Date of Award

3-2018

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Steve Schmidt

Language

English

Keywords

economics, sports, franchise, value, financial, metropolitan, bubble

Abstract

North American professional sports franchise values have been growing rapidly over the last 10 years, leading some to wonder how this rise might mirror previous economic booms such as those of the internet and housing sectors, and thus impact the future of the sport industry. To investigate this phenomenon, financial and other team-specific data was acquired from Forbes, while metropolitan area statistics were mostly gathered from the Bureau of Economic Analysis and the U.S. Census. The results of this study showed that revenue, metropolitan area population and GDP, multiple teams in the same metro area and the same league, and year that a venue opened (or was renovated) have a significant effect on team value. Additionally, a large “bubble” in team prices for 2016 was evident throughout, helping explain the drastic rise in prices since 2014. Revenue, metroGDP, and year=2016 were all positively correlated with franchise value, while metroteamssame, metropop, and venueyropened were all negatively correlated Since professional sports is a private industry, the bubble is most likely driven by external factors such as the rise in TV and broadcasting revenue, and thus does not seem to be in danger of bursting. As such, it will be interesting to see how new TV deals increase these valuations even further. Additionally, one can theorize how recent and forthcoming sales transactions might continue to “set the market” higher and higher, as typically occurs in other industries throughout the economy.

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