Ask Us Anything: The growth of women's sports + Is Melbourne's Metro Tunnel POINTLESS?

0:00I'm Adam Schwab. I'm Adir Shifflin. And this is The Contrarians with Adam and Adir.

0:08And we're back. Episode 158, Ask Us Anything. Michael, over to you. All right, guys. This week's first question comes in via LinkedIn from Cameron Harris. Hi, guys. Firstly, love the show. Having been made redundant recently and having a lot of forced time on my hands, I came across your show and I wanted to say thank you as I found it entertaining, but also helped me keep focused, educated and across what was happening in the world. That's nice. Just stop there and let's move to question two. Yeah, I thought I'd read out the compliments, but he does have a question. Valuations of professional sporting teams across the US and Europe are going through the roof.

0:50Women's sports are finally getting the support it requires to succeed. Do you see the same opportunity for investment in Australian sporting teams, women's in particular, to help them survive and grow? Investment in the players to be professional is needed and the opportunity seems big even with our smaller population. Where is the opportunity? Thanks. Well, it's a good question. I mean, I'm going to say things that are not going to be popular for me to say. So, the first thing is this, Women's sport, it is great seeing it grow. And obviously, to be blunt, Catapult is a big beneficiary of the growth of women's sport.

1:28And I think it's only just begun for Catapult because there's this thing called Title IX in the US, which means in college, women's teams have to get the same access to stuff as men's teams. That is great news for the future of Catapult. So I love the rise of women's sports. One of the challenges though with women's sports, and we can't get away from this reality, is that fewer people watch women's sports. and money basically follows viewership. And we can see that like the AFLW is doing a great job of trying to build up a women's league. It's going to take time and like they're not going to get, apart from a few rare examples, there was a game in I think Adelaide a couple of years ago, they got 50 ,000 and filled the stadium.

2:06They got lower viewership and the same is true in the WNBA. And so the reality is that the value of women's teams at the moment is going to be lower than the value of men's teams. Obviously the outlier for all of this comment I just made about women's stuff is not a team sport, it's tennis. So women's tennis, they earn the same. Women's tennis, people would pay the same to go and see women's tennis. Like people, I love women's tennis. I love it as much as I love men's tennis. I really do. I can tell you because the serving in men's tennis ruins the game a bit for me and women don't have these massive serves that win points routinely.

2:36So that's the first thing I want to say about women's sports. And long may it thrive, one, because I think it's tremendous, and two is because it's a great tailwind for catapults. But now we say, what do we think about? I'm not going to talk about the fact that globally, the value of sports teams is probably a bubble as it's transitioned from the playthings of rich billionaires to private equity businesses. But I will say this, Australia is fundamentally different to most other places in the world in a good way. The fundamental difference in Australia is that the major leagues in Australia, by and large, have teams that are not privately owned.

3:12They are there for the benefit of the fans. And we'll have strong views about his team on this and how much it's for the benefit of fans. But they are for the benefit of fans. And the leagues in Australia, here I talk about AFL and NRL and rugby as well, rugby Australia, these are custodians of the sports in Australia. And so the dynamic of owning teams in Australia is very, very different to the dynamic of owning teams overseas. And maybe my final comment will be the closest we might come to value creation in the way that there are teams overseas in a private capacity might be what Larry Kestelman has done with the NBL, where the teams have changed hands for material amounts of money.

3:54So I think it is a different dynamic. And I think that the valuation of the biggest teams around the world, we are in a moment of caveat emptor by beware, because there is an awful lot of money piling into these things. and some of the people that have been in there for a long time, like Mark Cuban, who's been a seller recently. So that's my views on teams. I think it's a really good question in a couple of ways. So I think your point on women's sports having less viewership is pretty self-obviously right. I think the exception we saw was obviously the Women's World Cup in Australia last year, which had much better viewership than pretty much any other sporting event we've seen men or women in 20 years since the Olympics.

4:32So there are some exceptions. So we've seen – Was that just in person that was higher or television slash street? No, I'm talking – I think it was the most viewed television event since the Sydney Olympics opening ceremony, which I think was – And it probably made lots of – I mean, I'm not familiar, but I suspect it made lots of money, right? Because the money follows the eyeballs. Probably to FIFA. I'm not sure how much money was made by Australian sources and the players. But yeah, certainly people would have done well from it. But I think that showed that some women's sports can outperform men's sports.

5:03I think your point is right. I think overall there is less demand from both women and men to watch women's sports, unfortunately. And I think you're right, tennis is probably the main exception. And it's not completely equal pay. I think most – like certainly Australian Open is equal pay, but not every tournament is equal pay. But I think what I like the question is – obviously, Australia doesn't have a great culture of private ownership outside NBL, as you said. And I think Brisbane Broncos, it's a publicly owned – I'm a news corp owner chunk of it, but it's a public company. But generally, you can't get exposure to teams.

5:33But why I think it's actually an interesting idea is, as you said, men's sporting teams have largely jumped the shark. They're very highly valued. They're valued on effectively beyond – they're not merely an Hermes bag. They're like beyond that. So they were an Hermes luxury product for rich people to play things. People have too much money wanting status. Now they've gone beyond that and private equity effectively buying it to sell to an even richer person at the end of the day. So men's sporting teams globally have gotten so out of – sort of caught outside their intrinsic value that it's really hard to buy them.

6:03There probably is an argument that there is a quarter weighing machine, voting machine opportunity with women's sport in that you're buying a much cheaper asset that is cheaper because not many people watch it now, but there is a chance that you could get a Matilda situation and get a women's sport catch on. So I'd be buying a women's sports team or doing what, who are the guys who bought that team in Wales? Ryan Reynolds and Rob McElhenney. Rob McElhenney. I'm not saying it's replicable. I'm saying what they did was bought a cheap team and use their Netflix connections to get a show made, but that can make you money.

6:39But you need to find these diamonds in the rough and you're not going to find it buying the Lakers. Like that's not going to be a good deal. That's going to be an overpriced deal. I agree. I had a chat with someone today and I was talking about a business and I said, oh yeah, I'll use like the platform that I've got and like I'll get it out there and maybe I won't have to use so much paid media. And this person said to me, you're not Kim Kardashian. and I'm like, well, maybe I'm better than Kim Kardashian. He's not a greatest sales pitch ever, I admit. And so no one is Ryan Reynolds. Like that was a unique – he was very, very smart in the way that they did that whole endeavor.

7:13But I think your point about women's sport is a very good point. It's less about weighing machine, voting machine, and it's more about the match or the mismatch between the risk and return curves. And I think at the top end of men's sports, the risk-return curve is skewed badly away from being a value creation opportunity. Like the level of risk about continued growth is higher than what you're paying for it. But if you look at women's sports, if you want to make a bet on women's sports, if you believe that there will be growth in women's sports, the risk return curve is in your favor because they're really cheap right now.

7:45And so, I mean, obviously some people have already started buying them. There are some celebs out of the U.S. that have started getting involved in soccer teams in the United States. but I definitely think that's an interesting point that you make about that. Yeah, absolutely. I think by the same token where it's also relevant is sponsoring players. If you're sponsoring a player or doing kind of influencer deals, we've done some deals with some Matildas and they've had incredible, like some of our best results ever, 100 ,000 plus likes have been on Matilda's post. So there's definitely some, obviously Commonwealth Bank did that famous deal.

8:18I'll second that. I'll advocate that heavily. Like I think, you know, especially, so I don't know how travel works, but I suspect women are strong drivers of the purchasing decision in travel. Yeah. And it's certainly true in the world that I live in, like not the catapult world, like the retail part of the world that I live in. And so I think that female, like athletes are already a bit tricky to resonate with women often, women's markets. But I think female athletes that represent such good value relative to most male athletes. I totally agree with you on that. Great question, Cameron. Thank you.

8:53And on to question number two, Mike. Question number two today comes in from Liam on LinkedIn. With the metro tunnel finally opening soon in Melbourne, I'm honestly wondering whether it was worth the years of noise, closure, delays, and costs. Has this project genuinely made Melbourne better or is it just another over-promised, over-budget infrastructure project that caused more pain than it solved? This is my favourite question anybody's ever asked. I know, but before you get worked up about this answer, which you may or may not get worked up actually, I suspect you might, we should draw a line and say, there's kind of two big train projects going on in Melbourne.

9:34One is the suburban rail loop and one is this metro, which is kind of akin to Sydney's metros. I don't think it's as good, but like these are not the same thing. And so here the question pertains specifically to the metro. I get a bit lost. The metro's not connected to the suburban rail loop directly, right? They're two different projects. No, suburban rail loop's the train line to nowhere from Box Hill to Springvale or something. It's like the most ridiculous thing ever. You don't mean the train line to nowhere. You mean the train line that encircles nowhere. So just in terms of, there was actually a great article today by an economist in the nine papers making the point.

10:09So if you look at the metro tunnel, which is, the suburban rail loop has got a lot of justified criticism because the cost is extraordinary. that the metro tunnel was budgeted at$10 billion, came in at$15 billion. This is just the actual cost of it, as in the first order cost. So it was 50 % over budget, which for Victorian Labor government, actually pretty good given how inept they are, but for any other rational business of disgrace. But it's sort of largely been either sort of complimented or people have been relatively positive about it. But my view, you'll be shocked to know, is highly negative.

10:42I think when people talk about this as being a successful project, they miss some really obvious stuff because this has just been propaganda from the massive sort of Victorian government PR machine. So if you look at it on the plus side, they said it would finish by sort of around 2025. It was a year late. That's not catastrophic for a public project. They said it would be$10 billion. It was$15, again, over budget, but like for Victoria, probably not so over budget. I think that the biggest issue is when they set out about building this in 2014-15, they were predicting that train usage would triple in the period from sort of 2014 to 2030.

11:18And because of COVID and the Victorian government, ridiculous COVID work from home policies and COVID lockdowns, train usage has actually dropped since 2019. So people are simply not using the train land they built. So as a result of their own ham-fisted policy. So they spent$15 billion on something that they killed themselves. Problem number one. Problem number two is even though it costs$15 billion and it's kind of slightly positive on the kind of risk return metric, the other problem they've done is it becomes basically break even when you factor in the lower usage. And then what they don't factor in is two other really important things.

11:49The important thing, one is, as Liam said, the massive disruption. It disrupted millions of people for 10 years. That's got a huge cost. So there's that cost as well, which gets conveniently wiped under the carpet. And the other thing that it's caused is it's been a massive driver of huge building cost increases. So every building in Victoria is doubled in cost because the government were paying laborers so much money to build these tunnels that nobody uses. So there's two massive impacts that I've forgotten about that have caused huge issues. So now I've got huge housing unaffordability because nobody can afford to build houses.

12:23And if you are building houses, it costs you double. So in every respect, this has been a disaster for a train line that really doesn't help anything because it pretty much mirrors existing train lines. So in every respect, yet another fail by the worst government we've ever seen. Over to you, I dear. Well, I don't really – I can't comment on this with any precision because I don't really understand what was the point of this because I know where there are some stations. I think like – it's going to be very Melbourne-centric for me to say this, but there's a station in South Melbourne kind of nearish to the shrine, you know, in that intersection.

12:54Anzac Station. Is that what it's called? That area desperately needed a train station. Did it? You can get a train from there to the city, a tram from there to the city. I don't think it needed a – I don't live near there. I know, but like if you're coming from a different area, I don't know, Brighton, let's say, and you want to go there, you have to go into Flinders Street Station and then catch a tram out. It's a long and slow process. So I'm all in favour of – So for the few thousand millionaires living in Brighton, Kentucky, a chauffeur-driven limousine. No, no, but it doesn't have to be from there.

13:25It can be from anywhere. I thought that that area is like a quite high density now of residential as well as business, like corporate. I felt like it needed a station there. But not for$15 billion. Well, that's a separate issue. My starting point would be anything that this Labor government has built will have a ton of wasted money going into some kind of overpayment of unions and just bad use of funds. but let's talk about, like, I don't even know if the actual infrastructure itself is good. I'm not saying it's not. I don't know. I haven't really paid much attention to it. And so, it's going to be a very short answer.

13:58I don't feel like I'm well-placed to answer this question. I can answer the Sydney Metro question, though, since that wasn't asked. I'll answer that one instead, though. Basically, the Sydney Metro is unbelievable. It goes to great places. It opens up the entire city. It has no drivers. Does this Metro have no drivers or it has drivers? God, drivers. God, Victoria, of course you've got to give the union mate something to do. Sydney Metro has no drivers and it's punctual. Unfortunately, in Sydney, the problem you have is for some reason there's constant track work on trains in Sydney. The Metro already is being shut for track work.

14:30I don't know what they build these tracks out of. You know what they build them out of? You know the snake lollies, snakes alive? That's what the tracks are. They have to keep recoding the sugar or something on them. So I don't understand why there's always so much track work in Sydney, but the Metro has been, it's beautiful. Like if you go into metro stations, they're sandstone, they're cavernous. Everyone is a slightly different style. I could not speak more highly about the metro in Sydney. I hope Melbourne is as good. I pray that the Melbourne metro feels as good and operates as well as the Sydney metro.

15:00We'll see. I don't know. I think that for more reports, the Melbourne metro has been built fine. Like I don't think there's a complaint about the building of it. The question is, A, they've been$15 billion plus all the other costs. that's probably the real cost is probably closer to$30 billion if you look at the increase in labor and all that kind of stuff. So let's say it costs$25 or$30 billion. It's not getting a return. So what the government's done is incurred$30 billion of debt that has to be paid for by future generations. And who's benefited? Well, a handful of people in Brighton who can now get to the shrine quicker.

15:29Well, I'm not even sure that line goes. By the way, don't tear me to shreds. I'm not even sure that line goes there. I think you might still have to go into the city, but at least it'll be faster to go out. And I don't go there. It's not for me. So don't pick Brighton. Pick anywhere. Pick anywhere you want. Pick Bentley East, okay? The reason they built it - Patterson Station. The reason they built it is because the loop, so the underground in Melbourne was too full. Oh, the loop's full. That's right. They said it was full, so we need to build this extra line through the city. Inherently, it kind of makes sense if the cost wasn't that expensive.

15:59The problem is the cost has gone way up and the usage has gone way down because of the COVID policies and the work from home. So on both respects, the Labor government has killed its own project. Of course, nobody cares because it's just people who don't realize they've been lumped with his debt. So it's just classic labor, just taking money, sorting out our mates and getting reelected by idiots who don't know they're just bankrupting themselves. Well, I think I'm one of the people that hasn't paid much attention to it, to be honest. Yeah, I agree with you. Most people don't pay attention. I do think there is an issue with these cost-benefit analyses for infrastructure, which is when you say get a return, the very good point you've made is train usage dropping as a result from these work-from-home policies.

16:37Like that is a pretty bad argument around this stuff. But I generally think, let's say they spent$30 billion, whatever number you said is, and it's hard to get a return on traditional metrics. But the consequence was that it was much easier for people to commute through the city and life got a lot better. People went into the city more. It was more productive and so on. I'd be in favor of that. I don't know where the line is for that, but I think there'd be an argument to make. That's the benefit. That's right. Well, that's the only benefit. You paid$15 billion hard cash and all the other costs.

17:12The only benefit is people get to the city slightly quicker. But nobody's even using this thing. So nobody's using trains. Yeah. Well, I think that's – because you do need infrastructure in a growing city. I think if you said to me, criticize rail projects in Victoria or even just criticize projects in Victoria, my criticism would be front and center SRL because that's ridiculous. That's the biggest joke, but you can't compare everything to that. That's not saying a racist isn't as bad as a murderer. Well, it's cast such a long shadow over everything else that I find it hard to concentrate on anything else.

17:46So I've got nothing material to add to this. I think your comments were interesting. Thanks for that. We've got a super quick break, back in no time at all.

18:03And we're back. Question number three. Mike. This question comes in from Carlos again on LinkedIn. Thank you all for your questions. With pressure always mounting for companies to cut emission, should Australian businesses be legally required to meet strict climate targets or is forcing climate responsibility onto the private sector unrealistic and economically risky? So this is a sad episode for me because I'm poorly qualified to answer a lot of these questions. So I'm going to answer a tangential question to this question. There's this big focus on, let's say, being aware of the climate consequences of your supply chain as an Australian company.

18:46And so I'm aware of that for Catapult, like the climate consequences. And at the same time, we're having all these discussions and I do not minimize the importance of trying to reduce emissions as part of a wider strategy, like an environmental preservation strategy. What strikes me as totally ridiculous and hypocritical is all of the same people that are harassing private companies to make all of these changes that are going to be expensive and detrimental to their businesses are on open AI all day, typing in prompts and chewing the world's energy and the world's water out of the system. And just the overwhelming hypocrisy makes it impossible for me to answer this question, which is just as well, because I don't think my answer would be especially sophisticated.

19:31But I do think that like this tunnel vision on certain topics to do with climate change, whilst ignoring everything else that's going on around it, and I'm not even talking about these arguments and say, why should we do anything? China's the problem, et cetera. I think the environment is something we all need to take seriously. But I just cannot get over the overwhelming hypocrisy that these piles and piles of people that feel so passionately about this trade Bitcoin and use AI prompts all day and then say, you should cut this out of your private company emissions. I think you're right. I think the issue is when it comes to climate change, everybody wants climate change as long as somebody else is paying.

20:14And when it comes to them paying, suddenly it's an issue. And that could be Mike Cannon-Brooks talking about Mr. Green himself, right been driving and flying his private jet everywhere it could be people having big commodore ss's and wanting like so i think there's there's and it could be people simply eating meat there's almost the biggest use of water in the world or one of the biggest uses of water outside data centers is is cattle and the amount of water it takes to i think it's like hundreds of liters of water for a single stake so like plus emissions right cattle are a big mission so i think it's all good and well people claiming i want i want somebody else to pay but unless you do it yourself I've got some real issues.

20:47I think just lumping on the private sector makes no sense at all. I think there's got to be a – if people want to complain about climate change, make your own changes to your life. So stop eating meat, stop dropping cars, stop flying, all that kind of stuff if you're really serious about it. And I don't think many people want to do that. Understandably, I don't want to do that. Well, don't eat meat. But the other stuff I don't want to do. So I'm not sure people can – everybody's just pointing fingers demanding everybody else do something. I think that's like the absolute worst way to go about it.

21:14And at the moment, AI uses this huge amount of energy. And for example, a lot of that energy is not renewables, right? There's some arguments that people make. I heard this with the Bitcoin data center argument. It's really great we use so much energy because it will create the economics to encourage renewables. Well, I mean, everyone's trying to do renewables as it is. We want to do it. And so what I find, this is the real private sector hypocrisy. So I know that this is like we have public sector hypocrisy. and like all, I'm 100 % certain that all of the people in the public sector that are complaining about climate change, they're also on AI all day, okay?

21:51Like everyone's on AI all day. But the biggest hypocrisy is these advocates in the private sector on their high horses about climate change, fine, but then when your business is at risk of being left behind by not using AI, don't embed AI across your whole business, suffer the consequences. The consequences are your business is going to be uncompetitive. That's the consequence of not wanting to use all this energy. Of course, none of them, none of anyone wants to suffer the commercial consequences of going out of business because you don't integrate AI. So it's like a lateral extension of your argument, which is everyone wants to fight climate change on someone else's coin.