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Alexis Ohanian: The Full P&L Breakdown of the World's Most Valuable Women's Sports Team | E1187

Alexis Ohanian is the Founder and General Partner of Seven Seven Six, an early-stage venture capital firm with $970M AUM. Prior to 776, Alexis was the Co-Founder of Initialized, one of the most successful early-stage firms in history with their first fund returning 56x DPI. Before Initialized, Alexis was a Partner at the world-famous Y Combinator and before that was one of the Co-Founders of Reddit. ----------------------------------------------- Timestamps: (00:00) Intro (01:46) From Tech Success to Sports Ownership (19:40) Managing Ongoing Costs in Sports Ownership (23:03) Navigating Media Rights & Negotiations as a New Sports Owner (30:22) How Much Revenue is From Merch? (38:21) Media Strategy: Impact on Team Culture & Performance (52:23) How Private Equity is Shaping the Future of Sports (55:38) Lack of Tech Awareness & Fan Engagement (01:00:51) Content Creation in Sports: What Media Takes a Hit? (01:03:09) Investing in MrBeast (01:12:16) Quick-Fire Round ----------------------------------------------- In Today’s Discussion with Alexis Ohanian We Touch On: 1. $33M in Revenue: The P&L of a Sports Team: What are the core revenue drivers for Angel City Football Team? How did Alexis convince Tony @ Doordash to write the largest-ever brand sponsorship check to have the Doordash name on the Angel City shirt? How much money does Angel City make from ticket sales per year? What does the revenue from merchandise look like for Angel City? How has it changed with time? 2. How to Spend $33M Annually To Run a Team: What are the single biggest costs in running a sports team? Does Alexis believe that salary caps are good or bad for leagues? How much money is spent by clubs on content and software today? How should that change? 3. More Cash in Sports Than Ever: Prices for teams are at an all-time high. Are we in a bubble for sports assets? What remains under-priced and what is over-priced today? What are the pros and cons of private equity entering sports ownership in a meaningful way? Who is the worst sports team owner who despite his mismanagement, still made billions? 4. Alexis Ohanian: AMA: How did Alexis and Serena William’s children become millionaires through sports team ownership? How did Alexis turn a $10,000 check into $17.1M? How did a $10,000 check into a shoe company make Alexis $7M? Why does Alexis believe that sports becomes even more valuable in a world of AI? ----------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Alexis Ohanian on Twitter: https://twitter.com/alexisohanian Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #alexisohanian #sevensevensix #venturecapital #partner #angelcity #mrbeast #football #serenawilliams #ai #reddit #doordash

Alexis OhanianguestHarry Stebbingshost
Aug 7, 20241h 22mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 1:46

    Intro

    1. AO

      ... and if you can't show me a sport where the highlights go viral on social media, the freest market of ideas that has ever existed in the world, you might have some stuff missing. And so, part of the job of a club is to then tell the story of our players every minute they're not on the pitch, because, one, that's, some of those are brandable opportunities. If you're not relentless, every day, as an athlete, trying to improve yourself, trying to get better, you're gonna be left behind. The teams around and that are supporting these athletes need to have that same mindset.

    2. HS

      Ready to go? (instrumental music plays) Alexis, dude, I am so excited for this. I mean, this is the first time-

    3. AO

      Me too.

    4. HS

      ... that we got to do this in person.

    5. AO

      That's right. We have met in person.

    6. HS

      We have met in person-

    7. AO

      But this is the first time-

    8. HS

      ... to be fair.

    9. AO

      ... we're recording in person.

    10. HS

      And it makes such a difference. I don't know, do you-

    11. AO

      Yeah.

    12. HS

      ... do you find it makes a big difference doing things in person? I do.

    13. AO

      I think so. I'm, I'm convinced like the best p- part that came out of COVID was at least defaulting to, and we, we see this culture internally, defaulting to not having the casual meeting. It requires, I don't know, I, like, yes, I love coming together in person. I just tell the team all the time, "Let's make sure it's intentional. Let's make sure there's a reason why." It's not just, I don't wanna spend, I'm at a point in my life where I don't wanna just hang out for coffee for 30 minutes to like pick brains, right?

    14. HS

      Or, or do a catch-up.

    15. AO

      Or do a catch-up, yes.

    16. HS

      L- I'm, uh, fuck, all these VCs that do catch-ups.

    17. AO

      No, no, no, never.

    18. HS

      I'm always just like, "What do you do?"

    19. AO

      What are we accomplishing with this?

    20. HS

      But I, all, I never know what to say, so I just ghost them.

    21. AO

      There, it does.

    22. HS

      Yeah, yeah, I, it's like, I, well, 'cause they're always just like, "Why?"

    23. AO

      That's fair. Yeah, no.

    24. HS

      Like, "What, why, what should we catch up on?"

    25. AO

      You gotta guard your inbox. That's totally reasonable.

    26. HS

      D-

    27. AO

      But, so when it's in person and with an agenda and good people, it's, it's

  2. 1:46 – 19:40

    From Tech Success to Sports Ownership

    1. AO

      the best.

    2. HS

      Dude, I wanna start-

    3. AO

      I love humans.

    4. HS

      ... when we look at like the, the career-

    5. AO

      (laughs)

    6. HS

      ... there's Reddit, there's-

    7. AO

      Mm-hmm.

    8. HS

      ... obviously Initialized-

    9. AO

      Yes.

    10. HS

      ... there's 776.

    11. AO

      Yeah.

    12. HS

      And we have this unwavering success across different technology elements from operating to investing.

    13. AO

      Mm-hmm.

    14. HS

      And then, it's like, "You know what? I'm gonna start owning sports teams."

    15. AO

      Yeah.

    16. HS

      As just an entry point.

    17. AO

      Madman.

    18. HS

      How did you get into the sports ownership game?

    19. AO

      You know, it was one of the most contentious deals ever at Initialized, and this was, so okay, well, it originally started with a tweet storm in 2019, March. I saw that Megan Rapinoe's team, she's an American footballer or soccer player, had just sold for like $4 million, and I saw it on my feed, and I just thought, "Wait, that makes no sense. Like, a whole team is worth $4 million?" Like, if you're marketing Megan Rapinoe well alone, she should be worth that much a year in brand revenue. So, something doesn't make sense. And I literally tweeted this all out, stream of consciousness, and somewhere in the third or fourth tweet, I just said, "You know what? I'm gonna buy a team in this league." I'd never heard of it before. It was called the NWSL. I was like, "All right, fine." You know, the World Cup's coming up. This is 2019, right? American soccer is defined by women. And for non-American listeners, you have to understand, our men are terrible. All right? They've never won anything on a global stage. I love, I mean, USA all day, but from-

    20. HS

      (laughs) I rem- I remember Landon Donovan. That was like the star.

    21. AO

      God bless. I mean, they, it's just, and look, I love Christian, you're doing awesome, like you are great. But the, the legacy of American soccer is, is women, in terms of excellence. And I can market greatness all day long in America, and I just thought, "Man, everyone is paying attention to these women every four years, and then poof, it disappears. Like, what the hell are they doing the rest of the time?" And Alex Morgan, one of our stars, to her credit, (laughs) replied to me and said, "I can help you with that." Um, 'cause I was talking about buying a team. So anyway, long story short, she's playing for Orlando. I brought her down to Miami probably like a month later, just took a bunch of notes, and just started asking her a bunch of dumb questions about s- the sport, about women's soccer, and what we could do, and I came away from that saying, "Okay, I'm gonna buy a team." And then, I started talking to existing owners, and I found this very weird dynamic, because all of them basically had gotten the team because they had a daughter or a granddaughter who liked soccer, and they thought, "Oh, this will be nice for them." And they really thought of it as charity, and, and I, I did not want to inherit a team with that kind of DNA. And, and then I got introduced to, uh, by the end of the year, through, I think it was Larry Freeman at LAFC, got introduced to Kara, Julie, and Nat, uh, Natalie Portman, who said that they wanted to put on a team, but they didn't have any money. And so, I was like, "Okay, this could be a good fit." I told my vision, it aligned with theirs. And so, I said, "All right, great, I'll fund this team. I'll own this team, and you all can operate it." And, you know, at the time, I was, so I was investing out of Initialized.

    22. HS

      How large was the investment?

    23. AO

      So, to buy an expansion was a million dollars back then. Now, you obviously need another few million dollars to like actually finance the team. But remember, an entire team had sold for $4 million, so even the million dollar expansion fee was pretty rich. I, I think a previous owner maybe had paid like a few hundred thousand dollars, but this was the state of women's soccer. Now, I looked at this, and this was the longest memo I'd ever written, 'cause I just, uh, I fell down this rabbit hole of opportunity, because I, I started learning about sports, and I was like, "Okay, well, how do sports teams generally make money? Okay, media rights deals." Where (laughs) I already knew it was broken, at the time, soccer matches in America, these, these women's soccer matches were being played on Lifetime. Now, this is a station in America that basically shows like sappy docu- uh, sappy, uh, uh, films, like Hallmark movies. So, it- it's not a place for sports at all, and it's aggressively targeting a demographic of women that like are not the, like young generation of sports fans that would actually watch sports, okay? So, you had an obvious mismatch, an obvious underinvestment, a broken mindset among so many of these owners at the time, and I just thought, "Okay, this is all upside. This is easy stuff to fix." Right? And, and, and the prices were incredibly low. And so, you know, I brought this together, and I said, "Listen, I wanna do this investment. The..."... you know, the nice thing when you have the track record that I have is LPs are fairly lenient.

    24. HS

      Yeah.

    25. AO

      You know?

    26. HS

      You get more leeway.

    27. AO

      You get to do more weird stuff. And you can look at, you know, some of th- some of my favorite investments that I've seen folks at like Thrive or Founders Fund do have been a little batshit when you looked at them at early stage.

    28. HS

      Keith Rabois always says, "If my friends look at my investments and think that half are not insane-"

    29. AO

      Mm-hmm.

    30. HS

      "... then I'm not doing my job right."

  3. 19:40 – 23:03

    Managing Ongoing Costs in Sports Ownership

    1. AO

    2. HS

      That's why you build media empires. Okay, so you-

    3. AO

      Mm-hmm.

    4. HS

      ... you invest then, it's crazy. The thing that-

    5. AO

      Yeah.

    6. HS

      ... you don't have investing in tech that you have here-

    7. AO

      Mm-hmm.

    8. HS

      ... is ongoing cost, though. You have to pay players-

    9. AO

      Yeah.

    10. HS

      ... you have... H- how did, how did that work, and what was that ongoing cost there?

    11. AO

      So, so there is and there isn't. Like, if you abstract away, there is a dynamic where there are some contract nuances to this, 'cause obviously players, there's collective bargaining agreements, you know, there's salary caps, there, it's not, it's not a one-for-one match to say that like, "Oh yeah, our star striker is the equivalent as like a 10X engineer." But it's, it's similar. And so when it came to, uh, when it came to funding, it was two things. One, you know, funding off of good old-fashioned revenue, which is a nice thing, right? Just focusing on having revenues coming in the door that you can then invest more in the team. Um, and so it doesn't look as, let's say, high growth at all costs as a traditional startup. Um, and then there's also future rounds of financing. And so it was, it... From our vantage point, my thinking was, "Okay, this has been a slog to get done at Initialized." Now not surprisingly, I don't know, six months later, I split the firm up. And so Caitlyn, Lizzy and I left, went and started Seven Seven Six, basically took, took the, the squad and we spun this up, and then I invested outta Seven Seven Six as well. So, now here's the net- sort of next round of financing. Now, the, the, the bigger question and the bigger unlock that we can't control is when those media deals get renegotiated. Because when those get renegotiated, now you have a new source of revenue. You probably see these headlines now, right? "Oh, no, big NBA media deal." Well, we had a similar one because remember, we were on Lifetime (laughs) . And so it was imperative once we had some momentum, you know, not long after Angel City, uh, a few other strong teams were started, San Diego Wave came out. Now you started to see more professional investors putting dollars behind women's sports. I remember pitching friends of mine for years on women's sports, and specifically the NWSL. And I remember saying like, "Guys, please buy a team. Trust me, it's gonna do well." And they'd say, "No, thank you, but would you like to invest in pickleball with me?" (laughs) Now I'm gonna upset a lot of pickleball fans, but I, my answer to them was, "Okay, but have you ever seen a pickleball clip go viral?" And they're like, "Well, no." "Have you? Have you seen a pickleball clip go viral?"

    12. HS

      I, I've never listened to one.

    13. AO

      I, we live on the internet, right? And, and again, maybe for better or for worse, 'cause I created Reddit, I think this way. Like, the, the only attention that matters to me is, is here, it's digital. I actually don't... Media deals are all based on data that is very out of date and an audience that is much older, right? What is relevant is where things are headed. And if you can't show me a sport where the highlights go viral on social media, the freest market of ideas that has ever existed in the world, you might have some stuff missing. And I don't know what the, the, the there there is, but there's something missing. And so, but there was still this notion that women's sports was uninvestable.

    14. HS

      So how much was, was it, Lifeline? Th- the TV channel?

    15. AO

      Oh, Lifetime.

    16. HS

      Lifetime, sorry.

    17. AO

      Yes. (laughs)

    18. HS

      Uh, maybe it needed-

    19. AO

      And you're not American. I don't blame you if you're not

    20. NA

      (laughs)

    21. HS

      ... a lifeline, um, but, uh-

    22. AO

      Yeah. (laughs)

    23. HS

      ... how much were they paying?

    24. AO

      Oh, it was a pittance. I, I, it was, it was nothing, it was irrelevant.

    25. HS

      But kind of like 50 grand, 100 grand starting?

    26. AO

      I mean, I, the, I honestly don't remember, but it was so small it didn't even matter.

  4. 23:03 – 30:22

    Navigating Media Rights & Negotiations as a New Sports Owner

    1. AO

    2. HS

      And so what then does that look like for you? You're the new owner, you're like-

    3. AO

      Mm-hmm.

    4. HS

      ... "Shit, we need to renegotiate media rights."

    5. AO

      Yeah.

    6. HS

      Who do you go to? How do you get it done?

    7. AO

      Uh...

    8. HS

      Wh- what happens there?

    9. AO

      Well, okay, this one, there was a s- just, this was like a whole stampede of events. So, unbeknownst to me, the NWSL also had this big scandal brewing underneath it. And, and there was a Yates report, there was a bunch of work very importantly being done to investigate all these other, a number of these other teams that had existed for horrible abuse of players. Uh, coaches mismanaging their authority, favors, all kinds of just awful stuff. And so the NWSL was going through this tremendous turmoil not long after getting it. It's like, "Okay, great, got a team, I believe in the sport," and then, "Oh, shit, now here's a serious investigation happening on some serious charges." But it was actually the best thing that could have happened because-

    10. HS

      You're like, "Fuck." (laughs)

    11. AO

      ... well, look, it, it brought... Sunlight is a great disinfectant. And so it cleansed, it, it really forced the league to overhaul everything. We got a new commissioner, that's Jess Berman. And, and it was a big forcing function for the league to face a lot of its demons and, and really do the work to exorcize them. And so now enter Jess Berman, new commissioner, and you have someone who comes in both with fresh blood and a mandate to basically say like, "I gotta get this right. Like, this league has been failing the players. We have new owners who are committing dollars, who are sophisticated business leaders, like, let's get to work." And so credit to Jess, the team she built, and as more and more new owners came in, there was just a natural push to say, "Okay, what is the most obvious thing we can fix?" Media rights deal, when it came up, I think ended up being CBS largely was the, the big winner there. Uh, and that was good. This was a few years ago. Now that deal just came up...... about to get my time right, last year. And the new deal, which you can read about, was a very big step up. And so now all of a sudden, you've got, you know-

    12. HS

      How big was it?

    13. AO

      ... the... We'll pay the league $60 million a year for four years.

    14. HS

      $60 million a year for four years?

    15. AO

      Yeah. And that's a medley of Amazon, CBS, ESPN, and then ...

    16. HS

      How many teams are there?

    17. AO

      Uh, 12. Uh, 12 and then a couple expansions. So, so 14.

    18. HS

      Okay. So you're basically getting four a year.

    19. AO

      Yes. But you've got to understand, this is coming from zero. It's an interesting flywheel. So you need a top-tier brand like DoorDash and a seven-figure brand deal to then show everyone else in the league, "Hey, you all can be charging more sponsor money."

    20. HS

      Mm-hmm.

    21. AO

      Now, the way that multiplies is then it, it... You know, if San Diego gets a g- a great brand deal, and, like, it's this information gets pretty well-shared within the league, like intentionally, to say, like... I- it's, it's weird. It's like a subtle flex, but it's also really helpful because then our revenue team goes to market and, and now knows, "Okay, well, this market, or this team, that we think we're worth more than is getting this much money, so you have to pay us more."

    22. HS

      Yep.

    23. AO

      Like, it's actually... It's a, it's a positive sum... You have to have a positive-sum mindset and actually see that. Well, great, that just means we want other teams to charge more, 'cause then we get to charge more. And, and so at the end of the day, and, you know, this is reported, so we, you know... I think last year the team did, like, 31 mil in revenue, and that's just in brand deals with a little bit of merch and everything else. And-

    24. HS

      Ooh. Pause, pause, pause. 31 million in revenue from-

    25. AO

      Yeah.

    26. HS

      ... brand deals?

    27. AO

      Yeah, largely.

    28. HS

      Where does that 31 million come from? I'm just so blown away by that number.

    29. AO

      The bulk of it's in brand deals, so sponsorships. Now, remember now, these things get renegotiated every few years.

    30. HS

      Yeah.

  5. 30:22 – 38:21

    How Much Revenue is From Merch?

    1. HS

    2. AO

      Yeah.

    3. HS

      How much revenue is from merch?

    4. AO

      It is still a fraction. Right? It's still on the order of single-digit millions, um, which is good, but relative to brand deals is still small. Now, part of this... Here's another... This is another fun one. We see this... So...... NW cell was kind of a mess (laughs) back in 2019. It's getting more professionalized. And with that, you're getting more and more infrastructure created to support all the teams, which basically means the teams can be less, sort of, cowboy renegade-

    5. HS

      Sure.

    6. AO

      ... about how they do stuff. We had the exact same thing in Tiger's, uh, T- uh, TGL, where we got to start doing exactly what we wanted the way we wanted. You can see all those thank you videos. With merch, with partnerships, with dope brands. But at some point, the deal with Fanatics happens, and when that deal with Fanatics happens, that merch now goes and lives at Fanatics. And so, it's double-edged. Like, there is definitely... It is good that we're professionalizing, 'cause you have great partners. That's, that's more revenue for the league. That's more revenue for the teams. It's simplifying life for a lot of other team owners that don't want to handle that stuff. But then there's us. (laughs) They're the folks who really want to lean in, get our hands dirty with those things, even something like merch, because we have expertise. My first... I'll never forget, the first fight I had with Steve at Reddit was like six, nine months in. Not even. Six months in. And it was a blow up fight, because I desperately wanted to sell merch on the website, and Steve was like, "Absolutely not. That's stupid. No one's gonna want our merch." And, but I was the CEO. It's the end of the day. I won, and I put up... And this is before, this is 2005, so it was like a janky, like, PayPal integration. I don't... Shopify didn't exist, or I didn't know about it. And so I built this shitty thing, got it online, bought, I don't know, a 100, 200 shirts from a local printer, had them literally in my bedroom. Sold out overnight. And you better believe, and I packed every one of those envelopes. I wrote a thank you note, signed it myself, and like s- like a weird Santa Claus, had two garbage bags full of shirts that I brought to the post office, and I was so smug when I left the apartment that morning when I was like, "We fucking sold our 200 shirts." But that was the first time I'd ever made merch and realized the power of someone willing to put their logo on your, on their torso. Like that is a hu- I, I sincerely meant those thank you notes because it was insane that someone would do that for our crappy little startup in an apartment in '05. So, take that now today, where it is totally normal for sports fans to tattoo the logo on their body. So merch is... I, I think it is still an underinvested-in opportunity, and this is... Here's a cheat code for most of sports, and I almost feel guilty telling you, but I'm gonna share it with the world. Fine. All of sports has been told, by and large, through the male lens of sports media, which has been great. I've loved it. Man hits ball, gets to second base. It's very... It's, it's, it's just the facts, right? It's, it's what happened in the story. We are starting to realize how powerful it is to tell the story of sports through a, a female lens. Well, what do I mean by that? You know, even if you look at some of the docuseries that have made great traction over the last few years, you know, like a Drive to Survive or now there's a great NFL one called Quarterback and Receiver, you're getting the humanity of these athletes. And, and men, I love them too, but women especially love this part of the storytelling, right?

    7. HS

      Unbeliev- Especially for Drive to Survive, the amount of American women-

    8. AO

      Yes.

    9. HS

      ... that now love F1-

    10. AO

      Yes.

    11. HS

      ... is insane.

    12. AO

      It is nuts. And, and that's-

    13. HS

      And for Liberty Media, that has been the deal of the century.

    14. AO

      It, and it's been a brilliant execution around storytelling through a different lens. And again, it's, uh, I think it is, it is first principles thinking around sports. Why do people love these athletes? Like, yes, it's 'cause they, they hit the ball well, and because there's something about them as people that we connect with. In this new world, you're gonna see so many more. And it won't just be women's sports, 'cause you do have to tell the stories around women's sports differently. But it'll also be applied to male sports, like we've seen with Drive to Survive and elsewhere, and it is gonna be a gold mine. It's the reason, it's the reason-

    15. HS

      Does the onus not go on the talent, though? Which is like, it is their responsibility to tell-

    16. AO

      No.

    17. HS

      ... their story, to open up, to show a side of themselves that they maybe hadn't needed to before, to take the camera behind the scenes-

    18. AO

      Yeah.

    19. HS

      ... to their training, to their diet.

    20. AO

      So, so most women athletes are already doing some version of this, but... And, and it's growing. I mean, this is... Yes. Well, look. Uh, at the end of the day, you can't force, you don't wanna force anyone to do anything. But you're already seeing women athletes' predisposition to doing this. Male athletes, right, the first Drive to Survive was, you couldn't get. They had, they had to go with whoever they could get-

    21. HS

      (laughs)

    22. AO

      ... 'cause no one really wanted to do it. And even then, it was kind of like pulling teeth, but then they saw the value. Women athletes are far more predisposed. What's crazy... So I funded a reality show called The Off Season, which was 11 national team and, and professional women soccer players in a house for three weeks for an off season in Miami. They train together. They party together. They live together. Camera's rolling the whole time.

    23. HS

      How much did it cost to fund?

    24. AO

      Let's say f- uh, four or five million dollars.

    25. HS

      Did it make money?

    26. AO

      Well, it gets even better. Um, so we got Box2Box, who obviously made Drive to Survive-

    27. HS

      Mm-hmm.

    28. AO

      ... and then 32 Flavors, which is... They make Vanderpump Rules. But what no one understood, and what Midge really had to engineer, was that if you have professional athletes living in a house together, you don't need to manufacture drama as if it's housewives living in a house together. You can actually let the cameras roll, but make sure you still have their trust that they're being authentic. They're not gonna get portrayed, like they're not gonna make up drama. Like, you're actually just gonna be honest with your editing, which is a level of trust that's not usually there in, you know, the, the reality TV show world. Um, and for the sports side, that they'd never really experienced. If you're in Drive to Survive, if you're doing a traditional sports doc, and someone doesn't like an interview, they just get up and they're like, "Okay, we're done."

    29. HS

      Huh.

    30. AO

      But if you're putting cameras in the house, you can't escape them. And so it was this very different format. We ended up actually going with X to, uh, stream it, and it's gonna... First episode is gonna drop, uh, towards the end of this season, probably like October. Um, but we launched the trailer. Tens of millions of views. And, and what's intriguing is, as people saw it, then we started to get inbound, and now we're talking to some-... you know, obvious, let's say, basketball folks about this because here is a format, but again, it's telling the story of sports through this lens that, for whatever reason, has never been told before. I'm the kind of person who doesn't really enjoy reality TV shows, but if my wife is watching one, I'll sheepishly pay attention while I'm on my laptop and by, like, episode three, I'm, like, all in.

  6. 38:21 – 52:23

    Media Strategy: Impact on Team Culture & Performance

    1. AO

    2. HS

      Do you ever worry about ... Uh, so I love your business media centric mindset, and I think it's what traditional sports owners lack and miss-

    3. AO

      Mm-hmm. Mm-hmm.

    4. HS

      ... really, as every club becomes a content house.

    5. AO

      Yeah.

    6. HS

      But what I worry about is two things here. Culture.

    7. AO

      Mm-hmm.

    8. HS

      It could cause rifts in the team with superstar cultures being created and not everyone-

    9. AO

      Mm-hmm.

    10. HS

      ... rises at the same time or speed.

    11. AO

      Yeah.

    12. HS

      And performance on the pitch.

    13. AO

      Yeah.

    14. HS

      What a lot would say is the only thing that matters.

    15. AO

      Yeah.

    16. HS

      How do you think-

    17. AO

      Hmm.

    18. HS

      ... about those two, and is it detrimental doing all the media activity for those two?

    19. AO

      And then when it comes to teams specifically, look, there's always gonna be that gap between the star player and the, you know, the role player at the end of the bench, but teams find a way to navigate it. Um, I do think in this new era, you're actually gonna find more opportunities for those role players because you're gonna see, you're gonna see folks who have fans that don't just have fans for their work on the court or on the pitch or on the track. They have fans because they're just beloved. And, you know, I'd, I'm not an F1 expert, but I feel like Danny Ricciardo punches way above his weight because he has such a strong fan base now thanks to that show.

    20. HS

      100%.

    21. AO

      And, and, and it's ... And I think there's a version of that that then extends to other teams and these are, look, these are things for coaches to handle, but it's not the worst thing in the world for them to, to navigate.

    22. HS

      Okay. So we have, like, say, 5 million a year in merch.

    23. AO

      Mm-hmm.

    24. HS

      We got 31 million a year in sponsors.

    25. AO

      Mm-hmm.

    26. HS

      Which is amazing.

    27. AO

      The challenges there, there's also this tension between, you know, you have 22,000 capacity stadium.

    28. HS

      It's impressive.

    29. AO

      I think we average 20 ... Oh, yeah. Thank you. We average about 20,000 attendees, so sell out about half the games, and ticket prices. There's always this tension, you know, we have something that's still pretty accessible, uh, to fans. And one of the things I remember hearing from the very start were, you know, plenty of fans saying, like, "Please do your best to keep this being something accessible for us." 'Cause as you get more valuable, ticket prices are naturally a thing that goes up, um, 'cause it also lets us play players more, et cetera. Um, but it's something that we haven't had, we haven't had yet. Um, I also think the big trend is going in the other direction. Stadiums and new build outs are getting smaller, and, and that tracks. I think even though we're craving more and more this humanity together-

    30. HS

      Why are they getting smaller?

  7. 52:23 – 55:38

    How Private Equity is Shaping the Future of Sports

    1. AO

      NWSL.

    2. HS

      How do you think about, like, the privaty- private equitization of sport? You know, we've seen-

    3. AO

      Hmm.

    4. HS

      ... private equity come in and buy-

    5. AO

      Yeah.

    6. HS

      ... teams en masse.

    7. AO

      Yeah.

    8. HS

      And now we've seen, you know, CBC and other large providers-

    9. AO

      Mm-hmm.

    10. HS

      ... come in and invest in leagues.

    11. AO

      Yeah.

    12. HS

      And by the ... Investing large parts in, you know, everything from the All Blacks-

    13. AO

      Hmm.

    14. HS

      ... in rugby-

    15. AO

      Hmm.

    16. HS

      ... but also, uh, La Liga.

    17. AO

      I think it's a good thing on the whole to have more dollars and more sophisticated managers involved. Um, I get the ... There is this tension of, like, what are their incentives long term? And I think always gonna be some balance, but there's only so many billionaires, and as some of these teams and leagues become worth so much money, um, I think you have to have private money come into it.

    18. HS

      Is there an asymptote-

    19. AO

      You have to.

    20. HS

      ... to team value? You know, we're seeing teams being valued at-

    21. AO

      Hmm.

    22. HS

      ... eight, ten billion in some cases.

    23. AO

      Yeah. What's an asymptote?

    24. HS

      Like a, a, a ceiling.

    25. AO

      Oh. Um ...

    26. HS

      A- Are we in a bubble for sports team enterprise value?

    27. AO

      Hmm. Some teams, sure. Uh, but I don't think ... There are definitely some leagues that I think are overpriced. I'd say the MLS is one that's overpriced. The Messi effect has been phenomenal. What they've built there is, like, real.

    28. HS

      Do you think-

    29. AO

      But-

    30. HS

      ... that is sustaining?

  8. 55:38 – 1:00:51

    Lack of Tech Awareness & Fan Engagement

    1. AO

      Software should do that.

    2. HS

      But that assumes a high level of customer education within the current sports ownerships and management teams.

    3. AO

      Yeah.

    4. HS

      And I think the thing that has astounded me-

    5. AO

      Hmm.

    6. HS

      ... is the lack of education, technological awareness. Everyone says-

    7. AO

      Yeah.

    8. HS

      ... fan engagement, but has no freaking clue what fan engagement-

    9. AO

      Yeah.

    10. HS

      ... actually is. That, uh, th- they do not have any clue. Uh, I'm so shocked by how poorly sports teams are managed.

    11. AO

      Yeah. Well, uh, look, you said it. I think it's, I, so I agree. I also know nothing speaks louder than revenue and success. And what I've found, I mean, I'm, I'm speaking at Arktosa's, I don't know if I'm allowed to say that, whatever. I'm speaking at Arktosa's event next week to, you know, 50 team presidents and owners from that whole Arktos investment group, right?

    12. HS

      Mm-hmm.

    13. AO

      And these are all the owners, all the presidents of all the teams, you know, who are l- I think doing some of the best work. And the fact that they even wanna hear from me and the, like, it's gonna be a full tear down on the ways we're using technology between Angel City, LA Golf Club, and Athlos, like, that to me is a good sign that someone like me is invited there to basically talk about how I'm building and how we're building. And I think, give it five more years and folks will level up quickly because you'll see, all you need is one example in a league.

    14. HS

      Mm-hmm.

    15. AO

      One team to be doing it really well, and everyone will fast follow. But it takes so much to get that one. It's just then the dominoes fall quickly. But there is a ton of friction because it's the way we've always done stuff, it's multi-year contracts that the league made that you can't get out of. It's, it's all the inertia, but it'll move.

    16. HS

      To what extent do you think enterprise value in sports teams will follow the same distributions as they normally do of 80/20? 80% of the value accrues-

    17. AO

      Mm-hmm.

    18. HS

      ... to 20% of the players?

    19. AO

      Oh. Oh, really? 80%, interesting.

    20. HS

      Like, will there be a few NWSL teams that are very, very valuable and very famous than the rest are like-

    21. AO

      Oh, yes. Yeah, power law. Yes. No, I think it'll be... I think it will be a power law, but even in the big four in America, I think you'll see a power law where maybe it's 90/10 even, where so much of the value is going to very few of the teams because we know that's what software does. And right now, if it's 80/20, devoid of software, simply because, like, the Warriors know how to run a good basketball team, when you layer in technology, I think it, it shifts. Now obviously, everyone can have access to that, but I do think there's a first mover, I think there's... Like, even, it's little stuff. This is, it's gonna sound so silly, but, like, (laughs) the, the, the Clippers installing USB ports at every seat of their... So, there's a brand new... So, the big... So, the Clippers have always been the second rate team in LA. Sorry, Clippers fans. Uh, 'cause of the Lakers, the, the number one team. Uh, Ballmer obviously very successful, invested a ton in this team and they've built a brand new arena. And one of the things that went viral recently was they showed off, um, it's not open to the public yet, but they showed off the USB-C charging ports at every seat. And it's such a dumb... On the one hand, like, technologically, this is moot. This is so stupid. Anyone could have done this. But making sure everyone can charge their phone means making sure everyone can be on their phone posting content.

    22. HS

      (sighs)

    23. AO

      Now, if they can just be... Uh, I don't know how good the wifi is gonna be in the stadium. (laughs) I've never built an arena, so what do I know? But I would make damn sure, like, throw Starlinks on every roof, every section of the roof. Like, make sure people have fully charged phones (laughs) and make sure they've got great internet. Because that is a huge army of people who should be broadcasting as much of this thing as possible to their fans. And it's little, like, it's stupid little things like that that show me that things are starting to change because they're realizing this is important.

    24. HS

      I went to Taylor Swift with my brother at, um-

    25. AO

      Hmm.

    26. HS

      ... Wembley.

    27. AO

      Mm-hmm.

    28. HS

      Because of, I don't know, uh, no phone signal worked.

    29. AO

      No. Oh.

    30. HS

      No. No uploads, no nothing.

  9. 1:00:51 – 1:03:09

    Content Creation in Sports: What Media Takes a Hit?

    1. AO

      see them just tumble all at once.

    2. HS

      ... when we think about the attention economy and sports as content creation houses-

    3. AO

      Yeah.

    4. HS

      ... and taking up more and more consumer mindsets-

    5. AO

      Or-

    6. HS

      ... and time, the question I ask then is, what falls out of the attention economy? Is it reality TV?

    7. AO

      Hmm.

    8. HS

      Is it documentaries? Is it movies?

    9. AO

      Hmm. Yeah.

    10. HS

      What slips?

    11. AO

      Uh, I think it is... Let's go back to that Pareto 80/20 action. I think 80% of movie, television, that kind of scripted, created, even non-scripted, that, that sort of entertainment slips. Uh, I think m- it, it is... Especially imagine AI is gonna trivialize or it's gonna expedite so much in the way of production and content creation, you're still gonna go to Taylor Swift because it's a religious experience. I'm, I know I'm taking my daughter-... this year, and then it'll take a few years to come.

    12. HS

      I went with my brother. We weren't massive Taylor Swift fans.

    13. AO

      But you loved this one, I bet, yeah. She's-

    14. HS

      We came out, "Oh, my God. I bought 50 quid T-shirts."

    15. AO

      (laughs) Yeah.

    16. HS

      "I'm listening every day."

    17. AO

      Yeah, yeah. (laughs) That- that is a religious experience, but imagine, uh, maybe even 90% of music that's created is so either derivative or pop or one-hit wonder. Like, it's just that, that's the stuff that's gonna be the biggest loser. And whatever that version of, like, television entertainment content, also the biggest loser. And it- the stakes will be so much higher. Basically, we'll be able to have this- Every screen is gonna be so good at delivering us what we want, when we want it, how we want it. It's this sort of, like, opiate. That's just- And it's- and it's- I think a lot of it's gonna be user-generated, pretty low friction, like, just dumb easy to consume stuff. And so what breaks through has to be impactful. It really has to be exceptional. And- and then you have sports, which can even be (laughs) like, uh, uh, the match doesn't have to be exceptional, but the fact that it's your favorite team competing with so-and-so, like, that- that's gonna make it stand out. That's why I'm so bullish on it. I really feel for a lot of the really medi- You don't wanna be mediocre in this world, uh, on the content side. You- there needs to be a powerful why. Why am I gonna pay attention to you for a few minutes?

    18. HS

      My team will laugh at this, but I-

    19. AO

      Yeah.

    20. HS

      I'm, uh, not easy to work with.

    21. AO

      (laughs)

    22. HS

      But- but I always say, like, this was never meant to be fun.

    23. AO

      Yeah.

    24. HS

      Like, if you wanted fun, and we have very high expectations, I will push you to do the best work of your career, and you will learn a lot.

    25. AO

      Yeah.

    26. HS

      But do not expect an easy fucking ride.

    27. AO

      Yeah. That's real.

  10. 1:03:09 – 1:12:16

    Investing in MrBeast

    1. AO

    2. HS

      Um, I-

    3. AO

      That's real.

    4. HS

      One- one more question before we do a quick fire, and it's just, you invested in MrBeast.

    5. AO

      Mm-hmm, oh, yeah.

    6. HS

      Kind of aligned in terms of media and that generation of entertainment. You were first outside investor in MrBeast Feastables?

    7. AO

      Yes. Pre-launch, and- and I just needed-

    8. HS

      So just talk to me. How did that come about?

    9. AO

      You know, I'd been chasing Jimmy for a while. So I seeded Patreon in '14, and over the years, as Patreon started growing and defining this idea of membership and the creator economy, I'd- I'd introduce them to folks, creators all the time, and they always said the one that they really wanna get is Jimmy. And the thing that I learned was (laughs) for MrBeast, it was never even on the table, simply because, one, he was so relentlessly focused on just creating these great videos, and two, he was already tracking so well that he didn't want any outsider to own the thing. He wanted to just have it all be under this empire, and he didn't quite know how he was gonna do it. But then as soon as this idea popped up, I was like, "Literally, I don't need to know anything about what this business is. As long as you're making something and you believe in it, it's gonna do well." And- and there were definitely some false starts. Um, I learned a lot (laughs) making, uh, candy bars. But seeing the growth has been phenomenal. I don't know if I'm ali- Some of this stuff's probably public. He's probably talked about it a bit. But it- it has- You know, Prime and Feastables are the two examples. That's Jake, uh, no, Logan Paul-

    10. HS

      Mm-hmm.

    11. AO

      ... uh, his drink. Um, those are the two examples of what I think is- It's unprecedented in terms of we're now seeing what apex creators (laughs) , like the apex predators of the creator economy, are able to do to move product. It's nuts.

    12. HS

      So you invest in the Feastables company as a separate company?

    13. AO

      Yeah, and now it- it- and now it's being absorbed in-

    14. HS

      Can I be blunt? How much did you put in, at what price?

    15. AO

      Uh, we might have to cut it, but I bought 10% at 40 mil.

    16. HS

      At a 40 mil price?

    17. AO

      Yeah. It was pre-launch, and at the time, I mean, I (laughs) ... It's funny, it's one of those things where you put in the-

    18. HS

      That sounds actually really well priced. If you look at his, like, audience base, you're gonna be guaranteed-

    19. AO

      Well-

    20. HS

      ... at least 20 mil on the first year revenues. I'm sure it was way more.

    21. AO

      Remember this was, remember this was 2020. Yeah, this was 2020. So it was also a Xerpy time, and so I was thrilled. I was like, "Oh my God, 40 mil?" Like I mean, it's pre-launch, pre-everything, but I was like, "This is a no-brainer." And- and plenty of other firms tried to win that deal too, um, but it was a funny one (laughs) in the LP updates, 'cause we definitely had a few LPs that were like, "Really?" Like a, a chocolate, a CPG like a chocolate company? Like, how is this venture backable? (laughs) And I was like, "Listen, guys," like, "this is why you pay me to do this job. Just- just- just trust me." I think the, you know, you- yes, you're pointing out an accurate thing if you just look at his subscriber base, but also their intent. Like, if he truly co-signs a thing, which is- I was like, "Look, as long as Jimmy's happy, as long as you're making something you truly stand behind, I'm long on it all day, even if it's a fucking commodity," right? You can break through with something that is s- solved in terms of making it.

    22. HS

      Liquid Death.

    23. AO

      I mean, a fantastic example.

    24. HS

      Half a billion in sales, quartering account.

    25. AO

      Water in a can. Great branding. Yes, and- and I'm sure there were plenty of LPs that reached out early in Liquid Death that were like, "Really?"

    26. HS

      He- PETA Farm got laughed at for years.

    27. AO

      Yeah, it is a- a casebo- a case study, and, uh, and what Jimmy's realized is ... And now having also invested in the holdco, um, this is ... And I've told him, I'm like, "You- you control such ... You- you drive internet culture in a way that's similar." It reminds me of Reddit. (laughs) Except you actually create the culture, and you actually have influence over your audience. Like, you can actually tell your audience, "Hey, here's a thing I'm making," and they go buy it. We can't do that at Reddit. (laughs) You actually have a thing that's incredibly brand safe that brands desperately wanna be aligned with. We can't really do that.

    28. HS

      What did he do well with Feastables that he didn't do well with the burger company?

    29. AO

      Oh. (laughs) He actually controlled it, and- and there's- there's layers to that one too, but that Feastables was a direct result of the burger company and the learnings from that. Um, and here's the good news. He's a smart dude, obviously, but he's also been very, very quick to iterate and learn from wins and losses. Uh, and so Feastables was a great lesson, but even now, I mean, he launched a ... God, View, uh, what the hell is it called? It's a basically YouTube stats software. It's a SaaS business, and-... uh, you, you should be a customer of it. View... we're gonna f- here, I'm gonna pull it up.

    30. HS

      I'm definitely gonna be a customer of it.

Episode duration: 1:22:40

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