Investing in Sports: A New Media Model
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When you look behind the soaring sports team valuations of the last twenty years, there's one major driver of growth, media rights deals.

Sports is the best thing in the world in terms of content.

The Price tag on the latest N, B, A deal underscores that point seventy six billion dollars for the league over eleven year period. Who's in, who's out? Notable as well. A tech platform is in while a legacy broads is out.

So you have more groups that think they have more distribution capabilities, and they all feel they have the ability to make money on IT.

The sports media landscape is in the midst of a significant disruption. Even as many people traded in their cable boxes for streaming subscriptions, the demand for live sports content remains high. It's a covered viewership that players across the sports ecosystem are eager to reach brands.

Advertisers are desperate to find these aggregated audiences, and they're increasingly paying top dollar .

to do that. This is investing in sports, a four part series from the golden sax exchanges podcast on the changing dynamics at the intersection of sports and finance. I'm a copal and ross.

I need the private wealth management business for the new york region at golbin sax, and I also head our sports and entertainment offering for golden sex private wealth management. In this episode, i'm speaking again with dave dassie, the global coherence of sports investment banking at golden sex. We are also joined by gene sites.

Gene is our coaches of mergers and acquisitions as well as the coach ir of global technology, media and telecom, also referred to as T M T. I think of gene as a senior american diplomat of sports. He has LED the bid and organizing committee for the twenty twenty eight olympic games, and he serves as president and share of the U.

S. Olympic and pair olympic committee, and recently became a member of the international olympic committee, which is the governing body of the games. In my conversation with David gene, we will discuss what makes sports content so valuable. The competition between the legacy broadcasters and the tech platforms, new direct to consumer models and how all of this disruption could influence the game itself.

I think you're going to find shorter games, more action, potentially higher scores and an opportunity for the most extravagant, most magnificent athletic performances to be more evident on a more frequent basis in these games.

Jane and dave, so excited for today's conversation. Thank you for joining me. Excited to be here. Thank you, jean. You have a really interesting vantage point. Having worked with media clients on some of the biggest deals in the industry, when did you become clear that media rights would be such a key component of a sports teams valuation?

Well, teams have been selling for a long time, often do very wealthy people. And you'd say, for those very wealthy people had so much money, the'd pay almost inconceivable amounts for the teams. But at some level, people had to base their valuations on something on cash flow or the opportunity for values to increase.

And the transaction I remember the most, was the sale of the dodgers to gug hide baseball partners that took place in two thousand and twelve. The dodgers had been owned at that point by a husband and wife in a court family. And they had a very nasty, very public divorce, which sort of forced the sale of the team accorded, bought the team from news corporation family, the murdoch family here, a media company owned the business.

And they think, well, we don't really need to own the business. All we need to own is the media rights to the business. That was their theory, at least.

And by two thousand and twelve, these media rights had an effect that in body through regional sports networks, which were partnerships between some media company, some kind of a distributor, programmer or distributor, and the teams. And in los Angeles st. Time, orna cable at the time was the biggest single provider of distributed cable services in this market.

And they decided they wanted to launch a very, very big R. S. N. And they went after both the lakers and the digges.

And the value of those two contracts was extraordinary high over a very, very long term. But the sale of the dodgers coincided with the negotiation of these media contracts and the buyers, the google sports partners. They are rich guys now.

They were rich then, but not as rich as they are today, for sure. And they weren't in a position to simply pay silly money for the dodgers. But they did what seemed to be a silly Price, two billion dollars for a baseball team, which was probably twice as much as any baseball team had ever sold for before. So there just wasn't a robust market for this until I became evident that you could capitalize the long term contractual value of the contract with the media players. And that's what capitalized a two billion dollar transaction by a buyer who was essentially a financial buyer.

Well, it's incredible. IT really is a hallmark and so much has change since then. You mention the regional sports networks or the r sense, and we'll get back to those in a moment.

But staying on this point about the value of these media rights deals certainly varies from league by league. But generally speaking, we've seen a huge surge in these deals. I I mean, the recent N B, A agreement is a great example of that. Dave, what does the composition of these deal signalize y about the changing sports media landscape? In your opinion?

I think similar others, the economy, the technology innovation and disruption which is taking place is having a huge, huge impact. IT wasn't so long ago that the ability to multi cast a live sports stream from a technology perspective was an incredibly, incredibly complicated thing to do. In recently, major baseball, vince ed media were the ones who developed that first.

And we actually worked for majority baseball when they sold that to disney, which became part of the backbones, the disney plus platform and the E. S. P N plus platform. And so the ability to sell that from a technology perspective until very recently was difficult.

That's one element that combined with the evolution of netflix and all these other content providers, where consumers for the very first time felt like that the opportunity consume what they wanted when they wanted to consume IT in an a form that they wanted to consume IT. Those two combination of things made IT possible to have these digital platforms that can now stream out to tens of millions of people on a simmun tent space. This is put tremendous pressure on the traditional media businesses, the traditional distributors where was not so long go about a decade or so go we one hundred million cable subscribers.

But with the advances of different forms of content and the ability to get IT in different forms, that number or a cord cutting has dropped pretty dramatically, is now somewhere around sixty million us. Households are. So which has put a lot of economic pressure on the traditional media companies.

Again, it's probably over simplified. This traditional broadcast, first is digital streaming, because you look at a disney and E S P N and what they are doing with E S P N plus you look at what peacock nbc is doing, peacock, they are absolutely coming. Its streaming.

And in my mind, it's all about increase in the addressable market and giving the consumer of the fame the opportunity to engage in the content however they would like to. Clearly, you're seen that you reference the MBA and what they're doing. Certainly, the nfl has done this as well with several traditional media partners as well as having amazon, which has the thursday night package in the youtube, which now has sunday ticket.

And they just recently announced they're gonna have games. So on Christmas day, where that's going to be broadcast, three netflix. And so you have more groups that think they have more distribution capability set, both broadcasting as walls, the tex treament businesses.

And they all feel they have the ability to make money on IT brands. Advertisers are desperate to find these aggregated audiences, and they're increasingly paying top dollar to do that, which makes the economic system work for the distributors, whether be traditional or the new streaming platforms. And IT certains makes IT for the leagues.

the teams and the players. I mean, that strikes me from my side of the table. We work with individuals all throughout the sports go system, whether their athletes or team owners.

And one of the things that we hear pretty consistently from both groups is the value of the local presence, the connectivity to the community and really the local brand that exists for the organza. We talked about the regional sports networks earlier. When you think about the direction of media rights and the examples you've used, i'm curious about the implications of this disruption for the regional sports networks. How do you think the local relationship looks when you have fewer cable customers.

consumers what what they want, when they want IT. And so again, back to the court cutting, you're now a position where consumers, if they want sports, they can pay for sports and they can find sports, but the consumers that may not necessary like sports don't want to be paying for IT.

And so implicit in the cable bundle was consumers many consumers who may not have an interest in sports or other verticals within the cable bundle were in effect paint for that. And so what this advent in the disruption we're seen, the whole business model has an effect been turned upside down. There's less money coming in.

Therefore, there are sense of of less money that they can pay to the teams. So specific major baseball, close to the NBA N H L. The majority of our cent contracts when they are expiring are seeing step downs in terms of the amount of money which is paid to the individual teams.

One specific cases, diamond sports, which is an aggregated about fifty majority baseball teams, twelve so N B A teams and several hockey teams. That company has been in bankrupcy for the last Better part of eighteen or twenty four months. And so what you're seen is but the NBA, the nh else was majority baseball talking about a national local package.

So they're potentially going to get the majority of those rights back in some form. And they would like to go out package those rights not on an individual market by market places, but package them as the totality across the N B A, across the N H L, across major baseball and more than likely do a deal with one of the digital or streaming based companies or seen more innovation from that perspective as well. But I think the short order code, your question is the impact and financial impacts going to be a negative in the short run? I think IT is a temporary step down and we will see earned back, but it's still early from a drug to consumer perspective.

Yeah, we don't know where it's gonna go, but they would like to have something that looks like sunday ticket for the other sports so that you can get everything on one channel and see the local games, but you'd not be able to see the games that were on the other Carriers. So the streaming platforms, or they are the broadcasters who'd pay premium values for a specific package of games.

I want to talk a bit more about the streaming platforms. There are the streaming services built by the tech platforms, and then there are the streamers that have come out of the legacy broadcasters. What advantages do some of the tech platforms have in this space?

Well, the tech platforms have all sorts of advantages in that. They have a much larger user base to start with, and they interact with their users much more directly so they know exactly who's watching, what, when and how much interest they have in what they are watching. And i'd say the tech platforms include netflix, who is built as a tech platform, not really as immediate company even though we think of them as immediate company.

So netflix, youtube, amazon, apple, to the degree apple is, is going to move in this direction. And anybody also moves in this direction because you could imagine meta or somebody else tiktok, putting themselves in a position where they're gona use the same set of interactions and relationships they have with users to figure out how to use sports. Now the other thing they have is the advantage of not having to share information about ratings.

Ratings aren't really important to them and they don't subscribed hilson. They're not trying to terrorize the success of what they do by a certain ratings performance. They do have to satisfy the content provided.

The league, the league wants to have wide distribution. So the tension from the league perspectives as they want, whatever somebody is, gonna pay for the content to be as high as possible. But they also want as many fans is possible to be able to see the content when it's offered.

So that's why broadcast has been helpful to them because they know there's a very, very big audience for broadcast. And we're seeing this play out right now because many of the media companies, as dave mentioned, nbc has p ock. Peos got thirty five millions subscribers that might move to forty million subscribers.

Just this last football season, they experimented with A P cock. Only nbc broadcast to a review of an nfl game. They actually had, I think I was twenty three million subscribers sign in to see the game, which was at the time the biggest streaming live audience for anything.

So I think what we're seeing is if you have broadcast and cable as a programmer, you're going to hold to what as long as you can. And sports is the best thing in the world in terms of content that reaches people and will be valuable both as a source of value through subscription or through a fillide fees as well as advertising. So they'll hold onto IT, but they're all migrating toward platforms which have this direct to consumer characterization so they understand what the consumer wants and they have other ways of achieving value from the relationship.

I want to try to explain the conversation a little bit. So much of what we've talked about so far has been focused on U. S.

Markets primarily. I think the story can be different outside of the U. S.

So dave, how does the media rights picture look in europe as a point of comparison? And do you think these trends are unique to europe or their lessons for the U. S. market?

I think IT depends on the sport. The call in one view, which I have, is the bigger sports, the more unique content are going to continuity at stronger and some of the more secondary or sports that don't really have that ability to aggregate audience maybe in a weaker position going forward. I'd also say part of the issue in europe, you need to think through its governance.

And in the us, you have very strict governance in terms at least the top four leagues, the N F film, the MBA maga baseball in the N H L. And I said, put analysts the category in terms of how decisions get made, how national revenue gets split in europe. IT depends a little bit, but let league in, in terms of how the national revenue get split, do they all go to market? How much leakage is there out to the local market, which allows stronger teams to generate a lot more revenue than some of the weaker teams?

You have things certainly to pertains to primarily, I think, their total rights, now about five billion dollars on an annual basis, which is a very significant number. And we've continued to do quite well in terms of those rights in the monitise ation of those rights. And recently, they've done really, really well internationally, particularly in the us in terms of their distribution agreement with comcast.

But no doubt, there's been some of the more secondary soccer markets around the globe that may not have done as well as they would have like to. But I think part of that comes back to a little bit business model, little bit governance and structure, a little bit the ability tagger get the audience. And I think we're just on the cutting edge of the direct consumer discussion and the ability to monetize what that is. And so I think is these business models evolve. The content that's really unique, core and differentiated is going to continue to have a lot of weight.

Let's talk about a few more recent trends that we've seen specifically related to live sports content, legal sports bedding. It's been the main stay in european sports for quite some time, but it's much more recent in the U. S.

So today, thirty eight states in the district of columbia allow sports bedding. Just last night, I was talking to a friend who was describing how he was betting on the eagles in terms of the number of scores and the yards, and people bet on so many aspects of various games. And so i'm curious, dave, how is online betting adding to the demand for life content?

Well, I think he touched on IT the prompts. So the ability to bet on seamy an economy, endless supply of new ways with games, and I think it's also made every game relevant. So if you're watching you, you a football game, two m in the morning on the east coast that still going on on the west coast, there is a reason to engage or an ability to engage if that's what you have a desire to do.

And so this, unless supplier increasingly on the supply of ability, tibet is drawn more audience, more interest and is bringing more people into the ecosystem. I think it's also having impact in terms of its bifricated, the true fans who love the games and love the teams from a more commercial element of people are just trying to find ways or they're following games where they may not really have any interest in the outcome. But they think there may be an opportunity ity to make money through bedding.

And so I think consistent with what we've seen as it's become digital, any of the ability to do IT what we're seen in europe, it's going to to continue to grow and explode. And as the technology gets Better and Better in the late and t in terms of the broadcast get shorter and shorter, whether your broadcasting are coming through satellite or digital delivery system, you're likely to just see more and more we have the ability to to play to play or pitch to pitch. You can kind of fall this to a conclusion where you have a lot of opportunities in terms of every single action and every single game becomes some sort of event that potentially you can bet on.

Yeah, another trend that we're saying is around viewership and engagement fair. We're seeing changes at the game level as specifically, as we all know, the M L B just brought in the pitch clock the nfl extend at the regular season. MBA created the in season tournament and notably, they saw their ratings go up sixteen percent and early twenty twenty four compared to the same period in twenty twenty three. So jane, how do you think the leagues are evolving the actual product or the content that the game is to meet this moment?

But I think the leaves have been behaving intelligently. They're recognizing theyve got ta make the product interesting. They have to make a vital to the user, to the viewer. So the more they can put more elements of dynamics, surprise or drama in a shorter period, that helps. They also want people to see the kinds of things that get them excited.

So if they can possibly figure out how a baseball game can have more home runs, that something people will come to the ball park to watch her, they watched on a television or on the streaming platform. So everything that helps the game have more interesting moments and be something in which is part of the conversation. It's got that excitement.

That's very much in the interest of all of the leagues, the team owners. And I think there is a very strong trend at this point to move in that direction. And it's across all sports. I think you're going to find shorter games, more action, potentially higher scores, the kinds of things that people want to see and they want to see again and again, and an opportunity for the most extravagant, most magnificent athletic performances to be more evident on a more frequent basis in these games.

We've talked about what all this disruption and how games are distributed means for media business models, for the game itself and for the rise of sports bedding. I'd like to talk now about the athletes. How do you see athletes capitalizing on the shift to direct to consumer models, particularly as they're engaging more creatively with fans? dave? Yeah.

I think it's interesting to call we talk a bit about these viral moments. And you look at the olympics and what happened in paris in the ability for athletes to take out their phone, take viral moments after winning a medal, after losing. Those are incredibly, incredibly powerful. We haven't had those in the past on lip yaz. And so this concept of individuals as brands is very, very powerful.

And going back to where advertisers, consumer brands want to be as they want to be around incredibly successful people, brands in the ability to, on a more microbes, get to specific audiences where going to continue to see a lot of innovation from that perspective, certainly is individuals. When their brand profile becomes higher, they get more followers on social media, they engage more, they have the ability to cross pollinate, you know, an essence across the music or entertainment industry. We saw this at the U.

S. open. I think this year, just the brands around the U. S. Open, the star power at the us.

Open, promoting of that both in stadium, on the broadcast as well through social media, just continues to drive this back to the experiential. People want to be there. They want to engage with IT.

It's kind of a must thing to do now, a technology of the ability to engage in that way physically if you are forced enough to be there. But you also have the ability to engage and be part of that community or similar ecosystem digitally. And so again, work thereby stages of this. But I think it's incredibly, incredibly powerful .

to anything you'd like to add.

Well, the athletes have become tremendous celebrities. And if they can channel that celebrity, that uh, familiarity with the consumer into something in which they're influence, they are impact on society, the sort of cultural significance becomes part of their brand, then I think there's a big opportunity. An example is steff curry, who has been in the sort of public limelight for a long time.

In the most positive way, he created a following that respects the role that he plays in his community with a spouse. And it's very interesting to see how many people are looking for staff to be a spokesperson or be somebody who leads them on certain tracks to be, you know Better and more effective in all the things they do from a social standpoint. I think that the evidence of how well that's worked for some of the principal and most successful athletes and professional sports IT is something a lot of people i've seen and looking for a way to take advantage of IT.

Dave raised a great example of this in his reference to the olympics. And I have to end our conversation today, gene, and ask you for a little bit of perspective as we're all so excited about the olympics. N.

L. A. In twenty and twenty eight, you played an instrumental role in bringing the twenty twenty eight olympics to L A. Carrs has set a very high bar. What do you expect to see from ali specifically in the context of the changing sports media landscape?

First five were incredibly excited to host the twenty eight games in law sanchez, and we're very happy that the paris games were as successful as they were. The paris games allowed the world to rediscover the love that people have for the experience of the olympics and per olympics, the relationship with the athletes, the national identity with people from your own countries, and then the true unifying character of sports.

What I will do on top of that, and somewhat differently, L. A. Has the best sports infrastructure in the world, the best stadia, the best arenas. We have been doing professional sports in los Angeles in a way that nobody else really ever has at this level.

And honestly, we have the best weather for sports anywhere in the world, which I think makes IT easy to imagine an effect, a rain free seventeen days. Of olympic experience when we have IT. And then la is hollywood. It's the place where creativity really starts and it's the place where people think about how to portray something in a larger than the lifeway. So I think we're looking forward to what the impact L A is going to be.

But in twenty twenty eight, in the evolution of all these things that we've been talking about, how technology has made the distribution of media images of sports so much broader, so much more impacted of people the moment in twenty twenty eight, for L. A. To capitalize on that is here. I think it'll be great for the future of the olympic and paralympic movement, and I will be great for the experience of these games. And as a long time native Angeleno, i'm very excited for our city to play host to the world in this experience that I also expect will be unforgettable.

Thank you. Both is an incredibly valuable perspective that you've shared. Thank you.

Thanks to call. Thanks to call.

The value of live sports content has turn n teams and athletes into global media brads. This will be a fascinating dynamic to watch over the next five to ten years, especially as the road media industry continues its shift to direct to consumer models of delivering content. Coming up on our next episode, when you think about being in somebody else's building, you're paying run to them.

They are keeping the sweet revenue. They have competing sponsors to you. All of those things go away when you have a place at all your own. What IT means to build and finance the fan experience of the future.

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