The Rise of Organized Sports

Organized sports now represent two sides of the same coin: an expanding investment industry and a growing line item in family budgets. As youth athletics continue to commercialize, they present new opportunities for investors while increasing the financial commitment for families. Understanding both dynamics can help make sure these commitments support your long-term goals – on and off the field.

Sports in Your Portfolio

How Consumer Demand Is Reshaping Organized Sports

Over the last five years, family spending on youth sports has risen roughly 46%¹ – reflecting just how significantly the landscape has evolved. What was once a community-based pastime has become a more specialized, year-round landscape centered on elite competition, intense training and events that allow exposure to college recruiting. This shift has increased families’ spending and fueled the need for professional coaching, advanced facilities and destination tournaments, creating strong revenue streams for businesses in the market.

The COVID-19 pandemic accelerated this trend, rebranding sports into a solution for low physical activity and social connection. At the same time, social media and Name, Image and Likeness (NIL) rights have increased young athletes’ exposure, creating pressure that many local programs simply aren’t built to handle.

How the Industry Is Evolving To Meet the Demand

Generally, industries become investable when they move from informal models to professionally managed platforms – and that’s exactly what’s happening to organized sports. As families look for year-round training and higher-quality facilities, operating costs and complexities have risen. In response, larger organizations are stepping in with standardized operations and more advanced technology.

Interestingly, the industry is still made up of many local and regional programs – so there is room for stronger organizations to grow by bringing them together and improving operations. In turn, this is shifting organized sports into a more consistent, year-round business.

What It Means for Investors

Organized sports now touch a wide range of businesses – from equipment companies to youth training academies and adult leagues. As participation and spending rise, these businesses generate recurring revenue through things like memberships, rentals and sponsorships. For long-term investors, this growth may present an opportunity among apparel providers, facility operators, league organizations and even the technology systems that support operations. Your Baird Financial Advisor can help determine if and how these opportunities may play a role in your portfolio.

Sports in Your Budget

Organized sports is not only an investment opportunity – it’s a growing household expense that shows up through club fees, travel and equipment expenses. This makes planning essential for families participating in youth sports today. Here are a few steps to help your wealth plan support your child’s sporting endeavors:

Define the Purpose of Your Child’s Participation

The organized sports industry is undeniably shifting toward a more structured, competitive landscape – but that doesn’t mean every child’s goal is to “go pro.” For some, a chance to play outside with friends is all they’re looking for. Ultimately, clarifying your child’s purpose can guide spending decisions. Is it…

• For social or exercise benefits? Local leagues may suffice – and renting equipment can reduce costs as well.
• For skill development? Travel teams and specialized camps may offer stronger competition, but at a higher expense.
• To achieve scholarships? You may need to budget for things like specialized instruction, travel and campus visits – and weigh the investment with other strategies, such as contributing to a 529.

As you weigh these possibilities, also be mindful of the time commitment. Intense sports can require tradeoffs with vacations, pull parents away from work and limit the number of other activities the child can fit into their schedule.

Determine the True Cost of Participation

At first, you may see a given sport’s registration fee and call it a day. In reality, though, there are many kinds of expenses you’re likely to incur. Generally, activity expenses can be broken into three categories:

• Upfront costs: Entry fees, gear, uniforms and other expenses you need to pay just to participate.
• Recurring costs: Weekly lessons, camps, tournament fees and any other ongoing expenses throughout the length of the activity.
• Indirect costs: Gas to take your child to and from practice, meals you’re eating at restaurants after an away game and hotels you’re staying at for the weekend tournament that’s out of state.

Of course, your child’s participation purpose will help determine the extent of these costs – but be sure to add up all of these expenses when determining how much an activity will truly cost. If the number is significant, your Baird Financial Advisor can help incorporate it into your budget so you don’t have to absorb the costs as they come.

As you explore organized sports as both an investment opportunity and part of your family’s comprehensive wealth plan, your Baird Financial Advisor can provide guidance on both sides of the discussion.

This information has been developed by a member of Baird Wealth Solutions Group, a team of wealth management specialists who provide support to Baird Financial Advisor teams. The information offered is provided to you for informational purposes only. Robert W. Baird & Co. Incorporated is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.