PERFORMANCE VS. POPULARITY: THE IMPACT OF PLAYER LIKEABILITY ON THE VALUATION OF SPORTS TEAMS, EVIDENCE FROM THE NATIONAL FOOTBALL LEAGUE AND FORMULA ONE

Abstract

Sports entertainment, and its financial metrics in particular, remain a source of considerable interest in the media. A century ago, sports was a small hobby pursued by the wealthy as a mere sidebar in their otherwise mundane lives. Today, however, the sports industry is massive, a global behemoth, touching both the emotional and financial wallet of nearly every human on earth. This thesis examines the major drivers of team valuations in two purposely disparate sports via the study of team valuations in American football, through the National Football League (NFL), and in car racing, through Formula One (F1). In this paper, I consider two primary facets of this financial analysis as the anchors for value correlation: the presence of star players and historical team success. I discuss the relationship between these factors and their contributions to overall team valuation in each respective sport with the intention of making a broader claim about sport financial performance globally. In essence, stars matter. Winning matters even more.

This study delivered a particularly challenging task because sports teams, universally, rarely transact, and thus evidentiary high n-sample levels of data remain sparse on a team-by-team basis in this setting. Regardless, I find that historical team success, as measured by post-season or championship appearances, increases team value in a statistically significant capacity, more so than does the presence of a star player on a given team. While star players can be financially contributive, their efficacy depends on the structure of the sport, whereas positive team performance exists universally as accretive to team value.