A young MLB Pitch Hit & Run player takes the field.
Courtesy of RCX
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Brand Velocity Group, the private equity firm of former New York Giants quarterback Eli Manning, is acquiring RCX Sports, the company that licenses official youth sports programming for the NFL, NBA, WNBA, MLS, NHL and MLB.
RCX has about 150 employees and makes money by distributing sports products such as uniforms and equipment and maintaining local parks and recreation centers. Financial terms of the deal were not disclosed. The transaction is backed by a broad group of investors including fellow former and current athlete partners Emmitt Smith, Larry Fitzgerald and Jameis Winston.
Parents of children who play youth sports are probably quite familiar with the programs: NFL Flag; NBA Jr.; WNBA juniors; MLS GO; NHL Street and MLB Pitch Hit & Run. NFL Flag is the largest youth sports league in the world, involving approximately 1 million children, according to RCX CEO Izell Reese.
The youth sports sector lends itself well to private equity. It relies on passionate customers, stable and reliable cash flow (each sporting season comes with new fees) and it is decentralized.
This lack of cohesion has led to the use of a myriad of mobile apps and websites to follow matches, pay championship fees, order equipment and chat with coaches.
A standard private equity model is to consolidate a variety of smaller leagues or apps, reducing costs by eliminating back-end duplication and gaining scale through a series of acquisitions. This is starting to happen in youth sports. Josh Harris and David Blitzer, two of the world’s most prominent private equity partners, launched Unrivaled Sports two years ago as a cumulative investment vehicle in youth sports.
Yet some powerful people are wary that the industry would put consumers’ desires ahead of its own mandate to generate profits for stakeholders.
This led a group of Democratic congressmen to introduce a bill specifically aimed at preventing private equity from investing in youth sports.
The “Let Kids Play Act” would prohibit private equity firms from investing in youth sports. U.S. Rep. Chris Deluzio of Pennsylvania and Sen. Chris Murphy of Connecticut unveiled the bicameral bill last month.
Congressional leaders said in a statement that youth sports is a $40 billion industry that is currently “dominated by private equity, with the sole objective of extracting as much profit from families as possible.”
“As a hockey dad, I have seen how viciously these private equity firms rip off families,” Murphy said in the release.
Manning said his private equity firm was different. BVG’s interest in RCX is to bring more scale to its programs and increase inclusiveness, he said.
“It’s about much broader access, keeping the prices low and just increasing that amount,” Manning said. “The fact that you’re working with the professional leagues, they don’t want it to be a high cost for kids. They want more kids playing sports, being active, being out there. So our goal is to bring in capital so they can grow this, they can expand it.”
Manning’s reputation would likely support his argument that not all private equity firms are the same. He was a champion flag football player, including serving as an assistant coach for his girls’ teams. His goal is to make flag football a high school varsity sport for girls and boys, he said.
“That’s what we’re hoping for. [for]and we believe flag football should not just be a stepping stone to tackling,” Manning said.
Eli Manning #10 of the New York Giants warms up before the game against the Philadelphia Eagles at MetLife Stadium on December 29, 2019 in East Rutherford, New Jersey.
Sarah Stier | Getty Images
Last month, New Jersey became the 18th state to allow girls’ flag football as a high school sport. But getting flag football approved as a boys’ sport could be trickier.
Coaches might not be happy if star football players choose to play flag instead.
However, this could be mitigated by offering the flag in a different season – for example, spring – than tackle, which is played in the fall.
“The tackle isn’t good year-round, but the flag is,” RCX’s Reese said. Reese is a former NFL safety, having played a total of seven seasons for the Dallas Cowboys, Buffalo Bills and Denver Broncos.
The multi-seasonal nature of flag football gives kids who also want to play tackle a way to “work on their football skills,” Reese said, while also giving other kids a chance to just play flag.