CNBC Sport: Why one prominent investor thinks team valuations are way too high
A version of this article first appeared in the CNBC Sport newsletter with Alex Sherman, which brings you the biggest news and exclusive interviews from the worlds of sports business and media. Sign up to receive future editions, straight to your inbox. It took nine months, but I finally found a high-profile investor who says professional sports team valuations are too high. This week's "On The Record" guest is Gerry Cardinale , the founder of RedBird Capital Partners. RedBird is a private equity firm that focuses on media and sports investments. RedBird has been the controlling owner of AC Milan, the Italian professional football (soccer) club, since 2022. It's also an investor in Skydance Media and one of the driving forces behind Skydance's still-pending merger with Paramount Global. Cardinale says he's "pencils down" on all major U.S. sports team acquisitions right now as valuations soar. "If you're a student of history, you know that always going up is not is not a great arbiter for making an investment," said Cardinale. "There needs to be some normalization in what I see as a bit of an asset bubble." Since we started this newsletter in September, I've spoken with many people who have touted the benefits of sports team ownership. They've pointed out investing in a franchise tends to be recession proof. The assets are scarce and appeal to rich people's vanity – a constant in all macroeconomic environments. The values are largely tied to media rights deals, which keep going up and up , at least for the big U.S. sports. The influx of private equity owners has added potential bidders, which boosts prices. The private equity firm Arctos Partners created an index with the Ross School of Business at the University of Michigan that tracks team transactions over the past 60 years. The results are clear: team valuations have risen for six decades in a row, including a stunning jump in recent years. The phrase "up and to the right" has never been more accurate. Arctos is one of the firms that's now allowed to buy a piece of a National Football League team – a rule that changed last year. Arctos quickly acquired a 10% stake in the Buffalo Bills. Ares Management, another authorized PE firm, has bought a 10% stake in the Miami Dolphins. RedBird isn't on the NFL's list of accepted private equity limited owners, but Cardinale told me he's uninterested in buying a minority stake in any major U.S. team right now. "I don't think that's a great investment," Cardinale said. "I want to have an involvement, a partnership, in the actual governance, in the underwriting of the business plan." A 10% ownership stake gives firms little control over day-to-day team operations. Minority investments come with no voting rights. Cardinale told me one of the major red flags for team ownership is a lack of generally accepted equity research for the asset class. Almost all sports teams aren't publicly traded. That has limited the insight into cash flow projections for how they'll perform. He noted Forbes Magazine and CNBC Sport's team valuations (led by our Michael Ozanian ) are the primary way investors research valuations given the lack of options. Cardinale says he's more interested in being the majority owner of a U.S. sports team one day – just not at today's prices. "I don't like the entry prices right now, because the underlying business plans are not there to really pay for it, and it relies on a certain assumption on media rights trajectory," he said. Cardinale noted that while NBA and NFL media rights have soared for decades, the question will become "the slope of the curve" for future deals. The NFL can opt out of its current media rights deal after the 2029-30 season. The NBA has its TV deal locked up until the end of the 2036-37 season. He predicted we'll see rights payments fall for sports with lower ratings – though perhaps not Major League Baseball. Cardinale is invested in New England Sports Network (NESN), which carries local Boston Red Sox games, through RedBird's minority stake in Fenway Sports Group. RedBird is also a minority owner in the YES Network, which owns the New York Yankees' local rights. That puts Cardinale in an unusually strong position to help dictate the future of local MLB rights. MLB Commissioner Rob Manfred has been vocal about his desire to take back local rights from regional sports networks in 2028 to sell a new nationalized product. Manfred will need buy-in from the big-market clubs like the Red Sox and the Yankees, whose RSNs bring in tens of millions more in annual revenue than those of smaller markets. Cardinale said one idea being discussed is to form a new company that could own local rights and negotiate with distributors. "The challenge baseball always has is there's a subtle tension between the big markets and the small markets. They both need each other," Cardinale said. "I think that baseball will do very well having groups like the YES Network and NESN – the Yankees, the Red Sox – and there are others like the Cubs and LA [Dodgers] anchor what ultimately will be a centralized media company." At this point, Cardinale's idea is hypothetical. MLB has talked to many people about different plans for regional games, according to people familiar with the league's conversations. A company that controls media but grants different amounts of equity in the venture to clubs isn't part of the league's current thinking, the people said. Still, Cardinale points out that teams should think of themselves as their own live entertainment entities and that there would be clear value in a company that could see distribution rights to all games at a national level. An MLB spokesperson declined to comment. On the record With RedBird Capital Partners founder Gerry Cardinale ... I spoke with Cardinale about several of RedBird's investments, including the UFL – that's the name of the combined USFL-XFL spring football league, which came together last year. I gave Cardinale an impassioned plea for the UFL to rebrand itself as an NFL developmental league that could service players such as Trey Lance , a quarterback who desperately needs live reps but can't get them because there's no forum for him to play what essentially should be minor-league football. The NBA has the G League, and the MLB and NHL have minor league affiliated clubs that offer the ability to develop talent for major league teams. The NFL doesn't have this same system, and the UFL could be that … Watch the entire interview here . Or listen to it here and follow the CNBC Sport podcast if you prefer the audio version. And if you go the audio route, a bonus: I also discuss the week's biggest sports and media news including my thoughts on Cardinale's interview with my colleague Lillian Rizzo . CNBC Sport highlight reel The best of CNBC Sport from the past week: One of those stories I talked about with Lillian was her report that high school sports at PBS stations are at risk with potential federal funding cuts. You can read that story right here. It's been a rough go recently for apparel companies, but the Swiss brand On is slowly gaining market share at the expense of Nike and Adidas, reports CNBC's Merritt Enright . CNBC contributor Karen Finerman joined "Fast Money" to talk about her investment, alongside Alibaba founder Jack Ma and supermodel Karlie Kloss , in the WNBA's New York Liberty, valuing the team at about $450 million. A CNBC Sport exclusive: Private equity firm Valeas Capital has acquired a majority stake in TicketManager, a company that specializes in managing corporate ticket sales, for $110 million. Have you heard of Hyrox? It's a series of fitness races that are drawing hundreds of thousands of athletes — both professional and amateur — and also more than $100 million in revenue. CNBC's Brandon Gomez has the details. The big number: 7.05 million A mammoth ratings number for Sunday's Indianapolis 500 is a clear win for Fox. The broadcast network took the TV rights from NBC beginning this year. Last year's race on NBC drew 5.02 million viewers. This year's race had the biggest TV audience for the event in 17 years. Quote of the week "It would be extremely prejudicial to Disney for Connolly to breach the contract which he negotiated just a few months ago and switch teams when Disney is working on a new licensing deal with the company that is trying to poach him." – Disney has filed a breach of contract lawsuit against YouTube for poaching veteran ESPN executive Justin Connolly . YouTube is making Connolly the steamer's global head of media and sports. Disney claims YouTube knew Connolly was under contract but offered a job to him anyway and "induced Connolly to breach the Employment Agreement," at a time when Connolly was working on a new licensing agreement between Disney and YouTube. "Connolly has intimate knowledge of Disney's other distribution deals, the financial details concerning Disney's content being licensed to YouTube, and Disney's negotiation strategies, both in general and in particular with respect to YouTube," the lawsuit claims. I'm going to crowdsource this one – what's the best sports/athlete analogy for this? I'm thinking of an athlete on one team who is traded mid-season to an arch rival to work for the other team. The one that came to mind will be a winner with my younger audience – the Chicago Cubs trading Lou Brock to the St. Louis Cardinals in June 1964. Around the league WNBA players want to get paid more, and that quest will be driven by additional revenue coming into the league. A key component of that will be advertising. The WNBA has struck a deal with Nielsen to measure its television viewership across traditional TV and streaming – the largest commercial measurement deal Nielsen has ever struck with a women's sports league, Axios's Sara Fischer reports . The College Football Playoff needs to figure out its next iteration, which could include moving to a 16-team field. ESPN has more details on the latest thinking about different big-time college football programs. One of 54 T206 Honus Wagner cards is currently up for auction, but you're going to need to pay at least $3.2 million, Sportico reports . The 1909 American Tobacco Company T206 is the gold standard for baseball card collectors. The last T206 Wagner up for auction sold in 2022 for $7.25 million by Goldin Auctions.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fox Sports
6 hours ago
- Fox Sports
The U.S. Is Thinking Outside the Box To Find An Edge In Set Pieces — And It's Working
ARLINGTON, Texas — Sebastian Berhalter stood over the free kick about 40 yards away from Saudi Arabia's goal. He raised his hand, then delivered pinpoint service into the box where Chris Richards was able to get on the end of it and score what ultimately became the winning goal for the U.S. men's national team in its second Gold Cup match at Q2 Stadium in Austin on Thursday. The victory meant that the Americans would advance to the quarterfinals, though they will conclude group stage play on Sunday vs. Haiti here at AT&T Stadium (7 p.m. ET on FOX). Richards nearly had a goal earlier in that match, but his header off Jack McGlynn's corner went right into the goalkeeper's chest. These two scoring opportunities — one that was successful and one that wasn't — are not coincidence. Since Mauricio Pochettino took over as the USMNT's manager last fall, there's been more emphasis placed on set pieces, both offensively and defensively. "Offensively, I feel like we've always had the ability to be good at them, but we've never been good at them," Tyler Adams told reporters. "So I think now it's important just putting the balls in the right areas, making sure guys are making the right runs. Obviously, Chris with a great finish, but I think it could be a huge trend for us." That's what this team has been hoping would be the case for a while. In fact, former U.S. coach Gregg Berhalter (Sebastian's father) had hired Gianni Vio, an Italian set piece specialist, and saw the benefit in last summer's Copa América opener when Christian Pulisic scored off a corner kick that Vio designed. But outside of a few goals here and there, the U.S. hasn't been proficient enough. Pochettino, however, has placed a greater significance on this aspect of the game. Yes, working on set pieces consistently is important, but he's also introduced the team to a technology called TrackMan , which provides real-time data on ball flight, speed, launch angles, distance and more. It has been predominantly used for golf and baseball, but according to the company's website, it has expanded to soccer, American football and even hammer throw and shot put. "It shows if you put the ball in a certain area, the percentage of scoring or getting a head on it or first contact is going to go up," Adams said. "I think putting the ball into consistent delivery has been important, but we have threats. Even Chris, I think he's finally coming into his own. I'm like, 'Dude, go and win the ball, like, you're huge.' And he's continuing to find that balance and be a threat for us." As Adams alluded to, this kind of innovation is all well and good, but you have to have players who can execute for it to matter. "The key is to have a player like Chris who is so good at attacking the box and then a player with great delivery like we have in Sebastian or Jack McGlynn, who have a really good touch on the ball," Pochettino said. "Of course, sometimes [scoring goals] happens and sometimes it doesn't happen, sometimes we have more or less luck. "But it's not only us who are working in this way to try to improve on set pieces in offensive and defensive situations. I think today, all the clubs and national teams are really focused and have specialists. And yes, we are in this way trying to help the players to achieve our goals on the pitch." Sebastian Berhalter has actually been using TrackMan with his MLS club, the Vancouver Whitecaps, for a while. During the season, he works with assistant coaches Jan Michaelsen and Michael D'Agostino a few times a week so he can keep improving his delivery. It's paying off. "I think my whole career it's something that I wanted to be good at, and slowly it's gotten better," Berhalter said. "I think these last couple years in Vancouver they've emphasized it. I sat down with our assistant coach and he told me that, you know, 'This year you can be the best in the league at set pieces.'" He's now developed a reputation for it, and given how open things are when it comes to Pochettino's player pool, this particular skill set could help Berhalter's case for a World Cup roster spot next year. "Set pieces are really about repetition," Paxten Aaronson said. "Everybody has the technique, but how many times can you take it? [Berhalter] serves really, really good ones in directions where defenses don't want to put their head. So he does a great job." The USMNT has been spending 15-20 minutes on set pieces before every Gold Cup game, "really making sure everyone knows what we're doing," Berhalter said. "Even the day before in training, [Pochettino] said, 'Take your time, be calm, you know you can deliver a good ball.' So it's something he's given me confidence in." As for capitalizing on more of these opportunities going forward, guys like Richards know they can anticipate quality service from Berhalter. "As soon as I saw it there, I thought, 'This has to be me,'" Richards said. He hedged correctly, and the USMNT won its second straight game. Laken Litman covers college football, college basketball and soccer for FOX Sports. She previously wrote for Sports Illustrated, USA Today and The Indianapolis Star. She is the author of "Strong Like a Woman," published in spring 2022 to mark the 50th anniversary of Title IX. Follow her at @LakenLitman . recommended Get more from Gold Cup Follow your favorites to get information about games, news and more
6 hours ago
Inter Milan ends Urawa's Club World Cup hopes with a win on 2 late goals
SEATTLE -- Valentin Carboni scored in stoppage time to give Inter Milan a 2-1 win over Urawa in the Club World Cup on Saturday, ending the Japanese club's chances of advancing past the group stage. Inter Milan failed to score until the 78th minute, despite holding the vast majority of possession. Lautaro Martinez brilliantly bicycle kicked Nicolo Barella's corner ball into the net. Carboni's game-winner assisted by Francesco Esposito came 14 minutes later. It was the culmination of multiple scoring threats by Inter, which had 21 more shot attempts than the Red Diamonds. Urawa opened the scoring in the 11th minute to the delight of their exuberant fans, who have shown up in droves for these Seattle cup matches. Ryoma Watanabe scored on an assist in transition by Takuro Kaneko, who found Watanabe all alone on the penalty spot with his cutback ball. The fans in red filled the south end of Lumen Field and made up a large swath of the 25,090 attendees. Their coordinated chants and jeers didn't wane until after the final whistle. Urawa had a chance to equalize in the last minute of stoppage time, but goalkeeper Yann Sommer tipped the long-distance free kick over the crossbar. Inter Milan takes over the top spot in Group E after following up their tournament-opening draw with the victory. The Italian club will play River Plate of Argentina on Wednesday. Urawa will be playing for pride against CF Monterrey on Wednesday. 'I cannot find the words, I am so frustrated. ... We had the objective to go on to the next stage, so this loss is very hard for us. But we still have one more game to go. ... There are many fans who have come all the way or (are) still remaining in Japan and cheering for us, so we would like to win for them.' — Urawa Red Diamonds goalkeeper Shusaku Nishikawa 'I was speaking to (Carboni) the day before yesterday, and he told me that it was eight months exactly since his cruciate ligament injury. Coming through an injury like that, with all of the hard work and graft he's had to put in ... you don't know whether you're going to come back to the peak of your powers. That's not easy at all, so it was lovely to see him so emotional. I was a little bit emotional as well. It brought a tear to my eye because he's a kid that I know very well. I'm delighted that he has the opportunity now to experience something as significant as that (goal).' — Inter Milan head coach Cristian Chivu ___
Fox Sports
8 hours ago
- Fox Sports
Inter Milan ends Urawa's Club World Cup hopes with a win on 2 late goals
Associated Press SEATTLE (AP) — Valentin Carboni scored the game-winning goal in stoppage time to give Inter Milan a 2-1 win over Urawa in the Club World Cup on Saturday, ending the Japan club's chances of advancing past the group stage. Inter Milan failed to score until the 78th minute, despite holding the vast majority of possession. Lautaro Martinez brilliantly bicycle kicked Nicolo Barella's corner ball into the net. Carboni's game-winner assisted by Francesco Esposito came 14 minutes later. It was the culmination of multiple scoring threats by Inter, which had 21 more shot attempts than the Red Diamonds. Urawa opened the scoring in the 11th minute to the delight of their exuberant fans, who have shown up in droves for these Seattle cup matches. Ryoma Watanabe scored on an assist in transition by Takuro Kaneko, who found Watanabe all alone on the penalty spot with his cutback ball. The fans in red filled the south end of Lumen Field and made up a large swath of the 25,090 attendees. Their coordinated chants and jeers didn't wane until after the final whistle. Key moment Urawa had a chance to equalize in the last minute of stoppage time, but goalkeeper Yann Sommer tipped the long-distance free kick over the crossbar. Takeaways Inter Milan takes over the top spot in Group E after following up their tournament-opening draw with the victory. The Italian club will play River Plate of Argentina on Wednesday. Urawa will be playing for pride against CF Monterrey on Wednesday. What they said 'I cannot find the words, I am so frustrated. ... We had the objective to go on to the next stage, so this loss is very hard for us. But we still have one more game to go. ... There are many fans who have come all the way or (are) still remaining in Japan and cheering for us, so we would like to win for them.' — Urawa Red Diamonds goalkeeper Shusaku Nishikawa 'I was speaking to (Carboni) the day before yesterday, and he told me that it was eight months exactly since his cruciate ligament injury. Coming through an injury like that, with all of the hard work and graft he's had to put in ... you don't know whether you're going to come back to the peak of your powers. That's not easy at all, so it was lovely to see him so emotional. I was a little bit emotional as well. It brought a tear to my eye because he's a kid that I know very well. I'm delighted that he has the opportunity now to experience something as significant as that (goal).' — Inter Milan head coach Cristian Chivu ___ AP soccer:
