exactly this. that is the other thing not getting talked about enough in this ordeal...PE isn't just going to make a one time $2 billion investment and say gee thanks for letting us invest in your media rights guys. they do not operate like that. ever. they will continue to invest in order to gain more equity/leverage/control, and in turn just ruin the entire sport that much faster.
This is true. As I mentioned earlier, Private Equity always projects well on paper but the promised increase on ROI haven’t followed through for Corporate America – see below quote:
I'm interested to see what they think they can do, to increase the value there. They don't invest unless they think they can make significant returns. They'll be looking for 20-30% ROI, although historically the rates end up being closer to 10 or 11%.
Yes. Despite Private Equity’s intensive cuts to overhead (i.e. layoffs) and price increases, PE proposals don’t take into account that increased consumer costs soon price-out the lower- and middle-classes. In other words, PE drives off a large segment of its consumers/audience.
There’s a larger unseen internal Private Equity strategy that nips into expected ROIs: The ESG Score.
ESG stands for Environmental Social and Governance. It’s essentially a Social Credit score for publicly traded corporations that the Fortune 500 has heavily subscribed to for the last ten or more years, and are only recently realizing that the expected long-term investment benefit likely will never be realized. Under CEO Bob Iger, Disney, for example, is the most devout disciple of nurturing their ESG score. In the process their stock value has stagnated for a decade, their parks aren’t drawing the crowds of the past, and audiences have become indifferent about their largest cinema brands – Star Wars, Marvel, Pixar – and Disney's costly ESG pursuit hasn't helped.
Private Equity takeovers almost always insist on raising the ESG score, yet establishing the internal practices and promotions that raise a corporation’s ESG rating is incredibly expensive and intensive, so much so it shows up as a contributing loss against an overall ROI. Why is it expensive? Maintaining an ESG scores requires hefty DEI departments and financial contributions to local and national organizations that promote causes such as LGBTQ+ and Climate Change awareness. This can include collectively paying for community Pride Parades or hosting fundraisers for the Sierra Club.
For a company like Disney (or Netflix) this additionally means peppering your movies and Disney+ shows with LGBTQ+ characters and expanding your screenwriting teams to include voices from marginalized communities.
Now, I say all this not to criticize the factors behind ESG scoring (that would be for the political board), but to point out how costly pursuing a preferable ESG rating can be. PE probably wouldn’t apply ESG initiatives as intensively to the Big Ten, however there would almost certainly be a large, centralized DEI department that would promote practices like raising the Pride Flag at stadiums during the month of June or, more expensively, requiring football programs to invest in and participate in organizations that increase ESG ratings. And look at NFL's DEI initiatives including the Black National Anthem before kickoff and painting slogans like “End Racism” in the endzones.
So, the big question is why did Corporate America and especially Private Equity collectively fall in line with ESG scoring in the first place? The longer-term promise behind ESG is that a high ESG score would make your company more investable, sellable, and mergeable, and thus drive an increase to its stock outlook for the long term. This is why shareholder boards insisted on a rising ESG score. Conversely, because a low ESG score indicated the opposite, there was a worry among Fortune 500 companies over being left behind, which drove an ESG arms race that only recently select companies are opting out of.
