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What a Price With a 99 Tells Us
November 30, 2022
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December 2, 2022
Calculating the value of a team franchise, we could need nine zeros.
Among their recent estimates, Forbes gave the Dallas Cowboys an $8,000,000,000 price tag.
Sports Team Prices
Thirty of the NFL’s 32 teams were in Forbes’s 50 most valuable list for 2022. In the top ten the NFL had six, and 13 of the top 20. As for an actual sale, in 2021, the Denver Broncos went for $4.65 billion. (7 zeros: $4,650,000,000).
Last purchased in 1989 for $150 million, the Dallas Cowboys topped the most valuable list. Then, the New England Patriots (#2), Los Angeles Rams (#3), New York Yankees (#4), New York Giants (#5), and New York Knicks (#6) came next. Among the top six, the most recent purchase was for the Rams in 2010 for $750 million.
Correspondingly, a league breakdown displays the NFL’s dominance:
Our Bottom Line: Supply, Demand, and More
Asking why sports team prices are in the stratosphere, of course we can go directly to supply and demand. Some very rich people want to buy one of a fixed number of teams. Or, as a Stanford economics professor commented, ““The driver is the limited number of teams against growing wealth.” When you buy the franchise, you enter an exclusive “rich guy club.” But perhaps even more crucially, it is cool to own a team. (Reminds me of Thorstein Veblen and conspicuous consumption).
Then, we can list a slew of reasons. Billion dollar media deals are cited frequently. In addition, teams have a strong brand. They benefit from publicly supported stadiums. They have auxiliary business deals that range from real estate to merchandise. And, to all of this, we can add monopoly power that lets some owners share revenue and cap salaries.
Still though, our long list of reasons for pricey teams returns me to where we began. It’s Thorstein Veblen and conspicuous consumption.
My sources and more: Thanks to Marginal Revolution for today’s inspiration. From there, two articles on team prices told me how much and why. Also, we should note that the Denver Broncos are primarily owned by Walton and Penner. Then, detailed by USA Today, Rice, Hobson, and Lewis Hamilton (not in the above picture) have a minority stake.
1 Comment
Conspicuous consumption certainly has a great deal to do with ownership of a team. But don’t forget that leveraging home team tribalism has enabled owners to enrich themselves by extracting enormous subsidies (stadium construction, and ancillary maintenance) from cash-strapped municipalities that are forced to neglect real problems.