Good morning everybody. Great to be with you, Joe. Thank you so much for being here.
We're here to converge, whatever that means. I wanted to start off on that theme, kind of bring a lot of things together. I'd love to start off actually on sports. I know Mark and Ray were talking a lot about AI; I want to get to that, and certainly Alibaba, China, US if we can. But you own a lot of sports teams in our neck of the woods in New York, where you spend some time as well. Of course, the Brooklyn Nets, the New York Liberty, champions of the WNBA, a couple of lacrosse teams I believe as well. When you think about these investments, I'm curious: many who invest in sports are aware of the asset values rising over time, seemingly inevitably in many of these areas. Is that the play ultimately, to create value over time through the asset value and a potential sale at some point, or do you really look for a return season after season?
For a sports owner, the return season after season is every season you're trying to win the championship. You want to win games. You're not looking at the income statement of the team from season to season. So the final payoff for me is less financial. Even though the financial aspects are important, I have to make sure the investment can make sense. But at the end of the day, it's through the love of sports. I have a passion for sports. That's why I invested in these teams. Now, I have a few principles when I make these investments. Those are financial, commercial principles. Number one: I want to invest in a league where the best players in the world play. If you look at the NBA, the NFL, around the world the best players play. It's different in soccer; the best players are playing in Europe. I don't want to touch European soccer because they don't have a salary cap, and it's a very different system. You're also competing with sovereigns when you get into that. So, the best players around the world come to play in the league. The second thing is you look at the media value. You really need to pay attention to audience, either online streaming. I think the world is moving towards streaming, but still linear TV is quite important. The NBA just completed a massive 11-year deal with a number of broadcasters, including my own, of course. NBC, welcome back to the NBA.
We paid quite a price for that as well, Joe. Is it going to be worth it? Because ratings actually have not been as strong, and I think there is some concern. Are you concerned at all?
I'm not concerned about it. I just saw some stats: the latest Lakers-Celtics game had something like four and a half million viewers for a regular season game. That's really extraordinary. I don't worry about it because these are the best players in the world, and they compete and they're stars. When the lights are on, the stars turn on.
You were talking about how you evaluate in terms of some of your rules. Media rights obviously is important. I didn't want to interrupt you. What else?
I think Americans have done it right in their sports leagues. If you look at both the NFL and the NBA, there's a salary cap. The cap is really less about depressing the cost of players; it's more about coming to a balance, a fair balance between the owners and the players. For example, in the NBA, the players share 50% of the revenue of the entire league. Anything that's basketball-related income, the players share roughly around 50% of that. That's on the top revenue share, as opposed to profit share. So they are getting the majority of the profits of basketball. But as long as you set the rules and the rules are very clear how you split the economics between the players and the team owners, I think that's a very good framework to work with. The other thing about American sports leagues is it's kind of like a socialist system. Doesn't matter whether you win or lose, whether you win a championship or not, the sharing of economics is actually quite fair. For example, TV revenues are shared evenly among 30 NBA teams equally. Doesn't matter if you're the Los Angeles Lakers where you're on national TV maybe 25 times a season, you still share the same TV revenues.
You still see opportunity in terms of buying sports franchises now? I mean, you bought the Brooklyn Nets in 2017, and obviously it's done quite well in terms of the overall asset value. But is the same opportunity there? Where are you if you were to look? Is it lacrosse? Is it emerging sports? How do you view it at this point?
I would continue to look at these first-tier sports. I know they seem very expensive. I think the latest NFL team traded for somewhere between seven to eight billion dollars of enterprise value. The average NBA team is like four-plus billion enterprise value. They all look expensive, but as long as you can grow the fan base, grow the viewership on television and streaming, these are global audiences. There's a lot of upside. When I invested first in 2017, everybody thought I overpaid. But seven, eight years later, I didn't overpay. There's a very important reason for this. They call these teams franchises because it's not like anybody can just start a team. Someone has to grant you the franchise to have a team. Supply is by definition limited. The league controls how many teams are in the league. Any expansion discussions will have to go through the league, and all the owners have to vote on it. It's a very economic decision: they have to look at the potential dilution of additional teams coming in sharing all the revenues like TV revenues, versus does an additional team help increase the fan base, increase viewership, and all the rest of the economics that follow.
You've mentioned in other interviews that you want control. You obviously have control of the Nets, the Liberty, and the arena. But you spent $200 million to buy a very small stake in the Miami Dolphins, which gives you no control whatsoever. Why do that?
My philosophy approaching the Dolphins is very different from basketball. In the case of the NFL, first, I'm a football fan. I love the NFL. I played high school football. The opportunity came up. Steve Ross wanted to sell a minority stake, get some liquidity so he could put capital to work in West Palm Beach. He's a big developer there. I saw the opportunity, and I told the team in my family office to look at this thing as a pure financial investment. I told Steve I'm not even going to call myself an owner of the team. I'm a guest when I come to Miami. I hope to sit with you in the owner's box if you invite me. But I have an economic stake in 3% of the team. The whole business is not just an NFL team; it's also Hard Rock Stadium. They have Taylor Swift concerts and things like that, very popular. They have the franchise for F1 Miami as well as the Miami Open tennis tournament. So it's a collection of great assets under one roof that I invested in.
Could you ever imagine yourself as an NFL owner?
No. I still don't feel like I'm an NFL owner. I have not been a real...
Well, you actually controlled the team.
No, no, no. Why not? I've got to take care of the Brooklyn Nets first, which means you need to win first in the sports that you're already involved in.
You mentioned the venue in Miami. You obviously control the Barclays Center in New York City as well, or own it. How is that evolving the fan experience, and how important is it as an owner of the franchises that play in the arena to actually have control of the arena so you can evolve that experience? Is it early days in terms of what you can offer fans?
It's like in any business. If you're McDonald's, it's a franchise. It's IP. But it's better if you own the real estate. Otherwise, every few years the landlord has to negotiate rent with you, or you have to negotiate rent with the landlord. You have to beg. In the case of sports, the team is the IP business, and the real estate is a venue-based, place-based kind of business. At our Barclays Center, we not only host basketball games, we have both the NBA and the WNBA, but most nights we have concerts. We're generating revenue from renting out the space to artists, and that's a great business. In fact, Barclays Center in the last year, according to objective metrics, is considered one of the top three or four venues in the world. This includes all the great venues like the O2 in London and all the other great arenas in the world. It's one of the top venues in the world in terms of concerts.
Has it proved to be a better investment than the team?
Oh no, I don't think so. In the case of real estate, your upside is kind of limited. You're collecting rent. But teams, the IP value will continue to rise as long as you can continue to build a fan base.
We are talking about convergence here, and I did want to quote something you said recently. You said, 'We're seeing media, sports betting, and crypto converging a little bit,' and you went on to say, 'Maybe for the betting fan base, injecting a little bit of crypto will be interesting.' What does that mean?
That's maybe four years ago. I feel like I'm so out of fashion talking about crypto. Why? Crypto is all the rage again. It's kind of back. But still, I think the value... nobody's talking about NFTs right now. People are kind of going back to the basics: Bitcoin, Ethereum, maybe a little bit of Solana. But this overlap of sports betting and crypto, certainly there is that. In fact, we talk about it: people bet on their phone, they make investments on their phone. I'll give you another thing: sports betting, crypto, and also the stock market. Young people today, especially young men, they love betting on sports, of course, they love playing crypto, and they love to trade in stocks. If they can do everything in one app, isn't that beautiful?
I think so. A number of companies are trying to do that. We do sometimes talk about a merger of DraftKings and Robinhood. It's not completely not right. It's not completely... I think they will try to get into each other's turf first and compete a little bit before a merger happens.
