Join M3 Challenge staff in a conversation with the author of this year’s first practice problem, taking place in our upcoming webinar on January 23, 2025, at 9:00 a.m. ET. We’ll talk about approaches to answering the problem questions and tips for how to use your math skills to be successful in M3 Challenge. Register now!
Professional sports are big business: sports teams around the world, from soccer, to American football, to baseball, and car racing, are worth billions of dollars. For example, the WNBA, America’s premier women’s basketball league, commands 9 figure valuations [2]. Notably, the value of sports teams is growing fast: in just the last five years, the world’s 50 highest-valued teams have almost doubled in value [1], and similar increases have been observed more broadly [2,3].
The reason for this growth in value could be attributed to increased revenue from TV and streaming deals [4,5], which make up a large fraction of revenue for many, but not all, leagues. However, for some leagues, like the WNBA and Formula 1 car racing, valuations may be increasing with growing fan bases [6,7]. Other sources suggest that growing valuations are due to a growing number of billionaires, who invest in sports teams for personal enjoyment and the allure of exclusivity [8].
In this problem, you are asked to use mathematical modeling to carefully explore the valuation of a single professional sports team of your choosing. You may pick any team, in any league, and based in any country. E-sports teams are also eligible [9]. If you have trouble deciding, we suggest:
- Seattle Storm (basketball, WNBA)
- Liverpool (soccer, English Premier League)
- Paris Saint-Germain (soccer, France Ligue 1)
- Los Angeles Rams (American Football, NFL)
For the team of your choosing, use mathematical modeling to answer the following three questions:
Keeping score. Like any business, a team’s value is tied to how much revenue (i.e., income) is generated through ticket sales, television and streaming deals, stadium concessions, and other sources. For your chosen team, create a mathematical model to project how much revenue the team will bring in over the next 10 years. You may wish to consider historic performance of the team or comparable teams, as well as global trends in revenue numbers across sports.
Priced out. For most teams, it is easy to find “values” listed in various sources – in fact, many of the articles linked above contain such values. However, these numbers are simply someone else’s best guess. Come up with your own model for valuing the team and report your best guess for its current value. Another way to think about this question: if the team was sold to a new owner tomorrow, what price do you think it would sell for? Your model might take into account your solution to Question 1, as well as other factors, like the prices recently commanded by similar teams.
Put your money to work. Suppose an investor or new owner acquires your chosen team and wants to invest money into the team to increase its value. For example, they might invest in a new stadium, a new star player, marketing efforts to increase the fan base, or something else. Create a mathematical model to evaluate the impact of at least one possible investment option on the team’s revenue and long-term value.
[1] The World’s 50 Most Valuable Sports Teams 2023
[2] Team valuations foretell league’s growth trajectory
[3] Valuations of Sports Teams on the Rise: A Tale of Two Continents
[4] The amount networks are paying to broadcast NFL games is skyrocketing
[6] WNBA set to cash in on rising popularity with $2.2 billion media deal
[7] After years of American growth, has F1’s U.S. fandom plateaued?
[8] What’s Behind the Exploding Prices of Pro Sports Franchises?
[9] The Most Valuable Esports Companies 2022
This problem was written by members of the Problem Development Committee: Dr. Jennifer Gorman, Lake Superior State University; Dr. Neil Nicholson, University of Notre Dame; Dr. Chris Musco, New York University.
Reference and other links included on this page were current and valid at time of original posting; if they are no longer valid or live please look for similar or updated links in context with the referenced topic.
