Franchise Valuation

Each year, Forbes publishes lists with the valuations for sports franchises and reviews of the businesses of the main professional sports leagues in North America. For this assignment, complete a review of the determinants of franchise valuation. In a narrative format, using the most current Forbes (Links to an external site.)Links to an external site.( report and three scholarly sources, in addition to the textbook, write a paper that includes:

Analysis of the economic determinants of professional sports franchise value.
Evaluation of the franchise valuation of one sports franchise of your choice. In the valuation include factors such as, championships, price paid, revenue, operating income, debt/value, player expenses, gate receipts, wins-to-player cost ratio, revenue per fan, and metro area population.


Franchise Valuation

Forbes is a media and publishing company founded by Walter Dreyand B. C. Forbes in 1917 (Bates, 2008). Based in New York, United States,Forbes most popular publication is the Forbes Magazine. In spite of business being Forbes’ common subject, the media company also provides coverage on technology, industry, science, law, politics, sports and many other topics. In addition to this, Forbes is well known for its lists and rankings of wealthy individuals and franchises.Examples of these include the ranking of the world’s top companies and the richest Americans in the Forbes 400. Moreover, Forbes’ attention spreads to sports, where it values the top sports franchises in the major professional sports leagues in the world. This paper analyzes the economic determinants of professional sports franchise value as well as the evaluation of Forbes’ valuation of the American Football team Dallas Cowboys.

Determinants of Franchise Value

The primary means of Forbes valuing sport franchises is by measuring cash in versus cash out. The revenue generated by the professional team is computed, as are the expenses spent on operations such as stadium maintenance, traveling costs and players’ wages. Revenue generated from official sponsors, player sales and loaning and gate receipts is also computed. Gate receipts from tickets help generate the revenue-per-fan. These details are gathered from the teams, credit rating agencies, sports bankers, network executives, public documents such as for public debt and stadium leases and from media experts such as SNL Kagan (Ozanian, 2015).

Forbes looks at the enterprise values of franchises when valuing their monetary worth. Enterprise Value (EV) refers to the amount of a business’s total value, usually applied as a substitute to equity market capitalization (Investopedia, n.d.). Enterprise Value, therefore, is computed from the addition of the market values of common stock, preferred equity, debt and minority interest. The company’s cash and investments are then subtracted from this total to provide the Enterprise Value figure. The debts calculated in this formula also include stadium debt recourse. By looking at Enterprise Values of companies, Forbes is able to gauge the value of the franchise over the past fiscal year. Enterprise Value, therefore, is the main determinant of the franchise value in sports.

Moreover, the income gained by a professional team from selling rights is also determinant of the Forbes’ valuation of the enterprise. Sport franchises mainly derive income from television rights and naming rights. For instance, the English Premier League (PL) sells broadcasting rights to media broadcasting companies such as Sky Sports, beIN and ESPN. The income generated from selling TV rights is then divided among the teams in the league as per their popularity on television. This is a major source of income for these franchises. Moreover, professional teams may sell stadium naming rights thus increasing their value. This is only possible if the team owns the stadium. A good example is the AT&T Stadium, home to National Football League’s Dallas Cowboys. According to Hillman (2016), the $1.2 billion stadium was completed in 2009 and its naming rights were sold to AT&T Inc. This is a major contributor to the value of the team.

Similarly, a team’s sponsors contribute heavily to its revenues. Sport franchises may have multiple sponsors, such as the main shirt sponsor and kit sponsors. Sponsorship of this kind is motivated by advertisements by some of the world’s top companies. For instance, General Motors signed a deal with Premier League side Manchester United to promote the Chevrolet brand on their shirts for $80 million per year (Unlucan, 2015). In addition to this, kit sponsors such as Adidas and Nike are major players in the sport. Adidas beat Nike as the Manchester United kit sponsor and outfitter in a deal worth almost one billion dollars in a ten-year period commencing from the 2015-16 season. This has helped Manchester United, which had stuck on 5th position in 2015 and 2016, climb up two places into 3rd position as the most valuable sports team globally (Forbes Corporate Communications, 2017).

In addition to tangible assets such as machinery, equipment and property such as stadiums, intangible assets are major determinants of the franchise values of a team by Forbes. Examples of these include player contracts, workforce, intellectual property, Acquired Goodwill and Season-Ticket Holder Subscriptions (Vine, 2004). According to valuations by Forbes, stable financial security on intangible assets increases the value of a sport franchise. For example, a team that has tied down its players to lucrative, long-term contracts is valued higher than a team that has some players on expiring contracts.

Finally, the championships a team is competing in are determinants of the revenue the club generates, thus influencing the franchise valuation. For instance, in European Association Football, the top-four clubs in leagues such as the Spanish La Liga, the English Premier League and the Italian Serie A compete in the UEFA Champions League as well as their domestic cups. This presents an additional source of revenue from UEFA for these teams especially when they proceed further into the competition.

            Franchise Valuation of the Dallas Cowboys

            The Dallas Cowboys are an American professional football club that competes in the National Football League (NFL). The franchise is owned by Jerry Jones and plays its home matches in the AT&T Stadium, Texas. The Dallas Cowboys became the most valuable sports franchise on the planet in 2016, with Forbes valuing the club at an unprecedented 4 billion dollars (Hillman, 2016). In the 2017 Forbes rankings, Dallas Cowboys maintained their first position with an estimated value of 4.2 billion dollars. Ironically, the Dallas Cowboys has never won the Super Bowl in more than 20 years despite being a consistent financial performer since Jerry Jones acquired the franchise in 1989.

Dallas Cowboys’ top valuation is mainly as a result of its 1.2 billion-dollar home stadium, the AT&T Stadium. The stadium was completed in 2009 and its naming rights were sold to AT&T Inc. in 2013. This gained the club an estimated 600 million dollars (Ozanian, 2015). Moreover, the stadium leads the NFL in terms of attendance, with an average of 90, 000 per game. This large capacity enables the franchise to generate a premium seating revenue of around 120 million dollars annually for the league events and around 30 million dollars yearly for non-league events such as boxing and professional wrestling (Aicher, Paule-Koba & Newland, 2015). This stadium is Dallas Cowboys’ goldmine that has helped the club stay top of the world’s sports financial ledger despite the team’s unsatisfactory performances in the NFL.

Dallas Cowboys, according to Forbes (2017), has a team value of $4, 800 million. It participates in 5 championships. The franchise’s price paid is $150 Million and the revenues were $840 million at the time of the valuation. $103 million of the revenue was from gate receipts. The club’s operating income in 2017 was $350 million and the player expenses in that year being $196 million. The franchise’s Debt/Value was valued at 8%. The club’s wins-to-player cost ratio was 151 while the revenue per fan was $80 in 2017. Finally, the Metro Area Population in the 2017 Forbes’ estimates were 7.2 Million.





Aicher, T. J., Paule-Koba, A. L., & Newland, B. (2015). Sport Facility and Event Management. Burlington: Jones & Bartlett Learning, LLC.

Bates, S. (2008). Encyclopedia of American Journalism. Edited by Stephen L. Vaughn. WILSON QUARTERLY32(3), 106.

Forbes Corporate Communications. (2017, July 12). Forbes Releases List of the World’s Most Valuable Sports Teams. Forbes. Retrieved from

Forbes. (2017, September). Dallas Cowboys. Forbes Sports Money: 2017 NFL Valuations. Retrieved from

Hillman, C. (2016). American sports in an age of consumption: How commercialization is changing the game.

Investopedia (n.d.) Enterprise Value. Retrieved from

Ozanian, M. (2015, Sep 14). The Most Valuable Teams In The NFL. Forbes. Retrieved from

Unlucan, D. (2015). Jersey sponsors in football/soccer: the industry classification of main jersey sponsors of 1147 football/soccer clubs in top leagues of 79 countries. Soccer & Society16(1), 42-62.

Vine, D. (2004). The value of sports franchises. Retrieved from

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