How Wall Street Fell in Love With Sports

**Bill Cohan** (0:01)
It's so like oceanfront property, Peter. They're not making any more of it, and if you can afford to buy it, you want it.

**Peter Hamby** (0:13)
Welcome to The Powers That Be Daily, Puck's podcast focused on the intersection of Wall Street, Washington, Silicon Valley, and Hollywood, and the players who run it all. I'm Peter Hamby. It's Friday, August 14th. Today, I'm joined by Bill Cohan to break down how private equity and billionaire investors are increasingly making their way into the world of sports.
Apollo just finalized a $2.6 billion financing deal with the New York Yankees. Josh Kushner of Thrive Capital, along with Bob Iger, are buying the Los Angeles Lakers. And FIFA this summer came this close to selling a piece of the World Cup to private investors. Bill and I dig in to what PE guys are trying to get out of pro sports, why major teams are a blue chip investment, and whether these investors would ever start to meddle with the product on the field. We'll discuss all that and much more on today's episode, The Powers That Be.
Happy Friday, everybody, and welcome to The Powers That Be. I'm joined today by my colleague Bill Cohan, author of Dry Powder, who's going to talk with me about a fascinating subject, perfect for puck, the rise of private equity investments in sports teams. Obviously, sports teams have a pretty good return. We saw just this week that the Lakers, the Los Angeles Lakers, were acquired by Josh Kushner of Thrive Capital, and his business partner in this case, Bob Iger, buying the team for, what, $12 billion.
Mark Walter, who also owns Los Angeles Dodgers, bought the Lakers from the Buss family just a year ago, and is going to make a pretty penny off this deal, making about $2 billion in just over a year. Not bad, not bad for him. But we also learned this week that Apollo is taking a huge stake in the New York Yankees. This all comes on the heels of news that the aforementioned Kushner tried to do a private equity deal with the World Cup, but that blew up in his face. All of the governing bodies of soccer around the world under FIFA raise an objection there. Bill, JP Morgan also has a little handy-dandy chart they released. This was last year, not this year. 25 percent of Major League Baseball teams have some kind of private equity backing. Almost 30 percent of NBA teams, 20 percent of NHL teams, 10 percent of NFL teams. So why is there so much interest from the private equity world in sports teams, in leagues? Is it just that this is something that everyone cares about and they're always going to make it more profitable and more expensive over time?

**Bill Cohan** (3:04)
So like oceanfront property, Peter, they're not making any more of it. And if you can afford to buy it, you want it because it's not going to lose value. These things have proven historically that they do not lose value. Now historically, the rules have been that you couldn't have private equity ownership in there. You had to sort of have like individual owners. You couldn't have like a private equity firm own a stake. I was going to say that you couldn't really have corporate ownership, but that's not really true.
I think that has evolved in kind of weird ways.
In my GE book, I wrote about how GE Capital at one point owned the Houston Astros because they had made a loan to the Houston Astros and it was defaulted upon. That's by the way one of the few times when a team lost value. Sometimes even a dollar of debt is too much, and sometimes if you put too much leverage on these things, it doesn't necessarily work out. And the guy who was the CEO of GE Capital, Gary Wendt, was like the guy who was the principal owner of the team there for the Houston Astros for a little while. But I mean, all that has begun to change. And I think now, at least in baseball, private equity firms are allowed to own 15%. And I think that's what Apollo now owns of the Yankees, as well as making a very big loan to the Yankees to refinance their debt. So, look, the bottom line is, and our colleague, John Oran, can definitely speak to this better than I can. But these franchises, they rarely make any more of them. They're very valuable. They've proven they continue to go up in value, most likely because of the TV contracts, as we know. You know, 98 out of the top 100 shows on TV every year, in terms of audience, watching them are, I believe, NFL football games or something like that, sports, live sports. And so, they're incredibly valuable. They have incredibly valuable, lucrative TV contracts, despite, you know, the machinations and the positioning that goes on in terms of whether or not to negotiate or, as we found out with our buddies, as to get rid of those contracts, because they're getting too expensive. But basically, the franchise values continue to increase. And if you need any more examples of that, you saw the Seattle Seahawks just got bought for, what, $9 billion or something or even more.