Tariff Timbres and Team Troops: Navigating the Economic Tumult
Trade policies under Trump administration: Potential increased influence of "Big Beautiful Bill" tariffs on the sports industry
The great tariff debate has been a hot topic lately, with global markets experiencing waves of uncertainty. But the sports world seems to be cruising through these turbulent economic waters fairly steadily.
City AM recently reported that even amid market turmoil, sports valuations stay rock-solid. And guess what? This week's changes to tariff plans have only fortified this trend!
"What impact could a pullback in consumer spending have on ticket sales, merchandise, and media rights? We're still pondering that question," explained David Sunkin of major US firm Sheppard Mullin to City AM. But he also added, "Despite the tariff drama, the pace of sports deal-making remains unabated. No sign of values dipping here!"
Sports Shrugging Off Tariff Tosses
Lale Akoner, global market analyst for eToro, agrees. According to Akoner, sports franchises have maintained a cool demeanor in the face of market volatility for a good reason: sports revenue springs mainly from media rights, sponsorships, and live events, all of which are barriers to tariff battles that hit goods-based industries.
On the other hand, a host of sectors reeled from tariff tremors, even with current pauses. The UK is close to signing a deal with the US that will trim a number of proposed tariffs, but hey, the ink ain't dry yet, and the final picture could still resemble a pre-Trump age.
Akoner therefore cautions, "Resilience isn't immunity," pointing out the potential for a global recession resulting from the tariffs to eventually impact sport. She added, "Debt adds another pressure point with many clubs, especially private-equity-owned, sitting on hefty borrowing that leaves margins in the hands of interest rates."
Say Hello to Uncle Sam
But wait! What Trump is doing that's catching everyone's attention, including Elon Musk, is not tariffs but his Big Beautiful Tax Plan. This proposal packs a legislative punch, including sports-specific tax rules that could steer the wealthy family proprietors of U.S. franchises towards Europe.
"It's funny how much attention is on tariffs, but folks seem more concerned about Trump's tax bill," observed Sunkin. "Because it has some sports-geared legislation that could influence the tax treatment of intangible assets, sparking dialogue on its effect on sports deal-making and valuations."
The plan is drafted to reduce the amount that can be deducted for intangible assets, which make up the majority of a team's value. Normally, such assets – including IP, media rights, goodwill, and player contracts – are written off at 100% over 15 years. But ole Trump wants to scale that down to just 50%.
Sunkin further noted, "Folks are keeping a close eye on this because it offers substantial tax benefits to wealthy families owning these teams."
And sports might just have a trump card: an unwavering popular attraction that steel and agriculture can’t quite muster.
In conclusion, Sunkin reasoned, "In tough times, people increasingly look to sports for an escape. History shows that sports have always provided this respite. Sure, sports are expensive to attend in person, but people have been dishing out the dough for a long time, and they'll continue to engage in watching and streaming."
- Despite the uncertainties caused by tariffs and volatile finance markets, sports have managed to maintain their value, with sports deal-making and valuations remaining unaffected.
- The proposed tax plan, instead of tariffs, has sparked more dialogue within the sports world, as it could potentially influence the tax treatment of intangible assets, affecting sports deal-making and valuations.
