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The founder of the owner of Private Equity of AC Milan Football Club predicted that the sport sector can face the new American pricing regime, but warned that if the trade war was intensifying, it would not be immune to a prejudicial decline of the confidence and expenses of consumers.
Gerry Cardinale, Managing partner and director of investments of Redbird Capital PartnersRecognized that climbing in the trade war launched by US President Donald Trump would indirectly strike the sport by its effect on consumers. But he said that sports operations had proven to be “resilients” in past slowdowns, including the 2008 global financial crisis and the coronavirus pandemic.
Cardinale, former partner of Goldman Sachs, was part of a series of figures associated with sports companies which said that the sector was in good position to resist the challenges of the President’s pricing regime.
Trump on April 9 imposed price 125% on all Chinese exports to the United States, which prompted Beijing to impose samples similar to American exports to China. The president has delayed many prices on other countries, but has retained a 10% levy from most goods from countries other than China – and special and special rights on imports of cars, steel and aluminum.
Cardinale said it was necessary to “browse the value chain” to understand the impact of a tariff war on different segments of the sports ecosystem.
“The pressure point for the sports ecosystem will be really around the consumer above all,” said Cardinale.
Cardinal acknowledged that there would be problems because consumers would have less money to spend on tickets and media subscriptions. But he predicted that richer customers would always be ready to pay for high -end hotel packages and to use VIP suites.
“At the end of the first, I think it is relatively inelastic income,” said Cardinale. “People who can afford premium prices before the price will be able to afford prices after the price.”
For the other consumers, however, their discretionary income was a vital part of their finances, added Cardinale. “They are likely to reduce,” he said. “It will be a problem that will affect the value chain.”
Cardinal’s evaluation reflects a generalized vision in the sport sector that it is relatively isolated from the direct effects of prices, which are imposed on physical goods.
There have been concerns about the effects of new samples on sales of clubs and leagues and warnings on the potential effect of prices on projects to build new stages and other infrastructures. But the sector largely depends on long media rights and sponsorship contracts, as well as ticket sales income.
Vasu Kulkarni, partner of Fund Courtside Ventures focused on the firstports, said that the sector had withstood the past economic slowdowns due to the loyalty of fans.
“No one stops looking at sports, no matter how bad things,” Kulkarni said.
Private investment company Arctos Partners wrote last week in a report that sport benefited from a “lack of correlation”, which means that the fortune of the teams has not changed with the wider economy. The company has formed a portfolio of shares in sports teams.
“With long-term contracts, interior supply chains and only faithful clientele, the sports company continues to offer something that is lacking in: predictability, resilience and lack of correlation,” he wrote.
Kulkarni predicted that professional sports investors and very rich individuals would continue to pay capital in sport. This trend has become particularly pronounced since the pandemic destroyed the finances of many sports operations, which needs a new capital.
“We think there are always five billionaires who are online to buy the next sports team that appears,” said Kulkarni.
Cardinale previously warned against “massively swollen” assessments in sport. Although he thinks that the evaluations will generally hold up, he said that he expected a decrease in the appetite of the rich investors for the sector. He said it would be “positive cleaning”.
“The guys jumping because everything continues to go up – they will be the first to leave,” said Cardinale.
The Arctos report, on the other hand, warned against high risks in the face of sports operations undertaken major physical investments.
Arctos has minority holdings in the Los Angeles Dodgers baseball franchise, the Golden State Warriors basketball team and the Paris Saint-Germain French football club, among others.
Problems for stadium developments could strike the finances of the teams, as such projects are often intended to help the operation increase its income.
The report indicates that the projects already under construction were unlikely to undergo “shocks of the material budget”.
But that added: “People in the first planning stages – where supply chains are not yet locked up – could cope with cost pressure depending on the price diet.”