There was a time when conventional wisdom said owning a sports team was a dalliance, a pursuit for the rich who could afford a risky, but personally satisfying investment.
At the MIT Sloan Sports Analytics Conference this year, two NBA team owners sought to dispel that notion, arguing that the Internet, global media, and e-commerce have opened up new avenues for a major return on their investments.
“I thought this might be a really bad investment and we’d have the time of our lives,” Wyc Grousbeck, CEO of the Boston Celtics, said Feb. 27 on a panel at the conference in Boston. “I miscalculated it. We’re having the time of our lives, but it turned out to be a good investment.”
Grousbeck bought the Celtics for $360 million in 2002, following a career in venture capital. At the time, Grousbeck said, the Celtics were a local phenomenon, with little opportunity for revenue even in nearby regions like Western Massachusetts and Southern New Hampshire.
Thirteen years and one championship later, the Celtics are valued at $1.7 billion. The team is “the same little franchise, but it’s not just the strength of a radio dial,” Grousbeck said. Fan engagement, a phrase heard throughout the conference, allows teams to cultivate, connect with, and sell to fans around the world.
“Increased fan engagement makes the rest of the sports world that much bigger,” said Michael Rubin, executive chairman of licensed sports merchandise retailer Fanatics and co-owner of the Philadelphia 76ers. “Which is why I’m so bullish on sports.”
Sports apparel and merchandise was once a brick-and-mortar-centric business, with most sales happening in local team markets. E-commerce has allowed the industry to grow, enriching the coffers of license holders and allowing sellers to capitalize on what Rubin called “micro-moments.” When New England Patriots cornerback Malcolm Butler intercepted Seattle Seahawks quarterback Russell Wilson in the final moments of the Super Bowl this year, he secured a championship for the Patriots and became a sudden sports hero. But Butler isn’t a superstar, so the team pro shop didn’t have jerseys available. Fanatics was taking orders immediately, Rubin said.
That’s a major micro-moment, but Rubin’s point was that sports fans celebrate a series of moments that happen throughout and between every game and can be hyper-specific. Rubin endeavors to sell merchandise to match each moment.
“Fans have a deep need to get any player, any team, any color, any place, all sorts of variations, and it doesn’t work in brick-and-mortar,” he said. That said, he conceded there are new opportunities for revenue in sports arenas, mentioning in-seat merchandise ordering and delivery. On another panel, Sacramento Kings owner Vivek Ranadivé summed up personalization of the fan experience as “the arena checks into you.” That could mean a season ticket-holder’s favorite foods delivered to his seat, a virtual T-shirt toss game conducted through smartphones, and many other creative ways to engage fans during games.
Rubin and Grousbeck—who were interviewed by Jessica Gelman, vice president of customer marketing and strategy for the Kraft Sports Group, which owns the Patriots and the New England Revolution—also said sports betting is a burgeoning opportunity for investors in the sports world. NBA Commissioner Adam Silver has called for legal sports betting.
“I think it’s easy money. [Legal] sports gambling is definitely coming,” Rubin said. “I think there will be tens of billions of dollars created very quickly in this business.” Legal betting has increased fan engagement in Premier League soccer, Grousbeck said.
Grousbeck’s recent investments focus on emerging sports markets that he believes will grow with a global fan base. Street League Skateboarding, founded in 2010, is a new model for skateboarding competition. And Formula E racing, founded last year, hosts electric car racing in major world cities. He is also invested in Seatgeek, one of a number of competitors in the mobile sports ticket marketplace that operates not unlike similar websites and apps for airline ticketing.
With all the opportunities in the sports world, Grousbeck—a Celtics fan long before he became owner—said fan enthusiasm and commitment make the team a “protected franchise.” Smart business decisions, he said, can make owning a sports team an even safer bet than the tech industry that has made sustained growth in sports business possible.
“I don’t know in 20 years who’s going to be the leading phone or car company or anything else, but I do know the Celtics will be around,” he said.