The Mets Could Shed Some Light on Sports Valuations in the Age of Covid-19, but Investors Might Think About Diversifying Into the E-Sports World Where Valuations are Soaring.

On Monday, final bids for the NY Mets Baseball franchise are due. A bidding war broke out when Jenny From-the-Block, A-Rod, and various A-list celebs and a few tycoons indicated interest. What we’ve learned about these transactions over the years is that you should believe almost nothing you hear or read in the news. The best owners and bankers usually know how to keep a deal quiet. Of course, we are taking about the Mets. Given the unprecedented circumstances, the entire sports world will be tuned in to see what effect cancelations and no live fans have had on a major sport’s franchise value. In February it was reported that the Mets were about to ink a deal for $2.6 billion, so we’ll see. The bigger question with the Mets might be whether the NY Post will report about it in the sports section or on page six?

So how are sports valuations and transactions coping during the time of Covid-19? Bobby Sharma talked with the Sports Professor and offered some insights and the perfect analogy. Sharma is Special Adviser to the Sports Industry Team at Foley & Lardner LLP; Founding Partner of Electronic Sports Group, an e-sports advisory firm; Partner at GACP Sports, a PE firm; Vice Chairman & Interim CEO of Soccerex; and was formerly SVP/Global Head of Basketball at IMG, and VP/General Counsel of the NBA Development League. With almost 20 years of sports, media, and entertainment experience, Sharma works with teams, leagues, and stakeholders across a variety of professional sports.

He sat down with Professor Tiryakian, virtually, to discuss franchise transactions with no fans in the stands but plenty of fans watching. Sharma believes the NBA, NFL, NHL, and MLB franchises are best compared to real estate holdings at a time like this. The best properties at the best addresses are going to hold their values. If you live on the Upper West Side near Central Park, there is probably no need to worry. However, if you bought in Queens or Brooklyn during the appreciation growth period, you’re probably in a different situation. 

The conversation then shifted to the e-sports industry, which has not faced the headwinds of traditional sports. In fact, Covid-19 has likely been a big boost to this burgeoning category of sports/entertainment. As an e-sports insider and partner at ESG, Sharma has his pulse on the phenomenon that is e-sports and its ecosystem. Sharma told us, “Stay at home orders have proven to be a bonanza for the industry. From Riot Games’ League of Legends to Activision
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’s Overwatch League and newly formed Call of Duty League, to Epic Games’ Fortnite, viewership and franchise values in the e-sports industry have seen dramatic increases.”

According to Sharma, Twitch, the American video live streaming service operated by Twitch Interactive, a subsidiary of Amazon
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, primarily focused on video game live streaming, including esports competitions, saw a 56% rise in viewership in Q2 of 2020, amassing more than 5 billion hours watched. In June alone, viewers watched around 1.5 billion hours on Twitch, representing a 60% jump in year-over-year viewership for the month.

Fortnite saw a 100 million year-over-year jump in registered players – from 250 million to 350 million – as Covid-19 kept people indoors and game consoles close by. Franchise values for Riot’s League of Legends properties have seen a 300% increase in just three years with values approaching $30 million from the initial $10 million price. 

Adding to his optimistic perspective, Sharma said “Seismically, e-sports organizations are drowning in funds as the likes of Michael Jordan and other wealthy and influential investors are throwing money at entities like Cloud9 and Team Liquid, who have become the de facto aggregators in the e-sports industry, similar to Fenway Sports Group, MSG, or Anschutz Entertainment Group in the traditional sports world.”

While we don’t know if the Mets will be able to get Steve Cohen, Josh Harris, or A-Rod to pay more than $2.4 billion for a franchise estimated to be losing $100 million annually, we do know that the loser of the auction could definitely put some of those considerable funds to work in the e-sports industry without the worry of when fans will be allowed to get back to the park.