Quite the week of listening and learning on screen, and yes, in person (twice) this past week.
Thursday night in New York we had a chance to be up close (literally front table) to listen to a POV and best practices from several key dealmakers we don’t often here speak so candidly, including Redbird’s Gerry Cardinale, Maverick Carter and Endeavor’s Ari Emmanuel as part of the Financial Times’ first ever New York Sports Business Summit.
Some tidbits and takeaways from the few hours learning… a dozen takeaways
“The kind of investing Goldman Sachs wanted to do was not what I wanted. We came to look at sports to basically do two things…build businesses and solve problems, and that’s how we have created our partnerships.”
And
“The SPAC phenomenon is not the right place for sports now.”
-Gerry Cardinale
The head of Redbird Capital, who this week announced a massive investment with Spring Hill Entertainment, brought up a host of insightful points about the issues the VC world has with sports, not the least of which is the need for a relatively quick ROI. His POV is that firms who invest in sports and the businesses around the games should be in this for the long haul, not the in and out in a few years, and that is difficult for many large investment businesses to understand or embrace. The idea of letting a business mature using your capital, so long as the plan is in place and the right people are leading the vision, is what he sees as Redbird’s sweet spot with many of its partnerships and investments, and that runs against what he, and many others see, when big money is chased in the venture world.
“In soccer I saw an ecosystem that attracted monarchs and oligarchs. I didn’t think it was for us but when we looked more at global soccer, we realized that cashflow wasn’t the most important part of success. You needed to have the right pieces more than just dollars, that’s what we learned from Billy Beane and its how we can compete with the clubs we work with.”
Cardinale’s point here came from his relationship with longtime Oakland A’s GM and “Moneyball” theorist Billy Beane. When looking first at the largest global soccer businesses, he saw billion-dollar individuals and groups throwing large sums of cash just to get the best players and coaches, with little thought, at least from the outside, of how culture, economies of scale, and brand building would take place. The clubs Redbird have invested in run counter to that billion dollar win on the pitch strategy…the goal is to build smartly and collectively over time, so that the business, the fans and ultimately the team is successful for the long term.
“There is the best home for creators & best for content. What our partnership w Redbird does is give us the ability to take our existing IP, like “The Shop” and expand it beyond just a show into products, franchises.”
-Maverick Carter
Cardinale was joined by Maverick Carter to discuss how their partnership has evolved, and the two presented a best practice for redbird’s vision. The example was the success that “The Shop” has had on HBO, and when married to the right platform how content and grow, but only so far without a partner with capital who can help accelerate a vision. In this case, what if Spring Hill and LeBron James had the ability to take “The Shop” and develop a product line, or popup stores, where conversations could happen regularly. It is not an easy quick fix, it takes commitment and time to execute, but that is what Redbird sees in its investments…a long tail in blue ocean that can be seized with the right people and commitment.
“The biggest growth businesses in the past 40 years…healthcare…colleges…and sports.”
“In the past seven years over 63 billion dollars in investment capital has flowed into sports. Only 11 % has gone into franchise acquisition. That tells you that there is a huge opportunity in investing in businesses that aren’t just teams, they are the businesses around the games.”
Ian Charles, Arctos Partners
The second session, moderated by Sara Germano, had a host of insights but two from Ian Charles at Arctos Partners really stood out and reflected how, when looking for the right places to invest, the numbers don’t always revolve around the games. The first tidbit also reflects where money, good and bad, has gone, and really shed a light on the potential for investment and smart opportunities going forward, way away from actually owning a team.
“I’m agnostic to distribution. I’m not agnostic to higher prices, I like those. The tail on content is infinite.”
“The UFC is a great example of exploiting an owned asset which was perceived as being overpaid for. We have added six new areas of growth, from NFT’s to sports gambling to country specific programming to Fightpass, all of which give us a multiple of our original investment.
“The key to owning assets is making them work for you. When you look at our company, we are in every aspect of the media landscape and have the best chance at giving properties a chance at success.”
‘The revenue model in sports is just going to go up. Now when gambling comes into the mix, and probably gambling with video games, the economics are going to get pretty steep pretty quickly “The sports rights ecosystem unbundling will not hurt live rights.”
-Ari Emanuel, CEO, Endeavor
The last group of thoughts came from Matt Garrahan’s conversation with Endeavor CEO Ari Emanuel, which again gave those in the room some great insight into the value of content, the convergence of opportunities which may not seem so interconnected, and why the investment in a property…which sometimes may be seen as an overspend (the UFC being the case) can actually bear tremendous fruit if you see the long tail, have some patience, pivot when needed and most importantly have the confidence in the management team and the forbearance to listen and look wide when the world is yelling around you.
None of which is easy, but it shows a path that can make sense from a business perspective and gave a great peak into the mindset of how the massive assets of Endeavor can mold, shape and lead an industry.
Takeaways:
We are just starting what should be a golden age of sport, not just at the highest levels of competition, but in all the ancillary opportunities that are coming to bear.
Once again leadership at the highest level is key, and leadership married to execution of a vision for the long term is not for the skittish. Having confidence in execution, knowing the narrative you are attached to and being able to evaluate opportunity is so critical, be it at the startup side or at a public company.
Investment is more important now than ever. When you look at topics raised this week that weren’t much on the radar five years ago…digital ticketing, health and safety, athlete wellness, Fintech, STEM, sports gambling, streaming, NFT, digital collectibles, heck even massive investment in women’s sports, you see such broad opportunity. Risk yes, but opportunity abounds.
Bright future ahead, just keep looking wide and listening deep.
