Inside the Commanders DC Deal With Owner Josh Harris | The Deal

Key Concepts

• Stadium and arena development as city revitalization tools
• Public-private partnerships in sports infrastructure
• Fan experience as a driving force in sports business
• The evolution of sports media and its impact on team valuations
• Private equity's role in sports team ownership
• Scarcity value and growth equity in sports team valuation
• Free cash flow as the ultimate metric for valuing sports franchises
• The importance of team culture and player experience
• The rise of women's sports and its potential
• Balancing business, family, and philanthropy

New Washington DC Stadium Deal

• Seismic Impact: The new stadium is described as "seismic" for the city, the DMV (DC, Maryland, Virginia), and for bringing football back to RFK Stadium, the "spiritual home" of Washington football.
• Multipurpose Venue: The stadium will have a dome to host major events like the Super Bowl and concerts (e.g., Beyoncé).
• Economic Impact: The project is a $3.8 billion investment, including infrastructure. The stadium itself is $2.7 billion.
• Redevelopment: The stadium is only 15% of the overall ground, with plans to redevelop surrounding neighborhoods with affordable housing, parks, retail, and mixed-use spaces.
• Key Issues Overcome:
  • Assuring Maryland's Governor Moore that Maryland would be considered if DC didn't work out.
  • Getting the land transferred from federal to DC control via a 100-0 Senate vote.
  • Concluding a deal with the DC mayor that is beneficial for DC.
• ROI for DC: The project is expected to generate billions in tax revenues, thousands of homes (30% affordable), and thousands of jobs.
• Private vs. Public Funds: The Commanders are putting up $2.7 billion, the largest private investment in DC history. The city is contributing by addressing the crumbling infrastructure at the RFK site.
• Criticism: Some NFL sports circles criticize the Commanders for not getting enough public funding.
• Fan Support: Public support is overwhelmingly positive due to memories of RFK and the desire to bring back the glory days of Washington football.

Arena Projects in Philly and London

• Common Thread: The common thread across all projects is building amazing fan and player experiences while helping the cities.
• Philly Arena:
  • Originally planned for a different site, but a deal was struck with Comcast to build sooner at their site.
  • The original site will also be redeveloped, benefiting the city twice over.
  • The partnership combines basketball and hockey in the same arena.
  • Brian Roberts (Comcast) and Josh Harris put aside differences to create a win-win situation.
• Crystal Palace (South London): The goal is to enhance the fan and player experience.

Evolution of Sports Team Ownership

• Sixers Acquisition: Bought for $280 million after Apollo went public. The Sixers were losing $50 million a year and had low revenues.
• Vision: To reconnect the team with the city, improve the fan experience, and start winning.
• Revenue Growth: The Sixers are now top quartile in revenue and profitable.
• Global Reach: Sports are now global media businesses, with more people watching the Sixers overseas than in Philly.
• Private Equity's Role: Sports values have increased significantly, requiring more equity. Leagues are allowing institutional capital to facilitate stadium development and innovation.
• Commanders Acquisition: $6 billion purchase with $5 billion in equity.
• Valuation Uplift: NFL teams like the Dolphins and Eagles are selling stakes valuing them at upwards of $8 billion.

Sports Team Valuation

• Scarcity Value: Limited number of teams and owners drives up value.
• Revenue Growth: As revenues grow, cash flow will grow.
• Cashflow Yield: The NFL is seen as a business with a real cap rate of 3-4% going to 5-6%.
• Growth Equity: Sports are seen as growth equity, backstopped by media deals.
• Inflation Resistance: Sports are inflation-resistant.
• Historical Performance: Sports valuations have outperformed private equity.
• Future Valuations: NFL teams could be worth $9-10 billion in the near term.

Financial Metrics

• Free Cash Flow vs. EBITDA: Free cash flow is the ultimate metric. EBITDA is just a proxy.
• Commanders Opportunity: The Commanders were in the bottom quartile in revenue. Moving to league average would double EBITDA, and a new media deal could triple it.

Running a Sports Team

• Key Hires: The three most important jobs are hiring a GM, a coach, and a president of business operations.
• Servant Leadership: A servant leader mindset is crucial.
• Player Experience: Facilities, travel, and food are critical to attracting and retaining players.
• Facilities Investment: $125 million spent on stadium and player facilities.
• Communication: Regular communication with the GM, coach, and president is essential.
• Values: The owner must set the values of the organization.

Public Persona

• Embrace Public Life: Owners must embrace being a public figure.
• Righteous Behavior: Owners must be righteous in their behavior.
• Tough Cities: Owning teams in cities like Philly requires managing passionate fan bases.

Balancing Priorities

• Five Priorities: Health, family, business, sports, and philanthropy.
• Time Allocation: 20 hours on sports, 60 hours on business.
• Culture: Creating a culture of winning for the city and the pensioners.
• Good People: Hiring genuinely good people who care about others.

Women's Sports

• Existential Moment: Women's sports are at an existential moment.
• Growth Potential: Significant growth potential in the NWSL, global soccer, and the WNBA.
• WNBA Expansion: The WNBA expansion team is part of the business case for the new arena in Philly.
• Youth Sports: Increased participation of girls in flag football and other sports.

Rapid Fire Questions

• Deal-Making Style: Flexible.
• Gut vs. Data: Data.
• Dream Deal-Making Partner: David Blitzer.
• Best Advice: "You can't do a good deal with a bad person."
• Worst Advice: "If you pay a low enough price, you can make it work."
• Hype Song: Coldplay.
• Commanders Season: Joyous.
• One Sport to Watch: Can't pick one.
• Team to Win a Championship: All of them.
• Advice for Aspiring Josh Harris: "Bring it, do something that you love, and keep going."

Synthesis/Conclusion

Josh Harris's approach to sports team ownership is multifaceted, blending financial acumen with a deep understanding of the fan experience and community impact. He emphasizes the importance of data-driven decision-making, strategic partnerships, and creating a positive team culture. His focus on long-term growth, coupled with a commitment to enhancing the fan and player experience, positions his teams for sustained success. He views sports as a powerful force for good, capable of uniting communities and driving economic development. His insights into the evolving sports landscape, particularly the rise of women's sports and the role of private equity, provide valuable perspectives for anyone interested in the business of sports.