Carlyle thinks it’s a good time to move on sports teams, but investors should be careful

The deal plays to Carlyle’s theses around sports as high-quality content with enduring appeal and as offering a chance to close the monetization gap between men’s and women’s sports, said managing director Ben Fund, who runs Carlyle’s sports investments with Alex Popov. Carlyle also sees an opportunity to take advantage of sports’ greater openness to institutional capital as teams get more expensive.

Fund said that even as the distribution model for sports faces uncertainty, sports’ value as an inflation-proof form of entertainment is clear.

“Post-COVID, no content is more important than sports content,” Fund said. “Legacy linear TV and video providers need sports content to maintain the customer base, while the world has changed how it evaluates the performance for streaming platforms. Everyone in the ecosystem needs sports to make the ecosystem work.”

Carlyle’s cofounder and cochair David Rubenstein is no stranger to sports, having recently acquired the Baltimore Orioles for $1.73 billion. A big player in private credit, Carlyle has put $4 billion into sports, media, and entertainment since 2018. Previous investments include Deltatre, a tech company that generates real-time stats about sporting events.

Successfully running a team isn’t as easy as investing in one

Carlyle sees openings for outside investors in teams as their valuations soar.

“As teams become more expensive, you’re running out of people to buy controlling stakes in teams,” Fund said. “You also have teams with generational change. The average age of the controlling owners in the NFL is getting older. They may not be able as a family to fund the tax bill. Someone has to foot the bill.”

Carlyle is among the PE firms that have zeroed in on women’s sports.

“The fans are there. But sports are not being monetized anywhere near the level they should be. The market is now recognizing the power behind women’s sports,” Fund said.

Some private-equity investors have eschewed direct team investments. Team values are subject to longterm media-rights deals, and investments often come with limits on ownership control and exits. With team values soaring, some veteran investors in the field have also warned of a bubble.

Carlyle, for its part, says it has passed on a lot of team deals and investors need to carefully evaluate what’s an appropriate price to pay for teams. It’s one thing to own a team but much harder to operate it successfully, Fund said. Key to the Reign deal, for example, was having the Sounders, with its deep market knowledge, as a day-to-day operator.

“We’ve stepped away from more transactions than we’ve closed,” Fund said. “We’re not going to be an index of sports investments.”