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

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>The latest on Direct TV and Disney is still struggling

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<v Speaker 2>to reach a dale. Millions of subscribers were blacked down

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<v Speaker 2>of ESPN's Monday Night Football featuring the New York Jets

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<v Speaker 2>and San Francisco forty nine Ers. The dispute highlights and

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<v Speaker 2>the shifting power balance in sports and TV. Steve valueucre

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<v Speaker 2>of Bank Capital and co owner of the Boston Celtics

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<v Speaker 2>and Atalanta Football Club, joined us now for more. Steve,

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<v Speaker 2>It's going to see us, sir, Thanks for joining us,

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<v Speaker 2>Thank you for being here. Let's talk about this standoff.

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<v Speaker 2>What do you make of this current standoff at the

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<v Speaker 2>moment between Direct TV and Disney.

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<v Speaker 3>Well, this is in a long series of kind of

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<v Speaker 3>the war and media right now, the old media versus

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<v Speaker 3>the new media, and distributors versus content providers.

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<v Speaker 4>And we've seen this before.

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<v Speaker 3>I was involved directly with the Weather Channel that had

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<v Speaker 3>a big battle, you know, long fought battle with Direct

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<v Speaker 3>TV as well. And you know, content providers want the

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<v Speaker 3>appropriate money for their content, but the distributors are between

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<v Speaker 3>rock hard plays because the distributors they don't have content

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<v Speaker 3>and they want to maximize the price they can get.

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<v Speaker 4>So that's what you're seeing.

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<v Speaker 2>Now, what do you think the future of sports distribution is?

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<v Speaker 2>Which is a highly broad question, I know, but what

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<v Speaker 2>do you think the future is?

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<v Speaker 3>Well, I think the future is good because sports is

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<v Speaker 3>the most watched programs. I think ninety three of the

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<v Speaker 3>top top one hundred programs in the USA last year

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<v Speaker 3>were sports events, and so you have to have sports

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<v Speaker 3>events if you're a distributor to get get eyeballs.

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<v Speaker 2>Do you see a future where they skip the traditional

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<v Speaker 2>distributors and these sports franchises just stream directly themselves. Is

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<v Speaker 2>that the direction of travel for you?

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<v Speaker 4>Well, it's a great question.

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<v Speaker 3>It's going to be a battle between convenience and bundling,

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<v Speaker 3>you know, versus trying to get all the carde anything

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<v Speaker 3>that you want to watch.

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<v Speaker 4>So we'll have to watch that over the next ten years.

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<v Speaker 3>The good news is that the content providers like the

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<v Speaker 3>NBA are in good shape no matter which way it goes,

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<v Speaker 3>because because content, as I think Eisner said a long time.

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<v Speaker 4>Ago, content is king.

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<v Speaker 1>Well, just to sort of push that a little further,

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<v Speaker 1>there's this issue and I see this with my son

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<v Speaker 1>says they digest sports and they have access to some

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<v Speaker 1>and not access to others. And do you rather have

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<v Speaker 1>a generation that is brought up with easily accessible sports

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<v Speaker 1>and being able to tune in in the popularity increases,

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<v Speaker 1>or would you rather hire fees from specific streaming sites.

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<v Speaker 3>Well, that's the balancing act, and I think you want

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<v Speaker 3>both because you obviously won't have new fans unless you

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<v Speaker 3>have broader distribution. If the charges are high, you're going

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<v Speaker 3>to really shut off your fan universe to the fanatic fans.

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<v Speaker 4>So you're seeing many deals now where people go on

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<v Speaker 4>AIRTV plus the distribution channel.

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<v Speaker 3>So it's kind of like the movies promote things going

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<v Speaker 3>you onto cable, are going onto satellite, and so you're

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<v Speaker 3>gonna have to have a balance of both.

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<v Speaker 1>The international sports scene, I guess if there's a question

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<v Speaker 1>about the US and how sort of isolated it is,

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<v Speaker 1>we've seen an increasing sort of internationalization with respect to soccer, football,

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<v Speaker 1>with respect to basketball, or with respect to even baseball.

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<v Speaker 1>How much do you see that continuing even with some

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<v Speaker 1>of the direct streaming et cetera. Some of the new

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<v Speaker 1>agreements that are coming out.

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<v Speaker 3>Well, direct streaming is actually going to increase that because

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<v Speaker 3>now you can access any sports from anywhere at any time.

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<v Speaker 3>And if you think about, you know, the NBA audience,

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<v Speaker 3>the global sports like football and basketball, huge international market

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<v Speaker 3>things are blending together. I think thirty percent of the

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<v Speaker 3>players in the NBA are from foreign markets, and people want.

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<v Speaker 4>To see those players.

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<v Speaker 3>So we're only tip of the iceberg, and that's going

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<v Speaker 3>to grow dramatically over the next twenty years.

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<v Speaker 5>Can we see more sports teams do what the Yankees

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<v Speaker 5>did say with the Yes Network, you.

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<v Speaker 3>Know, that will help defend, you know, creating kind of

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<v Speaker 3>regional espns. So that's a compelling reason. If, for example,

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<v Speaker 3>you're in New York and you want to see all

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<v Speaker 3>the New York teams, that's probably a defensible mode that

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<v Speaker 3>you can have a cable business. But not having that

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<v Speaker 3>and people being on go direct is a real problem.

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<v Speaker 5>So how hard is that if you're not saying the

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<v Speaker 5>Yankees are the Boss and Celtics, if you're the smaller

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<v Speaker 5>team trying to break in, yeah, it's.

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<v Speaker 4>A little more difficult.

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<v Speaker 3>But on the other side of it, the smaller teams

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<v Speaker 3>have really profited by the fact you have so much

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<v Speaker 3>social media and clips and accessibility. So it used to

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<v Speaker 3>be to be a star, you'd have to be in

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<v Speaker 3>New York or Boston or LA You can be a

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<v Speaker 3>star anywhere right now because people can talk with you directly,

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<v Speaker 3>see your market yourself, see the small team.

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<v Speaker 4>So the small teams are actually on the rise.

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<v Speaker 2>You've got a footprint in two major markets. You've got

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<v Speaker 2>a footprint over in Europe and European football and here

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<v Speaker 2>in the NBA here in America. How different are things

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<v Speaker 2>in the European market versus say, the US one when

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<v Speaker 2>it comes to sports TV distribution.

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<v Speaker 3>There's some similarities, but they're different in the fact that

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<v Speaker 3>you have different countries, you have leagues coming together, and

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<v Speaker 3>certainly in football is very confusing. It's hard to understand

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<v Speaker 3>in America that you're playing in kind of three different

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<v Speaker 3>leagues at the same time. You've got your Italian national

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<v Speaker 3>team players that leave your team for a while and

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<v Speaker 3>go to that team.

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<v Speaker 4>You have the Champions League, the Europa League, and then.

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<v Speaker 3>You have each nation has a league of its own,

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<v Speaker 3>So you have to be a very fascif fan to

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<v Speaker 3>understand what you're playing for in these different cups and

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<v Speaker 3>things in the US is much simple that the league

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<v Speaker 3>is very simple. You're going for a championship and that's it.

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<v Speaker 3>There's one championship in Europe. There are Championship Cups and

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<v Speaker 3>Europa Cups and all sorts of things.

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<v Speaker 2>The Europeans might say, that's a feature, not a buck.

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<v Speaker 2>It's part of the beauty of European foot I think

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<v Speaker 2>it is.

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<v Speaker 4>I think it is.

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<v Speaker 3>And look, the NBA has really learned from that, and

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<v Speaker 3>we have the n Season Tournament and many people were skeptics.

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<v Speaker 3>Adam Silver was very courageous and pushing that through. That

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<v Speaker 3>had amazing ratings last year. The games were early in

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<v Speaker 3>the season. It made it be like late seasons. So

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<v Speaker 3>it's been a big success.

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<v Speaker 2>So I would extend that thought and say the Europeans

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<v Speaker 2>might think it is a feature, not a bug. I

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<v Speaker 2>wonder if certain people think it's a buck and not

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<v Speaker 2>a feature, given that it might actually prevent them from

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<v Speaker 2>being able to really unlock franchise value. One thing that

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<v Speaker 2>I've noticed, without a doubt, football is the biggest sport

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<v Speaker 2>on the planet. But when you get a list that

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<v Speaker 2>the biggest franchise is buying faunue top ten, it is

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<v Speaker 2>dominates it by American sports teams. Why are Americans an

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<v Speaker 2>American sports team so much better at unlocking franchise FOUNDUS.

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<v Speaker 2>Is the European counterpats Well.

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<v Speaker 3>That's a great question, John, and I think Europe's got

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<v Speaker 3>to start to go more towards the American model. The

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<v Speaker 3>American model basically has a very strong central control of

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<v Speaker 3>the league, so the league can negotiate the television deals.

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<v Speaker 3>It's all unified. You can have a unified cost structure.

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<v Speaker 3>It's been much more difficult. Soccer kind of grew up

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<v Speaker 3>from the minor leagues to the major leagues. It's a

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<v Speaker 3>very different system and so you have a hard time

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<v Speaker 3>unifying it because it's in different countries. So that's the

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<v Speaker 3>advantage of being in a large footprint like the United States,

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<v Speaker 3>where there's one approach and you can have a strong

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<v Speaker 3>commissioner and it really smart commissioner like Adam Silver really

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<v Speaker 3>map out how do we get the product and most

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<v Speaker 3>people at the most effective cost to get the most

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<v Speaker 3>eyeballs on it.

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<v Speaker 4>In Europe, it's very fragmented right now.

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<v Speaker 1>What private equity bring to the US sphere, particularly I'm

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<v Speaker 1>talking about football. The idea of private equity investment now

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<v Speaker 1>that are looking at it now that the potential for

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<v Speaker 1>a ten percent ownership is available.

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<v Speaker 3>Well, I think, I think, you know, it's a misnomer

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<v Speaker 3>to call it private equity, a classic private equity, because

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<v Speaker 3>private equity really comes in buyas a company, tries to

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<v Speaker 3>grow a company, build a strategic plan, globalize a company.

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<v Speaker 3>A ten percent investment in an NBA team is more

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<v Speaker 3>like investing in gold or not bitcoin because it'svulnerable, but

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<v Speaker 3>it's more like gold. Its value in its value has

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<v Speaker 3>never gone down in the last twenty five years. It's

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<v Speaker 3>been a you know, a double digit returner for twenty

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<v Speaker 3>five years. So specific funds will be raised and are raised,

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<v Speaker 3>funds like Arctose and Dial. They are raised to be

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<v Speaker 3>put into these clubs. And if someone wants a safe

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<v Speaker 3>investment and to participate in the NBA in their own way,

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<v Speaker 3>they can go to these funds. But that's not really

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<v Speaker 3>classic private equity. So the stir in the newspapers of

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<v Speaker 3>private equity is taking.

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<v Speaker 4>Over football teams. It's going to call the plays. That's

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<v Speaker 4>not happening.

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<v Speaker 3>It's a ten percent passive stake in what is a

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<v Speaker 3>fantastic asset.

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<v Speaker 4>You know, the NFL has again grown for.

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<v Speaker 3>Twenty five years, all the values and it allows people

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<v Speaker 3>to invest in It's non correlated to the market, so

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<v Speaker 3>that's how it's sold. It's really specific sports related media funds.

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<v Speaker 5>How fantastic are these investments. If we were to see

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<v Speaker 5>a twenty eight percent capital gains.

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<v Speaker 3>Tax, well that's going to apply to everything, So it's

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<v Speaker 3>all on a relative basis.

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<v Speaker 4>So on a relative basis it'll be the same. You know.

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<v Speaker 3>I think inevitably taxes will go up given the deficits

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<v Speaker 3>that we have, and probably should go up, and hope

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<v Speaker 3>they do it in a thoughtful way, so it doesn't,

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<v Speaker 3>you know, kill the economy.

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<v Speaker 5>What is a thoughtful way as a businessman.

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<v Speaker 3>Well, if you look at if you look at nations

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<v Speaker 3>that have a total tax it's the same on capital

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<v Speaker 3>gains as it is on ordy income, you'll find that

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<v Speaker 3>they rank much lower. In terms of venture capital, you know,

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<v Speaker 3>business formation. The United States is number one in that,

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<v Speaker 3>and it has contributed the fact that you know, if

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<v Speaker 3>you invest in venture capital and you go for the

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<v Speaker 3>long term, you have capital gains. A whole industry has

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<v Speaker 3>been created around that. Europe's behind in that, Chinese behind

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<v Speaker 3>in that, and it's not perfect, but with some asymmetry

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<v Speaker 3>between those rates helps that industry grow and then helps

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<v Speaker 3>companies grow.

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<v Speaker 2>Do you see some contradictions in the democratic platform that

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<v Speaker 2>they seem to want to foster start up culture and

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<v Speaker 2>at the same time there is this constant, and I

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<v Speaker 2>would say constant effort to think of the best way

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<v Speaker 2>to text unrealized gains. Is that a high contradiction from

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<v Speaker 2>your standpoint?

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<v Speaker 3>Well, you know, I think, as you guys know, John,

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<v Speaker 3>I think I see contradictions and politics on all sides,

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<v Speaker 3>and I think we're in a very rough period right now.

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<v Speaker 3>We're in a very rough period where things have become polarized,

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<v Speaker 3>you know, you know, populism has taken over, and I

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<v Speaker 3>hope we'll get back to some rationality where both sides

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<v Speaker 3>can sit down and say, Okay, what is a relevant

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<v Speaker 3>tax policy that we can fill the deficit but not

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<v Speaker 3>kill the economy. Let's compromise and get something in the middle,

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<v Speaker 3>and hopefully that's where we're going.

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<v Speaker 2>Then we always share that. I hope Steve's going to

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<v Speaker 2>see it. Thanks says this morning, Thank you, sir, Steve

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<v Speaker 2>Paluke of Bank Capital