The Derivative - Tagging a Value to Pro Sports Teams with Bob Reif and Josh Moscot of TAG

Episode Date: May 21, 2020

70 days without sports – seems unbelievable, right? The COVID-19 pandemic has affected us all in more ways than one, and while no sports for 2+ months is at the top of the “first world problems” list, it’s a void left unfulfilled for many people. So we were excited to take a new twist on the Alternative Investment road in today’s episode and talk sports; particularly professional sports team/eSports investing and team valuations. So to help us dive deep on this, we’ve got CEO, Bob Reif, and COO, Josh Moscot of The Audible Group (TAG), to talk about purchasing part of a sports team, LA surfing, Jerryworld, if the pandemic is good/bad for sports, Arnold Palmer as the GOAT, how in the hell eSports works, Wayne Gretzky trivia, what league comes back first, what happens to salary caps, and building a Quant factor model to value a pro franchise. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer Notes: · Follow along with Bob Reif and Josh Moscot on LinkedIn. · Check out The Audible Group on Instagram, LinkedIn, and their website. · Mentioned in pod: RCM-X podcast

Thanks for listening to The Derivative. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference past or potential profits, and listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk

of substantial losses. As such, they are not suitable for all investors. Welcome to The Derivative by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from across the investment world. Things like stadium capacity, population of the local metropolitan area, things like how your team is trending on Google social media analytics, things that measure these qualitative aspects. One that's a little bit more financial is win to player cost ratio, right?

How many games are you winning versus what you're spending on your salary cap? And see if we can create a factor driven regression to understand not only where the value is coming from, but also where it's coming from. All right. Thanks for returning to The Derivative. I'm your host, Jeff Malek. And today we're taking a small twist on the alternative investment road and talking sports. It's about time. But this isn't a Bill Simmons pod. We're talking sports team investing and how in the world you value a sports franchise. Hint, a quant factor model can help. Our guests today hail from the Audible Group, or TAG as they're known, a firm that acts as a relationship broker for companies looking to break into the sports scene, particularly in media and content

rights through consulting, but also with some work on helping pro sports franchise owners find liquidity when and if needed. So today we're joined by CEO and founder of TAG, Bob Reif, and COO, Josh Moscott. Welcome, guys. Thanks for having us. Hey, Jeff. How'd I do on the names? Moscott, that's pronounced correctly? You got it perfect. It's a rare name. So guys, let's get a little

personal background first. You're both out there in LA? Yeah, I'm actually in Laguna Beach, just south of LA. In fact, they just opened the beaches today on May 5th, Cinco de Mayo, but from 6 a.m. to 10 a.m. So I was able to get a dip in the ocean this morning. And we have an office in Newport Beach and an office in Rockefeller Center, one Rockefeller private. Great. I actually, when I was able to get a dip in the ocean this morning. And we have an office in Newport Beach and an office in Rockefeller Center, one Rockefeller private. Great. I actually, when I was a kid, we were, I grew up in Florida and we were visiting California, LA area, and we were on Laguna Beach and we saw, actually saw a person die in the kelp.

It was shocking. I was like nine or something. And I'm like, they pulled him out. They're giving him CPR and everything. Well, we'll avoid the kelp then. Yeah, avoid it. Hopefully they get that all opened up. So I didn't even know that.

That's good news. Josh is up in LA. He's got less kelp up there and better surface. Yeah, there's actually a strange phenomenon happening right now. There's a red tide and there's bioluminescence happening up and down the coast. It's a pretty fascinating. I've yet to see it, but one of these nights I'll get out there. Yeah. Yeah. That's a, it's home base for me.

Actually one of the few that are born and raised here as well as still residing here. So count myself lucky, but, but right now with the beaches closed, it's not, it's not the usual paradise that it usually is. So we're fingers crossed, hoping that the regulations get fixed and we can all go back to safety pretty quickly. I hear you. Amen. So, Bob, coming back to you, you've got a pretty interesting background from what I've read online there. So tell us a little bit how you got started and how you ended up founding TAG. Well, the way I founded a tag is i was fired probably one of the best things that ever happened to me but at

the time it was the worst thing uh but prior to that i started out here in southern california i was living on the couch of a college roommate who happens to be the CEO of the Toronto Blue Jays right now, Mark Shapiro. So we played football together at Princeton. And I came out to Newport Beach. And I met a guy who owned a very small sports marketing company called Sports Group. And he was producing the San Diego Marathon for TV and selling sponsorship. So he hired me for $250 a week to sell sponsorship. And in the first 90 days, I sold about $150,000 in sponsorship for the San Diego Marathon, brought in Advil and a bunch of companies that were, it was like shooting fish in the barrel.

I'd never sold anything before. And that was my start in the sports business. And then I quickly found out who the biggest and largest player was in the world. It was IMG. Ended up interviewing for a job with IMG. It was hired, moved to Cleveland, which was tough going from Newport Beach to Cleveland. And for five years, my job at IMG was to travel the country for 200 days and talk to VPs of marketing, directors of marketing, CEOs, whoever had a budget to place money into sports and sports property. So I had the good fortune of doing endorsements for Joe Montana, Arnold Palmer, Chris Everett, Wayne Gretzky, some of the great names in

professional sports and sold sponsorships for all the premier events that IMG had, hospitality at Wimbledon, hospitality at the Masters. It was just an incredible experience. And while I was there, I went from Cleveland to Detroit, where we bought the Detroit Grand Prix. And so I had my taste of motorsports, which played a part in my later career. And IMG is the world famous IMG, like the Jerry Maguire firm kind of thing. Yeah. Mark McCormick founded what they don't teach at Harvard business school.

It was, it still exists. It was purchased by Endeavor, which was William Morris Endeavor. But it was founded on a handshake between all Palmer and Mark McCormick who played college golf against each other. So their roots are being an agency of representing talent. I never knew that. Golfers and tennis players, and then became Tiger Woods and some of the greatest tennis players on board and go on and on.

Connors, McEnroe. Mike, quick, you mentioned Wayne Gretzky. I've got to throw out my favorite trivia stat ever. If Wayne Gretzky had never scored a goal, where would he be on the all-time NHL points list? That's a great question. So you get a point for an assist, point for a goal. He'd be number one all-time if he'd never scored a goal.

Wow. More assists than anyone has assists plus goals. That's a great fact. That's a great fact. That's a great truth. I mean, that's why they called him the great one, I guess. But sorry. Anyway, so then you're getting- Yeah, I'll accelerate it.

So from IMG, I think big turning point in my career, I was in New York with IMG, was in 1995. Yeah, fall of 95, Jerry Jones in the NFL was a recent owner in the NFL, and he had cut deals for Cowboys Stadium with Pepsi, Nike, and American Express, all of which were not NFL sponsors. The sponsors were Coke, Reebok, and Visa. And that act that he did actually flew in the face of the NFL revenue sharing agreement that teams could not sell against. For Jerry World or the old Cowboy Stadium?

Oh, yeah. So I'm 53. So this is the Cowboys Texas Stadium in Irving, which was, so this is 1995, which cost $10 million to build, just to give you an idea of what those facilities were like back then. You can think about the meteoric growth of this business. So that was in 1995. Well, right then, I used to receive something called the Sports Business Journal that was

faxed to my office in New York. And I read this little story because there was no network that we have today, obviously. And I called every NFL team owner that owned their own stadium that could do exactly what Jerry did, which was sell sponsorship to competitors of the NFL, but because they own their own stadium. And the one guy that returned my call was Wayne Heisinger or his assistant did. And she gave me a number. And, uh, but I looked him up in the phone book and he was in the phone book and I was at an airport in Dallas and called him on a Sunday night at 10 o'clock and told him in light of what Jerry had

done. And Wayne took my call. I said, in light of what Jerry has done, we can get you $300 million in contractually obligated sponsorship. Cause this is what I've been doing for IMG, selling national sponsorships. So within a period of a couple of weeks, Wayne was able to get me out of my non-compete, went on to do $300 million in less than, I guess, about a year, sold the naming rights to Pro Player and Pro Player Stadium. Were you still making $250 a week or you changed your comp structure around? Yeah, that was in my first job in Newport Beach. But what changed your trajectory was really meeting Wayne and getting to see a guy that probably arguably, at least to me, the greatest American businessman of our time. The only man to take seven companies public on the New York Stock

Exchange. A guy who borrowed money to buy his first garbage truck to start waste management. Just the kindest man I've ever met, the smartest man I've ever met. What teams were you working on? That was the Dolphins and the Pro Players? I was vice president of corporate sales for Miami Dolphins, the Florida Marlins, the Florida Panthers, what was then Joe Robbie Stadium, which we sold the naming rights to the Pro Player Stadium. We sold the naming rights to the Panthers' new arena, to national car rental for the Florida Panthers hockey team

after they went to the Stanley Cup. And we also owned the Homestead Motorsports Speedway. We bought a CBA basketball team. But one of the big acquisitions was Sports Channel Florida for $10 million from the Dolans that we sold it back to the Dolans two and a half years later for more than 10 times what we purchased it for by putting the shoulder programming of the Marlins and the Panthers and the actual games on the air. businessman, but as a sports owner, he was a money manager. And so he kept all the assets separate, but went to market as a package. And he was an innovator and the first one to do that. And I was fortunate enough to be able to work within his assets and treat his local South Florida properties like a national sports property. So we would go to Coca-Cola instead

of doing one deal with the Marlins for a sign behind home plate for call it $50,000, we would do a multimillion dollar Heisinger partnership. So it was treated as a national sports property because he had so many, he's the only man to own three professional sports teams. A lot of people try to replicate that. Madison Square Garden's probably done the best job, but Wayne was the first to do it. So anyway, from there I left, which was a very tough thing. You're going to have to take the Florida Panthers public and also winning a World Series and getting a World Series ring, which was terrific.

But I left for an opportunity to run the IndyCar Series. Are you wearing the ring? You know, I haven't worn it in years. All right. If we take a break, go grab it haven't worn it in years. All right. If we take a break, go grab it. We want to see it. All right. I'll do that, actually.

I was going to say, I'm not sure where it is, but I may be able to find it. All right. So, yeah, that was 1997. And the franchise was only five years old. What's incredible, the expansion fee was $93 million. And right after we won the World Series, we sold the team to John Henry for somewhere like $173 million. So that was less than 10 years to get close to $100 million to return on that investment.

It was pretty amazing. That also exposed me to the value of team ownership and team valuations and how they were escalating. It was just during a burgeoning time where team values were growing at an exponential rate. So after being fired at Indianapolis Motor Speedway, but having done some of the work that I'm most proud of, a $100 million television rights deal with ABC and ESPN, $100 million dollar deals with engine manufacturers of Toyota, Chevrolet, and Honda, and taking their schedule from an 11 month schedule for nine races to making

it a 17 race schedule from April to September to not compete with the NFL season and have all of our races Sunday at one. We did some pretty neat things there. Well, that's when I started the Audible Group. So it was really November 1st, 2001, with the concept of representing buyers of sponsorship, companies like Chrysler, American Express, and putting their money into sports properties. We immediately put Chrysler into the Kentucky Derby, and that relationship has been going on since 2002. But it was also finding innovative ways to make that happen. Because when you think of the Kentucky Derby, it's not a sponsorship.

It's the fact that it's a network of 2,500 farm owners that drive trucks. Dodge wanted those customers, wanted all the farm owners to actually drive Dodge trucks, Ram trucks. That's why that relationship has lasted for so long. And so that's how the business started in representing these sponsors. And then within three years, we built the company up and sold it to Endeavor, the Hollywood talent agency. It was at a time where corporations were circling around the entertainment and film space, and companies wanted to put money into television and film projects,

yet there wasn't a metric to measure the value of a product integration on an HBO television show. So we're talking just basic product placement kind of stuff, or more advanced product placement stuff? Much more advanced. So the show Entourage, for instance, in year one, we brought Chrysler in, and they were driving Chrysler 300s, which were really cool cars or brought singular wireless in because the guys are always in their cell phones. So on a non-commercial network like HBO, we had corporations spending millions of dollars on an annual basis to be integrated into a show.

And so there was a distinction. There's a storyline about a product and that's more of a deep integration. Product placement is something that's just placed within the production. So that business dried up pretty quickly when the networks realized what we were doing at Endeavor and taking a nice, healthy percentage. They thought they could do that themselves, and they did. So we went back to our roots in sports, and that's when we met the folks at the Rams, Georgia Frontier, and John Shaw was the president. And we started running the day-to-day business of the Rams while we were at Endeavor.

And in 2007, I bought the company back from Endeavor and took a couple people from the company from Endeavor to do exactly that, run everything other than the players in the field for the Rams. TV, tickets, sponsorship, licensing, catering, concessions, anything that generated money, everything non-football. In that time, Josh came to work with us at the Rams for a period of time. We went through three different ownership groups of Georgia Frontier, her heirs, Chip Rosenblum and Lucia Rodriguez. And then Stan Kroenke actually bought the remaining 60%. He was a 40% partner in 2011. So through three ownership groups, we saw the valuations of these teams

and how they could grow, especially for a non-performing team like the Rams that had 12 consecutive losing seasons. But they were sold for $750 million in 2000. I guess it was August of 2010 when the deal closed. Were you there when they moved? Were you there for the move? Absolutely. So in January of 2016, when nobody believed the Rams were going to go to Los Angeles because

they weren't even an option when we went to the NFL owners meetings for the vote. The option was Raiders Chargers in one stadium in Carson, right? That was what they were voting on. In fact, the NFL subcommittee for relocation made a recommendation five to three, because there's eight people on a subcommittee. It's one fourth of the total 32 NFL teams recommended the Carson move that Bob Iger was behind and obviously the ownership of the Chargers and Raiders. But Jerry Jones and his infinite, I mean, just genius and brilliance turned that vote into by eight o'clock that evening from a morning vote he was able to get all 32 teams to do a re-vote and it was 30 to 2 in favor of the rams going to los

angeles and then some later date it would be the uh either the chargers or the raiders but the raiders and chargers were given 100 million dollars each for their time that the owners chipped in on. So it was fascinating. So, yeah, we transitioned the team out here to Los Angeles, and that's when we really recapitalized and restarted. It wasn't an opportunity for us to work with the team. It was going to be a different model.

It was going to be a long slog, and still the stadium is not open four years later. And we recapitalized with TAG and hire five people. And Josh is our chief operating officer. We've been focused on selling interest in pro sports teams, along with having other clients in the sports entertainment space that want to accelerate their growth in the space. Anybody that wants deep connectivity, whether it's teams, leagues, sports media, that's our value proposition, help people do things quickly in space.

I love it. So, Josh, he mentioned you there. So give us the background of how you got tied up with these guys and where you're at now. Yeah, absolutely. So as Bob mentioned, I first met Bob and the team in St. Louis. I was working in the marketing analytics division of the front office. And that was the first time I really whet my appetite in the business side of sports.

I come from a sporting family. My brother played for the Cincinnati Reds as a pitcher for a number of years. So I've always been steeped in the culture and spirit and passion of sports. And working with Bob, this opportunity presented itself through UCLA, where I had recently graduated from. And I really got a taste for like, wow, there's a lot of diversity and a lot of planning and strategy that goes into an organization that has a tangible and cultural product that they're putting out there. And I was really excited in a way that I hadn't been before, you know, versus the on-field passion. This was like, wow, this is a whole group of hardworking people working towards growing this really unique asset. And I was just really just enraptured by it. That was

the first experience. I did realize that I wanted to get some more robust business experience to complement the sports side of my background. Went into the management consulting route with Deloitte for about two, two and a half years. Did'd worked in their strategy division on a lot of different implementation and strategy projects. Got a great, just holistic experience with them. And when an opportunity presented itself towards the end of 2017, I jumped ship and came back to TAG.

And it's been phenomenal working with the team, especially operating the projects that I once served as a larger team on in the management consulting side. It's been really great to see the full cycle of those projects and to own the responsibility of them and there's a lot of cool you know examples I'm sure we'll touch on later around our involvement in eSports working with startups looking to get involved in entertainment media and sports and all of it really complements the educational side of what you know

the unique background that Bob just went through is obviously the core of our knowledge. But the more that we work with different components hitting the core of professional sports and esports, the more unique info we're able to provide folks that we're working with. So every day is exciting in that there's new information and new folks to share it with. So let's touch on everything that's going on currently. There are no pro sports right now. So it seems, right, my knee-jerk reaction would be these valuations have to be getting hammered down and it's a bad time to be a pro sports owner or involved in the operation. So

from the operation standpoint, what is, what's going on at the different leagues at the different teams? Are they laying off people, furloughing people? What are your guys' thoughts on what's happening right now? Yeah. Yeah. I'll jump in. I think I sort of see it as a two-step process to get back to normalcy. Right now, obviously, it's no surprise we're looking at an unprecedented hiatus for all professional sports. I mean, there are examples of, you know, basketball leagues in Tajikistan still playing, but that doesn't really apply. So when we're looking at the major North American leagues, the immediate concern is that sports, especially for the NBA and the MLB with their spring and summer seasons, they have to resume as quickly as possible. And the reason for that is regardless of whether or not you have live attendance, you have

to be able to derive some value from the television broadcast deals. There are projections that anywhere from $10 to $12 billion are at stake from sponsors and advertisers as a part of those deals. So regardless of whether or not folks are able to attend games, the first step is can we get these things back on public broadcast so people can consume them? In that sphere, it's my personal opinion that demand is actually going to increase throughout this period. A recent ESPN poll showed that 65% of people would prefer to consume the games from home rather than a live attendance. And I don't know that that's only specific to our current period or just a trend moving towards home theater engagement. But demand doesn't seem to be diminished. It's just a question of how quickly and safely

the teams can get those going. And there's a lot that goes into it, right? There's testing for the players. What happens if somebody gets injured? How do you have film crews working? Health and sanitation, as well as accommodations for everybody. So it's a really complex problem. And there have been some interesting ideas floated out there. You know,

I know Commissioner Silver on the NBA side has been entertaining the notion of possibly hosting an abbreviated season at Disney World in Florida, because that's an environment that's set up for accommodation. Vegas was floated too, right? Either Vegas or the bubble, they're calling it. Exactly, right. And their management of the NBA has always been incredible. And I think they are doing a daily review of the situation on the ground because it's so important to resume the season. Mark Cuban's of the opinion that it'll happen before June 1st.

We'll see. I think there's a lot that goes into it, but definitely the demand is there. I think the second half is more operational, to your point, about how do we get people back into these live venues? Because there's so many different auxiliary revenue streams and cultural attachments that exist outside of these huge sporting events. How do we restart that?

I think just this week, the Miami the Miami dolphins announced that they're, they're looking at a way to convert their 65,000 person stadium into a 15,000 person stadium following strict guidelines of like, you know, entry, entry and exit stipulations for leaving your row, ordering concessions in advance, a lot of stuff that sounds like it's going to be operationally a pretty heavy lift, but is necessary if we don't have a vaccine by that point. So there's a lot of numbers, 65,000 down to 16, 15, 15. So under, under a quarter of their capacity, but you know,

it will allow them to, to, to gain back some of the potentially lost local area revenues, which is everything from concessions to ticket sales, parking passes and all the businesses that surround right. In addition to suites and the whole shebang. And that works. The numbers will work for the NFL there because it's so much money on the others. Like I was talking with a, a Broadway actor actually, who was saying you can't fill the Broadway seats at 70%. They need like 95% in order to even break even.

Their profits on that last five to 10% of the seats. So you can't do it in some of these areas. Right. And I, I think that it's a, it's a question of, is, is something better than nothing at this point, right? Because it's not only a return to normalcy, but you know, there are projections that teams could lose up to a hundred million dollars in local local area revenues if the sport is canceled, if there's no live attendance. So to recoup some of that would be beneficial. It also helps for the major North American leagues, a large proportion of their overall

revenues come from the TV league broadcast deals, which is why the first step that I mentioned is so integral. But if they can work to get the fans back in place, they can recoup some of those lost revenues and work on a path towards normalcy when you do have a vaccine. But there's a lot that will go into that. And I do think we'll see some lasting evolutionary changes to the sport, similar to how post 9-11, you suddenly saw metal detectors and different security procedures put in place. There'll probably be similar adaptations for this.

So now it'll take four hours to get into the game instead of an hour. And you think it'll eventually percolate all the way down to the athlete's salaries. Like you think they'll see reduced salaries. I know in the NBA in the near term, the, the, the caps based on last year's revenues, right? So in theory, the cap could be negative or $10 million or something. So it would have a one-year blip there. It could be. I think there will be a downturn in valuations in the short term. I think that's a natural thing for what's happening with the

loss of revenues. I don't believe that has any impact on long term, even, you know, potentially as little as one to two years. But I think, you know, like you said, a lot of the salary caps are structured in a way to preserve competition. So a lot of that is covered by the revenues that are split by the leagues. So, so far as those contracts can be maintained, and based on the numbers that we're seeing from folks wanting to consume these gains more than ever in 2021, I believe, or the 2021-22 season. And, you know, those deals were nine-year deals with the five major networks. You know, I think it was at 5.1 or 5.2 billion per year. You're looking at a pretty strong reason to believe that those could come in even higher towards Commissioner Goodell's $25 billion target

by 27. There are other factors at play there, but I think the salary cap question will depend on where those renewals come from. As far as valuations go, the NFL specifically, if one of the 32 NFL teams were to come up for sale tomorrow, I do not see it selling less than $2.4 billion, which is the last purchase price that David Tepper paid for the Carolina Panthers

because of this market. No matter the team? Yeah, it doesn't matter. I mean, the Panthers, any team that comes up for sale is going to sell at least at that mark. It's just historically happened, regardless of what the economy situation is, that once they cross a certain threshold, a market is set at a certain price. And there's a limited number of teams available. And there's also a limited number of buyers. What I can see changing is that limited partners that want to get out of their illiquid positions, which are many.

People think of the Pittsburgh Steelers, you think, oh, the Roonies own the Steelers. Well, there's 24 limited partners or 23 plus the Roonies, the Rooney Trust and Rooney himself. And so those LPs are sitting on a liquid position that they're going to want to possibly sell. And the question is, is that going to impact the valuation? If somebody sells at a lower price than what they purchased it for, they're going to for the Atlanta Falcons had the insiders buy back in somewhere, one of the insiders, somewhere around a $3 billion valuation. So if that now sells, if another LP wants to sell it at a $2.8 billion valuation, it's really not hurting any of the existing LPs, and it's not hurting the GP, Arthur Blank. Yeah, it's just that new investor's getting a deal. Right.

And I think we'll see a lot of that. Actually, I'm optimistic, believe it or not, because what we've had is a situation where you have limited partners that want to sell at the top valuation level. You have a world of buyers that everybody that is qualified can buy it based on their net worth. But it's really a matching game of bringing the right buyer with the right seller, or not necessarily the seller, because it's the right buyer with the right general partner. Because these are basically small family-run businesses. And if you're the GP, you want to know who's coming into your business. So what we see is that it's been a seller's market. I think the buyers are going to have a little bit more opportunity. I won't call it a buyer's market, but there's going to be people

that say, you know what, I don't want to sit on 3% of this NBA team that I don't live in the market if the games aren't going on. I got in at X million nine years ago. I think I'll take a seven times return on my money. And that's what they'll get. You'll surely have people who are in the oil sector or real estate or malls or something that are getting destroyed right now with what's going on in the real sector or real estate or malls or something that are getting destroyed right now with what's going on in the real economy that maybe needs some liquidity also right and i think there's always going to be buyers for these assets because it is such a unique asset they're usually off market they're not marketed uh they're private transactions and it's it's one NBA limited partner equated to being knighted when you become a team

owner in one of the major professional sports in the United States and it's a club that some people have different motivations you always try to qualify with Josh does what people's whys are why do they want to be an owner and that's important do they want to have a legacy and they want to build a sports empire? They ultimately want to become a GP. Is that why they're coming in at an LP level? Like it's been the case with many GPs, including David Pepper and Jimmy Haslam

bought the Cleveland Browns. He was an LP for the Pittsburgh Steelers. I think when you look at it, it's such a unique club to get into. There's always going to be somebody that wants to get into it. So let's talk about that a little because in my mind, it seems it's just a unique club to get into. There's always going to be somebody that wants to get into it. So let's talk about that a little. Cause in my mind, it seems it's just a game of billionaires that are kind of like meeting at a

cocktail party and say, Hey, you want a piece of, uh, of the Steelers here? Sure. I'll throw a hundred million at that. But are you saying it's, it's more in the realm of high net worth individuals if they have a desire? Yeah. Josh, you want to take it? Yeah. Yeah, it absolutely is. I mean, there's, in the realm of high net worth individuals if they have a desire? Yeah. Josh, you want to take it? Yeah. Yeah, it absolutely is.

I mean, there's different types of purchases that occur, right? When a new general partner is forming a group to take over a team, you may have more discussions within a pre-existing group or a network. When there's an existing capital table where a number or a single LP is trying to find some liquidity, it's a completely different market. You're dealing with people that may have put up, you know, frankly, as little as $10 million, frankly less, depends on when they bought in, what their role in the limited partnership was, and again, what their why is. I think coming back to the optimism, you know, that I completely share for the long term of all professional sports franchises is really based on timeline.

One of the whys that we don't see because they're not successful is the following. You know, I'm looking for a quick return on my money. I want to flip this and find a profit. That doesn't work. And, you know, the first reason for that is that there's a very detailed approval process that goes into becoming an owner. You have to first pass through the general partner's approval and then that of the league commissioner. And in some cases, depending on the size of the stake, there's a vote that's had by all the constituent members

of the board of governors. So, and you know, the reason- Jerry Jones will veto you if he doesn't like you? Yeah, he could cast his single vote, but he does wield some influence, certainly. And there are long, you know, large discussions around that. So it's important to be the right fit, not only for the GP,

but also for the league. And so that's why it is a long-term play, frankly, whether you like it or not, because it's difficult to come in and say, I'm just going to flip this. It's hard to get approved in that sense. I think a great example of that, also touching on your question, Jeff, is the famous case study of the Golden State Warriors. You know, Joe Lacob and Peter Gruber bought the team in 2010, I believe, for $450 million. And at the time, you know,

there were other folks in the running like Larry Ellison who laughed at the price and said it's too much. Today, the team's worth $4.5 billion. And so that's like a thousand percent return on their investment. And it's impressive to look at, you know, granted, they're a group of private equity guys and they came in with their own why, which was here's an underperforming asset. But they also are passionate, passionate basketball fans that care about the market that they're in and wanted to build a legacy. And they've done all of that. And they've approached it from a uniquely business oriented mindset that's been able to drive the asset value. It'll probably help them close $400 billion worth of deals of bringing the deals to the games and meeting Steph Curry and, all right, are we going to sign this thing or what? Exactly, exactly. It's something that enhances, it's the tide that raises all boats for those folks, for

sure. I was going to cover this later, but we can dig into it now. Why doesn't there exist a hedge fund of ownership or a ETF or some sort of product for, right? It seems to me there's tons and tons of retail demand, right? If you said you can own a piece of the bears, you'd have people writing their last $10,000 to their name to buy the ETF to get a piece of the bears. Why doesn't that exist more? Yeah, it's a good question. You know, I think from, from our perspective, it comes down to control again, the league, it's very important that there's that there's a clear pass through visibility

to the, to the individual owners of every organization. That's not just so that there's responsibility and accountability, but so that the league can make you know, centralized decisions that are in the best interest of its constituent franchises. I think that's the, you know, that cuts across all the different sports in North America. I think that's generally the primary impetus. But I will say that there's been a trend at looking at new sort of creative financial approaches to team valuations. I know the NBA has been, you know, moving into that direction. They launched their own debt facility for teams.

They're thinking in different ways as they've proven themselves, I think some of the more forward thinking of the league leaders in the sense of how they've rapidly adopted technology and social media. And I think that's another area that we might see explored more in the coming years.

There's just rules. I think that when you make yourself subject to public markets, then that actually impacts the brand, so to speak, right? Let's say people don't want to buy that ETF you're talking about, or it's trending down. I mean, that's something out of the control of the league or team. They want to try to control it so these valuations continue. It stays in a sort of closed environment. They don't really necessarily want to open it up.

Yeah, for every team, and the Chargers are trading at $10, and the, yeah, whomever, the Bears are trading at $110. It's bad luck. And it could impact revenue sharing. It could impact everything. I mean, you start getting the player salaries. There's a number of things. So they have their own control ecosystem.

So last bit, then we'll move on. But who do we think, what sport's going to come back first from the COVID lockdown? Korean baseball. It happened last night. Well, the Arkansas Derby filled nicely into the Kentucky Derby slot on Saturday. I watched it. Well, something interesting. I forwarded it to you, Josh, last night on a message.

But a company we have an equity investment in called Tort Esports, they just signed a contract with ESPN to continue these virtual races that they've been doing. So there are many drivers that have won Indy 500s and Formula One races and Formula E. They're competing virtually with simulation. And it's actually fascinating. It's as entertaining to watch, to me, as it is a regular motorsports race without the crashes and people, like you can still crash, but people don't get hurt.

Just to give you an example, they tried this on YouTube about six weeks ago. They expected 250,000 people to watch. Within an hour, there were 19.5 million people watching a virtual race. Now that, of course, has to do with the lack of other options, but it's compelling enough that ESPN's taking a bet over the next five weeks.

We're bullish on it because we're invested in it. It's a publicly traded company under the ticker MLLF, in case anybody else is interested in it, but I don't want to tout anything. All I'm saying is that I think you're still going to see some virtual, you're going to see esports continue to grow in their popularity. As far as what comes back first, I would have hoped it was baseball. Talking to a couple of executives that are friends of mine, they're still trying to iron it out. I think it may be the NBA. I mean, at least they seem – if I were betting, and I don't bet, I would say it's the NBA. We love the NBA in terms of their leadership, their vision, their just organization as a group.

They just really have their stuff together. I mean, they were the first ones to go off. I bet they'd be the first ones to go on, but that's just my opinion. I agree. I'm going to side with both Bob and Mark Cuban here. I think the NBA will have something before the start of June. So you mentioned e-sports there. Let's dig in a little bit to that.

I agree with you. I've thought that it's long going to supplant live sports. And the IndyCar is a perfect example of like, why take the risk? Why build a $5 million car when you can put them in a virtual cockpit and get 80 percent of the same thing you're sounding like it was more like 95 percent of the same thing um so two things that one why does that not compete with the live sports is there enough demand for them to exist

equally um we'll just start there with your thoughts. Yeah, so that's a great question. And that's something that that we think about a lot, you know, in working with clients that are prospective buyers for for esports or professional sports. I think the best answer is that esports is not a perfect substitute for professional sports. It's what we view it as a compliment, right? In some cases, iRacing, you know, is something like a, like like a virtual racing game, is closer to a perfect substitute for the sport, but it's never going to be one-to-one. When you have games like EA's Madden, FIFA, and the NBA 2K franchises, you've got something that's close to a substitute, but it's never going to be the same experience. But the way that they're being used by the leagues and by the franchises as a compliment to their distribution and their engagement with fans. And one of the biggest draws of esports, especially considering that over 80%

of the global esports market revenues are coming from sponsorship, media, and broadcast rights, it's very important to make sure that you're accessing that coveted demographic of what is traditionally 18 to 34-year year old males and increasingly females, actually more than 50% female gamers now in the demographics. But I think the answer is that it's a different experience and engages folks in a different way that the smart leagues, NFL, NBA, and even the MLB have really started to use that to, to their advantage to get in front of a younger audience in a new way.

Does that mean that you might be sacrificing the older audience only if you completely abandon TV contracts, which is never going to happen in live events? So I almost view it as a different distribution channel, a way to engage different folks. And this is speaking purely in the realm of sports-oriented esports. There's a completely different world that uses a similar model, business model to traditional sports. That's first person shooter games and what they call real time strategy that are really taking the esports world by storm. And that's where you've got the really, really lucratively valued organizations like Team Liquid, SoloMid, Cloud9, Gen.G, these organizations that have

really been putting together teams in League of Legends, Overwatch, and Call of Duty. And what's fascinating there is that those leagues are leading the way in adopting the traditional pro sports franchise model because it starts unlike how professional sports teams started with local teams. This is starting from the top down, right? Because you can play anywhere. Now they're moving into trying to build, and they're successfully doing so, city-based franchises that can have their own local area market revenues and build loyal followings and can thereby raise the value of the league everywhere. And it's just, it's absolutely fascinating to see how that's playing out even without the pandemic. The players are from the cities? The team members are from those cities?

Not always. I think that's one of cities, the team members are from those cities. Not always. I think that's that's one of the trends that we'll see in coming coming years. But right now, it's acting themselves to the whatever. Here's your Chicago esports team. Exactly. Yeah, that's a great example. They're sort of they're acquiring talent from where it exists. A lot of it is coming from overseas, but there's also a lot in North America. And you see other parallels to traditional sports. You know, I think Activision Blizzard's been one of the leaders in this space in trying to build long-term value. They've got minimum player salaries. They're building expensive training facilities.

They're mandating that teams build, you know, some sort of stadium for local and away games to be hosted according to a strict season schedule. All these things are sort of moving towards the direction of something that can be seen as closer to a substitute for professional sports. Talk through that a little bit of what do I get when I buy a piece of a esports team, right? Like it seems to me the EA Sports and Blizzard, like those guys have all the power and they could just erase your team or right. It seems there's a little bit of a disconnect there for me. So help, help explain that away to me. Yeah. Yeah. I'll take the first,

the first shot at it. I think that's, that's a really important question. It's one of the first ones we always get about, you know, how do you, how do you invest in a space where really you're at the mercy of the publisher, right? The, I think the answer to that is it's no different than being at the mercy of the league. The publisher is just as invested as the franchise owner and making the league become a successful long-term entity. What's different is that they have an ability to make updates and changes that keep the game fresh that can't be done as quickly in a professional sports team landscape. For example, the whole CTE controversy in the NFL, that was a video game that would have been erased by a single line of

code, right? It's a a bad example but the idea is you can keep things fresh with new maps and new players and change the structure without alienating the teams so the point about also code out a team that's really good at one thing in a game oh the new update doesn't have that feature they're they're dead right i guess same thing if you're really good at kicking field goals and they say we're getting rid of field goals. Yeah. Right. And that has to do with the competency and the investment in a strong coaching staff and being nimble. And that's all occurring in tandem. I think what you get to answer the question as an esports owner is you're buying in, when you buy into one of these teams, you're buying into multiple franchises usually, because the larger teams can be seen almost as

holding companies because like take take you know fanatic for example or phase clan they have teams that play in the professional league the professional esports leagues for league of legends overwatch call of duty each of those has its own prize pool it's on schedule its own regulations and revenue sharing and you're an owner you have access to those players. And I think the smartest approach to the esports business model that I've heard is that it's a content play, that you really, you have an audience that is distributed at the player level,

at the franchise level, and at the team level. And by building smart content and getting all those audiences aggregated, you're creating a machine to deliver value. So I think that, you know, those are sort of the three magnifications. And so it's not just owning a piece of the potential prize money. It's, hey, we might put replays out on our YouTube channel, or we might have all this content and branding around our team that is generating revenue as well.

T-shirts. Yeah, 100 Thieves, Dan Gilbertbert's team i mean they these guys have incredible competency in direct-to-consumer space and they do a drop of product and they'll sell out in a matter of hours and it's several hundred thousand dollars and it's all because of the content that they create and the characters that they have that are compelling enough for their fans globally to want to buy the products that they're producing. Team NRG, I think, is one of the best content producers. In fact, they're trending as the number one.org on YouTube,

and they have teams in Overwatch, Call of Duty, Fortnite. They win the championships. Last year, they won the Overwatch championship. And the play with a company like NRG is that they are going to continue to compete at the highest level we're going to participate in the shared revenue streams that the league provides they're going to continue to get the best players they're going to get sponsorships which are a large part one of the top revenue streams you have prize money of sponsorship hopefully it should be sponsorship and prize money and your league shared revenues that you're building an asset that similarly is what an NBA team was in the 80s that's what an esports conglomerate holding company franchise is right

now and that they're going to continue to grow in valuation why the conventional wisdom is simply this you have a generation of people that grew up playing games, just like my generation grew up watching on the 10 channels that I had growing up in New York. I'd watch Mets games or Yankees games, and those were sports that I played. I wanted to see the best people in the world do what they did. I wanted to see Reggie Jackson hit home runs or Tom Seaver make strikeouts. And so I played those games, and I wanted to see the best people in the world do that.

Similarly, a generation of people, probably closer to Josh's age or younger, frankly, have grown up playing these games and watching people. They're now watching people do these things that they couldn't do that are the best in the world. It's also fascinating how the communication is between the players, between the fans and the players. It's unlike anything else. I mean, if you looked at some of these esports events,

if I wanted to see Michael Jordan play against a one-on-one against Charles Barkley in the esports world today, I can pay to have that happen. It's part of your Twitch Prime account. You can choose who you want to see playing in the game format if it exists. It's almost – And if there's enough demand, they'll make it exist. Right.

Even if it doesn't today. But just to give you an indication, there's a game which I don't even know – I've never played it, Dota 2. In 2017, I believe the prize money for at dota 2 in 2017 i believe the prize money for the dota 2 championship was somewhere around a million dollars the following year it was somewhere closer to 25 million dollars because so much of it is crowd crowdfunded you know if you think about traditional sports the master's prize money has been leveled off at about 11 million dollars for i don't know the years. Yeah. So think about the exponential growth.

It's because there's an audience, right? Whatever, if you think about my background from TV, you only would do something, I mean, we could only get IndyCar on ESPN if it could rate, or on ABC if you were rating. This is the new rating. If people are following what you're putting out there, it's going to create a demand.

And so I think advertisers will feel conspicuous by their absence if they're not participating in esports, whether they understand or not. I think people that are in the market of buying professional sports teams, if you look at some of the buyers, I can't, I would venture to guess that Robert Kraft, Stan Kroenke, Fred Wilbon didn't have a deep understanding of what this was going to be when they purchased franchises in the Overwatch League for $20-plus million. They did not want to be conspicuous by their absence. They wanted to get in early. And guess what? They were right.

Because in year two, franchises sold for $35 million. And what does that growth look like over the last even five years? Well, last summer, you know, 2019, Immortals, which is owned by Meg Whitman and the Milken Family Trust, I mean, they were out there trying to raise money, and I can't speak to whether they did or not, but at a level that was more than 10 times what they put what the team was originally purchased for we're talking three years right right i would pay to see meg whitman

fumble her way through a video game that would be good content yeah versus robert craft they should put that out there and i know some uh friends at prop firms here in chicago and those guys are dipping their toes into the uh esports world and buying them as you know they just see the optionality like you're saying like hey i can get this here if there's a huge tv contract if there's huge contracts down the line it's going to be worth you know x well we have a service that we can educate those people on that's right dude what we do because, frankly, the way – and I don't know if this is appropriate in the timing here, but we see esports as a power space,

and there's a number of teams out there that should not be invested in. I mean, not to downplay a particular team, but we see the teams that are playing in the top level in Overwatch, Call of Duty, League of Legends, those are the investable teams. If it's a game title that's not part of a league structure, it has to be a really incredible content play. It has to have some assets that we're not seeing in the league structure. It would be the equivalent of buying an independent league baseball team versus buying a minor league team

that has an affiliation with uh with a major league team or buying a major league team right and they may have a pitcher who can throw at 160 miles an hour but he's playing in the wrong league we don't want exactly so so people should know the difference between what they're buying when in eSports, and that's part of what we do. So that's a good lead-in to talking about valuation. Our quant team at RCMX listeners go back and listen to Episode 3 of the pod here for more info on them. We did a good one back when we first started. But our quant team at RCMX has worked with you guys in a few universities in building out a financial engineering quant model for valuing

sports franchises. So Josh, tell me a little bit more about that effort and how you've worked with the RCMX team on that. Yeah, absolutely. It's been a really exciting initiative over the last few months. So, you know, I know that I'm sure you covered this in previous episodes, but the RCM practicums are generally put on every year. There's usually a few of them going. And, you know, from my understanding, it's usually tied more to traditional equity pricing and different algorithms in that space. And this year, the approach was, well, let's take a look at an alternative asset, something that is unique and private and see if we can create a factor driven regression to understand not only where the value

is coming from, but also where it's going. And what's really interesting about that is that we started this, you know, long before the pandemic broke out, and we ended it in the midst of a global unprecedented phenomenon that now allows us to say, great, well, we've got this vehicle that we can plug our findings into and see what that predicts. And that's sort of step two as we move from using industry benchmark numbers, including some of the Forbes valuation numbers that are generally accepted in the industry. We wanted to say, what if we dig into some of that and say, we feed those numbers in, can we understand what really is like, objectively driving the valuation of a team, right? So what we found was that at a general level, we broke down into the regression, we said, let's take a look at revenues. And let's further

break down revenues into television revenues from the league and local area market revenues, take a look at what the importance of each of those coefficients is to the overall valuation. And then we said, all right, well, then the really interesting part of the exercise is what about all the stuff that is very much related to the performance of a sports team, both in the front office and on the field, but can't really be quantified. Those are things like stadium capacity, population of the local metropolitan area things like how your team is trending on google social media analytics uh things that that measure these qualitative aspects uh one that's a little bit more financial is win to player cost ratio right how many games are you winning versus what you're spending on your salary cap and so we had we did a really interesting exercise i should

say that's a bad stat for my cubs yeah Yeah, there are some outliers for sure. But we wanted to look at a way to normalize the data and say, can we make sense of these and put them in the same model as actual quantifiable financials? an incredible job at coming up with a principal component analysis, which they called the X factor, which is a great title for it because it popped out a formula for this additional coefficient in the equation that says, yeah, here's a relative weighting of how important that is based on the observed data we have going back 10 years. So it's really interesting to see, you know, I don't want to speak to the relative importance here, but stay tuned for some of our publications coming out. It is interesting to see how, relatively speaking, live in-person attendance is less important than you would think. It's more important to have players that are driving fan engagement, that are all-star players, the number of championships the team has accrued over a certain time period, how many playoff appearances they've made. So those are really interesting, especially in the context of the pandemic,

which goes back to what we were discussing earlier, which is if you have those things, but you don't have live attendance, you think you're going to see a huge valuation change. Our model in its current state says unlikely, but it is going to come down to revenues and how that large important driver is able to be maintained. Yeah. And my, it seems to me, right, like half the Major League Baseball is just doing this math, maybe not explicitly,

but in the back of their head of like, no, we don't need fans. We don't need wins. All we need is that revenue share from the league. You know, Florida baseball stadiums are half full. So how big of a factor is the league-wide revenue and the future tv contracts and i said before to me when people buy these teams they're kind of a they're saying hey i'm going to buy this call option on five ten year down the road tv contracts being 20x what they are today uh if that hits i'm i got a huge home run if it't, I probably still made money just on the gate sales and the tickets.

So it's kind of a free call option for them. Yeah, it's a good, I mean, it's a good example. I think the way I view live attendance for games is as a channel for engagement, right? The team, I think they're right in saying that we just need to play the game and have the people watch it. But you have to realize you're going to have fewer people wanting to watch the game if they're not able to consume it, or at least have the option to consume it in their preferred manner of engagement, which might be live, or, you know, some folks don't even go to watch the game, they go for the

experience, right? And that's true across all the leagues. So I think there's definitely an important two-way feed of live performance with TV performance. But in a short-term scenario, I would agree that as long as they can get the games broadcast, be it the MLB or the NBA, that will work in the short term. Long-term, to simply count on pure broadcast revenues over live attendance is definitely not a sustainable play. But the value of them, you know, they can range from anywhere from two-thirds to 80% of a team's revenues coming from the league. So it's, you know, and that just is like, you know, you have teams like the Knicks and you have teams like the Oklahoma City Thunder. It's just a different market. It's not because they perform differently. It's just there's a different

size of the opportunity for what they can actually extract. And that's actually a bad example because the OKC Thunder have one of the strongest fan bases in the league. And that's actually a bad example because the OKC Thunder have one of the strongest fan bases in the league. And it's really interesting to take a look at that as we do. I got to go back and watch that. I think there's a 30 for 30 on the moving out of Seattle in the middle of the night or whatnot. I heard good things.

I haven't watched it yet. Let me, I got two other questions I want to cover here before we go on. So I was a football player, played at D3 school. Everyone thought CTE was going to crash the league, maybe not crash it, but injure it, damage it. It seems like they've just completely sailed past that. What are your guys' thoughts on why that didn't affect valuations or viewership or TV rights?

I mean, to be candid, i don't think it's it's over i mean right uh we have opinions on it but uh it's very real right i think but when i think about this i i did endorsements for Muhammad Ali back in the 90s when he was a client of IMG. And he was the first person that I looked at that was a hero. And I saw the impact of what his sport had done to him and done to his body functions, motor functions. And that was impactful enough that I don't think I've ever watched a boxing match again right now that is because Muhammad Ali not only was a social figure uh for taking issues on social uh issue or for taking a stance on social issues in this country but also a great champion and I'm not saying that it hasn't happened to people in the NFL. When I saw Nick Bonaconti, who I knew when I was down in Miami, I was just shocked at what it had done.

I think the story is still playing out. That's all. I don't think we've sailed past it at all. I think it's going to take a lot of time. I remember working in the NFL and hearing the doctor who was retained by the NFL saying there's no conclusive evidence of concussions leading or hitting your head, you know, leading to CTE. And then that changed pretty quickly. And that guy was out of there. So it's a it's a sensitive subject because, first of all, I'm not a medical professional. I can make my own deductions on what's going on, but I don't think it's over by any means. I think it's a risk that's out there with the game. But in terms of valuations and TV contracts, it hasn't seemed to affect it anything. Or maybe they would be twice as big as they are now.

I don't know. I think we'll know in a generation of whether kids are playing football or not. I think that the popularity of the game could change. It could take on different forms. It really could. We talked earlier about e-sports and IndyCars and crashes. We've physically seen when a crash happens people can die if somebody knew that this if it was conclusive to the point where it was impactful enough that a generation is not no longer playing the sport of course that would have an absolute

impact on valuations down the road and i've thought of that if you could just replace the nfl with men but then who are the new players every year? If you didn't have any football, there wouldn't be anyone new to put on the cover. It's a violent game. Injury is 100% going to happen to anyone that plays the game. Yeah, and it seems to a man they would all, and they do, sign off full well knowing that's the risk they're taking

and they want the money for that risk. Then you see a lot of younger players retiring kind of before they're in their prime or before their prime because they're hey i've made enough i'm getting out it's not worth it uh then my second somewhat unrelated but remember when arian foster like sold shares in himself and that thing what do you guys see is there any more of that was that a good idea is that going to happen it seemed interesting seemed a little medieval or something. I don't know. But what are your guys' thoughts on that? I don't know if you have any, Josh, but there's a number of companies out there, two that are raising capital right now that are doing this sort of stock market for players, where you have a player that

just was drafted in the NBA and pledges his future earnings. And so the public can buy stock in this player and, and whether or not the leagues are approving that, or it's a, it's a player making a personal decision about his income stream. Right. And, and as if that starts to pick up, uh,

the leagues will get involved. But, uh, as far as I don't even know what happened with Aaron Foster, it seemed like the peak, right? I don't think he was good after that. Yeah. I mean, I, I get what he was trying to do. Uh, I see that there could be vehicles to make it easier for players to do that. Like, it's just, there's always ways. When you have a valuable asset, somebody is always trying to extract however much they can out of that asset.

Whether it's an individual or it's a team. I think we're kind of far away from having somebody buying interest in, like, the Dallas Cowboys and probably traded stock because how it's set up, you'd have to go through league approvals and so on. It seems there's a little bit of a corollary with e-sports of like, Hey, I have this e-sports team. It's not necessarily E. I have this P sports team physical and I own these 12 players. Right.

And I've diversified and I can kind of access each one well yeah go ahead Josh no I was just gonna say I think it's related to the question we discussed earlier around the ETFs I think it's even more difficult than that might be because this is actually something that could affect on-field performance it could affect the psyche of the player and that is inevitably going to complicate the jobs of all the people that surround him which is the coach their staff and then the league. And I think that I see that as hard for that to really take off, even though I don't dispute the financials make perfect sense as it'd be a way to sort of, you know, fragment out the value that a single person's

creating. I think it's just from a control perspective, it's really difficult to think about. It reminds me actually of, you know, there have been disputes in the past with fantasy football, you know, players that are engaged with people that have, you know, purchased them at auction on something totally unrelated that has had some, you know, some communication with gameplay. And that's been a huge controversy in this. I think even though it makes sense, buying shares in a player would further exacerbate that. But I do think in the realm of expansion for all professional sports leagues, we will see something of this nature in gambling and betting. I think that's, that's an untapped market there, you know, projections are like for, for the NFL, $2.3 billion of possible new revenue,

you know, point, you know, 600 million for the NBA. Probably those are, those are just high level estimates, but those are big numbers with some really innovative, some innovative partners. The NFL has partnered with Caesars Entertainment. I would expect to see some innovations on that side. And what does that look like? Like play-by-play betting in the stadium at the Bears game or like kiosks at the Cub at Wrigley Field? Yeah, I think it could be. I think a lot of it is going to move towards the digital direction in terms of, you know, on live broadcasts. And this is actually a great way for leagues to sort of innovate their TV broadcasts as well as the emerging streaming platform sector, because the streaming platforms are not only real time in a way that I think has less latency than cable networks. They're also, they allow for engagement, as Bob was mentioning earlier. You can not only engage with an e-sports player, you can also engage with a stream and place a bet on a physical field that you're watching for, you know,

a professional sports team. So I would expect to see some really cool overlap there. Yeah. Yeah, to that point, this past December, I saw Adam Silver in New York. He was talking about, he was speaking at a conference, he was speaking about the screen, how people consume an NBA game today. He'd like to see the screen look much more like NBA 2K,

which is their eSports league. And so with that, people can interact with the screen and they can place bets and they can be a participant. It's a totally different generation of when i grew up passively watching the baseball game for nine innings i mean that just i'm engaged i always have a second screen if i'm watching something whether i'm following fantasy i want to look up who a player is or their background and so the nba is smart to think how do we keep everyone engaged by making the screen come to life in a way that works for the consumer of the product, not just works for the broadcaster and works for us to put something out there. And I feel like baseball in particular needs something, right?

It's too slow for today's youth and people lose attention very quickly. They need something to keep people engaged. Right. Favorite sports team from each of you? You first, John. Yeah, it'd be the New York Giants. New York Giants? You grew up in Santa Monica? I know it.

I always get this question, but I'll be dating myself. When I was growing up here, there was no NFL football team in Los Angeles. So I stuck with the parents' hometown, and it's been a tough go. New York Giants for me, too. I grew up in New York, and my college roommate, his dad was the team doctor for the Giants, another one of my roommates. I had six of them. And we would play our games in, went to college in New Jersey on Saturday. We'd watch our film Sunday morning of our games. We'd

drive up to the Meadowlands and watch the Giants. It was during that great run with Lawrence Taylor and Phil Simms. So I followed them to the Super Bowl, and I've been a fan ever since. Who's the new quarterback, Doug Jones? Is that his name? Daniel Jones. Daniel Jones. Yeah. What do we think about him?

Eli's days are done? I think he's got promise. I picked him up in fantasy a couple times last year. Eli had to win that last game last year to have a 500 record for his career, right? Yeah, but he won two Super Bowls. I think it's hard to get into the Hall of Fame

with a losing record. He's in. Josh, favorite serve spot? That's a tough one. I'd say it would have to be right next to the Malibu Pier. There's a spot called First Point. Unfortunately, it's never got less than 500 people out there,

which is always a challenge, but it is just the perfect wave. Whenever I'm out there and I got a good college buddy out in San Monica, we go out to that Malibu farms at the end of the pier. That's delicious. Yeah. The, and Bob, you would surfer. No, I'm a swimmer. So I'd say a woods,

cold and Laguna beach is probably my favorite spot. Seems like something from the planet of the apes. And you're just out there like lounging around in the water or you're actually getting exercise doing. It's a combination. This morning was the quick dip at, you know, 50 degrees or whatever the water temperature was with no wetsuit. Got it. Favorite sports book. I'd say marketing outrageously is a great, great book. I read,

actually it was when I was working with the Rams with Bob and team, it was just a great expose on all the different approaches. Some of the Maverick leaders looking at Mark Cuban, you know, the tactics people use to market effectively is really, it's a great primer. I'll go read that right now. I've never heard of it. Love it. Bob. No sports book is tough. I don't really read much in the sports realm. I mean, there was one I recall that I really enjoyed, golfing a long walk spoiled.

Yeah. Just about camaraderie in the golf course. I'll let you go favorite book, overall book, if you want. You know, I just, I don't want to pigeonhole myself as a self-help guy, but I would say this, the book that I find myself reading consistently is actually two. One is the autobiography of Ben Franklin and the other is the seven habits of highly effective people. Yeah. Stephen Covey, I've leaned on that and I've reread it and reread it. So whether it's actually my favorite, it's not the most compelling, but I find myself going back to those quite a bit. Got it.

Favorite Santa Monica restaurant? Well, that's easy. There's a little cantina called Kay and Dave's, a little local chain. Fantastic pollo asada. That's the way to go. All right. You got to go hit it for Cinco de Mayo today. That's right.

And how about down in Laguna? Favorite restaurant? I'd probably say South of Nick's, which is also a Mexican restaurant. It is closed right now, but it's a pretty good spot. It's high in Mexican. Favorite athlete of all time. Josh. I'll let Bob go first.

I got to think about that. I'll tell you, I've been watching this last dance. And I mean, Michael Jordan is really gaining on it. I mean, it's just amazing to realize all of a sudden, not all of a sudden, but the aha moment for me was that we witnessed the greatest basketball player of all time, and his contemporaries are saying that, and everybody said it. And I wasn't a Bulls fan, and so I didn't get to enjoy it. You being from Chicago probably did.

But, I mean, everything he did was just incredible. Yeah, I've been watching it with my kids. And just it's been a great – we watched the beeped out version. Thank God. But, like, that's – right? They told him to do six reps. He did 12. Couldn't get it done.

So it's just a great lesson. I'm like, just always do more. Bring your best every day. And I would just say this. When we were representing athletes at IMG and doing endorsements, I mean, I just never got starstruck other than maybe Bruce Springsteen in my life. Because you're a Jersey guy. Yeah, well, yeah. With the school jersey. But in my life. Because you're a Jersey guy. Yeah, well, yeah, I went to school in Jersey.

But I will say this. Arnold Palmer just transcended sports. Arnold Palmer, people don't even know this, he didn't even win an event in the last 30 years of him playing golf. Really? Like, talk about, we'll end with a little trivia. Yeah. So that's a trivia.

Who's the greatest golfer that didn't win for the last 30 years of his career? Like talk about, we'll end with a little trivia. Yeah. So that's a trivia. Who's the greatest golfer that didn't win for the last 30 years of his career? I mean, even Jack Nicholas won the masters when he was 46 years old. Right. Yeah. Wow. But Arnold transcended golf and he really also transformed the game. Arnie's army before all these people were following Tiger woods around, there were armies of people following Arnold Palmer because he approached the game in a different way. I mean, he really just attacked it and got people interested in the game. And so Arnold Palmer is probably a guy that I would say would be one of the favorite, I don't know if I'd call him athlete,

but one of the favorite sports figures of my lifetime. Yeah. Josh? I'd have to go with Peyton Manning. I think, you know, I know it's a little bit on the younger side, but he is, I think, just a phenomenal leader, and I like him more and more every day that he's not playing. I think everything he does is just super. Those Peyton place things are pretty good.

Yeah, they're amazing. He's just got great banter he's got a great outlook and he's probably a great older brother for Eli to have I'm sure yeah I and then last one favorite Star Wars character it's got to be Mace Windu Mace Windu love itquested the purple lightsaber. That's right. Samuel L. Jackson and got it. Bob, you got me? I mean, we're really digging in. Yesterday was May the 4th.

Be with you. Yeah. Today I call Revenge of the 5th. Revenge of the 5th. That's great. I mean, I don't know. I liked Han Solo. The guy was pretty ingenious.

Yeah. Did a lot of great stuff. Made ships work when they couldn't. Right. Flew fast. Got stuff done. Won some wars. I've got a quick trivia question for you guys. It is Cinco de Mayo. Do you know which country in Mexico obtained independence from? Texas. Close. Republic of Texas. Republic of Texas

Republic of California no good guess it was actually France the French Napoleon III had a fleet and was trying to take over Mexico that was the battle that decided their independence pretty fascinating

I've learned so much in this podcast it's amazing well thanks so much in this podcast. All right. Well, thanks so much, guys. This has been fun. We'll put links to the Audible group out there and can get in touch with these guys for any more questions. So thanks so much. We'll talk soon. Thanks, Deb. Thanks, John. You've been listening to The Derivative. Links from this episode will be in the episode description of this channel. Follow us on Twitter at RCM Alts and visit our website to read our blog or subscribe to our newsletter at RCMAlts.com. If you liked our show, introduce a friend and show them how to subscribe.

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