Pagliuca on Soccer's U.S. Growth & Valuation

Bloomberg Audio Studios brought together Steve Pagliuca, Senior Advisory Partner at Bain Capital and co-owner of Atlanta Football Club, to discuss the booming interest in sports, particularly football (soccer), and its valuation trends. The conversation was sparked by the record viewership for the US match against Belgium in the World Cup, which drew over 50 million viewers, marking a historic moment for the sport in the country. Pagliuca highlighted how this surge in interest, coupled with significant capital injection from private equity and media deals, has led to record valuations for sports teams worldwide, with top clubs more than doubling in value over the past four years.

Bridging the World Cup Hype to Year-Round Engagement

Pagliuca addressed the challenge of translating the quadrennial World Cup fever into sustained, year-round interest in club football. He pointed to a fundamental issue in the U.S. soccer landscape: the economic disparity in player compensation compared to European leagues like the Premier League and Serie A. "The payments for players in UK, Italy are probably, you know, five to six times what they make in the United States," Pagliuca stated. He argued that this difference attracts the best talent to Europe, leaving the U.S. with lesser players. To truly establish soccer as a dominant sport in the U.S., Pagliuca emphasized that "the economic structure is going to have to change."

Making Youth Soccer Accessible

A critical point raised was the accessibility of soccer at the youth level. Pagliuca observed a stark contrast between the sport's global perception as accessible and its reality in the U.S., where he found it has increasingly become "a rich person sport." He contrasted this with Europe, where clubs like AC Milan have academies with hundreds of boys participating at little to no cost. To address this in the U.S., Pagliuca stressed the need to reform the grassroots system to ensure that "everybody can play" and that training is accessible across the country, moving away from a model that limits participation based on financial means.

The full discussion can be found on Bloomberg Podcast's YouTube channel.

Lessons from U.S. Sports Valuation

Shifting the perspective, Pagliuca also discussed what the global sports market can learn from the U.S. He cited the Seattle Seahawks' valuation of nearly $10 billion as an example of the immense franchise values seen in the U.S., even for teams with limited global recognition. He attributed this success to key structural advantages in American sports leagues, primarily the absence of relegation. "A big advantage in in the USA sports is there's no relegation," he explained. Furthermore, he pointed to the economic structures, particularly the presence of cost controls like the hard cap in the NFL, as a major factor in profitability and efficient revenue generation. Pagliuca suggested that European leagues could benefit from adopting similar financial fair play rules and exploring adjustments to relegation systems to drive higher valuations.

FIFA's World Cup Performance

When asked about FIFA's handling of the World Cup in the U.S., Pagliuca acknowledged the record revenues generated, estimated at $13 billion over the cycle, with $10 billion currently. He noted the high level of interest in the games, stating, "the games have had more interest I think than any other games in the history of the sport." While recognizing some issues with pricing and crowds, he concluded that, overall, the event had gone very well for America, fostering a strong sense of enthusiasm, even in cities like Boston where local outlets reportedly ran out of beer.

Personal Insights and Future Outlook

Pagliuca shared his personal plans, including attending the semi-final in Atlanta and then traveling to Milan to introduce coach Stefano Pioli at AC Milan before returning for the final. He expressed his rooting interest for England, admiring Harry Kane's play, and also congratulated CDK (Charles De Ketelaere) on his improved performance at Atlanta compared to his time at AC Milan. The conversation concluded with a reflection on the excitement surrounding the sport and the anticipation of the final match.