Latest / Rosters to Rings Podcast / Billion-Dollar Teams and Minority Stakes with Ryan McDonough

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Billion-Dollar Teams and Minority Stakes with Ryan McDonough · Rosters to Rings Podcast

• 0:03
  Speaker 1: Welcome back to Rosters ter Rings. Alongside Chet West, I
• 0:06
  Speaker 1: am fad Levine. Today we are joined by an extremely
• 0:10
  Speaker 1: special guest who needs no introduction to our incredible listeners,
• 0:13
  Speaker 1: but in true Roster s erring fashion, he's going to
• 0:16
  Speaker 1: get one anyway. Ryan McDonough is an executive whose journey
• 0:20
  Speaker 1: spans the NBA front office to the future of sports business.
• 0:24
  Speaker 1: Ryan spent a decade entering a championship ring with the
• 0:27
  Speaker 1: Boston Celtics and served as the general manager of the
• 0:29
  Speaker 1: Phoenix Suns. Ryan holds a special place in our show's
• 0:33
  Speaker 1: heart and history as the very first friend of Roster Rings.
• 0:37
  Speaker 1: Now he's charting new territory as the co founder of
• 0:40
  Speaker 1: Sports Ownership Group. Please welcome NBA insider, sports entrepreneur, and
• 0:45
  Speaker 1: dear friend Ryan McDonough to Rosters to Rings.
• 0:48
  Speaker 2: Thad.
• 0:49
  Speaker 3: Thanks for that glowing introduction, full transparencies. That's the only
• 0:52
  Speaker 3: reason I agreed to come back on the show was
• 0:54
  Speaker 3: for that introduction. So we're going to wrap it right here.
• 0:57
  Speaker 3: It's nice to meet you, Chet, and I think you
• 0:58
  Speaker 3: know we got fifty eight seconds in the can and
• 1:00
  Speaker 3: I'll move on.
• 1:01
  Speaker 2: That's shot.
• 1:02
  Speaker 3: I'm sure you're getting to know this that those glowing
• 1:04
  Speaker 3: introductions were certainly one of Dad's specialties. In fact, I
• 1:08
  Speaker 3: think if Greg Maddox goes into another Hall of Fame,
• 1:11
  Speaker 3: they're just going to read what Dad said about him
• 1:12
  Speaker 3: in his introduction as the as the script for that
• 1:15
  Speaker 3: Hall of Fame speech.
• 1:16
  Speaker 4: I got to do my first one last episode and
• 1:19
  Speaker 4: I was literally out of breath three corps the way through.
• 1:23
  Speaker 4: I had to gain consciousness. I almost passed out. He
• 1:28
  Speaker 4: does so many and so well up to now that
• 1:31
  Speaker 4: I felt like I just had to follow suit, and
• 1:33
  Speaker 4: I don't think I'm going to do that again. To
• 1:34
  Speaker 4: be honest, all my introductions are going to be shorter
• 1:37
  Speaker 4: from here on out.
• 1:38
  Speaker 1: I'm available for weddings and bar Mitzvah's if anyone needs me,
• 1:42
  Speaker 1: right Ryan, you sumerrely left the show in January because
• 1:47
  Speaker 1: you had a wonderful opportunity to pursue Can you fill
• 1:51
  Speaker 1: us in, fill the listeners in on what inspired you
• 1:54
  Speaker 1: to launch Sports Ownership Group and why was m ocarr
• 1:58
  Speaker 1: the right partner for you?
• 1:59
  Speaker 2: Yeah?
• 1:59
  Speaker 3: Happy that I really enjoyed doing the show with you
• 2:02
  Speaker 3: last year in the inaugural season and enjoyed broadcasting overall.
• 2:06
  Speaker 3: The different work I've done on NBA TV and Serious
• 2:09
  Speaker 3: XM was really fulfilling. But I realized there was a
• 2:13
  Speaker 3: significant opportunity in the sports team deal space. We know
• 2:18
  Speaker 3: what the franchises are selling for across sports, as evidence
• 2:22
  Speaker 3: last week by the Lakers record setting twelve and a
• 2:25
  Speaker 3: half billion dollar transaction less than a year after the
• 2:28
  Speaker 3: Lakers record setting ten billion dollar transaction. I won't go
• 2:31
  Speaker 3: through the whole history of it. I imagine we'll talk
• 2:33
  Speaker 3: about it later in the show, but we're I think
• 2:36
  Speaker 3: the future of sports ownership is growing. Is this is
• 2:40
  Speaker 3: not going to be a mom and pop operation anymore,
• 2:42
  Speaker 3: run by individuals or families. You're going to need a group,
• 2:46
  Speaker 3: a syndicate of some sports sorts to be creative in
• 2:49
  Speaker 3: terms of how they come up with the money, how
• 2:52
  Speaker 3: the deals are structured, and then really reach across different
• 2:57
  Speaker 3: asset classes across the world as far as where the
• 3:01
  Speaker 3: money comes from. So I saw a real opportunity there.
• 3:04
  Speaker 3: They are only thirty teams in the NBA, soon to
• 3:06
  Speaker 3: be thirty two, but there are twenty five minority ownership
• 3:10
  Speaker 3: slots per team, and those trade all the time. That
• 3:14
  Speaker 3: when you look at the different opportunities, so I thought
• 3:17
  Speaker 3: there was a real, you know option for mL and
• 3:20
  Speaker 3: I mL, I've know my whole life. He and my father,
• 3:23
  Speaker 3: I think maybe the two most pre eminent sports fundraisers
• 3:25
  Speaker 3: in New England. As I was a kid growing up
• 3:28
  Speaker 3: when mL, former player and coach with the Celtics, won
• 3:30
  Speaker 3: championships and nineteen eighty one and nineteen eighty four with
• 3:34
  Speaker 3: Larry Bird and that group, and then went on to
• 3:35
  Speaker 3: be the head coach and GM of the Celtics, the
• 3:37
  Speaker 3: only guy to do all three of those jobs. And
• 3:40
  Speaker 3: then you know, later transitioned into ownership deals. So I
• 3:43
  Speaker 3: worked in the NBA in some former fashion for about
• 3:46
  Speaker 3: twenty five years. mL has been involved in ownership deals
• 3:50
  Speaker 3: for about twenty five years. So we put our heads together,
• 3:53
  Speaker 3: you know. I advised a few groups who looked at
• 3:55
  Speaker 3: the Phoenix Suns when the Suns were sold a few
• 3:57
  Speaker 3: years back, and then participated in the Celtics sale, and
• 4:01
  Speaker 3: unfortunate I can't elaborate too much on some of these
• 4:03
  Speaker 3: because of agreements and things like that confidentiality, but yeah,
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  Speaker 3: there's a real need for it, that there's a real
• 4:08
  Speaker 3: opportunity for it, and as you know with your baseball background,
• 4:12
  Speaker 3: it's not just the NBA. It's not just MLB football,
• 4:17
  Speaker 3: soccer WNBA. The franchise values around the world are continuing
• 4:22
  Speaker 3: to rise, and I think the groups who are proactive
• 4:25
  Speaker 3: and ahead of the curve in terms of the creativity
• 4:27
  Speaker 3: and the fundraising will have a huge advantage and we'll
• 4:30
  Speaker 3: reap the benefits not only of being in different ownership groups,
• 4:33
  Speaker 3: but also the financial benefits because historically these have been
• 4:36
  Speaker 3: some of the best investments of our lifetimes.
• 4:39
  Speaker 1: And Ryan I a ton of respect for MLCAR and
• 4:42
  Speaker 1: what he's accomplished. As you mentioned, player coach, general manager,
• 4:46
  Speaker 1: I'm planning and going the other direction. I've been a
• 4:48
  Speaker 1: general manager. I'm going to ease into being a manager
• 4:50
  Speaker 1: and then I'm going to finish my career as a player.
• 4:52
  Speaker 1: That's what I'm planning to do. I think i'd be
• 4:54
  Speaker 1: the first ever to pull that off if I could
• 4:56
  Speaker 1: do it.
• 4:57
  Speaker 3: Yeah, I don't see any limiting factors there that I think.
• 5:00
  Speaker 3: You know, your dreams are intact. I can't see one
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  Speaker 3: reason why that would not work out.
• 5:05
  Speaker 1: I think by the time I'm a player of a
• 5:07
  Speaker 1: few spare body parts, I want to know.
• 5:09
  Speaker 4: When the tryout happens. I want to be there to
• 5:11
  Speaker 4: see that, that'll be incredible. So was there a particular
• 5:16
  Speaker 4: transaction or like a moment when you look at mL
• 5:19
  Speaker 4: and said, look what happened over here. There's a business
• 5:21
  Speaker 4: opportunity over here for us. There's something we can bring
• 5:23
  Speaker 4: to this that isn't being brought currently.
• 5:25
  Speaker 3: Yeah, great question, Chad. I think it was a couple
• 5:28
  Speaker 3: of different factors. The first was that in the NBA
• 5:32
  Speaker 3: there have only been three funds who have ever invested
• 5:35
  Speaker 3: in NBA teams, and they are all owned by giant banks, which,
• 5:39
  Speaker 3: to their credit, they've done extremely well financially. Obviously, these
• 5:44
  Speaker 3: are household banking names who have hundreds of billions to
• 5:48
  Speaker 3: trillions of dollars under management. They know where the money is,
• 5:52
  Speaker 3: they have a lot of already, they know how to
• 5:54
  Speaker 3: find it. Their adept at that. But to the extent
• 5:58
  Speaker 3: that sport teams and teams are unique assets as it's
• 6:02
  Speaker 3: sad and those as our Major League Baseball teams, you
• 6:05
  Speaker 3: can't evaluate them, you can't value them the way businesses
• 6:08
  Speaker 3: are traditionally evaluated and valued. So if you were to
• 6:11
  Speaker 3: look at NBA valuations today, if you were to Google
• 6:14
  Speaker 3: search it, the Forbes and CNBC and Sportico would have
• 6:18
  Speaker 3: their rankings. A lot of that, you know, we think
• 6:21
  Speaker 3: is kind of backwards looking guys in terms of revenue
• 6:23
  Speaker 3: and ebadah. To paraphrase Wayne Gretzky, they tell you kind
• 6:27
  Speaker 3: of where the puck has been, not as much as
• 6:29
  Speaker 3: where the puck is going. So we saw a real
• 6:32
  Speaker 3: opportunity as far as doing some things that frankly and
• 6:36
  Speaker 3: humbly require a little bit of experience, a little bit
• 6:38
  Speaker 3: of nuance, as far as okay, let's evaluate the talent
• 6:41
  Speaker 3: on the roster, specifically the young talent, because we have
• 6:44
  Speaker 3: a general idea of what the values are now, but
• 6:47
  Speaker 3: we're really trying to project is five to ten or
• 6:49
  Speaker 3: more years from now when we go to sell, which
• 6:51
  Speaker 3: franchises are going to do better than average, because we're
• 6:53
  Speaker 3: not looking to obviously do average, we're looking to outperform
• 6:55
  Speaker 3: and create some alpha. So, you know, we have a
• 6:58
  Speaker 3: proprietary valuation model that incorporates a number of factors, including
• 7:03
  Speaker 3: the talent, specifically the young talent on the roster, and
• 7:06
  Speaker 3: then things that I think for guys like that and
• 7:08
  Speaker 3: I with what we've done our whole careers, are right
• 7:10
  Speaker 3: in our wheelhouse, but for most people don't really know
• 7:14
  Speaker 3: how to value a team's draftic situation. You know, you know,
• 7:17
  Speaker 3: are they neutral, are they positive? Are they negative at
• 7:21
  Speaker 3: a deficit? And also the cash flow and ability to spend.
• 7:26
  Speaker 3: You know, in the NBA, the luxury tax and the
• 7:28
  Speaker 3: second apron is real and it's very punitive. So certain
• 7:31
  Speaker 3: teams that have spent at a high level for a
• 7:33
  Speaker 3: peiod time are going to have to pull back there.
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  Speaker 3: It's going to have to be a financial reset to
• 7:37
  Speaker 3: some extent. Others have been more conservative and can really
• 7:40
  Speaker 3: go for it. They can push more chips into the
• 7:41
  Speaker 3: table and go for it. So we evaluate those factors
• 7:45
  Speaker 3: in addition to things that are more easy and obvious
• 7:48
  Speaker 3: like revenue, IBADA, market size, and then also some factors
• 7:52
  Speaker 3: that where our relationships are helpful in terms of what
• 7:55
  Speaker 3: is the ownership quality been like historically, you know, have
• 7:58
  Speaker 3: they been good partners the people who've invested with them,
• 8:01
  Speaker 3: do they treat their employees well? All those kind of factors,
• 8:05
  Speaker 3: And so, yeah, we're valuing each franchise individually. And you know,
• 8:09
  Speaker 3: the biggest challenge for us yet, to be honest, will
• 8:11
  Speaker 3: be the fundraising. If we can raise the fund and
• 8:13
  Speaker 3: we're having great conversations with a number of large financial institutions.
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  Speaker 3: Hopefully when we raise the fund, we're very confident that
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  Speaker 3: we'll be approved by a majority, if not all, thirty
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  Speaker 3: majority owners if we want to invest in their group,
• 8:25
  Speaker 3: and that we'll know the asset. We know the league
• 8:26
  Speaker 3: better than anybody else, so we think that's our biggest advantage.
• 8:29
  Speaker 3: That's a real differentiator for us, and frankly, where we
• 8:31
  Speaker 3: think the future of sports investing is headed. The banks
• 8:35
  Speaker 3: have had a great run and the monopoly on it
• 8:36
  Speaker 3: so far, but we're trying to change the game a
• 8:38
  Speaker 3: little bit, being the first ever sports fund led by insiders.
• 8:44
  Speaker 2: Go ahead, no place check good.
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  Speaker 4: Well, I guess I'm kind of wondering where all this
• 8:48
  Speaker 4: kind of came from too. I mean, we're starting to
• 8:50
  Speaker 4: hear more and more about these minority investors coming into
• 8:54
  Speaker 4: sports across I mean, every NFL is allowing it now,
• 8:57
  Speaker 4: you know, you guys are NBA focus got them in baseball.
• 9:01
  Speaker 4: We hear about it all the time. What changed across
• 9:04
  Speaker 4: the sports ownership marketplace? Really? And like the last it
• 9:08
  Speaker 4: seems like this has really come on in the last
• 9:09
  Speaker 4: five to ten years, even five years and more so,
• 9:13
  Speaker 4: what's changed? Really?
• 9:14
  Speaker 3: A number of things, Jed, I think the most important
• 9:17
  Speaker 3: one is the valuations have gotten so high, the teams
• 9:21
  Speaker 3: have gotten so expensive, and that's in large part because
• 9:25
  Speaker 3: the franchises have done so well. One of the things
• 9:28
  Speaker 3: we looked at in the NBA we did a fifteen
• 9:32
  Speaker 3: year look back from last year from twenty twenty five
• 9:35
  Speaker 3: going all the way back to twenty ten. So in
• 9:38
  Speaker 3: that fifteen year period, the returns are staggering. Frankly, and
• 9:41
  Speaker 3: what surprised us more. I won't use specific team names,
• 9:44
  Speaker 3: but the best performing team in that period, well, I'll
• 9:47
  Speaker 3: say the best one. Right, it's the worst one I
• 9:48
  Speaker 3: don't want to say, but the best one is the
• 9:50
  Speaker 3: Golden State Warriors, and the Lake of Family bought the
• 9:53
  Speaker 3: ghost Golden State Warriors for four hundred and fifty million,
• 9:57
  Speaker 3: then record in twenty ten. They beat out Larry L
• 10:00
  Speaker 3: of all people of Oracle fame, one of the wealthiest
• 10:02
  Speaker 3: men in the world, to win that bid. That was
• 10:04
  Speaker 3: a record four hundred and fifty million in twenty ten. Now,
• 10:08
  Speaker 3: Forbes and Sportico, in these groups that publicly value franchises,
• 10:11
  Speaker 3: have the Warriors worth over eleven billion dollars, second most
• 10:14
  Speaker 3: valuable franchise. No doll of sports, trailing only the Dallas Cowboys.
• 10:19
  Speaker 3: And so if you look at the annual return chat,
• 10:21
  Speaker 3: that's over twenty five percent a year average annual return,
• 10:25
  Speaker 3: which I think all of us wish our stock portfolios.
• 10:27
  Speaker 3: Did you know twenty five plus percent a year? You know,
• 10:30
  Speaker 3: you think of the returns, that's how four hundred and
• 10:32
  Speaker 3: fifty million goes into turns into over eleven billion, you know,
• 10:36
  Speaker 3: fifteen years later. What surprised me more than that, frankly,
• 10:39
  Speaker 3: as well as I thought I knew the league was
• 10:41
  Speaker 3: the worst performing team, I'm not going to mention it
• 10:43
  Speaker 3: because you know, we talked to all of them, and
• 10:45
  Speaker 3: you know, you can look at this as a potential
• 10:46
  Speaker 3: opportunity to to buy in at a lower cost. But
• 10:49
  Speaker 3: the thirtieth and last performing team from a financial perspective
• 10:53
  Speaker 3: in terms of that fifteen year valuation period still returned
• 10:56
  Speaker 3: over fifteen percent a year fifteen. So the band of
• 11:00
  Speaker 3: all thirty teams the NBA is between fifteen plus percent
• 11:03
  Speaker 3: and twenty five plus percent for fifteen years. We're talking
• 11:06
  Speaker 3: about almost two decades now. You know, we think with
• 11:09
  Speaker 3: the recent transactions with the Celtics last year selling for
• 11:13
  Speaker 3: a then record six point one billion. I mentioned the
• 11:15
  Speaker 3: Lakers a year ago going for ten billion and then
• 11:18
  Speaker 3: now twelve and a half billion. That's going to reset
• 11:21
  Speaker 3: the market up. Yeah's that's that's going to reset the
• 11:25
  Speaker 3: market up. And so yeah, these are unique assets. So
• 11:28
  Speaker 3: I think it's more than anything chat is. You know,
• 11:31
  Speaker 3: there aren't I think more than a handful of people
• 11:33
  Speaker 3: on the planet who can stroke a twelve and a
• 11:35
  Speaker 3: half billion dollar check or even a five and a
• 11:37
  Speaker 3: half billion dollar check. So you have to have a group,
• 11:39
  Speaker 3: You have to get creative. They're significant tax benefits to
• 11:43
  Speaker 3: being an investor as well. So I think for all
• 11:45
  Speaker 3: those reasons, this is the wave of the future. This
• 11:48
  Speaker 3: is the way deals are going to look like. It's
• 11:49
  Speaker 3: the majority owner gets the attention he or she does
• 11:53
  Speaker 3: and should get the most of the attention. But that's
• 11:55
  Speaker 3: kind of the tip of the spear. That's the leader
• 11:56
  Speaker 3: of the group. These groups are vast and they're significant,
• 12:00
  Speaker 3: and we want to play a part in as many
• 12:01
  Speaker 3: as we can.
• 12:02
  Speaker 4: Folks. We got to take a break real quick, but
• 12:05
  Speaker 4: we'll be back with Ryan McDonough and the Business of
• 12:08
  Speaker 4: Basketball and Sports Ownership Group when we return.
• 12:26
  Speaker 1: Ryan, you just mentioned that the Golden State Warriors are
• 12:29
  Speaker 1: valued at eleven billion. That obviously doesn't mean they would
• 12:32
  Speaker 1: sell for it. Just for our listeners understanding, what were
• 12:36
  Speaker 1: the Lakers valued at before they just sold for twelve
• 12:39
  Speaker 1: and a half billion, or when they sold for ten billion.
• 12:41
  Speaker 1: How closely are those numbers aligned with what they actually
• 12:44
  Speaker 1: sell for.
• 12:45
  Speaker 3: It's a great question that from my experience, the teams
• 12:47
  Speaker 3: almost always sell for more than their listed value because
• 12:52
  Speaker 3: these are scarce assets. In addition to the historical fifteen
• 12:55
  Speaker 3: to twenty five plus percent returns, the tax benefits which
• 12:59
  Speaker 3: I don't want your listeners to fall asleep when I
• 13:01
  Speaker 3: talk about one ninety seven amorgization, but basically you can
• 13:05
  Speaker 3: depreciate a write off of most like ninety plus percent
• 13:09
  Speaker 3: of your investment in these teams, and so there are
• 13:11
  Speaker 3: significant tax savings as well to potential investors. So those
• 13:16
  Speaker 3: couple factors financially combined with a scarcity right because you know,
• 13:20
  Speaker 3: let's be realistic, there are a lot of nice beaches
• 13:22
  Speaker 3: in the world. Beachfront reality sales for a lot, but
• 13:25
  Speaker 3: you can buy beach properties anywhere in the world. They're
• 13:28
  Speaker 3: only thirty NBA teams soon to be thirty two, and
• 13:31
  Speaker 3: so it's a scarce asset. It's a unique asset. You know,
• 13:35
  Speaker 3: all the talk and articles I read about the K
• 13:37
  Speaker 3: shaped economy, which is obviously unfortunate for the people at
• 13:40
  Speaker 3: the lower end of the spectrum, but at the high
• 13:43
  Speaker 3: end of the spectrum, the rich are getting wealthier than
• 13:45
  Speaker 3: they ever have been, and they're looking for somewhere to
• 13:47
  Speaker 3: deploy that money, you know, beyond equities, beyond real estate,
• 13:51
  Speaker 3: and so pro sports is the natural fit. And I
• 13:54
  Speaker 3: think what a lot of folks now realize too, is
• 13:56
  Speaker 3: the business benefits outside of just say NBA basketball or
• 14:01
  Speaker 3: Major League Baseball. The adjacent deals either with other sports
• 14:05
  Speaker 3: teams are outside of sports. The relationships, the networks you
• 14:10
  Speaker 3: form if you're in these groups are significant. So yeah,
• 14:12
  Speaker 3: that I think with only one exception or so I
• 14:15
  Speaker 3: can think of over the last five to ten years.
• 14:18
  Speaker 3: You look at Forbes, SPORTCO, CNBC. Those guys do a
• 14:21
  Speaker 3: nice job with the information they have, with their values
• 14:23
  Speaker 3: and even if they're dead on as far as what
• 14:25
  Speaker 3: the team should be objectively, from my experience, they almost
• 14:28
  Speaker 3: always go for more. People pay a premium for them
• 14:30
  Speaker 3: because they're scarce assets and the majority control these teams,
• 14:33
  Speaker 3: as you know, doesn't trade all that often, so when
• 14:36
  Speaker 3: a more key one like the Celtics, like the Lakers,
• 14:38
  Speaker 3: comes up, there's kind of a feeding frenzy and a
• 14:41
  Speaker 3: bidding more for it. And I think the best evidence
• 14:43
  Speaker 3: of that going forward in the not too distant future
• 14:46
  Speaker 3: will be the expansion franchises in Las Vegas and Seattle.
• 14:49
  Speaker 3: I think some people are going to be surprised, if
• 14:51
  Speaker 3: not shocked, by the numbers those groups put up in
• 14:53
  Speaker 3: the bid because there are a number of weld healed
• 14:55
  Speaker 3: groups in the mix there, and those ones, especially Vegas,
• 14:59
  Speaker 3: I think it's going to be a record uttering for
• 15:00
  Speaker 3: an expansion franchise.
• 15:02
  Speaker 1: Well, and Ryan, you and I have talked about it
• 15:04
  Speaker 1: in the past, but we always valued we had two
• 15:07
  Speaker 1: different valuations when we were pursuing players or trades. One
• 15:10
  Speaker 1: was what do we think the fair market value is?
• 15:12
  Speaker 1: Then you assume there's competition, and so then there's a
• 15:15
  Speaker 1: second valuation, which is what are you prepared to do
• 15:18
  Speaker 1: to win the opportunity? And I think that's what you're
• 15:21
  Speaker 1: talking about. So in a vacuum, yes, the Golden State
• 15:24
  Speaker 1: Warriors may be valued at eleven billion dollars, but once
• 15:27
  Speaker 1: you have multiple bidders, then all of a sudden that
• 15:29
  Speaker 1: those prices start going up, and I think we will
• 15:32
  Speaker 1: see that with the expansion franchises, and we'll dive into
• 15:34
  Speaker 1: that in a little bit. I want to circle back
• 15:36
  Speaker 1: to one thing you said earlier about your unique skills
• 15:39
  Speaker 1: and why maybe investing with you rather than a major
• 15:42
  Speaker 1: bank on its own would make sense, and that is
• 15:44
  Speaker 1: you talked a little bit about how you and mL
• 15:47
  Speaker 1: can uniquely value front offices as well. You grew up
• 15:51
  Speaker 1: in the Celtics organization where you had exceptional mentors, a
• 15:54
  Speaker 1: number of people who probably will go on or who
• 15:57
  Speaker 1: are already in the Hall of fame. You had a
• 15:59
  Speaker 1: chance to run a franchise in Phoenix as a very
• 16:02
  Speaker 1: young general manager. How do you and mL actually apply
• 16:06
  Speaker 1: your experiences to value front offices and how much should
• 16:09
  Speaker 1: that value factor into your overall pursuits of attractive relationships
• 16:15
  Speaker 1: with ownership groups in franchises.
• 16:18
  Speaker 3: I think the relationships are our biggest advantage that I
• 16:22
  Speaker 3: think in a lot of ways we can view viewed
• 16:24
  Speaker 3: as a quote unquote softener for private equity money fund
• 16:28
  Speaker 3: style money. To the extent there is still a faction
• 16:31
  Speaker 3: of owners, especially the folks who owned teams for a
• 16:33
  Speaker 3: while who may not want fund money per se. We're
• 16:36
  Speaker 3: kind of a hybrid, right. Fund structure behind us is
• 16:39
  Speaker 3: what we built. But they know us right the seventy
• 16:41
  Speaker 3: five years of experience, we've done deals with them. We
• 16:44
  Speaker 3: may have worked for them or with them in some
• 16:46
  Speaker 3: form or fashion, and I guarantee you we know their
• 16:48
  Speaker 3: top executives, their coaches, men and women who work for
• 16:51
  Speaker 3: them on the basketball and business sides. So I think
• 16:54
  Speaker 3: that's our biggest advantage. We do have to be careful,
• 16:57
  Speaker 3: and the NBA is put us through the ringer on
• 16:59
  Speaker 3: this a little bit. From the fund structure, we can't
• 17:01
  Speaker 3: have any active role in the teams. In fact, that's
• 17:04
  Speaker 3: one of the things that the NBA. We had a
• 17:06
  Speaker 3: number of conversations with them about this, and you know me, Thad,
• 17:09
  Speaker 3: I'm an open books. I'll just kind of share how
• 17:11
  Speaker 3: those conversations went. The NBA is you can probably imagine
• 17:14
  Speaker 3: given the fact that mL and I have both been
• 17:16
  Speaker 3: general managers, We've both been fortunate enough to win championships.
• 17:19
  Speaker 3: He obviously played in the league and coached as well.
• 17:22
  Speaker 3: You know my broadcast experience. They wanted to make sure
• 17:25
  Speaker 3: that this was not some kind of ploy for us
• 17:27
  Speaker 3: to try to influence a bunch of teams, you know,
• 17:30
  Speaker 3: from the shadows and and we said, that's actually the
• 17:32
  Speaker 3: opposite of that. We really enjoyed doing that. Like you thad,
• 17:35
  Speaker 3: we were fortunate enough to begms. Only so many people
• 17:38
  Speaker 3: who get to do that in any sport. But this
• 17:39
  Speaker 3: is kind of the next iteration and step for us,
• 17:42
  Speaker 3: where we know how needed is to be an owner
• 17:44
  Speaker 3: and not only how fun it is to participate as
• 17:47
  Speaker 3: an owner with an active component in it as far
• 17:49
  Speaker 3: as attending events and games and things like that, but
• 17:52
  Speaker 3: also how great it's been financially and how hard it
• 17:55
  Speaker 3: is to get access to that because folks, you know,
• 17:58
  Speaker 3: as you can imagine that get eliminated usually one of
• 18:00
  Speaker 3: two ways. Either they don't have the money, which is
• 18:02
  Speaker 3: eliminates you know, ninety nine point nine percent of the
• 18:04
  Speaker 3: people initially, and or they don't have the access. So
• 18:07
  Speaker 3: even if they have the money, they might not have
• 18:09
  Speaker 3: the access. So our goal is to say, how do
• 18:11
  Speaker 3: we bring down the bar financially to let more people participate.
• 18:16
  Speaker 3: One of the biggest advantages we have with the fund structure,
• 18:18
  Speaker 3: and it's not unique to us, but just NBA funds
• 18:20
  Speaker 3: in general. That is, we can invest in up to
• 18:23
  Speaker 3: eight teams. Now that is something that you cannot do
• 18:26
  Speaker 3: as an individual per NBA rules. Per NBA rules, you
• 18:28
  Speaker 3: can only invest in one franchise. It doesn't matter if
• 18:31
  Speaker 3: you're Elon Musk or pick your other you know, extremely
• 18:34
  Speaker 3: wealthy person at the top of the Forges billionaires list,
• 18:36
  Speaker 3: you can only do one team, and that applies for
• 18:38
  Speaker 3: majority and minority ownership. For us, we can do up
• 18:41
  Speaker 3: to eight. So we think those relationships, you know, with
• 18:44
  Speaker 3: the fund structure. As I mentioned, we're talking to a
• 18:46
  Speaker 3: number of high level banking partners, which is really just
• 18:50
  Speaker 3: the first level that we're going to pull. Other ways
• 18:53
  Speaker 3: for us to raise money include, to some extent, pension funds, endowments,
• 18:58
  Speaker 3: sovereign wealth, insurance companies, ultra high networth individuals, family offices.
• 19:04
  Speaker 3: I won't go on, but you see, you know, there
• 19:05
  Speaker 3: are a number of different ways for us to fundraise.
• 19:08
  Speaker 3: But yes, we think the relationships with the owners and
• 19:11
  Speaker 3: the front office, you know, if they need us to,
• 19:14
  Speaker 3: you know, to be a sounding board or something best practices.
• 19:17
  Speaker 3: But we're clear there's a clear delineation between you know,
• 19:21
  Speaker 3: with us as the fund managers. What even if we
• 19:23
  Speaker 3: hear something that maybe we're not supposed to that, we
• 19:25
  Speaker 3: won't share it, you know, with other teams or the
• 19:26
  Speaker 3: rest of our group. But that's that's part of the job,
• 19:29
  Speaker 3: right as a general manager, you know this. But ninety
• 19:32
  Speaker 3: plus percent of the conversations you have as an executive
• 19:35
  Speaker 3: about trades or sensitive matters, they don't go anywhere, right,
• 19:38
  Speaker 3: They just stay internal. And the groups that you've developed
• 19:41
  Speaker 3: a relationship with and trust with to keep it internal
• 19:43
  Speaker 3: are the ones you prefer to work with and go
• 19:45
  Speaker 3: to again and again because you know the conversation is
• 19:47
  Speaker 3: going to remain confidential. I think that's what mL and
• 19:50
  Speaker 3: I bring from a fund manager perspective, the experience, the relationships,
• 19:54
  Speaker 3: and the fact that we'll you know, we're not going
• 19:56
  Speaker 3: to try to run anybody's franchise, and if we do
• 19:58
  Speaker 3: hear anything, will appropriate filter it to protect the franchises
• 20:02
  Speaker 3: that we invest in.
• 20:03
  Speaker 4: Ryan, I'm curious about something. So I hear about these
• 20:06
  Speaker 4: minority stakes and these teams, and you hear all sorts
• 20:08
  Speaker 4: of stories around what the what the investor is actually owning,
• 20:12
  Speaker 4: Like what does the investor actually own? Walk me through this,
• 20:15
  Speaker 4: I'm writing the check, mind you I lack many zeros
• 20:18
  Speaker 4: for this effort. But what do I own? What am
• 20:22
  Speaker 4: I buying when I when I invest in one of
• 20:24
  Speaker 4: these teams this way?
• 20:25
  Speaker 3: Yeah, Jed, I don't know about the lacking financial means.
• 20:28
  Speaker 3: Last night checked it was Joe Rogan one Rosters to
• 20:31
  Speaker 3: Rings two and then I think Alex Cooper was third
• 20:33
  Speaker 3: in the podcast rankings last night.
• 20:34
  Speaker 4: I didn't know that. Must be hiding that from me.
• 20:37
  Speaker 3: But yeah, so we'll put you down for an IOU
• 20:39
  Speaker 3: and you're filling the rest of it later. No, in
• 20:43
  Speaker 3: all seriousness, you own a piece of the team. You
• 20:45
  Speaker 3: own a piece of the team. And what we're trying
• 20:47
  Speaker 3: to figure out, to be direct, is how low can
• 20:50
  Speaker 3: we bring that bar financially? How low can we make it?
• 20:53
  Speaker 3: Because you know, because that's again a big advantage through
• 20:56
  Speaker 3: the fund structure, one of the things I should have
• 20:58
  Speaker 3: mentioned earlier in the show, because it is very important
• 21:00
  Speaker 3: to our thesis and what we're doing. I did mention that,
• 21:03
  Speaker 3: you know, each individual investor can only do one team.
• 21:06
  Speaker 3: We can do up to eight. Another huge advantage chet
• 21:09
  Speaker 3: in that is each team, each of the thirty NBA
• 21:13
  Speaker 3: teams gets only twenty five slots for individuals so you
• 21:16
  Speaker 3: have the one majority owner and then up to twenty
• 21:18
  Speaker 3: four different minority owners. Your capped at that. And so
• 21:22
  Speaker 3: if if Ryan, Thad and Chet invest together, even if
• 21:26
  Speaker 3: we had a lot of money, that counts as three slots,
• 21:28
  Speaker 3: not one in our fund, like we say it would
• 21:31
  Speaker 3: you know, and I'm you know, obviously using exaggerated numbers,
• 21:34
  Speaker 3: but whether we have two investors, twenty two or two
• 21:37
  Speaker 3: hundred and twenty two investors, we're going to count as
• 21:39
  Speaker 3: one slot, which is a big advantage when slots are limited.
• 21:42
  Speaker 3: So it's just that chat, it's it's a piece of
• 21:44
  Speaker 3: a team.
• 21:46
  Speaker 2: You know.
• 21:46
  Speaker 3: It's not a direct correlation to a mutual fund or
• 21:49
  Speaker 3: an ETF, but essentially it's a diversifying investment in pro
• 21:52
  Speaker 3: sports at a level that someone who are especially folks
• 21:56
  Speaker 3: that you know, I think are probably in the three
• 21:57
  Speaker 3: of our networks who we consider you know, comfortable, regular wealthy,
• 22:01
  Speaker 3: but aren't you know, nine figure you know, billionaire type people.
• 22:04
  Speaker 3: How do we bring them into sports ownership with an
• 22:08
  Speaker 3: intriguing package that's diversified across teams, with that is managed
• 22:12
  Speaker 3: responsibly and that makes them a lot of money over time.
• 22:15
  Speaker 3: That's what we're trying to do, and at least, you know,
• 22:16
  Speaker 3: with our initial conversations, I feel like we're off to
• 22:19
  Speaker 3: a good start.
• 22:19
  Speaker 4: Does the NBA have like approval rights over your investors
• 22:23
  Speaker 4: or the individual transactions behind within your fund? Like can
• 22:26
  Speaker 4: they say no, we don't want this person or you can't?
• 22:29
  Speaker 4: Can they do that? Or is that kind of hidden
• 22:31
  Speaker 4: from them? How does that work?
• 22:32
  Speaker 3: Yes, both of those things are true. The NBA could
• 22:35
  Speaker 3: theoretically veto any deal involving us. We don't think they will,
• 22:39
  Speaker 3: and that's, you know, part where the relationships come in,
• 22:41
  Speaker 3: and we've obviously stressed test to this that number of
• 22:43
  Speaker 3: conversations with them. Also, the majority owners Chick obviously control
• 22:47
  Speaker 3: who comes into their group or doesn't.
• 22:49
  Speaker 2: Again we say this humbly.
• 22:50
  Speaker 3: We think as far as approval, all thirty owners would
• 22:53
  Speaker 3: approve us, if you know, all the boxes are checked right,
• 22:55
  Speaker 3: if they have a need, there's an opportunity for us
• 22:58
  Speaker 3: to buy in the moneys behind it all that. So
• 23:01
  Speaker 3: I think that's actually one of our biggest advantages because
• 23:03
  Speaker 3: I'm glad you asked the questions. A lot of times
• 23:05
  Speaker 3: folks think, well, I just have money, I'll buy my
• 23:07
  Speaker 3: way in. As Dad knows, it's an exclusive club and
• 23:11
  Speaker 3: certain owners do not want to deal with certain people.
• 23:14
  Speaker 3: So yeah, so there are some some barriers to entry
• 23:18
  Speaker 3: that are they're difficult, and I think a big part
• 23:20
  Speaker 3: of the reason that there only been three funds who've
• 23:21
  Speaker 3: ever invested in NBA teams. But you know, look at
• 23:25
  Speaker 3: it from from our perspective, said, we think that's a positive. Again,
• 23:27
  Speaker 3: as long as we raise the money that we need
• 23:29
  Speaker 3: to raise, which we're confident we will, we think the
• 23:32
  Speaker 3: rest of the hurdles for others actually turned into advantages
• 23:35
  Speaker 3: for us, given our reputations, given our experience, and given
• 23:38
  Speaker 3: the relationships we have around the league.
• 23:40
  Speaker 1: Brian, you talked earlier about how you know, you rank
• 23:43
  Speaker 1: all of the teams and they're all uniquely valued, But
• 23:47
  Speaker 1: it sounds as if one thing that you guys bring
• 23:48
  Speaker 1: to the table is a willingness to invest across the
• 23:51
  Speaker 1: entire platform of the League's of the of the teams,
• 23:55
  Speaker 1: the member teams. But as you're valuing them and you're
• 23:58
  Speaker 1: creating some of these poor fololios, what is the ideal
• 24:01
  Speaker 1: makeup of one of those portfolios? Are you are you
• 24:04
  Speaker 1: intentionally trying to hit some of the high value teams
• 24:07
  Speaker 1: as well as some of the low value teams. How
• 24:09
  Speaker 1: are you putting those together? And then the other end
• 24:11
  Speaker 1: of Chet's initial question about what you're buying, how fluid
• 24:15
  Speaker 1: is this asset for the investors? Can they get out
• 24:18
  Speaker 1: whenever they want to or is there a minimum time
• 24:21
  Speaker 1: requirement for them to invest?
• 24:23
  Speaker 2: Yeah? Good question.
• 24:24
  Speaker 3: Instead, so we try to look at it like you'd
• 24:26
  Speaker 3: want a traditional portfolio manager to evaluate an asset, whether
• 24:30
  Speaker 3: it's you know, your stock portfolio, right, you don't want
• 24:32
  Speaker 3: all all growth or all value or what you know
• 24:35
  Speaker 3: you want? I think you want to blend. And so
• 24:37
  Speaker 3: that's the way we view the NBA teams. You know,
• 24:40
  Speaker 3: some of the things that are topical right now are
• 24:43
  Speaker 3: the expansion franchises in Las Vegas and Seattle, and we're
• 24:46
  Speaker 3: talking to a number of folks who are interested by that,
• 24:49
  Speaker 3: and we said, look, you know they're going to be expensive,
• 24:51
  Speaker 3: right there are less expensive opportunities to invest in NBA
• 24:55
  Speaker 3: teams today. However, you know, there's the the cachet, the
• 25:00
  Speaker 3: unknown and the upside of doing something new in Seattle
• 25:03
  Speaker 3: in Vegas. So that's a big part of the conversations
• 25:06
  Speaker 3: we're having that with our top investors. You know, hey,
• 25:09
  Speaker 3: we can try to participate in even the bids or
• 25:12
  Speaker 3: and or win.
• 25:14
  Speaker 2: A group for groups.
• 25:15
  Speaker 3: Get the teams in Vegas, seatle. It's going to be expensive,
• 25:18
  Speaker 3: but it might shoot the moon, you know, look at
• 25:20
  Speaker 3: it just in the same city, Las Vegas. What the
• 25:22
  Speaker 3: Golden Knights did I think when they came online in
• 25:24
  Speaker 3: the NHL for five hundred million if my numbers correct,
• 25:27
  Speaker 3: people said, oh, it's crazy for an expansion hockey team
• 25:30
  Speaker 3: in Vegas. Well, I think in year one they went
• 25:31
  Speaker 3: to the Stanley Cup finals and I talked to a
• 25:34
  Speaker 3: few folks who passed uninvesting and they're banging their heads
• 25:37
  Speaker 3: against the wall, like, yes, that was was one of
• 25:39
  Speaker 3: the great investments in NHL history. You know, they wish
• 25:41
  Speaker 3: they'd gotten in when the opportunity was there, But yeah,
• 25:45
  Speaker 3: we're trying to be responsible obviously with other folks money,
• 25:48
  Speaker 3: and when we're you know, GPS as well, so we
• 25:51
  Speaker 3: invest our own money alongside them. So we're looking at
• 25:53
  Speaker 3: you know, just a different blend, whether that's financial in
• 25:57
  Speaker 3: terms of you know, more expensive teams, less exensive teams,
• 26:01
  Speaker 3: even geographical you know, kind of across the country. So
• 26:04
  Speaker 3: we're not too concentrated. As I mentioned, the historical returns
• 26:07
  Speaker 3: are great. If you've historically just kind of thrown a
• 26:09
  Speaker 3: dart and got into any of them, you would have
• 26:11
  Speaker 3: done extremely well. But we don't want to do average.
• 26:14
  Speaker 3: We want to look at the teams that we think
• 26:15
  Speaker 3: will perform better than average. And as much as anything,
• 26:17
  Speaker 3: we want to be around good people who you know,
• 26:19
  Speaker 3: are responsible with our money, who we trust with our
• 26:22
  Speaker 3: money on our investors' money, who you know when we
• 26:25
  Speaker 3: interact with them, it's an enjoyable experience.
• 26:27
  Speaker 2: You know that you've been around a long time.
• 26:30
  Speaker 3: Ideally, you hope that every ownership group treats everybody great.
• 26:33
  Speaker 3: In reality, that is not always the case. So that
• 26:35
  Speaker 3: that's a big part of our model and one of
• 26:37
  Speaker 3: the things that I think is easy for us to
• 26:39
  Speaker 3: do and we have done and we'll continue to do
• 26:41
  Speaker 3: that would be hard for say a more traditional Wall
• 26:43
  Speaker 3: Street banker to do is go to current and former
• 26:46
  Speaker 3: minority owners and people other majority owners who have dealt
• 26:49
  Speaker 3: with these folks and say, hey, what's what's this guy
• 26:51
  Speaker 3: with this woman? Like your employees, current current or former employees,
• 26:54
  Speaker 3: what's it like to work for them? So that's that's
• 26:57
  Speaker 3: where we think our advantages are to answer the second
• 26:59
  Speaker 3: part your question. Per NBA rules, there's a minimum five
• 27:03
  Speaker 3: year old from when we invest. So to be clear,
• 27:05
  Speaker 3: this is not a vehicle for people who want to
• 27:08
  Speaker 3: trade in trade out. This is for somebody who has
• 27:11
  Speaker 3: a longer horizon and says, yeah, I can wait at
• 27:14
  Speaker 3: least five years, probably closer to ten years or so.
• 27:17
  Speaker 3: But I look at what the teams have done historically.
• 27:19
  Speaker 3: I think in that ten year period, if these things
• 27:22
  Speaker 3: do anywhere close to what they've done before, I could
• 27:24
  Speaker 3: triple my investment and view it more as a hones
• 27:27
  Speaker 3: say a retirement plan, but you know something like that
• 27:29
  Speaker 3: where you have some money, you set it aside. One
• 27:32
  Speaker 3: of the things that we've researched is the NBA teams
• 27:35
  Speaker 3: have a very low correlation to stocks to real estate.
• 27:39
  Speaker 3: In fact, remarkably, when there have been crisis is whether
• 27:42
  Speaker 3: it's the dot com bubble, the Great Financial Crisis, the
• 27:46
  Speaker 3: COVID crash, the teams have actually either held their value
• 27:50
  Speaker 3: or gone up slightly. They haven't gone up as much
• 27:52
  Speaker 3: in the valuations, but they've still gone up. And I
• 27:54
  Speaker 3: think that speaks to the scarcity and what a great
• 27:56
  Speaker 3: investment they've been. The one caveat to that that now
• 27:59
  Speaker 3: don't want to get two technical but there is a
• 28:01
  Speaker 3: way to cash out and get liquidity sooner. With these deals,
• 28:04
  Speaker 3: will negotiate what are called tag along rights. So if
• 28:06
  Speaker 3: the majority owner sells, which we do not control as
• 28:09
  Speaker 3: passive minority investors, but if if the majority owner decides
• 28:12
  Speaker 3: to sell at any time, he or she obviously gets
• 28:14
  Speaker 3: a premium valuation for that. As we discussed, we would
• 28:17
  Speaker 3: get rolled up in the bigger deal and get you know,
• 28:19
  Speaker 3: pro ratas share of what they get as far as evaluation.
• 28:22
  Speaker 3: So that's something we cannot promise, but that has happened
• 28:25
  Speaker 3: with other funds and individual investors who have bought into
• 28:28
  Speaker 3: NBA teams.
• 28:30
  Speaker 4: I'm curious about something here. Ran. You've been in a
• 28:33
  Speaker 4: front office with Boston, you know, front offing executive of Boston.
• 28:39
  Speaker 4: You've ran basketball operations in Phoenix, one of the youngest
• 28:42
  Speaker 4: GMS league history. You know, you've you've you understand evaluating
• 28:47
  Speaker 4: players from that whole front office side. Has looking at
• 28:50
  Speaker 4: basketball through an investor's eyes changed anything that maybe you
• 28:54
  Speaker 4: believed when you were GM.
• 28:55
  Speaker 2: It's a great question.
• 28:57
  Speaker 3: I think what has changed the most, and these are
• 28:59
  Speaker 3: recent changes Chat offered the better for investors to be
• 29:02
  Speaker 3: to be frank is when when I started in the league,
• 29:05
  Speaker 3: and probably when you know Thad started in MLB, which
• 29:08
  Speaker 3: obviously has different economics. But when I started the NBA, Uh,
• 29:12
  Speaker 3: there was a real concern that, hey, you know, are
• 29:14
  Speaker 3: we gonna like some of these teams are gonna lose
• 29:16
  Speaker 3: so much money, they're not going to be solving, you know,
• 29:18
  Speaker 3: they're not going to be able to operate. The famous
• 29:21
  Speaker 3: example in the NBA was a guy named George Chinn
• 29:24
  Speaker 3: who moved to Charlotte franchise to New Orleans, you know,
• 29:27
  Speaker 3: rebranded the Pelicans and then you know, at some point
• 29:30
  Speaker 3: I think essentially handed it back to the NBA to sell.
• 29:33
  Speaker 3: You know, it couldn't in the NBA was operating it.
• 29:36
  Speaker 3: That that is more known in the the you know,
• 29:38
  Speaker 3: kind of popular vernacular because of the avoided Chris Paul
• 29:40
  Speaker 3: to the Lakers trade, right That the famous when when
• 29:43
  Speaker 3: David Stern essentially was acting as the owner of the
• 29:46
  Speaker 3: Pelicans when he was the NBA commissioner, and that the
• 29:48
  Speaker 3: front office in New Orleans agreed with the front office
• 29:51
  Speaker 3: Lakers to trate Chris Paul and David Searn said we're
• 29:53
  Speaker 3: not doing that. And that was obviously very very controversial
• 29:55
  Speaker 3: because it involved Houston and other teams as well. So
• 29:58
  Speaker 3: that was I think just in twenty eleven if I
• 30:00
  Speaker 3: remember correctly, So fast forward fifteen years. The biggest change, Chad,
• 30:04
  Speaker 3: A couple are the new media deals that's changed the
• 30:08
  Speaker 3: game in the NBA with Amazon Prime and NBC now
• 30:12
  Speaker 3: joining ABC and ESPN. I believe we just concluded year
• 30:16
  Speaker 3: one of an eleven year deal that's in the seventy
• 30:19
  Speaker 3: seven billion dollar range. So for our fund, if we're
• 30:23
  Speaker 3: projecting a ten year kind of life span or you know,
• 30:26
  Speaker 3: so we were looking at these investments plus or minus
• 30:29
  Speaker 3: ten years. The media deal goes out that long and
• 30:33
  Speaker 3: escalates every single year. They're built in escalators to the
• 30:36
  Speaker 3: media deal. So that puts it a very nice cushion
• 30:38
  Speaker 3: I think underneath your investment thesis. The other part is
• 30:42
  Speaker 3: I look across to the NFL, which is we know
• 30:45
  Speaker 3: in this country from the sports media landscape is king.
• 30:48
  Speaker 3: It's reflected in the numbers. Those guys get crazy the
• 30:52
  Speaker 3: articles I'm reading, Chad. Essentially, what Roger Goodellen company are
• 30:55
  Speaker 3: doing now is going to the current TV partners and saying, hey,
• 30:58
  Speaker 3: we think it's in your interest and our best interest
• 31:01
  Speaker 3: to renegotiate up and extend the deal out now because
• 31:05
  Speaker 3: with the subtext there chet being if you're a current
• 31:08
  Speaker 3: uh you know, TV provider, especially more of a traditional
• 31:12
  Speaker 3: non streamer, say a cable ish company, I really don't
• 31:16
  Speaker 3: think you want to be in an open bidding war
• 31:18
  Speaker 3: against Netflix, against Google, against Apple, against Amazon Prime. I
• 31:22
  Speaker 3: could go on, but you know how much how much
• 31:24
  Speaker 3: money those tech companies have, and they all want live sports.
• 31:27
  Speaker 3: It's it's for our research. It's the one thing that
• 31:29
  Speaker 3: you cannot record or people do do not record and
• 31:32
  Speaker 3: then watch back, you know, a day or two later.
• 31:34
  Speaker 3: My wife and I are watching a Reacher right now
• 31:36
  Speaker 3: on Prime, a great, great show for those who haven't
• 31:38
  Speaker 3: seen it, but we just watch it, you know, whenever
• 31:40
  Speaker 3: you watch it.
• 31:40
  Speaker 2: Right, It's that.
• 31:41
  Speaker 3: But but as evidence recently, I think by the World
• 31:43
  Speaker 3: Cup and other you know, the World Series, other big
• 31:46
  Speaker 3: live sporting events, you have to watch them live and
• 31:48
  Speaker 3: the advertisers pay a premium for that. So yeah, I
• 31:50
  Speaker 3: think I think those are the biggest changes, all for
• 31:52
  Speaker 3: the better, and that's why chat. I'll give you one
• 31:55
  Speaker 3: quick story before we move on. But when I came
• 31:58
  Speaker 3: into the NBA. I was one of the first time
• 32:00
  Speaker 3: that Wick Rousebeck and Steve Paluka made when they bought
• 32:03
  Speaker 3: the Boston Celtics.
• 32:04
  Speaker 2: And I'll never forget it.
• 32:05
  Speaker 3: I just graduated University of North Carolina, very fortunate from
• 32:08
  Speaker 3: the Boston area, moved back home, like a lot of
• 32:10
  Speaker 3: twenty two year old kids, was trying to figure out
• 32:12
  Speaker 3: what to do next, living with my parents, and out
• 32:14
  Speaker 3: of nowhere these two local private equity guys by the
• 32:17
  Speaker 3: Boston Celtics. And the headline in the local papers, The
• 32:20
  Speaker 3: Globe and the Herald were private equity billionaires by the
• 32:23
  Speaker 3: Boston Celtics in the opinion columns, or what are these
• 32:27
  Speaker 3: guys stupid? They paid three hundred and sixty million dollars
• 32:29
  Speaker 3: for a basketball team that doesn't even own its own arena.
• 32:32
  Speaker 3: It's the worst investment of all time. These guys are
• 32:34
  Speaker 3: never going to make their money back. They're way over
• 32:36
  Speaker 3: their skis. So that's how I came into the NBA.
• 32:39
  Speaker 3: And that, you know, the three hundred and sixty million,
• 32:41
  Speaker 3: that's insane.
• 32:42
  Speaker 4: A poetry, that's now if you will.
• 32:44
  Speaker 1: Yeah, And on the other end of that, you were
• 32:46
  Speaker 1: advising them as they sold for six point one billion dollars. Ryan,
• 32:51
  Speaker 1: I don't know if it's a conflict of interest, but
• 32:53
  Speaker 1: you and I've talked about this in the past, like
• 32:55
  Speaker 1: whether or not Bill be GMS again is one thing,
• 32:58
  Speaker 1: But we have a lot of friends who acquire with
• 33:00
  Speaker 1: us as we assess their opportunities to be gms elsewhere.
• 33:04
  Speaker 1: I'm sure you're now looking at those opportunities with a
• 33:07
  Speaker 1: much different eye than you once did. You were very
• 33:09
  Speaker 1: sophisticated in how you broke down those as friends talk
• 33:12
  Speaker 1: to you about it. But I'm sure this is giving
• 33:14
  Speaker 1: you an even greater dimension as you evaluate these opportunities
• 33:19
  Speaker 1: for people who you know in the industry who are
• 33:21
  Speaker 1: evaluating should I go be the GM of another team
• 33:24
  Speaker 1: put my hat in that ring. I'm only I can
• 33:27
  Speaker 1: only imagine the levels of information you have, But I
• 33:31
  Speaker 1: don't know is that now a violation that you have
• 33:34
  Speaker 1: or do you have to stand down in some of
• 33:35
  Speaker 1: those conversations, or could that be an adjunct to this
• 33:38
  Speaker 1: business for you. Nobody probably knows better than you and
• 33:40
  Speaker 1: mL now about the inner tickings of a lot of
• 33:42
  Speaker 1: these franchises. You probably thought you knew it before. Now
• 33:46
  Speaker 1: you absolutely know everything that's going on.
• 33:48
  Speaker 3: Yeah, we will for sure. Especially our target with fun
• 33:52
  Speaker 3: want is to raise a billion dollars invest in four
• 33:54
  Speaker 3: or five teams. Our goal with that is to build
• 33:58
  Speaker 3: out not just one fund, but you know, a company,
• 34:02
  Speaker 3: a business model that scales. And when we reach across
• 34:05
  Speaker 3: to folks maybe like yourself, although you're doing so well
• 34:07
  Speaker 3: here with CHAT, I don't know if we can get you.
• 34:08
  Speaker 3: But folks who have been you know, executive.
• 34:11
  Speaker 1: Behind Rogan I heard right behind it.
• 34:12
  Speaker 3: Yeah, exactly, executives, players, coaches and other sports that and say, look,
• 34:18
  Speaker 3: you know, the banks have done great. And I say
• 34:20
  Speaker 3: this in no disrespectful way. There's a reason that KKR
• 34:25
  Speaker 3: just bought Arctos, the industry leader pioneer, for an initial
• 34:29
  Speaker 3: evaluation of one point four billion that might escalate closer
• 34:32
  Speaker 3: to two billion. Those guys have done extremely well. But
• 34:35
  Speaker 3: at the same time that the folks who know the
• 34:37
  Speaker 3: businesses better than anybody who have done that, who have
• 34:39
  Speaker 3: lived it for decades as you and I have, they're
• 34:42
  Speaker 3: probably the best ones to evaluate the assets. And what
• 34:45
  Speaker 3: I think most people want when they're looking at buying
• 34:47
  Speaker 3: an asset or evaluating an asset is who knows the
• 34:49
  Speaker 3: asset the best, who can explain it to me and
• 34:51
  Speaker 3: who can give me a thumbs up or thumbs down
• 34:53
  Speaker 3: in terms of is this a good investment for my money?
• 34:55
  Speaker 3: And I think that's where we come in. So yeah,
• 34:57
  Speaker 3: for fun one, you know, it's NBA specific, we'll look
• 35:00
  Speaker 3: to do four or five different NBA team minority investments
• 35:03
  Speaker 3: for future funds. You know, could be a hybrid of
• 35:05
  Speaker 3: across different sports. It could be a sports specific one
• 35:08
  Speaker 3: in a different sport, whether that's MLB, NHL, the NFL
• 35:13
  Speaker 3: bars a little higher, but maybe we can get there,
• 35:15
  Speaker 3: or a hybrid. So yeah, that's kind of the model.
• 35:18
  Speaker 3: So we will have some good insight initially in the NBA,
• 35:20
  Speaker 3: which I feel like we already currently have to some extent,
• 35:23
  Speaker 3: but then you know, ultimately, if we do what we're
• 35:25
  Speaker 3: hoping to do, we'll have that insight across all of sports.
• 35:28
  Speaker 1: And as you mentioned, there are more people working in
• 35:30
  Speaker 1: the financial world than there are who have worked in
• 35:33
  Speaker 1: front offices, so your expertise are very unique. It should
• 35:36
  Speaker 1: be a sustainable competitive advantage for you. Stay with us
• 35:39
  Speaker 1: through the break. On the other side, we're going to
• 35:40
  Speaker 1: put Ryan on the hot seat to discuss the ins
• 35:43
  Speaker 1: and outs of the Lakers sale and all the other
• 35:45
  Speaker 1: topics going on in today's NBA on rosters, Terrans, Brian,
• 36:01
  Speaker 1: let's turn our attention to a very specific sale. I
• 36:04
  Speaker 1: remember it may have been like episode three or four
• 36:07
  Speaker 1: for us where we were talking and we were blown
• 36:09
  Speaker 1: away by the fact that the Celtics sold for six
• 36:12
  Speaker 1: point one billion, and that was in August of twenty
• 36:15
  Speaker 1: twenty five. Well later, in October of twenty twenty five,
• 36:18
  Speaker 1: the Lakers sold for ten billion. In August of twenty
• 36:21
  Speaker 1: twenty six, the Lakers are now being rumored to be
• 36:23
  Speaker 1: sold for twelve point five billion dollars. That seems like
• 36:27
  Speaker 1: a remarkable amount that this is going on with Josh
• 36:31
  Speaker 1: Kushner and Bob Iiger joining forces. You alluded to it
• 36:35
  Speaker 1: in the previous segment. There's a rumor out there that
• 36:38
  Speaker 1: those two guys were putting forth a bid to buy
• 36:41
  Speaker 1: one of the expansion franchises, and once the bid started
• 36:44
  Speaker 1: escalating into the ten billion dollar range, they decided, Hey,
• 36:48
  Speaker 1: maybe we should reach out to Mark Walter and just
• 36:50
  Speaker 1: make sure we can't buy the Lakers for something in
• 36:53
  Speaker 1: that range. They end up doing just that. But what
• 36:56
  Speaker 1: is your insider's view of the sale of the Lakers.
• 36:59
  Speaker 1: Why is it old twice in ten months now.
• 37:02
  Speaker 3: You know, it's amazing that I'm forty six going on
• 37:05
  Speaker 3: forty seven years old. And I bring that up because
• 37:07
  Speaker 3: as of a year to year and a half ago,
• 37:09
  Speaker 3: the Bus family had owned the Lakers my entire lifetime, right,
• 37:13
  Speaker 3: just one one family started by the late great Jerry Buss, considered,
• 37:17
  Speaker 3: you know, widely considered one of the best owners in
• 37:19
  Speaker 3: NBA history, if not all of sports history. I think
• 37:22
  Speaker 3: the Lakers were in the final something incredible like sixteen
• 37:25
  Speaker 3: times in his thirty three year tenure as majority owner,
• 37:28
  Speaker 3: and what he did from a business and basketball perspective
• 37:30
  Speaker 3: is really unmatched. But yeah, last year Mark Walter, who
• 37:35
  Speaker 3: obviously know very well with the Dodgers' ownership and the
• 37:37
  Speaker 3: success that the Dodgers have had with Walter and his
• 37:39
  Speaker 3: group owning the team since twenty twelve, they were already
• 37:42
  Speaker 3: in the group as a minority investor. And this is
• 37:45
  Speaker 3: what we talked about earlier. Yet you know, you know
• 37:47
  Speaker 3: with you guys, is you know, they weren't coming from
• 37:50
  Speaker 3: zero to owning the team, right they were coming. They
• 37:54
  Speaker 3: already had a foothold in the team. They were part
• 37:56
  Speaker 3: of the group already to use a you know, stock term,
• 37:59
  Speaker 3: their cost base. This was already established at a lower
• 38:01
  Speaker 3: amount than what they bought the team for, and so
• 38:04
  Speaker 3: I think they came up with the creative way to
• 38:07
  Speaker 3: They went to Genie Bus, the owner. You know, ten
• 38:09
  Speaker 3: billion dollars shattered the previous record, which was the Celtics
• 38:12
  Speaker 3: sales just a few months before at six point one billion.
• 38:15
  Speaker 3: But to the cost basis point, it wasn't ten billion
• 38:19
  Speaker 3: for them, right. They didn't pay ten billion cash because
• 38:21
  Speaker 3: the Bus family rolled over some of their shares because
• 38:24
  Speaker 3: they already Mark Walters Group already had equity at a
• 38:26
  Speaker 3: lower evaluation. So it made sense for them to do it.
• 38:29
  Speaker 3: And it seemed like they let Genie Bus do what
• 38:32
  Speaker 3: she wanted to do. She took a lot of the
• 38:34
  Speaker 3: money off the table, but she remained the controlling owner
• 38:37
  Speaker 3: of the La Lakers. So that this one's a unique situation.
• 38:41
  Speaker 3: I know there's been a lot of swirl about, you know,
• 38:44
  Speaker 3: what's going on with Mark Walter. You know, a lot
• 38:47
  Speaker 3: of reporting about federal investigations and things like that, which
• 38:50
  Speaker 3: I think some extent are real. We're not I'm not
• 38:53
  Speaker 3: going to comment on you know, what happens. We'd just
• 38:55
  Speaker 3: be speculating if we try to figure out what's going
• 38:57
  Speaker 3: to happen as a result of the investigation, it seems
• 39:00
  Speaker 3: to me like Mark Walter needs some cash and the
• 39:04
  Speaker 3: best ways to do that are essentially flip the Lakers,
• 39:07
  Speaker 3: which I don't think anybody would have anticipated if you
• 39:10
  Speaker 3: look at his business history, including the Dodgers, but not
• 39:13
  Speaker 3: just limited to the Dodgers. He has other sports assets
• 39:16
  Speaker 3: as well. He's an investor in Chelsea, the Premier League team.
• 39:20
  Speaker 3: He's not a buy and flip kind of guy. That's
• 39:22
  Speaker 3: not his reputation. He's a buy and hold kind of guy.
• 39:24
  Speaker 3: So as far as I can, you know, gather at that,
• 39:27
  Speaker 3: he's concerned about, you know, what's going to happen, needing cash,
• 39:31
  Speaker 3: and something went wrong along the way, because you know,
• 39:35
  Speaker 3: we talked a little bit earlier about the tax benefits
• 39:37
  Speaker 3: of owning these teams. The worst thing to do from
• 39:40
  Speaker 3: a tax perspective, would be to get a short term
• 39:43
  Speaker 3: capital gain tax where you don't even own the thing
• 39:44
  Speaker 3: for a year, right and you have to pay California's
• 39:47
  Speaker 3: fifty percent tax rate or whatever on this. So something
• 39:51
  Speaker 3: went wrong along the way. This is certainly I don't
• 39:54
  Speaker 3: believe at least in my opinion for everything I know
• 39:56
  Speaker 3: about it, this was something he planned on doing when
• 39:58
  Speaker 3: he bought. Yeah, let's buy it and if I get
• 39:59
  Speaker 3: twenty to twenty five percent more flipan the year he
• 40:02
  Speaker 3: needed liquidity, It's been reported as of the last twenty
• 40:05
  Speaker 3: four to forty eight hours, he's looking to sell his
• 40:07
  Speaker 3: stake in Chelsea, the Premier League team as well. And
• 40:10
  Speaker 3: that the multi billion dollar question that I'd love to
• 40:14
  Speaker 3: get your take on and whatever in the NBA is
• 40:16
  Speaker 3: asking around sports is are the LA Dodgers next? Do
• 40:19
  Speaker 3: we just be speculating? But that's the thought process. Folks
• 40:21
  Speaker 3: I talk to said, Okay, he's going to have to
• 40:23
  Speaker 3: keep going. He needs billions, if not ten billion or more. Still,
• 40:28
  Speaker 3: are the Dodgers going to be sold next? I know
• 40:30
  Speaker 3: he and his group are putting out there through their
• 40:32
  Speaker 3: people know, but you know, the folks who are investigating
• 40:35
  Speaker 3: this and look at the numbers say they think that's
• 40:37
  Speaker 3: at least possible, if not likely, that he may have
• 40:39
  Speaker 3: to sell the Dodgers as well.
• 40:41
  Speaker 1: Yeah, and you know, for most of our lifetime, as
• 40:44
  Speaker 1: you mentioned, the Bus family owned the Lakers, and for
• 40:46
  Speaker 1: most of our lifetime, the Yankees were the gold standard
• 40:49
  Speaker 1: of Major League Baseball, and they were the team that
• 40:53
  Speaker 1: had the financial might to bully around the rest of
• 40:55
  Speaker 1: the league. Well, the Dodgers have taken over that role
• 40:58
  Speaker 1: over the last five to six years under Mark Walters
• 41:00
  Speaker 1: and their ownership group. It is fascinating what they've achieved.
• 41:05
  Speaker 1: I think so much credit is due to Andrew Friedman
• 41:07
  Speaker 1: in his front office, as it should be. The players
• 41:10
  Speaker 1: are excellent, ownership has to be part of that equation.
• 41:14
  Speaker 1: So from a person who's employed by a team that
• 41:18
  Speaker 1: competes directly with the Dodgers, I would love to see
• 41:20
  Speaker 1: them get sold because I can't imagine another ownership group
• 41:23
  Speaker 1: being as much of a positive influence as Mark Walters
• 41:26
  Speaker 1: and his group has been for the Lakers. It's not
• 41:29
  Speaker 1: just all about the money. It's how you spend it.
• 41:31
  Speaker 1: It's who you invest in and who you empower to lead.
• 41:35
  Speaker 1: And they seem to be doing everything right on every
• 41:37
  Speaker 1: single level over there. But it is a fascinating turn
• 41:41
  Speaker 1: of events. And as another wrinkle in Major League Baseball,
• 41:43
  Speaker 1: we're about to embark upon a new collective bargaining agreement.
• 41:47
  Speaker 1: There are a lot of rumors of the specter of
• 41:49
  Speaker 1: a work stoppage of a leveling of the playing field,
• 41:51
  Speaker 1: It'd be a fascinating time to sell because we may
• 41:54
  Speaker 1: look on the other side of this that with the
• 41:57
  Speaker 1: level of the leveling of the playing field, that teams
• 41:59
  Speaker 1: like the Dodger and some of their competitive advantages maybe
• 42:02
  Speaker 1: mitigated someone at least that's the goal that all thirty
• 42:05
  Speaker 1: teams have a chance to be a dynasty, not just
• 42:08
  Speaker 1: the four or five markets that currently can in Major
• 42:10
  Speaker 1: League Baseball.
• 42:11
  Speaker 4: I'm curious about something, right, and I've got a I'm
• 42:15
  Speaker 4: fascinated if I had known getting rid of Lebron would
• 42:18
  Speaker 4: raise the Lakers valuation by twenty five percent, I find
• 42:22
  Speaker 4: I mean, what is it that that makes them so valuable?
• 42:26
  Speaker 4: Is it just the name the Lakers? Is it the brand?
• 42:29
  Speaker 4: I mean, you're evaluating these franchises. You guys have this
• 42:33
  Speaker 4: proprietary valuation model that you've talked about, and you've got
• 42:36
  Speaker 4: a couple of things you're digging into here that maybe
• 42:38
  Speaker 4: some others aren't. What makes them valuable? What makes the
• 42:41
  Speaker 4: Lakers so valuable besides the brand obviously, or is that
• 42:45
  Speaker 4: it can they roll anybody out there?
• 42:47
  Speaker 1: And and Ryan has an adjunct to that, How are
• 42:49
  Speaker 1: they twice as much as valuable as the Celtics, which
• 42:51
  Speaker 1: I would think would be as iconic a brand in
• 42:54
  Speaker 1: the world as the Lakers are.
• 42:56
  Speaker 3: Yeah, all great questions, and it speaks to the fact
• 42:58
  Speaker 3: that I think Bill Chisholm and his group of vents,
• 43:00
  Speaker 3: who you know to some extent got criticized for paying
• 43:02
  Speaker 3: a premium when they got it. Those guys look pretty
• 43:04
  Speaker 3: smart right now, you know, given that they bought into
• 43:07
  Speaker 3: the Celtics a least for the initial valuation of less
• 43:10
  Speaker 3: than half of what the Lakers are reportedly going to
• 43:12
  Speaker 3: be sold for. Yeah, I say with Lakers, yet, number
• 43:15
  Speaker 3: of factors you mentioned the brand. I talked about the history,
• 43:18
  Speaker 3: you know, going back to the doctor Buss and what
• 43:19
  Speaker 3: he did with the team, and the Magic Johnson, Kareem
• 43:23
  Speaker 3: Abdul Jabbar era, and obviously then it continues to the
• 43:27
  Speaker 3: Kobe Shack era, and then you know kind of Kobe
• 43:30
  Speaker 3: Pagasol and on and on. Lebron and Anthony Davis. Those
• 43:34
  Speaker 3: guys won championship. So they've been right up there, neck
• 43:37
  Speaker 3: and neck with the Celtics as far as the most
• 43:38
  Speaker 3: successful franchises in the history of the NBA. I think
• 43:42
  Speaker 3: the other factors are significant though. The LA market is
• 43:45
  Speaker 3: the second biggest in the country, as you guys know,
• 43:47
  Speaker 3: trailing only New York, and it's maybe the second wealthiest,
• 43:51
  Speaker 3: or likely the second wealthiest. I haven't studied it from
• 43:53
  Speaker 3: that prison, but there's a lot of money in LA
• 43:55
  Speaker 3: and southern California in general. It's probably the most desirable
• 44:00
  Speaker 3: place for NBA players to play. And so one of
• 44:03
  Speaker 3: the the jokes in the NBA privately is well, Lakers
• 44:07
  Speaker 3: are always going to be in the mixed free agents
• 44:08
  Speaker 3: even if they're god awful, because guys just want to
• 44:10
  Speaker 3: live and play in LA. That's it's it's frustrating if
• 44:12
  Speaker 3: you're you know, running the Indiana Pacers of the Utah
• 44:16
  Speaker 3: Jazz or one of these franchises who does a great
• 44:18
  Speaker 3: job and you have twice as many wins as the
• 44:20
  Speaker 3: Lakers the year before, and then you know the star
• 44:23
  Speaker 3: free agent, uh just has no interest in meeting with
• 44:25
  Speaker 3: you guys, but would love to play in LA. So
• 44:27
  Speaker 3: that's uh, you know another uh you know, big advantage
• 44:30
  Speaker 3: of it. And I think too another factor chet that's
• 44:34
  Speaker 3: I think more certainly more NBA and Major League Baseball
• 44:37
  Speaker 3: specific than it is NFL specific. Are the local TV
• 44:40
  Speaker 3: contracts and the local deals, so you can do as
• 44:44
  Speaker 3: far as you know, ticket sales and sponsorship deals and
• 44:48
  Speaker 3: all that. There are a lot more games in the
• 44:51
  Speaker 3: NBA than the NFL, and obviously a lot more in
• 44:53
  Speaker 3: Major League Baseball than either of those leagues. But the
• 44:55
  Speaker 3: Lakers have their own local TV contract and it is
• 44:59
  Speaker 3: very lucrative because think of the Southern California market and
• 45:02
  Speaker 3: think of you know, the interest in the Lakers in
• 45:04
  Speaker 3: Southern California. But to your point earlier, as a worldwide brand,
• 45:08
  Speaker 3: So I think for all of those factors, you know
• 45:11
  Speaker 3: it it remains a premium. The last one is if
• 45:13
  Speaker 3: you're an extremely wealthy man or woman or group, where
• 45:17
  Speaker 3: would you choose to own a team and spend a
• 45:19
  Speaker 3: lot of October to April ala? Southern California is not
• 45:25
  Speaker 3: a bad place to be with all the court side celebrities,
• 45:27
  Speaker 3: all the cachet, in addition to what the team's done
• 45:30
  Speaker 3: historically and competitively. So I think, yeah, there are a
• 45:33
  Speaker 3: number of factors to it, but you know, there's a
• 45:38
  Speaker 3: reason that it went up after setting a record at
• 45:40
  Speaker 3: ten billion, that went up another twenty five or so percent,
• 45:43
  Speaker 3: And you know, Bob Iger and Josh Kusher in the group,
• 45:46
  Speaker 3: I think are happy to pay it because after the
• 45:48
  Speaker 3: franchise only traded once in about fifty years. I'm sure
• 45:52
  Speaker 3: when they started this process and putting the group together
• 45:54
  Speaker 3: for the Vegas expansion bid, they did not expect it
• 45:57
  Speaker 3: to come back in the market, yes, less than a
• 45:59
  Speaker 3: year later.
• 46:00
  Speaker 4: So let's suppose I put two clubs with you know,
• 46:02
  Speaker 4: two different assets in front of you, and I said,
• 46:05
  Speaker 4: one of these championship contender, aging, roster, limited, draft capital,
• 46:09
  Speaker 4: you know, expensive contracts. The other is losing you know,
• 46:12
  Speaker 4: fifty five games or more, young players, draft capital out
• 46:17
  Speaker 4: the wazoo, cap flexibility, great front office like, which one's
• 46:21
  Speaker 4: more attractive as an investor in that deal? Considering neither
• 46:24
  Speaker 4: one of them is on a coast. We'll put it
• 46:26
  Speaker 4: that way into.
• 46:26
  Speaker 2: Okay, all right, all right, that's a great question.
• 46:29
  Speaker 3: I mean, I think that's where that would be a
• 46:31
  Speaker 3: more nuanced discussion where the other factors come into play.
• 46:34
  Speaker 3: How good are the young players and how long are
• 46:37
  Speaker 3: they under contract for? What does the team's salary cap
• 46:40
  Speaker 3: situation look like? What does their draft pick situation look like?
• 46:44
  Speaker 3: Thad And made an excellent point about Major League Baseball,
• 46:47
  Speaker 3: and one of the reasons we really think what we're
• 46:49
  Speaker 3: doing is a great time to invest in the NBA
• 46:51
  Speaker 3: because for the first time in the history of the NBA,
• 46:54
  Speaker 3: there have been eight different champions in eight years. That's
• 46:56
  Speaker 3: never happened before in the NBA. It's kind of the
• 46:58
  Speaker 3: parody era for the championship winners or from the Eastern
• 47:02
  Speaker 3: Conference for from the Western Conference. We have geographical balance,
• 47:06
  Speaker 3: so we like, you know, some of the opportunities smaller
• 47:10
  Speaker 3: market and mid market, especially if the young talent is
• 47:12
  Speaker 3: good on the roster, especially if the the management and
• 47:16
  Speaker 3: ownership are are sound, the draft pick situations good. Some
• 47:20
  Speaker 3: of those are intriguing to us.
• 47:23
  Speaker 2: Now.
• 47:23
  Speaker 3: Like I said with the caveat though, when we're discussing Vegas,
• 47:25
  Speaker 3: that some folks, when with Vegas particular and some extens Seattle,
• 47:29
  Speaker 3: are saying, yeah, I know it's going to be expensive,
• 47:31
  Speaker 3: but gosh, it's brand new. I think we can we
• 47:32
  Speaker 3: can blow the roof off the building and we want it,
• 47:35
  Speaker 3: you know. So that's a different conversation, and that's where
• 47:38
  Speaker 3: CHET we view our role in the truest sense as
• 47:41
  Speaker 3: portfolio managers. It's not just whatever Ryan and mL want
• 47:44
  Speaker 3: to do. We'll have our opinions ultimately make the final decision,
• 47:47
  Speaker 3: but go to our investors, specifically our biggest investors, say hey,
• 47:50
  Speaker 3: do you want to chase this marquee team that has
• 47:52
  Speaker 3: been good and it is more expensive but has aging stars,
• 47:55
  Speaker 3: or getting a younger price for this young, up and
• 47:57
  Speaker 3: coming team that has not been good but we may
• 48:00
  Speaker 3: be pretty good over the next five to ten years.
• 48:02
  Speaker 3: And here's why. That's a group decision. And we're looking forward,
• 48:05
  Speaker 3: frankly to having those conversations and making those decisions.
• 48:09
  Speaker 1: Ryan. Just to set the stage for our listeners, we've
• 48:13
  Speaker 1: talked a lot about the Lakers and the Celtics and
• 48:15
  Speaker 1: the exorbitant sales prices. The Seattle Seahawks just sold for
• 48:20
  Speaker 1: nine point six billion. They're the highest NFL franchise sale
• 48:24
  Speaker 1: in the history in Major League Baseball, believe or not.
• 48:26
  Speaker 1: I was surprised to see that it's actually the San
• 48:28
  Speaker 1: Diego Padres at three point nine billion, is the highest.
• 48:31
  Speaker 1: And that's a deal that is being consummated as we
• 48:33
  Speaker 1: speak and being brought to fruition. So the top ten
• 48:37
  Speaker 1: sales across all sports, six are NBA teams, three are NFL,
• 48:42
  Speaker 1: and one is Major League Baseball, which is fascinating to
• 48:45
  Speaker 1: me that the NBA, and maybe it just goes to
• 48:47
  Speaker 1: show that maybe fewer NFL teams change hands, and that
• 48:51
  Speaker 1: is the truth. In the last ten years, four NFL
• 48:54
  Speaker 1: franchises have been sold, six Major League Baseball and eleven
• 48:57
  Speaker 1: NBA franchises if you count the Lakers twice effectively. So
• 49:01
  Speaker 1: I'm curious your insights. Why do you think one third
• 49:04
  Speaker 1: of the NBA franchises have changed hands in the last
• 49:07
  Speaker 1: ten years, where in contrast in NFL and Major League Baseball,
• 49:12
  Speaker 1: we just don't see that type of turnover.
• 49:15
  Speaker 3: Yeah, I think all three leagues are different. So let's
• 49:18
  Speaker 3: get let's attack of one at a time. The NFL
• 49:22
  Speaker 3: the most profitable clearly in terms of valuations, in terms
• 49:24
  Speaker 3: of the cash flow year over year. I think, frankly,
• 49:28
  Speaker 3: a lot of these teams are too valuable to sell.
• 49:30
  Speaker 3: People just don't want They just rather pass them down
• 49:32
  Speaker 3: because not only do they do well in terms of
• 49:36
  Speaker 3: the valuation going up in the comps going up, but
• 49:39
  Speaker 3: they're so cash flow positive.
• 49:41
  Speaker 2: Year over year. Why would you sell?
• 49:42
  Speaker 3: You know, if you have an asset that generates that
• 49:45
  Speaker 3: much cash that you can either take some profits and
• 49:48
  Speaker 3: or reinvest into the team and the value goes up.
• 49:50
  Speaker 3: There's no better and we'd all love that kind of investment.
• 49:53
  Speaker 3: And these are more, you know, kind of generational teams
• 49:55
  Speaker 3: that gets passed down within families, right whether it's you know,
• 49:59
  Speaker 3: the Hunt family Aansas City, the Rooneyes in Pittsburgh. I
• 50:02
  Speaker 3: want name all the different NFL owners, But so they trade.
• 50:05
  Speaker 3: I think the Seahawks were unique. What I know about
• 50:07
  Speaker 3: it because you know, Paul Allen, Microsoft co founder, was
• 50:11
  Speaker 3: a you know, single guy with no kids, and so
• 50:14
  Speaker 3: his sister took over the estate. So I think, you know,
• 50:17
  Speaker 3: the group led by vanad Cosla, they saw that so okay, yeah,
• 50:20
  Speaker 3: we're going to pay a premium for this, you know,
• 50:22
  Speaker 3: just under ten billion dollars. But these don't trade very often,
• 50:26
  Speaker 3: you know, and so so.
• 50:27
  Speaker 2: I think that's the NFL, the NBA.
• 50:30
  Speaker 3: I think it's you know, the media deal, to be honest,
• 50:33
  Speaker 3: actually a couple of different media deals. I think the one,
• 50:35
  Speaker 3: you know, starting in twenty fourteen, that was greed upon
• 50:38
  Speaker 3: in twenty fourteen, I believe it was I think my
• 50:40
  Speaker 3: second year with the Sons that was a significant bump.
• 50:43
  Speaker 3: And that's why if you remember an NBA fan that
• 50:45
  Speaker 3: the in the now infamous salary cap spike year in
• 50:48
  Speaker 3: twenty sixteen, where that the cap was not smoothed out,
• 50:51
  Speaker 3: the money was not phased into the economy.
• 50:53
  Speaker 2: It came in, you.
• 50:54
  Speaker 3: Know, kind of in a bazookah of cash. And that's
• 50:57
  Speaker 3: why if you go back and look at some of
• 50:58
  Speaker 3: the players, there's never a better time to be an
• 51:00
  Speaker 3: NBA free agent, especially an unrestricted free agent. Then in
• 51:03
  Speaker 3: the twenty sixteen offseason, some of the guys, the contracts
• 51:06
  Speaker 3: look ridiculous now, so wait, abut that guy's you know,
• 51:08
  Speaker 3: he got what good for them? You know, it was
• 51:10
  Speaker 3: a windfall for those players. But then this new national
• 51:13
  Speaker 3: media deal that was agreed upon a couple of years
• 51:15
  Speaker 3: ago kicked it up a whole other level.
• 51:17
  Speaker 2: So I think it was that bad.
• 51:18
  Speaker 3: But also something that I think, frankly i'd love to
• 51:21
  Speaker 3: get your opinion, is probably the next step for Major
• 51:23
  Speaker 3: League Baseball, and that is kind of a changing of
• 51:26
  Speaker 3: the guard in ownership where some of the you know,
• 51:29
  Speaker 3: the families and groups that have owned the team for
• 51:32
  Speaker 3: decades and maybe they bought them as young men or women,
• 51:35
  Speaker 3: or inherited from their parents or grandparents, and kind of held.
• 51:38
  Speaker 3: They look around in the marketplace and the comps and say,
• 51:40
  Speaker 3: my goodness, think of how low our cost basis was.
• 51:44
  Speaker 3: What we bought this thing for and inherited for decades ago.
• 51:47
  Speaker 3: Look at what we could sell it for now we
• 51:48
  Speaker 3: have to at least think about that, especially if they're
• 51:51
  Speaker 3: getting older.
• 51:51
  Speaker 2: Right.
• 51:51
  Speaker 3: So, I think those are all three different scenarios. I
• 51:54
  Speaker 3: think the NFL's at the top of the pyramid. I
• 51:56
  Speaker 3: think the NBA is kind of in the middle. And
• 51:57
  Speaker 3: then I'm fascinated to see that. And I'd love to
• 51:59
  Speaker 3: get your opinion as far as what happens to Major
• 52:01
  Speaker 3: League Baseball, especially if the Dodgers sell. But then regardless
• 52:05
  Speaker 3: of whether the Dodgers sell coming out of the lockout,
• 52:07
  Speaker 3: when there is labor certainty, if there is a lockout,
• 52:10
  Speaker 3: I think the valuations from there go up pretty significantly.
• 52:12
  Speaker 3: But yeah, you know a lot more about that than
• 52:14
  Speaker 3: I do.
• 52:14
  Speaker 1: Yeah, and right, you touched on it. I think there
• 52:16
  Speaker 1: are a lot of Major League Baseball franchises that are
• 52:18
  Speaker 1: still owned by families or by individuals, or there's a
• 52:22
  Speaker 1: primary holding position and then there's some minority positions behind.
• 52:27
  Speaker 1: We don't see as many investment vehicles that have entered
• 52:30
  Speaker 1: baseball just yet, and so I think that there will
• 52:33
  Speaker 1: be a turnover that we'll see. And you know, I
• 52:35
  Speaker 1: think you brought up the tag along rights concept, and
• 52:38
  Speaker 1: I think that was one of the things that rumors
• 52:41
  Speaker 1: that he held up the Padres deal a little bit,
• 52:44
  Speaker 1: that people who would then minority position holders said, oh
• 52:47
  Speaker 1: my god, we're now valued at three point nine billion.
• 52:49
  Speaker 1: I'm ready to sell as well. And so I think
• 52:52
  Speaker 1: that we're going to see a lot more transactions in baseball.
• 52:55
  Speaker 1: You bring up a great point once the CBA stabilizes
• 52:58
  Speaker 1: things and people have a much greater under standing of
• 53:00
  Speaker 1: the financial landscape in all of these marketplaces. Because keep
• 53:04
  Speaker 1: in mind, in baseball, recently, the Baltimore Orioles in Tampa
• 53:08
  Speaker 1: basol for around one point seven billion, the San Diego
• 53:12
  Speaker 1: Padres more than double that. But then there are other
• 53:14
  Speaker 1: franchise that were up forbid, the Minnesota Twins, the Anaheim Angels,
• 53:18
  Speaker 1: the Washington Nationals. Those all did not sell at the
• 53:21
  Speaker 1: time because they weren't getting the asking price. It'll be
• 53:24
  Speaker 1: interesting on the other side of the CBA negotiation if
• 53:27
  Speaker 1: some of the financial uncertainties in these markets get stabilized,
• 53:31
  Speaker 1: get smoothed out. The TV rights are in total flux
• 53:34
  Speaker 1: in baseball. That's going to be a primary focus for
• 53:37
  Speaker 1: the Commissioner's office once it gets resolved. I think we
• 53:40
  Speaker 1: may start seeing a real uptick in Major League Baseball
• 53:43
  Speaker 1: and an interesting opportunity for sports ownership group as you expand.
• 53:48
  Speaker 1: Once you have tremendous success in the NBA, Baseball may
• 53:51
  Speaker 1: be a new burgeoning frontier for you guys to pursue.
• 53:56
  Speaker 2: Yeah, I would love to with that.
• 53:57
  Speaker 3: If you could talk to the Brewers ownership group and
• 53:59
  Speaker 3: tell them, tell them the hohold five percent for us,
• 54:01
  Speaker 3: and you know, we'll come back to him in a
• 54:02
  Speaker 3: couple of years with a big fat publisher's clearing house check,
• 54:05
  Speaker 3: you know, and you know, make sure you're you're handsomely
• 54:08
  Speaker 3: compensated for making the introduction.
• 54:11
  Speaker 1: Well, that would be that would be wonderful. Ryan, we
• 54:13
  Speaker 1: spent some time talking about the high end of this
• 54:15
  Speaker 1: market with the Celtics and the Lakers, unprecedented sales in
• 54:20
  Speaker 1: our local market in Minnesota. We've got to ask you
• 54:23
  Speaker 1: the question. In the last five sales, the Timberwarves were
• 54:26
  Speaker 1: one of them. They sold for one point five billion.
• 54:29
  Speaker 1: Why so little in air quotes, I should say relative
• 54:33
  Speaker 1: to where the market has gone from there. Even the
• 54:35
  Speaker 1: Trailblazers who sold in the last five years sold at
• 54:37
  Speaker 1: four point twenty five billion. What were the market dynamics
• 54:41
  Speaker 1: that led to the sale of the Timberwolves at one
• 54:43
  Speaker 1: point five billion.
• 54:44
  Speaker 3: The market dynamics are the most important factor in all
• 54:47
  Speaker 3: of this. That because if you look at the history,
• 54:49
  Speaker 3: the NBA evaluation, the say we've discussed, they've gone up
• 54:52
  Speaker 3: significantly and consistently over time. However, they were going up,
• 54:56
  Speaker 3: you know, relatively steadily, and then when COVID hit, which
• 55:00
  Speaker 3: approximately six years ago now, they went almost parabolic. They
• 55:05
  Speaker 3: got a lot steeper in terms of the curve and
• 55:06
  Speaker 3: the appreciation. So what happened in that sale was Glenn Taylor,
• 55:11
  Speaker 3: as you know, owned the Wolves as a majority owner forever,
• 55:14
  Speaker 3: had the team on and off the market a few times.
• 55:17
  Speaker 3: I know there are some groups that thought they were
• 55:18
  Speaker 3: going to buy a majority control from Glenn and then
• 55:20
  Speaker 3: something happened or he changed his mind, and so he
• 55:23
  Speaker 3: had been rumored to look at sales for a number
• 55:25
  Speaker 3: of years. Then you know, during COVID, we all I
• 55:28
  Speaker 3: think had more time and Alex Rodriguez obviously famous MLB player,
• 55:33
  Speaker 3: and Mark Lourie really developed a relationship with Glenn, you know.
• 55:38
  Speaker 3: They it came up with a plan where it was
• 55:39
  Speaker 3: a staggered ownership transaction that I think made sense at
• 55:43
  Speaker 3: the time. And that's the key factor here with that.
• 55:46
  Speaker 3: I think you can't look at when the deal closed.
• 55:49
  Speaker 3: You have to look at when it was agreed upon,
• 55:51
  Speaker 3: which I think was either twenty twenty or twenty twenty
• 55:54
  Speaker 3: one before the market kind of reset right around that time.
• 55:57
  Speaker 3: To give you the first comp that comes to my mind,
• 56:00
  Speaker 3: Ryan Smith bought the Utah Jazz for I think one
• 56:02
  Speaker 3: point six or one point seven billion, so it was
• 56:04
  Speaker 3: in line, it was in range of what those guys paid.
• 56:07
  Speaker 3: But then all of a sudden, the market went parabolic
• 56:09
  Speaker 3: and team started getting traded at a much higher valuation. So,
• 56:13
  Speaker 3: you know, it seems like Glen Taylor and his group
• 56:15
  Speaker 3: realized that said, oh shoot, we sold kind of under
• 56:17
  Speaker 3: the old economics and the old comps. These new comps
• 56:21
  Speaker 3: are better for us. But the deal has not closed yet.
• 56:23
  Speaker 3: So yeah, as you know that you live in the
• 56:25
  Speaker 3: Twin Cities, it got contentious. There were you know, a
• 56:28
  Speaker 3: lot of lawyers involved. It took years a multi year process. Ultimately,
• 56:32
  Speaker 3: I can't remember if it was a judge or an
• 56:34
  Speaker 3: arbitrador ruled. I think it was two to one on
• 56:36
  Speaker 3: a three man panel that Mark Laurie and Alex Rodriguez
• 56:39
  Speaker 3: were white right. The deal needed to be honored. Glenn
• 56:42
  Speaker 3: Taylor would have loved the deal to be voided because
• 56:44
  Speaker 3: had he been able to reset it and shop it
• 56:46
  Speaker 3: back in the marketplace three or four years after his
• 56:49
  Speaker 3: initially agreed upon, he would have gotten a much higher price.
• 56:52
  Speaker 3: So too bad for Glenn Taylor. A tremendous deal for
• 56:56
  Speaker 3: Mark Laurie and Alex Rodriguez. And I'll say one thing
• 56:58
  Speaker 3: with confidence that I know prediction projections and predictions are
• 57:01
  Speaker 3: tough in this business. You'll never see an NBA team
• 57:03
  Speaker 3: trade for one and a half billion or close to that. Again,
• 57:06
  Speaker 3: the market is reset. So those guys made one of
• 57:08
  Speaker 3: the best investments in recent NBA history and not, if
• 57:13
  Speaker 3: not all, of the history of recent sports transactions.
• 57:16
  Speaker 1: And the very vehicle that attracted those two owners, which
• 57:21
  Speaker 1: was that length of time that they could actually buy
• 57:25
  Speaker 1: the team, was a very vehicle that then made Glenn
• 57:28
  Speaker 1: Taylor have sellers remorse, which was unfortunate. If that was
• 57:31
  Speaker 1: a transaction done acutely in a moment in time. He
• 57:35
  Speaker 1: probably regrets it, but not quite as much. It wouldn't
• 57:37
  Speaker 1: be quite as public as it turned out to be.
• 57:40
  Speaker 4: You know, we've had a few teams here in Minnesota
• 57:42
  Speaker 4: lately kind of either sell or sell pieces off. Fans
• 57:47
  Speaker 4: get excited. They think, oh, you know, we're going to
• 57:49
  Speaker 4: have some more money injected into this whole thing, or
• 57:52
  Speaker 4: you know, we won't have to rely on X owner
• 57:55
  Speaker 4: anymore and they'll have more voices in the room. Is
• 57:57
  Speaker 4: that really what it looks like? I mean for fans,
• 57:59
  Speaker 4: is this a bit to have these minority ownerships buying
• 58:02
  Speaker 4: into these teams?
• 58:03
  Speaker 3: I think it is, chat at least in theory it is.
• 58:06
  Speaker 3: It all depends, frankly, on how the majority owner spends
• 58:10
  Speaker 3: the money and what he or she does with the money.
• 58:12
  Speaker 3: The case that that will make, especially to the majority
• 58:16
  Speaker 3: owners who have owned the team for a while, is yeah,
• 58:19
  Speaker 3: invests a lot, if not all, the money that we
• 58:22
  Speaker 3: bring into your group back into the team.
• 58:24
  Speaker 2: Right right.
• 58:24
  Speaker 4: They're not required to do that.
• 58:26
  Speaker 2: No they're not. No, they're not.
• 58:27
  Speaker 3: And that's why a big part of what we're doing
• 58:29
  Speaker 3: as the first ever sports Insiders to do. This is
• 58:32
  Speaker 3: figuring out the likelihood and having some pretty detailed conversations
• 58:35
  Speaker 3: about with the owners if and when we bring them
• 58:38
  Speaker 3: checks well into the nine figures, what are they going
• 58:41
  Speaker 3: to do with that money? Because if the answers, hey
• 58:43
  Speaker 3: pocket it and run the team into the grounds, that's
• 58:45
  Speaker 3: probably not a group that we want to be a
• 58:47
  Speaker 3: part of. So that's where it comes in CHET. It's yeah,
• 58:49
  Speaker 3: are they going to invest it in, especially the things
• 58:52
  Speaker 3: frankly that have no cap right that the infrastructure, the stadium,
• 58:56
  Speaker 3: the practice facility, the staff, you know, on your operations,
• 59:01
  Speaker 3: whether it's basketball operations or business operations, side technology, all
• 59:05
  Speaker 3: those kinds of things. Are they going to invest a
• 59:08
  Speaker 3: significant portion in that or are they going to pocket
• 59:10
  Speaker 3: it and go to the Maldives and sit on their yacht.
• 59:13
  Speaker 3: I don't know, but those are the conversations we're having,
• 59:16
  Speaker 3: and that's what you know, I think fans should be
• 59:18
  Speaker 3: looking at because, yeah, a lot of the teams in
• 59:20
  Speaker 3: different leagues they cash flow positive, pretty much all of
• 59:23
  Speaker 3: them do now in the NBA, But that doesn't mean
• 59:26
  Speaker 3: the owners necessarily take every dime and reinvest it back
• 59:29
  Speaker 3: into the team. However, the guys and women who are
• 59:32
  Speaker 3: closer to that than taking every dime and putting in
• 59:34
  Speaker 3: their own pocket and going and cashing it at the bank.
• 59:37
  Speaker 3: Those are the people we want to invest with in that.
• 59:38
  Speaker 3: That's a big part of our conversations and our thesis,
• 59:40
  Speaker 3: and we're frankly, I think we can add some of
• 59:42
  Speaker 3: our biggest value, our biggest advantage as far as having
• 59:46
  Speaker 3: conversations and saying, hey, if we give you a lot
• 59:48
  Speaker 3: of money, what are you going to do with it?
• 59:49
  Speaker 3: And if we like what we hear back in return,
• 59:51
  Speaker 3: we're likely to invest. If we don't like it, we'll
• 59:53
  Speaker 3: probably look to invest elsewhere.
• 59:55
  Speaker 4: And if they there's no real way to hold them
• 59:57
  Speaker 4: accountable to a degree other than you don't invest with
• 1:00:00
  Speaker 4: them anymore. Is that kind of how it works. It's
• 1:00:02
  Speaker 4: a reputation deal, right.
• 1:00:03
  Speaker 3: I think that the way to you, as a minority owner, yes,
• 1:00:06
  Speaker 3: the majority owner controls it. The theoretical way at least
• 1:00:09
  Speaker 3: told them accountable is to try to sell at the
• 1:00:10
  Speaker 3: earliest possible opportunity. Like any other deal, we have a
• 1:00:14
  Speaker 3: business agreement. You told me you were going to do
• 1:00:16
  Speaker 3: something and then you didn't. So as soon as I
• 1:00:18
  Speaker 3: control it, we're going to look to get out of it,
• 1:00:20
  Speaker 3: and that's the situation that we're trying to avoid. And
• 1:00:22
  Speaker 3: that's where, frankly, I think our extensive resources and connections
• 1:00:26
  Speaker 3: in the NBA, with seventy five years of experience, that
• 1:00:28
  Speaker 3: all the people we know will help us more than
• 1:00:31
  Speaker 3: any other sports fund that exists because we can talk
• 1:00:33
  Speaker 3: to literally dozens of people who know the majority owner,
• 1:00:36
  Speaker 3: know the group, know his or her history, and can
• 1:00:39
  Speaker 3: establish a pattern. Nothing is certain, but I like our
• 1:00:42
  Speaker 3: ohs better than they as far as trying to predict
• 1:00:44
  Speaker 3: how people are going to act when you do give
• 1:00:45
  Speaker 3: them money, which is a big part of sports, whether
• 1:00:47
  Speaker 3: it's on the ownership side or even on the front
• 1:00:49
  Speaker 3: office side when you're looking at signing players to contracts.
• 1:00:52
  Speaker 1: Right, in this case, what will inspire your investors is
• 1:00:55
  Speaker 1: the owner's willingness to reinvest their funds to improve the
• 1:01:00
  Speaker 1: product on the court. That's the very thing that's going
• 1:01:03
  Speaker 1: to inspire the listeners and the fans as well, because
• 1:01:07
  Speaker 1: they're going to want the exact same thing. You're going
• 1:01:09
  Speaker 1: to be aligned perfectly there.
• 1:01:10
  Speaker 2: Ran.
• 1:01:11
  Speaker 1: It has been absolutely awesome to have you back on
• 1:01:13
  Speaker 1: the show. We couldn't appreciate it more. And as you
• 1:01:16
  Speaker 1: mentioned earlier Joe Rogan, those footsteps you hear are rosterst
• 1:01:20
  Speaker 1: rings coming your way courtesy of this huge bump we're
• 1:01:22
  Speaker 1: getting from having Ryan on the show. Thanks again, you
• 1:01:27
  Speaker 1: helped launch us and take us to where we are today.
• 1:01:29
  Speaker 1: We hope to have you back on multiple times. Wish
• 1:01:32
  Speaker 1: wishing the best of success for you and mL IN
• 1:01:35
  Speaker 1: Sports Ownership Group, and we can't wait to hear how
• 1:01:38
  Speaker 1: you guys take off and hear the first investment you
• 1:01:40
  Speaker 1: guys make down the road. Please join us this Thursday
• 1:01:44
  Speaker 1: and every Thursday on Rosters to Rings