Will the NFL Allow Private Equity Investment?

Hey!

Last night, I sent you an email and I forgot to include the link to the original article.

I updated it on the site so you could see it:

But here is a link to the piece as well about the A-Leagues and their strategy.

Due to my mistake, I’ll now share with you a few thoughts on whether or not the NFL is going to allow Private Equity investment in the league and a few other notes.

The Big Thing: I can’t see why Private Equity wouldn’t make its way into the NFL.

The price of teams has exploded.

The better question: Should the NFL embrace PE?

That’s a tougher question because as Roger L. Martin points out this week, PE usually invests in places where they can “extract” the maximum return from their investments, mature businesses.

The truth is that SportsBiz along with the arts, opera, and other cultural institutions are all facing an environment where their business models are being challenged and are changing almost in real time.

This raises a few questions to me:

• How much higher can the current business model go? As Megan McArdle points out here, the shift to streaming has created an environment where it is much more difficult for leagues and broadcasters to “extract” money from non-fans or casual ones.

• The secondary market has often been a place that teams could turn to to sell tickets to brokers, consolidators, and, fewer and fewer, direct customers. But, a long term trend has been that more than 50% of tickets on the secondary market go for under face value. As more and more customers are strained financially, will the ability to make up for the loss leaders with the gains on less than 50% of the inventory continue to hold up?

• What lesson are the high costs of game attendance teaching fans? Is there a point where things become so cost prohibitive that people start to go less, leaving stadiums less than sold out, and a feedback loop begins that makes the experience seem less impressive. (We’ve seen it in college football where the superstars are fine, but there are a lot of places that are not fine.)

This brings me back to the extractive nature of PE.

What so many places need right now is innovation in their business models and the way that they approach monetization.

The siren song of streaming has been a popular topic because of the $110M that Peacock paid for an exclusive playoff game and the announcement that Amazon will have an exclusive playoff game next season.

Marketing science will teach you that you want to reach the largest audience possible to ensure that you take advantage of the dual laws of mental and physical availability.

In other words, MLS is on Apple and no one watches.

The NFL is on over-the-air TV a lot more and people watch in droves…just look at the growth in viewership this year, tons of it was driven by putting Monday Night Football games on ABC.

(Apple TV+ is great, but the audience is small compared to other streamers.)

Why did this happen?

It isn’t genius, it math!

More people have access to your broadcast, more people are likely to tune in.

Duh!

That’s why I’ve been so big on the move by the Suns and Jazz to move to over-the-air with the decline of their RSN deals.

Math!

If you reach the full audience in your community, you have a bigger audience to work with, and you can be more creative in how you create revenue opportunities.

There is brand equity in a bigger audience.

Back to the big question of SHOULD:

• PE is going to want to push for more gated content because those are recurring revenue streams.

• PE is going to look for ways to bump ticket prices, sponsorship prices, and other things in the short term.

• PE will look to cut costs because the spread of P&L matters more than the quality of the product.

Again, you don’t have to look far to see that the business model of PE is at odds with growing and innovating businesses:

• Mother Jones called it ‘the smash and grab’ economy.

• The Atlantic looks at the practice of PE firms bankrupting its own businesses.

• Brendan Ballou wrote a whole book on the topic called Plunder.

The big point is that the idea of taking PE investment might seem like a magic wand to fix a lot of problems, but it could just as easily go astray…even if you are an NFL owner.

What do you think?

• Can the prices of tickets keep going up?

• Is putting more content behind a paywall a smart decision for the NFL? Likely?

• What about the secondary market? Can they continue to pay the prices they are paying in hopes of hitting big on less than half of events?

Let me know in the ‘Talking Tickets’ Slack Channel.

Me, I’m always looking for innovation and growth! That’s always been my MO.

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Keep an eye out for the announcement of ‘Sold Out’.

As I mentioned last night:

• We are going to focus on growth and creating opportunity.

• You are going to want my ‘Billion Dollar Strategy’ framework that helps you set strategy by answering 5 questions.

• Knowing the 1% secret will give you a chance to stabilize your revenues.

It is going to be $100 per organization/team/building.

This is my way of making up for not being able to attend many of the conferences this year due to my travel schedule.

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Mark your calendar for the last week of June in London!

I’m coming for Pearl Jam at Tottenham Hotspur Stadium and I’m going to make my summer residency international this year.

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Drop me a note!

• What are you thinking about?

• What are you reading?

• What are you interested in learning more about?

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You’ve made it to the bottom!

You rock!

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