The Sporting Class: Why NFL Owners Want Private Equity Cash

Welcome to Pablo Torre Finds Out.

I am Pablo Torre, and today we're going to find out what this sound is.

John Skipper just spat water out right after this ad.

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What is the dog, David, that you're exercised about today?

I am incredibly worked up about the NFL because it's bringing me back to how badly.

That's that's not what I want to know from you right now.

You were complaining about John's desire to have a beagle as our master.

Well, I don't, John, his creative mind,

we're doing the sporting class as part of Pablo Torrey Finds Out.

And John has been obsessed obsessed with dogs the sporting class as in could we explain the name I actually would not suggest obsess since it hasn't come up a single time on the many shows we've done the original punning intent of the name was to suggest sort of best in show sporting class Westminster dog kennel but also that of course we are providing something of a class in sports business so it's a sporting Yet you were obsessed with making sure that in our artwork there was a beagle, and I'm just not sure.

A beagle is very important to me from my childhood, where I always had beagles as dogs.

As a country lawyer, a humble country lawyer.

My favorite being Sugar,

who was my companion, about the only person who talked to me for two or three years of my life,

was Sugar.

What goes around comes around.

And I once had a pair of beagles called Ella and Lewis.

And David, what kind of dogs did you have in your?

I don't like dogs.

Yeah.

For the record, if you're not watching YouTube of the Graphics Network, John Skipper just spat water out.

Well, no, I didn't.

I've managed not to,

but somehow

surprised me that Snadley Whiplash does not have a big old soft beagle at home.

I just can't imagine the concept of picking up someone's crap and having them never grow up to be able to talk and be on their own.

So in all seriousness, you guys were flailing, smacking papers against desks,

David yelling obscure financial terms that I don't understand.

And so I'm here to find find out about why he cares about these terms I don't understand.

And I want to start with the NFL, because the NFL this week took a vote, a vote on a subject that we've covered on this show previously, more generally, but specifically to them, it's about taking private equity investment.

And so the proposal was 10%,

up to 10%,

which is not as much as the other leagues, which we're talking about 30%.

But David, to you, private equity money in the NFL landing in this way, the top line understanding that you have is what?

Well, private equity money is very important as a source of capital.

And what that means is when you are putting together money to buy something, you have to find owners.

You have to find individuals to put in money to buy a team.

Sometimes you run out of individuals.

You have to go to the capital markets, which means you go to a bank to borrow money or you find a syndicate of banks to borrow money.

Or if that doesn't work because you're tapped out, then there are these firms that are willing to invest in your company, except they require a heightened rate of return.

So when you borrow money from a bank, you pay an interest rate.

When you get money from a private equity firm, it comes in the form of an equity investment, but it's like a preferred equity investment because

which means that upon a monetization, upon a sale, they get back their money and a rate of return on their money before anyone else gets a rate of return on their money.

That's how private equity firms make money.

And it is an amazing thing to be in a private equity firm because you invest in different companies and you make a lot of money.

With an amazing favorable taxation rate.

That is also true.

I can't deny that.

Which is a feature of American capitalism.

Which is, which is, well, it's all in the code.

It's not illegal.

Oh, sure.

I didn't suggest it was illegal.

It may not be moral.

I wouldn't even suggest it's immoral.

I would suggest it's unfair.

It is unfair.

It's unfair in the way.

It is unfair.

A bug, arguably, morally, but a feature.

It is a tiny bug.

But what the NFL is doing by having this vote, they're the last league, and I think we should point that out.

MLB, the reason why MLB allows private equity investment and the NBA

is they want their value of the teams to keep going up.

So if you're buying the commanders for $6 billion, Josh Harris had to come up with $6 billion between the people he knows and the banks he does business with.

It's hard to do that.

But John, just to make this even more plain English here, what these teams and these leagues are realizing is there aren't enough super, super, super rich people to keep pace with the idea of a single owner of a super, super, super rich asset.

Well, and you've also got the realization by owners that most of the benefits of owning a team don't require you to own more than 50.1%,

right?

You get to sit in whatever seats you want.

You get to pick the personnel who run your team and do things if you choose to.

And so, why should they put $6 billion in where they can put $3.1 billion in, get all the benefits of ownership other than they're giving away half the upward valuation?

And as David pointed out, the private equity guys will actually get a favorable return.

But that's not why most people own teams.

They own teams because they're the greatest trophies you can have to display your importance and your wealth and because it's fun.

But that's changing now, John.

And these PE firms are not doing it because of the trophy.

They're not.

Well, I know.

And that is where some rub may end up coming in.

So what's changing?

Why is this happening?

So the PE firms, if they're going to invest, what they do is they've got a

picture you having $100 million just for fun, Pablo.

And you're deciding how to diversify.

Let's take a break, Juo, Pablo, and I consider that.

Yeah, yeah.

I'm going to recline here for a second.

Oh, Oh,

thank you.

That was really great for the audience.

You put it in on the draftings network.

I was chewing on a pen like a guy with nine figures.

So

come on.

I was going to use a different amount.

I was going to use like a billion dollars, but I decided to bring it down to a number that I thought you would be okay with.

Oh, yeah.

I'm sorry.

David is unimpressed by the hypothetical.

That's right.

The hypothetical doesn't even make sense.

This is why this is rich guys only face.

It's not.

this is it's math, but we're good.

Back to 100 million.

You've got 100 million to invest.

You want to find different sectors.

You want to diversify your investments.

What these firms have said is, you know, sports teams keep going up in value.

We keep buying corner grocery stores and widget stores.

I think we ought to be investing in sports teams because they do well.

We don't need good seats.

We don't need to stand on the stage when we win a Super Bowl.

But man, it seems like when you buy a team and sell a team, that's one hell of a return on investment.

So this is quite different from previous minority owners, right?

Big time.

So previously, what is it like to be a minority owner of a pro sports team?

Previously, because the numbers were lower, it's called a CPI.

That is a cocktail party investor.

That is someone who puts in a little shtupple of money into the industry.

This is an industry term, the CPI.

This is, this is.

I thought that was a consumer price index.

I always say that it's the cocktail party investor because they get to go to cocktail parties and say, hey, I own the Marlins.

Oh, I've never heard of you.

Yeah, no, I'm one of the owners of the Marlins.

And they put in $250,000 and they get to tell everybody that they're an owner.

The numbers have changed significantly.

To be a CPI, it's not an ordinary CP that we would be invited to.

It is now for these super, super wealthy individuals.

And we're pretty much out of those parties, which is why you start with PE.

So John was explaining the upside of being an owner in any form of these teams as essentially, yes, the CPI dynamic, the court side, I get to be the owner of this precious piece of art,

a symbol and a signal of exclusivity.

The NFL, of course, is the apex predator of all of these leagues, right?

And so here are the numbers.

Over the past 20 years, the NFL's total value has risen from $23.46 billion to $190 billion,

710%.

The SP 500, by contrast, has risen about 660% during the same time span.

Which does kind of prove the fact that for almost any ordinary human being, the best way to invest your money is to put it in the SB.

In an index fund.

In an index fund.

If people are out there asking, what do I do with my $1,000 or $10,000 or $100,000, put it in an index fund and then forget about it?

Like revisit it in 50 years.

But it's funny that that is the difference.

But in any case, the NFL as the apex predator, what's interesting is what they're talking about in the NFL, however, is totally different than what the other leagues do.

The other leagues took votes with owners and they approved private equity investments in order to keep valuations rising.

But for the NFL, it wasn't good enough.

Right.

So the NFL doesn't have the same problems of other leagues because the Cowboys, the Dallas Cowboys, their valuation in 2019, John, was $5.5 billion.

Now, as of August 2024 from Sportico, $10.32 billion.

You go down the list, the Rams, 7.79, Giants, 7.65, Patriots, 7.31.

You can go,

these are all

so much richer, so much more expensive, valuable than their equivalents in other sports.

And so the NFL, what do they want here?

What's the reason why they're approving to do this vote?

They want those numbers to be real for starters.

And I'm not yucking on Sportico's yum or on Forbes, but those valuations were never really looked at within baseball.

We never could go to a bank and bring out the Forbes article and say, hey, lend us money.

Our team is worth blank.

We never were able to use that.

How did you get the $1.2 billion, David Samson, that you got for the Florida Marlins?

Having nothing to do with Forbes, clearly, the way we got it is when supply demand.

It's when you have two people who want the same trophy.

They're going to.

bid up the price of that trophy.

It's really that simple.

And I love the fact that I get credit for that transaction, but i feel as though that my beagle could have done that hate resentment well it's it is not my fault you can't blame a seller when a buyer overpays for an asset i don't believe yeah and you could question even the overpaid if they are happy to pay 1.2 and they get to sit in the seats they want and it makes them happy they didn't overpay they're despondent beyond repair and they're losing money hand over fist and they sell it for 1.2 in a heartbeat.

If you want to buy a team team that you can buy the Marlins today, all you have to do is give them their money back plus the losses they've incurred.

But getting back to a broader subject, the NFL wasn't satisfied with just being like the other leagues.

And that's what fascinates me.

But just these valuations, because we hear about these all of the time, John, that these teams are worth X and Y and X times Z, all that stuff.

When we talk about valuations, can we just demystify them then?

Like, what are they really?

Are we repeating numbers that are actually not worthy of repetition?

It's not much different than real estate.

Is a building is worth whatever somebody will pay for it.

So the valuations are based on some kind of mathematics of past

increases or what somebody's recently paid for a team and comparing it to another team.

But it really is no more complicated, in my opinion, because there's such a shortage of supply.

There's only 30, 32 NFL teams.

There are way more than 32 people who want to own an NFL team.

Not many have enough money to buy it by themselves.

And they assume it's going to keep going up.

So there'll be no harm, no foul.

They could have put the money in the SP 500 and made just about as much, but it wouldn't have been as much fun.

And it wouldn't have been as public.

It wouldn't have been as exciting.

I mean, I think I just read this great story about Steve Ballmer and his new arena.

He seems to take great joy out of it and he can afford it.

And I don't, I suspect he could make more money if he wanted to, much simpler by doing something more simple.

But it's no more, it's not as much fun.

If you watch him at a game, he's going crazy.

He loves it.

That's, that's the best value money can buy for him.

Right.

This Vanity Fair story, the profile of Steve Bond.

It was really good.

Well, and talk, David, about something that you know well, the opening of a new stadium.

The Intuit Dome is this thing.

Again, speaking to the party, the actual literal cocktail party that might be held at these buildings.

But you started this conversation with the commanders so let's get to the real money that we can sort of extrapolate off of right so josh harris a private equity prince as he's been called previously his group paid over six billion and so all of these teams the eagles now at 6.75

valuation that number like we're we're the floor keeps going up and so private equity now being up to 10

uh this is something that you would do, take advantage of if you were if you were an NFL owner.

So if I were allocating, first as a

principal of a PE firm, I would take advantage of the asset class, which are sports teams, and the ability to invest in them.

I would allocate a part of my portfolio to a sports team.

There's no question.

If I'm an owner, a current owner, I would be happy to take some money off the table because one thing John said that isn't.

accurate, you don't need 50.1 to get the courtside seats and to have control and hire your people.

You have to be the general partner, the control person.

You have to be the largest shareholder, like an MLB.

That's it.

You can own 20%.

Let's just speak to you.

And get that shit.

I'm just speaking to my people.

And that's the kind of language they understand.

You have to own more than 50%.

I understand that there are preferred shares and common shares and you can't own less than 50.

I was just trying to speak to our people.

Yeah.

You can do like the Murdoch.

They happen to own far less than 50.1 and they run everything.

It is, it is the biggest piece of chicken.

It is amazing if people would realize, do you know that the Stein Renners, they don't own 100% of the Yankees.

They barely own a ton of Yes Network.

You know this better than I.

Everyone assumes that that's the Yankees owners who own the Yes Network, but surprise, it's not.

But anyway.

The ways of well-to-do people are mysterious.

Well, it's actually, it's very simple.

You want to use other people's money as often as possible to get the pleasure of the asset.

And that's what owners do.

How romantic.

I didn't say that it's, it's lovey-dovey butterflies and unicorns, but that's how rich people get richer.

But okay, private equity, though, what do they, as a category, just to make this very clear for our people, our audience, that wants to be, again, led into this world of very wealthy people, private equity wants what out of this?

They want the increase, of course, but when it comes to input, control, private equity across

zero.

No input.

They want returns.

They want returns.

It's quite simple, I think, for the

but that is simple because they're making money hand over fist in the NFL right now.

They don't need to be activists the way that private equity, you're saying, I presume, has been in restaurants, in department stores, in the rest of American life.

So there's seed money that PE does, which is when you put money into a fledgling business or you do the Richard Gere pretty woman situation where you buy a company and then break it up for pieces.

There's different allocations that you do with your 100 million pot of money.

It's a very different interpretation of what Pretty Woman was about, I believe.

But

my memory is dim, so I'm not going there.

That was a movie.

I know what it was.

Richard Gere and Julie Roberts and the Beverly Wilsher Hotel.

Right.

Yeah, I got it.

Arguing over shares of a company.

Yeah.

That's what I thought they were doing.

Well, look, isn't it the fact, Dave, the PE firms believe strongly that they're going to get returns, so they don't need to have that much influence.

That's my question.

In most cases, when they go in and even invest a minority

money, they want more control.

They want a seat on the board sometimes.

They're active as investors who want to tell the then CEO what they need to do so they can make more money.

And we have that in regular public companies now where you can become an activist investor.

We've talked about Nelson Peltz, I think, on this show and how you can be an absolute disturber and disruptor.

We've also talked about private equity coming to college sports on this show.

And you're saying that this is a different proposition in terms of what to expect from these private equity investors if you're the head of an NFL team versus the AD, the athletic director of a college football team.

I think it's a nightmare for everybody, to tell you the truth, because

in the NFL?

I do.

Yeah.

Yeah, that I don't know.

I was just going to, we've had this discussion before.

PE

in colleges makes no sense to me because they have to have high level of confidence they're going to get a return.

And I do not understand how they think they're going to get a return from an athletic department.

I think the numbers, I think that the PE investments in the college programs are CPI, cocktail party investors.

Might be.

They're putting much smaller amounts of.

By the way, there are so to date not very many of them.

And you're going to see NFL once this has passed, and it is, you're going to see immediate investment by private equity firms.

I think on nothing personal, I did a wait to see that there will be PE by the end of 2025.

And I did it knowing I win by definition, because I think there'll be that investment even sooner.

But the nightmare for the NFL when it comes to PE, then, is what, in your view?

So it's funny, nightmare.

The nightmare would be that the asset valuations are a bubble and somehow it goes down.

And that's a nightmare for all owners and for the league.

I think the problem is for the PE firms that it was easier for Jerry Jones to make money on the Cowboys because when he bought it and what it's worth now versus investing at a $10 billion valuation and expecting to have that same 700%

increase over a period of time, you'd have to have the team worth, you know, $40 billion.

Is it possible?

I never thought I'd live to see the day an NBA player would make 80 a year, and I think that's coming.

So I guess it could happen, but the rate of return is more questionable.

And it's interesting to me that what the NFL is trying to do is keep a peace.

So let's get to,

as you collapse onto a fainting couch, John.

Do you know what David's talking about here?

I have a vague sense of what Carrie is, but he would be much better equipped to explain it than I am.

It's PE firms, they get paid.

It's the people who run the firms, who started the firms, who fund that $100 million.

When you put money into a company, you also take other people's money into your firm.

So if I want to put $100 million together and I ask you for $10 and you for $10, you're going to get your $10 million back.

You're going to get a rate of return on your $10 million.

I'm going to get a bigger rate of return on mine because I started it.

It's called a preferred interest, a carried interest.

It's like a promote, meaning I get paid to make the decisions.

And what the NFL is being asked,

which is incredible, they are asking their owners to approve that when PE firms invest,

when PE firms then monetize and make money because of team sales, the profit the PE firm gets, which gets distributed to the holders of that fund, the operators of the fund, The NFL wants a piece of that profit.

The league wants a piece of that profit.

It's socialization in a way that mind-boggles me because that means, let's say, cowboys, when they're sold, that means the Jaguar owner would get 1 30th, 132nd of the VIG between what the team is.

It's a little off the top, David.

It's a little off the top.

It's so good.

Screw them.

So hold on.

This is not, just to contextualize this, this is not a thing that we've seen before.

Never.

No league, no league would ever be able to ask a PE firm for that.

The NFL believes, and John, you know this better than I, the NFL asks for things that other leagues don't.

The NFL believes correctly that they have the most leverage

and they feel very comfortable exerting that leverage.

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This smooth, flavorful cognac is crafted from the finest grapes and aged to perfection, giving you rich notes of oak and caramel with every sip.

Whether you're celebrating a big win or simply enjoying some cocktails with family and friends, Remy Martin 1738 is the perfect spirit to elevate any occasion.

So go ahead, treat yourself to a little luxury, and try Remy Martin 1738 Accord Royale.

Learn more at remymartin.com.

Remy Martin Cognack, Feene Champain, afforded to an alcoholic volume, reported by Remy Control, USA, Incorporated in York, New York, 1738, Centaur Design.

Please drink responsibly.

The NWSL is at the different.

is at a different part of this hierarchy.

That's a stretch.

It's the difference between a beagle and a German shepherd.

The National Women's Soccer League.

I don't think the

Beagle is worth that much more than the German Shepherd.

Clearly, it's in the hierarchy of doggage.

The Beagle is at the top.

That's funny.

I had it the opposite.

I know.

I don't know anything about dogs.

I was trying to say that the NWSL is

a rounding error for the NFL.

Right.

And John has.

I think you're talking about a schnauzer and Godzilla.

That's really the difference.

The Schnauzer has a new CBA, is what we're saying here.

And on one level, this is exactly what media types like me have been clamoring for from American sports for a while, which is abolish the draft.

You know, David is aghast at the idea that people would have called for such a thing, but as somebody who hates socialism, of course, this has been a common argument among media types.

John, previously, by the way, on this program, has laughed as well at the idea of abolishing the draft because the draft, of course, is a television program.

that's very popular.

The NWSL is a relatively new league that had been, I believe the term is scandal-ridden in previous years.

And so here they are with new economic ambitions and with this clean slate of a CBA in which a couple of things have happened.

Number one, of note,

unrestricted free agency.

Number two,

no draft.

Number three,

To be traded, the player must consent.

And this is part of FIFA regulations on the status and transfer of players in so many words.

So, John, as the resident

soccer fan here, what does all of this sound like to you?

Well, it sounds to me like a league that is beginning to find its footing is doubling down on some changes and hoping that it will move them forward faster.

I do believe it is some reaction to the fact that the best women's club soccer now happens in Europe and not in the United States.

So, and by the way, they have a better model there than they have here.

Could you explain the model?

Well, the model is that the big brand names and the big leagues, Real Madrid and Barcelona and Manchester City and Manchester United and Bayern Munich have women's teams.

So you get the same

brand, you get the same uniform and people, that's the easiest way to attract an audience.

And since in this country, the MLS has not yet emerged as one of the top leagues in the world.

I'm sorry to say I

always felt good supporting it going that direction.

They chose not to have that model.

The NBA tried this model with the WNBA, which over time would have been the better model, which is right.

They're the New York Knicks.

There's a women's team and a men's team.

And they have the same licensing.

And there's value in that.

From a branding perspective.

From a branding perspective and from a business perspective right there's one reason that women's college sports works is they're wearing the same uniforms so notre dame fans like the notre dame's women's team and the women's basketball team um you wouldn't start college basketball teams that didn't have the same name and colors and anyway i'm off the subject a little bit no but that's interesting because it speaks to the decisions you can make as a relatively new league trying to compete globally so they're clearly trying to create a bit of a splash saying we're doing things different.

This will create some advantages and disadvantages.

The draft, for instance, is a mechanism to try to create parity, right?

That's why the big leagues in the United States want that.

And there's no such thing in European football.

They don't have a draft because they don't really much care about parity.

They're okay if Real and Barcelona win every year, if Bayern wins every year, and if Manchester City wins every year.

They're mostly okay with that.

And in fact, the business of college football is better if Alabama and Georgia and Southern Cal and Texas and Ohio State and Michigan win every year.

That's better business.

So I would like to just ask rhetorically, maybe to myself, does this not smell of such desperation for a league to do this?

What is it they are solving for?

Are they solving to somehow get past the fact that their salary cap is going to rise to $5 million by 2030, their minimum salary is going to 80 grand by 2030, and that now there's player empowerment to a degree that is just unacceptable?

And then on top of that, you've got a situation where there's no more parity, which means you are trying to create a super league without the existence.

We're trying to create a non-parity league.

It's not a super league.

Super league would be up to the league.

It'll be the haves and the have-nots.

Yeah.

No, well, it...

You're not creating a super league.

you're creating super teams in a league because that's what people follow.

I'm not sure.

Maybe they're trying to solve for, gee, we're not paying you a lot of money, but you can leave anytime you want.

I can't trade you if you don't want.

I think it's player empowerment that they're trying to put in place that to some extent is.

is a offset of, I know you're not making very much money, but man, you've got a lot of freedom.

You can do what you want.

And by the way, they will end up ultimately because

you have a salary cap.

If you had no salary cap, then what you'd be solving for is we're going to be the greatest women's sports league in the world because American owners are going to spend the most money, get the best players, and we'll have the best women's sports league in the world.

It doesn't actually solve for that.

The salary cap confounds that as opposed to supports it.

Yeah, I happen to think they just did this as a direct result of Bob Igner.

I actually think that he is the person responsible for this collective bargain agreement.

I think that the NWSL was so pleased to have him and his wife, Willow Bay, invest in

the NWSL at the valuation that was so off the board.

It was four standard deviations away from where teams were worth is where they invested at $250 million franchise value.

Absurd.

And then all of a sudden, the rules are changed, which will allow Los Angeles to become a super team inside the NWSL.

Salary cap cuts against that.

Well,

unless they're going to have a salary cap exception.

Is that like the messy deal in Miami?

Well, I think it raises the question of how American teams fight and compete with those European clubs.

Can you compete for the best talent in the world, right?

That seems to be the direction that a $250 million valuation, John, is gesturing towards.

It would seem to, but again, I'm puzzled only because the salary cap cuts against that.

It says that in 2030, they're going to have a salary, collective cap of 5 million.

That's not like really a big bunch of money to bring in the best players in the world.

But it's jumping for the record here, right?

So 2.75 million this year, 3.3 next, 5.1 2030.

And David.

Come on.

David.

David, that's really jumping.

That's like the guy.

I used to argue, hey, our attendance is up 20%.

I know it was crap, but we're up 20%.

Look at us go.

So, so there is a larger financial sort of, I guess, logic here, right?

And so in the micro, the NWSL announced in November of 2023, a four-year contract that begins this year, began this year, CBS, ESPN, Prime Video, Script Sports, $60 million per year, $240 million for the term of the deal, reportedly, a 40 times multiple of the NWSL's previous agreement.

And so that in the micro, the macro being, look at all of the stuff that's happening in women's sports.

John Skipper has previously disclosed, investor in upstart three-on-three women's basketball league.

The WNBA, which we've covered exhaustively increases everywhere right green arrows which we've unpacked in other points on the show um why isn't this logically just fitting inside of that same trend

can you do some math for me do you mind i'll try will you uh 60 million a year for the broadcast deal and let's say there's 16 teams Do you want to say there's 15 teams just for easy math?

Would you agree that that's 4 million per team?

I would.

In media revenue?

Yes, I would.

Can you imagine?

Exclusively.

Definitively.

Can you imagine a world where your media deal, your distribution from your media deal is equal to your salary cap?

Is there a world where that exists that you can think of?

No.

We can do the NBA math.

We can do the NFL math.

Well, they have built, in many cases, it's defined by the CBA, right?

In the NBA's case, it's about 55%, I think.

That's the revenue that goes to players.

Yeah.

Oh, it's pinned.

So that's the total.

They total up their basketball-related revenue.

Well, there is some other revenue, attendance and licensing, but it's modest.

Modest.

I wouldn't expect that any of the teams were making $50 million a year.

Probably not even 25.

Probably not 20.

I don't think they have 20 million in revenue.

Forget profit.

That's what I meant.

No, I was not talking about profit.

Oh, you meant like revenue.

For me, I was misspoken.

Yes.

I was thinking about total revenue.

Yes, I would say it's very unlikely.

So the idea of the NWSL, America's foremost women's soccer league, adopting the European model, which works again for the highest levels of soccer in Europe.

This is a bad idea is what David Sampson is landing on?

I'm not sure.

I actually,

it is possible that they simply think they're doing a socially progressive thing.

Right?

They're giving players more freedom.

They're giving them more, maybe.

That's so nice of them.

That really is nice.

Is that because of all of these scandals and the fact that they would sexually harass and abuse players before and they want to change their reputation?

So they did it and manifested

the new management group has clearly become more organized.

They have cleaned up many messes and they have some momentum.

So I think somehow they must believe this is helping them extend the momentum, move forward.

Ultimately, any commissioner's job is to create more value for their owners.

That's who, right?

And so I think it's Jessica Berman.

Jessica Berman

thinks she's doing something that will create more value in the long run for the owners.

And maybe she's also addressing the player concerns, which is we want to play in this league, but we want a different set of rules.

What David is detecting, though, is that this is defensive.

This is a defensive maneuver by a league that has lost the trust of the players they negotiate with.

That's all you read about these days is the fact that the league's reputation had gone to zero.

They're trying to rebuild it.

And step one, bring in Iger.

Bring in, excuse me, a corporate Titan.

Bring in someone who's willing to invest in a valuation never before seen.

Then don't worry, we're going to make it so it's going to be worth it.

Your investment is going to pay off.

And to do that, we need a CBA.

We need labor peace and we need rules within that CBA that will advantage your team.

We'll find out because we'll see what franchises sell for and we'll see what values happen.

So this is a very easy one for us to follow up on.

Venue, a tool that is being blamed roundly, incidentally.

There's at least one tool involved.

Can we explain why we are heartily laughing at this?

It's a joint streaming venture, of course, from Disney Fox Warner Brothers that was not able to launch on Friday as planned.

This is just me reading now the news reports.

Because late last week, district court,

the judge, Margaret Garnett, granted the injunction blocking Venu, V-E-N-U,

and they ruled that FUBO, FUBO TV, which we've talked about on the show previously as well, they made a plausible case that the Disney Warner Brothers discovery and Fox Corp practice of requiring paid TV distributors to take bundled channels while not requiring it of their own joint venture in venue amounts to an antitrust violation.

Could.

Could.

I assume they put the word could in there because she did not rule that it was.

She made the case.

She ruled that their case was plausible.

Yes.

Okay, that could.

She made the case that the case is plausible.

But that's not how injunctions, so that that's a separate thing from a judge granting an injunction.

The injunction, Fubo TV, said, you cannot let Venue launch because if they launch, we're done.

We are irreparably harmed.

We're screwed in perpetuity.

Your honor, stop this from happening.

And if you don't do it right now, we're in trouble.

That is a different threshold required to grant such an injunction.

You can allow a lawsuit to continue, and that's the lawsuit of Fubo TV against the joint venture.

And you can allege in a lawsuit an antitrust violation.

And the judge can say, eh, not positive, but there's a good enough chance that we're going to let this go forward and survive a motion to dismiss by the defendant, in this case, the joint venture.

But this judge went even further and said, not only do we think the case should go forward, but also you can't launch while we're doing the case because we think that if you launch Fuo TV, we agree with you, you're going to be irreparably harmed.

That's a major decision by the court.

And it really does screw venue.

Yeah.

This thing was

tarnished at the beginning when they deliberately obfuscated about what it is.

Oh, it's a sports bundle.

It's not a sports bundle.

Can you remind us?

It is a collection of networks and cable channels that has a sporting event on it, right?

Because it included,

it doesn't include Fox.

They have NFL.

They have a lot of sports.

It includes True TV.

They have very few florts, but that's what it was.

So that's how they got away with.

We're doing a different bundle here because we don't include the Disney channel because that doesn't have sports.

We don't include other channels because they don't have sports.

But it's a light, it's a sport.

They said it was a sports bundle.

And then they pretended and it was deliberately put together with an eye towards not creating more cord cutters.

So this is not about cord cutters.

So they assured their

distributor partners, not going to take any of your business away.

That's kind of BS.

And second, that it's the sports bundle.

It's not really.

I don't quite understand the ruling.

Fubo is a light bundle, right?

That's what it is.

It started in an attempt to be a sports bundle, and they could not aggregate and convince all the people who had sports to sell them their rights to distribute.

At least when I was at Walt Disney and ESPN, we said, Fuboo,

Fubo, you want our content?

We'll sell it to you.

But it's going to cost the same thing that it costs everybody else.

But you knew they couldn't pay that.

I didn't know they could pay it or not.

And by the way, I have MFNs in all the deals, so I can't can't sell it for less.

And I assume in venue that they are not, they're charging themselves the same thing they charge Comcast and DirecTV because they have to.

A most favorable nation clause, MFN, for those keeping score at home or even if you're alone.

Thank you.

That just means that what you charge the goose, you got to charge the gander.

I don't think that helped explain.

Really?

You have to do the same deal with one company as you do with another company.

Well, not if you have a most favored nation clause.

Lots of people don't right it is often the case that the large distributor gets more money than the small distributor we had one price and i assume that fubo tv had to pay the same price they're angry their business has struggled they're a light bundle now they have had some success i mean i forget how many subs they have they have a couple million subs um but it has not been a runaway hit then you now you got an interesting question whether how angry are the parties at this?

I love this.

Because I don't think it's a particularly at 40, I think it was 42.95, it's not a particularly great deal.

Fubo TV, by the way,

second quarter of 2024 had around 1.85 million paid subscribers worldwide.

I would call that somewhat close to two.

That's very good.

Which is a decline from the over 2 million subscribers from the end of the previous year.

So hence, you see why they are aggressive in their lawsuit.

Their already tough business is declining.

And they do believe, and I'm assuming they convinced the judge, oh my gosh, if this gets a big hit rate, the FUBU, Fubo, I keep saying FUBU, which I think means something else.

I think you're thinking of Sit, Ubu, Sit.

Who owns Fubo?

Fubo, which is not Fuboo, which is for us, by us, and was a hip-hop clothing brand at one point, I believe.

In the months following the merger, John Techstor, again, super real sounding name, sure.

That guy's a guy.

He resigned his post as executive chairman, and the company named former Warner Music Group chairman, Edgar Bronfman Jr.

as executive chairman of the board.

What was Edgar Bronfman doing these past few weeks?

Edgar Bronfman was trying to buy Paramount and just gave up that bid, handing Paramount over to Skydance.

Now, why Edgar Bronfman, Edgar Bronfman, would have an interest in Paramount as the chairman of Fubo.

Paramount not in the joint venture, him on one side fighting to the death as part of Fubo to stop this joint venture while putting together a bid to purchase the company that was not invited to be part of the joint venture.

I'm just telling you that these things don't just happen.

I'm not sure what it means.

It's interesting.

It would be in the best interest of Edgar Bronfin when he thought that he was getting Paramount or had a chance to get it that this joint venture disappears.

It is clear to me

it is good for for Fubo and good for CBS Paramount if this bundle does not exist.

And I do believe, on a side note or a front note, this lawsuit, this is the end of the joint venture.

I don't believe Venue will ever launch.

I believe that Warner will walk away as they wanted to and would like to, even though they are protesting publicly.

We're going to fight it.

We're despondent.

I think actually the board of Warner would say, all right, let's move on.

I think it certainly likely that this

does derail the product because I've always thought this product overwhelmingly benefited the Walt Disney company.

And what they were really trying to do was to set up a bunch of options for you to get ESPN.

And they're going to launch, because they've said they were going to launch in 2025, the standalone ESPN bundle.

So I think this sort of helped with, oh, you can buy the standalone bundle, you can buy a venue, or you can just keep your cable, television, subscription.

You can do all those things.

And now I'm not sure they need this middle state.

And you've noticed that ESPN has been clear.

They've said, listen, venue, no venue, we're doing DTC direct to consumer.

We're making sure that you've got a product that's going right to you.

Well, this is a pretty irrelevant venture compared to taking ESPN direct to consumer.

And that's why I think that.

And now they're going to concentrate on that and probably not spend a lot of time, effort, and money fighting this.

Though I don't know, I'm somewhat skeptical of the judge's ruling that this really is, I don't understand antitrust.

Judges don't like their injunctions being overturned.

I can promise you that.

It's not a good look for them.

Can I ask John, though, if we're going to, and this is just a breadcrumb on the way to another future episode, but the idea of ESPN going DTC.

As the president, formerly of ESPN, this must have crossed your transom at one point.

And your position then was simply

doesn't make sense economically right now.

Yeah.

And I think now it's imperative.

I think the cable television

decline is rapid enough now that they have to go because they can't afford not to have 90, 100 million people, households getting ESPN.

And it's down to what, 60, 60 something from 90 something at one point.

And it's going, it's declining faster than ever.

Say what you want about Murdoch and their family and the insanity of it all.

They did not spend a dollar on a streaming service, on building out any DTC, anything.

They are waiting for the market to develop, to figure out where things are going to land.

And believe me, Fox will need something along those lines.

There will be some sort of consolidation.

And they were basically laughed off the table when they didn't do anything.

But it really ended up being a smart move.

Well, I've never, I have many critical things to say about

the owners of Fox, but one of them is not that they don't understand how to make a lot of money.

They do.

They sold at exactly the right time a collection of assets.

And

were they able to foresee this?

But the broadcast networks have a more robust future than was thought at the time.

So they kept Fox News, which still and Fox News will be fine no matter what happens.

That's our problem, not theirs.

And but and Fox Broadcast Network is probably worth more than ever.

So they bet on a channel and the broadcast channel and they were right.

We circle back around at the end here to sort of take people behind the curtain a bit.

Because because as we've been taping,

spoiler alert, we have the documentation that validates that NFL owners have in fact approved new ownership rules that will allow private equity firms to buy passive minority stakes and franchises.

For those scoring at home, the firms involved in late-stage discussion over the past few weeks, and this is just...

true top-tier Rich Guys OnlyFans content to know these names.

Arctos Partners, Aries Management, 6th Street,

as well as a consortium of Blackstone, Carlisle Group, Luxembourg-based CVC, and Dynasty Equity.

And what does that do for the fluttering of your heart, David?

These are people who, in theory, I would assume Roger Goodell has been dealing with, and they are very aware of this carried interest issue that they'll have to give a little piece back to the NFL.

I would assume they've already approved it.

I would assume that's how they got into this fund of funds, these seven amazing companies that are allowed to spend billions of dollars of their assets on NFL teams.

So all of this is going according to exactly how Goodell wanted.

I am a big fan of your nostril skills,

but it is no feat of forecasting to suggest that NFL owners will not approve something that will put money in their pockets.

Yes,

I did not say on this show that I said they would 100% approve it.

No, no.

I'm suggesting thank you i'm giving you credit for being right very nice really suggesting that was not a hard prediction i hope i think

it's based on you i think the sun will come up tomorrow you might not be able to see it could be behind the cloud but i do believe it will come up

minimum committed capital of funds two billion dollars uh maximum percentage of fund invested in one club 20

um

Anyway, there's an appendix.

There's a proposed policy.

If you really want to nerd out on this stuff, it's over there.

But what does it say to everybody else in sports?

Is there anything to take away from this?

Or is this all just about the NFL gets to do some NFL shit because they're the NFL and we should all be jealous of how NFL the NFL.

Yeah, the NFL was last.

Don't forget.

They watched the other leagues approve this.

They watched the other leagues.

This was a huge debate in MLB circles and NBN and NHL.

And the reason why the argument ended is very simply, the commissioner said, listen, gentlemen.

Just gentlemen, you want your teams to be worth more.

You're going to have to have people who are willing to invest in ways that individuals can't anymore.

And the NFL just stood back, stood back, stood back, and now they've pounced.

So the fascinating question for me is, will MLB go back now and say, wait a minute, let's revisit.

our rule of private equity.

Do we want to put in there that we get a piece back to help distribute to other teams?

And that is what I'd be doing as a Major League Baseball team president of a small revenue team.

I'd be going to the commissioner today to say, please, I would like to revisit going forward how we are allowing these investments.

Hard question, though, David, as to whether the valuations of baseball teams are going to go up enough to justify taking that piece or whether the equity firms will agree to that.

I would tell you that having been in baseball, I'm sad to say the answer is likely not.

because baseball teams do not go up in the same way.

Right.

If I'm a partner potentially at Aries Management, I'm looking at this hypothetical equivalent email from a David Sampson-like figure saying, guess what we want here at Major League Baseball at the National Pastime?

And they are mostly moving that thing to the trash.

I tried.

Thank you, Pablo.

David and John,

just the finest breed of sports business analysis.

Thank you both.

This has been Pablo Torre finds out a Meadowlark media production,

and I'll talk to you next time.