September 1, 2024

Read in Browser [[link removed]]

POWERED BY

Good morning. The biggest news of the past week came Tuesday, when NFL owners met in Minnesota to vote on whether to let private equity firms invest in teams. Shocker: They voted yes. But what felt like big news to those of us in the industry won’t really mean any visible change to fans.

Also, a note to FOS readers: We are off on Monday, but check your inboxes on Tuesday for our regularly scheduled morning newsletter.

— Dan Roberts [[link removed]], FOS EIC

The NFL Let the Private Equity ‘Barbarians’ Through the Gate

Tommy Gilligan-USA TODAY Sports

As NFL owners gathered in Minnesota this week and voted 31–1 [[link removed]] to allow private equity firms to buy ownership stakes in teams, I kept thinking of the greatest business book of all time, Barbarians at the Gate.

The 1989 title by Bryan Burrough and John Helyar chronicled the infamous 1988 leveraged buyout of RJR Nabisco by the PE firm Kohlberg Kravis Roberts. ( The firm is currently being sued [[link removed]] by the early founders and employees of FanDuel.) The Nabisco madness marked the start of the era of LBOs and “corporate raiders” like KKR and its PE peers.

Now the corporate raiders can buy into the NFL’s Raiders. Or any other team that will have them. (Probably not the Bengals, the lone dissent in the vote.)

In Barbarians at the Gate, Teddy Forstmann of Forstmann Little, a firm that also entered the frenzied bidding war for Nabisco, derides KKR’s “phoney junk bond” money and declares, “We need to push the barbarians back from the city gates.”

The NFL has let the “barbarians” in. But despite it being a meaningful shift in position by the league, it really won’t mean much for the typical sports fan.

Private equity investors in NFL clubs won’t have any voting power, influence, or say in the team’s operations. They won’t be the faces of the teams and won’t have governance rights. Each team will be limited to selling no more than a 10% stake to private equity; for comparison, the NBA and MLB allow 30%. Additionally, no individual or group can own more than 7.5% of any league-approved fund (the NFL approved only eight [[link removed]]), which means no individual from this new PE cadre will own more than 0.75% of a team. A team’s most devoted fans will probably never even catch a glimpse of the silent-partner suits who’ve bought in behind the curtain.

We know what’s in it for the teams: A low-pressure capital injection. “All it is,” commissioner Roger Goodell said after the vote, “is a silent position that would allow access to capital for those teams that wish to offer 10% of their team.”

What’s in it for private equity?

For starters, it’s basically a guaranteed investment. No investment is ever guaranteed [[link removed]], but NFL team valuations have risen steadily every year, and the latest Forbes valuations [[link removed]] are up an average of 11% from just a year ago. All 32 teams are profitable (not the case in the NBA or MLB). Owning a piece of an NFL team is the closest thing a group of rich people can get to a sure bet. The NFL is requiring private equity investors to stay invested for at least six years; that means they can’t stage the kind of activist raid that PE is known for. And no matter which team a firm buys into, that firm will be able to sell its stake for a profit as soon as it’s permitted.

It’s also a vanity play. When Jeff Bezos bought The Washington Post, and John Henry bought The Boston Globe, and Salesforce CEO Marc Benioff bought Time, they didn’t do it thinking print media would be a great investment. They bought it because if you’re a billionaire, you need your plane, your yacht, and your legacy newspaper or magazine. Approved PE firms will view NFL stakes the same way.

It’s also a hospitality play, as so much of sports is nowadays. The partners at these PE firms won’t be public facing, but they’ll certainly use the suite to impress clients and friends. With the rising price of tickets, many of the people in the nicest seats at games now are corporate guests anyway, not real fans. Teams have embraced this and created ultra-luxe hospitality experiences and areas for ultra-high-net-worth individuals.

Ted Leonsis nailed it in a comment to ESPN [[link removed]]. Private equity firms, he said, are basically being told, “Do you have any control? Any role? No, you’re passive investors. You’ll get your name on a website somewhere or something and you get to tell people I own a piece of an NFL team.”

That’s good enough for them. That’s the bargaining power of the NFL.

SPONSORED BY U.S. BANK

Enter to Win TaylorMade Qi10 Golf Clubs

Golf season isn’t over yet, and it’s not too late to get yourself a new set of clubs.

Front Office Sports is teaming up with U.S. Bank to give away a full set of TaylorMade Qi10 golf clubs, and the steps to enter are easy:

Follow this link [[link removed]]. Complete the tasks to earn entries to the sweepstakes.

Level up your golf game like U.S. Bank ambassador Collin Morikawa and enter for a chance to win today.

Terms and conditions apply [[link removed]].

Notes From the Crowd The Betting Effect

Kirby Lee

Opening the mailbag of responses to recent weekend columns:

“I was moved to write after reading your recent article on FanDuel and DraftKings. The view of this 50-year industry veteran is that the adoption of sports betting by the media and many of the sports bodies does not end well.”

—Randy Haynes in response to “ DraftKings and FanDuel Still Can’t Escape Each Other [[link removed]]”

“ESPN Bet and every other company have failed. Nobody else can touch DK and FD.”

—@KansasMan55 on X/Twitter in response to “ DraftKings and FanDuel Still Can’t Escape Each Other [[link removed]]”

“One thing I’m curious about is the impact that legalized sports gambling may be having on sports viewership/ratings. The 82% Olympic bump—as well as all the impressive NFL viewership stats I read about (93 of top 100 [most-viewed live broadcasts in 2023]!)—are fascinating. But I do wonder if there is some correlation.”

—Joe Lynch in response to “ NBCU’s Peacock Shows Us Our Sports Streaming Future [[link removed]]”

Good Week / Bad Week Cowboys Rise, RSNs Wane

Tim Heitman

Good week for:

Cowboys ⬆America’s Team is the first professional sports franchise to breach a $10 billion valuation, according to Forbes. The team’s $10.1 billion valuation is double its valuation in 2019—and is $2.5 billion more than the second-place Rams. Dallas also put some of that money to good use this week, signing wide receiver CeeDee Lamb to a four-year, $136 million deal and ending a contract holdout that included a social media callout from the receiver.

Private equity ⬆ In relation to the rising NFL franchise valuations, the league and its owners agreed to allow PE firms to invest [[link removed]] a maximum of 10% of an individual team’s equity. While the agreement was expected, the NFL was the last of the major U.S. men’s sports leagues to open the door to PE. The NFL still does not allow sovereign wealth funds to directly invest in the league—though there is a backdoor avenue [[link removed]] for them to take a stake in an NFL franchise.

Bad week for:

Regional sports networks ⬇ ESPN chairman Jimmy Pitaro said the company wants to be a major player at the regional level [[link removed]] amid growing concerns about the state of local sports coverage. “We want to be at least part of the solution. … We are very interested in stepping up here,” Pitaro said at ESPN’s Bristol Media Day on Wednesday. Earlier this week, Amazon also pulled out of its $115 million commitment [[link removed]] to financing bankrupt Diamond Sports Group.

Nike ⬇ The Swoosh lost out on the projected No. 1 overall pick in the 2025 NBA draft, Cooper Flagg, after the Duke freshman announced an endorsement deal with New Balance. [[link removed]] While the length of the deal was not disclosed, ESPN described the deal as “significant.” With LeBron James expected to retire over the next few years, the mantle for the NBA’s biggest star will soon be up for grabs. Nike has a deal with Victor Wembanyama, but Flagg’s performance at USA Basketball camp [[link removed]] in July showed he could become one of the NBA’s best eventually. New Balance’s acquisition of the Maine product signifies its commitment to competing with Nike in the basketball space.

You Might Have Missed Pro Rodeo’s Moment, Kelce’s Eye-Popping Payout

Sam Eagan

A new obsession with Western culture—think Yellowstone, Beyoncé’s Cowboy Carter, and Wild West–inspired fashion on runways and urban streets—has opened an opportunity for rodeo. Professional Bull Riders is already growing, but as contributor Sam Eagan saw at Brooklyn’s first rodeo event, the zeitgeist is propelling PBR into new markets with big revenue potential [[link removed]]. Travis Kelce’s podcasting salary this NFL season will rival his check from the Chiefs. Travis and his brother, Jason, who recently retired from the NFL, have sold their New Heights podcast to an Amazon division [[link removed]]—and, as FOS’s Alex Schiffer [[link removed]] reports, there are rumblings the three-year deal is worth more than $100 million.

After the House v. NCAA settlement, non-power conferences blasted its terms and how they were revealed. Now, three of these commissioners tell FOS’s Amanda Christovich [[link removed]] they’re no longer pushing back [[link removed]]: “We’re going to move forward and not cry over spilled milk.” Advertise [[link removed]] Awards [[link removed]] Learning [[link removed]] Video [[link removed]] Podcast [[link removed]] Written by Daniel Roberts [[link removed]] Edited by Meredith Turits [[link removed]], Catherine Chen [[link removed]]

If this email was forwarded to you, you can subscribe here [[link removed]].

Update your preferences [link removed] / Unsubscribe [link removed]

Copyright © 2021 Front Office Sports. All rights reserved.

460 Park Avenue South, 7th Floor, New York NY, 10016