00:00The cynics view of this push could be they're all adding in retail capital. It's a lot of dudes who
00:05like sports. It's a lot of investors or L.P.
00:07is probably like sports. Maybe their returns aren't so good but it's like a sexy flashy topic. What is sort
00:12of the counter to that narrative of why this
00:15actually makes sense for private capital to push into. I think it's tremendous sense. You think about sports. It's a
00:19trillion dollar plus asset
00:20class. Right. It has very little outside capital which has come into it. And if you look at historical returns
00:25over time these have been very
00:27strong returns. They've generally been uncorrelated with other asset classes. So the investment thesis is very very strong from that
00:33perspective. And then you look at the content of sports and the fan engagement and the repeat nature of that
00:39and how it's not only the
00:40fan it's the family etc. Very very significant. And increasingly with direct to consumer you have the ability to drive
00:46this on a truly
00:47global basis. And so you think about addressable market and what that total fan base could be for different leagues
00:52different teams
00:53quite frankly even players. These are really global businesses today. And we're just at the beginning stages of what that
00:58can
00:58really look like.
00:59With the entry of private capital that means that valuations can go even higher. And there are a lot of
01:03questions about whether
01:04valuations are already too high. How do you go about breaking down the answer to whether valuations are in bubble
01:10territory.
01:11Well it's interesting. As we think about the different pockets capital that are interested in investing. Right. You have your
01:16traditional owners say your billionaires. More billionaires are getting made at a faster pace today than I think any time
01:21in
01:21history. You look at family offices. You've talked a lot about family offices on your shows. That's growing very very
01:27dramatically. And so across our business we're seeing significant interest out of these family offices. Some for a passion play
01:33which you
01:33talked about. Some just for pure asset allocation into a really good asset class. And then you have the private
01:38equity firms which
01:39you talked about 15 to 18 or so on a global basis. Probably 50 to 100 billion dollars of capital
01:44that wants to go in. But again on a
01:45trillion dollar industry. Trillion dollar plus it's not that much capital which is going in. So we think there's tremendous
01:50interest. From a floor perspective media rights continue to be strong. You see in the best leagues around the world
01:55the best unique
01:56content. Those continue to go up a pretty dramatic pace. And we talked and we can touch more on but
02:01this direct to consumer
02:02model and how do you think about the monetization of the fan and that community building around that fan base
02:06is very very
02:07strong. So we think there's significant opportunities. Sports have also historically been funded more pure equity. So the loan to
02:14value has been relatively low. And so over time as this evolves and you continue to see more innovation. We
02:20think there are
02:21opportunities to drive down the cost of capital pretty dramatically as well. In the U.S. though it's already a
02:26very mature market. And
02:27Arctos is really the only fund that has approvals and ownerships of all of the big leagues. Does that mean
02:33liquidity is a problem. If you buy into
02:36this are you sure you can get the valuations you want if you want to exit the investment. That's it's
02:41a fantastic
02:41point. Secondary liquidity is critical to this. It's critical called every other asset class. It's very limited today as you
02:47touched on. And so we're going to continue to see more innovation more openness. Leagues are going to probably be
02:53more open to
02:54terms of how this works from a Goldman perspective. We think that the evolution of this will be similar to
02:59what we've seen in other asset
03:00classes over decades. And it'll move more in that direction. But it's a very good point because today secondary stakes
03:05still
03:05fundamentally trade by appointment and they're highly illiquid. But it's getting better. It's come a long way in the last
03:12five
03:12years. And we continue to see this evolution. And everybody's aligned to want this secondary liquidity to come. We talked
03:18about
03:18all the pockets of capital that want to come into the sector. Certainly if you're in the sector and there
03:22are certain pockets of capital
03:23they'll only come in if they feel they can get out at a true market based price. And so that's
03:27the that's our path here.
03:29Which part of the sports investment landscape do you see secondary liquidity happening the fastest? Is it going to be
03:34in the
03:34established leagues or the niche sports?
03:36Look, I think I think it'll be it'll be both. Certainly the broadest pockets capital tend to have an interest
03:42in the biggest leagues,
03:44the best content, the biggest companies. Right. And so I think we'll see that liquidity drive over time. And that's
03:48where you could drive to
03:49more liquidity at scale. The nascent leagues, the high growth leagues, there's huge opportunity. Valuation is
03:55important. But we think there's really attractive opportunities in that sector as well. How are you advising
04:00people when they want to buy some of the more niche sports to Scarlett's point? Like I've spoken with Mark
04:04Lazarie of Avenue before, who I believe has a stake in sale GP. And I look at something like that
04:08and I'm like, what is the
04:09audience for that? How do you grow that? What are the media rights? So when you have these more niche
04:13sports,
04:14what does the path of growth look like? We talked a little governance. So I think governance, the league,
04:19how's it controlled? How are decisions made? Are those decisions made for the betterment of the
04:23league and all the teams of the league? Or is it everybody just, you know, going aggressively after
04:27each other? You need to have that competition, but more of that competition on the field or on the
04:31water in sale GP cases. So that's, I believe that's really, really critical in terms of what you do.
04:37And then valuation, what's the addressable market, right? We talked about that. How big is that fan
04:40base? What does that fan base look like? Sale GP, smaller addressable market for sure. But you think about
04:45that fan base and what the profile that consumer looks like and the economic profile that
04:49consumer, highly, highly attractive, right? So to certain brands who want to get access to that
04:53type of consumer, very attractive. And the league's done tremendously well. Let's talk about a direct
04:58to consumer market and what that's going to look like in five years and 10 years from now with say
05:02something like the NFL versus something like just a pickleball league. Yep. Direct to consumer,
05:07like there's been no better time to be a fan today of any type of sport. And again, it goes
05:12back to
05:12in the old days, you had to go to the stadium, right? You probably weren't in the region. Then you
05:16had
05:16broadcast television, but now you can be anywhere on the globe and be a fan. And this community
05:21element of being social, being attached, having this curated audience. And for those teams and
05:27these owners now having this first party data to know, if you have 10, 20, 50, 100 million people
05:32in your database, you know everything about every single one of them. And so the ability to engage
05:36them in a way that makes their experience better is very, very significant. And the next evolution of
05:41this is going to be more tools in an AI world are going to get pushed out to the fan
05:44base so they can
05:45curate. You can now get your own customized sports center, right? But you can curate your own
05:49highlights. You can do this in the way you want to do. And I think increasingly you'll see television
05:53angles where if you're watching a game, you can say, look, I'd like the quarterback cam, or I'd like
05:57the catcher cam, or I'd like this different cam. And so you're almost going to be your own producer.
06:01And that's just going to drive more and more active engagement into the, into the sports world.
06:05Yeah. I know like F1 already does that. You can pick your driver of who you see behind the wheel,
06:09which is wild to me. On the other side of things, you have extreme fans and extreme fandom
06:14in Europe. And you also then have the risk of delegation for European football teams. And this
06:21has been a really popular investment for a lot of not just private capital, but for billionaires too
06:26in the U.S. and otherwise. How should an investor weigh up the risk of opportunity of these clubs when
06:31you can also have serious financial consequences if your payoffs don't result in staying in the league
06:38or maybe you see delegation? Well, it's not a surprise. The NFL and the NBA have the highest
06:42team valuations of the world. And it's for this part, for this reason, right? Certainly European
06:46soccer has massive fan base in many ways, bigger fan base today on a global basis, but that relegation
06:52risks, the lack of a salary cap, a business model where it's, there's a lot more volatility in the
06:57business model versus had an NFL case, having a hard cap and the NBA, it's in essence, a soft cap.
07:01They got through the last collective bargaining agreement. And so it's a huge, huge impact
07:05in terms of how you ultimately, ultimately think about this. And every sport is different,
07:09but ultimately comes back to that governance and what's been set up.
07:13The Paul Allen Trust has tapped Latham and Watkins to lead the sale process for the Super
07:17Bowl victors, the Seattle Seahawks, along with its pending sale of the Portland Trailblazers.
07:21How do you see this shaping out? Like, how do you see this playing out over the next couple of
07:25months?
07:25Well, I think it's hard to comment on any specific situation, but the fundamentals
07:29for sports, rich, large, certainly the fundamentals for the NFL continue to be very, very strong.
07:35And so we will, you know, we'll see what ultimately plays out here if they decide to move forward or
07:39not.
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