Michael Lewis, author of “The Big Short” and “Moneyball,” said last year in an interview with Yahoo Finance that the next “big short” might be the NFL, since the league is dealing with political controversy and declining ratings. There’s just one problem: there is no direct way for a person to invest in, or invest against, a major U.S. pro sports league. They are not public entities.
A company called SportsETFs had the same thought. In July of last year, it launched the ProSports Sponsors ETF (exchange-traded fund) as a way for regular sports fans to invest, indirectly, in American pro sports by investing in the sponsors of those sports. The fund (ticker: FANZ) holds 73 stocks of companies that are official sponsors of the NFL, NBA, MLB, or NHL.
In its first year, the fund returned 17% to investors, two percentage points better than the S&P 500 during the same period.
“We looked at the sports industry overall and found it’s growing a lot faster than the overall economy,” says SportsETFs CEO Nick Fullerton. “All these companies that enter into partnerships with the leagues, they’re all benefitting… When they partner with the NFL, NBA, MLB or hockey, they tend to grow faster than their competition.”
The 73 stocks in the modest $7 million fund range from giants like Amazon, AT&T, Mastercard, Microsoft, and Nike, to lesser-known tickers like Exelon, Mitel, and New Relic. (There are more than 100 official sponsors of those four leagues, but not all are publicly traded.) The fund also includes broadcasters of the leagues, like CBS, Disney, Fox, and Sirius XM.
Some of the companies make the fund thanks to one single league partnership (New Relic does cloud analytics tracking for Major League Baseball) while others have significant relationships with multiple leagues (Amazon powers MLB Statcast and pays the NFL to stream Thursday Night Football).
Of course, there’s one giant caveat to the success of the fund: How much of the rise in share price of these companies can really be credited to their sports partnerships? Very little, many investors would say.
But Fullerton makes the case that the exposure these brands get from their sports sponsorships, and the positive sentiment that generates for them among sports fans, shouldn’t be waved off. “When these brands are supporting their sport of choice, [sports fans] tend to gravitate towards those brands,” he says.
He cites Microsoft as an example: its Surface tablet is the official tablet of the NFL. “After a team goes out on downs, everyone sees the quarterback holding a tablet, and it’s a Surface tablet by Microsoft,” says Fullerton. “That has been so successful for them that Apple said, ‘We want in on that.'” (In 2016, Apple made a deal with Major League Baseball to put iPad Pros in every dugout.)
Fullerton also makes the case that the health of sponsor stocks is a reminder that for all the talk about the NFL’s decline, football “is still the biggest game in town. If you look at the fan, they’re still watching the NFL and other leagues on other devices. It might not be television, but they’re still catching snippets. And they see those sponsors.”
Of course, being a sports sponsor puts a brand at risk, at any moment, of some kind of scandal associated with a league, team, or individual player. And for the brands associated with the NFL, in 2018 there’s the particular risk of political controversy. As Brian Cristiano of ad agency Bold Worldwide tells Yahoo Finance, “Brands are nervous behind the scenes” right now amidst the declining ratings and political turmoil the league faces.
But Fullerton says sponsors will continue to thrive. “When you look at a Nike or Budweiser, or Gatorade, brands that rely so much on sports for their revenue streams, I think there can be some risk associated,” he says. “But there are always going to be sports fans out there, and there are always going to be people watching sports and passionate about it, and I think the brands associated will always ride that wave, regardless of scandals.”