The agreement to acquire the Los Angeles Lakers at a $12.5bn valuation marks a milestone not only for professional sports but also for the investment world. It is the highest valuation ever attached to the sale of a US professional sports franchise.
Little more than a year ago, the Lakers changed hands at a $10bn valuation when billionaire Mark Walter acquired majority control from the Buss family. The latest deal, which still requires approval from the NBA's Board of Governors, therefore represents an increase of 25%, or $2.5bn, in barely a year.
The prospective new owners are investor Joshua Kushner and former Disney CEO Bob Iger. Kushner founded venture capital firm Thrive Capital and is the younger brother of Jared Kushner, husband of President Donald Trump's daughter Ivanka and a longtime Trump adviser.
Iger, meanwhile, spent decades at the heart of America's media and entertainment industry. The backgrounds of the two buyers illustrate where the economics of professional sports are heading: toward the intersection of finance, media, technology and global entertainment.
Why the Lakers Keep Getting More Valuable
The speed of the Lakers' appreciation is striking. A $2.5bn increase in little more than a year is equivalent to nearly 8% of Slovakia's projected government revenue this year. Yet such an increase cannot be explained by the basketball team's operating performance alone.
What buyers are acquiring is something potentially far more valuable: one of the world's most recognizable sports brands and an asset that is effectively impossible to replicate. Anyone can establish another basketball team. No one can create another Los Angeles Lakers, with its history, identity, championships and generations of fans.
That scarcity helps explain why valuations of the world's biggest sports franchises have risen so rapidly. The number of billionaires and the amount of capital competing for trophy assets can increase; the number of Lakers, New York Yankees or Real Madrids cannot.
At the very top of the market, sports franchises are therefore beginning to resemble rare real estate or works of art: unique assets for which increasing amounts of capital compete.
Media rights add another layer to their value. In an age of streaming, social media and increasingly fragmented audiences, live sports have become more valuable precisely because they remain one of the few forms of entertainment capable of attracting huge audiences simultaneously.
And unlike films or television series, the outcome cannot be known beforehand. That combination of scarcity, immediacy and large live audiences makes premium sports exceptionally valuable to broadcasters, streaming platforms and advertisers.
The Lakers deal therefore illustrates a broader transformation in the economics of professional sports. The biggest franchises are no longer valued primarily according to their current profits. Investors are paying for global brands, scarcity, media rights and the expectation that even wealthier buyers may eventually be prepared to pay still more for the privilege of owning them.
Originally published on the author's personal website lukaskovanda.cz.