Despite the ongoing Covid-19 pandemic, the US-based sports investment group Bruin Sports Capital remains one of the most influential and notable entities in the sports industry.
The parent company of a portfolio of entities that includes streaming technology provider Deltatre, data-driven sports marketing agency Two Circles, and experiential marketing agency Engine Shop, among other entities, Bruin has direct visibility to most major components of the industry.
The firm also started this year with a major transaction to sell a prominent stake in premium hospitality company On Location Experiences, and has a rapidly-growing business through its joint venture in OverTier to supply NFL Game Pass streaming around the world.
The company’s ability to continue as an industry change agent was further buttressed last fall with a massive deal worth at least $600m with CVC Capital Partners and The Jordan Company to infuse more capital into Bruin’s ambitions.
Bruin’s founder and chief executive George Pyne, the former president of IMG Sports and Entertainment and prior to that Nascar’s chief operating officer, discussed the current state of the business and the impact of the public health crisis on the industry with SportBusiness US Editor Eric Fisher.
How has the pandemic been for Bruin and what kind of impacts have you seen? How has dealflow been affected and how material has been the impact upon your businesses?
The games not being played has obviously created its challenges across the number of companies that we’ve invested in. But on the balance, I’m really pleased with how the companies have held up and am proud of the leadership and management of each company. Having been through something like this now several times between [the terrorist attacks of September 11, 2001], the financial crisis, the Internet bubble, these are times where you can bring out the best in people, people can be resilient. So I come out of this feeling fortunate that our companies have held up well, and I feel positive about the future, at least for our company.
Your model for Bruin is based in large part on acquiring companies, building them and expanding them, and then finding successful exits, such as On Location. How has the pandemic changed the timetable for that core model? Will things take longer to come together or incubate now?
I don’t really think about it that way, honestly. We love to build companies. We love to work with management teams. For us, we’re long-term, patient capital and think about things over a long period of time. And we think sports is going to be a strong sector for many years, and are excited to be part of it. We focus on trying to build value and when there’s a chance to realize that value we might take advantage of it, but we don’t feel any pressure.
I’m not suggesting pressure. What I’m asking is if the pandemic forces an adjusted thought in terms of how you think about timing.
Not really, to be quite honest. We just raised a significant amount of capital in November, and we’ll be looking to deploy that capital over the next several years and hopefully in a constructive way. But this really hasn’t affected how we look at things.
What is the current thought of using that CVC Capital Partners and Jordan Company investment and putting those resources to work?
We will think methodically as we look for good investments over the next three to five years. We’ll be active making investments, and I’m cautiously optimistic we’ll be making investments this year as well. So we’re looking for opportunities to deploy capital and we’ll probably be aggressive over the next three to five years.
So you haven’t written off 2020 and you think some things could happen in the third and fourth quarters this year?
I think so. We’ve had some discussions that are underway and were underway prior to the coronavirus and we’re hopeful those discussions can conclude this year. We’ll have to wait and see, but we hope that’s the case, and hope that there are other opportunities that present themselves as well in the back half of the year. We would have been active without the virus and I think we’ll be active after the virus.
So we’re excited about the future prospects. We think sports over the long run is going to be a great place to be. In the short run, sports may see a bit of a challenge. And if you watched “60 Minutes” recently and listened to the [US Federal Reserve] chairman, the first affected industry he mentioned was sports. The whole ecosystem around gameday revenues is going to be challenged, probably for the next 12 to 36 months, and that’s obviously going to create challenges within sports. You could certainly see a weakening in the advertising market, which will create some short-term challenges. But in the long run, I think sports is going to be a very strong sector. And what I think will also come out of this will be an acceleration of new ideas and probably new technologies. Digital adoption, OTT, technology that was on its way will get accelerated as a result of the virus. I also think you’re going to see a lot of innovation around the gameday experience as operators want to encourage fans to come back. That will mean more adaptation. So coming out of a challenging situation in the short run will be terrific opportunities that I think are going to present themselves. Sports, like most every other businesses, is going to go through a reinvention over the next couple of years that I think will make the industry better in the long run.
But it’s tough to see the challenges now on a human level. It’s been at this 25, 30 years in an industry that I love, and it’s sad to me to see events without fans and to see friends, good people be hurt.
You mention empty stadiums. But so much of this business is predicated on filled venues. Without those filled venues, how much does that change your operations and the kinds of opportunities that will present themselves?
It’s going to cause dislocation in the industry. Like I said, there are a number of lines of business that are in and around the gameday experience, and all those lines of business are going to be affected. It doesn’t mean they’re bad lines of business. But it does mean for the next 12, 24, 36 months that they’ll be affected to some degree. And people won’t feel 100 per cent comfortable [coming to games] until there’s a vaccine, and even after that, there’s going to be some hesitancy.
The other thing that a crisis like this highlights is the importance of liquidity. And we’ve never been a group that’s borrowed a lot of money. And if I were to be critical of myself in the past, it would be that we probably could have been more aggressive. But we never ran our business to create value by financial engineering. We always thought we could create value through operational improvements. So that’s another advantage we have versus others that might be highly leveraged going into a crisis. And I do think as you look forward, when you’re in a bull market, who you do business with, what their approach is to business is a little less relevant because everything’s going well. But when things get tougher, how people approach things because more and more important. Is your partner highly leveraged? How do they go about creating value? How you feel about them? Because everybody can feel great about everybody else when things are going great. But when things are challenged, how do you feel about the people you’re in business with? I think going forward, those things come back to the forefront. So we feel good about our model, which is about low leverage, operational excellence, and a pretty good track record of credibility. Those attributes going into the future are going to be more valuable.
That would seem to speak to real importance on simple, core fundamentals such as clean balance sheets and high-quality partners.
Right. And when things are going great and kind of flowing, those are taken more for granted. But now, things with clean balance sheets and low debt look pretty attractive. This all reorients the balance.
What would be the segments of the sports industry currently poised for significant upside?
The OTT space and those areas of digital media and technology, driven by data, are going to be on the forefront and accelerate as a result of the pandemic. A related thing to watch will be cord cutting. With 36 million Americans out of work, how long are they going to pay those cable bills? And are there other ways they are going to be consuming sports besides traditional media? Something definitely to watch carefully. And I think you’re going to see the importance of some sports also to investigate the OTT space with more urgency, for a variety of reasons. The acceleration of the media side is going to be interesting, and on the data side, building relationships with fans and encouraging them to come to games is going to be interesting. And again, the innovation around the gameday experience is also going to have to be part of the solution.
And in three to five years, when we look back and asked what impact did coronavirus have on sports, you’re going to say this led to that reinvention of the gameday experience and an acceleration of OTT and digital technology, geared to giving fans what they want, when they want it.