WEBVTT - Apple Cuts Jobs in Online Services Group as Priorities Shift 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.400 --> 0:00:30.360 Hey, Apple shares a little bit lower in today's trade. 0:00:30.560 --> 0:00:33.479 This, as one of the world's largest market cap companies, 0:00:33.479 --> 0:00:35.680 as you know, took the rare step of cutting about 0:00:35.720 --> 0:00:38.680 one hundred jobs. It happened in its digital services group. 0:00:38.680 --> 0:00:41.120 It's part of a shift and priorities for the critical 0:00:41.120 --> 0:00:43.760 division at least that's according to people with knowledge of 0:00:43.800 --> 0:00:44.200 the matter. 0:00:44.440 --> 0:00:47.120 Well reporting this out as he does all things Apple. 0:00:47.159 --> 0:00:49.760 Back with this is Bloomberg News Chief Technology correspondent Mark 0:00:49.760 --> 0:00:52.639 Germ and he joins us from Los Angeles. Mark. When 0:00:52.640 --> 0:00:55.279 we talk about Apple, we talk about a company that, 0:00:55.440 --> 0:00:58.040 as of its latest filing, as about one hundred thousand 0:00:58.040 --> 0:01:01.360 employees around the world. The cut of one hundred people, 0:01:01.880 --> 0:01:05.759 it's not huge, but as you write, it's pretty rare 0:01:06.080 --> 0:01:07.200 for Apple to do layoffs. 0:01:07.240 --> 0:01:10.160 What's going on one hundred in context of how big 0:01:10.200 --> 0:01:12.800 Apple is and in context of the size of the 0:01:12.880 --> 0:01:16.480 layoffs that some of Apple's peer group have done is 0:01:16.600 --> 0:01:19.760 very minimal. But layoffs at Apple, no matter how many 0:01:19.800 --> 0:01:23.800 people are involved, have an outsized influence. Right, It's an 0:01:23.920 --> 0:01:27.959 outsized understanding of what's going on here. Apple simply does 0:01:28.040 --> 0:01:31.399 not do this. They've done it four times this year, 0:01:31.720 --> 0:01:36.919 four times. Right. They've probably done four rounds of layoffs 0:01:36.959 --> 0:01:39.839 in the twenty years prior to this year. 0:01:39.920 --> 0:01:41.240 Wow, So this is notable. 0:01:41.319 --> 0:01:42.960 At the beginning of this year, you had one hundred 0:01:42.959 --> 0:01:46.920 and twenty one people at an AI serie related operations 0:01:46.959 --> 0:01:50.760 group in San Diego, California. The end of February, you 0:01:50.920 --> 0:01:54.240 had several hundred people across two projects that were shut down, 0:01:54.720 --> 0:01:57.480 one the self driving car initiative, the other a micro 0:01:57.640 --> 0:02:00.480 led project. Right, And if you really look at it, 0:02:00.560 --> 0:02:03.600 both of those have to do with cost cutting. Even 0:02:03.600 --> 0:02:06.880 the San Diego one has some cost cutting involved. There 0:02:08.040 --> 0:02:11.000 cut to the services division, which by the way, is 0:02:11.040 --> 0:02:14.960 Apple's fastest growing and one of its most important organizations 0:02:14.960 --> 0:02:17.919 in the entire company, one that most people would probably 0:02:17.919 --> 0:02:21.080 believe would never face any layoffs. That is where the 0:02:21.120 --> 0:02:24.840 cuts happened. So about one hundred jobs mainly across Apple 0:02:24.880 --> 0:02:28.600 Books and Apple News. We're talking about engineers, we're talking 0:02:28.600 --> 0:02:32.560 about design, we're talking about software quality assurance and testing. 0:02:33.520 --> 0:02:36.760 These people worked across many different platforms within Apple Services. 0:02:36.800 --> 0:02:38.800 Some of them probably touched the App Store, some of 0:02:38.800 --> 0:02:41.640 them probably touched Apple Music and Apple TV to some extent. 0:02:42.160 --> 0:02:45.040 So that's one hundred resources there. And if it wasn't 0:02:45.080 --> 0:02:48.440 purely a cost cutting move, Apple probably could have relocated 0:02:48.480 --> 0:02:51.280 those people to other teams from the get go. To 0:02:51.360 --> 0:02:54.560 be fair, they're getting sixty days notice here, they have 0:02:54.600 --> 0:02:57.360 sixty days to find another job within Apple. I would 0:02:57.440 --> 0:03:00.160 venture to guess that far fewer than half of the 0:03:00.160 --> 0:03:02.560 one hundred people will find a new job within Apple 0:03:02.600 --> 0:03:04.360 in the next two months. So most of those people 0:03:04.440 --> 0:03:07.760 probably will be leaving the company in sixty days from 0:03:07.840 --> 0:03:10.840 yesterday when this was announced internally, So this is quite 0:03:10.880 --> 0:03:13.639 a big deal, although it is one hundred people comparatively. 0:03:13.880 --> 0:03:15.880 Yeah, and if you're one of those one hundred, it 0:03:15.960 --> 0:03:18.880 certainly doesn't feel like a small job cut. Having said that, Mark, 0:03:18.919 --> 0:03:21.720 why is it then happening? As you said four times 0:03:21.720 --> 0:03:24.440 this year, this does not happen at this company, So 0:03:24.520 --> 0:03:26.440 why is it. It's a company that's got a very 0:03:26.520 --> 0:03:29.360 rich balance sheet, it's got lots of cash. 0:03:29.480 --> 0:03:30.200 What's going on. 0:03:31.320 --> 0:03:33.280 So let me start with yesterday's cut. 0:03:33.360 --> 0:03:36.520 So Apple Books is not a big part of the 0:03:36.600 --> 0:03:40.120 overall PI of revenue for the Apple Services organization, right, 0:03:40.440 --> 0:03:43.400 It's probably one of their weaker services. They don't invest 0:03:43.440 --> 0:03:45.880 a ton in it. It's not a true money maker. 0:03:46.880 --> 0:03:49.480 Apple News doesn't make a ton of money either, even 0:03:49.480 --> 0:03:52.320 though there's advertising, even though there is that subscription which 0:03:52.360 --> 0:03:54.880 I believe is now thirteen dollars a month, So it's 0:03:54.920 --> 0:03:57.080 simply less of a priority. So there's a bit of 0:03:57.080 --> 0:04:02.840 a priority shift in Apple Services towardstreaming, video, streaming music, gaming, 0:04:03.000 --> 0:04:05.160 the App Store and such. Remember there was that app 0:04:05.160 --> 0:04:09.320 store reorganization a couple of weeks ago, which meant that 0:04:09.360 --> 0:04:11.880 they probably had to reallocate some resources related to that 0:04:11.960 --> 0:04:15.440 as well. Now, in terms of the layoffs and totality, 0:04:15.680 --> 0:04:18.360 I think it shows that, you know, Apple is bracing 0:04:18.480 --> 0:04:21.080 for some sort of recession or trying to get ahead 0:04:21.080 --> 0:04:24.679 of the possibility of a recession. Obviously we've seen stats 0:04:24.720 --> 0:04:28.479 out there, and Apple wants to be a leaner company, right, 0:04:28.839 --> 0:04:32.000 They're not able to spend extra few billion a year 0:04:32.040 --> 0:04:33.680 at this point, or they don't want to spend an 0:04:33.680 --> 0:04:36.360 extra few billion a year at this point on bets 0:04:36.560 --> 0:04:39.719 like the self driving car, like the micro led project 0:04:39.720 --> 0:04:41.960 that they believe there's a strong chance will never come 0:04:42.000 --> 0:04:45.000 to fruition. Right, Apple can continue to spend a billion 0:04:45.000 --> 0:04:47.680 a year on each of those projects, rack up a 0:04:47.680 --> 0:04:49.600 bill of an extra ten billion over the next five 0:04:49.680 --> 0:04:52.560 years and get absolutely nowhere. But they decided to save 0:04:52.600 --> 0:04:56.159 that ten billion and probably reinvest it into bigger priorities 0:04:56.200 --> 0:04:59.799 like generative AI. They're working on the tabletop robotics project 0:04:59.839 --> 0:05:01.760 that I reported all and they're working on a new 0:05:01.800 --> 0:05:04.039 iPad that's going to require a lot of R and D. 0:05:04.520 --> 0:05:07.120 This is a nineteen inch iPad that can fold in half. 0:05:08.120 --> 0:05:10.760 They need to reduce some R and D to redesign 0:05:10.800 --> 0:05:14.520 the iPhone. They need to put money into shrinking down 0:05:14.560 --> 0:05:16.880 their components and making them more efficient so they can 0:05:16.960 --> 0:05:20.120 roll out new form factors. There are some health technologies 0:05:20.160 --> 0:05:22.320 that they want to roll out. But you know, the 0:05:22.400 --> 0:05:25.320 big picture here is AI and probably reinvesting that money 0:05:25.360 --> 0:05:27.279 into artificial intelligence development. 0:05:27.720 --> 0:05:31.880 Mark Apple as a lean company. I didn't think i'd 0:05:31.880 --> 0:05:35.880 hear you say that. How would you describe Apple? How'd 0:05:35.880 --> 0:05:38.440 you characterize Apple in terms of it being a quote 0:05:38.480 --> 0:05:39.520 unquote lean company. 0:05:40.960 --> 0:05:45.360 I watched this great interview with Luca Maystree, the outgoing CFO, 0:05:45.640 --> 0:05:49.520 earlier this week, and he said that he runs the 0:05:49.600 --> 0:05:54.240 company with about ten percent in his finance office. The 0:05:54.240 --> 0:05:56.040 amount of people he had, Well, he was a CFO 0:05:56.080 --> 0:05:59.400 with other public companies prior, even though Apple's market cap 0:05:59.480 --> 0:06:02.760 is ten times the size, if not more than those companies. Right, 0:06:02.839 --> 0:06:05.560 he worked at Xerox, he worked at General Motors, a 0:06:05.560 --> 0:06:09.680 few other companies before Apple. Those are big companies internationally, right, 0:06:09.720 --> 0:06:11.080 they're global titans as well. 0:06:11.600 --> 0:06:12.600 He gave this example. 0:06:12.640 --> 0:06:15.320 So he said his investor relations group has two people. 0:06:15.720 --> 0:06:19.080 He says that Apple's hedge fund. That's Brayburn Capital out 0:06:19.080 --> 0:06:22.919 of Nevada. They manage Apple's cash, right, several hundred billion dollars, 0:06:23.200 --> 0:06:25.760 he says, that's seven people, right, And so I think 0:06:25.760 --> 0:06:27.840 those are some good examples of how lean they run 0:06:28.200 --> 0:06:30.720 in terms of their R and D budget. Over the 0:06:30.760 --> 0:06:32.680 past few years, I've seen the overall company y R 0:06:32.720 --> 0:06:36.760 and D budget either stay stagnant or grow less than 0:06:36.800 --> 0:06:39.080 five percent on an annual basis. And if you compare 0:06:39.080 --> 0:06:41.080 that to the R and D budget growth of companies 0:06:41.160 --> 0:06:43.720 like Meta and Google and Microsoft. 0:06:43.760 --> 0:06:45.479 It's slim right. 0:06:45.920 --> 0:06:48.280 Apple knows that the iPhone and some of their other 0:06:48.320 --> 0:06:50.279 products and services are going to continue to print a 0:06:50.320 --> 0:06:52.320 lot of cash and a lot of money. Right, They 0:06:52.320 --> 0:06:54.839 don't want to upset the status quo and risk doing 0:06:54.920 --> 0:06:57.159 something that is going to put the company in a 0:06:57.160 --> 0:07:00.600 bad position. Now, what I will tell you is Apple 0:07:00.760 --> 0:07:03.920 as an issue here where they're not really reinventing themselves. 0:07:04.040 --> 0:07:06.760 They're not really moving the needle. They are very far 0:07:06.839 --> 0:07:10.200 behind in artificial intelligence, robotics in some other areas, and 0:07:10.240 --> 0:07:12.240 there is a lot of catchup to do. They have 0:07:12.320 --> 0:07:16.239 become too reliant on this annual September formula of new iPhones, 0:07:16.280 --> 0:07:19.080 Apple watches, and AirPods does great for the stock, make 0:07:19.160 --> 0:07:22.240 shareholders happy. There's not a lot of needle moving there, 0:07:22.400 --> 0:07:24.880 and so I believe the company needs to take more risk. 0:07:24.960 --> 0:07:27.600 And so I guess the hope as a consumer and 0:07:27.600 --> 0:07:29.800 someone who watches the company, and maybe the hope for 0:07:29.840 --> 0:07:33.080 employee morale the people who are still there, is that 0:07:33.600 --> 0:07:36.080 this amount of money could be reinvested in other areas 0:07:36.320 --> 0:07:39.280 that will allow Apple to pursue new growth opportunities and 0:07:39.360 --> 0:07:42.400 create some really cool products. When was the last time 0:07:42.440 --> 0:07:44.360 you waited in line for an Apple product, and when 0:07:44.360 --> 0:07:46.320 you got your hands on that device for the first time, 0:07:46.680 --> 0:07:50.280 you were amazed. I have never seen anything like this before. 0:07:50.760 --> 0:07:52.640 I can give you a few examples. There was the 0:07:52.920 --> 0:07:56.040 iPad Air in twenty thirteen. There was the first retina 0:07:56.080 --> 0:07:59.840 iPad the Air before that, the iPhone four with that 0:08:00.200 --> 0:08:03.200 threat and display in that glass back in front design 0:08:03.240 --> 0:08:05.240 with the aluminum band around the edges. 0:08:05.320 --> 0:08:07.920 That was pretty incredible. But it's been a while. 0:08:07.960 --> 0:08:11.320 Maybe the twenty eighteen iPad Pro, maybe the original Apple Watch, 0:08:11.360 --> 0:08:14.480 maybe the AirPods, but it has been a serious number 0:08:14.480 --> 0:08:16.840 of years since the last time. I feel like they 0:08:16.920 --> 0:08:20.240 came out with something that was really earth shattering, and 0:08:20.280 --> 0:08:21.960 I think COVID played. 0:08:21.720 --> 0:08:22.200 A part in it. 0:08:22.360 --> 0:08:26.280 Right between across the pandemic or the hide the Pandemic, 0:08:26.320 --> 0:08:29.440 Apple was able to churn out products still at an 0:08:29.480 --> 0:08:32.200 amazing pace. They were able to get out the iPhone 0:08:32.200 --> 0:08:34.520 twelve with five G only with about a month and 0:08:34.520 --> 0:08:36.680 a half to lay right in the height of COVID. 0:08:36.920 --> 0:08:39.280 That is crazy that they were able to do that, 0:08:39.440 --> 0:08:43.040 and that was a major accomplishment. But that what people 0:08:43.040 --> 0:08:45.800 don't realize is how many years of R and D 0:08:46.160 --> 0:08:48.640 how many years of Apple working on these new types 0:08:48.640 --> 0:08:50.920 of form factors and products and software and services that 0:08:50.960 --> 0:08:53.400 they normally be doing during COVID, how much of that 0:08:53.559 --> 0:08:55.880 was just pushed to the wayside in order to prioritize 0:08:55.920 --> 0:08:58.680 the products they had to get out right and everything 0:08:58.679 --> 0:09:01.079 else going on with the pandemic working from home versus 0:09:01.080 --> 0:09:02.959 the office. So there's a bit of a delay there, 0:09:02.960 --> 0:09:04.200 and I think it's going to take a few more 0:09:04.280 --> 0:09:04.760 years for them to. 0:09:04.760 --> 0:09:05.800 Catch up, all right. 0:09:06.360 --> 0:09:07.880 And for me, I think it was when I got 0:09:07.880 --> 0:09:10.680 my Apple Watch, which was the second version, and it's 0:09:10.720 --> 0:09:12.079 I don't even have it on right now. 0:09:12.240 --> 0:09:15.720 I mean I haven't touched upgrade. 0:09:15.800 --> 0:09:19.119 She still has the second version of the Apple Yeah, 0:09:19.160 --> 0:09:20.319 anti collectors. 0:09:20.000 --> 0:09:21.480 You'll get some new ones in a few weeks. 0:09:22.040 --> 0:09:24.800 Hey, listen, you mentioned the CFO that you listened to 0:09:24.880 --> 0:09:27.959 that conversation about being lean and how he ran his 0:09:28.160 --> 0:09:30.760 office and his team. He is stepping down from the 0:09:30.840 --> 0:09:32.079 job at the end of the year. It sounds like 0:09:32.080 --> 0:09:36.080 he's not leaving the company, but are they getting ready 0:09:36.120 --> 0:09:38.920 in terms of a younger c suite thinking about the 0:09:38.920 --> 0:09:39.920 company moving forward. 0:09:41.120 --> 0:09:43.959 I've been writing a lot about this and my latest 0:09:43.960 --> 0:09:45.640 point of view and You can read my power on 0:09:45.720 --> 0:09:48.920 column this weekend on Sunday at Bloomberg dot com to 0:09:49.200 --> 0:09:51.440 get more insight on this. But they've come up with 0:09:51.440 --> 0:09:54.800 a new Formula's a succession here, right, do everything you 0:09:54.840 --> 0:09:57.400 can to make sure the old guard, Kim Cooks most 0:09:57.400 --> 0:10:01.320 trusted lieutenants don't really leave the building. The last you know, 0:10:01.679 --> 0:10:04.239 four major executive departures. 0:10:04.280 --> 0:10:05.240 They didn't let them leave. 0:10:05.559 --> 0:10:07.800 Well, I mean they didn't you know, handcuff them to 0:10:07.880 --> 0:10:10.440 their office or anything like that, right, but they gave 0:10:10.480 --> 0:10:12.840 them enough money and enough of a business card and 0:10:12.880 --> 0:10:16.800 responsibility to stay. Phil Schiller is not marketing chief anymore. 0:10:16.840 --> 0:10:19.000 He runs the app store. Dan Riccio is love hardber 0:10:19.040 --> 0:10:22.040 Engineering chief. He runs the Vision pro. Now you have LUKEA. 0:10:22.120 --> 0:10:25.960 Maistreet who's no longer CFO, and he's going to run ISMT, 0:10:26.200 --> 0:10:28.559 which by the way, is probably the most controversial and 0:10:28.679 --> 0:10:32.880 boring division in the entire company. So you know, you 0:10:32.880 --> 0:10:34.760 can see what they're doing here. They're trying to keep 0:10:34.760 --> 0:10:37.960 the band together as long as possible because I don't 0:10:37.960 --> 0:10:40.599 think they they're I think they're a little afraid of 0:10:41.040 --> 0:10:44.720 evolving and reinvention and risk taking. Given that you don't 0:10:44.720 --> 0:10:47.320 want to upset something that is working so well, but 0:10:47.400 --> 0:10:49.560 you also have to at the same time balance, you know, 0:10:49.600 --> 0:10:53.280 long term management of the company. And so that's really 0:10:53.280 --> 0:10:56.360 the succession story there. Kevin Perrick, he basically came to 0:10:56.440 --> 0:11:01.600 Apple alongside Bucca may Street. In two thousand and thirteen 0:11:01.720 --> 0:11:05.079 or so, Park joined the company. He's been the heir apparent. 0:11:05.120 --> 0:11:08.679 Apple has been signaling this CFO transition for months now. 0:11:08.720 --> 0:11:10.840 I wrote about it earlier this year. They have been 0:11:11.640 --> 0:11:15.840 showing off Parick so to speak to financial institutions, investors, 0:11:15.840 --> 0:11:18.680 financial analysts and the like. They've been talking him up 0:11:18.960 --> 0:11:22.920 externally and internally. He has been really shadowing Luca has 0:11:22.920 --> 0:11:25.720 been involved in every CFO related meeting over the last 0:11:25.760 --> 0:11:28.120 year or so they've been preparing for this. It was 0:11:28.160 --> 0:11:30.160 down to two candidates at the end of last year, 0:11:30.200 --> 0:11:34.880 so Kevin, Parrit and cr Ac. When Casey apparently found 0:11:34.880 --> 0:11:36.920 out that, you know, she wasn't going to be the replacement, 0:11:37.000 --> 0:11:38.880 she left. Maybe I think that was at least a 0:11:38.920 --> 0:11:41.839 component of her leaving Apple. At the beginning of this year, 0:11:41.840 --> 0:11:45.200 she became the CFO of Sonos, So it seems clear 0:11:45.240 --> 0:11:48.000 that she wanted a public company CFO role, and Sonos 0:11:48.080 --> 0:11:50.360 is a great brand despite the issues they've been facing lately. 0:11:50.440 --> 0:11:52.680 Yeah, we could do a whole segment on those app issues. Mark, 0:11:52.880 --> 0:11:55.760 we have twenty eighty two. Yeah, we have twenty seconds left. 0:11:56.600 --> 0:11:59.880 Very briefly, what about filling Tim Cooks shoes twenty seconds? 0:12:00.960 --> 0:12:04.560 I wrote earlier this year. My belief is that John 0:12:04.600 --> 0:12:08.200 turnis the senior VP of hardware Engineering. He's still not fifty. 0:12:08.280 --> 0:12:09.840 Tim cook stays around another three. 0:12:09.640 --> 0:12:10.360 To five years. 0:12:10.720 --> 0:12:12.440 Turnas is the only one that would have a long 0:12:12.520 --> 0:12:15.760 runway a CEO and Apple board can make a strong 0:12:15.840 --> 0:12:18.520 argument about getting a hardware person back in those shoes. 0:12:18.559 --> 0:12:19.600 All right around the world. 0:12:19.600 --> 0:12:22.319 And Apple of Apple and about what seven eight minutes, 0:12:22.400 --> 0:12:24.600 nine minutes. You did it as you always do. Mark German, 0:12:24.640 --> 0:12:26.800 thank you, Thank you. He is Bloomberg News Chief Technology 0:12:26.840 --> 0:12:28.040 correspondent Mark German. 0:12:27.880 --> 0:12:30.920 And apples hedge fund Rayburn. It's a type of Apple. 0:12:30.880 --> 0:12:34.640 Lean lean Apple Apple like sticking with me. 0:12:36.520 --> 0:12:40.040 You're listening to the Bloomberg Business Week podcast. Catch us 0:12:40.080 --> 0:12:43.319 live weekday afternoons from two to five pm Eastern Listen 0:12:43.360 --> 0:12:45.520 on Apple car Play and then brout Auto with a 0:12:45.559 --> 0:12:49.640 Bloomberg Business app, or watch us live on YouTube. 0:12:50.000 --> 0:12:51.800 Let's get a view of the private mind. 0:12:52.040 --> 0:12:54.760 Yep, that's because NFL owner is voted to allow private 0:12:54.760 --> 0:12:57.120 equity firms to buy stakes in their franchises and move 0:12:57.120 --> 0:13:01.120 expected to attract billions in fresh capital while boosting team 0:13:01.760 --> 0:13:03.720 valuations that have already been surging. 0:13:03.800 --> 0:13:06.880 Yeah. During a special one day league meeting in Minneapolis, 0:13:06.960 --> 0:13:09.360 the group loosen some of the strictest ownership rules in 0:13:09.400 --> 0:13:12.280 professional sports to allow private equity to own it as 0:13:12.360 --> 0:13:14.320 much as ten percent of a team. That's according to 0:13:14.360 --> 0:13:16.960 the NFL. You know who was there, Randall Williams was 0:13:17.000 --> 0:13:20.040 there and he's fresh off a plane from Minneapolis. Wow, 0:13:22.080 --> 0:13:23.280 we've all we've all been there. 0:13:23.480 --> 0:13:24.360 You have been there. 0:13:25.080 --> 0:13:27.679 You right into the office. Yeah. 0:13:27.720 --> 0:13:29.120 Absolutely, Thank you all for having me. 0:13:29.200 --> 0:13:31.800 Yeah, thanks so much for joining us. Randall's Bloomberg News 0:13:31.880 --> 0:13:34.199 US sports business reporter. He's the perfect guy to have 0:13:34.280 --> 0:13:36.880 on talking about this. When this broke yesterday, we read 0:13:36.960 --> 0:13:40.240 your story on air. Randall, it's the red headline. A 0:13:40.240 --> 0:13:44.000 big deal. I was being a little cynical in my 0:13:44.080 --> 0:13:45.800 analysis of this. I was like, Oh, you know, a 0:13:45.880 --> 0:13:48.600 bunch of folks get together who own assets that are 0:13:48.640 --> 0:13:51.959 worth a lot of money, and they vote to open 0:13:52.040 --> 0:13:54.760 up to allow them to become worth more. AM I 0:13:54.880 --> 0:13:56.800 do I look at the AM I looking at this incorrectly. 0:13:58.160 --> 0:13:59.880 I think there's an argument for both. There are a 0:14:00.080 --> 0:14:03.160 lot of private equity pros in the NFL, but they're 0:14:03.320 --> 0:14:06.920 invested individually, and the NFL has limited the role that 0:14:07.000 --> 0:14:10.240 they can play as individuals in investing through funds. So 0:14:10.640 --> 0:14:12.320 I think they've structured it in a way so that 0:14:12.400 --> 0:14:16.320 it isn't unfair, or it isn't. Yeah, it isn't unfair 0:14:16.360 --> 0:14:18.360 for some of these NFL owners. I think I did 0:14:18.360 --> 0:14:19.040 a really good job. 0:14:19.160 --> 0:14:20.840 But doesn't it by bringing in a new group of 0:14:20.840 --> 0:14:26.000 investors just automatically the demand will increase the value of 0:14:26.040 --> 0:14:29.040 these teams. So those existing NFL owners are like, yeah, come. 0:14:28.960 --> 0:14:31.960 On, right, thousand percent. I mean, there is an expectation 0:14:32.040 --> 0:14:33.920 that a couple of these deals will happen before the 0:14:34.000 --> 0:14:36.960 end of the year. I've had NFL executives and in 0:14:37.720 --> 0:14:42.000 their in their building their HQ and NFL team executives 0:14:42.000 --> 0:14:44.960 say they expect these deals to go fast and furious. 0:14:44.680 --> 0:14:47.200 Because an NFL team is so expensive that they're only 0:14:47.240 --> 0:14:48.760 a handful of individuals. 0:14:48.400 --> 0:14:50.560 Or thirty two of them, and technically thirty one. 0:14:50.640 --> 0:14:52.720 Really and if you think about who can actually afford 0:14:52.760 --> 0:14:55.600 to buy a new one or to buy a team 0:14:55.600 --> 0:14:57.880 that goes up for sale. Yeah, there's a small number 0:14:57.880 --> 0:15:01.320 of people because these these are so expensive. So if 0:15:01.360 --> 0:15:05.400 now you're allowed to sell ten percent to private equity, 0:15:05.880 --> 0:15:08.680 you're opening up the available pool of purchases just so 0:15:08.720 --> 0:15:11.760 many more people. Doesn't that just automatically increase the value 0:15:11.920 --> 0:15:12.280 for sure? 0:15:12.320 --> 0:15:15.760 But there's only four groups. Arctose Aries Sixth Street in 0:15:15.800 --> 0:15:21.160 a consortium that consists of Dynasty and Curtis Martin led 0:15:21.200 --> 0:15:24.920 this other group. It's Dynasty, it is I'll have to 0:15:24.920 --> 0:15:25.920 pull up the names. 0:15:26.240 --> 0:15:26.680 It's fine. 0:15:26.720 --> 0:15:30.720 He's off of Dynasty, CVC, Blackstone, and Carter all together 0:15:30.800 --> 0:15:33.200 at the same time. And so those four will get 0:15:33.200 --> 0:15:36.080 the first right and then eventually they may open it 0:15:36.160 --> 0:15:37.720 up to more firms, but they'll have to be pre 0:15:37.800 --> 0:15:40.600 approved and the NFL will do its due diligence. 0:15:40.160 --> 0:15:42.600 There what's the due diligence like? It kind of sounds 0:15:42.600 --> 0:15:44.400 like a credited investors You know, you can. 0:15:44.560 --> 0:15:46.200 First of all, you have the money. You have to 0:15:46.240 --> 0:15:47.840 have the money. If you don't have the money, there's 0:15:47.880 --> 0:15:50.640 no way. So it starts with the funds, and then 0:15:50.800 --> 0:15:53.720 I think it depends on how you're going to invest. 0:15:53.800 --> 0:15:57.040 One of the things that the NFL CFO was saying 0:15:57.200 --> 0:15:59.720 was that each of these funds have a different strategy 0:15:59.720 --> 0:16:02.000 for how they're investing in sports teams, and so that 0:16:02.080 --> 0:16:04.960 for a team perspective, what you're going to expect is 0:16:05.000 --> 0:16:06.720 a team may not want to do a deal with 0:16:06.800 --> 0:16:09.360 one for one fund. They may want to do something 0:16:09.360 --> 0:16:11.800 with somebody else. So they have enough capitals for them 0:16:11.800 --> 0:16:13.160 to have a wide variety of choices. 0:16:13.200 --> 0:16:16.160 How much, say, will private equity investors they have in 0:16:16.200 --> 0:16:17.040 this zer row? 0:16:17.400 --> 0:16:18.280 How do you know that? 0:16:18.760 --> 0:16:20.720 I mean, if you're anteing up, I mean, what are 0:16:20.720 --> 0:16:22.920 the limitations on how much a private equity firm can 0:16:22.920 --> 0:16:24.360 put in a team? 0:16:24.480 --> 0:16:29.600 Is So the reason that this is happening is because 0:16:29.880 --> 0:16:33.600 when Josh Harris raised money last year, he had I 0:16:33.600 --> 0:16:37.240 would say significant difficulty doing it. Is six billion dollar 0:16:37.280 --> 0:16:39.120 team and he has to put up a lot of 0:16:39.160 --> 0:16:42.240 money by himself. I believe his ownership group is twenty plus. 0:16:42.560 --> 0:16:45.600 The cap for an ownership group is twenty five. That 0:16:45.680 --> 0:16:48.360 raised concerns if you have private equity who can offer 0:16:48.760 --> 0:16:52.440 ten percent. Let's say an average NFL valuation by Sportico 0:16:52.520 --> 0:16:54.960 is five point nine to three billion. That's five hundred 0:16:54.960 --> 0:16:57.400 million right away. They have to hold the team for 0:16:57.480 --> 0:17:00.760 six years, so then you have a little bit more leeway. 0:17:01.880 --> 0:17:05.240 Other leagues having done this, Yes, what have we learned? 0:17:06.240 --> 0:17:09.600 Well, the NBA, MLS, all of the other leagues allow this. 0:17:09.680 --> 0:17:12.600 The NFL's rules are the strictest. They also have the 0:17:12.640 --> 0:17:18.280 highest valuations. The NBA's are the most expansive. The ARCTOS specifically, 0:17:18.560 --> 0:17:21.520 is a pioneer in this private equity sports space. I 0:17:21.600 --> 0:17:23.879 expect them to be one of the first, just because 0:17:24.080 --> 0:17:25.800 there they've been the most active. 0:17:25.960 --> 0:17:31.520 Hey, what was this meeting? Like you were actually did 0:17:31.560 --> 0:17:32.879 you actually get to go into the meeting? 0:17:33.160 --> 0:17:36.119 Of course not, of course not. But a lot of 0:17:36.160 --> 0:17:38.560 the NFL owners meetings are watching the owners come in 0:17:38.640 --> 0:17:41.440 saying hi, hello, how you doing, Watching the NFL's employees 0:17:41.480 --> 0:17:43.760 come in, Hi, Hello, how you doing? And then they go, 0:17:44.080 --> 0:17:46.800 you know, they'll walk past, they'll they'll speak, and when 0:17:46.800 --> 0:17:48.959 it's meeting time, it's meeting time. You don't hear anything 0:17:49.000 --> 0:17:51.720 unless you have sources like the really really good reporters. 0:17:52.119 --> 0:17:54.760 And then you sit and wait, you wait to hear 0:17:54.880 --> 0:17:57.199 what happens. You get to ask questions to Roger Goodell, 0:17:57.640 --> 0:18:00.640 Jerry Jones is always going to talk to you. That's fun, guy. 0:18:01.080 --> 0:18:05.120 But it's quite the interesting meeting because I'll say, at 0:18:05.119 --> 0:18:07.000 the March and May league meetings it's a lot more 0:18:07.000 --> 0:18:10.400 free flowing. Owners bring their families, coaches bring their families. 0:18:10.440 --> 0:18:12.240 They're more relaxed, they're happy to talk to you. In 0:18:12.240 --> 0:18:15.720 the season. Absolutely not, it's a competition, huh. 0:18:15.880 --> 0:18:17.680 You know in your story, though, you say the move 0:18:17.720 --> 0:18:19.960 to allow private equity and to ownership has the potential 0:18:19.960 --> 0:18:22.560 to shift how teams are run. Limited ownership partners have 0:18:22.600 --> 0:18:25.840 traditionally been friends, former players and local celebrities. I mean, 0:18:25.920 --> 0:18:30.600 this definitely does change the dynamics. We'll find out I 0:18:30.600 --> 0:18:32.679 guess over time what that actually means. 0:18:32.720 --> 0:18:33.840 But it's going to be different. 0:18:34.000 --> 0:18:36.159 It's going to be different. There's an example in the 0:18:36.160 --> 0:18:38.800 story where I talk about how the Atlanta Falcons welcome 0:18:38.880 --> 0:18:41.560 some new limited partners, but they won't be able to 0:18:41.560 --> 0:18:44.400 sell to private equity. Only people that can sell are 0:18:44.440 --> 0:18:47.480 family limited partners and controlling owners. So if you just 0:18:47.560 --> 0:18:49.560 happen to have a piece of the team, but you 0:18:49.600 --> 0:18:51.800 are not a member of the family that owns the team, 0:18:52.119 --> 0:18:53.920 you're out of luck. But if you own a piece 0:18:53.960 --> 0:18:55.280 of the team, and you're a member of the family, 0:18:55.400 --> 0:18:56.239 it's a good time for you. 0:18:56.440 --> 0:18:57.879 So we'll still have family ownership. 0:18:58.040 --> 0:18:59.879 Of course, of course you got to protect the f 0:19:00.080 --> 0:19:00.840 on my ownership. 0:19:00.880 --> 0:19:02.520 That's really fair, and that's kind of in. 0:19:02.800 --> 0:19:04.600