really good, informative, fairly terrifying episode. i even went as far to send it to my lovely (uga ‘18) girlfriend’s father (uga for undergrad and law school. he graduated too long ago for the years to even seem real). well to be honest, i sent it to my girlfriend’s mother who knows how to play podcasts and will be able to play it for him on their next long car ride. i’ll update you with his review of the episode when i receive it.
“I think they will be worth far more than they are today, and they will be in the exact same spot in the financial pecking order that they exist today.” Sighhhhhhhhh.
I have been waiting for this type of interview, as all other reports on PE in college sports have lacked information. Unfortunately, Doomberg didn't answer the main question I want to know. How will a school use the influx of cash to increase revenue, and how will the PE firm recoup their investment? Alex asked the perfect question using Utah as an example, and Doomberg pivoted right away to a "look at what has happened to NBA salaries" answer, possibly because the guest doesn't know. As with all of the other reporting on PE, Doomberg basically said Texas is worth $10 billion today, and in 7 years they could be worth $25 billion, without any explanation as to how they get there. Great interview by Alex, unsatisfactory answers by Doomberg.
Also, as a fellow cynic like AK, as soon as someone makes a patently false claim like "the NFL Draft gets more eyeballs than everything but the Super Bowl and Conference Championship Games," I start to doubt that they know what they are talking about.
I think the perspective is a good one to understand, even if it is a bit like getting to know exactly what a lion thinks about you, “mmmmm two legged snack.”
The perspective is terrifying and represents a dark future that I don’t want to be a part of, but it is good to know how PE thinks about the things you love, so that you can be better informed about how to react when PE sets its hooks into those things.
Shorter version: raise hell now, because once they are in they are never leaving.
Raise hell now...raise hell how? I'm not a member of my school's booster club. I don't have season tickets or a reserved parking spot. I cobble together my home game attendance from flash sales and mobile passes. Why should my school's athletic department give two shakes about my opinion?
That’s the rub for sure. I’m a small time donor for Virginia Tech, so I can at least direct a complaint in that direction. Will they care about my individual complaint? Maybe not. But I’m not alone.
In a function democracy there would be a path of appeal to your congress-critters. Other aspects of the sport are the subject of laws. But in today’s environment... *shrugs broadly*
I think this is one of the most important episodes you guys have done. But I also think it is like the end of the Watchmen. The mad plant has already been hatched and there’s not much to do about it.
There’s some howler positions in this dystopian hellscape foretelling of what is mostly like going to happen. Like the idea that entire industries have been gutted but hey at least a few people have been able to make a living on the flotsam that has been left behind.
And the “sure, there will be victims but that won’t matter to the non-victims.”
It’s great that the players are going to make hundreds of thousands of dollars but is that really fair given the billions that will be extracted from fans as a result? The money is coming from somewhere and arbitrage with broadcasters will only go so far.
God damn this is bleak. Which means it is likely to occur.
To add, how is it good for the players who aren't making hundreds of thousands? If the athletes are now the employees, how will they not be the ones who are ultimately screwed (like the factory employee?)? As he said, the top 20% generate 80% of the wealth. So players outside that top 20% may find themselves in worse situations than they were before.
As someone who has worked in PE, specifically for a firm that has bid against CVC on sport assets, I was quite curious about this episode. I do think it missed several parts that are (likely, though unconfirmed) parts of the investment thesis.
Obviously, to Doomberg’s point, CFB Assets are undervalued on a revenue multiple basis. But, most importantly, CFB is a fractured industry with a lot of the upside on top & bottom line that it implies.
On the topline portion, CFB lacks the weight to be able to negotiate TV deals in their favor. Compare the NFL deals, with their auctions for multiple assets to drive competition, vs. the ACC multi-decade agreement without even an inflation rachet. Conferences and programs are unsophisticated and get taken advantage of by the major TV networks. PE, by creating cross conference tranches of cooperation can provide leverage over top line.
On the bottomline portion, the cost savings will not be on the players – these are the core assets of the product that cannot be substituted, to Doomberg’s point you will likely see more investment in this cost line. Where the cuts and savings will come will be mostly admin staff. Does every school need an NIL coordinator? Does every school need a roster management specialist? Does every school need a swimming coordinator? Ultimately, the idea will be to centralized the back office functions into one centralized pool, get the benefits of scale and build verticalized software to do most of the work, establish best practices etc.
The one interesting point of discussion is how they will ultimately structure the investments. The firms will want a senior/secured asset that has significant liquidation value to justify the investment. However, the way CFB is set up it’s usually done through shells (university owns the real estate, not the athletic department). I assume they will have to shuffle these around to provide the downside security necessary.
This was hilarious. Doomberg finally made me understand the key to this whole PE thing as it relates to college sports: Yes, it is dumb, you’re not missing anything if you think that it’s dumb, but also they’re still going to do it. They’ll take the money because PE wants to give it to them, and PE will make a return because there was always going to be a return anyway. PE won’t need to innovate, universities will take out bad loans because they can, and regulators will allow it because they’ll get paid. Good job Alex continuing to drill down on the “why” of it all because it really took most of the interview for me to buy into Doomberg’s premise, because yeah, it’s still incredibly dumb to sell off a part of a hypothetical 10,000-year institution. I’m going to listen again now. Again, hilarious.
“It’s game theory. Those who go and get hurt first will be ahead of everyone else who will still be hurting long after the first movers have gone numb.”
I would like to hear Godfrey weigh-in on a few claims from this episode. Doomberg asserted that PE would have input but not total say on hiring/firing decisions as a result of a 20% stake. That feels incorrect. We know that boosters with much smaller "stakes" pull the trigger on hires and fires, while the AD sits in the chair in the corner of the bedroom.
I would raise one point about this. Have talked about it on the show before but the conversation moved away from it in this case: I think the cost of capital provides some leverage for a minority owner like a PE firm. E.g. if you disapprove of the management of the business and get out at a lower valuation, it becomes harder for the business to raise money moving forward. It's not ultimate leverage but it's something.
He ignores the diversity of existing alternative asset classes in favor of a narrative that helps bros like Drew Weatherford fleece limited partners on fees by calling it PE. He is longer on ideology/worldview than knowledge of how institutional capital flows from investors to business and back.
Have to add a caveat from someone who works within the steel industry. Doomberg said that Chinese importing has led to the consolidation and contraction of the domestic steel industry but that is just not true. Less than 4% of steel consumed in the US originates in China and the US steel industry remains robust in volumes. Most of the shift away from tradition rust belt mills is driven by a) the industry running away from labor unions and b) a shift in production from blast furnaces to scrap recycling mini mills
Maybe I'm just a downer on it as a whole but I'm not sure I buy the idea thar AI is going to take away human jobs/do more human activities and that will make sports franchises more valuable, if AI is going to be that powerful and people will just accept it why would sports teams start making AI sports events of some sort?
Very interesting. The question I had, that Alex asked but Doomberg didn't seem much interested in, is what about the institutions that are left behind? I think the exact question was "how does this go wrong?" Isn't it very possible that an institution that isn't in the top 20%, feels it's being left behind, but wants to be in the top 20%, the type of institution that is at most risk (and now incentivized) to make catastrophic decisions (like turning it's athletic department, or worse, fully over to PE)? Doomberg was dismissive of this. He said they will "just go back to teaching." For the MAC, FCS, Division 2, Division 3, etc. that's probably true. But I think there is a middle class of institutions who want to be among the top 20%, but aren't fully there, who will now make bad decisions that will have catastrophic consequences for athletes, AD employees, and the institutions. As we know, the destruction of the factories in the Midwest hasn't been just "winners and losers." Individuals, families, communities, etc. have been ruined for generations and we still haven't seen the full consequences of it.
Thanks I hate it. In all seriousness, this had the opposite effect of most SZD/Fullcast products in that instead of engendering enthusiasm and appreciation for CFB, it induced an uncomfortable combination of dread and apathy towards the sport I'm closest to. Got about ¾ of the way through and cut it off.
If this is news and a school is actively pursuing such a path, please report on it. If it's speculation, I'd prefer not to think about it at all.
Florida State is certainly horny for PE funds. And reportedly the Big-12 is looking at every possible revenue source as well.
I think the grim reality is that things are already doomed and the bad event that initiated it already occurred in the past, maybe more than a decade ago at this point.
It sucks. And it will absolutely lower my own interest in the sport. And that’s something that the Line Go Up, Number Go Up finance bro crowd may not appreciate. I don’t care about the NFL. I likely won’t care about another semi-pro level of the sport that my own university doesn’t participate in. Are there enough eyeballs and open wallets from the 24 or 32 schools that have even a hope of agency in a system like this to make those Lines and Numbers Go Up in a year over year fashion? I submit that there is not. Attendance is declining already. Even at places like Bama. If it becomes an even more naked cash grab who exactly is going to be throwing money into a hole for this once everyone in the Super League is going 7-5 or 5-7? That math ain’t mathing.
really good, informative, fairly terrifying episode. i even went as far to send it to my lovely (uga ‘18) girlfriend’s father (uga for undergrad and law school. he graduated too long ago for the years to even seem real). well to be honest, i sent it to my girlfriend’s mother who knows how to play podcasts and will be able to play it for him on their next long car ride. i’ll update you with his review of the episode when i receive it.
So good I’m listening a second time
“I think they will be worth far more than they are today, and they will be in the exact same spot in the financial pecking order that they exist today.” Sighhhhhhhhh.
I have been waiting for this type of interview, as all other reports on PE in college sports have lacked information. Unfortunately, Doomberg didn't answer the main question I want to know. How will a school use the influx of cash to increase revenue, and how will the PE firm recoup their investment? Alex asked the perfect question using Utah as an example, and Doomberg pivoted right away to a "look at what has happened to NBA salaries" answer, possibly because the guest doesn't know. As with all of the other reporting on PE, Doomberg basically said Texas is worth $10 billion today, and in 7 years they could be worth $25 billion, without any explanation as to how they get there. Great interview by Alex, unsatisfactory answers by Doomberg.
Also, as a fellow cynic like AK, as soon as someone makes a patently false claim like "the NFL Draft gets more eyeballs than everything but the Super Bowl and Conference Championship Games," I start to doubt that they know what they are talking about.
Or when he said the players are mobile in the EPL due to promotion and relegation 🤦
When people state things as fact that are actually incorrect, I always question their knowledge.
Yeah... Fuck this episode. There are other places for "PE bros are so smart and run the world" takes. Get that shit off SZD please.
I think the perspective is a good one to understand, even if it is a bit like getting to know exactly what a lion thinks about you, “mmmmm two legged snack.”
The perspective is terrifying and represents a dark future that I don’t want to be a part of, but it is good to know how PE thinks about the things you love, so that you can be better informed about how to react when PE sets its hooks into those things.
Shorter version: raise hell now, because once they are in they are never leaving.
Raise hell now...raise hell how? I'm not a member of my school's booster club. I don't have season tickets or a reserved parking spot. I cobble together my home game attendance from flash sales and mobile passes. Why should my school's athletic department give two shakes about my opinion?
That’s the rub for sure. I’m a small time donor for Virginia Tech, so I can at least direct a complaint in that direction. Will they care about my individual complaint? Maybe not. But I’m not alone.
In a function democracy there would be a path of appeal to your congress-critters. Other aspects of the sport are the subject of laws. But in today’s environment... *shrugs broadly*
I think this is one of the most important episodes you guys have done. But I also think it is like the end of the Watchmen. The mad plant has already been hatched and there’s not much to do about it.
There’s some howler positions in this dystopian hellscape foretelling of what is mostly like going to happen. Like the idea that entire industries have been gutted but hey at least a few people have been able to make a living on the flotsam that has been left behind.
And the “sure, there will be victims but that won’t matter to the non-victims.”
It’s great that the players are going to make hundreds of thousands of dollars but is that really fair given the billions that will be extracted from fans as a result? The money is coming from somewhere and arbitrage with broadcasters will only go so far.
God damn this is bleak. Which means it is likely to occur.
To add, how is it good for the players who aren't making hundreds of thousands? If the athletes are now the employees, how will they not be the ones who are ultimately screwed (like the factory employee?)? As he said, the top 20% generate 80% of the wealth. So players outside that top 20% may find themselves in worse situations than they were before.
As someone who has worked in PE, specifically for a firm that has bid against CVC on sport assets, I was quite curious about this episode. I do think it missed several parts that are (likely, though unconfirmed) parts of the investment thesis.
Obviously, to Doomberg’s point, CFB Assets are undervalued on a revenue multiple basis. But, most importantly, CFB is a fractured industry with a lot of the upside on top & bottom line that it implies.
On the topline portion, CFB lacks the weight to be able to negotiate TV deals in their favor. Compare the NFL deals, with their auctions for multiple assets to drive competition, vs. the ACC multi-decade agreement without even an inflation rachet. Conferences and programs are unsophisticated and get taken advantage of by the major TV networks. PE, by creating cross conference tranches of cooperation can provide leverage over top line.
On the bottomline portion, the cost savings will not be on the players – these are the core assets of the product that cannot be substituted, to Doomberg’s point you will likely see more investment in this cost line. Where the cuts and savings will come will be mostly admin staff. Does every school need an NIL coordinator? Does every school need a roster management specialist? Does every school need a swimming coordinator? Ultimately, the idea will be to centralized the back office functions into one centralized pool, get the benefits of scale and build verticalized software to do most of the work, establish best practices etc.
The one interesting point of discussion is how they will ultimately structure the investments. The firms will want a senior/secured asset that has significant liquidation value to justify the investment. However, the way CFB is set up it’s usually done through shells (university owns the real estate, not the athletic department). I assume they will have to shuffle these around to provide the downside security necessary.
I can see why this wasn't a Godfrey episode
He would have just said “it’s always been like this”
This was hilarious. Doomberg finally made me understand the key to this whole PE thing as it relates to college sports: Yes, it is dumb, you’re not missing anything if you think that it’s dumb, but also they’re still going to do it. They’ll take the money because PE wants to give it to them, and PE will make a return because there was always going to be a return anyway. PE won’t need to innovate, universities will take out bad loans because they can, and regulators will allow it because they’ll get paid. Good job Alex continuing to drill down on the “why” of it all because it really took most of the interview for me to buy into Doomberg’s premise, because yeah, it’s still incredibly dumb to sell off a part of a hypothetical 10,000-year institution. I’m going to listen again now. Again, hilarious.
“It’s game theory. Those who go and get hurt first will be ahead of everyone else who will still be hurting long after the first movers have gone numb.”
I would like to hear Godfrey weigh-in on a few claims from this episode. Doomberg asserted that PE would have input but not total say on hiring/firing decisions as a result of a 20% stake. That feels incorrect. We know that boosters with much smaller "stakes" pull the trigger on hires and fires, while the AD sits in the chair in the corner of the bedroom.
I would raise one point about this. Have talked about it on the show before but the conversation moved away from it in this case: I think the cost of capital provides some leverage for a minority owner like a PE firm. E.g. if you disapprove of the management of the business and get out at a lower valuation, it becomes harder for the business to raise money moving forward. It's not ultimate leverage but it's something.
And I think that Doomberg underrated the leverage that PE will have. And this is all incredibly bleak and bad.
He ignores the diversity of existing alternative asset classes in favor of a narrative that helps bros like Drew Weatherford fleece limited partners on fees by calling it PE. He is longer on ideology/worldview than knowledge of how institutional capital flows from investors to business and back.
"Doomberg is optimistic about private equity" is definitely a sentence
I am optimistic about you, Arif!
Have to add a caveat from someone who works within the steel industry. Doomberg said that Chinese importing has led to the consolidation and contraction of the domestic steel industry but that is just not true. Less than 4% of steel consumed in the US originates in China and the US steel industry remains robust in volumes. Most of the shift away from tradition rust belt mills is driven by a) the industry running away from labor unions and b) a shift in production from blast furnaces to scrap recycling mini mills
Excellent episode I learned a ton.
What the hell has become of the sport that I once loved
Maybe I'm just a downer on it as a whole but I'm not sure I buy the idea thar AI is going to take away human jobs/do more human activities and that will make sports franchises more valuable, if AI is going to be that powerful and people will just accept it why would sports teams start making AI sports events of some sort?
To me it's a scary theory of the world. I don't strongly subscribe to it yet but also don't think it's outrageous.
Very interesting. The question I had, that Alex asked but Doomberg didn't seem much interested in, is what about the institutions that are left behind? I think the exact question was "how does this go wrong?" Isn't it very possible that an institution that isn't in the top 20%, feels it's being left behind, but wants to be in the top 20%, the type of institution that is at most risk (and now incentivized) to make catastrophic decisions (like turning it's athletic department, or worse, fully over to PE)? Doomberg was dismissive of this. He said they will "just go back to teaching." For the MAC, FCS, Division 2, Division 3, etc. that's probably true. But I think there is a middle class of institutions who want to be among the top 20%, but aren't fully there, who will now make bad decisions that will have catastrophic consequences for athletes, AD employees, and the institutions. As we know, the destruction of the factories in the Midwest hasn't been just "winners and losers." Individuals, families, communities, etc. have been ruined for generations and we still haven't seen the full consequences of it.
Thanks I hate it. In all seriousness, this had the opposite effect of most SZD/Fullcast products in that instead of engendering enthusiasm and appreciation for CFB, it induced an uncomfortable combination of dread and apathy towards the sport I'm closest to. Got about ¾ of the way through and cut it off.
If this is news and a school is actively pursuing such a path, please report on it. If it's speculation, I'd prefer not to think about it at all.
Florida State is certainly horny for PE funds. And reportedly the Big-12 is looking at every possible revenue source as well.
I think the grim reality is that things are already doomed and the bad event that initiated it already occurred in the past, maybe more than a decade ago at this point.
It sucks. And it will absolutely lower my own interest in the sport. And that’s something that the Line Go Up, Number Go Up finance bro crowd may not appreciate. I don’t care about the NFL. I likely won’t care about another semi-pro level of the sport that my own university doesn’t participate in. Are there enough eyeballs and open wallets from the 24 or 32 schools that have even a hope of agency in a system like this to make those Lines and Numbers Go Up in a year over year fashion? I submit that there is not. Attendance is declining already. Even at places like Bama. If it becomes an even more naked cash grab who exactly is going to be throwing money into a hole for this once everyone in the Super League is going 7-5 or 5-7? That math ain’t mathing.