The last of the holdouts has fallen. A few weeks ago, the National Football League passed a resolution to allow private equity investment in individual teams, thereby bringing to an end to the league’s long resistance to the incursion of institutional capital. The NFL joins the National Basketball Association, National Hockey League, Major League Baseball and Major League Soccer, all of which have opened up to institutional investment in recent years. Only one of the league’s 32 owners, the Cincinnati Bengals’ Mike Brown, voted against the proposal – a decision, reports suggest, born of his longstanding desire to maintain the financial viability of smaller franchises in a league where growth in team valuations and media revenues shows no sign of slowing down.
The effects of the new ownership regime will be minimal, for now at least. The NFL will not be transformed overnight from a league in which teams are owned by wealthy individuals and families and managed for the benefit of fans and communities to one run according to the whims of private equity’s bullies and money grubbers. But it seems hard to imagine that a shift of this nature won’t take shape eventually. The league has been careful to limit the initial scope of private equity investment in the league: individual funds can buy no more than 10% in a given franchise; will acquire purely passive stakes, stripped of any decision-making, governance or voting rights; and will have to hold on to their investments for at least six years. Only four participating funds are allowed to invest for now; they are all long-dated (meaning they generally have long investment horizons and are not, in theory, looking to generate quick returns) and have a lot of money to burn. Sovereign wealth funds, asset management firms, endowments, and pension funds are barred from investing in the league – a marked contrast to the NBA, which opened up to this bigger class of investors in 2022.
As other US professional leagues began to offer themselves to so-called “smart money” in recent years, the NFL held the private equity barbarians at bay, partly out of a belief that the incentives between the league and the world of institutional investment are fundamentally misaligned: the league wants what’s best for teams, fans and the sport in general (or so the story goes), whereas private equity investors are out to make a buck, for themselves and their shareholders. This misalignment has not gone away, but booming team valuations have forced the league’s hand. The average team in the NFL is now valued at $5.9bn (versus $4bn in the NBA and $2.6bn in MLB), a number that’s rising fast: hedge fund manager David Tepper bought the Carolina Panthers for $2.3bn in 2018, and just six years later the team is now reportedly valued at $5.9bn, despite Tepper’s laughably bad stewardship. The pool of ultra-rich individuals able to afford to buy franchises of this size is getting smaller, even as the financial burden of maintaining them grows. Hence the league’s turn to private equity: throwing the gates open to institutional capital gives owners access to cash to keep franchises running, without handing Wall Street the keys outright.
In theory the limitations on the first wave of private equity investment in the NFL seem designed to allow teams to maintain the fiction that they are above all family affairs, involving a special kind of kin-like connection between owners, players, and the communities they represent. Even as he was doing the media rounds to promote the big regulatory shift, New England Patriots owner Robert Kraft was promising continuity, claiming the league will still prioritize community over profit under the new rules (already a debatable claim at best). Limiting private equity investment to 10% per team “is a way to keep it under control, from our point of view,” he told CNBC.
By tossing owners a lifeline to keep up with rising team valuations, however, the league will only feed the financial frenzy and push the NFL closer to a future built on cut-throat commercialism and cynical revenue maximization. The point of the new regime is to widen the pool of individual investors in individual franchises. More buyers, especially buyers like those who have now been given the green light to invest across the league – liquid and hungry to deploy capital – will necessarily imply a rise in competition for assets. The oddly staid old proprietary world of the NFL – which restricted the pool of potential team owners to a tiny elite of ultra-wealthy, football-obsessed individuals – is about to be broken open. The growth in team valuations will only accelerate from here, and at that point the perverse logic behind this first wave of investment will take hold: as valuations and the financial burden of running these huge franchises grow, the argument for greater institutional investment in the league will become impossible to resist. A league of super-teams will become the plaything of super-investors.
This projection is anchored in more than mere suspicion: we’ve seen this story before. The NBA was the first of the big professional leagues in the US to open up to wholesale investment, in 2020. Private equity investors came first, and NBA commissioner Adam Silver made all the right noises about reputation and cautious evolution and community and heritage. But in more recent years, as the sport has grown in popularity and the money at stake in the joyous business of hurtling up and down a hardwood floor for 48 minutes with a ball in hand has ballooned, basketball as an asset class has been thrown open to a much bigger, and potentially far more controversial, swathe of investors. To be fair, investment from sovereign wealth funds in the NBA remains limited to stakes of 5% per club, meaning we’re yet to see the full effects of oil money in North American basketball. But there’s every reason to think that the NFL, like the NBA, has passed a point of no return, and that these leagues are now entering a path of inevitable and ever-deepening financialization.
The real cautionary tale for the NFL comes not from North America but from across the Atlantic, where smart money has completely distorted the world of European football, ripping it from its roots in community and entertainment and turning it into a vulgar money box for the supposedly sophisticated investor. The Premier League offers perhaps the starkest illustration of how broken a sport can become once it’s given up to investors whose primary objective is not to serve fans and build community but to generate revenue and profits for themselves and their partners.
Along with undeniably thrilling football, the arrival of Serious Money in the Premier League over the past two decades has been a recipe for leaky stadiums, outrageously high ticket prices, cockamamie breakaway schemes, reckless transfer policies anchored in a mistaken application of the venture capital power law to professional sport, unsustainable player spending, “exotic” accounting, and rampant inequality, both on and off the pitch. Everything we deplore about the economy today – the precarity, the violence, the ruthlessness and inhumanity of it all – has found its own sad replica in the modern Premier League. And this is before we even get to the moral compromises involved in approving investment from oil autocracies and petrochemical billionaires, which have forever destroyed top-tier football’s status as a font of values and ethics around which communities can be consolidated. The Premier League’s on-field action remains roaringly entertaining, but it leaves a sour taste. If European soccer can serve as any kind of model for the NFL, it’s as a model of what not to do, of how not to handle the influx of clever money into sport.
The NFL is undoubtedly aware of what’s happened in Europe, and has observed the volatility of fan sentiment in response to these convulsions over the past few years: the Super League protests, a generalized disgruntlement over ticket prices and the inaccessibility of the matchday experience, the hatred most fans reserve for the money clubs, “115 charges” and all that. This explains, in part, why the first steps to opening up to professional investors have been so cautious. In particular, reports have suggested that under the new rules, the league will take a cut of the “carry” (or profit share) that private equity investors earn in the event of a sale: the idea here, one assumes, is to ensure that part of the bonanza team investors reap in a frothy sports market will be socialized among the league as a whole, for the benefit of everyone, rather than pocketed in toto by the vendors.
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That’s a nice idea in theory, but it assumes that what most institutional investors want is a fat return generated on disposal rather than a steady and growing stream of revenue from which they can siphon off a portion for their own ends. As the Premier League shows, the exit is not the endgame of professional sports investment today; the point of owning a stake in professional sports franchises today is to hold on to it, for as long as possible, and extract value wherever and whenever you can. The key is revenue generation; even in a club that runs at a loss, revenue can produce dividends, which are what the sophisticated institutional owner is really after. (Losses, in any event, can be used as a tax offset, so they serve their own kind of purpose.)
Professional investors in the modern Premier League, as I’ve argued previously, are more like rentiers than carers of the clubs they own: the Glazer family, which has trousered most of the £166m ($220m) in dividends that Manchester United have paid out to shareholders since 2005, serves as the emblematic example of this parasitic style. These investors’ main function is to own and extract rather than operate, improve, or nurture the assets under their control: their business model is built on minimum investment with maximum drain. Nothing about the protections put in place by the NFL suggests that the new wave of investors entering American football will behave any differently. Carry is irrelevant in a sports investment world built on the principle of perpetual leakage.
Indeed everything we know about the NFL’s hand-picked first round of approved private equity investors suggests they are every bit as revenue-focused as the worst culprits among today’s Premier League owner class. Many of these investors are already active in the European football market: Arctos Partners, for instance, holds minority stakes in Liverpool, PSG, and Atalanta, while late last year Ares Management invested $500m in Chelsea. Sixth Street, another fund admitted to the NFL’s first private equity dance, has invested in the media and stadium business of both Barcelona and Real Madrid; in a revealing interview he gave to Sports Business Journal this summer, Sixth Street CEO Alan Waxman claimed that until a few years ago, “sports were run like family businesses. There was no need for institutional capital, and there was no need to run it like a real company.”
Investors like Sixth Street are setting out to change that, and they’re doing it by acquiring as many different sports-related revenue streams as possible; tellingly, Sixth Street’s first major investment was in Legends, the hospitality company that has become one of the US’s most important stadium operators. On the face of it, there’s nothing sinister about any of this, of course; the danger is in what will happen should these types of investors, whose real goal is self-enrichment through revenue generation, gain a bigger foothold in US sports. As the NFL goes out in search of the institutional dollar, there’s a delicate balance to be struck between maintaining the attractiveness of the league as an investment destination and ensuring the sport does not get swallowed whole by its new funders. If the league has any sense, it will maintain the limitations it has put in place on private equity in American football and resist the urge to open the sport up to a bigger class of investors.
The saddest spectacle in today’s Premier League is of new stadiums and dynasties taking shape amid communities whose people can’t afford to watch their teams play live. Priced out of regular attendance at matches, fans are condescended to with various shabby substitutes for the real thing, for Live Football: crappy crypto baubles, betting coupons, opportunities to win some desultory prize in response to a social media campaign, merch. Meanwhile, stadiums are increasingly the preserve of those who view football as a networking event, mere background music to the transactions of life rather than the stuff of life itself. The NFL arguably enjoys a less emotional relationship to place than the Premier League – perhaps not in a place like Buffalo, where team and community hold each other in a lifelong embrace, but outfits such as the Las Vegas Raiders and Los Angeles Chargers have shown that franchises are willing to uproot teams and move when economic conditions make a change of address attractive. Financialization of the league opens the door to more transactionalism of this nature, only on steroids. At this still-early stage of its budding romance with the boffins of Wall Street, the NFL has the opportunity to avoid going down this path. Whether it will seems difficult to believe.