Lindsell Train Global Equity fund manager Michael Lindsell has justified the 4.8 per cent of the fund invested in sports franchises arguing they attract audiences highly valued by advertisers.
Lindsell Train portfolios hold 12 per cent of Celtic, 10 per cent of Juventus, both football clubs, and 1 per cent of ISC, the US equivalent of Formula 1.
It also holds 8 per cent of WWE – which Lindsell argues is “not actually a sport” as wrestling is stage managed, but attracts “sports-like audiences”.
“The allure to us of live sports franchises of this type is the loyal fan base that is more valued by advertisers than almost any other entertainment medium,” Lindsell says, arguing Sky TV and ESPN owe their success to rights to the Premier League and other major sports leagues.
WWE has been the fund’s most successful sports rights investment based on 26.9 per cent total return per annum over the last five years ending August.
In contrast, Juventus returned 2.4 per cent, while ISC returned 6.6 per cent and Celtic returned 14.1 per cent.
Unlike football stars, Lindsell argues, WWE owns the talent and it is unlikely to be poached by competing franchises, with Ultimate Fighting Championship being one of the few alternatives.
He adds that WWE has been successful at internationalising its franchise with 26 per cent of revenues now coming from outside the US.
“WWE is well established in the UK, Mexico and Canada but over the last few years has been actively building its franchise in the important geographies of China and India.”
It has also established its own online network where it can host content without going via a distributor.
Lindsell points out that UFC recently became the most expensive transaction in sports history selling for $4bn – 7x its sales.
On Italian football club Juventus, Lindsell says that revenues have risen 50 per cent in the last five years and cash flow is “at last” turning positive.
“Even though the league still needs better management, today Juventus stands out as the only club in Italy that owns its own stadium and under new management headed by president Andrea Agnelli has won five successive championships and reached the final of the European Champions league in 2014,” Lindsell says.
Lindsell says football clubs in aggregate may lack in profitability “but if any game has the chance to go global it is this one” pointing to the sport’s developing popularity in China.