Why NFL teams are suddenly worth $10 billion

0:05Hello everyone and welcome back to the next episode of Stream Climb Sportsman. This is Chris Dunn, the community lead joined as always by our CEO and Nick Vietro. And I'm Nick, it's good to be back in person. Today we're in London at the Sports Pro Investment Summit. And I have to say, Nick, I mentioned this before, this event always makes me a little bit nervous. And granted, I say always a second time. And at the media summit, I'm very comfortable. I know the big names. I know the players. Similar to you with AI. I'm not a big tech guy. I know that the NVIDIAs are very familiar with that. Walk around the investment summit, I get a little hesitant because I don't know the names of all the different people.

0:38And I don't want to go up to someone and go, oh, who are you? What are you doing? They're like, oh, I manage a multi-billion dollar portfolio. It's a little awkward sometimes. You don't know their businesses and how much money they work. It could definitely happen. It happened to me a couple of times. I'm like, who are you? Oh, yes, you own multiple sports properties. Yeah, OK. But I think that's the fun games of events like this because you get mixed with that with other startup organizations. But it's really cool to see all these investors in the room. But what I got comfortable with, I had echo Eagle Center about being like, there's that bringing around the investment people and so forth, coming to grips with all of that.

1:14But what I've noticed and I've come to more comfort with is that they actually don't know Sportback well. In most instances, there's some exceptions. So actually, we know a lot more than they do about the industry. and we can be really helpful. So I used to think that I'm on a bit of a pedestal and actually I think we bought a bit about the industry that they need to learn. So that's why they're here, obviously. Well, fine. Next year, maybe I will, you know, take more of a forward approach and introduce myself to a few more people. I just didn't want to be like, oh, sorry, I don't know you. Meanwhile, you just sat on 10 sacks of cash.

1:43Well, maybe if they got a portfolio of like, say, I don't know, North and a billion dollars or didn't wear a hat. So everyone can know who they are to have a chat with. Yeah, definitely. sure there are people definitely love that idea if we did that so nick speaking of investment we we're gonna i'm gonna segue this because i'm the king of segues i'm very good at the world guys go to that thank you thank you um so recently um as of a couple weeks ago i think it still needs to be approved by the nfl ownership group but there was the the sale of the seattle seahawks to the costler family for 9.6 billion dollars establishing a new record for nfl franchise sales uh the last sale came in 2023 so not that long ago washington commanders um i'm glad i got that name right because sometimes i'll refer their old name oh okay that sales for six billion dollars so we're talking about in the span of three years went from six billion to nine billion um it did it bring to los angeles lakers on record which sold for 10 billion but obviously probably one of the five to ten most recognized sports franchises in the world but these numbers are going up astoundingly and i think the the question is segue this into the investment summit is someone has obviously invested close to 10 billion dollars into something and i think a lot of that is reportedly has to do with the fact that the nfo media rights are continuing to go up and up and up and just sort of the role that media rights play specifically when it comes to investment um whether that is in individual franchises whether that's you know we've had some people here today like baliga um they had the the sponsorship from cbc that we also had on a moto gp which is uh used to inform you a little bit at liberty or where you grew up so it comes in at all different levels and things so i mean nick it's just it's continuing to go to go up and particularly like from the team so like i said i mean massive jumps even just span a short year and like certainly that can't just be because they won a super bowl i mean if it was it'd be pretty pretty mad you never know right but it obviously does drive the value to some extent and you know maybe seattle's an appealing market for some because of the the tech world that only Amazon, maybe Microsoft are based out there, I think, from memory.

3:46But it is pretty astonishing when you compare it particularly to the Washington Commanders, which is one of the main teams. I guess there's probably things to do with real estate that might come into play there that might drive it up. But frankly, I think since 2023, what the big change is, is that private equity is now able to invest into NFL and NBA and maybe one of the other leagues as well. And I think that just adds a whole layer of demand in there. that's just going to keep pushing it up for the near future. Private equity, from the conversations I've had over the last year or so, a lot of investors have been sitting on cash and they want to spend and deploy it somewhere.

4:20And so what better place to put it than basically a surefire, an equivalent surefire bet where you can get a lockdown and NFL team. You know those businesses aren't going anywhere. They never go to this pier. And you get to deploy billions of that was incapable to do it now granted this was by a family but the fact that probably equity is also in the game i think adds to this driver of the value and only will continue for the near future but how far can it go you're talking what's that the equivalent of father home it depends how you want to slice and dice that's only 500 million dollars a match equivalent to play a year it's how'd be nuts yeah well i think we're going to get into the question as as the values go up who can actually own franchises we'll come back to that but it is worth mentioning with the nfl you know I think the current deal is worth around$110 billion.

5:08I think that ends around 2030, 2031, assuming that rolls its way through. And approximately two-thirds of the NFL revenue is through its media rights. So it is just a good chunk of that. And I think it was reported that roughly every team, because of the way they do the rev share model, basically starts every season with around$400 million that they get from their media rights. So, you know, when you talk about investments, you've got to feel really good about something that you know. before the ball is even kicked the very first time we kick off the season you're already guaranteed 400 million every single year when you start thinking about what you're going to get back to that investment like that feels like first once we talk about volatility it feels like a really safe investment well you think if you compare what the the situation is in europe with all sorts of sports they always have relegation involved and that's why even we look the values of premier league clubs there's always a tier of other ones that will never get relegated although topham was one of those until this year that almost uh that their valuation was sort of protected because they weren't ever going to be in a delegation conversation.

6:06And there's a huge drop to that level with the volatility of potential risks of going down. And you just don't have that. So, yeah, you're right. I mean, it's a surefire bet. Then those guaranteed revenues, guaranteed cash flow will always exist. And they're going to probably get more if the NFL gets its way. Yeah. Well, in terms of just looking back at what is someone actually buying for $10 billion? dollars you know it it's clearly there will still be some club ownership that is um you call it vanity driven about the idea i mean lots of people grew up wanting to own a sports team and there's always a thing about scarcity right like it is a it's a very limited commodity there's only so many people that can own a sports team so but at the end of the day you're not just buying something for 10 billion dollars purely for that so what is someone buying when they're spending that much And, you know, if you go to the small end levels, you're still talking multi-billionaires.

6:58What's someone actually purchasing beyond just a team? I still think that a lot of it is to do with the team for some of these people. They are the prestige-loading stock team. But they are. I think the American sports is an interesting one, really, because they're quite what's regulated, very centralized, all of the decision-making. You're buying a seat at the table with other billionaires. If you think about how that plays out with the NFL, So your team's contributing to the decision-making in the future of the score, that access must be worth something. It must be worth something to being alongside those other multi-billionaires who are only those different properties.

7:35I mean, what are they buying? They're buying an asset that they probably have the surety of revenue. They're buying an asset that continues to keep growing. They're buying an asset that has a connection with audiences like no one else can as it are created. But I don't think that is why they can't turn that into anything more. You know, that the NFL has been so maximized. And, you know, if I think about what we see in Europe where you talk to some sports clubs and even Leeds and they're pretty lacking in a lot of areas of digitization. and whatnot. I don't know if there's much upside in those investments that those owners can create in the same way that someone buys a European football club and they can go spend big on salaries and try and raise quality and standards.

8:25I think it's mainly they're buying a seat and buying a bit of guarantee and they're just banking on the fact that someone else will want to buy that at some stage down the line. Yeah, I want to try to think of it and it's almost like a media aspect because we were talking about all these mergers and acquisitions, sort of where you sit in the ecosystem. Do you want to be the distributor? Do you want to own the platforms? you know and you think about all those connected pieces is it almost are you better off buying the team and letting the espns or the skies and which side of the comment let them deal with all that stuff but you're just you're the product and then ever like it sort of in that idea of like the whole media landscape like is it perhaps maybe the best seat to be in because let everybody else do the work you just kind of get sit on it well i think that's the thing is that the nfl is in a different boat than say other like european base uh i think they just they kind of just buy it and then all their focus is primarily on trying to win a couple of Super Bowls, basically that.

9:14I don't ever hear any of them talking about how they're trying to revolutionize ABC. It's all very incremental gains. The sole focus when they're buying is to try win a Super Bowl because, well, because they want to, because it's an exciting thing. It's a great hand in the back. You see that the owners go out there and get the trophy handed to them, which you don't see the same way and a low European sports, that prestige is definitely a factor. Also, if they win the N8 League, then they are increasing the ULV investment as well. And in terms of that jump from, you know, the$6 billion to the$9 billion, how much of that do you think we can attribute to perception that media rights are going to go up?

9:56Because, you know, that all these rumors going around that the NFL might even cancel or cut short their existing media deal because I think there's more beat on the bone to go after. We're seeing the introduction of more big tech, which makes you believe that will either A, bring new investment for new people, or it just drives up competition. How much of that $3 billion jump do you think could be attributed, using the pie analogy, to the idea that media rights values are only going to go up? I think that's exactly what's there. I'm going to take you a bit of a bet. There have to be that. That's a level.

10:27But didn't the Dolphins get a sold at a valuation. It was, there's a minority stake that actually even valued it even higher than that. Are they taking a bet that the NFL get its way? It will find someone to spend more and invest more into those rights. And quite frankly, I've never, in the last 10 years, I can't remember this amount of competition existing, you've got Paramount going big, net clicks down and spending more and more and Amazon's obviously, you know, big in any play and being a major partner for the NFL. I just think they're really setting themselves up to try and maximize every penny.

11:02And they will be fragmented. They'll be on seven different platforms. But they have made it work better than anyone else. So fair play to the NFL. They keep finding a way to just keep rinsing that, squeezing that sponge or something. Every time you think there's no juice left in that lemon, there's still more juice. Squeezing the lemon was definitely what I was trying to say, not squeezing the sponge. Yeah, or negative. But in terms of we talk about who media owners are talking about private equity, Like it does get to a point that these values go up that at some point, like there's actually just going to only be so many people that can actually afford these.

11:34And I think that's probably the reason for the introduction of private equities, because there just can't be that many single, I say single, but, you know, individuals that are able to purchase that. The only way to continue driving it up has to be on the introduction of private equity. There's just no way it could continue. And then it was asked a question, like, who can even buy a sports franchise at this point? I mean, the window must be getting smaller of who can afford to buy it. And maybe you'll see further evolution in those roles. I don't know the exact rules, but I believe a majority shareholder by far has to be a single person and family.

12:10And then there is an allocation for private equity. But inevitably, over time, if those valuations keep inching any further, then, yeah, those numbers will keep going up. The private equity will get a bigger and bigger stake. I think that seems to be pretty much inevitable. The idea that they needed to have private equity, I've said this on stage actually at the event, American sports don't need private equity like that, particularly in the NFL, because quite frankly, it's so regulated, salary caps are so powerful and robust, there's not much that extra investment will be able to drive, unlike in European sports where you can really invest, and the invest, but she needs them.

12:46And I think that's going to continue to strive more and more growth, but inevitably a P will have to have more of a stake for them to democratize the people who can buy a stake in the NFL. Yeah. And that leads us to actually kind of talk about European football and the comparison between the two sports there. It is interesting. You mentioned sort of the value of European teams, and Forbes usually does a list. And it's interesting. There are football clubs that had larger global reaches that do not have the same value as even smaller NFL franchises or even some of the NBA franchises. And I guess the question is, how much are those perceived values of franchises down to the media rights values, and how much has that been impacted by promotion and relegation or just simply the structure of the European Cup Bowl has?

13:37It is a volatile investment. Rav Azami was on stage talking about at the event just now, had to sell Leeds United at a low point when they got relegated because he just had to get out of it. you don't have that sort of risk when you're looking at some of these other sports so it is interesting when you see a real madrid clearly a more globally recognized brand than the seattle seahawks but doesn't have the same amount of monetary value and i and that's not that's just one example but if you go through that whole forbes list all the american sports are up there i forget who does the top 50 um football clubs there's another one of those um so sportico do evaluation on uh as well it's like the bunny goal oh there's also brand finance to do uh a couple lists uh yeah not sure yeah but anyways i was looking at their list and i was amazed at how all the nls teams are on there but again because of the whole commercial relegation like you would never put those nls teams up there but just going off values which is partially on all different various metrics so yeah just question like how much does the the european football structure limit its value and its be your own truth i i honestly think that's everything if you compare like to your point let's say the mls and you compare some of the values and some of those clubs to some of the ones in the premier league you would be pretty shocked at seeing how they they line up but the fact of the matter is it's a sake investment so is that club worth more in terms of its fan base and its impact no but if you're in the best you don't want your the risk If you get relegated, if you're in the Premier League now, there's risk in there for get up again.

15:13Or you see what has happened before. Some had thrown the kitchen sink out to fund their way out. And again, because everyone else is doing the same thing, they can never get there. They never get there. Those revenues dry up pretty quickly. And you see some of the spending that's going on in Europe. It's unsustainable, right? You're seeing in some instances spending on players to do more than their revenue. I mean, it is insane. So that's why there's always calls to try and bring more regulation to that, more on the transfer side. And again, the weird volatility we have around player transfers over here, where some clubs pay more money out of players spending the effort that they'll ever make on prize money from their performance, which European sports, European football, is in a bit of a mess as a result, but frankly.

16:00Well, that kind of leads me to the big crescendo question at the end of it is, in Sports World Limited this year, you had your presentation on dreams versus realities. If you're on LinkedIn, you've probably seen it shared in one way or another. But one of your things was talking about sort of this, where's the dream versus reality when you're investing in media rights? And I think it's probably more volatile in Europe. And I guess the question is, your sort of general belief on investing on the speculation that media rights are going to continue to continue to grow, how much of that is the dream versus reality but then the kind of flip side is is the nfl just a unique piece that doesn't have that and then on the other side things are europeans going to feel the pressure to have to change their structure long term yeah look um a bit of a curveball has happened this year and that's paramount has gone big on the championsley parts that sort of reset the naka things go it's going to create a lot of more optimism that me writes isn't dead um which is a bit dramatic but it is not going on purely a downward table here.

17:05And all you need is one major bidder to come in and spend. And that can drive up those values again. So I think that will create a lot of buoyancy and excitement across the wider industry, perhaps naively, because I can't see parents continuing to spend and spend on rides. But it shows that, you know, it's not all doom and gloom in some instances. The problem that's for Scott, we talked about it before. is that particularly in Europe, European football especially, doesn't have ad breaks, doesn't have advertising revenue coming in. Yes. But seriously, I think maybe that's where it might go. Particularly if you think what's happened in Germany and therefore also what's happened in the UK, the sky either diversifying or acquiring, that there'll be more European football on free-to-air TV would be by estimate.

18:01it and if so they want to maximize that opportunity if they do then that will mean more interest in spending more on those rights so i think not people not many people will be excited about the idea of the hydration break concept becoming a thing uh but i think that'll be a lot of push for a lot of people to bring that to life because there's a good chance of really bringing back a bit of energy into the meteorites landscape not just in shandles but for local markets as well Well, I would say be careful, in my opinion, on the Champions League model, because it's really close to the European Super League in the sense of that's more on the international level.

18:38Even if you're living in Sweden, you might still want to tune in to watch Round of Dread, where I hope people, at least we might be doing too much. And it is a completely different proposition, because, like, I still think that although the European Super League appears to be dead, I don't think that will ever be fully dead. well I could say I've heard healthy conversations and I've heard it's not dead but it's definitely on ice I think they've still European football particularly are looking for some sort of magic solution to usurp basically the Premier League and give more power and more revenue back to the major European clerks so I think there's a desire to find this new magic thing to do it I still can't see how it's possible that would work.

19:25I can't see why in the European Super League model at that time it was actually to pull those teams out of the local leagues and just be focused on this internationalist European competition. But that would mean you would leave a divine unique Borussia Dortmund relationship depending on what they were going to do. But you would lose that local rivalry potentially and all the other markets you have those local rivalries and I think that's the heart and soul of football. Those local derbies is probably what it's all about. So I've imagine that would ever happen or they might think that uh you know like all of germany will get behind buying munich because they're playing in the european company no of course that's not going to happen so i just think that this gets flawed they're looking for this home run swing i just can't see how it can happen uh but i know a lot of people would are definitely looking at it seriously and they're still searching around for see how they can bankroll it yeah well there you go those are the things you hear the sports car investment something you might not hear else for a little little whispers little uh chattered one of them on the scenes but yes nick it is something in there there's a lot of money going around uh you know 10 billion dollars on teams uh and surely that does have to do a bunch with the media rights and the investment space and yeah hopefully this time next year i'll be more comfortable nick to have more conversations and know people and uh who knows next year and have you will see another end of the bill fret to us off for about 15 billion a week to whether maybe it'll be the bangles thank you everybody for joining this head of center stream top sports