The Bubble. A buzz-word that has reached a level of infamy in social culture for it’s defining of a very dangerously overvalued industry or asset, could eventually reach the world of professional sports ownership.
There are many things that led to the dot-com collapse early in this decade however the easiest explanation? Revenue and profits were not in line wtih the the perceived value of firms, their stock, and the investment in them. The real estate bubble’s recent collapse is yet another example of a bubble popping as it was always assumed that there would be a buyer. The plan “Sell it for more than you bought it for.”
In a very insightful recent piece by the Financial Post, that very sentence is uttered when describing how to successfully own a professional sport franchise. If this sentence doesn’t stink of the stench of an unsustainable bubble, what does?: “Unlike other businesses, there’s no correlation between how much money is spent to purchase a sports franchise and how much it generates.”
The approach has always been to sell for more than it was bought for, but how long can that last? There seem to be no serious takers for the Phoenix Coyotes now that RIM frontman Jim Balsillie has been rebuffed by a federal bankruptcy judge.
All business, whether sports business, sponsorship, or selling retail goods requires the return on investment to be in the positive- otherwise why invest. Is this a bubble and will we eventually see the end of massive growth in value for sports teams and franchises?
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