out of 255 entries, with just 16 declines since 1976.

Revenue Stabilization Mechanisms

• Long-Term Contracts: Leagues and teams are shielded from market downturns through long-term contracts covering media rights, sponsorships, and premium seating, which secure a significant portion of their revenue years in advance.
• Premium Seating: NBA teams, for example, generated an average of $45 million from luxury suites and other premium seating areas during the 2023-24 season, representing nearly 12% of their total revenue.
• National Media Rights: National media rights constitute a substantial portion of revenue: 35% in the NBA ($132 million per team) and 60% in the NFL ($381 million per team in 2024), with NFL TV deals extending to 2033.

Scarcity and "Fun Value"

• Limited Number of Franchises: The scarcity of franchises (only 124 across the four major leagues) drives up their value.
• Bidding Wars: Competition among billionaires to own teams can lead to inflated valuations.
• Mark Cuban's Perspective: Dallas Maverick's minority owner Mark Cuban stated, "Over the long term the scarcity and fun value will always be up and to the right," highlighting the enduring appeal and investment potential of sports franchises.

Conclusion

Despite potential economic headwinds such as tariffs and recession risks, sports team valuations have historically demonstrated resilience. Long-term contracts, scarcity, and the inherent "fun value" associated with owning a sports franchise contribute to their stability and growth, making them attractive investments even during periods of economic uncertainty. The article references Justin Burbam and Hank Tucker's piece on Forbes.com for full coverage.