Carolyn, Jason Kelly, $51 Billion discussed on Bloomberg Businessweek


Nvidia spilled over to semiconductor and tech shares and helped broad U.S. markets extend a weeklong advance after the trip maker pledged this week to invest in the expansion of its core business Nvidia today up by 9.8% Again recapping S&P up 63 a gain of 1.4% I'm Charlie that is a Bloomberg business flash Hey Charlie thank you so much So we want to get into over the next half hour 30 minutes or so A couple of stories that tap into the big money of sports Collegiate and professional So first step do you remember Tim this might have been before your time there's a Bloomberg business week cover story pre-pandemic it was all about how private equity is everywhere And was it written by Jason Kelly Jason was involved in it Yeah well I've spent enough time with Jason Kelly and read his book about private equity And that's kind of how the book begins actually about private equity Yeah it's all that private And then he did a second book called sweat equity which was just about fitness and wellness Well that's what we're talking about right now Alex whittenburg is investing reporter for Bloomberg news He's with us in the Bloomberg interactive broker studio He and along with some other colleagues of ours have a great new story out in Bloomberg business week called private equity funds pushing deeper into pro sports some really big numbers here Private equity firms Alex spending $51 billion on sports transactions globally last year 22 billion of that in Europe alone That's according to data from pitch pitch book What are they trying to get out of sports Obviously money but why do they see the value there Well okay so in North America this kind of came at a good moment because the pandemic saw some damage to the valuations of sports So private equity saw an opportunity and a lot of that comes because of media rights They've just been exploding in value And a lot of the charts Especially if you have more and more streaming services Exactly It's not just the networks right It's amazons of the world bidding That's right And think about the sports viewer It's like one of the few people who you can keep live no matter what these people aren't recording In business Yeah of course And we need to find out Exactly Exception of course So that matters a lot because that increases the value of advertisement revenue and there's also sports betting That's emerging as a key source of revenue that these firms can tap into because if you have a live viewer people are generally more engaged and all of that comes together I was thinking of the power players summit that we were in out on the West Coast and Beverly Hills ahead of the Super Bowl Tim and I were there They asked us to go We reluctantly said yes We'll spend a few days in Beverly Hills We did it But my point was it was really nice But my point was that they all talked about gambling right And that being a revenue stream And this is the way especially a younger they were thinking a younger consumer the gamification like this is how they want to interact especially when it comes to sports And the opportunities there Yeah it's just another reason why it's an attractive asset I mean you get a large draw for these private equity firms I want to investor kind of like into a Bond holding It's a safe haven asset because even during COVID you know there's that initial hit but they recovered so quickly And then something like sports betting it just shows that there's more value to be mined in these businesses and a range of areas that we probably can't foresee We've all heard of NFTs and tokenization that kind of thing Totally The sports metaverse like that was something we talked about a lot right Yeah it was Beyond gazing at the pool in Beverly Hills Okay Well it's funny because Carolyn and I a few weeks ago we interviewed one of the people behind the new HBO HBO series winning time which is the story of the Lakers dynasty the showtime Lakers dynasty and I'm at the beginning of it now where Jerry buss buys the Lakers for what $68 million which in today's terms is still a tiny amount of money Because the sports franchises have become so big and garnered so much money What are the leagues What are the sports that private equities particularly focused on right now Well they're focused on I mean NBA is a large draw for them right now just because that is booming globally And I would say they're focused on the focus on providing liquidity and they're focused on cashing in on those returns for the reasons we just discussed I think the other aspect that's interesting about this is because of those rising valuations we're just talking about a lot of these limited partners that bought in maybe a decade or more ago They've seen those values rise so much that it's hard to get other individuals to buy them out So that's another reason private equity comes in They have the capital enough capital to be able to easily purchase those kinds of things Alex when they come in and especially when it comes to some kind of ownership of a team right It's usually what passive I'm assuming because I just think about people might think private equity are going to look to cut costs So are we looking to work up the margins and stuff So what's typically the relationship there Yeah so North American leagues it's entirely passive in the leagues have been pretty clear about the rules there because of those exact concerns It's a little bit different in Europe The trend there now it seems like firms are increasingly targeting leagues instead of individual teams because there's fewer risks But yeah the concern is that a private equity firm would come in and get a little stingy And if you need to buy or if you need to increase costs to buy a good player or just for staff there is concern that they wouldn't be willing to do that But for now they're passive Right because that's part of the discussion that we're having when it comes to Chelsea F.C. and Roman Abramovich and that for years you know he was actually liked by fans of Chelsea because he was willing to actually spend the money Kind of like you know they could he was basically gave him a blank check to do whatever they wanted and it was successful for fans Yeah and it's hard to know if a different owner would be as willing to spend as much money I know that's been a concern In North America there's different rules about salary caps And right now leagues are in the NBA for one institutions are only allowed to own a collective 30% and a few people see that kind of changing anytime soon But as you write in your story the Denver Broncos write the selling of this team is going to be a big test because even if they can only own 30% that means they still have to come up with a bunch of other equity or capital right To fill out that purchase price That's right And that's what you could come in right Yeah and the NFL is one of the few holdouts in North American leagues That doesn't allow private equity So it's a real test I mean we don't have time but I'm just thinking about the exit for these private equity firms Because they need to do that Or do they in this or can they just buy creating new ever revenue streams kind of create some Yeah.

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