SCOTT SIMON, HOST:
A big purchase has rocked the sports world. The Los Angeles Lakers, who haven't won a championship in five years, sold for a $10 billion valuation. The new majority owner is Mark Walter, CEO of financial services giant Guggenheim Partners, who also owns Major League Baseball's Los Angeles Dodgers. And recent rule changes in the NFL and Major League Baseball now allow for private equity firms to own a share of their teams. Kurt Badenhausen is a sports valuations reporter at Sportico. Thanks very much for being with us.
KURT BADENHAUSEN: Thanks for having me on.
SIMON: And it's not just the Lakers. The Boston Celtics - basketball - Washington Commanders football team also sold recently for about $6 billion each. What's driving these prices?
BADENHAUSEN: A few things are driving it. You talk about sports as an asset class now, which is not something that existed 10 years ago. And they traditionally are recession-proof. They do not go down in value. You can count on one hand the number of teams that were sold for less than they were purchased for over the last 50 years. People are really recognizing the scarcity of these assets. There's only 32 NFL teams. They're not making any more of them. They make more billionaires every single year. There's 30 NBA teams. At some point, we'll add two more. But it's pretty rare, particularly in the four biggest sports leagues in North America, to have expansion. We've been talking about the top of sports franchise valuations for 20 years now, and they keep going higher.
SIMON: The Buss family owned the Lakers for decades. Now they've sold the team. Of course, there's the Rooney family and the Pittsburgh Steelers and the Brown family of the Cincinnati Bengals, but are family-owned teams becoming a thing of the past?
BADENHAUSEN: It's getting harder. And to keep up, you really need to see significant investment. I mean, look what's happened in the WNBA with expansion this week. There are three people that basically two guys worth $10 billion and a third guy worth $30 billion who just are the new owners in the WNBA. It's a new mindset where owners are coming in and deciding we want to spend. They see an opportunity to make these assets a lot more than just the team. So whether that's a mixed-use real estate development, launching a venture fund underneath the team, hospitality companies, media assets, there's a lot of different avenues that you can take where the sports team is that tentpole and sits in the center. But you have all these different tentacles coming out of it and other revenue opportunities.
SIMON: What does this mean for fans, do you think?
BADENHAUSEN: It becomes tricky for fans because the casual fan gets priced out in a lot of ways when a building costs $2 billion or $5 billion in Los Angeles. You need to charge a certain price point on tickets to pay for these buildings. And so what happens is these buildings get built with the corporate sponsor in mind, with the premium seat in mind, and those are really expensive items. These leagues are all thinking about their audience at the arena, at the stadium, but their money is really built outside there.
Adam Silver talks about the NBA. He says, 99% of our fans will never step foot in an NBA arena. It's servicing those fans, and then also those corporate fans that pay the high prices and tap the premium. So the average die-hard fan, in some ways, is - it's tricky for them to keep up.
SIMON: When you have private equity so involved in sports ownership, what does that mean for the athletes and the team? These are corporations that aren't known for absorbing loss.
BADENHAUSEN: That's a good point. But all of these leagues have opened themselves up to private equity, but with very strict guardrails. They can't have any sort of governance. They all have to be passive investments. And honestly, they do not want to run these organizations, too, 'cause it's very hard to run a sports team and requires tremendous bandwidth. But this is all kind of new. We'll see how this plays out if these teams run into trouble in five years, 10 years, and private equity suddenly has to get out, how that works.
SIMON: Kurt Badenhausen, sports valuations reporter at Sportico. Thanks so much for being with us.
BADENHAUSEN: Thank you so much.
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