CVC Capital’s $300 million investment will shape beach volleyball for years to come, yet many fans don’t know anything about it. Last February the FIVB announced a partnership with CVC Capital that will have huge implications for current and future players. The partnership created a brand new entity called Volleyball World.
CVC Capital’s press release announcing the deal stated that Volleyball World would “become the commercial entity for the sport around the world” The stated goal of the new venture is “increasing the profile and popularity of the sport, through fresh investment for the benefit of fans, players and National Federations.” This is a partnership for all aspects of volleyball (indoor and beach), meaning only a portion of the total investment is headed to the sand.
CVC Capital in (very) brief
So what is CVC Capital and how do they operate? CVC is a private equity firm with over $122 billion of assets under management accord to their website. They started out as the venture capital arm of Citicorp and in 1993 CVC Capital became independent from the giant bank.
Private equity firms generally invest in companies that aren’t traded publicly on stock markets. Often these are new companies that they see promise in (venture capital) or distressed companies that they can turn around and make a profit on (leveraged buyouts). Companies like CVC make a large outlay of money to get a majority stake in a company and once they are in control, they make changes to management practices to increase profitability. Being profitable does not mean better for everyone involved, but it does mean money for the private equity firm. CVC Capital is very successful at what they do and what they do is make a lot of money. They have have found sports and entertainment to be very lucrative investments and have invested more and more heavily in sports in recent years. That means volleyball is not alone in their sporting portfolio.
Corporate house flippers
I see CVC Capital as corporate house flippers. They buy a neglected house in a good neighborhood, update the kitchen and knock out a few walls to open up the floor plan. They may modernized the electrical and plumbing and soon the house is on the market again for a much higher price.
The house flipper doesn’t love the house the way its previous owners did and they don’t really care about the neighborhood very much either. They just make their money and move on to the next house. But at the end of the day, the house is in better shape and the neighborhood is slightly better off. Everybody wins, right?
On the other hand, too much house flipping causes gentrification. Soon the people who have always lived in the neighborhood can’t afford to stay. Will CVC’s impact on beach volleyball be good for everyone or will it force a lot of fans and players to leave town?
CVC’s Formula One legacy
For the most part, the response to CVC’s investment in volleyball has been full of optimism. One of their earliest and longest lasting sports investments was in Formula One racing. They controlled one of the world’s most popular sporting brands from 2006 to 2017. Beach volleyball fans see this as a good sign, but Formula One fans would urge caution.
Race calendar and TV rights
During the CVC Capital years, F1 had a strained relationship with many of its fans. Race hosting fees rose and some traditional stops on the annual calendar were dropped for new cities that could pay up. Some complained that wealthy governments that were able to create modern venues and pay ever increasing fees moved the sport away from its roots.
That being said, many fans and drivers loved the shift from a predominantly European race calendar to a more global scope. Who wouldn’t want to end the season at the beautiful Yas Marina Circuit in Abu Dhabi even if it means dropping a stop in Hockenheim, Germany.
CVC’s approach towards broadcasting meant there were fewer opportunities to watch races on free TV. According to the Racefans article by Keith Collantine in 2016, “Formula One’s attitude to media rights under CVC has been to sell at the highest possible price regardless of the consequences for the sport’s popularity. In many countries F1 has disappeared from free-to-air channels and moved to pay television.” It is estimated that global viewership of F1 racing dropped by as much as one third during the CVC Years.
If you read the comments section in media stories about CVC Capital taking over other sports, you will find scores of bitter F1 fans that view the CVC years as the worst their sport has endured.
Small racing teams suffered
In 2013, Bob Fernley had a harsh accusation for F1s owners. The boss of Force India, an F1 team, said, “CVC is not interested in developing the sport, it’s interested in making as much money as possible and then selling it”. He said new deals were beneficial to the big teams but would be disastrous for smaller teams. The rising costs of being an F1 team during CVC’s reign had a much greater impact on small teams than large ones and increased the gap between the haves and have nots. Force India no longer exists, so maybe his words were prophetic. Perhaps flamboyant Force India owner Vijay Mallya’s trouble with the law was probably a more direct cause of the teams demise.
CVC did very well for themselves in Formula One. They sold half of their holdings throughout their first decade and made $4.4 billion according to this 2014 Guardian article. They created a contract where their own appointed director would have one more vote than all other share holders combined. Again, reading the comments in this article shows the anger that Formula One fans felt at the time when profits from the sport were not reinvested but went back to CVC. CVC Capital sold their remaining shares in Formula One in 2016.
Many beach volleyball fans are excited by the prospects of having a show similar to the Netflix series “Drive to Survive” based volleyball. A Netflix show should happen (I pitched the idea back in 2019), but make no mistake, CVC Capital had nothing to do with the Netflix deal. They cashed in their Formula One chips long before Drive to Survive brought Formula One to the attention of many new fans through the steaming platform.
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Rugby skepticism
Back in 2018, CVC Capital acquired English Rugby. While that deal was being negotiated, The Guardian’s F1 correspondent Giles Richards wrote this piece slamming CVC Capital’s years in charge of Formula 1.
In the case of Rugby, the clubs own most of the league with CVC Capital only controlling 27%. That is a very different relationship than CVC Capital had with Formula One or has with volleyball. The pandemic makes it hard to judge how successful the partnership has been but viewership has increased globally. In fact, English Rugby has expanded its reach through broadcast deals reached 150 million households around the globe.
When the COVID-19 pandemic hit rugby and their matches were played in front of empty stadiums, clubs were in financial peril. Did CVC Capital step in to help the league it invested in? Nope. It was the British government (read tax payers) that pitched in £135 million to rescue the league.
The CVC sporting family
What other sports does CVC Capital have a stake in? In addition to English Premiership Rugby, CVC capital is heavily invested in two huge rugby tournaments, The Pro14 and the sport’s most famous event, the Six Nations. Their biggest deal on record was just signed last December with a nearly $2 billion investment in Spain’s top flight football league, LaLiga. There was a lot of resistance to that deal but in the end money won. Last December they also finished a deal for an Indian Cricket team.
They have also been in talks for a huge deal to dramatically restructure tennis. The tennis deal has the same model as the FIVB deal, based on the creation of a new entity called Tennis One. Tennis One would handle the “commercial” aspects of the sport. The deal is much larger and more complicated because the men’s tour (ATP) and women’s tour (WTA) are completely separate at this time. The tennis world is taking a much more cautious approach than volleyball did. Half a year after news of a potential deal came out, there is still nothing signed. Both the men’s and women’s tennis tours have hired financial advisors to review the offer. That sounds like a very wise move.
The Volleyball World Team
The other sports that CVC has invested in were already commercial operation. As mentioned above, Volleyball World is a new creation. The CEOs installed by CVC Capital into their other sporting ventures all had ties to the sports in question or links to major media companies. In the case of Formula One, they left the iconic face of the sport, Bernie Ecclestone, in charge. In rugby, they’ve used media men. For volleyball they went to Cirque du Soleil to find Finn Taylor.
It seems like an odd choice, but Cirque is essentially a huge tour, with different stops every couple of months. The skills required to bring a circus of that scale to town, rent the land, build the venue, provide accommodations, promote the show and get the local government and sponsors behind it are all skills the FIVB has lacked in recent years. Viewed that way, hiring Finn Taylor, who has no volleyball experience, makes sense.
A LinkedIn search for Volleyball World’s employees shows the majority have moved over directly from previous roles with the FIVB. Whether or not you think that is a good thing depends on what you think of the FIVB. At least there are a lot of volleyball people involved.
The roll out of the Pro Beach Tour hasn’t bathed Volleyball World in glory. We are now about a month from the first tournament and we know about as much about the tour as we did last October when it was first announced. The Elite 16, Challenger and Futures tiers are an exciting concept, but the lack of communication with players has created some major stress in the early relationship. Volleyball World’s inability to land as many tour stops as they had hoped due to the pandemic also has the relationship between players and new management on shaky ground before the tour even starts.
Marketing through the stars
From interviews with Finn Taylor, it is clear that Volleyball World wants to market beach volleyball through it’s stars. Creating a stable and consistent offering of sixteen teams at every major event is key to that endeavor. Anders & Christian, Cherif & Ahmed and Agatha & Ana Patricia will probably feature large in every promotion. Players with media savvy and that little something special on the court will probably get extra attention, too. That mean’s Adrian Carambula and Alexandrs Samoilovs could soon be featured in all the targeted ads you get surfing the web and on social media. The strategy makes sense. How many people bought Christiano Ronaldo’s kits after Man U signed the superstar last fall. How many Lebron James shirts do the Lakers sell every year? There are fans of teams and fans of sports, but it is the superstars that caused people to pull out their credit cards. Beach volleyball has lacked that kind of marketing and Volleyball World wants to change that.
As much as I love upsets and Cinderella stories at major tournaments, I probably won’t get to see many in the coming years. Volleyball World would rather have the same few heavily promoted teams playing in the final week after week.
The perceived (and probably accurate) preference for the top teams has made the next tier of up and coming teams question their place in the new system. Quentin Metral shared his concern via Instagram a few weeks ago. Not only the content of his post, but the number of players that liked and commented on the post should cause Volleyball World a lot of concern. Other players like Liliana Fernandez and Sam Pedlow have also used social media to point out the problems they see.
I’ll look into their concerns and other questions about the new tour in my next post.
Playing nice with the AVP?
Another complaint that many have had about beach volleyball in recent years is the lack of cooperation between the America’s AVP tour and the FIVB. Many countries’ tours have a formal relationship with the FIVB and players can earn ranking points by competing at home. The AVP and FIVB can’t even coordinate schedules so top American teams can fully compete on both tours.
Last year the AVP was bought by Bally’s, a major casino and gaming company. CVC has its own interest in the betting world. They just bought a Belgian company called Gaming1 at the end of 2021. That is in addition to their existing holdings in Tipico (German sports betting company), Sisal (Italian betting), and Sky Bet (England). It seems unlikely that the two new ownership groups would cooperate rather than compete. If they can’t both tours will miss some star power.
It’s all up to Volleyball World now
The focus here has been on CVC, but the future of international beach volleyball is really in the hands of Volleyball World, not the financial giant. After making an initial investment, it appears CVC does not like to put any more money in.
The $300 million that Volleyball World started with could be all the money they will ever see from CVC. Let hope Finn Taylor and his team can get the most out of that money. Lets also hope that beach volleyball gets the share of the money it deserves relative to investment in indoor volleyball.
Would I have preferred a beach volleyball loving billionaire to have emerged to rescue the tour while installing Sinjin Smith as chairman of the board? That would have been awesome, but it didn’t happen and we got CVC Capital instead. The fact that they saw $300 million worth of value is a good sign and with wise management that investment could turn the sport around. Before the sport can turn a profit for the mega fund, there have to be some major changes. We can only hope that the changes are as good for the long term interests of our favorite sport as they are for the bottom line of CVC Capital.
The following graphic shows some but not all of CVC Capitals ventures in the sporting world. Pitchbook, another venture capital fund created the graphic.