Private Equity's New Venture: Youth Sports
jacobin.com
jacobin.com
edit: Would like to understand from downvoters how this does not meet free market principles?
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!
So, a fairy tale.
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.
One more "great" use case that cryptocurrencies enable
>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...
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.
It's the enshitification of all the existing third places and extraction of social value for profit, because people will tolerate it due to lack of choice and social need.
And this is the only logical consequence of unregulated capitalism.
Line must go up, always. No matter the damage it causes. Price will always go up, and costs are always cut down.
It sucks because it is supposed to, as long as profits increase.
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.
“We” collectively should demand better. You act as if government is some omnipresent being that makes its own decisions. If citizens start demanding the government act in their best interests by enforcing things like anti-trust laws, it will.
Enshittification is shit, though one can imagine bigger scarier issues slapping us in the face and fast.
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.
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.
When PE buys them in the majority of cases they continue to market them like local business and in most cases they go out of their way to lake them look like local businesses.
What you’re talking about happened decades ago when Walmart, McDonalds etc… ran a huge chunk of the mom and pops out of business. This is the next round where they go after businesses that don’t benefit as much from nation wide advertising and branding.
People don’t tend to pick their dentist based on nationwide advertising/brand recognition.
While some may eventually find enough success to IPO and subsequently enter a big index, the past few decades of VOO / buy-the-market growth owes far more to tech stocks than what’s being discussed here.
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?
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.
>You can do this in every state, at least with a conventional mortgage.
No you can’t. Mortgages require you to keep the property in good repair. Your lender won’t let you start taking the house apart to sell pieces of it because that lowers the overall value of the property.
> You can do this in every state, at least with a conventional mortgage.
Legally, you generally can't, because the terms of the mortgage will prohibit it. Practically, you probably can get away with it, as long as you actually make the payments, unless the dismantling requires recorded paperwork that comes to the lenders attention, because how will they know? But if you fail to make payments, then the lender is likely to care about the condition of the property, and then, in addition to collecting your debt on the mortgage itself, the lender will have a cause of action against you for breach of contract. (And such breaches of duties under the mortgage also will often be within the scope of "recourse carve-outs" in loans in non-recourse states.)
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.
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!
> In some instances, parents have been threatened that if they choose to defy the rules and record the game, they may end up on a blacklist that punishes their kids’ teams. Those threats were even reportedly made to a sitting US senator.
> Black Bear’s streaming service costs between $25 and $50 a month, depending on the package and additional fees. In addition to its recording rules and associated costs, Black Bear is starting to add a $50 “registration and insurance” fee per player for some leagues. That’s on top of what players already spend on expensive equipment, team registration, and membership to USA Hockey, the sport’s national governing body.
Feeling bad for the folks having a hard time pulling the plug on scams like these and going back to a more sensible and sustainable way of life.
Example, buy out a well-known software product with a lot of customers. Then offshore development to cut costs. Then raise prices to milk customers that are too slow to migrate. Eventually the software dies off.
As a parent with two younger kids I haven't run into this at all so I wonder how much of it is more sport dependent where the company controls the infrastructure. Maybe I'm being naive here but I struggle to imagine this is going to make its way very far into other sports where you simply are out in a field.
My experience is with San Jose where I'd be really surprised to see this happen. There's a massive six-sheet facility owned by the city and managed by the parent company of the Sharks, so being good for the community and good for hockey might be enough without them having to resort to these tactics.
‘They control everything’: How the Dallas Stars monopolized Texas youth hockey: https://www.usatoday.com/story/news/investigations/2025/08/0...
Routine layoffs, increased costs, and worse quality of service have crept in over the past 6 months.
Average turnover went from 4 years to 1 year, hes one of the last few people who are there from when they were purchased.
If someone is going to the vet once a year for blood work and a rabies vaccine; and there’s only like 3 in the whole city, you’re probably not going to rotate between them. What if the next one is even worse?
I have left a single vet over “bad behavior” and most of the other times it’s been over moving and things getting too far away.
The reality is most of their “getting worse” and “increased prices”, etc, is missed because most people come in once a year, so changes over time aren’t especially visible.
For example, the business in the comment above might be selling veterinarian services, but the new owner's business is actually selling cash flow. The veterinarian services are just a means to an end, so it could be possible to take the built up good will and convert that to cash flow by cutting costs/raising prices in the short term, and then selling the new and improved cash flow.
You might ask, who would buy from this person again when they know the underlying business is being trashed? The answer is usually dumb money, such as defined benefit pension funds where the investor and the beneficiary are far disconnected. As long as it looks like due diligence happened, everyone can kind of get away richer in the short term with no one to stop them.
The hard part is lining up the investors, that requires being in the right networks.
Sometimes, these buyouts are leveraged, with the company itself taking on the debt the PE firm used to buy it, so the PE's own risk is minimal.
That's why they are pushing the Trump admin to allow 401k funds to take over the toxic PE assets.
https://www.whitehouse.gov/presidential-actions/2025/08/demo...
The effects in health care were studied.[1]
Less competition supports higher prices. People can be convinced to purchase unnecessary services. People are slow to leave trusted doctors. Non compete agreements limit new competition. The time to train new veterinarians limits new competition. Short term profits fund future acquisitions.
There's now only 2 emergency vet clinics within 30 miles of each other, there are no other options unless you want to drive nearly an hour away.
How do they extract as much profit as possible? Because wouldn't the previous owner have tried to, you know, make as much money as possible? Yes, but PE firms have more capital and scale and will specialize in a certain type or types of business to maximize impact.
Here's how it works:
1. First the PE Firm will focus on a business type - maybe it is auto repair shops, maybe it is pediatric clinics, maybe youth sports facilities and leagues. It doesn't really matter. What matters is that they will buy a lot of them.
2. Now that they own quite a number in a certain geographic area, maybe even most of that type of business they have leverage over customers, employees, and sometimes suppliers. The PE playbook dictates they first cut costs wherever they can. Reduce staff, add surcharges and fees, negotiate better prices with suppliers.
3. The businesses are now operating at a slightly higher margin, which is great, because the initial capital outlay was huge and they had to pay a premium because no one really wants to sell to PE. So over the next 5 years or so they need to make all of that investment back and they usually will. They might lose some employees and some customers, but people hate change and most will stick around even though service is a bit worse. And anyway, who cares, their profit margins are now nice and padded.
4. It has been 5 years and now their businesses are really starting to show signs of cracks. It is getting harder to find competent onsite management who will put up with the terrible work environment. Customers are leaving. Some of those employees are starting their own shops. But who cares, the money has already been made back. Now is the time to sell before the whole thing implodes and if it already has imploded, well, that is less than ideal, but there are still assets to sell. Sell for whatever you can and walk away. The PE firm netted slightly higher than if they were to invest in the stock market. Could they have made even more by just running competent businesses over the long term? Maybe...but that would have required a lot of time and active management and no one wants to do that, so on to the next venture.
We operated with a slightly different approach; leveraging long term lease back of land and physical resources to the original operators with caveats, such as transitioning to Organic Certification and Cost Effective Staffing - read that as Wallpapering the Products' Perceived value while shorting the personnel costs through under-staffing and underpaying - with some real improvements which included international market access and lower ecological footprints by ceasing deforestation for expansion and removing toxic petrochemical fertilizers, herbicides and insecticides from the operations which are actually beneficial to both employees and the community.
However, the standard modus operandii in the industry was and still is some flavor of this get in, grow, leverage, and then exit approach.
Individual operations' access to low to no interest financing for OPEX and CAPEX was a fundamental uplift to the value of those operations. There existed the possibility of leveraging the organizations' histories to secure low-to-no interest loans equal to the estimated market value of those operations; spend that money to expand and partially offset the cost of acquisition (protecting the investment funds from market volatility) and leverage those expansions to reduce competition through assimilation or under-pricing the competition.
Often the 'exit strategy' can include sell-off of physical assets to cover the loans; or folding the organization and defaulting on outstanding loans. The fund never actually has to be at risk, the upsides are up-front during the stage wherein the public sees the 'investment' into expansion of or improvement of goods and services before the inevitable degradation due to under-staffing and cost cutting through volume renegotiation or through changing suppliers and processes for cheaper and less effective inputs. When customer satisfaction and employee burnout reach a crescendo... move on.
The end for me was when the organization decided to use COVID as an excuse to cut an entire environmental tech development team from payroll; with zero benefits and the expectation that local government to provide the entire cost of team members and their families' survival, while selling the technology invented and being developed by those team members for approximately one dollar to show as great a loss as possible.
PE is at least as big a blight on the global economy and community well being as joint-stock monopolies serving a few majority shareholders.
And here’s a ChatGPT summary of it for the TLDR crowd:
Private equity ownership of hospitals and medical practices is linked to worse patient outcomes, higher prices, and weakened physician autonomy. The paper argues that PE’s standard playbook — heavy debt loading, cost-cutting, consolidation, and short-term profit extraction — is fundamentally misaligned with long-term medical care. Case studies like Hahnemann University Hospital show how sale-leasebacks and aggressive financial engineering can push essential hospitals into collapse. Consolidation of physician groups reduces competition and raises prices for patients and employers, while staff cuts and reduced investment correlate with lower care quality. The author calls for stronger antitrust scrutiny, transparency of ownership, and limits on practices such as asset-stripping to prevent further harm in the healthcare system.
>The long and short: In 2010, private equity firm Cerberus Capital Management purchased Caritas Christi Health Care, a struggling eastern Massachusetts hospital system, from the Archdiocese of Boston, converting it from non-profit to for-profit and rebranding it as Steward Health Care. In 2016, after years of continued financial instability, Steward signed a sale-leaseback agreement with Medical Properties Trust (MPT), selling the land and buildings occupied by its hospitals to the real estate investment trust then leasing them back. Steward made $1.25 billion from the agreement—enough to steady its financial footing, pay off Cerberus, and fund a growth spree. The next year, the company purchased 26 more hospitals across the country. But with the agreement came what many viewed as inflated rents.
Then read below "Consequences of cost-cutting".
"'This is starting to show up to be the problem that I've been referencing… that private credit and private equity, frankly, is being borrowed from private equity. It's sold on a volatility argument, primarily," Gundlach added. "Maybe there's some excess return for your illiquidity that you can get, but it's largely a volatility argument.'
Illiquidity could turn paper losses into real ones, Gundlach cautioned, pointing to the kind of liquidity squeeze that worsened the 2008 financial crisis, when investors were unable to meet capital calls."
https://www.foxbusiness.com/markets/jeffrey-gundlach-says-cr...
https://www.whitehouse.gov/presidential-actions/2025/08/demo...
It's just the "remove barriers to do X" arguments tends to be used to justify removing important regulations that protect consumers, or the environment, or institutional integrity - all of which may indeed help the little guys, but it also certainly helps the big guys.
I'm also wary of the idea that regulations and the like are the real issue small businesses have a hard time of things - and not just that operating a business has become more expensive/difficult in the modern age (even after taking out regulations), as well as the simple fact that big businesses can, for example, tank losses for a lot longer than a small business in order to win out a market. How would less regulation for the smaller businesses help situations like that?
In practice, humans are frogs, and eager to prove their fitness as the pot of water grows hotter and hotter.
Most of the people here would be for varying forms of these deterrents in a VC model or some other potentially non-monetized user experience, if it was independent of the owner of the game