Business of Sports: Ted's season pass

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We've got plenty of news for you this week. A triathlon organizer is raising money; we tell you how much Chelsea's women's team is now worth; and we sit down with multi-team owner Ted Leonsis (just before the Washington Capitals lost in the Stanley Cup playoffs) to hear how his building plans are going and his thoughts on the future of how we watch sports.

As always, send us any feedback, tips or ideas here. If you aren't yet signed up to receive this newsletter, you can do so here.

Ohanian's Statement

Hi, it's David. When we revealed that Chelsea Football Club was considering the sale of a stake in its women's team last June, many doubted the club would get anything like the $200 million valuation it was targeting.

That Chelsea then sold the team back to itself, allowing it to book a sizable pretax profit, seemed to confirm suspicions that value is really a nebulous concept when it comes to sports teams.

However, it now transpires that Alexis Ohanian, the founder of Reddit, partner of Serena Williams and a very big backer of women's football — he helped found Angel City in Los Angeles — has bought an 8% stake in Chelsea Women at a valuation of £245 million post the investment, according to a person familiar with the situation.

Catarina Macario of Chelsea Photographer: Alex Davidson/Getty Images Europe

On a pure revenue basis, the price Ohanian has paid makes little sense. Chelsea Women's revenues last season were €13.4 million, according to Deloitte's Football Money League. That puts the valuation at around 18 times revenue, compared to the two to five times sales at which many men's teams trade.

Chelsea isn't any ordinary women's team, though, having won the domestic League six times in a row.

And there are those, like Ohanian, who believe in a fantastically strong trajectory for the women's game.

"I've bet big on women's sports before," Ohanian said in a LinkedIn post.

This deal shows a "clear expectation for continued growth" in women's football, according to Cristina Philippou, associate professor in accounting and sport at the University of Portsmouth.

There's still not a rising tide for women's football in the UK. Chelsea repositioned its women's team last year to provide the opportunity for investment to specifically support women's football and this deal provides validation of that strategy, the club said.

In the same week, though, news emerged that Blackburn Rovers were considering keeping its women's team in the second tier of the women's league over concerns about costs. That came just days after Wolverhampton Wanderers admitted that it hadn't even applied for a promotion for its women's team because it would be too expensive.

Women's football has indeed been boosted by Ohanian's investment and the value he puts on it, but there are still question marks about the depth of support for the game outside a few big teams.

ICYMI

Meet the man who wants to make college football fair again. On the latest episode of The Deal with Alex Rodriguez and Jason Kelly, Georgia Tech athletic director J Batt explains how the House settlement could "tighten up" the spread.
A group of professional sports team insiders, including Dallas Mavericks minority owner Mark Cuban, is launching a $750 million private equity fund designed to take small stakes in US pro sports teams.
Lenore Sports Partners, an investment group that includes the co-founder of private equity firm Crescent Capital, has acquired a minority stake in Benfica SAD, the company that manages one of the most valuable Portuguese football clubs.
Nike co-founder Phil Knight has repeatedly expressed interest in buying the Portland Trail Blazers, but now that it's finally for sale, he has decided to pass on the chance to own the NBA franchise.
A former Nike and Beats by Dre executive is launching a new media company, Homecoming, focusing on video podcasts that aim to be at the center of sports, business and culture.

Ted's Season Pass

Hi, it's Vanessa. The WNBA season is getting ready to start this weekend with the anticipated return of league phenoms Caitlin Clark and Ellie the Elephant back on screens regularly. It will also be the first season for expansion franchise the Golden State Valkyries, the first new team since 2008.

Last year, the league experienced unprecedented growth on the back of Clark. More fans means franchises have to work out whether to look for bigger stadiums, or leave money on the table. So far, upsizing has mostly happened for games against Caitlin Clark's Indiana Fever, but also against other young stars Angel Reese and her Chicago Sky and Wilson's Las Vegas Aces.

Ted Leonsis Photographer: Scott Taetsch/Getty Images North America

Some teams aren't necessarily able to keep up with the demand for more tickets. We spoke with Washington Mystics owner and CEO of Monumental Sports and Entertainment Ted Leonsis about the rise in popularity in the WNBA, and what that means for attendances for his team.

We also talk about his idea for a year-long sports pass. Leonsis has long made it clear that he still wants to add Major League Baseball's Nationals to his collection of Washington sports franchises.

The Mystics are locked into a deal to continue to play in CareFirst Arena until 2037, which only holds a capacity of 4,000. How do you grow revenue when you're stuck in a smaller venue?

Well, short term and there's nothing I can do about it. And we right sized those buildings for what the reality of the attendance was. We were playing in a 20,000 seat building and selling 1500 to 2000 seats. It's very expensive to run the building and open it up and then you lose revenues when you don't have the dates and you can have a Bruce Springsteen concert. So, our goal was always, let's try to have a 5,000ish arena for Monday night games against maybe an opponent that isn't a rival and then use the big building for playoff games, camp days, big games. And that's still the plan. Even though eventually I can see figuring out a way to put some other programming in CareFirst and when we can sell out all of the games in the big building, they would deserve to be in there. I think they'll excel in CareFirst, but it's our aspiration to have 20,000 sellouts for the women and for the men on an ongoing basis.

What's the timeline for the new arena? Has anything changed?

No, we're ahead kind of ahead of schedule. We broke ground. It's a ton of work that's going on right now. If you came by, the Wizards locker room doesn't exist right now. It's been destroyed. It'll be redone for the next season. It's gonna take three off-seasons basically. We have to rebuild the plane while it's flying.

You bought the Mystics in 2005 for $10 million. The Connecticut Sun could sell for over $200 million. Does that valuation feel right for you?

We've gotten better media deals, ticket prices are going up. Once you sell out and then you have a playoff team, your renewals increase. So it's gonna follow the same kind of pattern that the NBA, the NHL have done as great indoor sports. And my bet is that these teams can get to $20 to $25 million in revenue on average [average WNBA team revenue is around $15 million]. And so if you have a 10 times multiple on it, that's how you get to quarter billion dollars.

Monumental Sports is more than just basketball with the Washington Capitals and Monumental Sports Network. You spoke recently about carrying Washington Nationals games on your RSN but only if you owned the team. How likely do you think that is?

ESPN announced it's new streaming service and it's $29 a month and they have 46,000 hours of live programming a year. The reason for that is scale. It's expensive to get a subscriber. You don't want them churning off. That's why we bought our RSN and wanted to control our destiny. Just like we want to own the building, you want to control the scheduling destiny. If you only have winter sports or you only have one team and you get someone to subscribe, well when the season ends they're going to cancel. And now you have the great expense of having to get them again.

For us, we have two winter programming teams, we have the Capitals and the Wizards and now we have the Mystics. Well the Mystics are 40 games. If you had a baseball team at 160 games and you had basketball and hockey, all of a sudden you're starting to get that scale and you can sell a year round subscription or month to month and people won't be churning out and canceling. So from a business standpoint it makes a lot of sense.

You have other teams that are not at scale. If you're part of a bigger organization, a bigger platform, you can grow revenue. I think you'll find there's gonna be lots of mergers or virtual mergers, where they collaborate and find a way to share programming and sell advertising year round, and do a season pass for the hardcore fans. I love baseball, I love basketball, I love hockey, why can't I go to all of those games? Right? Have a season pass. So I think we're gonna have to see that kind of innovation as the media landscape changes.

Supertri's Ambition

Hi, it's Maddie. I'm looking at the business of triathlons this week and one company's push to appeal to a wider audience.

That seems like a tall order because just looking at the events in an Olympic triathlon — often considered the standard distance — is likely intimidating to most people. It starts with a 400 meter swim, followed by a 10 km bike ride and 2.5 km run.

London-based Supertri aims to make the sport more accessible even for casual exercisers. It has a range of events, including a supersprint with a 0.37 km swim, 10 km bike and 2.4 mile run.

Alex Yee of Team GB wins the gold medal in in the Men's Individual Triathlon event at the Paris 2024 Olympic Games in Paris Source: Source: Nathan Laine/Bloomberg

Supertri is looking to raise $60 million from investors to keep expanding. That includes building out Supertri's pro league that features top triathletes competing on spectator-friendly courses.

"Triathlon as a sport has been static since its inception, and has been very much focused on the ultra endurance," Chief Executive Officer Michael D'Hulst said in an interview. "So we created the concept of short endurance, which we believe is very well aligned with modern audiences and how they consume media."

Supertri is part of a boom in the participation sports market. Coming out of the pandemic, people looked to improve their health while also looking for in-person social events. That's fueled growth in running clubs and competitions such as Hyrox, a fitness race mixing running and events like sandbag lunges and burpee broad jumps.

"We have proven that we can inspire people to come and participate," D'Hulst said. "We've already integrated 10 events, so now let's put that on steroids and grow from 10 to 50 over the next three years and continue to use that flywheel where we have the TikTok and broadcast moments to reach wider audiences."