The Pomp Podcast - #1011 Joe Pompliano On Apple’s $2.5 Billion Bet On Major League Soccer

Starting point is 00:00:00 what's up everyone this is anthony pompliano most of you know me as pomp you're listening to the pomp podcast simply the best podcast out there now let's kick this thing off joe pompliano is the founder of huddle up and also my brother he joins us to talk about the brand new major league soccer and apple tv deal billions of dollars it's going to end up trading hands here as the sport of soccer becomes much more popular across the united states this is fascinating to learn more about, and I hope that you enjoyed this episode. Before we get into it, though, I first want to talk about our sponsors. This episode is brought to you by FTX US. FTX.US is the safe, regulated way to buy and sell Bitcoin and other digital assets.

Starting point is 00:00:42 You can trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees either. FTX.US is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX app today and use referral code POMP to earn these free crypto on every trade over $10. The more you trade, the more you earn. Go download the FTX app today and use referral code POMP. This episode is brought to you by Unstoppable Domains. They recently launched an awesome feature to level up your Unstoppable Domains profile. It's called Badges. They translate wallet activity into achievements, so celebrating, reliving, and sharing your crypto story has never been easier.

Starting point is 00:01:25 Before, these stories were buried in transaction logs that were hard to read, making them difficult to find and understand as well. But since Unstoppable domain badges are awarded based on your wallet activity, they're a super fun, easy way to build on-chain reputation just by doing what you do, like supporting NFT projects, collecting domains, or holding crypto. Unstoppable domain owners can activate badges from their account profile page right now. If you haven't minted an NFT domain yet, go to unstoppabledomains.com right now to own your name starting as low as $5. Again, head over to unstoppabledomains.com right now to get started.

Starting point is 00:02:00 Today's episode is brought to you by Pipe. Crypto is all about giving the power back to the people, and our sponsor Pipe is doing that in a big way. Pipe is the world's first trading platform that allows you to trade recurring revenue streams for upfront capital. And with Pipe's new API, companies with recurring revenue can build seamless embedded financing options into their platforms. One of the most interesting uses for Pipe's new API right now is Compass Minings. Mine now, pay later, which powers payment plans on Bitcoin mining hardware so more miners can start or scale with a smaller upfront investment. Whether you're looking for mining hardware or scaling any business with recurring revenue, Check out Pipe to access growth capital with no loans, no dilution, no restrictive covenants or

Starting point is 00:02:42 warrants, just growth on your terms. And right now, Pomp podcast listeners can access tens of thousands of dollars, even millions, fee-free for 12 months. Whether you are a Bitcoin mining company looking to enable financing for your customers or a SaaS, DTC, or any business that has recurring revenue. Sign up at pipe.com slash Pomp. Again, pipe.com slash Pomp to start trading today. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion.

Starting point is 00:03:28 This podcast is for informational purposes only. What are you going to teach us about today? We're going to talk about Major League Soccer and its new deal with Apple. Okay. I care because Apple's involved. Soccer, I feel like not that many people in America care about Major League Soccer. I think they might. A lot of people care about soccer, football internationally, so still a big sport. But they just signed a big deal with Apple. And it's worth talking about not only because it's a major sports league and it's a big deal, but they're really going all in on the streaming media rights deal now.

Starting point is 00:03:56 So they signed a 10-year deal with Apple where they'll be the exclusive provider of every single MLS game. So they're still going to try to work out a couple of deals with linear TV providers like ESPN, Fox, etc. But they will be simulcast. Every single game will be on Apple. So every single game globally, you'll be able to watch it on Apple TV for Major League Soccer. So even if it's somewhere else, Apple will still have it. Apple will have every single game. They may put some or try to sell some to ESPN, Fox, etc.

Starting point is 00:04:22 But they won't go for that much money because it'll be simulcast on Apple TV, right? So they have the exclusive rights. And this is Apple TV, like I watch on the TV with the smart app. So there's a bunch of nuance to this, but yes. But they're also going to make an MLS subscription service, an app within their app, right? Where people can pay a monthly fee and get extra access and all these things. So the easiest way to look at the deal is they're paying $250 million.

Starting point is 00:04:44 Apple's paying Major League Soccer, which is $2.5 billion over 10 years. Their old deal was $90 million a year. So you go from 90 to 250, right? Which is 2.8 times more. and the interesting part though is that that 250 each year is a minimum guarantee so apple has to pay them 250 a year no matter what but they have the opportunity to earn additional income depending on subscription sales right so it's kind of like an affiliate deal of some sorts where if you you sell more and they can justify it for the money that you're bringing into the subscription service

Starting point is 00:05:14 they'll pay you more right so it's actually kind of uh unique and historic in that sense because in a lot of ways when the nfl does a deal with espn or so forth like the deal is done you're getting paid that X amount of money, they produce the game, et cetera. What's happening here is Apple obviously doesn't produce live sports. So they're doing MLB now, but what they're going to make Major League Soccer do is Major League Soccer will be the ones actually putting together these game broadcasts. They're going to be producing all of the matches. And we can get into a little bit about what that means from a monetary perspective, but there's several other unique things that I think are probably worth talking about too. For example, an undetermined amount

Starting point is 00:05:48 of Major League Soccer games will be on the app for free. So some of them you have to have a subscription for some you have to pay for or some will be free the new subscription service will have no blackouts which is different than other subscription services historically in sports usually they still have blackouts to incentivize people to go to games and so forth no blackouts for this season ticket holders of a club will receive free access and the plan is to now change up the schedule so most of the games are either on wednesday night or on saturday night because they want to create these what they're calling whip around shows which is basically like nfl red zone so they want to create these shows where they can view a bunch of games at once it's

Starting point is 00:06:21 appointment viewing now and you know wednesday night saturday night those are when major league soccer is playing sounds good but while everyone is saying this is uh an awesome deal it's incredible it's innovative they really went all in on streaming i'm not so sure uh it's probably as good as people think okay and there's several reasons for that i think one uh major league soccer is growing right it's a growing sport you have to get as many eyeballs on it as possible uh it's cool to go and streaming and i think everyone understands at this point streaming is going to be a huge part of sports viewership in the future. Amazon is obviously contributing a lot of money. They're paying a billion dollars a year for NFL access. Major League Baseball has

Starting point is 00:06:56 done a deal with Apple, and now Apple is doing this also. So it will be much bigger in the future, but the cable platform and the distribution channel is still much bigger than Apple TV Plus right now, right? So you're sacrificing eyeballs, in my mind, to get some extra dollars in the door. And the reason why I think they're doing that, and again, this is just kind of my hypothesis or theory here, is that expansion fees have been driving a lot of growth in Major League soccer. And if you look at major league soccer franchise values today, they've skyrocketed over the last few years. The average franchise is now worth $550 million, which has doubled in just the last three or four years. And if you look at this list, we have five teams here. The top three are

Starting point is 00:07:31 approaching billion dollar valuations, right? Los Angeles FC is worth $860 million. Atlanta United is worth $845 million. LA Galaxy is worth $835 million. That's like NHL money, right? Those valuations are now increasing tremendously. And the reason why this is happening that I don't thing most people realize is that the expansion fees the league has been getting they've added 10 teams i think over the last few years that are either playing currently or will be playing soon those teams have been paying a lot of money in expansion fees so if you look at cincinnati and nashville they each paid 150 million dollars to join major league soccer st louis and sacramento paid 200 million dollars each and charlotte paid like 325 or 350 million dollars to join major

Starting point is 00:08:12 league soccer and what happens is those fees are then distributed throughout the other teams in the league, right? Because you're giving up a share of the media rights and everything else. And so those fees that they pay to get into the league are then distributed to other teams. And those fees have been driving a lot of the revenue growth, which is where the multiples come from for the valuations. So for instance, according to Forbes, the 23 teams that played in major league soccer during the 2018 season combined for $100 million in losses. Even worse, only seven of those teams turned a profit and of those seven teams, only three of them made one million dollars or more so basically every team's either losing money and the few teams that

Starting point is 00:08:49 are making a little bit of money they're barely making any money are they making money because of the actual advertising like in stadium and on the jerseys and stuff or do they make money on like ticket sales and like actual like fan engagement yeah so it's the same for every professional league really in the united states which is uh the media rights are supposed to drive the majority of the income but sure they have different revenue streams they have ticket sales they have sponsorships, they have merchandise, they have all of those things, just like every other league. But the problem is that when you're expanding this quickly, and you're growing this quickly, most estimates put that they need a media deal that pays them like $500 million a year for every

Starting point is 00:09:22 team to be profitable, right? There's certainly going to be some outliers and big markets that are able to make more money than others. But ultimately, a $500 million a year media deal is what will make every team profitable. So my opinion is right that not only is the $250 million number per year, a little bit deceiving. Why? Because you have to do the production costs, which is about $50,000 per game, they say, or they estimate. That's about $50 million a year in costs related to that. And then the other thing you have to think about is that Apple TV now owns the local rights too. You can no longer sell local rights. They own all of the rights to Major League Soccer. So Forbes estimates, again, that each team was earning about $3 million or

Starting point is 00:09:59 could have been earning about $3 million from local TV money, which is $85 million in total money so if you subtract that plus the production cost now you know we're under 150 million dollars a year uh so again there's some nuance to this and some some creative gymnastics when it comes to the math behind it but ultimately the number is probably a little bit deceiving at the top line 250 maybe they can earn money through subscriptions or whatnot but the reason why i think they did this goes back to the valuations because major league soccer teams are being valued at 12 times revenue but if that revenue not only is it 12 times multiple much higher than other sports leagues traditionally sports leagues sports teams are valued at six times revenue or something

Starting point is 00:10:36 similar to that major league soccer is growing so they get double that that's i mean a sas company or something relative right so it's it's much higher than you would expect but that's also a problem even an even bigger problem if the revenue number is inflated right and my my point being revenue numbers are inflated because of expansion fees and now those expansion fees are going to stop or should be stopping soon because they're at or around 30 teams now or clubs that will be playing either currently or will be playing soon and once those 350 million dollar fees stop coming in yeah you got to have a big media deal so major league soccer and its commissioner don garber have been going around for the last several months if not years saying that they're aiming for a 300

Starting point is 00:11:13 million dollar per year deal they didn't get that obviously and my guess would be that they ended up agreeing to this deal with apple tv one because sure they're looking into the future it's very cool it's awesome but at the end of the day i bet they couldn't find a linear tv partner to give than that 250 was the highest apple was willing to throw at it because they have this this massive pile of cash it's a good bet for them and uh you got to think about it major league soccer they average just under 300 000 viewers on espn right now it's it's a good size but it's not massive um so my guess is that they tried to get that number much higher weren't able to do it settled for 250 even though it might sacrifice some short-term kind of uh growth from a viewership

Starting point is 00:11:50 perspective now they're going to go try to monetize this in other ways and if you're apple tv it probably makes a lot of sense because if you just think about it from a subscription basis messy ronaldo like those guys are getting older there's already rumors that messy might come here within the next few years they have a 10-year deal locked in which covers the next world cup next couple world cups right and if messy comes to the league like how many people are going to buy apple tv just to watch messy it's you think that that's possible he'll come yeah i i think messy will come eventually i think major league soccer beckham did yeah i think major league soccer similar to beckham will offer him a deal that just is a no-brainer whether it's major

Starting point is 00:12:24 league soccer or a team, he's just going to bring so many fans. He's going to bring so much money, even from just a sponsorship perspective, uh, to make it a no brainer. Right. And if you're major league soccer, that's okay. In my mind, like that's okay. If that's your MO right now, that you are a retirement league for the world's best players, you'll, it'll change, right? You need more money to be able to attract more people. And once you get more revenue, once you get more profit coming in, you're able to go buy better players. You're able to invest more in your clubs. You're able to do all these other things. So if you have to start out by getting older player should come over here and retire that's fine and then next thing you know you have more

Starting point is 00:12:55 money more money more money it's same thing with the nfl it's same thing with basketball if you look at basketball it's a global game but why do people come to the nba because it's where they get paid the most right it's the biggest it's the most profitable and if you can create that in soccer that's obviously going to be really really really difficult and what you're going up against in europe in the premier league and everywhere else but once those fees get higher you're obviously going to be able to raise the quality of talent how do you make people in america care about soccer than the same way they care about it in Europe or elsewhere? I think you need better players, right?

Starting point is 00:13:22 The quality of the play. The quality of the players. Yeah, I mean, it's not even comparable really to soccer internationally, right? If you look at the Premier League or the Champions League or any of these other high-level competitions, it's just different, right? And you obviously need better players.

Starting point is 00:13:36 You need better developmental systems. There's the promotion relegation system, which people really like. And it's just also ingrained in their culture, right? In the United States, if you don't play soccer growing up, it's highly unlikely that you're going to get into the sport later on. over there mostly everyone plays uh some level of soccer at some point so it's ingrained in you

Starting point is 00:13:53 but i do think that it has some structural advantages on other sports like in my mind it's just a matter of time before uh major league soccer overtakes the nhl one because the nhl we've we've seen this for decades now it's not growing right it's not uh growing relative to where it should have been in other sports leagues like the nba nfl etc but also uh you have to look at youth participation so not only are younger generations not care as much about sports and live sports in general but hockey doesn't necessarily have those same stars and the participation rate at a younger ages for kids is much much much lower because you need ice you need skates you need all the equipment you need all these things for soccer you just need a ball and a goal right you could

Starting point is 00:14:31 even make a goal so the participation rate in the United States is much higher and I think that will end up driving most of the growth right if you can get young people to play it if you can get them interested in if you can get homegrown talent that becomes much bigger and I think it's just a matter of time before that becomes at least bigger than the NHL and then you start thinking about other sports after that if you're watching this right now leave in the uh comments what team do you cheer for uh in soccer it could be in the united states or uh or international i'd love to see what everyone's uh what their teams are what's the most valuable um uh what's the most valuable soccer team in the world uh it's probably real madrid or barcelona i think it was barcelona

Starting point is 00:15:08 last year it's probably real madrid this year yeah it's crazy how much do you think they're worth billions of dollars yeah they're like top 10 most valuable sports teams in the world what do you say to somebody who says soccer is glorified kickball that was somebody said in the chat i say that's dumb i mean it's uh but if you look like many of the people uh who are discussing you know who are dropping in here it's international right you got barca madrid inter milan uh sounders dallas fc guadalajara chivas atlanta united atlas fc orlando city chelsea man u orlando city uh barcelona um is orlando city is that like literally orlando yeah and and it's uh uh what what are the mls cities you have orlando there's

Starting point is 00:15:57 a bunch i mean there's 20 26 or 27 maybe 2018 is in miami uh yeah miami inter fc or whatever they're in there as well the other thing too is like uh mls has a bunch of international competition here right the premier league deal with i believe it's nbc is like 2.7 billion dollars right now right so if you have massive premier league viewership which also is on usually on weekend mornings and you're not competing with other sports so they have high viewership and then international leagues uh like the mexican league league mx right those have big viewerships a lot of league all these leagues have big viewerships here already so you're competing with people and eyeballs that are watching external sports leagues which is obviously

Starting point is 00:16:35 very difficult when you're trying to build one internally the big uh big advantage that they have right is people can go to games so if you live in a city you go to a game maybe you start following the team after that major leagues uh soccer has tried i think at some level to to make them more accessible it's obviously uh difficult to some degree but i think that's their real shot is if you can get people to care about the team in their local community then it starts to spread outward uh because they could watch you know if you can watch messy on tv if you can watch chelsea on tv if you can watch these other teams on tv why would you care about the mls team if the quality of play isn't nearly as good right so the advantage that they have that i think they

Starting point is 00:17:10 need to exploit to some degree and get better at is getting people to care about their local team and then that's what ends up spreading the virality of of fandom yeah i think um i think soccer will likely become much more popular than united states i bet you it's more popular than we think it is in the united states if you look at the actual data some of the some of the stuff you're pointing out um and i also think that it will continue to increase and so i think nhl is going down or not growing but baseball i think has also been trending down right yeah yeah yeah so like mls likely will and well and it's it's an international game which i think has huge advantages what we've seen with formula one and other sports uh but it's also the most popular

Starting point is 00:17:47 sport in the world right people play it again to my point you just need a soccer ball and you can go play it so somebody in the chat said that the mexican soccer league is the most watched soccer league more watched than the premier league and the mls combined that's crazy united states that's wild yeah and and that's uh a big population plus highly engaged with uh with soccer or what's driving that well we're on the border of the mexican soccer league right so most of it is driven primarily from southern states uh and then yeah it's it's uh uh it's obviously an extremely popular league and sport relative to where we are location wise but it is pretty shocking that the united states has a league now and that is still viewed by more people because you have to think

Starting point is 00:18:25 about all the immigrants and people that come over here obviously that's their league uh and obviously it's it's a high quality of play and so it's like if we if we went and we moved to canada we'd still watch the nfl yeah exactly and and my point though is uh was exactly that that that's a real challenge for the mls for major league soccer to overcome is that you're not only competing to build a sport with other sports leagues but you're competing against your own sport internationally right so the premier league is obviously popular the mexican league is popular and all those so You really have to overcome a lot of things, and a lot of that has to be driven by your local team.

Starting point is 00:18:55 For the record, I'd go to Mexico, not Canada, if given the choice between north or south. I'd definitely go to Mexico. I'm just throwing it out there. I mean, would you? I don't know. I don't know how that has to do with Major League Soccer. Well, Mexican Soccer League is popular.

Starting point is 00:19:10 I would want to go check it out. We should go to a Mexican league game. You got to be careful what game you go to, but yeah. Oh, really? I mean. there's some uh just just do yourself a favor and i'll show you on twitter after this some videos oh okay all right thanks so much for coming in and uh educating us today uh also uh can i say i i needed joe to do me a favor today i uh i didn't have time to go get a coffee and he slid

Starting point is 00:19:37 this this little coffee right here this is the joe special so thank you very much for uh for bailing me out there i'll venmo you uh for the coffee plus tax you were fiending for coffee i was i was you asked me like five times i was dying i was like bro give me the caffeine i was like i got the call all right where can we send people funny on the internet read huddle up.com r-e-a-d huddle up.com bro when you say you gotta do this this is what we need you doing like this right here huddle up huddle up huddle up the business and money behind sports read huddle up for anyone Who doesn't know when you run the two-minute drills, huddle up, huddle up. I also dropped a new podcast today, The Joe Pomp Show.

Starting point is 00:20:13 Apple, Spotify, wherever you get your podcasts, you know. Amith, he actually runs Religion of Sports, which is a production company that Tom Brady and Michael Strahan started together, making big moves. They just raised $50 million. We talked about everything they got going on. Really good podcast. I enjoyed it.

Starting point is 00:20:29 All right. Thank you very much. I appreciate it. Yeah, your boy hit 400K, by the way. Shout out. Let's hit it. Who are you shouting out? Myself.

Starting point is 00:20:38 If you don't shout out yourself, no one will. Let's go. Goodbye. See y'all. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player.

Starting point is 00:20:51 And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events

Starting point is 00:21:06 packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.

The Pomp Podcast - #1011 Joe Pompliano On Apple’s $2.5 Billion Bet On Major League Soccer

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.