Boston Celtics Co-Owner Steve Pagliuca Talks DirecTV-Disney, Private Equity in Sports

Bloomberg Audio Studios, podcasts, radio news.

The latest on Direct TV and Disney is still struggling to reach a dale. Millions of subscribers were blacked down of ESPN's Monday Night Football featuring the New York Jets and San Francisco forty nine Ers. The dispute highlights and the shifting power balance in sports and TV. Steve valueucre of Bank Capital and co owner of the Boston Celtics and Atalanta Football Club, joined us now for more. Steve, It's going to see us, sir, Thanks for joining us,

Well, this is in a long series of kind of the war and media right now, the old media versus the new media, and distributors versus content providers.

And we've seen this before.

I was involved directly with the Weather Channel that had a big battle, you know, long fought battle with Direct TV as well. And you know, content providers want the appropriate money for their content, but the distributors are between rock hard plays because the distributors they don't have content and they want to maximize the price they can get.

So that's what you're seeing.

Now, what do you think the future of sports distribution is? Which is a highly broad question, I know, but what do you think the future is?

Well, I think the future is good because sports is the most watched programs. I think ninety three of the top top one hundred programs in the USA last year were sports events, and so you have to have sports events if you're a distributor to get get eyeballs.

Do you see a future where they skip the traditional distributors and these sports franchises just stream directly themselves. Is that the direction of travel for you?

Well, it's a great question.

It's going to be a battle between convenience and bundling, you know, versus trying to get all the carde anything that you want to watch.

So we'll have to watch that over the next ten years.

The good news is that the content providers like the NBA are in good shape no matter which way it goes, because because content, as I think Eisner said a long time.

Ago, content is king.

Well, just to sort of push that a little further, there's this issue and I see this with my son says they digest sports and they have access to some and not access to others. And do you rather have a generation that is brought up with easily accessible sports and being able to tune in in the popularity increases, or would you rather hire fees from specific streaming sites.

Well, that's the balancing act, and I think you want both because you obviously won't have new fans unless you have broader distribution. If the charges are high, you're going to really shut off your fan universe to the fanatic fans.

So you're seeing many deals now where people go on AIRTV plus the distribution channel.

So it's kind of like the movies promote things going you onto cable, are going onto satellite, and so you're gonna have to have a balance of both.

The international sports scene, I guess if there's a question about the US and how sort of isolated it is, we've seen an increasing sort of internationalization with respect to soccer, football, with respect to basketball, or with respect to even baseball. How much do you see that continuing even with some of the direct streaming et cetera. Some of the new agreements that are coming out.

Well, direct streaming is actually going to increase that because now you can access any sports from anywhere at any time. And if you think about, you know, the NBA audience, the global sports like football and basketball, huge international market things are blending together. I think thirty percent of the players in the NBA are from foreign markets, and people want.

To see those players.

So we're only tip of the iceberg, and that's going to grow dramatically over the next twenty years.

Can we see more sports teams do what the Yankees did say with the Yes Network, you.

Know, that will help defend, you know, creating kind of regional espns. So that's a compelling reason. If, for example, you're in New York and you want to see all the New York teams, that's probably a defensible mode that you can have a cable business. But not having that and people being on go direct is a real problem.

So how hard is that if you're not saying the Yankees are the Boss and Celtics, if you're the smaller team trying to break in, yeah, it's.

A little more difficult.

But on the other side of it, the smaller teams have really profited by the fact you have so much social media and clips and accessibility. So it used to be to be a star, you'd have to be in New York or Boston or LA You can be a star anywhere right now because people can talk with you directly, see your market yourself, see the small team.

So the small teams are actually on the rise.

You've got a footprint in two major markets. You've got a footprint over in Europe and European football and here in the NBA here in America. How different are things in the European market versus say, the US one when it comes to sports TV distribution.

There's some similarities, but they're different in the fact that you have different countries, you have leagues coming together, and certainly in football is very confusing. It's hard to understand in America that you're playing in kind of three different leagues at the same time. You've got your Italian national team players that leave your team for a while and go to that team.

You have the Champions League, the Europa League, and then.

You have each nation has a league of its own, So you have to be a very fascif fan to understand what you're playing for in these different cups and things in the US is much simple that the league is very simple. You're going for a championship and that's it. There's one championship in Europe. There are Championship Cups and Europa Cups and all sorts of things.

The Europeans might say, that's a feature, not a buck. It's part of the beauty of European foot I think it is.

I think it is.

And look, the NBA has really learned from that, and we have the n Season Tournament and many people were skeptics. Adam Silver was very courageous and pushing that through. That had amazing ratings last year. The games were early in the season. It made it be like late seasons. So it's been a big success.

So I would extend that thought and say the Europeans might think it is a feature, not a bug. I wonder if certain people think it's a buck and not a feature, given that it might actually prevent them from being able to really unlock franchise value. One thing that I've noticed, without a doubt, football is the biggest sport on the planet. But when you get a list that the biggest franchise is buying faunue top ten, it is

That's a great question, John, and I think Europe's got to start to go more towards the American model. The American model basically has a very strong central control of the league, so the league can negotiate the television deals. It's all unified. You can have a unified cost structure. It's been much more difficult. Soccer kind of grew up from the minor leagues to the major leagues. It's a very different system and so you have a hard time

In Europe, it's very fragmented right now.

What private equity bring to the US sphere, particularly I'm talking about football. The idea of private equity investment now that are looking at it now that the potential for a ten percent ownership is available.

Well, I think, I think, you know, it's a misnomer to call it private equity, a classic private equity, because private equity really comes in buyas a company, tries to grow a company, build a strategic plan, globalize a company. A ten percent investment in an NBA team is more like investing in gold or not bitcoin because it'svulnerable, but it's more like gold. Its value in its value has never gone down in the last twenty five years. It's been a you know, a double digit returner for twenty

Over football teams. It's going to call the plays. That's not happening.

It's a ten percent passive stake in what is a fantastic asset.

You know, the NFL has again grown for.

Twenty five years, all the values and it allows people to invest in It's non correlated to the market, so that's how it's sold. It's really specific sports related media funds.

How fantastic are these investments. If we were to see a twenty eight percent capital gains.

Tax, well that's going to apply to everything, So it's all on a relative basis.

So on a relative basis it'll be the same. You know.

I think inevitably taxes will go up given the deficits that we have, and probably should go up, and hope they do it in a thoughtful way, so it doesn't, you know, kill the economy.

What is a thoughtful way as a businessman.

Well, if you look at if you look at nations that have a total tax it's the same on capital gains as it is on ordy income, you'll find that they rank much lower. In terms of venture capital, you know, business formation. The United States is number one in that, and it has contributed the fact that you know, if you invest in venture capital and you go for the long term, you have capital gains. A whole industry has

Do you see some contradictions in the democratic platform that they seem to want to foster start up culture and at the same time there is this constant, and I would say constant effort to think of the best way to text unrealized gains. Is that a high contradiction from your standpoint?

Well, you know, I think, as you guys know, John, I think I see contradictions and politics on all sides, and I think we're in a very rough period right now. We're in a very rough period where things have become polarized, you know, you know, populism has taken over, and I hope we'll get back to some rationality where both sides can sit down and say, Okay, what is a relevant tax policy that we can fill the deficit but not

Then we always share that. I hope Steve's going to see it. Thanks says this morning, Thank you, sir, Steve Paluke of Bank Capital