Forwarded this newsletter by someone in your network and want to receive it yourself? Subscribe here 

Got any feedback for me? Respond to this email or on social media (LinkedIn, Twitter).

Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: We’re talking sports globalization. Borrowing from Thomas Friedman’s seminal book, The World is Flat, we assess how this principle has applied to sports.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: The next great WNBA franchise

• 💪 Weekly Reminders that Sports are Awesome: An iconic movie scene recreated with one of the NHL’s young stars, and Lions game > preparing for landing

Hey team,

The NFL played in Germany this past weekend, with an atrocious scintillating! matchup between the New York Giants and Carolina Panthers in Munich.

This is the fifth and final game in the NFL’s 2024 international series, with games taking place in São Paulo and London earlier this season.

This structure will expand to eight games next year and bring on Madrid as a host city, and it is reported that the NFL is exploring adding more international games in locations like Dublin, Paris, and even as far away as Sydney.

Looking further out on the horizon, the NFL has floated the idea of one international game a week and even sent out a trial balloon on its crown jewel — the Super Bowl — taking place abroad at some point in the future.

Whether or not it actually happens remains to be seen, but the NFL’s international strategy highlights a growing trend we are seeing across the $2.6 trillion sports ecosystem: the world is flat.

Before you call me Kyrie Irving, I’m alluding to the title and premise of Thomas Friedman’s seminal book on globalization from 2005, The World is Flat.

In it, Friedman argues that advancements in technology (i.e., the internet), communication, and transportation have effectively "flattened" the world, making it more interconnected and competitive than ever before. These “flatteners” have facilitated the global flow of information, goods, and labor, and it has both created the ability for more countries to compete and innovate on a global scale as well as brought up new problems and challenges for the world to navigate.

TWiF was written almost 20 years ago now. The sports world generally runs a decade or two behind the business world, so it makes sense that we have witnessed the sports globalization era these past several years.

The flywheel of capital and content is picking up speed and traversing the globe like never before, and with it come both opportunities, negative externalities, and unforeseen challenges in the future.

It is not good or bad; it just is.

In today’s SBP, we’re looking at sports macroeconomics and globalization. You’ll learn:

• Examples of sports globalization in both content and capital

• The underlying principles that are driving this, and why sports are following this same trajectory

• The challenges sports globalization creates, and my best guess at what happens next

What does it look like

There are myriad examples of this flattening occurring across the sports ecosystem, but let’s look at three widely adapted use cases: big game strategy, flow of capital, and growing the game(s).

Two caveats here before we dive in:

1. The examples used are meant to be representative of broader trends and are not an exhaustive list.

2. I certainly take a more US-centric approach to this topic, but I have done my best to also pull in examples of non-US companies either coming into the US or engaging elsewhere in the world.

Big Game Strategy

In addition to the NFL examples in the intro, almost every North American professional sports league is playing a handful of games abroad.

MLB had its regular season opener in Asia this year and has found success with its recurring London Series, the NHL has multiple games in Europe, and the NBA plays a handful of exhibition and regular season games around the globe.

Individual sports like boxing have been doing this for years, but the current combat sport juggernaut — the UFC — has continued to reach further and further into the Middle East and other developing markets.

This works both ways, though, as international sports organizations are seeing the U.S. and other foreign markets as a fertile ground for expansion.

The top global soccer leagues have continued to play more and more matches in the States and outside of Europe, citing the increased interest in the world’s game, and cricket has continued to expand out of its traditional sweet spots to the US and other high opportunity locations with its marquee tournaments.

The concept for this is a return to the past where scarcity and novelty are king.

These sports leagues have invested heavily to create interest in these international markets (more to come on that shortly), and today’s hyperconnected world enables these fans to follow along the action.

Bringing a game (or series of games) to these markets drives demand for these fans to see the action up close and personal, and it also creates opportunities for premium experiences with both existing businesses/VIPs taking a special trip over and building new relationships with in-market entities.

Flow of capital

Investors are looking abroad for investment opportunities to generate returns.

A prime example is the growth in American ownership in the English Premier League (EPL). As of the 2024 season, 9 of the 20 EPL clubs are majority owned by Americans (and nine more in the second tier Championship), and there is continued interest these clubs as majority and minority stakes come available. This has spread to other soccer leagues as well, with a number of ownership groups creating a City Football Group-type conglomerate with clubs across various levels and countries around the world.

There are more restrictions in the type of investments occurring stateside, but look no further than the PIF’s LIV Golf tour/subsequent attempt to invest in the PGA Tour as well as the Qatari sovereign wealth fund’s investment in Monumental Sports in DC. There are also opportunities in other parts of the sports industry outside of professional teams/leagues — i.e., youth sports — that are attracting outside interest. Lastly, while not there yet, these foreign entities are also keeping close tabs on the NFL’s new private equity rules and what transpires with college athletics.

Growing the Game

Leagues recognize that in order to grow in foreign markets, they need to make the game more ubiquitous in the local culture and more accessible.

This can come in a few different forms, and many of them deploy a combination of all three in foreign markets:

1. Setting up business operations in the local market. Example: LaLiga, Bundesliga, and other European soccer leagues have established U.S.-based offices to help grow the interest in their respective leagues.

2. Designating specific territories that teams can market in. Examples: The NFL has divvied up a series of international market rights for individual clubs to market to. These are usually based upon location (i.e., west coast teams target Asia) and/or fan demographics (i.e., Cowboys have Mexico). Note that clubs in other leagues do this in a more informal fashion if they have international players that are big in their home countries. Think the Dodgers and Shohei Ohtani or the Lakers and Rui Hachimura in Japan.

3. Developing professional and grassroots organizations/leagues. Examples: The NBA and NFL have both established leagues/developmental programs in Africa, and the NFL lobbied the IOC to get flag football included into the LA28 Olympics. On a more niche level, a number of teams and leagues have instituted supporter clubs abroad and created ambassador-type programs that get local fans to evangelize in-market.

Sports’ “flatteners”

As with Friedman’s assessment in TWiF, a series of macro trends — or “flatteners” are propelling this globalized growth in sports. I want to highlight three.

Technology advances

Let’s start with the most obvious. The growth of the internet, social media, streaming services, and more has unlocked the ability for topics and trends to carry around the globe like never before.

In sports’ case, this means bringing the game and players to fans around the world and creating unique experiences that were once confined to local or domestic markets.

It is rare you will find a major league team or league without some form of international social media account using local languages/customs, and the ability to watch games and highlights and engage in the conversation has removed the geographic restrictions of fandom.

Growth of wealth around the world

A number of developing countries have created substantial economies that growing at faster rates than their more mature counterparts.

According to the World Bank, high-income countries averaged 2.8% gross domestic product (GDP) growth in 2022, versus 3.6% for middle-income countries and 3.4% for low-income countries.

While inflation, currency depreciation, and other headwinds may slow this growth, the law of convergence suggests that these nations will continue to grow faster.

And with the large amounts of wealth comes a consolidation at the top with both companies and individuals. To that end, a number of these developing countries, particularly the Gulf States, are looking for opportunities to grow their profile on the international stage and diversify their wealth from natural resource exports.

This means that wealthy entities will both be looking to invest this capital abroad and attempting to bring events and foreign direct investment in local markets to shine a positive light on their country. In many cases, they are looking at sports as a great industry to help them accomplish this task.

The Qatar 2022 World Cup, the F1 races in Saudi Arabia, and China’s two Olympics in the past two decades are great examples.

Player empowerment

Sports has always had its heroes. We remember those great players’s epic performances and “where you were” when those moments happened. It’s pure nostalgia.

The difference now is that these players’ in-game heroics can spin around the globe within seconds and enthrall an even larger audience. Through a combination of social media and shift towards more persona-based marketing, athletes have stepped into their power in the last several years and risen to become international superstars.

The expectation at this point is that if you are one of the seminal players in your sport, you are not just an athlete — you are a platform and a movement. Top stars across all sports have taken this to new heights, from appearing around the world in international fashion shows and other star-studded events, to launching media companies and venture capital firms, and creating legacy brands that are umbrellas for their style and aura.

To put this in context:

• LeBron James is a billionaire and still growing

• Cristiano Ronaldo has over 1 billion followers across all social media platforms,

• Shohei Ohtani has become such a global star that Japanese brands are signing sponsorship deals with other teams for when Ohtani comes to town for away games a few times a season.

Movements.

What’s notable, though, is that it’s not just the A-list stars building these followings.

Role players, has-been’s, and never was’s are able to build a brand and a following because they’re interesting and have a megaphone that reaches millions of people.

It’s not at the scale of the giants, but people want to see behind the curtain and learn more about these athletes, and the aforementioned technology advances bring it to life like never before.

Accepted investment thesis around sports

Sports investing has always had a presence among the ultra wealthy, with the reasoning for investment, whether acknowledged or implicit, being to have a new, shiny toy and status symbol to show off to friends and peers.

This has shifted over the last few decades, as legitimate investment theses around sports have taken root.

A few areas of focus in these positions:

• In today’s on-demand world, sports is the last frontier getting consumers to watch live entertainment (for the most part — will explain more later)

• Non-collinearity with the global stock markets, which implies that the industry’s performance is not tied to stock market performance

• Opportunities for growth up and down the value chain (i.e., youth sports, leagues, suppliers, etc.)

What’s been interesting is that this is occurring with many different forms of investment vehicles — not just high net worth individuals — focused on various stages of growth.

Venture capital firms are looking for startups in the sports and entertainment space, growth equity firms are finding those mid-tier opportunities, and private equity funds are springing up to invest in larger, more late stage deals. Look no further than the proliferation of private equity involvement in team ownership across the world.

The numbers prove this out.

According to stats from CNBC, annual global investment in the professional sports industry rose from below $10 billion in 2008 to more than $30 billion in 2023. In the broader sports ecosystem, investment bank Drake Star estimated that there was more $27 billion in M&A in the first half of 2024.

The need for continued growth at the league level

More mature leagues think in 5-10 year increments when planning. Many of them recognize that while there are certainly goals to make incremental gains with new fans domestically and there are always new generations to try to attract and nurture, they need to continue to diversify and seek greenfield opportunities to grow revenue and overall value.

No different than traditional business, foreign markets can be fertile grounds for these pursuits, and it’s unsurprising that there has been a growing focus for so many of these developed leagues.

Externalities

As with general business, the globalization of sport is not without its potential pitfalls. Let’s examine three major ones.

Morally ambiguous decisions

The need to remain relevant and create value can lead sports entities into ethical gray areas.

The most pertinent example was the preliminary backlash the PGA Tour received after announcing its merger with the Saudi Public Investment Fund (PIF) last year.

Detractors of the move skewered the PGA for partnering with a country with a checkered human rights history, and they accused the PIF of “sportswashing,” or the the use of athletics to bolster public image and divert attention away from other areas of focus.

There are myriad other instances of this sportswashing taking place, often with events or investments coming from developing nations that have some skeletons in their closets.

Regardless of one’s personal opinion on the subject, it does inflame tensions with a large segment of people and could cause issues for attracting and retaining fans in the future.

Loss of tradition and accessibility in favor of revenues

Friedman talks in TWiF about China’s growth from timeless kingdom steeped in tradition and history to manufacturing powerhouse that eroded core parts of its culture and identity.

In a similar vein, the move to "grow at all costs” and can result in a loss in the magic of what made sports special in the first place.

There is a romanticization of sports and what once was, with people recalling when they saw a legend play in person when they were kids, the electricity of a monumental game they were at, or how they share a special bond with loved ones over a team, a player, or a moment.

In the modern era, many sporting events have priced out the average fan of being able to take in those moments, and those who do make it into the arena or stadium are greeted with a sterilized, corporate-feeling event that removes some of the authenticity and magic. When expanding this challenge to a macro level, a globalized presence can result in commoditized, overly manufactured products that operate in the name of efficiency and repeatability.

To be clear, this is not universal by any means, and as I point out to you at the end of my newsletters each week, we are often reminded how awesome sports are.

But, it’s hard to deny that with the professionalization and globalization of sports leads to a more commercialized product that may not have the charm and mystique that evoked the same emotion from so many fans.

My guess is that each of you reading this can draw upon a recent instance where you observed and engaged in something related to sports that made you feel this way.

Which brings us to our last point.

Potential oversaturation 

Sports has been touted as the industry that doesn’t lose. Valuations keep going up and to the right, and the demand for innovative products and services remains high.

Sportico’s most recent valuations of the NHL, considered firmly last in the four major professional sports leagues in North America, grew valuations by 37% year over year, and nearly every team in the big four leagues is worth over $1 billion now.

But, given the issues that have come with the growth — namely the reliance on the legacy media model — some are concerned we may be killing the golden goose.

I follow a couple industry veterans in Europe who have been calling this out for a few years, and they are seeing some of the most clear cracks in the foundation in the most popular sport in the world — soccer.

As we have noted in the past, runaway spending being driven up by irrational actors in the market (owners from the Gulf States) with no interest in adhering to traditional P&L business principles has put a lot of downward pressure on other clubs to continue to spend in order to 1. not be relegated, and 2. put together a good enough roster to compete for championships, which means enough revenue to start the cycle over the next season.

When looking for how to subsidize this spending and justify their soaring valuations, sports entities point to media rights as the foundational element that buoys them. And the expectation is that sports entities can keep pushing the envelope in globalization and commercialization with no thought to the consequences because the demand will be there.

But, what happens if we hit the saturation point, the market corrects, and these rights don’t keep growing in eye watering increments?

While the NFL and NBA have been enjoying monster growth in their new TV deals, France’s Ligue 1 had a disastrous negotiation cycle, resulting in a €500 million per season package that represents a 12.3% decrease from the last deal. The initial asking price when negotiations began was €1 billion.

It gets more concerning when you look at the EPL’s renewal late last year with Sky. While a record £6.7 billion on paper, the overall growth was only 4%, just below the levels of inflation at the time. So, the renewal was effectively flat.

These media rights contractions, driven by media companies struggling to stay afloat in a rapidly eroding industry, are threatening to topple the house of cards. Couple that with weary fanbases also dealing with varying degrees of severe inflation around the world, and you’ve got a powder keg.

The U.S. operates its leagues in a socialized manner where revenues and challenges are pooled and shared, so it is somewhat more insulated from these issues.

But, there are nascent examples of these same cracks beginning to show — i.e., the local media rights problem, the carriage disputes between media companies and distributors — and you better believe the idea of what keeps propelling the industry forward keeps executives up at night.

What happens next

Despite the aforementioned concerns, the sports industry is not “dying.” Interest is not waning, and we are seeing record attendance numbers and revenues in some of the marquee sports.

I do think we are in the middle of a paradigm shift, though.

As with all industries in the middle of a rapid growth cycle, there are likely to be winners and losers that come out on the other side as the industry matures and new paradigms begin to develop.

Fandom = “Glocalization”

Being a fan does not just mean those who show up in your stadium or watch on TV anymore. Now, it means following your club and top players on social media/watching highlights on YouTube, buying merchandise from the club’s different fashion lines, and playing with them in video games or repping their brand in virtual worlds.

The same tribalism of sports fandom still exists, but the difference now is that the connection points are more varied and it transcends geography.

Sports entities will continue to balance bringing the authenticity of their brand to consumers around the world, but with the technology advances, it will be translated through the lens of their local markets.

Media consolidation, and the rich get richer

The champagne and cocaine days of the media sports rights wave for all are likely over.

Tier 1 properties will continue to get their money assuming the steady supply of eligible bidders from legacy media companies and tech companies. This will also extend to international rights as more fans are interested in watching these top properties.

But, there will be a point of reckoning for others as the traditional cable bundle further erodes.

This trend is already taking shape in Europe, and we are likely going to see similar developments take place in the States with lower-tier properties (RIP Pac-12).

The tech companies are new entrants that have plenty of cash to spend and could help boost competition in negotiations, but they have proven to be stingier than expected when it comes to media rights.

Given these rights have been the foundation bolstering much of the valuation growth over the past decade, what happens when the music stops?

You have to course correct and find new/improved revenue streams, but it’s often at the cost of short term revenues and potential valuations.

The cascading effect of this shift leads me to my last point.

Investment Bifurcation: VC or PE type approach — no in-between

If you’re the owner of a small market MLB club, you should be selling as soon as you’re able (see: Minnesota Twins).

The valuations may continue to go up for the time being because of inertia in the broader market, but the underlying fundamentals, particularly in non-salary cap leagues like MLB or European soccer, are going to catch up to the market vibes eventually. You will see an even greater disparity between the have’s and have not’s in these leagues, and the only way they will able to rise above their stations is through ownership with near unlimited coffers (rare) and willingness to burn said coffers with no guarantee of success on the field (rarer).

Until this correction, the dumb money will likely continue to flow in as these groups play follow the leader.

The risk profiles for the smart investors will continue to move to the outer ranges:

• Take low risk bets (i.e., NFL) with the capital and time to take advantage of greenfield opportunities abroad

• Search for assets in undervalued areas — i.e., women’s sports, bringing successful platforms abroad, expanding sports to different formats (TGL, Sprint League, etc.) — and take on more risk for potential outsized returns. The opportunity here is not only finding good businesses that have room to grow, but also the recognition that there are a number of later stage funds that have flooded the space in recent years and need to deploy capital somewhere.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

Opener: The NFL’s recent international strategy showcases a growing trend we are seeing across the $2.6 trillion sports ecosystem: the world is flat.

Based upon Thomas Friedman’s book on globalization from 2005, The World is Flat, the premise is that advancements in technology (i.e., the internet), communication, and transportation have effectively "flattened" the world, making it more interconnected and competitive than ever before. These “flatteners” have facilitated the global flow of information, goods, and labor, and it has both created the ability for more countries to compete and innovate on a global scale as well as brought up new problems and challenges for the world to navigate. TWiF was written almost 20 years ago now. The sports world generally runs a decade or two behind the business world, so it makes sense that we have witnessed the era of sports globalization these past several years. The flywheel of capital and content is picking up speed and traversing the globe like never before, and with it come both opportunities, negative externalities, and unforeseen challenges in the future.

Shot: I’ve called out three examples of what this looks like:

• Big Game Strategy: Playing marquee games in international markets, whether that be NFL or NBA in Europe, or the European soccer clubs playing in Asia and the U.S.

• Flow of Capital: Americans now own nearly 50% of the EPL teams, and several international entities have invested in sports in the U.S.

• Growing the Game: This comes in many forms, but many entities set up business operations in the local market (i.e., LaLiga in New York), designate specific territories for teams to market to (i.e., NFL), and developing professional/grassroots organizations and leagues in international markets (i.e., NBA Africa, flag football in LA28 Olympics)

Shot: There are a series of “flatteners” driving things forward in sports

• Technology advances: Internet, social media, and AI are driving forces in bringing content and connectivity to fans everywhere.

• Growth of wealth around the world: Developing countries are rapidly growing and looking to invest in sports to diversify their assets, bring attention to the country, and get them a seat at the international table

• Player empowerment: Players are not just athletes; they’re platforms and movements.

• Accepted investment theses in sports: Last thing to really get people’s attention in real-time, not tied to global stock markets, and opportunities up and down the growth chain (i.e., youth sports, suppliers, etc.)

• Need for growth: To continue to justify valuations, the leagues need to look for new opportunities. Foreign markets represent untapped potential and a possible path to growth

Shot: While exciting on many fronts, there are also negative externalities with this globalization.

• Morally ambiguous decisions: LIV Golf/PGA Merger is a great example, and there are a number of instances of “sportswashing” by other countries.

• Loss of tradition and accessibility in favor of revenues: Sacrificing some of the magic of sports for the bottom line

• Potential oversaturation: Do we run the risk of pushing this too far and killing the golden goose? Seeing some signs of weakness in Europe, and there are concerns it could come to parts of the American sports ecosystem

Chaser: As for what happens next:

• Fandom = “glocalization”: Sports entities will continue to balance bringing the authenticity of their brand to consumers around the world, but with the technology advances, it will be translated through the lens of their local markets.

• Media consolidation, and the rich get richer: The champagne and cocaine days of the media sports rights wave for all are likely over. Tier 1 properties will continue to get their money assuming the steady supply of eligible bidders from legacy media companies and tech companies. This will also extend to international rights as more fans are interested in watching these top properties. But, there will be a point of reckoning for others as the traditional cable bundle further erodes.

• Investment bifurcation - VC or PE type approach, with no in between: There will likely be a correction where there is less money flowing into riskier companies that have unsteady revenue streams and uncapped costs. The risk profiles for the smart investors will continue to move to the outer ranges:

  • Take low risk bets (i.e., NFL) with the capital and time to take advantage of greenfield opportunities abroad.

  • Search for assets in undervalued areas — i.e., women’s sports, bringing successful platforms abroad, expanding sports to different formats (TGL, Sprint League, etc.) — and take on more risk for potential outsized returns. The opportunity here is not only finding good businesses that have room to grow, but also the recognition that there are a number of later stage funds that have flooded the space in recent years and need to deploy capital somewhere.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. This team is going to be a monster success

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Ferris Bueller Connor Bedard, you’re my hero

2. These Lions fans have no time for the final preparations for landing

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex