SportsMarketReport_2012.pdf

WR HAMBRECHT + CO

PIER 1, BAY 3

SAN FRANCISCO, CA 94111

TEL. 415.551.8600

FAX. 415.551.8686

www.wrhambrecht.com

THE U.S. PROFESSIONAL SPORTS MARKET

& FRANCHISE VALUE REPORT

2012

WILLIAM HAMBRECHT

CHAIRMAN & Co-CEO

bhambrecht@wrhambrecht.com

415.551.8602

ELIZABETH HAMBRECHT

Co-CEO

ehambrecht@wrhambrecht.com

415.551.3603

PETER MORRISSEY

MANAGING DIRECTOR

pmorrissey@wrhambrecht.com

415.551.8613

MICHAEL BLACK

VICE PRESIDENT

mblack@wrhambrecht.com

212.313.5944

Table of Conten ts

Welcome… ............................................................................................................................................. 3

The Economic Climate ............................................................................................................................ 4

U.S. Professional Sports and the Economy ....................................................................................... 7

Top 2011 News & Developments ............................................................................................................ 9

The NFL Avoids Lockout; Plays Full Regular Season ........................................................................ 9

NFL and Networks Sign Record Setting 9 Year Deal for TV Rights ................................................. 11

NBA Settles CBA, to Play Shortened Season .................................................................................. 12

New MLB CBA Extension Run Through 2016.................................................................................. 13

Green Bay Packers Complete Public Stock Offering........................................................................ 15

Stadium Naming Rights Decided ..................................................................................................... 15

Conference Realignment Picks up Steam........................................................................................ 16

UFL Concludes Third Season, Refocuses Strategy ......................................................................... 18

Sports Media Landscape ...................................................................................................................... 19

Franchise Valuation .............................................................................................................................. 21

National Football League ................................................................................................................. 24

Major League Baseball .................................................................................................................... 27

National Basketball Association ....................................................................................................... 29

National Hockey League.................................................................................................................. 31

Conclusion ............................................................................................................................................ 32

Appendix A: Franchise Values .............................................................................................................. 33

Appendix B: Revenues.......................................................................................................................... 37

Appendix C: Attendance ....................................................................................................................... 41

Appendix D: Ticket Prices ..................................................................................................................... 45

Appendix E: Selected Media Contracts ................................................................................................. 49

Methodology ......................................................................................................................................... 50

Disclaimer ............................................................................................................................................. 51

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Welcome

Readers,

Welcome to the fourth annual edition of the W.R. Hambrecht & Co. U.S. Professional Sports

Market and Franchise Value report. We have included new data and analysis in this year’s

edition, which we hope will provide the reader with a richer, more thorough understanding of the

U.S. professional sports landscape.

The professional sports industry has enjoyed impressive growth over the past several decades,

to the point where personal consumption expenditure (PCE) on the spectator sports segment

reached $25.4 billion and has grown at a 6.4% compound annual growth rate (CAGR) over five

years, outpacing the 2.6% CAGR of all PCE. Furthermore, the sports industry has not only

weathered the recent economic recession nicely, but has shown strong growth, with the each of

the four major professional leagues posting year-over-year revenue increases. The values of

professional sports franchises have kept pace, and in some cases outperformed, revenue growth

rates over the last decade.

We believe professional sports will remain an attractive investment over the next decade.

Expansion into additional markets remains a key objective for stakeholders in each of the four

major sports. Broadcasting rights continue to rise with each new executed contract, driving top

line growth. And of course, one thing that never seems to wane is the passion of the fan base,

although it will be interesting to see if there will be any long term effects from coming so

dangerously close to not one but two cancelled seasons for the NFL and NBA, respectively.

Indeed, with three CBAs expiring in 2011, we may yet come to remember this year as the “Year

of the Lockout,” though the MLB faired far better than the NFL or NBA in that respect.

We hope you enjoy this year’s edition of the Report. Please feel free to contact us with your

thoughts and ideas on areas for further study.

- The WR Hambrecht + Co Sports Finance Team

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The Economic Climate

In 2011, the economy continued to climb out of the depths of the Great Recession, which had begun in January

2008 and ended in June of 2009. While the length of the recession was not unique or overly lengthy from a

historical perspective, what is most alarming is the snail’s pace of growth in the wake of the crisis. Many

economists have characterized the rate of growth as “anemic,” with the economy ticking along at a pace far too

slow to feel the effect on a global basis. In fact, though the final numbers have yet to be reported for the fourth

quarter of 2011, the economy is believed to have grown less than 2%.

For 2012, most economists anticipate faster domestic growth of 2.4%, so long as it is not knocked off track by the

recent economic upheavals in the Euro zone, which is on the verge of recession due to unresolved debt issues. In

fact, economists expect the European economy to shrink by approximately 0.5% in 2012. While the consensus is

that the U.S. economy will continue to grow at an anemic rate in 2012, most experts agree that the pace will

quicken towards the end of 2013 and into 2014, when we can expect to see a fuller recovery.

On a positive note, the economy ended 2011 on an uptick, as at least 100,000 jobs were added in each of the last

five months of the year, the longest such streak since 2006 (See Figure 1). While the US economy has enjoyed

the benefits of the US government’s stimulus package in terms of job creation, the unemployment remains high as

corporate America is reluctant to invest its newly cash-rich balance sheets in workforce growth, especially with the

fear of global contagion from the debt crisis in Europe. As such, economists generally expect the pace of job

creation to remain subdued, predicting a rate of unemployment of 8.8% for 2012, with the likelihood that we will not

return the 4-6% range until the later part of the decade. On average, the economy is expected to add

approximately 150,000 jobs per month for 2012.

FIGURE 1

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In addition to the sputtering rate of job growth, there are several other palpable threats to economic growth. The

state of sovereign debt continues to be a pivotal issue, especially in Europe. In the US, budgetary problems and

related election year politics are at the forefront. Among the most serious threats is the potential for a major world

economy such as Italy defaulting on its debt, which would in turn set off a global banking crisis that would spread

far beyond the borders of the Euro zone. Banks across Europe with exposure to European sovereign debt have

already curtailed lending, and such a default would only lead to further locking down of access to debt capital at

tenable rates. If such a downturn in Europe were large enough, it could very well bring the world economy into

recession, though most economists do not believe that is likely. In addition to the looming debt crisis, unforeseen

global events such as the protests that continue to rage throughout the Arab world or the nuclear ambitions of Iran

may also impact economic growth.

At home, the U.S. also faces intermediate-term challenges of its own, as the debt-to-GDP ratio increased from

96.5% at the end of 2010 to 100.3% at 2011 year end, with total public debt outstanding increasing from $14 trillion

to $15.2 billion. Rising debt levels threaten to dull or slow any corresponding growth in the overall economy for

2012 and beyond.

There are, however, positive trends that support the case for continued, albeit measured, economic expansion. In

addition to the recent streak of job creation, inflation has continued to remain low, though to be sure, inflation is

always a threat in an economy with such historically low interest rates. Many economists also predict that

supportive Fed policies such as near zero interest rates and measures aimed at lowering mortgage rates and other

long-term rates will provide a boon to the US economy. Additionally, many economists believe that the US

economy is strong enough to withstand any short term spikes in the price of oil, which may yet be on the horizon in

2012. As Figure 2 illustrates, the U.S. has avoided any significant bouts of deflation, however, with inflation rising

to 3.4% at the close of 2011, we must be cognizant of potential inflationary risks to the economy.

FIGURE 2

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