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WNBA team valuations foretell league's growth trajectory – Sports Business Journal
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When the owners of the Seattle Storm — Lisa Brummel, Ginny Gilder and Dawn Trudeau — decided to pursue the construction of a standalone training facility last year, they realized it would require a bank loan and the potential sale of team equity to finance the $64 million in construction costs. The Storm ultimately hired consulting firm CAA Icon to value the team for prospective lenders and investors alike. The result of the months-long valuation process was stunning.
In February, the Storm sold a roughly 14% stake in the team to a group of 15 limited partners at a $151 million valuation, nearly 10 times the prior record for a WNBA team transaction. Sources say the deal, which followed the WNBA raising a league-level $75 million funding round a year earlier, reflects not only a major inflection point for the league, but also provides a critically important benchmark for other team owners and for the league itself as it prepares to add two expansion teams and negotiate a new national media rights agreement.
“It’s really important to be recognized as a legitimate sports, media and entertainment property, and it kind of sets the benchmark for everything else we do,” said WNBA Commissioner Cathy Engelbert, the former Deloitte CEO who also pointed to increases in the league’s televised games and commercial revenue. “When you see rising values and a growth property, and when the external market recognizes that, that raises everything.”
No team was better suited as a test case than the Storm, which has estimated annual revenue of $17 million, the highest in the league.
According to CAA Icon Vice President Josh Cohen, the agency took a multifaceted approach to valuing the team that considered not only the Storm’s finances and the Seattle market, but also the growth trajectory of the WNBA and surging investment throughout women’s sports. The consulting firm could not rely much on WNBA-specific comparable transactions, since many of the league’s past team deals were distressed or forced sales, but CAA Icon also took into account transactions in other women’s leagues as well as the WNBA’s league-level investment round.
Though that funding round diluted the teams’ share of league operations — NBA and WNBA teams had split league ownership 50-50, but each now owns 42% after the new cadre of investors acquired 16% of the league last year — sources throughout the league, including multiple owners, argue the newly injected capital was necessary for the league to fully staff up and fund needed marketing and fan engagement efforts. The investment valued the WNBA at a reported $475 million, suggesting each WNBA team’s 3.5% stake in the league is worth at least some $17 million.
Brummel said CAA Icon’s report ultimately suggested the Storm should be valued at a 7.8x to 8.5x revenue multiple. The minority ownership transaction was at the high end of that range, which is roughly equivalent to how the average NFL or NBA team is valued.
While many were shocked by the Storm’s sale price, Brummel suggested it was actually a conservative estimate, since postseason revenue projections weren’t included. The Storm have been profitable for the better part of the last decade, and the team’s financial fortunes were boosted by moving into Climate Pledge Arena last year. In fact, Brummel said the team’s revenue grew so quickly that they had to reforecast projections several times throughout the season. It was ultimately up 106% over the previous year.
“The way the valuation kind of works is you have to believe the Storm is a good organization and that we know what we’re doing, which we’ve proved because we’ve been around a while, we’ve won championships, we’ve made money, all those kinds of things,” said Brummel. “But the real accelerator comes when you multiply on all the people who are getting behind women’s sports. Pick media, pick attendance, pick salaries, pick any pivot, and you realize how much it’s growing.”
For CAA Icon’s Cohen, the Storm transaction is proof positive that the WNBA, which played its first season in 1997, is at long last showing returns on its decades of investment, and that the rest of the league stands to benefit.
“It really shows that the appreciation and values of the WNBA teams can be realized. It shows that the current team owners, as well as the league level, are making the right investments,” said Cohen. “Whether that’s from increasing spending on facilities or increasing dollars to the salary cap and player salaries, all of those examples show that the growth is real in the WNBA and that there’s still additional room for the league to grow and team values will follow.”
It remains to be seen exactly how the Storm’s valuation will influence subsequent team sales, though it should be put to the test soon as the league has plans to add two expansion teams by 2025. The WNBA’s media rights agreements expire at the end of that year, and upcoming rights negotiations couldn’t be better timed. The WNBA last year posted its best postseason viewership in 15 years, and last month’s NCAA women’s basketball championship game drew a record 9.9 million viewers.
“We’ve got some amazing talent coming into this league [from the collegiate ranks], so it’s just an incredible opportunity to set these valuations even higher,” said Engelbert. “And what investor doesn’t want to invest in a growth property where their valuations are rising? And especially when there’s such scarcity in many sports properties. … There are only so many teams that come up for sale, and there are only so many cities that we’re going to put up for expansion, so I think that helps raise the values as well.”
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SBJ I Factor presented by Allied Sports — Charles Altchek SBJ I Factor presented by Allied Sports features an interview with Charles Altchek, president of MLS Next Pro and a member of Sports Business Journal’s Forty Under 40 class of 2023. Altchek talks with SBJ’s Abe Madkour about how joining the Mets early in his career led directly to his influential position at Major League Soccer, the opportunity to work without a net when he helped launch MLS Next Pro, and how he’s handled his biggest career and management challenges. SBJ I Factor is a monthly podcast offering interviews with sports executives who have been recipients of one of the magazine’s awards, such as Forty Under 40, Game Changers and others.
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