Athletes and Investing

Why is it so common now?

Why are more athletes investing than ever before? What can they bring to the table?

You’ve got LeBron and his 2% stake in Liverpool. Estimated cost of around $6.5m, now worth roughly $43m+.

Kobe’s $194m payday from BodyArmour.

Shaq at one point owned around 10% of Five Guys Stores (155 locations in total!).

My favourite of the lot, Steve Smith’s mattress startup investment has netted him more than his whole cricket career!

What’s changed? Why are athletes and investments such a big thing now? (I’ll be focusing more on NBA players, but the argument applies across a range of sports)

More Money to More Players

Previously you might have only heard of player investments from the big players. Michael Jordan, Magic Johnson, Shaquille O’Neal.

Now more players have access to making those large capital decisions that make people notice. But why?

Total NBA revenue exploded. In 1984, the year before David Stern became commissioner, revenue was $165 million.  In 2013 revenue was $5.5 billion. A 12.71% compounded annual growth rate! 

The salary cap for players similarly expanded. In ‘84-’85, the salary cap was a piddly $3.6 million (just under $8m in 2015 dollars). Under the current agreement, it’s now north of $100 million.

GIF of NBA Salary Spending since 1990. Source: Dorian Banutoiu on Data.World

So where’d all this money come from? TV deals.

It’s estimated the NBA’s ABC, ESPN and TNT deal through 2024-25 gives them around $2.6 billion in annual revenue.  Decent increase from the previous $930 million a year deal.

And what makes TV deals so lucrative? Obviously it’s the ads they can generate. But more specifically, whoever watches a taped NBA game? Meaning live sports have ads that can’t be fast-forwarded through. This makes live events like the NBA so much more valuable to advertisers.

The massive new media deal means more money filtering down to players. So those high initial investments are more within reach to lower status players, who now have a bigger slice of the revenue pie, thus more money to invest.

Players a few decades back might have even had second jobs. Today those second jobs are replaced with allocating capital and starting family offices.

They’re Offered Investments You Dream Of

For better or worse, sporting stars are put on a pedestal. So when a VC has a choice to invest alongside an NBA player or Jimbo Jones with daddy’s money, you know who he’s choosing.
So just like big investors (see Buffett and his BoA deal), athletes can access investment opportunities that us peasants can only dream of.

And people might not just partner with athletes because of their sporting success and wanting to be buds. Top athletes have incredible social platforms and access to movers and shakers. So who naturally wouldn’t mind getting into business with athletes and hanging out a little bit more.

But let’s not pretend athletes have nothing to bring to the table in the business world. They perform under intense pressure and perform at the highest level consistently. I do believe, that if curious and eager to learn, they easily have the insights and attributes to bring to the table.

Being a professional athlete is an edge, no doubt about it.

They Can Affect Investments

Athletes have a public presence and following like never before. Why not use it to their advantage? 

Because sports fans are mental.

I’ve seen how powerful it is. A fringe NBA player probably has more supporters and haters than the top VC investors. They deal with more vitriol (also support and sucking up) daily than a VC does per month. 

Why not leverage that interaction and fanaticism to benefit your investments?

“We saw firsthand how athletes are starting to have these global brands, these global influences. Connecting the world of tech and sports — it’s not just holding up a soda can and smiling. It’s how can you bring that company to the next level?”

Andre Iguodala 

Even with athlete’s being paid better than ever before, there’s still the opportunity for them to leverage their platforms in order to earn even more income post-career than they did as athletes.

So?

Mo’ money, mo’ investments. The overall increase in salaries, plus a rise in players looking to invest and investors looking to partner with them. They can also affect their investments more than ever before. So why not?

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