How private equity ate youth sports

Youth sports bring in about $40 billion a year, roughly twice the NFL's revenue.

The pandemic shutdown of rec leagues allowed private sector and private equity-owned club teams to fill the gap quickly.

Investors use a roll-up strategy to own or hold stakes in leagues, apparel, scheduling apps, hotel partners, and media packages.

Average spending is over $1,000 a year, but travel club families spend $3,000 to $10,000 per season, and some spend $25,000 or more annually.

Rec programs end earlier and are diluted because private leagues attract families early, creating FOMO that pushes parents into travel teams.

The year-round private sports environment causes psychological stress and physical overuse injuries, contradicting medical advice for multi-sport participation.

Minnesota's nonprofit hockey model costs $200-$400, uses volunteer coaches, and produces more D1 players than any other state.

Leveraged buyouts use 70-80% borrowed money, placing debt on the portfolio company and creating misaligned incentives between the firm and the company.

Private equity firms sold Toys R Us's real estate back to it, adding $5 billion in debt and rent, which prevented it from competing with Amazon.

The 'two and twenty' fee structure guarantees firms 2% of deal value annually and 20% of profits, making deals profitable even when companies fail.

Recent rule changes allow 401(k) money to be invested in private equity, exposing ordinary Americans' retirement funds to the industry.

Public pension funds are major PE investors with mixed return data, creating a zero-sum dynamic where pension gains rely on undercutting workers at PE-owned firms.

Private equity grew without serious regulations, allowing it to expand with minimal restrictions and making it easier to block new rules.

Congressional approaches range from Warren's comprehensive reform bill to piecemeal bans like youth sports, but fundamental reform lacks political support.