Owners Looking To Sell, No One To Buy
This summer could be unlike any other we've seen in professional sports.
If things don't turn around with the economy by then, and it's not looking particularly good, it's possible we'll see some teams engage in conversations with their respective leagues about either contracting the team or selling it off to the league.
As one banker recently told me, the main problem with sports ownership isn't so much that particular teams are doing so badly, it's that the main businesses or investments of the owners that own these teams are, on average, half the businesses and investments they once were.
So a decline in ticket sales and sponsorships that now equals a $10 million loss is much more painful than it used to be.
The reason why the only choice might be to contract or have the league buy a team is pretty simple. In normal times, if you wanted to buy a sports team for $300 million, say four years ago, you could have put down $160 million and financed the rest.
Today? You'd have to have $300 million. And there's not a whole lot of people out there with that type of money in cash. So what does that mean? It either means that teams that must get off the owner's hands will come at steep discounts that are in line with market losses and if that's not enough to sell it, leagues might have to decide whether contraction or buying it back is better.
One owner told us that having a league prop up a team is not that hard. If a league wanted to buy a team from an owner, they can make it back over time by paying it back with money from the national television distribution fund.
This action would obviously have to be approved by the teams, as would a sale since those teams would be taking place in the distribution of the profit. The last time this happened in professional sports, it actually turned out well. Major League Baseball bought the Montreal Expos, kept it for four years, and sold it for four times the amount they bought it for to Theodore Lerner, who became the owner of the Washington Nationals.
Having the league buy a team is also the path of least legal resistance as the unions obviously always have problems when the amount of jobs are being cut.
Questions? Comments? SportsBiz@cnbc.com