Exploring Possibilities for Player Ownership in Professional Sports?
In the world of professional sports, the relationship between athletes and their teams has always been a subject of interest. Recently, discussions have been brewing about the potential for players to own equity in the franchises they represent. Let's delve into this intriguing topic and explore the current state of affairs.
The NBA-NBPA Collective Bargaining Agreement (CBA) identifies the revenue streams considered Basketball-Related Income, which is used to derive the salary cap. However, annual valuations of a franchise's value purely for salary cap purposes would be an uncertain, tedious, and costly exercise.
Valuations for sports teams have seen a significant surge in the last five years. The average value of an NFL club is a staggering $7.1 billion, while the NBA and NHL clubs follow closely at an average of $4.4 billion and $3.8 billion respectively. The Orlando Magic, for instance, is currently valued at approximately $3.2 billion, according to Forbes. The average value of an MLB club is $2.6 billion.
The idea of players owning equity in their teams is not entirely new. John Elway, a legendary figure in the NFL, was offered the opportunity to buy 10% of the Denver Broncos in 1998 but declined. More recently, Steph Curry has argued that players are underpaid and should receive equity interests in the clubs for which they play.
The Women's National Basketball Players Association (WNBPA) is advocating for an equity-based model in ongoing labor negotiations with the WNBA. However, there are currently few answers regarding the possibility of players owning equity in professional sports teams. Private equity firms have invested in several sports teams, including the Buffalo Bills, Boston Red Sox, and Los Angeles Dodgers, but no publicly known names of individuals or institutions negotiating the introduction of a system that allows basketball players to obtain equity shares in their franchises have surfaced.
The valuation of a player's equity interest in a sports team is not straightforward and could depend on several factors. Sportico estimates that NBA teams are valued at an average of 11.9 times their annual revenue. If Paolo Banchero's interest were valued at $32 million, for example, it would need to be accounted for and could count against the club's luxury tax thresholds.
The differences in sports franchises' holdings, such as multiple sports teams, stadiums, ancillary property development, and more, can help explain large discrepancies in franchise valuations. These complexities make the implementation of an equitable ownership model for players a challenging endeavour.
As the landscape of professional sports continues to evolve, it will be interesting to see how the concept of player equity unfolds. The potential benefits for players and teams alike could reshape the dynamics of the sports industry, offering new opportunities for both parties. Stay tuned for updates on this intriguing development.
