The World on Sports

Vince Carter got everything on his Christmas list last year…

→ Hall of Fame induction, October 2024

→ first Toronto Raptor to have his jersey retired, November 2024

→ Brooklyn Nets jersey retirement scheduled for January 25th, 2025

→ 1 of 10 limited partners who joined the Buffalo Bills ownership group last month

The Buffalo Bills and the Miami Dolphins were the first NFL teams to bring on private equity firms - Arctos and Ares, respectively.

Vince Carter and his cousin, Tracy McGrady, were both involved in the Arctos - Bills investment group.

Today we travel through the world of sport, jumping from old deals to new possibilities, and picking up interesting pieces of information along the way

ballin’

The NFL was the last major league to allow private equity ownership of team assets. In August 2024, the NFL voted to allow the following funds into minority ownership roles:

• Arctos

• Ares

• Blackstone

• Carlyle

• CVC

• Dynasty

• Ludis

• Sixth Street

Funds can own up to 10% of any team; most funds listed are expected to get involved with multiple franchises, with a cap of 6 teams

The Bills deal in December was anchored by Arctos and brought on a handful of individuals, including athlete investors Jozy Altidore (USMNT / MLS), Vince Carter (NBA), Tracy McGrady (NBA). The Bills sold 20.6% to investors.

Sidebar: where is Redbird on that list…

The Dolphins deal was anchored by Ares Management and brought on Joe Tsai and Oliver Weisberg (Brooklyn Nets owners). Ares took 10% while the Nets owners took 3%.

Some thoughts:

Valuations

Prices across the league will rise as more of these deals get done. As of last summer, Forbes computed the average NFL valuation to be $5.7B with the Dallas Cowboys taking the top spot with a $10B valuation.

Assume most NFL deals get done before 2026 and valuations see a significantly higher YoY increase than usual. The Cowboys will remain the most valuable team at the end.

Mixed Use Development

One of the most profitable segments of sports investment is mixed use development. As sports teams - in general, not just NFL - price out more and more investors, mixed use development should see an influx of capital over the next few years.

Investor demand is picking up; it’s easier to model out a path to “x” IRR with mixed use assets.

contracts & rights

2024 was a year of superstars getting paid…

Juan’s contract caused an Internet tidal wave when it was announced, similar to Ohtani’s a year ago.

Baseball players are getting paid, but the timeline is much different from other leagues:

• Juan Soto - $765M / 15 years - 2024

• Shohei Ohtani - $700M / 10 years - 2024

• Mike Trout - $426M / 12 years - 2019

• Mookie Betts - $365M / 12 years - 2020

• Aaron Judge - $360M / 9 years - 2022

Compare that to basketball:

• Jayson Tatum - $314M / 5 years - 2024

• Jaylen Brown - $285M / 5 years - 2023

• Nikola Jokic - $276M / 5 years - 2022

• Bradley Beal - $251M / 5 years - 2022

A couple of things:

Regional Dominance in Baseball Contracts.

• All of baseball’s highest earners play in a top-tier regional market: NY Mets (Soto), LA Dodgers (Ohtani), LA Angels (Trout), Boston Red Sox (Betts), NY Yankees (Judge).

• The reason lies in MLB media rights structure. Although the MLB has a $12B+ / 7 year media deal with ESPN, Fox, TNT, and Apple, a nontrivial amount of cash comes from regional streaming deals. Teams like the Yankees, Red Sox, Dodgers, and Cubs rake in big bucks from regional/local deals, and their stars are paid accordingly.

• The MLB is considering a long-term media rights deal for all teams to level out the regional income disparity, but top earning clubs are unlikely to hop on board.

King of the Court

• NFL media rights are still in highest demand ($100B / 11yrs) but the NBA’s new deal comes in close ($77B / 11yrs).

• Basketball remains the premium payer out of the big 3 leagues due to smaller roster size. NBA has 550 players vs. NFL’s 1,696 vs. MLB’s 1,200.

• NBA superstar contracts also have a higher guaranteed % compared to the other leagues, due to the outsized impact and influence of superstars on a game.

big tech has entered the chat.

Right before the year came to a close, Netflix swooped on the women’s World Cup rights for 2027 and 2031. Fox previously had a 12 year run on the English-language women’s World Cup rights.

This marks the first time that any World Cup matches will be hosted on streaming services and not linear television.

By the time major leagues head back to the negotiating table in the 2030s, my gut is telling me that most linear cable networks will be priced out.

Current Big Tech Sports Deals:

• Amazon Prime Video: NBA media rights (2025 - 2036)

• Amazon Prime Video: NFL media rights (2022 - 2033)

• Netflix: NFL media rights (2022 - 2033)

  • $400M for 3 years of Christmas games

• YouTube TV: NFL media rights (2022 - 2033)

  • $2B per season for Sunday Ticket

• Apple: MLB media rights (2021 - 2028)

  • $595M for 7 years, ending in 2029

Zooming in on Netflix a bit, they’ve been particularly aggressive in high-upside sports rights with monetization potential:

→ Jan 2024: acquired 10 yrs worth of WWE content for $5B

→ Nov 2024: live streamed Paul vs. Tyson

→ Dec 2024: 2027 and 2031 women’s world cup

The NFL Christmas game deal is an anomaly, likely a relationship builder that Netflix will use to wedge its way into a more substantive deal come 2032.

Headlines

• An Unprecedented Year in Stadium Development. FOS article here

• Hedge funds Citadel and Millennium gain 15% in 2024. Financial Times article here

• The new economics of NFL ownership. Axios article here

• Thiel-backed venture debt fund raises $269M. TechCrunch article here

• AI sales agents are booming and VCs are wary. TechCrunch article here

• YouTube Chief Neal Mohan bets on AI and creators to supercharge growth. Financial Times article here

• Notre Dame football wins $14M after CFP win over Georgia. FOS tweet here

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