A promotional truck with Toronto Maple Leaf logo pulls away from the Air Canada Centre as the Rogers Dome looms in the distance. Rogers Communications is reported to be interested in buying MLSE and all it's holdings which include the Toronto Maple Leafs hockey team, the Toronto Raptors basketball team and Toronto FC.Fred Lum/The Globe and Mail
The lineup for Rogers Communications Inc.-owned sports teams isn’t just to get into venues when the Leafs, Raptors or Blue Jays play.
There’s also a long list of investors who want to get in on major league action by acquiring a stake in Toronto’s pro sports franchises once Rogers concludes its $4.7-billion purchase of BCE Inc.’s minority stake in Maple Leaf Sports & Entertainment (MLSE).
Valuations on sports franchises seem to hit new highs each time a team changes hands, prompting concerns that debt-heavy Rogers RCI-B-T is paying a top-of-market price to double its stake in MLSE to a 75-per-cent holding. (Billionaire MLSE chair Larry Tanenbaum owns the remainder.) In response, Rogers executives have consistently said they will buy out BCE BCE-T in a transaction expected to close later this year without taking on additional loans by selling minority stakes in MLSE teams to outside investors.
These potential bidders aren’t just sports fans with big wallets. They include bottom-line-driven fund managers who want to capitalize on what they project will be strong continued growth in sports revenues. The investment case for buying teams starts with traditional broadcasters such as Rogers-owned Sportsnet facing increased competition for the rights to Stanley Cup playoffs or World Series games from streaming platforms controlled by tech giants Amazon, Apple and Netflix.
A new study by one of the potential minority owners in Toronto teams, private equity firm Arctos Partners, shows already lofty valuations on sports properties are all but guaranteed to keep soaring.
Founded six years ago, Dallas-based Arctos pioneered institutional investment in pro sports by committing more than US$4.4-billion to stakes in 20 teams. Last year, Arctos broke ground by being one of the first fund managers to buy into the NFL, acquiring an interest in the Buffalo Bills. Arctos also owns a piece of baseball’s Astros and Dodgers, basketball’s Warriors and Jazz and hockey’s Penguins and Lightning.
Arctos executives, who include the former CEO of New York Rangers’ and Knicks’ owner Madison Square Garden Co., declined to comment on their potential interest in Rogers-owned teams.
The fund manager did share a recent presentation on why pro sports represents a compelling investment. Arctos predicts “the massive demand spike for national premium sports will continue, driven by persistent media fundamentals.”
Over the past eight years, broadcasters increased their rights’ payments to North American sports leagues by 9.1 per cent annually, from US$14-billion in 2016 to US$25-billion last year, according to Arctos. The vast majority of the money came from conventional broadcasters – networks such as ABC, CBS, Fox and NBC.
In the past few years, streamers began grabbing games to feed content-hungry subscribers. Amazon acquired Monday night NHL hockey from Rogers. Netflix snapped up NFL games played on Christmas Day last year. Arctos is buying into pro teams on expectations their values will soar as tech platforms go from also-rans in sports broadcasting to the dominant platforms.
“While Netflix and Amazon have taken a leading role among Big Tech streamers in sports so far, all of them continue to have active rights deals and teams examining spends in the space,” said Arctos. “They have formidable dry powder for rights.”
Last year, legacy media platforms took in an estimated US$146-billion of revenue and devoted 16 per cent of this money to sports rights. Tech platforms posted US$278-billion in subscriber and advertising revenue in 2024 and spent just 1 per cent of that total on acquiring sports.
Over the next decade, Arctos projects increased demand for content from streaming services will translate into a 6.2-per-cent annual increase in revenues from sports rights. By 2034, team owners will see broadcast revenues double to US$51-billion.
That steady potential growth shows why Rogers is buying out BCE, fully confident it can find partners to invest in MLSE teams. The compelling economics of pro sports also explain why Rogers is widely expected to acquire Mr. Tanenbaum’s 25-per-cent stake in MLSE when it has the right to do so next year, and eventually create a sport powerhouse by combining the platform with the Blue Jays, which the telecom has owned for more than 20 years.
Who will step up for minority stakes in Toronto teams? The better question is who won’t bid. Funds such as the Ontario Teachers’ Pension Plan and OMERS have already scored wins on MLSE investments. These trendsetters, and fund managers such as Arctos, have given sports investment a seal of approval for institutional investors.
Once its MLSE purchase closes, Rogers will be able to choose between selling minority stakes in the Jays, Leafs and Raptors to deep-pocketed fund managers and the country’s wealthiest families. Relentless demand for content from streamers and conventional media platforms can continue to make owning sports teams a profitable investment.