Comment by srameshc
3 months ago
Anywhere there is money, making an everyday man some money, these pests creep in. I generally dislike what has become of recreational sports and how the parents are either forced to spend for things that really don't matter, when learning to play. But learning Private Equity is eyeing this give me creeps. There must be some guy who observed how families are spending and decided it would be the next destination for PE.
They have only discovered what lots of small operators in youth sports already knew. Parents will pay stupid money to have their kids participate.
My kids played some travel sports, the tournament organizers were all in it for profit, they also had deals with local hotels and parents were required to stay at the "tournament approved" hotels. They were inevitably rather premium hotels such as Marriott brands and the room rates were high. The tournament organizer got a kickback on every room sold.
Hockey is particularly expensive because the costs to operate a hockey rink are high. Costs to run and maintain chillers are high, especially if you are open in the summertime, and you need trained staff who can drive a Zamboni and otherwise maintain the surface, and you can't just switch that off if nobody's using it. Usually a community-owned ice rink runs at quite a loss to the municipality. A privately-owned rink will have to charge hundreds of dollars an hour for ice time and they often are barely profitable. There's no way to scale beyond about 12-16 hours a day where anyone wants to use the ice, and often 5pm-midnight is the only ice you can sell.
Then there are the "academies" for the parents who think their kid is the next NHL or NBA superstar. They are private schools, operated at or near the sports facility, where kids go to school as well as play/practice their sport. The tuition rates are what you might expect: exclusive, to say the least.
If you think hockey is expensive, you are lucky to have sons, otherwise you'd experience the wrath of ice skating.
Not only it is individual sport unlike hockey, it is also elitist especially because it is completely shut off youtube because... not cp, no. Music!
Ice skating varies. The skates for someone into it range from $500-$1500. Those typically last several years unless you're skating like 4 hours a day and doing tons of jumps. It costs $20 to sharpen skates and that needs to happen every few weeks for competitive skaters I think. I like mine slightly dull and usually go a few months at a time. Lessons are like $200+ per month for group or $40+/hour for private. Travel + recitals + outfits + music, would be another thing too, but we don't do the competitive stuff. As a result, I pay a lot more for hockey for my kid. I could see figure skating being a little more expensive overall if we were competitive and did more private lessons. They're both super expensive in general though.
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The problem is mostly how unregulated gambling is in 2025. If you couldn't bet on everything I think sport would be much less infested by money.
One more "great" use case that cryptocurrencies enable
Youth sports have been moving in this direction since long before sports gambling was a meaningful economic force in the US at least. I attended both a high school and a college that started football programs while I was a student because the leadership thought it was necessary to maintain enrollment.
We were discussing cheerleading at a break in one of the office meetings this morning. Varsity Brands, owned by Bain Capital, controls the "sport" of cheerleading in the US. If you want to compete, you must purchase current year's uniforms, pay to enter contests run by VB, stay at hotels that VB decides. A teenager involved in competition cheerleading can easily spend $5k-25k/year. This "sport" injures more teens each year than football does - and that's a high-contact sport with significant protective gear.
>I traced Varsity’s market power to three basic maneuvers. The first was buying up most of the cheerleading competitions in the country, so that entering a competition meant dealing with Varsity. The second was secretly creating and running the nonprofits that govern the sport, such as the U.S. All Star Federation, which gave Varsity the power to write rules for and organize competitions, scheduling, camps, and ancillary services like insurance. And the third was cutting deals with gyms to block rivals. Gyms are where teams of cheerleaders train, and gym coaches tend to have control over what uniforms athletes must buy. The company gave gyms who bought their uniforms from Varsity preferential treatment and special rebates.
>One key result of Varsity’s scheme is inflated prices to the end consumer, which is why Bain bought the corporation in the first place. If there was cash to grab, Varsity tried to grab it. For instance, Varsity makes it very hard for parents to watch videos of cheerleading competition except through the firm’s specific expensive streaming service. There was the practice of 'Stay-to-Play,’ where Varsity would force athletes to stay in a specific hotel if they wanted to enter a competition, with Varsity likely getting rebates from that hotel in the process. The net result is that today it can cost up to $10-20k a year to be an All-Star cheerleader.
https://www.thebignewsletter.com/p/antitrust-and-the-fall-of...
>I missed out on two anti-competitive practices in the industry. The first is called “Stay to Play.” For many cheerleading competitions, though not all, out-of-town contestants are required to stay at a specific area hotel or set of hotels, or they cannot enter the contest. This is yet another way to raise prices on cheerleaders, and parents hate it. The second is that Varsity tends to be very aggressive about takedown notices for cheer contest video. If you film your kid at an event and put it up on Facebook or YouTube, Varsity is likely to ask you to take it down because it’s competitive with their VarsityTV streaming app. As one parent told me, it’s basically Varsity preventing you from sharing your memories publicly with your family or friends.
https://www.thebignewsletter.com/p/what-a-cheerleading-monop...
The way the term private equity is used is meaningless. It’s just business, and the same thing happens anytime a business is sold, because the new owners have paid a 5x or more multiple, and the reason they would is if they think they can cut costs and increase prices.
One should expect lower quality and higher prices anytime a business is sold.
>Really, one should expect lower quality and higher prices anytime a business is sold.
They really shouldn’t. And the fact this is treated as common knowledge kind of speaks to everything that’s currently broken in our country.
You're using the same words to talk about different things.
You're right, in the world we would like to live in, this wouldn't be a thing. People shouldn't expect that a business sale means a quality drop. That would be a good reality.
However, next to that good reality is the one we live in. Where people should expect quality to drop on a business sale, because that's the structure of the world we live in. Wishing the world were different isn't sufficient to make it so.
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What’s the argument? Sounds like you’re sour on it
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But it's not just that a business was sold; it's that it (usually) was sold in such a way (leveraged buy-out) as to weaken the business and make it more desperate from jump. Doctor's practices et al. used to change hands all the time without much trouble; it's only now that PE is allowed to buy them with massive amounts of debt that they're allowed to use aggressive tactics to pay off (and pay themselves) in just a few years that we've started to have these troubles.
When you buy a house, the mortgage is associated with the buyer, not the house, and you can't just dismantle the house and sell it for parts to cover payments. Could you imagine if we could, though? Pretty soon, we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale). Then, the house declares bankruptcy and the bank is just out all that money. It's preposterous, they'd never let that happen. So, why with businesses?
>When you buy a house, the mortgage is associated with the buyer, not the house
In the US, this depends which state you are in:
https://www.investopedia.com/ask/answers/08/nonrecourse-loan...
The non recourse states are Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, Washington.
>and you can't just dismantle the house and sell it for parts to cover payments
You can do this in every state, at least with a conventional mortgage. If you default, they can pursue your other assets, except in non recourse states.
>we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale)
I don't know what "after a nominal sale" means, because if you sell a property with a lien on it, then the lien holder gets paid first. And underwriting would not let people who have a history of dismantling a house and defaulting borrow money over and over, and people need a place to live, so I'm not sure why anyone would take out a mortgage to dismantle a house. The scenario makes no sense, as raw materials are cheap, and labor costs are expensive.
> It's preposterous, they'd never let that happen. So, why with businesses?
Because the lender agreed to those terms. No one forces a lender to lend money without a personal guarantee.
https://www.investopedia.com/terms/p/personal-guarantee.asp
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Believe it or not, most buyers aren't interested in weakening the asset they just paid 5x for
Well a lot of times these “businesses” were sold to existing employees or family members who were going to run it themselves and it usually wasn’t for a huge multiple.
In many cases they weren’t sold at all just passed down to heirs. The differentiator is that PE has figured out that they can offer enough to bypass the traditional methods of business continuation.
I would frame it differently. Due to advances in communication and automation with the use of software, business owners can market the business to a far larger group of buyers, and business buyers can buy from a much larger pool of businesses.
Everybody likes seeing those 10%+ annual returns in their 401K (or their local government's taxpayer funded defined benefit pension plan), but no one likes how the sausage is made.
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Youth sports isn't like driving for Uber on the side. It's a giant money fire for the consumers that partake. I'm surprised it took PE this long to say "hey, there's a bunch of money on fire over here let's go get some"
Just the free market at work
edit: Would like to understand from downvoters how this does not meet free market principles?
A "free market" is one in which all the participants of the market have perfect information and act completely rationally. This is, of course, an academic ideal, similar to solving a physics problem that tells you to ignore friction.
What we have here is a "capitalist market", where those with more power (capital) within the market leverage it to exploit the other participants. Private Equity uses their money to extract as much money as possible from a segment of the market, usually destroying it in the process. But for a beautiful moment in time they created a lot of value for shareholders!
> A "free market" is one in which all the participants of the market have perfect information and act completely rationally.
So, a fairy tale.
It is a good example of neoliberalism gone completely insane and your comment is a good example of the religion of neoliberalism.
It is this deluded idea that "the market is always right" so naturally to not let market forces at work in children's sports is equivalent to a type of moral wrong.
The real insanity of neoliberalism is in convincing people like you that this is some kind of natural law like gravity, so to object is like objecting to the law of gravity to the point you can't even understand why you are being down voted.
It is actually a form of scientism and the misapplication of the efficient market hypothesis to unwarranted situations.
Convenient cover for ripping people off.