February 17, 2025 • 7 mins
Chris explains why NFL franchises are treated like a "black box" asset—constantly rising in value despite operating at a loss. He breaks down how tax benefits, amortization, and collateral use make owning a sports franchise a license to print money, drawing parallels to private equity strategies. Plus, he notes Trump’s plans to end special tax treatments for these franchises. www.watchdogonwallstreet.com
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Episode Transcript
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Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it will have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
The NFL and private equity, black Box meet other black Box. Yeah,
what I mean by black boxes? Hey, we say it's
worth this, so it must be worth this. Well, here's
the story. My team, the New York Giants, are putting
a limited stake in the team on the market. This
(00:39):
process is likely to set a record for an NFL
franchise valuation. The Giants are looking into the possibility of
selling up to ten percent of the team. The Mare
and Tish families each owned fifty percent of the Giants.
They're considered one of the most valuable teams because I
(01:01):
don't know, they were in New York, their history New
York market. Again, the stadium sucks TV market though the
TV revenues are leave a lot to be desired, but again,
you know a lot of it. Quite frankly, again, people,
it's black Box. And what do I mean by black box?
(01:22):
Who actually puts the valuations on these things? What's the
multiple does anybody ever know does it even matter? Well,
I'll try to break this down for you. Owning a
professional sports franchise is it's a license to print money.
(01:47):
Does anybody actually ever see the books in these things?
I mean they say, Okay, this franchise is worth five billion,
this one's worth six billion. And again I understand certain
franchises like Dallas Cowboys, the assets that they have, They
built their own stadium, They've got their own practice facility
that they use for other events. Certain franchises have had
(02:11):
their stadiums paid for with bonds, and those bonds are
you know, those are unit municipal bonds are tax free.
And they may actually change that moving forward in regards
to whether or not they're going to allow those to
be tax free. But one of the things is is
that the way it works, because again, these franchises just
(02:35):
keep going up in value because they say they do. Again,
I I always say, well can I can I see
what your numbers are? Actually it doesn't matter because you
buy a franchise the way that the tax laws work
at this point in time, you can amateurize that over
(02:59):
a fifteen year period of time. So you write down
that purchase price every single year, little by little by little,
and these people that buy it again they can obviously
that's going to reduce their tax bill a great deal.
There's also certain caveats and rules with the irs where
(03:19):
the owner of the franchise, if he works for the
franchise at least five hundred hours a year, they can
get more or greater tax benefits. But the reality of
the situation is is that it's it's almost like a
national commodity to some degree that only goes up in value.
(03:45):
And if it only goes up in value, you're purchasing something.
Let's say you buy a franchise for five billion dollars,
you can write it down over a fifteen year period
of time that in fifteen years, you know, because that's
just the way it is, they keep going up in value.
And having an asset that keeps going up in value
(04:08):
allows you to what allows you to go and use
that asset as collateral to do other things. You can
borrow against that asset. I mean, it's one of the
things that people often talk about, well, you know, I
you know Bezos and those guys, and I discussed this
as well. I said, you know, they're not getting any salary.
(04:31):
They either are selling shares of their stock, which they
do periodically, or they can borrow against the shares that
they own. They can also borrow against the franchise that
you own. Not to mention again, you're running a sports franchise.
You've got a lot of high paid contracts to you.
(04:52):
Don't think that these accountants can find a way to
make sure that the franchise could literally lose money for
fifteen years every single year, run in the red okay
and still be worth more. Again, I'm in Tampa, Florida
(05:14):
right now. There's an ongoing debate about what's going to
happen with the Rays, the baseball team, and the stadium.
And the worst awful stadium in Saint Petersburg got wrecked in
the hurricane. Prior to that, there was negotiations they were
supposed to redevelop an area there in Saint Petersburg and
(05:34):
put the stadium. Politicians getting into a bit of a
tizzy and a fight. Now they don't know what's going
to happen, where the Ray's going to go. You know,
the couple of years, a couple years left on their
stadium contract that they have to go by. But again
they have to spend how many millions of dollars to
rebuild it, even though they want to either build a
(05:56):
move into a new order somewhere else. It's a disaster.
But the reality is, you go, oh, and they got
some of the worst attendants in baseball, some of the
worst attendance in baseball, the Tampa Bay Rays, the other
one the Miami Marlins. Yet their value of their franchises
(06:17):
keep going up. Can you can you name for me,
you know other businesses out there that can lose money
forever and the value continues to go up. Yeah, private
equity can do that. They can ladder companies up over
a period of time. In essence, that's kind of what
(06:38):
a franchise is in some respects. And again it's just
accepted now that they're going to continue to go up
because again it's a great it's a great tax deal
for these owners. Now, Donald Trump has said that he
wants to do away with the special tax treatment, uh
(07:00):
for these franchises. We'll see how that pans out. We're
going to see how that pans out. But I agree,
I don't I don't have any any problem with that.
But again, the parallels between private equity in the NFL
and how they put out valuations. It's extraordinary and natural
(07:21):
that private equity is going to want to get involved
in this game. Watchdog on Wall Street dot Com
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it will have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
The NFL and private equity, black Box meet other black Box. Yeah,
what I mean by black boxes? Hey, we say it's
worth this, so it must be worth this. Well, here's
the story. My team, the New York Giants, are putting
a limited stake in the team on the market. This
(00:39):
process is likely to set a record for an NFL
franchise valuation. The Giants are looking into the possibility of
selling up to ten percent of the team. The Mare
and Tish families each owned fifty percent of the Giants.
They're considered one of the most valuable teams because I
(01:01):
don't know, they were in New York, their history New
York market. Again, the stadium sucks TV market though the
TV revenues are leave a lot to be desired, but again,
you know a lot of it. Quite frankly, again, people,
it's black Box. And what do I mean by black box?
(01:22):
Who actually puts the valuations on these things? What's the
multiple does anybody ever know does it even matter? Well,
I'll try to break this down for you. Owning a
professional sports franchise is it's a license to print money.
(01:47):
Does anybody actually ever see the books in these things?
I mean they say, Okay, this franchise is worth five billion,
this one's worth six billion. And again I understand certain
franchises like Dallas Cowboys, the assets that they have, They
built their own stadium, They've got their own practice facility
that they use for other events. Certain franchises have had
(02:11):
their stadiums paid for with bonds, and those bonds are
you know, those are unit municipal bonds are tax free.
And they may actually change that moving forward in regards
to whether or not they're going to allow those to
be tax free. But one of the things is is
that the way it works, because again, these franchises just
(02:35):
keep going up in value because they say they do. Again,
I I always say, well can I can I see
what your numbers are? Actually it doesn't matter because you
buy a franchise the way that the tax laws work
at this point in time, you can amateurize that over
(02:59):
a fifteen year period of time. So you write down
that purchase price every single year, little by little by little,
and these people that buy it again they can obviously
that's going to reduce their tax bill a great deal.
There's also certain caveats and rules with the irs where
(03:19):
the owner of the franchise, if he works for the
franchise at least five hundred hours a year, they can
get more or greater tax benefits. But the reality of
the situation is is that it's it's almost like a
national commodity to some degree that only goes up in value.
(03:45):
And if it only goes up in value, you're purchasing something.
Let's say you buy a franchise for five billion dollars,
you can write it down over a fifteen year period
of time that in fifteen years, you know, because that's
just the way it is, they keep going up in value.
And having an asset that keeps going up in value
(04:08):
allows you to what allows you to go and use
that asset as collateral to do other things. You can
borrow against that asset. I mean, it's one of the
things that people often talk about, well, you know, I
you know Bezos and those guys, and I discussed this
as well. I said, you know, they're not getting any salary.
(04:31):
They either are selling shares of their stock, which they
do periodically, or they can borrow against the shares that
they own. They can also borrow against the franchise that
you own. Not to mention again, you're running a sports franchise.
You've got a lot of high paid contracts to you.
(04:52):
Don't think that these accountants can find a way to
make sure that the franchise could literally lose money for
fifteen years every single year, run in the red okay
and still be worth more. Again, I'm in Tampa, Florida
(05:14):
right now. There's an ongoing debate about what's going to
happen with the Rays, the baseball team, and the stadium.
And the worst awful stadium in Saint Petersburg got wrecked in
the hurricane. Prior to that, there was negotiations they were
supposed to redevelop an area there in Saint Petersburg and
(05:34):
put the stadium. Politicians getting into a bit of a
tizzy and a fight. Now they don't know what's going
to happen, where the Ray's going to go. You know,
the couple of years, a couple years left on their
stadium contract that they have to go by. But again
they have to spend how many millions of dollars to
rebuild it, even though they want to either build a
(05:56):
move into a new order somewhere else. It's a disaster.
But the reality is, you go, oh, and they got
some of the worst attendants in baseball, some of the
worst attendance in baseball, the Tampa Bay Rays, the other
one the Miami Marlins. Yet their value of their franchises
(06:17):
keep going up. Can you can you name for me,
you know other businesses out there that can lose money
forever and the value continues to go up. Yeah, private
equity can do that. They can ladder companies up over
a period of time. In essence, that's kind of what
(06:38):
a franchise is in some respects. And again it's just
accepted now that they're going to continue to go up
because again it's a great it's a great tax deal
for these owners. Now, Donald Trump has said that he
wants to do away with the special tax treatment, uh
(07:00):
for these franchises. We'll see how that pans out. We're
going to see how that pans out. But I agree,
I don't I don't have any any problem with that.
But again, the parallels between private equity in the NFL
and how they put out valuations. It's extraordinary and natural
(07:21):
that private equity is going to want to get involved
in this game. Watchdog on Wall Street dot Com
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