Pro Wrestling Business Experiencing Boom

The pro wrestling business is experiencing a boom, as evidenced by the newly signed U.S. broadcast television deals for WWE “Monday Night RAW” and “SmackDown Live” (worth $468 million/year), the scheduling of the largest indie wrestling event ever on September 1st (“All In”) and the news that Ring of Honor and New Japan Pro Wrestling sold-out (18,500 seats) Madison Square Garden for their “G1 Supercard” in April ‘19; the first wrestling show at MSG without a McMahon promoting, since 1960. The next marquee event on the wrestling calendar is WWE SummerSlam, Sunday Night in Brooklyn. Brock Lesnar and Roman Reigns are the main event; Ronda Rousey will take on Alexa Bliss for the WWE RAW Women’s Championship. Fans around the world can live-stream the event on WWE Network, August 19 at 7pm ET; there is a 30-day free trial period for all subscribers.

Howie Long-Short: Q2 ’18 was another landmark quarter for the WWE. The company posted record quarterly revenue (+31% to $281.6 million) and reported it had nearly doubled operating income (to $21.2 million) from the prior year quarter, news that sent share prices to a new all-time high ($85.93) on Thursday July 26th. The +31% revenue increase represents the company’s greatest YoY sales increase in 2 years.

In addition to strong financials, WWE reported significant growth in digital engagement; video views rose +58% YoY (to 14.4 billion) and the number of hours consumed watching WWE content across digital/social grew a staggering +71% YoY (to 509 million). The company also just crossed the 30 million subscriber threshold on YouTube, a figure that represents a larger following on the platform than that of the NBA, NFL, MLS, MLB, NHL, PGA TOUR and NASCAR combined. While YouTube subscribers don’t directly correlate into dollars, WWE Network subscriptions do; and the company reported paid subs rose +10% (to 1.8 million) during the quarter ending June 30th. Co-President George Barrios said the company plans on growing its international subscriber base by adding more localized content and languages.

WWE shares are up +/- 275% over the last 12 months, closing at $79.01 on Thursday. Concerned the WWE trades at too high a multiple (60x ’19 earnings estimates)? Consider the company trades at less than 25x ’20 earnings projections.

New Japan Pro Wrestling is owned by the Japanese card game company Bushiroad (privately-held). You can play the promotion via the Japanese television network, TV Asahi Holdings (trades under the ADR THDDY) or the Japanese music artist management company, Amuse, Inc (TYO: 4301). Both are minority shareholders. Ring of Honor is a subsidiary of the Sinclair Broadcast Group (SBG).

Fan Marino: The WWE recently announced it will host the company’s first all-women’s PPV event, entitled Evolution, on October 28th. The event, which will be live streamed on the WWE Network, will feature more than 50 female competitors from Monday Night Raw, SmackDown Live, NXT and NXT UK rosters. While current stars like Sasha Banks and Ronda Rousey are sure to be in attendance, so too are WWE Hall of Famers Trish Stratus and Lite; both already confirmed to be participating.

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FanDuel Wins July Leg of NJ Sports Betting Race, Mobile App on Deck


New Jersey’s 5 licensed sports-betting operators shared $3.8 million in total revenue during the month of July, the slowest month on the sporting calendar. The FanDuel branded sportsbook at the Meadowlands generated more revenue ($1.3 million, 34%) than any other NJ sportsbook, despite having only been open for 17 days; Ocean Resort Casino was the only other sportsbook in the state to clear $1 million for the month. It should be noted that Monmouth Park, which generated the most revenue during the month of June, experienced a -60% MoM decline in sports betting revenue as the competition has stiffened (see: Meadowlands, DraftKings). 

Howie Long-Short: FanDuel took in more revenue than anyone else in July, but that’s unlikely to be the case in August now that the competition is armed with a mobile app. FanDuel hopes to have their mobile sportsbook (website & mobile app) operational in time for the start of football season. Last month it was announced that FanDuel’s sports betting software will be powered by GAN, a B2B gaming software supplier; IGT technology will continue to power the FanDuel sportsbook at the Meadowlands.

It’s curious that DraftKings is the only sportsbook to have released (on Aug. 1) a mobile sports betting application (outside NV) to date. That will change this fall when MGM Resorts International (playMGM), Caesars Entertainment (Caesers Casino & Sports app) and Resorts Atlantic City introduce their mobile sportsbooks within the state.

West Virginia is getting closer to introducing legalized sports betting and when they do, FanDuel will be a part of it; the company (along with Penn National) was awarded one of the state’s first 2 sports betting permits. FanDuel intends on offering retail, online and mobile sports betting at The Greenbrier.

As for Paddy Power Betfair (PDYPY), the company recently reported a +5% rise in H1 revenue as both its online gaming and sports verticals experienced double-digit growth in Q2 (on albeit soft comps). It wasn’t enough to please investors, shares are down -14% from the close on August 7th (earnings were released on 8th).

Fan Marino: 4 FanDuel’s founders (including former CEO Nigel Eccles) have filed a $120 million lawsuit against the company for “unfair prejudicial conduct” after failing to profit on its $465 million merger with Paddy Power Betfair; a deal that delivered no value to ordinary shareholders (held by most employees), but +/- $30 million to 6 current C-Level executives. Sounds fair.

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College Football to Experience Dramatic Rise in Naming Rights Deals

Carrier Dome

The value of college football stadium naming rights deals has skyrocketed over the last 3 years, with the average annual fee now exceeding $1 million. Several deals have re-set the market. Back in ’15, American Airlines started the trend, agreeing to a 10-year $41 million pact with the University of Washington (Husky Stadium). United Airlines followed, agreeing to a 16-year deal worth $69 million, to put its name on the Los Angeles Coliseum; home of USC Trojans. The shifting landscape has programs across the country considering the adoption of corporate names for their athletic buildings. Colorado Chief Revenue Officer Matt Biggers explained his school had explored naming rights sponsorships “over the past few years”, but said now for the first time there seems a universal understanding (from administrators and alumni) “from a cost and revenue standpoint” that “we have to generate revenue to compete.”

Howie Long-Short: College football is in an arms race and naming rights are just one of many revenue streams that allow athletic departments to stockpile artillery. Back in May ’17, Kentucky became the first SEC school to add a naming rights sponsor (on a football stadium), agreeing to a 12-year $22 million deal with Kroger. I would expect the remainder of the conference to follow in short order. Programs in the football crazed SEC can’t be perceived as falling behind asset-wise.

The first stadium naming rights deal in college athletics was signed nearly 40 years ago when the Carrier Corporation gifted a one-time $2.75 million donation to Syracuse athletics in exchange for the naming rights in perpetuity to the Carrier Dome; home to both Syracuse football and men’s basketball. Considering the teams still play there today, one could certainly argue that deal ranks among the best in sports history (see: St. Louis ABA, Bobby Bonilla). Carrier Corporation is a subsidiary of United Technologies Corporation, which trades under the symbol UTX.

Fan Marino: Back in ’07, “Papa John” Schnatter agreed to pay the University of Louisville $6 million over 10 years to brand the school’s football stadium Papa John’s Cardinal Stadium. While Schnatter holds those rights until ’40, the school was quick to strip the brand name off the stadium after it was revealed the company founder had made racially insensitive remarks on a corporate conference call. Expect a settlement, the value of those rights is too lucrative for the building to sit without a sponsor for too long.

Speaking of Papa John’s (PZZA), more than a half dozen MLB teams have quietly restored their partnerships with the company just a month after cutting ties. The Yankees said their decision was made in support of the +/- 120 tri-state area franchise owners suffering from declining sales, but that had nothing to do with the racist comments. Papa John’s has said it will lower franchise fees to help offset the revenue lost due to the controversy. Major League Baseball has not yet reinstated the Papa Slam promotion, but is reportedly considering it.

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Adidas To Become First Brand to Live Stream High School Football on Twitter

Adidas 200x200

Adidas (in collaboration with Intersport) will become the first brand to “live stream high school football games on Twitter”, when it kicks off its “Friday Night Stripes” series on September 7th. The 8-game showcase will feature weekly match-ups between nationally ranked programs nationwide. Live streams of the game feed will include a twitter timeline featuring “real-time conversation about the action.”

Howie Long-Short: Game coverage will be accessed by visiting @AdidasFBallUS, so Adidas should see their Twitter following rise. That should suit ADDYY well, as the company has done a good job (at least relative to NKE) converting brand sales once customers are on their site. It’s worth pointing out that H1 footwear sales rose +20% (see: retro) and apparel did even better, on the back of a strong World Cup (sold record 8 million jerseys).

Stephen Wilmot (WSJ) made a strong argument that ADDYY shares are undervalued. Even after an 8% jump on August 9th (following earnings), Adidas is trading at just 23x prospective earnings; compared to Nike’s 29x. That’s despite Adidas growing sales (16% vs. 3% in U.S.) and profits faster than their rival, not having to deal with any potential #MeToo backlash or increase employee wages. Shares closed at $119.02 on Tuesday.

For those wondering, Intersport creates sports marketing platforms. While you may know them as the company behind the 3x3U basketball tournament for college seniors (held at Final Four), they own one of the most infamous pieces of video footage in sports history. Intersport was the only production company rolling on January 6, 1994 when Nancy Kerrigan was attacked with a police baton. The company has said it’s earned 7-figures from licensing the footage, receiving $10,000-$15,000 (or $250/second) each time it’s used.

Fan Marino: Fans of youth sports are going to experience a sharp increase in the number of games available to a broadcast audience over the next several years, as OTT platforms give rights holders the ability to reach niche audiences directly. How long before high school kids start complaining they aren’t being fairly compensated for their name, image and likeness?

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Coca-Cola Invests in BodyArmor, To Challenge Gatorade (PepsiCo)


Coca-Cola (KO) has made a minority investment in the sports drink BodyArmor, as it once again (think: Powerade, Honest Brand) looks to shake up Gatorade’s dominance within the performance drink category (think: hydration). Marketed as a healthier, natural alternative to sugary sports drinks, BodyArmor uses coconut water (lower in sodium, higher in potassium than filtrated water) and excludes artificial colors/high fructose corn syrups from its formula to distinguish its product in a crowded market of enhanced waters, teas and energy drinks. Beyond the equity investment, KO’s bottling system will take over BodyArmor distribution responsibilities, expanding the company’s reach internationally (namely China). Financial details of the pact were not disclosed, but it’s expected that the deal offers Coca-Cola a clear path to full ownership, with the price point to be determined based on “sales and other performance measures”.

Howie Long-Short: Gatorade, a subsidiary of PepsiCo. (PEP), currently controls +/- 75% of the $8 billion domestic sports drink market, but sales are on the decline with consumers becoming more health and wellness conscious. BodyArmor, which has gained in popularity over the last few quarters (it had just 3% market share in ’17), remains a distant 3rd (behind Gatorade, Powerade) with just 6% of the market share. CEO Mike Repole has projected the company will own 10% of the market by 2019. PEP intends on presenting BodyArmor as a premium product when compared with Powerade (which controlled 17.5% of market in ‘17).

The deal makes KO Body Armor’s 2nd largest shareholder, surpassing Keurig Dr. Pepper Inc. (KDP). With KO on board, BodyArmor no longer has the need for KDP to assist with distribution (as they’ve been doing); it’s unlikely KDP will retain its equity in the company, management isn’t interested in owning minority stakes.

It’s been said that BodyArmor “is on track to reach almost $400 million in retail sales this year”, which would place the value of the company between $1-2 billion if you look at the multiples some others within the beverage industry have sold for. For information purposes, KDP acquired 15.5% (since diluted to 12.5%) of the company back in ’15-’16, when the company’s value was said to be less than $200 million. BodyArmor did $253 million in ’17 sales.

Fan Marino: Back in April, BodyArmor introduced its largest ad campaign to date (included 1st TV ad), a comedic series portraying market leader Gatorade as out of touch with the needs of the modern athlete. Conceived, written and co-directed by shareholder (and Emmy/Oscar winner) Kobe Bryant (10% stake), the multi-media campaign places athletes in outdated situations; akin to high performance athletes continuing to drink Gatorade during competition (think: Kristaps Porzingis using carrier pigeons to communicate with family in Latvia, video here). The campaign positions BodyArmor as the sports drink for today’s health conscious athlete, while noting the lack of innovation from Gatorade since its inception in 1965.

All BodyArmor spokes-athletes have equity in the company. In addition to Kobe Bryant, the list of athlete-shareholders includes; Mike Trout, Porzingis, James Harden, Diggins-Smith, Andrew Luck, Rob Gronkowski, Buster Posey, LeSean McCoy, Richard Sherman, Sydney Leroux, Anthony Rizzo, Dez Bryant and Dustin Johnson.

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Italy Issues Blanket Ban on Gambling Advertising, Sponsorships


Effective January 1st, 2019, all forms of gambling advertising and sponsorships will be banned under Italian law. Gambling operators, media outlets, sport groups and event organizers are all required to follow the new Dignity Decree; failure to do so will result in administrative fines up to 5% of the value of the advertising or sponsorship, per violation. The government intends on issuing larger fines (up to $+/- $570,000) to those who advertise gambling services/products to kids. Deputy Prime Minister Luigi Maio has expressed intentions of lobbying the EU for a Union-wide ban.

Howie Long-Short: Gambling is synonymous with Italian futbol. Stadiums are named after gambling companies and gaming companies are represented on club kits as primary sponsors. To put the significance of this ban in perspective, Alun Bowden, Senior Consultant, Eilers & Krejcik Gaming called it, “by far the most significant thing to happen in online gambling this year and yes I include PASPA in that.”

The Italian government issued this ban to strengthen consumer protection laws and all money raised from fines paid will be invested into programs designed to fight gambling addiction, so while gaming operators (and their shareholders) are upset, they’re unlikely to find much sympathy from the public, here.

That will change though if Serie A clubs start to struggle financially, a likely outcome when club sponsorship deals expire (existing agreements can be fulfilled); gaming companies invest +/- $135 million/year in Series A sponsorships and Italian clubs (see: AC Milan, 2-year ban) are already struggling to meet UEFA Financial Fair Play rules.

Several Italian clubs are publicly traded including Juventus, AS Roma and Lazio.

Fan Marino: Maio won’t have to lobby hard in England, senior gaming execs (think: Philip Bowcock of William Hill, Peter Jackson of Paddy Power Betfair) there are already asking the government to implement regulations; concerned children are being subjected to far too many gambling-related ads on television (particularly, tied to sporting events). Of course, a blanket ban on advertising is beneficial to the giants of the industry as it becomes more difficult for small outfits to take mindshare.

It’s worth noting that Australia also now has a ban on gambling related advertisements during sporting events. While no ban is needed here yet, it’s easy to foresee one coming down the pike if the competition for legalized sports bettors begins to look like the infamous DFS competition of 2015. Perhaps the time is coming sooner than later, CBS is reportedly “all-in” on gambling related advertising.

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WNBA Franchise Forfeits Game Following Commercial Air Delays, Cancellations


The Las Vegas Aces became the 1st team in WNBA history to forfeit a game after electing not to play in their August 3rdcontest against the Washington Mystics; the club cited player health and safety concerns following 25 hours of travel (see: flight delays x3, cancellations). League rules prevent teams chartering private planes to ensure an even playing field. With the season ending on August 19th, and no common availability, the league was unable to re-schedule the game.

Howie Long-Short: WNBA teams travel commercial because their finances simply don’t support anything better. Indiana Fever SVP Kelly Krauskopf explained to the Indy Star that a club could travel all season (commercially) for the same price as 2 charter flights (estimated $150,000-$200,000/trip).

Aces coach Bill Laimbeer acknowledges that “it’s not feasible” for league franchises to travel private, which makes the club’s decision to forfeit the game that much more peculiar. Why damage your playoff changes for a couple minor changes in travel guidelines (think: limiting number of time zones a team can travel following game)?

Fan Marino: Aces fans should be upset their team didn’t take the floor amid a playoff run. Sure, 25-hours of travel is a nightmare and I’m certain the players were tired, but to claim anyone was at risk of being injured because they had a broken night of sleep is absurd. Aces players willingly took a loss to make a statement to the league, it’s time to treat WNBA players like professionals. They’re right, but if the club fails to make the playoffs (and they’re currently just one game out), it’s going to be hard to argue their approach was; the debate over if the team should have played the game will overshadow why they chose not to.

While the league’s travel accommodations may not be 1st class just yet, if the league continues its recent growth trajectory they’ll get there. Viewership (during 1st half of season) rose +35% YoY across ESPN2 & NBATV and +38% YoY (to 247,000) on ESPN, merchandise sales on the league’s website increased +50% YoY and Puma recently announced a league-wide footwear partnership with the WNBA.

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APM Sports Exec Explains Why Pro Sports Teams Require Custom Tracks

APM Sports

If you’ve ever watched Monday Night Football, you’re familiar with this song. Interestingly, ABC/ESPN does not own the ballad entitled “Heavy Action”; it’s a pre-composed British library track that was pulled off a shelf at ABC 30 years ago. That track is among 620,000 others in the APM Music Catalog. JohnWallStreet had a chance to connect with Matt Gutknecht, Sr. Account Director, Sports Entertainment at APM Sports to explore the intersection of sports and the music business.

JWS: Why would a pro sports franchise choose to work with APM Sports as opposed to just playing “Top 20” hits?

Matt: Teams come to use for 2 reasons. You may have seen on national signing day a bunch of Top 25 college football programs had their Twitter accounts shut down for copyright infringement (use of popular music). So, we can provide a solution to mitigate and reduce liability.

The second reason is cost. One NBA team paid $200,000 for the in-arena and social media use of a single pop song (in their scoreboard intro video), for 41 home games. We can provide a track similar in vein, something unique that no one else, without having to pay in the low-to-mid six figures.  

JWS: Is there a financial penalty for this type of copyright infringement?

Matt: No, I’ve actually had P5 conference teams tell me they’d rather pay a fine than have the content (or their account) taken down.

JWS: A team wants to use The White Stripes’ Seven Nation Army but isn’t willing to pay the publisher’s asking price. What kind of solution can you offer them?  

Matt: So, we’d look to create a great track, with big quarter note, bass drum feel. That coral, chanting kind of thing. We’re not in the business of knocking off tracks or doing something that is 2-3 notes away. (check out a sample playlist in the style of The White Stripes)

Howie Long-Short: APM Music is owned by Sony/ATV Music Publishing (a subsidiary of SNE) and Universal Group Music Publishing (a subsidiary of the French mass media conglomerate Vivendi, EPA: VIV).

Fan Marino: Speaking of Imagine Dragons, “the new White Stripes for in-arena music”, if you’re a college football fan, you’ll be hearing a lot of them this fall. Their hit “Natural” has been selected by ESPN/ABC as their 2018 college football anthem. You may recall, the ’17 anthem was “Walk on Water” by 30 Seconds to Mars.

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