Does anyone know if someone who buys a sports franchise is required to sell their interest in their other business entities ?
This is an important question that gets overlooked too often in discussions about the profitability of owning a professional sports team. As stated already by Recovering Journalist, although there can be some case-by-case exceptions, for the most part owners are NOT required to sell their other business interests. The most business-savvy owners of professional sports franchises are those who recognize there's a lot of value in owning a team beyond selling tickets, concessions, apparel and even TV rights. Owning a team can potentially have HUGE implications on the value of their other business interests.
A very interesting example of this comes from the owner of another sports team in Cleveland: Dan Gilbert of the Cavs. Although the NBA doesn't have the same reach as the NFL, I'd bet he's one of the more well-known owners of any professional sports team in this country because of the national media coverage "The Letter" to Lebron generated during "The Decision" to leave Cleveland back in 2010. His name might be fairly well-known, but his backstory in business doesn't seem to get much coverage outside the regional media. He generated a lot of goodwill in Cleveland when he bought the Cavs by not only promising a championship, but also by promising to expand his other businesses into the city and create jobs. To his credit, he followed-through on the promise of jobs and opened new offices for a handful of his businesses in Downtown Cleveland. More to the credit of Lebron, Downtown Cleveland was also undergoing a renaissance of interest in development as new restaurants and stores opened around the arena to capitalize on Lebron's super-stardom and the Cavs being a championship contender. Gilbert's biggest business is Quicken Loans in the mortgage industry, but he owned over 30 companies then and probably owns more now. A huge focus is placed on capitalizing on the success of each to help the others grow.
There's been stories in the press the past couple years about about the Cavs losing hundreds of millions of dollars each season. Even in 2016 when they won the championship, the Cavs lost money. Despite the arena selling-out every night, the high ticket prices were nothing compared to what you'd see in New York or LA. TV rights and jersey sales didn't come close to making up for the money they spent in free agency. Rather than having a "salary cap" like the NFL, the NBA has a "luxury tax" which just fines owners more and more for each dollar over the max they spend on player contracts. So have the Cavs lost money for years? Absolutely. Has owner Dan Gilbert lost money from owning the Cavs? That's where this gets complicated.
Back in 2009, he was one of the largest supporters of the statewide ballot initiative in Ohio to legalize gambling. He capitalized on his goodwill with voters in the state from bringing jobs to Cleveland and promised more jobs if he was allowed to build casinos. It's impossible to say how much his support impacted the vote passing, but I think most would agree there weren't many other people who had the swing he did with voters. Lebron left in Free Agency the following summer, but Gilbert's casino was built before he returned for round two. From 2014 to 2017, the city of Cleveland was PACKED with people whenever the Cavs played. Even during AWAY games the bars and restaurants and bars were filled. You know what else was filled? Dan Gilbert's casino. It's impossible to know how many additional games of craps were played because the Cavs were bringing fans into the casino, but this summer when you hear how much money the Cavs lost because they are still paying contracts for former head coaches and former players, don't let yourself be tricked into thinking owning a professional sports team is a money-losing proposition.
(I know that story is about an owner in the NBA, but I used it because it's a great example. Any owner in the NFL can gain similar benefits in business because they own a team. In fact, I recently started a business and in researching a company I'm crossing paths with, imagine my surprise when I discovered it's owned by some guy named Jerry Jones. I haven't looked into the specifics of when the company was founded, but the industry is definitely more closely tied with football than it is with oil. I don't know this company's financials, but I suspect old Jerry is doing OK for himself...)
Last Edited: 12/29/2018 5:40:54 PM by The Optimist