Speaker 1: Today we saw a major shift in one of the most important businesses that's not available for trading. It's only about the NFL. Sources have confirmed with me is that the NFL is going to approve private equity investing.

Speaker 2: Owners have just voted to approve a rule allowing a portion of NFL franchises to be sold to private equity firms.

Speaker 3: In late August, for the first time ever, the most profitable sports league in the world joined other major American sports leagues in allowing private equity investing in its teams.

Speaker 4: You're literally in the first inning, second inning of sports. This is like literally a trillion dollar industry when you take a look at all the different subsets. So I think it's a massive opportunity. I think for the next 10 years this is where you want to be.

Speaker 5: The whole media TV landscape is shaken up because of streaming coming in. And the only thing that seems to be safe from all of that upheaval has been sports. Viewers are still showing up, whether it's streaming or linear regular TV. And there's just a ton of money there. So it's made it a very attractive investment for private equity.

Speaker 3: Major League Baseball in 2019, Major League Soccer in 2020 and the National Hockey League in 2021 all allowed their teams to sell minority stakes to private equity before the National Football League's announcement in late August.

Speaker 1: After viewing how private equity was investing in those leagues, which have limits up to 30 percent private equity investment, the NFL said, OK, we'll allow a little bit in. We'll put our toe in the ocean, see how it works.

Speaker 3: It also has very different minimum dollar requirements than other leagues. While the minimum investment in an MLS club is $20 million, the minimum in an NFL team is 3 percent of that franchise's valuation. The average NFL team is valued at $6.49 billion. That's almost $200 million.

Speaker 6: Frankly, the private equity firms really want to get into the NFL. It's the gold standard. It's where they really want to be. So they the ones that are in had to accept these different terms in order to be able to participate.

Speaker 3: So far, four investment firms have been approved for initial investing in teams, flushing them with an expected $12 billion. The money can be used for anything like stadium projects or facility upgrades, and three fourths of NFL owners have to approve the stake sale before it's signed.

Speaker 7: So it's sort of like having a pool of capital of faceless investors that allow us to grow and build our asset.

Speaker 8: That capital can can be used for a lot of purposes. I think most importantly, it'll give teams that are considering new stadiums or renovated stadiums an opportunity to access a capital pool that they haven't had access to in the past.

Speaker 3: The initially low investment threshold will keep investment firms as minority stakeholders with no voting power, decision making or

Speaker 6: governance. The only way they're going to allow institutional capital in was if the decision making process remained as it has been, that there would be no pressure on control owners or their families to alter the way and the type of decisions that they make.

Speaker 3: That's far from how private equity generally operates.

Speaker 5: Typically in a private equity strategy, there is an outcome. It's getting board seats and seeing management change or it's dividends or it's a specific time period to exit and get that return. That is not what is happening in sports.

Speaker 3: Private equity in sports really started in Europe when three private equity funds bought majority stake in famed soccer team Paris Saint Germain in 2006. In the U.S., the MLB was the first to allow institutional investment. Today, 18 of 30 MLB teams have accepted private equity. The league's franchises have grown 35 percent between 2019 and 2024.

Speaker 6: The United States, we had a we had baseball teams that had serious liquidity problems and some of those were solved by the investments of

Speaker 3: private equity. PE firm Arctos, which launched in 2020, is one of the most active players in the sports investment class. It holds minority stakes in the Houston Astros, the Sacramento Kings, the San Francisco Giants, the Utah Jazz, Boston Red Sox, San Diego Padres and the New Jersey Devils, among others. Arctos recently closed its second sports fund valued at four point one billion dollars, which includes investment from pension funds, retirement systems, endowments, insurance companies, family offices and global wealth platforms. Each of the six baseball teams they hold stakes in will be or have already renovated their stadiums. Only the Astros are issuing bonds to complete their 20 million dollar renovations. 20 of the NBA's 30 teams have ties to institutional capital. The average basketball team is worth four point four billion dollars. That's up 15 percent compared to 2023.

Speaker 6: A lot of teams in the NBA, more than people might realize, have been in a cash loss position every year, some in a nine figure cash loss position, a significant amount. But the valuations have increased much more than that. And so they've been able to avoid capital calls in some cases by selling shares to private equity firms. So it has been a way to create liquidity without having to borrow money and without having to do capital calls.

Speaker 3: In July 2021, Blue Owls Dial Home Court Fund bought a stake in the Phoenix Suns at a one point five billion dollar valuation. Two years later, it sold its share to the Ishbia Brothers in 2023 at a four billion dollar valuation, a 158 percent return in just 18

Speaker 1: months. Primarily, the way private equity money has impacted the NBA is it's helped pushed up the value of teams, because when you have a greater interest, in other words, you have a greater supply of investors and more money looking to buy an asset. But the supply of assets remains unchanged. There are still only 30 teams in the NBA. It's going to push up prices.

Speaker 3: The National Women's Soccer League is an outlier amongst its peer sports leagues in that it allowed private equity firms to own majority controlling shares and teams. Bay FC owner Sixth Street is also one of the approved funds for the NFL. Sixth Street CEO Alan Waxman serves on the NWSL board of governors and even led the consortium that launched Bay FC from scratch, investing 125 million and then a 53 million dollar expansion fee. It sold out its first home game in 2024 with a record high 18,000 attendees.

Speaker 5: Usually a private equity, there's a specific time and way of getting out of a deal. There's an exit strategy. There is a return on investment. This is not at all traditional in that sense. But yet people want to be in it.

Speaker 3: Private equity investment in sports does come with some inherent risks, one being an increase in the role of the funds. The NFL said itself in an announcement, the league long resisted PE's involvement, partly due to the fear of misaligned incentives. The NFL wants what's best for its teams, fans and the sport in general. The league has always remained staunch about its focus on heritage, community and reputation. That hasn't always been the case for private equity, known for its laser focus on financial return by deep cost cutting and maximizing

Speaker 7: revenue. We have the very tight rules that we have in the NFL. Having individuals be able to come in and invest is difficult. So it's a perfect addition. And and limiting the investment to 10 percent is is a way to keep it under control from our point of view.

Speaker 1: I think over time you'll definitely see the percentage of private equity money that it's allowed to go into a team increase.

Speaker 3: NFL ownership is kept to a very select few billionaires, making every effort to keep controversies to a minimum. Now the league is exposed to outsiders.

Speaker 6: Do any of the private equity firms get in trouble? Do they get into political trouble? Are they going to be boycotted for investments like we've seen them boycotted in investments in oil or in certain countries in the world? These are just things that have never the NFL has not had to deal with because of its pristine ownership rules.

Speaker 3: The selection process of the approved funds was extremely secretive. It remains to be seen if the league decides to expand the pool of investors, adding another layer of risk.

Speaker 1: I do think the league will continue to allow other forms of investment, whether it's more private equity, other types of institutional investment, perhaps allowing some foreign ownership down the road, because all the sports leagues, but in particularly the NFL, has huge interest from overseas investors.