The Exchanges

Q Doc, which two people have had the biggest impact on your professional life?

A That's a difficult question to answer. I'd say the first that comes to mind is, uh, Lorne Michaels. He was my client for more than 20 years, and he's an extraordinary human being more than anything else. But he taught me, I think, two things. Number one is the power of relationships. His entire life and career has been driven by the strength of his relationships. I've never seen anybody Better at that than Lauren. And the second thing is, I think he, he integrates his life and work in a truly seamless fashion. I'm not a believer in this work-life balance idea. Work is life. Life is work. It's all one. And he's probably the best practitioner of that that I've ever seen. The second was Michael Ovitz, who was my First boss and the founder of CAA. I learned a lot of things not to do with Michael. It was probably just as much as important as what I did learn from him, but he really showed me what hard work looks like. I didn't know it before I arrived in the mailroom at CAA, and I saw up close what drive and ambition and hard work looks like, and I think he taught me another thing, which was He knew no limits in his life. He believed that how you spend your time is who you are. And he chose to spend his time very in a very directed and mission focused way. And he never saw the limitations of being an agent. It was only possibility.

AI assessment note: “the first that comes to mind is, uh, Lorne Michaels... The second was Michael Ovitz”

Q And what's happened as these businesses have grown with the ownership structure that now allows you to come in as minority owners in these franchises?

A Going way back, these were largely sole owners. They were, it was more of a hobby or a side hustle. Many of these were family-owned assets. They were rarely full-time pursuits by any of these owners, but again, as popularity grew, as value grew, these became more syndicates. There's more multiple ownership stakes in each of these individual Franchises, but it was mostly still driven by local affinity, by civic duty and leadership and whatnot. Over time, actually, and one thing that's important to note is that these were assets that at one point in time, institutional ownership was allowed. So if you recall, newspapers owned these assets. Disney owned the Angels and the Ducks, and Fox owned the Dodgers. But what happened Was those institutions by their own governance were forced to sell. And as forced sellers, the leagues perceived those values to be diminished in the marketplace. So they disallowed institutional ownership for the better part of a decade or more. And it became, as the NFL says, the two-legged rule, which is all owners had to, had to have two legs. But there's been this steady transformation in the business over time towards more and more professionalized and sophisticated ownership, which has grown asset value tremendously. And at the same time, it's been driven largely by revenue growth and by the fact that more rational collective bargaining agreements have br…

AI assessment note: “there's been this steady transformation in the business over time towards more and more professionalized”

Q I know you both have different and really interesting backgrounds that came together for what you're doing. So, Doc, why don't you kick it off? Love to hear some about your background.

A So I began my career at Creative Artists Agency. I was there for 32 years, the last 20 of which I was one of the managing partners and owners of the business. I started out in the movie and television businesses representing talent. When we took over the company, we really saw a lot of headwinds coming in the entertainment business, and we realized pretty quickly that we needed to diversify our business Strengthen our platform. So we started to think about adjacencies and the most logical and biggest adjacency clearly to us was sports. So I was instrumental in building the sports business from ground zero starting around 2005. And we started in the representation business and we built out a real diversified sports platform, which very quickly became The most profitable division in the company, the biggest division in the company, and really was the, was the growth engine for CAA, which attracted the interest of outside investors like TPG, who ultimately bought control. In about 2015, after 20 years of being a managing partner there and running and building the business, I felt like I had done just about everything I could possibly do in the agency business, and I really began to thirst for Getting my hands on real hard assets. And about that time, Jim Dolan came calling. MSG was a big client of CAA and the sports side. And he came calling with the role of CEO, public company CE…

AI assessment note: “So I began my career at Creative Artists Agency. I was there for 32 years”

Q How much does winning on the field of play matter to the economics of these businesses? Clearly the league sharing, it doesn't matter at all. But how about on the local side on the platform?

A It's very specific to league and geography. It's really hard to quantify what Winning really means. In European football, it's much more of a direct corollary to winning and revenue, because so much of the revenue is tied to on-field performance. In the US, it really depends on the league. It's less important in the NFL and the NBA, given the high percentage of national revenues that each of those Those leagues generates, so market matters less. In baseball, in hockey, and in Major League Soccer, winning is probably more important, but even in those circumstances, winning and losing is less important, I believe, than the customer experience. If you create a great experience of going out to the ballpark or going to the rink You will make for a memorable experience, and winning becomes less, less and less important. But markets matter. Actually, what you own matters as well. If you own your arena, if you own your venue, if you own a bunch of the ancillary assets, winning and losing becomes less important. You'd have to look no further than my own experience with the New York Knicks. During my tenure there, we were terrible. I think one year we had a 17 win season. We were awful. I believe, if I'm not mistaken, that the Knicks are the worst performing NBA franchise in the 2000. So, 21 years of some of the worst performance in all of the NBA. Yet, night after night after night, The…

AI assessment note: “winning and losing is less important, I believe, than the customer experience.”

Q So doc, when you go in to look at acquiring a minority interest, what is it that you are owning? There's an interest in a team. You mentioned there's a bunch of other assets around it. What is the lump sum of what you're purchasing?

A Well, I guess the simplest answer is to say we're investing in the platform. It's not simply the sports franchise, because in most cases, these franchises own a number of ancillary businesses. These are legal monopolies that exist inside and have geographic exclusivity in most cases, except those cities where there's more than one franchise in a given league, but they're given very clear geographic parameters within which to operate, and it gives an owner essentially a call option on a host of ancillary businesses from media, To real estate, to hospitality, and so forth. So consequently, you're investing in the entire platform. The question of what is the actual asset is more of a philosophical conversation and an argument that Ian and I frequently have.

AI assessment note: “we're investing in the platform. It's not simply the sports franchise”