The Relentless Optimization of Pro-Sports Franchises
Later this year, the NFL will almost certainly approve the sale of the Washington Commanders to a group led by Josh Harris. The private-equity investor already owns majority shares of the NBA’s Philadelphia 76ers and the NHL’s New Jersey Devils, and a sizable piece of Crystal Palace in soccer’s English Premier League. To buy the Commanders, Harris and 16 partners will pay $6 billion, the largest sum ever spent on a sports team—unless England’s Manchester United, which is currently entertaining offers from at least two potential buyers, goes for more in the interim.
Why should the Commanders, whose home market is smaller than that of seven other NFL franchises and who haven’t won a playoff game since 2005, be worth more than any other team in history? And what are the ramifications of the sale for the rest of the NFL—and for teams and fans across all of professional sports? Examine the Commanders through the lens of a multibillion-dollar business that will operate much the way other multibillion-dollar businesses do, and the answers start to become clear.
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For most of the long history of professional sports, teams were basically baubles for rich owners, like art collections or wine cellars. If anyone thought of them as businesses, it was usually to note how capriciously they were run. When William Clay Ford bought the NFL’s Detroit Lions in 1963, for example, he paid about $6 million. That’s the equivalent of nearly $60 million today, an insignificant sum for the head of the family that owned Ford Motor Company. Freed from the constraints of turning a profit like a real business, the Lions were a toy.
In the mid-1990s, I watched a New York Giants practice with Bob Tisch, who had bought half of the team from Tim Mara, the grandson of its founding owner, for $75 million. That seemed like a lot of money to me, but not to Tisch, whose family owned such businesses as Loews Hotels and the Lorillard Tobacco Company. “I don’t care if I never make a cent on the investment,” he told me as we stood on the sidelines one Tuesday afternoon. “I’m just going to pretend I never had that $75 million.”
Since then, the values of sports teams have grown precipitously. In 2004, the NBA’s Phoenix Suns—an investment that nobody would confuse with a New York–based NFL team—cost the real-estate developer Robert Sarver $401 million. A decade after that, the former Microsoft chief executive Steve Ballmer paid $2 billion for the Los Angeles Clippers, who aren’t even the most popular basketball team in their own city.
Ballmer understood that sports franchises, even the historically woebegone Clippers, had evolved into intricate companies that, much like Microsoft itself, have many sources of money. For pro teams, those include live entertainment (that is, tickets to the games being played on the court night after night) but also intellectual property (rights to televise those games and distribute digital video of them), hospitality (rental suites where local executives can drink expensive wine while schmoozing with clients), catering (hot dogs and beer, maybe even prime-rib sandwiches and sushi, all marked up to airport prices), fashion (those $200 “authentic” jerseys), and real estate (not only arenas and stadiums but also the surrounding commercial and residential zones, which the team can own and operate). It’s “the equivalent of a mutual fund” of revenue streams, as the Golden State Warriors owner Joe Lacob once told me. But unlike any mutual fund I’ve ever heard of, these mutual funds have passionate followers, which is why those $200 jerseys sell so well.
Beyond that, sports franchises in North America are attached to leagues that hold monopolies and protect individual owners from economic failure. This means the investment comes with no risk. Run the franchises as badly as you like—even lose as often as the Clippers did under Donald Sterling, the owner before Ballmer. It won’t matter. You’ll still make a killing should you ever want to sell. The value of the Detroit Lions is about $3 billion, which happens to be more than the Ford family’s current stake in their automaker.
This explains why Josh Harris could gather 16 investors to help him buy the Commanders. Of course, even all those partners weren’t enough to get him to the finish line. He reportedly also plans to borrow $1.1 billion—the league limit—against the value of the franchise, plus an undisclosed additional sum using his other franchises as collateral. That elaborate financial structure includes a lot of different entities, individual and institutional, that will be seeking a return on their investments. So even if Harris wanted to, he couldn’t treat the Commanders like a bauble. Rather, he’ll doubtless run them as he runs the Sixers and the Devils and the other billion-dollar companies in which he has invested: by relying on data collection and analysis and implementing the same marketing and financial-management practices that have become standard across most industries.
Everyone knows—or thinks they know—what happened when sports teams used analytics to optimize the games they play. In baseball, analytics ended bunting, encouraged infield shifts, and brought us bullpen-by-committee. It also ushered in the thrilling three-point game of the Golden State Warriors, and savvy soccer teams around the world upending giants by applying insights culled from data to actually figure out what was happening on the field.
We’re now seeing a similar revolution in the front office. Applying best practices, as promulgated by management consultants, venture-capital firms, and investors in public companies, has become a basic tenet across the various leagues, which explains why the playlist you hear at an NBA game in Charlotte, North Carolina, sounds the same as the one in Minneapolis or in Portland, Oregon. The fan experience has, by definition, become homogenized: If every team optimizes its operations in similar ways, going to big-league games, in whatever sport, will start to feel the same.
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From the equivalent of corner grocery stores, many of them managed in illogical but charming fashion, franchises have evolved into the sports equivalent of the chains that dot the American landscape, as indistinguishable from one another as Apple Stores. A trip to the ballpark doesn’t feel all that different from a trip to a theme park, because both are carefully packaged and marketed every step of the way.
And because owners rely on broadcast and streaming deals to keep paying the interest on the loans they’ve taken out to buy their teams, constant engagement with fans is crucial. Those final minutes of blowouts are typically wasted content for viewers who watch games to see which team will win, so the major sports have embraced gambling to keep them watching when point spreads and individual players’ statistics are still in doubt. For nearly a century after the Black Sox scandal of 1919, betting on sports was anathema. Now Charles Barkley sells us parlays at halftime.
The relentless optimization of franchises as businesses, particularly by financial wizards and tech tycoons, runs the risk of undermining the special relationship between a team and its supporters. “If everything you do is financial or metrical,” the London-based writer and broadcaster Robert Elms told me in an interview for my new book, “you’re missing out on the biggest reason people want to support your club. You’re creating customers rather than fans.” The problem with such a transactional relationship, of course, is that if you have enough bad experiences at a restaurant or a car wash, you eventually try somewhere else. Traditionally, teams and their fans have enjoyed a deep relationship, something like the love that one might feel for an occasionally incorrigible family member. If poor play were enough to keep Elms from attending games of his favorite soccer team, London’s second-tier Queens Park Rangers, he said, “I would have stopped 25 years ago.”
Not every old-school owner understands that unique relationship, or the ramifications of losing it. Under Dan Snyder, the Commanders (and their incarnations under previous names) have been mediocre or worse on the field, and unlikable off it. Fan support—once so rabid in the capital area that the team sold out every game for half a century starting in 1967—has dissipated in recent years. If only because the new ownership group isn’t Snyder, the mood among the Washington faithful seems upbeat. Still, Harris and his partners shouldn’t assume that success, in the form of winning more games than Snyder’s teams did, will rekindle all the old emotion. Six billion dollars was enough to get them the Commanders—and grant them access to a host of revenue streams—but they need to earn back the love.