Madison Square Garden and E-Sports (NYSE: MSGE)


We’re mixing things up at Fresh Capital - normally we dive deep into a company to assess and understand its strategy, how it wins in the market and the future trends that could impact it. In addition to this, we decided to start dissecting industries and markets to help you understand the market forces that impact companies. First batter up? The sports industry.

  • Whether the sports industry is an attractive market and how international expansion has allowed ‘all boats to rise’
  • The tension between the value of a sports company and the performance of the sports team
  • Publicly listed sports teams and unpicking why teams go public
  • Madison Square Garden Sports, Manchester United and the Green Bay Packers as case studies for how listed sports companies spend their cash
  • Source: Fresh Capital (do we count Sports Illustrated as ‘sports’?)


What is the sports industry?

The sports industry today covers the entire value chain of sports - from tickets to events, stadiums, leagues teams, merchandise to media rights, sponsorship and licensing.

Segmenting the industry, we can see a few key players in the field:

  • Sports Leagues and Teams
  • Media and Broadcasters
  • Apparel and Merchandise

Sports has undoubtedly increased in popularity over the last decade. Streaming services, global expansion of leagues, international fans and sports betting has driven growth in the industry, leading to ballooning of both revenue and valuations of these players.

Source: Roundhill Investments


The global sports industry is estimated to grow to ~USD $630bn by 2023 highlighting the growth in the industry and attractiveness for both investors and players to move into the space. Additionally, the industry is opening new doors both upstream and downstream in the value chain, further increasing attractiveness and the potential of the market.

How do sports teams and leagues make money?


Generally speaking, leagues and teams generate revenue through three key streams:

  • Event revenue - ticket sales, season tickets, food and beverage sales. Ticket sales includes season tickets, dynamically priced individual tickets and tickets to corporate suites and boxes
  • Media and broadcasting revenue - licensing of media and streaming rights to games, as well as revenue received from the league as a result of revenue sharing agreements
  • Sponsorships and advertising - revenue generated from selling advertising spots and signage on stadiums, scoreboards, jerseys and anything else you can squeeze a logo on

Additionally, teams generate revenue through merchandising (although it’s more common to license out logos to merchandisers) and renting out their infrastructure assets (stadiums, training facilities).

There is an interesting tension for sports teams when generating revenue - teams are limited in how many tickets they can sell to a game (stadiums are capped), as well as broadcast rights and sponsorship agreements (these are generally exclusive). As a result of this, they cannot just create more ‘supply’ in the same way a company could just manufacture more widgets - their only path to increasing revenue is to increase the price (and the value) of tickets, sponsorship and advertising.

But in order to do this, teams should be winning. Teams that perform and outcompete other teams or have a star player attract more eyes on the games and more fans to the stadium, and therefore increases the value of a ticket to a game or sponsorship opportunity. As a spectator, you’re not going to pay a lot of money to see your team get blown out by a much stronger competitor when its uncompetitive, but you may want to pay good money to see LeBron James or Ronaldo, because these players have ‘star power’ and attract more eyes on the games they play.

Pictured: Star Power (Source: Forbes)


How do teams get more ‘star power’?

Teams compete for players and need to attract the better players to sign with those teams, or draft players who can grow into stardom. Implicit to doing this is having the resources to attract or develop these players.

This is where going public as a team can help. As we discussed on our ‘What is an IPO?’ episode, teams that go public can generate large amounts of cash quickly, which can help with hiring coaching and development staff, scouts, build state-of-the-art training facilities and bigger stadiums to sell more tickets.

Madison Square Garden Sports (MSG) is a great example of this - MSG is a publicly listed sports company that owns a number of New York sports assets including the NY Knicks (NBA) and the New York Rangers (NHL). MSG went public when it was spun out of another organisation, but having the company public means they could issue more shares to raise capital and enable MSG to invest in better facilities to attract players, hire more scouts to evaluate players (particularly internationally) or renovate their stadium to increase capacity or a better fan experience.

The Beard has joined the Utah Jazz (Source:


So why don’t more teams go public?

The key reason that teams don’t go public is to maintain control and limit accountability. Owning a sports team is the closest thing to having a royal family in the US. And in Europe, they may even be more highly regarded than royalty.

Going public would dilute ownership and take away the autonomy and decision making that comes with ownership. Additionally, once a team goes public, they become subject to a number of regulations that would impact the operations of the business. Owners may have to disclose the rationale for their organisation’s decisions to hire coaches and why they drafted or traded particular players. This could lead to criticism, negative press and distractions that affect a team’s performance and ability to win.

Source: Deloitte


Looking ahead, what are the some key trends in the sports industry?

As leagues expand internationally and the world emerges from the COVID-19 pandemic, there are a number of key trends that will continue to drive growth in the sports industry:

  • Shift in business model - Leagues and teams are starting to stream directly to consumers (D2C), rather than licensing or selling broadcast rights to media organisations, enabling leagues and teams to take ownership of the fan relationship and opening doors for data-driven advertising and monetisation. An example of this is the NFL Game Pass, a streaming service run by the NFL
  • Immersive media Leagues are now using AR / VR to improve the viewing experience of fans and leveraging this technology to simulate being on the bench and watching the match from the same angle as the players on the team (the NBA is trialling this right now and letting fans watch games in VR)
  • Secondary sports markets’ - We’re talking about betting and fantasy sports. Sports betting has become even more popular, with instant betting, micro-betting and fantasy sports becoming avenues for consumers to generate money from the outcomes of matches, or even events within matches. DraftKings is a platform that lets fans play fantasy sports while betting on outcomes of games, all in one platform
  • Celebritisation of athletes - Athletes have always been in the media spotlight but have increasingly become so due to the rise of social media platforms. Athletes are looking to grow their own personal brand and reputation, leading to more eyes on their game or more people interested in their ‘stardom’, which ultimately generates a halo effect around particular players, driving up ticket revenue or advertising sales (an NBA player even created their own crypto-currency)
  • Non-Fungible Tokens NFTs have taken off with sports highlights being one of the most popular segments of the NFT market (earlier this year a LeBron James dunk sold as an NFT for over $200k) As NFTs continue in popularity, the sports industry will undoubtedly look to capture their own piece of the pie to help grow revenue and audience engagement

What’s the verdict on the sports industry?

As the global vaccine rollout continues, stadiums will fill back up, sports events will return and be as popular as ever (even if athletes are a bit out of shape), fans will be hungry for entertainment and all these indicate the industry continuing on its growth trajectory. On our podcast this week, we dived deeper into Madison Square Garden, the Green Bay Packers and Manchester United as interesting case studies for publicly traded teams, so check us out!

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