In the latest episode of the Biz Doc Podcast, Tom Ellsworth highlights how the NFL has the most valuable teams in the professional sports industry. He also explores the economics of politics, which can be expensive.
He later explains why consumer prices may not reflect falling inflation. Finally, he takes a deep dive into the worrisome situation at the Disney company and whether Bob Iger’s return can make a difference. You can’t afford to miss it!
Of Forbes’ “50 Most Valuable Sports Teams” list, 30 are NFL teams. And they carry far higher price tags than luxury vehicle companies like Ferrari and Mercedes, worth $3.9 billion and 3.8 billion respectively. This goes to show that valuation matters, and that it goes beyond bragging rights. It’s the ability to invest in a stadium, to liquidate, to bring on another partner, to recruit new part-owners.
If your business isn’t worth more today than it was yesterday, you’re doing something wrong. Regardless of what it is—whether a luxury car brand, a sports team, or a laundromat.
What if your business is politics? The price of winning elections has gone up like housing prices.
The average House winner spend was $2.8 million in 2022; the average Senate winner, $26.5 million. For the 2020 presidential race, a colossal $14 billion total. If you want to get elected as a senator, it’s ten times that of a Representative.
What exactly is all this money spent on? As for the 2020 election cycle, expenditures were broken down by media (56 percent), fundraising costs (10 percent), campaign expenses (9 percent), salaries (8 percent), unclassified (7 percent), admin expenses (6 percent), and strategy & research (4 percent). So if you donate to a political campaign, only a sliver of that is spent on advertising.
So almost half of your political donations are going up in smoke to administrative costs.
In 2020, Kevin McCarthy outspent his opponent by $21 million, Nancy Pelosi outspent her opponent by $19 million. On the other hand, Don King, the longest-serving Republican in congressional history, spent about $3.3 million less than his opponent, and Ilhan Omar spent $6.5 million less than her closest rival. It pays to be well-liked by your district, whereas in Pelosi’s case she had to pay to stay.
Politicians come to entrepreneurs for money, not the other way around. Entrepreneurs have to be careful about who they give their money to. They can find negative returns if they support those who have a policy platform that cripples entrepreneurship and various industries.
News You Can Use
Inflation is cooling but prices are still up. Eggs were up at 80 percent in early 2023 compared to where they were in 2020, and they have dropped 53 percent, but that’s still 27 percent more than where they were in 2020.
A similar trend follows across the board: electricity, new vehicles, gas, and so on. While prices are coming down they have not yet returned to where they were before the pandemic.
Businesses have had to raise prices to meet the high costs of raw materials. Yet at the same time, some have decided to raise salaries to keep their star players.
To stop runaway inflation, caused by people raising their prices, Jerome Powell (Chairman of the Federal Reserve, the central bank in the United States) has responded by raising interest rates. There is speculation he will raise rates by another quarter percent soon. Right now, it’s at 8 percent. That affects car loans, mortgages, and many other things people need to stay afloat.
Case Study – The Disney Dilemma
Bob Iger was president of Disney for 15 years. He bought the “Fox” library for a high price, and ushered in what many consider to be the golden years of Disney. Bob Iger left the company in 2021, after his presidency expired in 2020 and he stepped down to an executive chairman role for a year. Then, at the request of Disney’s board of directors, Iger returned as CEO in November 2022 in what BizDoc calls “The Return of the Jedi.”
Iger returned to a “living room” whose furniture arrangement, done by Bob Chapek, he disliked. He has begun rearranging the furniture, but this is very expensive furniture.
Disney is besieged by a contract to buy Hulu for $27.5 billion it agreed to, and by a decline in demand for theme parks as the public recoils at the prices. Also, with the highly profitable Marvel and Star Wars franchises finally nearing the end of their runs, Disney has to find new frontiers of entertainment. ESPN (which Disney owns) is also declining in a changing sports landscape, and Iger needs to find an heir to replace him.
Over the past 5 years, Disney stock has declined 35.46 percent. Iger has to get the profit of Disney up. His means to do this are his channels and their subscriptions, theme parks, and new movies.
Disney revenue is actually growing.
But while it is growing, the question is where does it go from here. The stock market is a hungry beast that wants profit, not just revenue, and a guarantee it will continue. Disney is split between media and entertainment distribution, and experiences and products. The latter declined during the pandemic and the fall in theme parks and so on, while the entertainment side has begun to decline since 2021.
As for Disney media and entertainment, they had a surplus of revenue during the pandemic, but those consumer interactions began to decline and the company began investing more into content.
Iger has discussed selling ABC networks to Nextar, according to Bloomberg. He has also said linear TV (ABC, National Geographic, and ESPN) is not “core,” essentially saying they are on the table to be bought up by other companies. Byron Allen of Entertainment Studios offered $10 billion to buy ABC, FX, NatGeo, and other Disney-owned networks. They responded saying they are not ready to do that.
Meanwhile, ESPN has said it needs cash (or the euphemism “strategic partner”).
And finally, striking Hollywood unions criticized Iger for his comments, leading him to find himself in hot water.
BizDoc’s two cents: Tom would rather be practical and traditional and recommend just what makes sense from an objective business perspective. He would keep parks and libraries but sell everything else. The ESPN lifecycle is threatened with a multi-year erosion of subscribers. Major League Baseball (MLB) has its own app, and Apple TV+ has acquired exclusive streaming rights to Major League Soccer (MLS). Same with Formula1.
BizDoc’s idea is to have someone like Jimmy Pitaro take up TV assets of ESPN and the other networks and spin them out into independent entities that can go on the stock market. Disney would then use shares to leverage their debt.
The increase in perceived “woke” themes is hurting Disney’s wider appeal and narrowing its audience size. If it wants blockbusters, it needs to have a regime change of decision makers who will approve broad-themed movies.
Leave a comment on Biz Doc’s YouTube video if you want him to discuss a topic that interests you!
And if you want to talk to Tom, Patrick Bet-David, Vincent Oshana, Adam Sosnick, the Tates, or anyone else that might be in their network, get on Minnect and connect with them for a consulting call.