Why pro sport team values only go up

Professional sports team valuations are ruled by the law of scarcity, no matter the geography or game.

The big picture: This is a luxury toy collection at a level above yachts or private islands. Mega-billionaires — and, increasingly, institutions — are barreling into everything from the NFL to the NBA to European soccer.

By the numbers: The all-time record for pro sports team sales has been broken twice in the past month: First when American businessman Todd Boehly bought Premier League club Chelsea F.C. for $3.1 billion, and then again when Walmart heir Robb Walton struck a $4.65 billion deal for the NFL's Denver Broncos.

• There also has been a flurry of other team sale processes, including soccer clubs in Italy, France and Spain. Plus, the Washington Nationals baseball franchise is on the block.

Deal math: Team sales are as much art as science, but bidders tend to start with a multiple of revenue (rather than of profits).

• League health and media market size can add a premium. If the team owns its own stadium property and media rights, that's better still.
• Many pro teams aren’t profitable. But a pro sports investor tells Axios: "The notion that valuations always keep going up has led everyone to be complacent."

What's changed: Institutional capital, including private equity, has become a major player in team auctions over the past five years — competing with the traditional pool of rich folks who want to own their childhood obsession.

• Increasing numbers of both individuals and institutions are also trying to buy multiple teams, across different markets and leagues.

Be smart: The increased demand is meeting static supply, thus price appreciation.

• The resulting number-goes-up dynamic is very attractive to private equity.

The bottom line: One pro sports team owner tells Axios that "if you look at the history, what you see is incredible performance and a lack of correlation to the markets. Plus continued growth in media opportunities, like streaming and international expansion. This is a very good business to be in."

Go deeper: Axios Markets plays moneyball