Braves' 19 Million Dollar Tax Battle, Fight Night in NYC

0:01Bloomberg Audio Studios Podcast Radio News. This is the business of sports. The business of sports can be intimidating or hard for a starter to break into. We really appreciate when our owners are actually there, you know, with us through the journey. Teams, ours especially, have been very intentional to diversify at all levels of the company. I think we're in the golden years for the NFL and college football. Our demographic reach has continued to expand. This is going to be really unlocking the streaming platform for sports fans. Sports valuations are rising. We'll see when they peak. You don't have to be the best in your sport to make a whole ton of money.

0:43Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports, where we explore the big money issues in the world of sports. I'm Michael Barr, along with Vanessa Burnomo. My colleagues Scarlett Fu and Damian Sassauer will join us later on in the show. Coming up, we speak with Matt Troom Boxing Chairman Eddie Hearn. We'll talk about the big fight coming to New York City on May 2nd. Plus, get his take on the state of the sport. Just bonkers. The whole thing is bonkers and bizarre. But boxing right now, boxing's really rocketed over MMA, in my opinion, in the last 12 months.

1:23And it's just nonstop every single week. Plus, we'll check in on a leading sports private equity firm and one of its newest, biggest investments. All that is on the way on the Bloomberg Business of Sports. But first, the Atlanta Braves. They are the MLB's only publicly traded club in America, and they could get hit with a huge tax bill. For more on the unique situation facing the Braves and what it's trying to do to get out of it, we welcome Bloomberg's Bill Allison. Bill, welcome to the Bloomberg Business of Sports. Well, thanks for having me on. I really appreciate it. You wrote an article recently, and it involves the Atlanta Braves.

2:04They are the only publicly traded Major League Baseball team in America. And they have a problem because now they're facing off against the U.S. tax code, and it threatens to cost the franchise millions. Can you explain what this is all about? There's a provision in the tax code that only applies to publicly traded companies. And this is something that goes back to the 1990s, when corporate greed was first becoming an issue. Bill Clinton ran in 1992, promising to end excess executive pay. Obviously, he didn't quite do it. But one of the ways that they tried to do it was by preventing companies from deducting the salaries of their top executives.

2:48And this was passed in 1993. It's been around for years and years. It's been modified by different times. And most recently, what they did is they added the top five paid non-executive employees, people who are not like CEO and chief financial officer and so on. And that's sort of where the Braves come in, because they're a publicly traded company. They're pay players,$10 million,$15 million,$18 million. They give these big contracts so that they can compete. And suddenly, they can't deduct those as expenses anymore. And that's going to increase their tax bill. You know, it's interesting because I could imagine that when they have, you know, put these bills in place, and I feel like you mentioned it in your story, that this wasn't really something they thought about, that it was going to affect professional sports teams.

3:35Yeah, it's really funny. I talked to a lot of compensation executives or consultants and tax lawyers, and kind of everybody would say at the end of it, I just can't imagine Congress meant this to apply to a professional sports team. But, you know, the rules are the rules, and that's kind of how they're written. And the Braves have hired lobbyists. They're working on Capitol Hill to try to talk to Congress about this. And but, yeah, I mean, this is very much an unintended consequence of something that, you know, is really designed to raise revenue from companies that where basically the employees aren't the product.

4:07I mean, if you think about why people go to see the Atlanta Braves, it's to see Acuna, it's to see their players. And that's just like central to everything that they do. Yet they're going to get taxed by for it. And this is the difference here. Like a privately owned team like the New York Mets and Steve Cohen, that's why he can pay all this money to Juan Soto and this and that with$765 million over 15 years. But the Braves, you can't compete with that. And the Toronto Blue Jays, they are a publicly traded company, but they really aren't going to have a problem because, according to the company spokesman, it's not going to have a meaningful impact from the U.S.

4:54tax provision. The Blue Jays have revenues and they're part of a big conglomerate. It's a big media company. And one of the things that folks said about this is that with tax planning, you can set things up so that you move losses around and you can kind of offset these penalties. But the problem for the Braves is that about 90 % of the revenue comes from the baseball team. They also own some property and some other things. But really, it's the team that's the business. And so they don't really have that option where, okay, well, we're just going to take a huge loss in this division, and that's going to offset what we would owe in taxes for these player contracts.

5:33And so that's really going to put a straitjacket on the Braves. And, you know, as you said, you know, if you're sitting down with an agent, you've got to be thinking, you know, well, I'd love to sign this player, but, you know, I've got to think of the tax implications of it, not just my normal budgetary implications. When we're talking about private league companies, like Michael mentioned there, the Mets and the Dodgers and the Yankees and all these teams who spend a ton of money, but they do have the luxury tax to deal with, right? That's MLB's tax that they put on them. Is that anywhere comparable?

6:06Like, is it kind of playing in the same ballgame, but just for basically getting taxed by different people? I think the difference there is that, yes, you know, there is a luxury tax on and the Braves have been. I think this is the first year that they've been under the cap, but they were over it. You know, the last few years, I mean, they've obviously been a very successful team. They've won the World Series in 2021, the series of division championships, their perennial playoff team. And they have like, you know, they're in the top third of payrolls and they were over that. I think the difference there, though, is that this is something that every team has to contend with, whereas the deductibility of the salaries of their star players is something that they're the only team that's going to have to deal with this.

6:51This is one extra expense that nobody else in baseball has. Glad you said it's more than just baseball because it will affect Madison Square Garden Sports. They own the NBA's Knicks and the NHL's New York Rangers. For some reason, they're going to fall under this same rule? Yeah, it's a publicly traded company which owns the Knicks and the Rangers, so it'll affect them too. I reached out to them. They didn't want to talk about it. They didn't respond to or they basically didn't comment. As far as I can tell, looking at congressional disclosures, they have not hired lobbyists. So, but I'm sure this is going to be an issue for them.

7:35And one of the problems with the team is that, you know, that Madison Square Garden Group and its owner, James Dolan, and the Dolan family have a long history of basically getting special tax breaks and tax deals. And that kind of makes them a little bit more of an unpopular client in the way that I think that the Braves sort of are. Right. I wanted to mention there, you obviously talked about the Braves have hired lobbyists. So what are they trying to get the to to do? I mean, we've spoken kind of about maybe this isn't what Congress wanted, you know, with the professional sports teams being a thing.

8:16So are they trying to speak to people there and say, hey, can you just like amend the law to not include sports teams? Or in your piece, you mentioned that, you know, both sides of the parties are kind of for this rule. Yeah. So, you know, I think that the simplest thing to do would be if, you know, Congress could write an exemption and something along the lines of, you know, this rule called 162M shall not apply to a professional sports team or to a corporation that makes its money from running a professional sports team. I mean, I think you could word it in a way that it's very limited. Obviously, that might make the teams, you know, I seriously don't think there's any corporation that would go to the expense of paying billions of dollars for a team just to save money on the compensation when you're talking about these big multinational conglomerates.

9:18that this is supposed to apply to, but it would get the Braves off the hook in that sense for the taxes. And you would think that that's sort of the kind of thing that, you know, you would be able to do. But again, this is Congress, which is not the most functional organization on earth. So, you know, it's, I think it's questionable whether that's going to happen or not. I was just going to ask that. It's the the principle of what you're saying is there. But the chances of this happening, I don't know how it's going to go through in this Congress. Exactly. And when you think about everything that the Trump administration has proposed, everything from reducing taxes on tips and Social Security benefits, and there's a whole host of things that they've promised.

10:10And, you know, while it's very important to the Braves and Braves fans, you know, I'm wondering just how important an issue in Congress is going to be that, you know, the payroll of a baseball team, the deductibility of it compared to all of these other issues. I guess that's fair, right, for sure. And while they're still playing well, it doesn't seem like it would matter to them at the current moment. But when we're talking about what you said, signing free agents and things like that, is something is a creative way for something to get around that? Adopting a Shohei Otani sort of a model where they sign a free agent, but delay some of the contracts so that maybe not everyone is being hit in the same year.

10:57Is that is that a creative way to get around it? So if this goes into effect, how do they get there? So that's a good question. There used to be a loophole in this rule where if you were paying people based on performance rather than basically an incentive-laden contract, that that wouldn't be taxable. But the problem there is which player is going to say, well, I'm going to take an incentive-based contract rather than a guaranteed contract. I mean, there's, you know, I think, and of course, that exemption no longer exists. So, you know, among the things they could do, they could try to take the team private.

11:41I mean, that would be one way to get out of this. You know, it's really just because they're publicly traded that they're subject to this. another option would be you know and I think that that's I'm sorry that's really the only option that that they have unless Congress acts to do something to get them out of it and of course the other option the last option is they could trim back their sales and not pay their players as much and you know and basically you know assume that they're going to be paying these taxes. Bloomberg campaign finance reporter Bill Allison on his recent story on the Atlanta Braves always dropping some knowledge on us.

12:23We appreciate it. Thank you, Bill. Thank you both. Our thanks to Bloomberg's Bill Allison for joining us. Up next, we turn to private equity and a big new investment from a leading sports private equity firm. For Vanessa Perdomo, I'm Michael Barr. You're listening to the Bloomberg Business of Sports from Bloomberg Radio around the world.

12:57This is Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports, where we explore the big money issues in the world of sports. I'm Michael Barr, along with my colleagues Scarlett Fu and Damian Sassauer. Vanessa Perdomo will be back later in the show. Velocity Capital Management is a top private equity firm with a big focus on sports. It just announced a new strategic investment in Unique Sports Group, a top five ranked UK-based football talent representation agency. For more on the investment, the growth of sports in the private equity world, and of course soccer we welcome david abrams co-founder and managing partner at velocity capital management and will soldhouse ceo at unique sports group david and will welcome to the bloomberg business of sports thanks michael thank you for having us david i'm going to start with you because with velocity capital management you guys are private equity firm when it comes to acquiring sports teams and you guys have been in the business for 60 years but especially now you guys are like biscuits, honey, and butter.

14:07You guys are a hot commodity. That's a great combination, biscuits, honey, and butter. I'm going to have to try that. It's definitely an active time for us. I think as we've talked about, we've chosen to not focus on investing in sports teams, but the activity in the broader ecosystem continues to be very active. And our partnership with Will and Unique Sports Group goes back three a year is a transaction where we're excited to talk to you about. So, Will, let's bring you into this conversation. Talk to us a little bit about what Unique Sports Group does and why it fits in to a private equity ownership model where there can be synergies and other points of commonalities between the different parts of Velocity's holdings.

14:56Well, firstly, I'll answer the first question, which is, what do we do? Obviously, we represent footballers. you call it soccer players we mainly that involves contractual negotiation and negotiating their contract between clubs and I started on that journey 18 years ago by representing a friend and soon became a player in the space of lower league football where I saw a gap in the market, players that weren't represented given a voice pretty much where a lot of people overlooked them and went straight to the top league. I looked at what we call in baseball, we call the minor leagues, right? Right.

15:39So I was scouted the minor leagues and found some players that really came through and shot through those leagues to the Premier League. And I kind of rode the wave with them. And that's where unique sports is today. Obviously, we used, I think, a different type of strategy at that time, which was data, which now is obviously very evident right the way through soccer and football. But I did that on my own by buying the local newspaper at the time and making my own data on the games and waiting outside players' lounges and waiting outside training grounds and meeting up with guys and saying, look, could I give you a voice?

16:16Could I go and speak to some of these clubs on your behalf? Because I think you're an under-market product. And I was very lucky that I got in front of guys who had elite talent and they gave me the opportunity. And we really never looked back from there since then. We built, I'd say, the largest independent football agency in the world with the level of clients that we've got on transfer market, the values, the number of agents, the number of transactions in the UK market. To answer the second question, where does Velocity and David's team fit into that? It's we're now on a journey where we've grown the business organically.

16:51we were looking for a partner that had the same vision really about unique as what we did which was look this is a business that can really scale they've got something special it's something that can go into a global structure with other verticals and as soon as I sat down with David and the Velocity team it was really clear to me that these guys just they had exactly the same vision as I did for where we wanted to go and I had various approaches that I'd kind of batted off over the 18 years from major sport management or entertainment businesses. And for one reason or another, we didn't do those deals.

17:28And it's obviously going to pay dividends now because we've now got our same principles, but now we've got more firepower as such to go into the market and look at agents like myself who are independent and giving them a home and a platform that they wouldn't have otherwise. The needs of the business and the dynamics of the business are intact regardless of what may be happening politically in the U.S. or overseas in Europe. But I wonder how much the economic uncertainty that has really come across over the last three, four weeks has affected the negotiations or the timing of this deal. Did that come into play at all, David?

18:11Well, Will, I'll turn over the question to you first on how you view tariffs, and then And I'll talk a little bit about our perspective. Yeah, but there's no tariffs on football. There's no tariffs on football, but there's a lot of uncertainty and people are nervous and they don't want to commit to anything, right? Yes, Scarlett, that's Will's famous line. From the investment perspective, one of the very exciting aspects of Unique is its incredible foundational business in the Premier League. The Premier League by far has the largest global meteorites deal and continues to grow internationally.

18:54The value of the international meteorites deal for the Premier League is significantly larger than all the other European football leagues put together. Right. And so irrespective of the economic environment, these are long term meteorites deals. That means clubs will have a very consistent revenue stream. And our perspective is as capital flows in to acquire teams and to grow their commercial operations, it's critical to be successful on the field. And Unique is effectively a partner to owners of professional football clubs on putting the best players on the field so they can succeed. succeed.

19:34So we didn't, obviously, the economic environment is something that we're watching, you know, as a private equity firm, but it did not have a direct impact on, you know, the final structure and pricing of the deal. The Premier League, this transfer window, if my numbers are right, and for our audience, 370 million pounds spent during the winter window, is that right? Talk to us a little bit about how you approach these transfer windows. How does it work? What we're dealing with right now is kind of the floating period, which you'd call the clubs are looking at who they're going to take. And obviously at the moment we're speaking to many people and finding out, we call it requirements, and there'll be a requirement which will be a certain type of profile for each position, which a club or a manager in a recruitment team will work out what that requirement is in regards to what is the general requirement of each player in each position and what do they want from that player.

20:31And then off the back of that, then the names will start to move in the next few months. And then as we get into the transfer window opening, and then it starts to get manic because obviously clubs go after their first targets. A lot of other clubs are obviously on the same first target. Then a club misses the first target. They're working on the second and so on and so forth. And as we move down the transfer window, when you get into the last week, that's when complete bedlam and mayhem sets in, when people realize that they've not got their fifth or sixth or even their eighth target. And they're literally running around thinking we need to fill positions.

21:08And that's where, obviously, the workload steps up for an agent right the way through the transfer window. But, look, clubs from when I started 18 years ago are far more organized and they're far more efficient than they've ever been at recruitment and have a bigger team and they're a lot more strategic, whereas 18, going back right the way through, they weren't as organized, weren't as strategic and wouldn't have as many people in the recruitment department. Obviously now we've got so many different tools that have come into the game that have made it a lot more innovation, especially in recruitment.

21:46It's been completely dynamic over the last four or five years to how it used to be. The money ball, which you'd see, which you're probably aware of, is very evident within the Premier League, you know, that concept. Are you seeing greater competition for sound investments in the space, or are you able to uncover more unique sports groups? Are there opportunities abound? There certainly are a lot of firms that are focusing on this broader ecosystem. What we try to say is we stick to what we do and what we know best, which is being a very operationally focused private equity firm and partnering with fantastic founders and management teams.

22:24And I think the difference in a lot of the organizations that have come on the air and that you talk to is they're either focusing on investing in sports teams, which we don't do. Uh, some cases they're just very passive minority investors in someone else's business. And we don't do either of those. Like we are a very active partner. And that was an important part of, of how Will and I organized the structure. He didn't want just capital. I know we're running out of time. One source of money is out there and that's from Saudi Arabia. They just recently announced that they were going to invest a lot of money in boxing and bring it back to the level of the old Don King era.

23:06How much of competition is that when you're dealing with that much money that is out there for you guys? I think Saudi, as you've seen, obviously have the world cup approaching in, I think it's 10 years. I think if you look at what they're doing right the way through sport, they're here to stay. They're not just going investing in, in talent. As far as players, they're actually investing in infrastructure, sporting directors, CEOs, and now stadiums, training grounds. They're taking it very seriously. And it's the first one to say they're here to stay for the long term. And it will take time. It's going to take time in their national team to see the changes and see the improvement.

23:52But I think in the next five to six years, you'll see how strong the league has been. I think each year it's going to improve. And look, me personally spending a lot of time in that market, obviously I just brokered the deal in January, which is the largest transfer deal of John Duran from Aston Villa, who's a young player at 21 who decided that he wanted to go and play on Ronaldo's team and drive it forward. And I know he's enjoying it. So it shows the intent from that of where they want to go. But I think I don't want to get away. want to try and get away from that and not just buying players that they are investing in infrastructure and investing in really experienced people um to drive to drive everything forward and i think i would say watch this space to where it can go and i can see it being you know one of the top three top four leagues in world football and uh it's quite exciting to to be involved in speaking to owners and teams who are at a stage of building and that's where obviously from my experience over the last 18 years, it's been great because we've been able to go in and advise in a consultancy capacity in a few places of our views on how things are in the outside world with football.

25:10Our thanks to both David Abrams and William Salthouse for joining us. David is co-founder and managing partner at Velocity Capital Management, and he is also former CIO of Harris Blitzer Sports and Entertainment, and Will is CEO at Unique Sports Group. Up next, we turn to boxing, a big match coming up to the Big Apple next week. For my colleagues, Scarlett Fu and Damian Sassauer, I'm Michael Barr. Stay tuned for more of the Bloomberg Business of Sports from Bloomberg Radio around the world.

25:47This is Bloomberg Business of Sports from Bloomberg Radio. Thanks for joining us on the Bloomberg Business of Sports, where we explore the big money issues in the world of sports. I'm Michael Barr, along with my colleagues Damian Sassauer and Vanessa Perdomo. There is a big fight coming to the Big Apple. On Friday, May 2nd, Ryan Garcia makes his long-awaited return to the ring against Raleigh Romero. And here to get us excited about the bout, see what I did there, plus do a pulse check on the state of the world of boxing. We welcome Eddie Hearn. He's chairman of Matchroom Boxing. Eddie, welcome to the Bloomberg Business of Sports.

26:27Thanks for having me, guys. Well, boxing, it's making a big comeback. And I say that because just recently, Saudi Arabia and the boxing body over there, they're putting a lot of money into boxing to bring it back to the level of the Don King era. Your thoughts about that. At first, you got Saudi Arabia putting their money into it and boxing coming around, playing big time with Muhammad Ali in the era that I remember it very well as an old man. Your thoughts? Yeah, I mean, I think boxing, to be honest with you, is it's always hot. You know, every business is cyclical. Every sport is cyclical. And for many, many years, people have talked about, you know, boxing's dying, boxing's broken.

27:14I think it couldn't have been further from the truth. Globally, the sport exists with a huge commercial presence. But of course, when Saudi Arabia comes along with ambition and a lot of money as well and starts making some of the big fights, it lifts the entire ecosystem of the sport of boxing globally. And we've seen that, you know, and we've seen huge fights in Riyadh. We've seen those huge fights in America, in Britain. You know, we had Anthony Joshua with 95 ,000 fighting Daniel Dubois last September. Remember this weekend, we have Ben against Eubank, 65 ,000. I mean, boxing's red hot. And obviously now with, like you said, the influx of the Saudi Arabia investment, there's huge opportunities for everybody.

27:59Well, let's dig into it, Eddie. I mean, Tottenham, you know, April 26th, Conor Ben, Chris Eubank. And then I think in New York City, Michael Barr, May 2nd, Ryan Garcia against Raleigh Romero. I mean, talk to us a little bit about some of these matchups. I mean, it is peak prime time here, is it not, Eddie? Yeah, I mean, it's really interesting. the difference of the dynamics of the event. So next weekend's a wild one. On Friday night, there's a Ring Magazine event in New York. Now, it's not a Madison Square Garden. It's not at the Barclays Center. It's in the middle of Times Square. Get out. Invite only with a couple of hundred people.

28:33You know, Ring Magazine, Turkey Outta Shake, Matchroom, Golden Boy. We are shutting down Times Square for this kind of historic one-off event. that features Ryan Garcia against Rody Romero, Devin Haney against Ramirez, and Tiafimo Lopez against Barbosa. Kind of all of these real big young stars of the sport. And if that wasn't enough, 24 hours later, Canelo Alvarez will fight for the first time in Riyadh, Saudi Arabia, on the Saturday night, early Sunday morning in Riyadh, prime time for the American audience on Cinco de Mayo. So it's just bonkers. The whole thing is bonkers. and bizarre, but boxing right now, boxing's really rocketed over MMA, in my opinion, in the last 12 months.