Ways to invest in sport – existing model and its disruption
Sport is one of the biggest and fastest growing industries in the world. It’s a trillion-dollar commercial enterprise involving countless participants on all levels of economic activity, and it’s a field full of passion and emotions, that brings people closure and a sense of belonging.
Everybody loves sport, either as a participant or a fan, and many dreams of having a piece of it, to own a sports franchise or a stake, to support their team, favourite athletes, or, well, just to make their bank accounts bigger. But till now this privilege mostly belonged to a very exclusive club of investors – big corporations and very wealthy individuals. Till now. Cause we aim to change that.
Before we dig in and elaborate what are some of the advantages of our business model, let’s take a look at how investment in sport was and still is possible till now.
Corporate Ownerships and Affiliations. There are several major companies that have stakes in professional sports teams, or the companies have an affiliation with the owner. For example, NBA’s Miami Heat owner is Mickey Arison from 1995, the CEO of Carnival Corporation, the world’s largest cruise ship operator. One of the well-known corporate owners was also the Walt Disney Company, but it sold its stakes in the Anaheim Ducks and Los Angeles Angels. And so on.
Teams are sold for huge amount of money, with a record in the NBA (Houston Rockets) and MLB (Miami Marlins) this year. According to Forbes, there are now 100 sports teams across the globe worth at least $1 billion.
Exchange Traded Funds (ETF). Another possibility is to invest in ETFs, an investment fund traded on a stock exchange, that has a small percentage of investments in companies with sports team exposure. Few to consider are EWJ – iShares MSCI Japan Index Fund, FXD – First Trust Consumer Discretionary AlphaDEX Fund, IAI – iShares Dow Jones U.S. Broker Dealers Index Fund, ProSports Sponsors exchange-traded fund, etc.
ETFs are passively managed, so generally, expenses are lower than those for actively managed funds. Still, since ETFs are traded like stocks, you have to pay your broker a commission to do so, every time you want to purchase an amount of that particular ETF.
Green Bay Packers. This professional football team was the only professional sports team that actually sold stock directly to the public. Everything started in the early 1900s when the franchise floundered, so the local businessmen nicknamed the “Hungry Five” formed the non-profit Green Bay Football Corporation and raised $2,500.
Fans had a chance to buy shares in 1923, 1935, 1950, 1997 and 2011. There were, however, no dividends and no capital appreciation. Green Bay offered sports fans no share of the Packers profits, nor any chance to profit from the huge growth in the price of the shares. Fans of the team basically bought the stock as a show of pride, team support and bragging rights. They got a few perks, like special stadium tours and access to rookie practices.
Minor Leagues. For those who want to own a part of the team but are not super-rich, investment in minor league teams is one way to get a foot in the door. A sports consulting firm National Sports Services reported, that well-run independent and minor league teams yield an annual return of 5% to 10%. That level of positive cash flow has pushed up the value of these teams, with selling prices averaging four times the purchase price after at least five years in operation. There is still a significant risk in such investments, however, many teams have been turned around and become very profitable.
Here is the thing. Sport is a business, but it’s unlike any other one. Owners face tax and accounting challenges that few other business owners encounter. They must, for example, deal with unique issues as part of the acquisition and operation of a team, like revenue recognition and expenses, players’ contracts, and so on. And let’s not forget there is no room for small investors here. Until now, only major conglomerates, corporations and people commanding extensive amounts of capital were able to participate in the sports financing industry. So what is the solution and what are the advantages of our model?
Blockchain. Yes, guys, blockchain is the game changer here. And although we might sound like a broken record, it will help us to reach goals that were beyond the horizon of realistic implementation before. Utilizing smart contract capacities and other benefits of the blockchain revolution, we minimize the logistical issues and related costs in sports financing and maximize the potential for low-overhead, secure and instant transactions between the participants in the sports economy. With that we allow the sports community to raise funds independently across the world, creating brand new strategies for investment in sport.
With SportyCo platform, that allows athletes, teams, clubs, or other sports organizations to collect funds, we enable the public to get involved in sport on a personal level, acquiring a stake, for instance, in the career path of a young athlete by supporting them financially as they progress.
The power of sports financing is now in the hands of the public, the fans, and not just big corporations. Any fan or sports enthusiast can become a sports investor, depending on their interests and values, with the aim of possible future returns, like a share of future image rights of an athlete, a share of future sponsorship proceeds, commercial rights relationships, a share of transfer rights, or other athletes’ economic rights.
The bottom line. We are disrupting the world of sports financing, but every investor still must take into account there is no money-back guarantee, no matter the investment method. Professional sports may appear to be lucrative, because of the huge contracts that are all over the news, but in reality, many teams, also the most famous ones, consistently lose money. Investors are primarily talent seekers and scouts rolled into one, seeking good investments in a lively and wealthy industry. Have that in mind before making your decisions.
To see how our platform is progressing and what are we improving, please check our status report and plan, and read our blog on how upgrades will be seen by a non-crypto-savvy user. For any additional questions, our team is available almost 24/7 on our Telegram channel.
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