What's Wrong with the NBA: Former Warriors Owner Explains
00:00:00.000 | All right, now we're going to move on to the 2025 biggest business loser predictions in 2024.
00:00:06.080 | Chamath said pro sports teams because they hit peak valuations. It's looking like a pretty good
00:00:10.640 | prediction. I would take the other side on pro sports teams. It feels like that market is about
00:00:15.200 | to be institutionalized. And funds are going to start buying pro sports teams. Okay, that ultimately,
00:00:22.960 | and ultimately, capital markets have way more resources than kind of the wealthy individuals
00:00:27.200 | who've done it for now, to date. So I just think it's the amount of money that can go after pro
00:00:33.760 | sports teams is about to, you know, 10x 100. I think you're totally right. The reason I said
00:00:40.160 | that last year was it was pretty clear to me at the time. And the NBA was the canary in the coal
00:00:45.600 | mine that there was a viewership problem in professional sports. And specifically in the NBA,
00:00:51.760 | the game has devolved into essentially rebounds and dunks, or three pointers. And the issue with
00:00:58.960 | that is that it becomes just meaningfully less interesting to watch. At the same time, because
00:01:04.000 | of the fact that the TV deals are really what determines the discounted value of these sports
00:01:09.680 | franchises. The TV deal was so enormous, that it creates no reliable rivalries anymore. Because
00:01:19.760 | people will hopscotch teams almost every year, because the compensation that they can get is
00:01:24.560 | just so obscene, quite honestly. And I think what happens is, sports will have a decent run
00:01:30.560 | until the next TV deals get done. And I think if you, for example, take pharma ads outside of TV,
00:01:39.040 | so like that pool shrinks, if you have less viewership, and so you can sell the remaining ads
00:01:46.640 | less effectively, because there's just fewer of them, and then there's fewer buyers, and it shrinks
00:01:50.400 | yet again, then the dollar pool that the television networks and the streamers are going to be willing
00:01:58.000 | to pay for sports will go down. And the group that will be the most price sensitive are exactly who
00:02:04.320 | you said, Gavin, meaning the non-trophy buyers. So when I bought into the Warriors, I bought it
00:02:09.920 | purely as a trophy asset, and I was price insensitive. But I agree with you that now that
00:02:14.640 | you have the PE firms on the cap tables of these sports franchises, those folks are all DCFs,
00:02:20.080 | those folks are all Excel models. I don't think that they're buying things for emotion. I don't
00:02:25.200 | think they've grown up thinking, "I want to own this thing," not using institutional LP dollars.
00:02:29.920 | So I just think that's why I said that in '24, so I just want to be clear.
00:02:33.200 | On behalf of Phil Hummuth and I, we appreciate you made that vanity investment for the number
00:02:37.280 | of times we got to sit in your court side seats. Yeah, because I never went to the games.
00:02:42.000 | You made with NBA players. It's great. I never went to the games. I should have
00:02:44.640 | gone to more games. I went to your games and almost got thrown out of your seats.
00:02:47.920 | I got a red card one time. It's true.
00:02:49.920 | Is it true? You did?
00:02:50.880 | Oh, you don't know that story? No.
00:02:53.360 | I got a call. I think it was from the Warriors or it's from the NBA, something to the effect of
00:02:57.840 | Chamath. This guy that was sitting in your seats was almost kicked out. And I said, "Excuse me,"
00:03:02.080 | because I knew that it was Jason. It was the Knicks game, in fairness.
00:03:05.040 | And he was jawboning our own players. I was getting into it with Bogut and with David Lee.
00:03:12.000 | Because I told- It was unbelievable.
00:03:14.000 | I told Steve Kerr, "Listen, you're up 30 on my Knicks. Sit these guys down. This is
00:03:18.160 | Bush league. What if Steph Curry gets hurt out there?" And Bogut told me to shut up on Andre
00:03:24.160 | Iguodala. Bogut told them to basically go pound sand in a morgue.
00:03:26.960 | He basically did. It was the funniest thing ever, Gavin. This is what happens when you get-
00:03:31.040 | Bogut's one of our friends and he's one of our good friends, so that's why it's so funny.
00:03:34.480 | But they come over, Friedberg, and they tap you on the shoulder. I'm with my wife. She's mortified.
00:03:40.800 | And the guy hands you a card. And the card says, "You've been warned one time and one time only
00:03:47.840 | about abusive behavior. If we have to warn you one more time, you will be escorted out."
00:03:53.680 | So I look at the guy and I say, "But," and he goes, "Read the card." I read the card. I say,
00:03:58.480 | he goes, "Give me a thumbs up." That was it. I never-
00:04:02.960 | That was it.
00:04:03.920 | You're not supposed to. Then, three years later, I'm sitting in the same seats. I'm interacting
00:04:08.160 | with Draymond during the finals games and then everybody's hokey dokey with it.
00:04:12.000 | When you say interacting, what do you mean when you say interacting?
00:04:14.240 | Wait, hold on. Gavin wanted to make a point about what I just said.
00:04:16.400 | No, I just want to just come back to Chamath because for sure these private equity guys,
00:04:20.400 | there's DCFs. The NBA has been terribly managed. I think even LeBron said they have a big problem.
00:04:25.280 | And I'd separate the NBA is the worst managed. NFL is probably the best managed.
00:04:31.040 | But the one kind of counterpoint I would say on the TV rights is Google bought Sunday Ticket
00:04:36.640 | and are extremely happy with it. Amazon and Netflix also both bought NFL games and are really
00:04:45.200 | happy with them. And so I just think those three companies, it doesn't really matter to them if
00:04:50.560 | pharma ads go away. In 18 months, you're going to be able to dynamically create an ad for each
00:04:57.120 | individual person and show it to them. And if you're a high value user that Google knows that
00:05:02.800 | you're about to book a vacation, they'll dynamically generate whatever hotel destinations
00:05:09.040 | you want and show click here. So I just think sports, as long as they command the eyeballs
00:05:15.760 | that they do, and for sure, if the NBA doesn't fix it, the value of those franchises will start
00:05:22.000 | to decline. But just the fact that all of the biggest tech companies are so happy with the
00:05:29.200 | sports kind of rights that they bought, they're going to buy them all. And every
00:05:33.600 | I can't understand, Gavin, maybe maybe you're closer to this, but why wouldn't Apple, Amazon
00:05:39.760 | or Google just back up the truck to the NBA and say, we'll take the whole thing. And then anybody
00:05:44.400 | who's got an iPhone gets the NBA for free. And then everybody else has to pay and they figure
00:05:49.600 | it out in the back and they lose, you know, 5 billion, they make 2 billion, who cares?
00:05:53.680 | It's a rounding error for Apple. I agree. And they, you know, I mean,
00:05:57.760 | they all all except for Apple, really. And Apple, they have, I think, an MLS deal,
00:06:02.640 | but they all kind of stuck their toe in the water. And I think they feel like, wow,
00:06:06.400 | the water's warm. Let's dive in. Okay. Yeah. And the new deal is an 11 year deal for the NBA. So
00:06:13.360 | these things don't come up that often. But we'll see over time, maybe somebody will buy one of
00:06:18.080 | of these media companies and inherit them.