In this week’s CNBC Sport videocast, CNBC Media & Sports Reporter Alex Sherman spoke with Avenue Capital Group CEO and former co-owner of the Milwaukee Bucks Marc Lasry. Lasry talks to Sherman about his big bet on bull riding, how private equity will transform college athletics, whether he sold the Bucks too early, and the NBA’s upcoming European expansion.
Marc Lasry on buying the Connecticut Sun
Marc Lasry: I would love to do it, if we are able to move the team to Hartford. I grew up in Hartford.
Alex Sherman: Is that the why behind that?
Marc Lasry: No, it is actually, I know. I know it's – people find that hard to believe. But I grew up in Hartford and the team right now is in an area of Connecticut that's much smaller. And sort of the idea was, look, there's no professional teams in Connecticut. I know the governor pretty well, and thought this would be fun and interesting for the state to try to keep a team there. But move it, I think to Hartford, I don't think that's going to work. I think –
Alex Sherman: Why is the state against that?
Marc Lasry: It's not the state, it's the NBA. I think – you need to get approval for the NBA – from the NBA to move a team, which I think that's just the way it is, because it would prevent – like I used to own the Bucks. I would love to have moved the Bucks to New York, right? I mean, that's – it's a little bit of a bigger market than –
Alex Sherman: Sure and closer to you.
Marc Lasry: Yeah, and closer. But if you think about it, you really can't do that. So you need to have –
Alex Sherman: It seems a little different, moving it to Hartford, Connecticut, from a team that's in Connecticut already.
Marc Lasry: Yeah, but it's – it all depends on where markets are and sort of where the TV market and part of is, you know, maybe the NBA wants to sell a franchise to Hartford. So I think there's a lot of different reasons, so I think it's going to be hard.
Lasry on investing in professional bull riding
Marc Lasry: Do you know what an average baseball viewership is in the United States, for an average baseball game?
Alex Sherman: TV?
Marc Lasry: Yeah.
Alex Sherman: About a million.
Marc Lasry: That's exactly it. It's a million viewers. So somehow, you've got more people watching a PBR event than you have watching –
Alex Sherman: Now they don’t have an NFL game leading into that –
Marc Lasry: Doesn't make a difference. Still, like, you've got a million and a half viewers, that's a lot of people. And as we started doing the work, came to the conclusion that here's a league that's just going to keep on growing. And it's growing sort of 10% plus a year, you've got more and more people going. And when you go to an event, now, I've been to a lot of them, you sort of – people love it. I've never met anybody walks out going, oh, I didn't like that. And when we sort of do our polling, 95% of people who've been to an event love it.
Alex Sherman: What's the demographics in terms of fandom?
Marc Lasry: I think it's pretty much everybody is going. What we're seeing is it's much more rah, rah. Like people love the action. It's every three minutes, there's a ride. So because of that, you're pretty excited. And people love gambling as to whether somebody's gonna be able to stay for the full eight seconds.
Lasry on college sports programs
Marc Lasry: If you're in Michigan or UCLA or any of these schools, the teams make quite a bit of money. The pressure the teams have is very simple. They've got to now start paying the players. So it's either you donating to end up giving money to the athletic department for them to do this, or they've got to sort of monetize it in a way so they can keep on competing. And I think for the top 20 programs, top 30 or top 50 programs, you're going to have to ultimately do that if you want to compete. So it'll happen. It'll start happening. And I think you'll see quite a bit of it over the next five, ten years.
Lasry on private equity ownership in college sports
Alex Sherman: Just for people that are not familiar with this, and honestly, even myself, the process here would be, you would be turning a team into a corporation, essentially, or an asset like, what is the technical?
Marc Lasry: So the way to think about it assume a team makes 100 million in revenue, you would go out and sell by 10% so that's 10 million. So now whatever the revenue of that team is going forward, you're gonna get a 10% of it. So the question is, what are you paying for that? Are you paying 100 million? So 10 times—
Alex Sherman: And you're, this is some sort of like derivative security in essence that you’re getting?
Marc Lasry: Yeah, that's exactly it. It's just what you're doing is you've got a contract saying all the revenue that you receive. So the idea is, by me giving you money today, you're going to get better, because you're going to spend it on players, and therefore your revenue is going to go up, and therefore I'm going to start getting good returns on my money.
Lasry on colleges sports programs and private equity
Alex Sherman: Why does no one want to be first? Is it just because it's new?
Marc Lasry: It's because it’s new. Everybody's first to be second. Like, everybody's like, I'll do it after. I think part of it is, it's still, I think it's people view that sports is pure.
Alex Sherman: Right. But it's getting less purer and purer by the day.
Marc Lasry: No, and that's the problem. I mean, it really is. It's not how you and I grew up. I mean, I know I'm older, but you ended up thinking that players or athletes were playing, and they were in college for four years, right? Then it became they're there for one year. And now – and athlete's never got paid. And today athletes are getting paid. So it's changed quite a bit, and I think it's going to continue changing. Because if you don't, you're not going to be able to pay the athletes.
Alex Sherman: Right. So in essence, perhaps the catalyst force will simply be a team that realizes the funds aren't there without doing this.
Marc Lasry: Yeah, you're not going to be able to compete. So if you don’t – here's a question, are you going to take money away from your medical program, are you going to take from your history program –
Alex Sherman: Scholarships.
Marc Lasry: From scholarships to end up trying to pay to have a better basketball team. And I think that's the issue.
Lasry on NBA’s European expansion plans
Alex Sherman: You mentioned you're interested in doing NBA, their international Europe play.
Marc Lasry: Yeah.
Alex Sherman: What is appealing about that investment to you?
Marc Lasry: I think the NBA, or basketball, is one of the fastest growing sports. You see that there's a huge amount of interest in Europe for basketball because of EuroBasketball. I just don't think it's been run that well. And I think the NBA putting the – tour of the NBA, and with Adam and the team over there running it, I think you're going to find that it's going to be a great investment.
Alex Sherman: How much at this stage are you familiar with the specifics of what they have in mind?
Marc Lasry: I don't think they've disclosed it. I think what they've said is they're going to try to do about 10 teams. So I think all that's going to come out in next three to six months, and then it'll enable people like me to figure out, you know, who we should invest rather than what we should be doing.
