George Pyne, Bruin Sports Capital CEO, joins Yahoo Finance Live to discuss the financial repercussions of COVID-19 on the sports community and broadcasters.
JEN ROGERS: Welcome back to "Yahoo Finance Presents." Time out, sports interrupted. So no secret that franchise values have soared recently. Just this year, Forbes valued the New York Yankees at $5 billion, only trailing the Dallas Cowboys at $5.5 billion. Those are big numbers. Let's bring in our next guest, George Pyne, Bruin Sports Capital CEO, because I want to ask you, George, what does COVID-19 mean for these hefty valuations? How do these look on the other side of the coronavirus pandemic?
GEORGE PYNE: Good question. On the short run, I think it's choppy and challenging because I think, as Don mentioned, a lot of the revenues for Major League Baseball, the NHL, Major League Soccer are game day-related. Game day being tickets, suites, sponsorships, concessions. And that's not a switch that just goes back on. I think that's going to take 12, 24, 36 months to straighten itself out.
And you don't know what kind of dislocation that's going to have for those teams, how many teams are going to suffer dislocation, and how many owners of teams might face challenges as a result of the virus. So I think in the short run, I think it is challenging for sports franchise valuations.
Now on the long run, I think sports teams have proven to be a great investment. They've increased in value, double-digit CAGR for 20 years, and there's not any business I know that can make the same statement. So long term, very good. Choppy, I think, the next one to three years. And that depends on the sport and their dependence on game day revenue.
DAN ROBERTS: George, Dan Roberts here. Thanks for joining us.
GEORGE PYNE: Thank you.
DAN ROBERTS: Let's talk about the TV side of this, the broadcasters. I mean, NBC missed out on the Olympics, although that's going to happen, just a year delayed. You know, you've got ESPN, owned by Disney, and Fox, and all of these broadcasters that have paid up big for live sports rights. And now there's been a period of months with no live sports, and you hope they start up again, but you're starting to hear questions about, will broadcasters ask for those rights fees back? And you know, ESPN might be facing those kind of requests.
What happens now, in the near term, in terms of whether it'll be as valuable to pay for live sports rights? I mean, I know you guys at Bruin Sports Capital are already invested in some businesses that stream live sports. Maybe live sports on TV-- now it accelerates the process of those not being quite as expensive.
GEORGE PYNE: Well, that's a lot to handle, so I'll try to unbundle it one step at a time. First of all, sports are very important to companies like Disney, Comcast, Fox, Viacom, Sinclair, AT&T. So why are they important? 88 of the top 100 programs on TV are sports. They drive ratings. They're also are a platform to promote other programming. And their advertising revenue's significant, as well as the affiliate fees. And that's why they pay billions of dollars in rights to sports leagues.
And so I think the broadcasters and the people that are benefiting for the rights will be prudent and cautious in how they manage their partnerships, because COVID-19 is a period of time, and these leagues and this value are going to be there for a long time. So I think it's cautious and tenuous. I don't see people being too aggressive with the leagues because they need them long term.
ANDY SERWER: Hey, George. Andy here. Who do you remind me of? You remind me of Warren Buffett.
GEORGE PYNE: I don't know if I--
ANDY SERWER: You really do. You remind me of Warren Buffett. You know why? Because you're not so bullish, short and even medium term. I mean, you just said three years. Wow. I mean, 2023, but I think that's probably realistic. Let me ask you, what do you think is going to change permanently? You said it's going to get back. But what are you going to take away? What is everyone going to learn out of this, do you think?
GEORGE PYNE: Well, I think what will change is, of course, as Dan mentioned, with 30 million Americans out of work right now, will they continue to pay cable operator subscription fees or not? But irrespective, I do think it's going to accelerate technologies and digital innovation going forward. So I think that's something they'll be taking away.
The at-venue experience-- again, just like you're seeing parts of America reopen doesn't mean people will go rushing back to restaurants. So that at-venue experience is going to have to improve if you own a team or a facility. So I think you're going to probably see real improvements in that area.
And then I think on television, you know, you're going to see the PGA TOUR play with full fields of eight weeks of all their best players. And I would be looking for innovation in terms of the way the product is presented. So I think you'll see real innovation, like every other business that comes out of the difficult time.
DAN ROBERTS: George, let's talk about college a little bit. We've been focusing on the major leagues, but you have some personal relevance here because you have a quarterback son who's headed to Notre Dame. How do you think this period of time might change things for college athletes? Also, of course, you've played football yourself at Brown. You're a college football family.
I mean, if things are delayed and college football doesn't start on time, you wonder if you might see recruits decide, well, I don't want to deal with it if it's a weird season or if it's unusual, and maybe, you know, college top recruits go pro sooner, and maybe high school recruits try to defer for a year. What do you think happens?
GEORGE PYNE: I think on the high school level, I think people will go on to college, and I think the colleges will try to get the season in. Why? Because it's such an important economic engine for the entire athletic department. 70%, 80% of the revenue in college sports comes from football. And again, that's a lot live gate. So college football is very important to the financial picture of college athletics in general.
So I think they'll play the season. They'll hope to get it in in its entirety. They could play a shortened season, conference only. They may push it back a little and they may look at the spring. But I think you can see college football will be adaptive.
Now, you raise a good point. If they played in the spring, what would Trevor Lawrence do? What would happen to the best players? Would they go in the draft or would they come back and play? I don't know. And I think the more things get delayed, there is a lot of dislocation-- seniors coming back, freshmen coming in, how many scholarships can somebody have.
I don't even want to think about it because there are all kinds of complexities and secondary impacts, not to mention I'll just say in general on the dislocation of sports and what Don Garber mentioned, we're talking about hundreds of thousands, if not millions, of jobs around the live event industry. And so there are a lot of people that hit hard.
Think about this stat. Tuscaloosa, Alabama, one home game has 20 million of economic impact. They play six or seven games a year. Tuscaloosa needs Alabama football. Madison, Wisconsin, needs Wisconsin football. Columbus, Ohio; Knoxville, Tennessee; Athens, Georgia. You know, there's a massive economic impact around these events that are really important to the average person.
ANDY SERWER: Hey, George, quick last question. We've got to hop, but I've just got to ask you, is it possible that leagues and teams will go bankrupt out of this?
GEORGE PYNE: I don't think so. I think, you know, they're in the media business, and their media rights are so valuable, so I think all the major sports leagues will be in good shape. There'll be some pain in the next one in three years, but I don't see that as a challenge. Now, you could see individual team ownership have some issues if they had difficult financial situations going into it.
And I also think you'll see some of the team owners in certain industries-- cruise lines, hotels, restaurants-- that could impact it. But the leagues look pretty smart right now by limiting the debt levels of these franchises, which makes them stand in good financial shape.
JEN ROGERS: George Pyne, Bruin Sports Capital CEO, thank you so much for joining us and giving us so much to think about for all of us in the business world and sports fans out here, as well. Thanks so much.