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ARE YOU READY FOR SOME (PRIVATE EQUITY) FOOTBALL!  
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Sam Pizzigati
September 5, 2024
inequality.org
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_ The greediest owners in pro sports are now welcoming in the greed
kings of high finance _

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The billionaires who run the world’s most phenomenally profitable
sport have just decided to “share the wealth” — with the
greediest of their fellow rich. By a 31-1 margin, the owners of the 32
pro football franchises that make up the NFL have just voted
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crack open their money-making machine to the investment fund kingpins
of private equity.

The NFL isn’t exactly welcoming in private equity with totally open
arms. Only some NFL-pre-approved private equity firms will initially
be able to buy up stakes in NFL franchises, and the NFL will allow no
single private equity stake to amount to over 10 percent of a
franchise’s total value.

The current NFL billionaire owners, in other words, will still be
calling all the shots. These owners are essentially counting on their
new private equity pals to make them even more powerful shot-callers.

How so? Right now, for instance, NFL owners have to bargain with
elected officials over how lush the taxpayer subsidies
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expect and extract will be. Welcoming private equity into the NFL will
only strenghten the owners’ bargaining position. They’ll be able
to leverage
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new access to private equity cash to tighten their squeeze on local
pols: Give us what we want or we’ll build our new stadium outside
your jurisdiction.

The downside of letting private equity in? NFL owners don’t see one.
After all, every other major pro sport — from baseball and
basketball to hockey and soccer — is already sporting a private
equity presence.

In Major League Baseball, that presence began after MLB took control
over the baseball minor leagues in 2020, knocked a number of small
cities out of the minor league system, and eliminated the prohibition
against the ownership of multiple minor league teams. That made the
minors a tempting target for a private equity greed grab.

Silver Lake Partners, the world’s 15th-largest
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equity firm, has taken the lead on that grabbing. Silver Lake has been
underwriting Diamond Baseball Holdings, an operation that has
already bought up
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a quarter of Major League Baseball’s 120 minor league franchises and
has no plans to stop buying up franchises anytime soon.

The basic Diamond Baseball Holding’s gameplan with these franchises?
Demand public subsidies that have so far cost local communities
hundreds of millions of dollars. This foisting of costs onto
taxpayers, notes
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Pat Garofalo, comes “with the ever-present threat of moving teams
out of communities that don’t comply.”

Silver Lake is currently managing over $100 billion in overall
combined assets, and the ownership of these assets can get
complicated. Diamond Baseball Holdings, for instance, originated as an
enterprise owned by the Silver Lake-backed Endeavor entertainment
industry colossus. Silver Lake is now planning to take the publicly
traded Endeavor private in a transaction some are calling the largest
in media and entertainment history.

This transaction will be particularly rewarding
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the executives involved.

Endeavor CEO Ari Emanuel will receive a $25 million “asset sale
transaction bonus.” Endeavor COO — chief operating officer —
Mark Shapiro, Deadline.com reports, will see his base salary jump to
$7 million a year, with a guaranteed annual $15 million bonus. He’ll
also be “eligible for a $15 million transaction bonus when Endeavor
is privatized” as well as a maximum cash bonus of $100 million
“upon the completion of certain qualifying asset sales.”

Emanuel and Shapiro will also each receive a private plane.

The private-equity industry has, over time, been generating plenty of
windfalls like these. For decades now, private equity firms have been
buying up firms, charging them enormous fees, and stripping them of
their assets. The private equity execs, their pockets full, then sell
off what remains of the firms they’ve so ruthlessly exploited and
depart the scene, leaving behind laid-off workers and unhappy
consumers.

America’s largest participation sport — bowling — has been
experiencing a good bit of this classic private equity pattern.
Private equity investors have enabled one giant company, Bowlero, to
dominate what used to be a locally controlled leisure-time enterprise.

Just 10 years old, Bowlero now runs over 350 bowling centers
nationwide. Prices at these centers have gone up, the _Lever_’s
Amos Barshad reports
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gone down. Bolero has even introduced “Uber-like surge pricing.” A
few hours of bowling at a Northern California Bowlero can now set a
family back more than $400. Bathrooms at another Bolero can “go days
without being cleaned.”

Private equity top execs, meanwhile, are certainly cleaning up at pay
time. The CEO of the Blackstone private equity giant, Steve
Schwarzman, last year pocketed
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million in dividends and compensation, just a bit off the $1.1 billion
he inhaled
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in 2021.

Numbers like these have caught the attention of some members of
Congress. This past April, U.S. senator Tammy Baldwin from Wisconsin
and 14 of her Senate colleagues introduced
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that would nearly double the federal tax rate on the income private
equity firms pull in. Success with that legislation could lead to
stronger controls on private equity in other realms.

But that success won’t come easy. Private equity execs are spending
more than ever these days on politics. In the current election
cycle, notes
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Center for Media and Democracy, the top 50 national contributors to
political campaigns include 11 private equity giants.

These 11 have already contributed over $223 million to congressional
and presidential candidates and the super PACs that back them. In the
2016 election cycle, candidates and political committees only
collected $92 million from the 147 private equity firms the Center was
then tracking.

In the meantime, we don’t need to leave the future of our beloved
sports to the whims of billionaires. Another model for how sports
franchises could operate does exist. Indeed, a hint of that model
exists right within the NFL, with the Green Bay Packers, the most
unique franchise in U.S. pro sports.

The Packers have operated as a publicly owned, nonprofit corporation
since 1923. No billionaire owns the Packers, and no billionaire, the
team’s 538,967 stockholders maintain, ever will. The franchise’s
articles of incorporation “prohibit
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owning more than 200,000” of the 5.2 million franchise shares now
outstanding.

The average shareholder, the _Green Bay Press-Gazette_ points out
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holds fewer than 10 shares, and these shares can’t be traded, only
transferred to family members. Shareholders don’t get dividends, but
they do get to elect the franchise’s board of directors.

Sounds pretty good, right? Not to the owners of the NFL’s other 31
franchises. The NFL now has in place bylaws that prevent any other
franchise from operating along the Green Bay model. Back in
1960, relates
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Katie Thornton, the NFL “wrote into the league’s constitution —
in a section known as the ‘Green Bay Rule’ — that future teams
must be organized as for-profit entities.”

_SAM PIZZIGATI, AN INSTITUTE FOR POLICY STUDIES ASSOCIATE FELLOW,
CO-EDITS INEQUALITY.ORG. HIS LATEST BOOKS INCLUDE The Case for a
Maximum Wage
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Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that
Created the American Middle Class, 1900-1970
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_Inequality.org [[link removed]] has been tracking
inequality-related news and views for nearly two decades. A project of
the Institute for Policy Studies since 2011, our site aims to provide
information and insights for readers ranging from educators and
journalists to activists and policy makers._

_Our Inequality.org contributors come from the United States and
around the world. Our focus throughout: What can we do to narrow the
staggering economic inequality that so afflicts us in almost every
aspect of our lives?_

_If you would like to support and help expand our work, please
consider making a donation. Thank you!_

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