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June 12, 2023

Lasry Bucks Big Four Leagues for Women’s Sports and Global Properties

Marc Lasry bought into the Milwaukee Bucks in 2014 alongside Wes Edens. The two paid $550 million for the NBA team. Lasry recently sold his 25% stake in the club at a $3.5 billion valuation.

“The return was tremendous,” he said. “I don’t think [big four sports teams will] have that same [600%] return over the next 10 years.”

The Wall Street titan is not down on the sports or media business. He simply believes to find PE-like returns, investors will need to look beyond the leagues that are currently most successful.

“If you’re a pickleball team, a women’s soccer or women’s lacrosse team, a WNBA team, you’re starting out at a much lower valuation,” Lasry said. “And I think that depending on the [next] media deal [the league does], that’s going to increase the value of these teams a lot more [than the next NBA broadcast pact will for the Bucks or any other NBA franchise].…You’ve just got a lot more room to grow.”

To be clear, Lasry anticipates national media rights will continue to increase in value across the big four leagues.

“It’s just advertising rates, [which] go up 5 or 10% [annually],” he said.

He’s less convinced local rights can maintain their current trajectory or that clubs worth billions of dollars today will be worth multiples within a decade.

“If you buy a team today for $5 billion, is it going to go up 5x? That means somebody is going to pay you $25 billion [for it],” Lasry said. “There’s a probability of that…It’s just hard [to imagine].”

But that’s not why he sold his stake in the Bucks. He wanted to invest in other sectors, including niche and emerging sports properties.

Lasry has since announced that Avenue Capital Group, where he is CEO and co-founder, is raising a new private equity vehicle that will back challenger and women’s sports properties across the U.S., Europe, Africa, and Asia. It will also lend capital to existing and prospective team owners.

Historically speaking, Lasry has made few investments in sports outside of the Bucks. Avenue Capital Group has made its mark in distressed debt and undervalued securities.

He believes it is the right time to change that.

At a macro level, he sees “more demand for live sports than there has ever been, mainly because of gambling.” And believes that demand drives opportunity.

But he is convinced the greatest returns will come from smaller properties in the years ahead, not the established pro leagues where the ‘get-in’ price to ownership now exceeds $1 billion.

While there are a large number of people who value these clubs and would like to have a seat at an exclusive, high-profile table, he simply doesn’t believe that can continue as valuations begin soaring past $10 billion. Remember, even the wealthiest of individuals only keep 10-20% of their net worth in cash.

Rising valuations should create opportunities for Lasry’s lending business, and others, to help bridge the gap. The greatest among them are likely to come overseas as debt limits exist within the U.S. sports.

Though, “you can do preferred, and preferred is viewed as equity [within the big four leagues],” Lasry said.

While the upside is lower, lending should be ‘safer’ than investing in challenger sports properties and markets.

Avenue's new fund expects to have its first closing within 90 days. But it won’t be Lasry's first investment in a smaller sports asset. He, along with James Blake, bought the Milwaukee Mashers of Major League Pickleball back in 2020 for $100,000.

The value of that club has since skyrocketed. Lasry estimates it is worth $10 million today.

The success of that investment has helped to confirm his core thesis.

“If you invest in a team today at $5 million, $10 million, $50 million, $100 million, there is a higher probability that it could be worth 5-10x in 5-10 years [than a team bought at $1 billion plus],” he said.

That in part because the pool of potential buyers is larger and the competition amongst is expected to drive valuations higher. As wealthy individuals are priced out of the big four leagues, logic suggests they’ll increasingly look to less expensive properties as an alternative.

Lasry believes challenger properties will experience meaningful increases in broadcast revenues too.

“As smaller markets or leagues grow in popularity, their media rights will go up and up,” he said.

That remains to be seen. As the cable universe continues to dwindle and television subscribers decline, there may be less money for emerging sports properties. In essence, what remains could flow to the top.

But Lasry looks at broader trends (see: 40 million people playing pickleball, record television ratings for women’s basketball) and the relative cost of the rights for challenger leagues and believes broadcasters will recognize the value proposition that exists. He also expects the media pie to grow as the demand for live sports continues and as the streaming business matures. 

Because the dollars invested in challenger properties will be smaller, so too will the returns on each individual investment. Lasry is looking to make a host of investments, over number of different teams and leagues, to account for that reality.

“Whether it is pickleball, paddle, lacrosse or bull riding, a bunch of things will take off [over the next 5-10 years], and those leagues and teams will be worth quite a bit of money,” he said.

The Avenue Sports Fund will also invest in women’s properties and across emerging markets.

“The U.S. and Europe are not unique in that they are the only places where people like sports,” Lasry said.

People in Africa and Asia simply haven’t had access to them. He pointed to the enthusiasm surrounding Morocco’s run to the World Cup semifinals as evidence that fandom exists on those continents.

“As [those highly populated locales] keep growing, and more people have phones and [the ability to] stream games, you will have more demand and therefore the value of those teams will go up exponentially,” Lasry said.

We’ll find out over the next half decade or two if he is right. In the interim, he’ll be on the lookout for the next sports property that captures the fans’ imaginations.