F1 Signs $100 Million Sponsorship and Data Rights Pact, To Develop In-Race Betting Platform

F1

Formula One has announced a 5-year $100 million+ sponsorship and data rights deal with Interregional Sports Group (ISG) that will enable the development of a live in-race betting platform. The deal gives the sports marketing agency the ability “to sublicense betting partnership rights around the world”; rights packages said to include regionalized on-screen promotion, trackside signage and exposure across F1’s digital and social properties – where the promotion of sports gambling is legal (i.e. not all 21 race locations). Sponsors will not be permitted to offer odds within ads that run during grands prix. ISG will use Sportradar to create betting markets and provide its “integrity” monitoring services.

Howie Long-Short: The $100 million figure makes “the cost of acquisition per player very high”, leading some to believe ISG is using F1 as an entree to sports bettors hoping they’ll gamble on other sports. They’d better, the $100 million fee ISG will pay up front is more than the company’s annual revenue.

F1 teams are expected to split $921 million in ’18 prize money, which would be $45 million less than they received in ’16; despite an increase in the number of races. That’s because F1 teams split 68% of the circuit’s underlying profits and costs have increased significantly (think: rebranding, new headquarters, eSports) since the Liberty Media acquisition. The $921 million figure may represent a best-case scenario. F1 is facing the difficult decision to re-brand againcompensate 3M or engage in a costly legal battle with the manufacturing company over its new logo; though, that decision may not be made anytime soon. The European Union Intellectual Property Office (at the request of both sides) recently delayed the start of the adversarial part of the negotiations by 22 months (a “cooling off” period).

Rising costs (+$27 million) and declining revenues (-$31 million to $585 million) drove F1 operating income down a staggering -69% (to just $14 million) during the most recent quarter. FWONK shares closed at $37.59 on Thursday, up nearly 10% from when the company reported in early August.

Fan Marino: The deal comes at a time when the involvement of gaming companies in sports (around world, not U.S.) is being scrutinized more than ever before. Italy and Australia have already implemented bans/restrictions on betting advertisements during live sporting events and there is now talk similar bylaws could be set in the U.K., F1’s most lucrative broadcast market.

On Wednesday, Tom Watson, Deputy Leader of the Labour Party, called for a ban on all gambling advertisements during live sporting events, to address what he’s tabbed “a public health emergency” (gambling ads rose an estimated 600% between ’07 and ‘13). Watson’s plan also calls for a tax on gaming operators (1% of gross gambling yield), money that would be used to offset a portion of the recovery efforts and a prohibition on the use of credit cards to pay down bets.

One U.K. gaming operator, Sky Bet (TSG), is on record supporting the levy, but vehemently opposes a “blanket ban” on advertising and credit card payments saying those initiatives could push gaming companies to drop their license in the UK (as in theory, it would become a less appealing market); leaving gamblers vulnerable to “disreputable operators.” Good luck selling that, the odds of Sky Bet closing its U.K. division are infinitely long.

Did you know? 60% of clubs within England’s top 2 divisions (9/20 in EPL, 17/24 in Championship) have a gaming company represented on their kit. The Labour Party previously called for all to put an end to those sponsorship agreements, threatening legislative action should they fail to comply.

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Blind Auction to Determine Sky PLC Winner

SKY

There’s finally an end in sight in the transatlantic battle between 21st Century Fox and Comcast for British broadcaster Sky PLC. Back in August Comcast increased its offer, valuing the London based pay TV group at +/- $34 billion. Under British takeover rules, Fox (owns 39% of Sky PLC) has until September 22nd to top Comcast’s all-cash bid. It now appears as if Fox will have the opportunity to take down Sky, without another bid, before this week’s deadline. The U.K. Takeover Panel has announced a blind auction will determine the winner. Though a best-and-final offer can still be made before Saturday’s deadline, a “sealed bid will [probably] be the only way to decide the outcome.”

Howie Long-Short: Sky (SKYAY) is appealing to U.S. broadcasters because it gives them the rare opportunity to expand abroad. With primary broadcast rights to the English Premier League (through 2022), German Bundesliga (through 2021), and Italian Serie A (through 2021), the company is a market leader in the UK, Ireland, Germany, Austria, and Italy.

Generally speaking, European sports broadcast rights sell for +/- 30% less than those in the U.S, but that doesn’t mean Sky’s profitability hasn’t suffered amidst skyrocketing acquisitions costs. The company’s current rights deal with the EPL ($2.25 billion per season) resulted in operating profits for its the UK division declining -14.1% during FY16/17, the first year of new deal (cost cutting moves in ‘17/18 enabled the division to grow operating profits again). In Germany ($1.36 billion per season), the company posted a loss a $5.2 million loss for FY17-18, just one year after recording the division’s first positive result ($52.6 million under old contract). Sky has since conceded rights, so expect the divisions return to begin growing profits again in ‘18/19

Recent developments in Italy have been much more favorable. Thanks to a legal dispute between Serie A and the Barcelona-based MediaPro Group, Sky Italia – in a joint bid with DAZN – retained domestic rights with just a minimal cost increase (+3.2% to $1.13 billion per season); though, it must be noted that reaching subscription milestones could result in the fee increasing by as much as $116 million/season.

Sky PLC’s stock has nearly doubled since Fox first agreed to buy the remaining shares of London based broadcaster at a 35% premium back in December 2016. Shares closed at $83.34 on Wednesday, meaning investors still see +/- 6% upside from Comcast’s latest bid.

Fan Marino: Sky customers in the U.K. have been hurt by the increased competition for sports rights market as they’ll now need to pay for Amazon Prime and Eleven Sports too if they want Golf’s US Open, the Tennis PGA Championships, or the Spanish La Liga.

While Howie mentioned that Sky has dropped rights to lower their expenses in several markets, one place you won’t find Sky cutting costs is with domestic futbol rights – as they drive subscriptions. All three divisions reported subscriber growth during FY17/18 (UK: 13m; Germany/Austria: 5.2m; Italy: 4.8m) despite each carrying fewer games than under the terms of their previous deals.

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NFL Experience Fails to “Meet Expectations”, To Close Less Than 11 Months After Opening

Less than a year after opening its doors (Dec. ’17), the NFL Experience (NFLX) will be “ending its season” effective September 30th. The 40,000 SF football themed interactive attraction, located at 20 Times Square, had been touted as an opportunity to bring fans closer to the game than ever before. Unfortunately, not enough fans enjoyed the experience; while the league did not release a statement explaining why NFLX was closing, one employee said it had failed to “meet expectations.”

Howie Long-Short: The NFL Experience was a joint venture between the league and the entertainment company Cirque du Soleil, though it appears the league’s power brokers offered minimal support (in the way of cash, operations and promotion) to ensure its success. Cirque du Soleil, served as the lead investor and oversaw the project.

In theory, keeping fans engaged in the off-season and find new ways to drive revenue makes sense, but the location selected likely killed the venture’s chances of success before the project had even gotten started. 2 other sporting concepts (ESPNZone and Sports Museum of America) had shuttered their Times Square location doors within the last decade and with ground floor space in the area (between West 42nd and West 47th) now commanding rents +/- $2,000 per square foot, NFLX was never going to draw enough visitors to turn a profit.

For those wondering, 90% of Cirque du Soleil is owned the U.S. P.E. firm TPG Capital, the Chinese investment firm Fosun Industrial Holdings and the Canadian institutional investor Caisse de depot et placement du Quebec. Of the 3, only Fosun Industrial Holdings is publicly traded. The company trades on the Stock Exchange of Hong Kong Limited (SEHK), under the symbol 656.

Fan Marino: The NFL Experienced offered fans the opportunity to go “from the practice field to the Super Bowl.” Interactive simulations of gameday experiences (think: walking out of the tunnel onto the field), a 4D rollercoaster theatre and the chance to celebrate with the Vince Lombardi trophy were among the football theme park’s marquee attractions (here’s video). For those who want to make a visit before the venue closes, it will remain open daily between the hours of 10a-8p.

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NFL All-Time Greats Demand Health Insurance and Share of League Revenue

Eric Dickerson, Chairman of the Hall of Fame Board (newly created), sent a letter to NFL Commissioner Roger Goodell, NFLPA Executive Director DeMaurice Smith and HOF President David Baker demanding health insurance and an annual salary (i.e. share of league revenue) for the Hall’s living alumni. The group argues they were “integral to the creation of the modern NFL, which in 2017 generated $14 billion in revenue”, but instead of enjoying retirement have been saddled “with severe health and financial problems.” Signed by 20+ of the league’s most accomplished players (including: Jim Brown and Jerry Rice), the letter threatened that failure to comply with the demands would result in many high-profile players abstaining from future Hall of Fame induction ceremonies. It needs to be noted that the league has had a pension plan (which goes up with each CBA negotiation) in place since ’59, a 401K plan (that players can contribute to) since ’93 and an annuity program since ’98.

Howie Long-Short: Simply looking at it from a cost standpoint, to insure every living hall of fame player would cost the league just $4 million/year or the equivalent of $.03 for every $100 generated. While obviously feasible, I’m having a hard time grasping why just a select few retirees should receive benefits. If the argument is that “to build this game, we sacrificed our bodies. In many cases, and despite the fact that we were led to believe otherwise, we sacrificed our minds”, then why shouldn’t every retired player receive medical insurance and a salary? For comparison purposes, MLB players receive lifetime coverage if they are on a MLB roster for just a single day and a life-long pension if they’re in the big leagues for 47 days.

NFL player salaries exploded in the 1990s, so there’s really two distinct classes of players; those that played in the 70s and 80s before the television money started rolling in (in ’82 the average salary of the league’s QBs was $160K) and those that started their careers after the ’87 lockout. Guys like Jim Brown, Joe Namath and Carl Eller were an instrumental part of the league’s early success and can likely use the league’s financial assistance, but I’m having a hard time grasping why guys like Kurt Warner ($62 million), Marshall Faulk ($49 million) and Curtis Martin ($47 million) are on the list; those guys were paid as franchise players at a time when the league was already generating billions/year in revenue.

Dickerson’s letter also takes aim at Goodell’s $40 million salary and the construction of a $1 billion Hall of Fame Village in Canton, OH. While I can’t argue that the league needed a $1 billion shrine to honor the league’s past, Goodell’s compensation is in line with CEOs of corporations generating comparable revenue; Les Moonves earned $69.3 million ($13.7 billion in revenue) in ‘17, while Michael Rapino (Live Nation) took in $70.6 million ($10.3 billion in revenue). Those opposed to Goodell’s salary will point to the Ray Rice video, deflate-gate and the anthem protests as reasons why the commissioner is overpaid, but his success in driving revenue in undeniable; the league is generating 50% more revenue than it did in ’10.

Fan Marino: The NFL plans to hold the league’s 100th anniversary celebration during the 2020 season and the Hall of Fame board is looking to use that event as leverage for a payday. Dickerson’s letter talks of “exploiting” player images for marketing purposes, but that statement is more than a bit disingenuous. The reason HOF players show up in Canton every summer is because they are paid (autograph signings, meet & greets etc.) and it strokes their ego. There’s no requirement that inductees attend, the old-timers come because it’s the one weekend/year they can relive their glory days and listen to fans tell them how great they were. If the NFL’s HOF players want to bite off their nose to spite their face, let ‘em.

Speaking of the ’87 lockout, no HOF board member is a bigger pig than Lawrence Taylor. For those too young to remember, Taylor crossed the picket line as his teammates were on strike to secure better working conditions and improved retirement benefits. While it’s worth asking why Sarah White (Reggie White’s widow) is on the list (it’s supposed to be for living players), one can at least argue Reggie’s impact on free agency; there is no argument to be made for scab who has since plead guilty to sexual misconduct with a 16-year-old.

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Amazon Expands Presence in Sports World, Announces Partnership with IRONMAN

Ironman

Amazon (AMZN) has acquired title sponsorship rights to the 40th IRONMAN World Championship. As part of the agreement, the e-commerce giant will serve as the Official Sports Nutrition Retailer of the “iconic endurance event” (10.13 in Kailua-Kona, Hawaii); “providing participants access to a vast selection of nutritional products.” IRONMAN will receive a branded pop-up shop, (amazon.com/ironmanrace) featuring product from the event’s official nutrition partners (see: Gatorade, CLIF Bar), on the world’s largest e-commerce platform.

Howie Long-Short: Amazon’s shown interest in streaming sports content (see: Sunday Night Football, U.S. Open), so it’s interesting to note that this deal does not provide the company with broadcast rights; NBC Sports platforms, ironman.com and IRONMAN NOW on Facebook Watch will all have the event. That’s not to say this deal doesn’t make sense from the Amazon perspective. The demand for health/wellness/performance products is at an all-time high, it’s perfectly logical that Amazon would want to connect with the most committed of fitness enthusiasts.

Amazon posted (Q2 earnings) its largest quarterly profit in company history during Q2 ’18, surpassing $2 billion (posted $2.5 billion) for the first time. It was the 3rd straight quarter that AMZN surpassed $1 billion in profits. The company’s e-commerce division reported operating profit of $1.34 billion, shattering analyst expectations ($240 million); an increase in online ad sales (+132% YoY to $2.2 billion) and “efficiencies in generally all our fixed costs” were among the factors that drove higher profits (along with their high margin cloud services business). FYI, sales from Amazon’s Prime Day will factor into 3rd quarter financials. In late August, AMZN shares traded at over $2,000/share for the first time; they’re up 65% YTD, opening at $1,970.19 on Monday 9.17.18.

IRONMAN is owned by the Dalian Wanda Group, a privately held Chinese real-estate conglomerate which bought the endurance racing series in ’15 for $650 million.

Fan Marino: Not to be outdone by an American counterpart, Rukuten (RKUNY) has announced a multi-year global partnership with Spartan Race (obstacle racing series). The deal provides Rukuten with exposure at Spartan events (+ in digital advertising, content and merchandise), makes the company the official kit sponsor of the Spartan Pro Team and places the company logo on finisher shirts. The partnership officially begins with the “2018 Spartan World Championship powered by Rakuten” (Spartan’s biggest event); the Japanese e-commerce and internet company will also “power” the live stream of that event on Facebook Watch.

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Riot Games Denies It’s Slashing eSports Budget

Riot Games

Riot Games has denied accusations that the company is cutting its eSports budget, but does acknowledge the focus has turned from growing viewership to becoming a profitable endeavor. Derrick “FearGorm” Asiedu, Head of Global Events, Riot Games, said it’s the company’s preference “to invest even more than what we do now ($100 million annually), but only if it makes sense for the business and if revenues continue to increase”; if the company is unable to grow revenues enough to turn a profit, Asiedu said it will be forced to reduce its eSports budget “by some amount.” Advertising, sponsorships and “digital experiences” are expected to drive the bulk of the revenue increase.

Howie Long-Short: Riot Games made several recent decisions implying the company was reducing spending. The company announced the group stage of the League of Legends World Championships would be condensed from 2 weeks to 8 days and that English broadcasts of the event (taking place in S. Korea) would occur remotely (from a U.S. studio) through the semi-final round. I’m on board with the decision to condense group stage competition as that should provide meaningful cost savings and if Fox can get away with calling Russian World Cup games from a studio, I see no reason why American broadcasters need to be in S. Korea. Back in May, Riot held the group stage of a midseason tournament at its EU studio, a venue that failed to reflect event’s importance; the company has since said it would not do that again.

If you listen to Team Liquid owner Steve Arhancet, Riot Games shouldn’t have an issue boosting sponsorship revenue; Arhancet sees “an ecosystem where there’s substantial revenue still being earned within the space.” Newzoo projects $360 million will be spent on eSports sponsorships in ’18. While that figure reflects the potential upside for Riot Games, League of Legends currently maintains just one North American partner (State Farm); it’s fair to ask why the company hasn’t been more successful, in terms of signing partnerships for League of Legends, to date.

Riot Games is owned by Tencent (TCEHY). Company shares are down -10.5% (to $41.35) following recommendations made by China’s Ministry of Education to restrict the number of new video games, limit internet usage and explore an age-appropriate rating system for players; the Ministry blames video games and internet usage for the increase in reported cases of myopia amongst minors. Amidst heightened regulatory risk, it’s no surprise TCEHY reported a decrease in profits for the first time in 10+ years in Q2 ’18.

Fan Marino: The founding League of Legends franchises paid $10 million to join. It’s 4 newest franchises – 100 Thieves, Clutch Gaming (owned by Houston Rockets), Golden Guardians (owned by Golden State Warriors) and OpTic Gaming – paid a $13 million expansion fee. It’s certainly worth wondering if any/all would have made the commitment had they known Riot Games was talking about reducing its eSports budget.

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Courtney Force Explains How Diversity Makes NHRA “The New Disney”

Courtney Force

Courtney Force is the #1 driver (and the only female) in the NHRA Mello Yello Funny Car Drag Racing Series standings, as the Countdown to the Championship (their playoff system) begins this weekend with the Dodge NHRA Nationals at Maple Grove (PA) Raceway. Force is the daughter of legendary drag car racer, John Force, the winningest NHRA Champion and the founder and CEO of John Force Racing (the team Courtney races for). Courtney was in New York earlier this week and sat down with JohnWallStreet to discuss NHRA’s appeal, her appeal to sponsors and to find out what makes NHRA “the new Disney”.

JWS: For those not familiar with NHRA racing, can you explain what draws fans to drag races?  

Courtney: These cars are going down the strip at over 330 miles an hour, in under four seconds; so, it’s exciting. It’s more like a sprint than the marathon that you see at most other auto races. It grabs everyone’s attention and hits all the senses. The smell of the nitro. The feeling of the cars as they vibrate the stands as they go down the race track.

JWS: Parade recently wrote an article asking if NHRA “the new Disney?”, citing the sport’s family-friendly atmosphere. Does having women compete at the highest level, against the men, contribute to sport’s family appeal?

Courtney: Definitely. We all get to compete equally, we’re not separated by a men’s league and a women’s league and that’s pretty rare. Drivers of all different ages compete in our series. I compete against men in their thirties, all the way into their sixties. There’s so much diversity in the sport and I think that’s why it really appeals to so many different types of audiences.

JWS: Are sponsors drawn to you because you’re a great driver or because you’re a great driver and you’re a female?

Courtney: Well, I hope it’s because I’m a great driver. Then on top of it, I guess a bonus is that I happen to be female. I think a lot of companies like the uniqueness of that. Advance Auto Parts (primary sponsor) is a company you would think would be male dominated, but there are females running that company; there’s females that are getting involved in racing and working on their own cars in their garage. It’s that audience we’re trying to reach.

JWS: Racing down the strip at 300 MPH requires a strong core and muscular legs, but unlike Big 4 sports race teams don’t have fitness coaches, nutritionists etc. Do you have a personal trainer? Is that a team expense or a personal expense?

Courtney: I paid for a trainer out of pocket. I did it for a little while. Now I just kind of take what I learned a few years back and do it on my own. It makes it cheaper.

JWS: NHRA racers compete for their share of a $3 million prize pool. If you include all potential off-road income streams, is it feasible for a driver to earn 7 figures?

Courtney: I think you can, over time. It depends on the different types of sponsorship deals you put together, whether you have personal services deals; I think that’s where you can kind of make your bonus bucks. Social media is starting to grow into something that’s profitable. So, I think it depends on the success the driver has had and if they’re appealing to sponsors.

Howie Long-Short: Courtney’s primary sponsor is Advance Auto Parts (AAP). Back in August, the company reported Q2 earnings. Sales (see: brakes, batteries & Spring related categories) rose +2.8% YoY (to $2.33 billion), with comparable stores growing sales +2.8% (nearly twice the +1.5% max projected for FY18), as EPS climbed +24.6% YoY (to $1.97). AAP also announced its board had approved a $600 million share repurchase program, to replace the $500 million program ($415 million remained) approved back in ’12. AAP shares are +6.7% since earnings were reported a month ago and are +57% YTD. They’ll open at $166.73 later this morning (9.14.18).

Fan Marino: Drag racing is the Force family business. While Courtney currently leads John in the Funny Car series standings, her sister Brittany became the 1st woman to win a Top Fuel championship in 35 years in 2017. Older sisters Ashley Force Hood and Adria Hight are also involved in the family business; Ashley is a retired drag racer, while Adria currently serves as the CFO of John Force Racing. It doesn’t stop there. Courtney is married to IndyCar driver Graham Rahal, while Adria is married to Courtney’s teammate Robert “Top Gun” Hight.

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DraftKings, FanDuel Generate 2/3 of NJ’s August Sports Betting Revenue Total

draftkings-fanduel

The New Jersey Division of Gaming Enforcement reported that the state generated $9.2 million in gross revenue, on a total handle of $95.6 million, during the month of August. DraftKings Sportsbook ($2.97 million) and FanDuel Sportsbook ($3.06 million) each accounted for roughly a 1/3 of the state’s monthly gross revenue total. The FanDuel Sportsbook at the Meadowlands was the state’s most profitable retail location, generating more than 3x the revenue Monmouth Park ($898,000) reported. DraftKings accounted for +/- 95% of the state’s mobile sports betting revenue.

Howie Long-Short: If you consider that $95.6 million was wagered in a month with just one week of college football, no NFL action and just a single mobile app (there’s now 7) live for the month’s entirety (and it was a soft launch until 8.6), it’s reasonable to expect the state’s handle to push $250 million in September.

Extrapolate the $6 million+ DraftKings Sportsbook and FanDuel Sportsbook earned in August by 30 states and those 2 companies alone could do $180 million/month in sports betting revenue by 2021; or +/- half of all annual DFS revenues worldwide. Of course, state populations and regulations ensure they won’t all generate equal revenues.

New Jersey sports bettors are getting wiser (and the lines are getting more competitive). Sportsbooks within the state saw their win percentage decline from 15% in July to 9.6% in August.

Fan Marino: On Sunday afternoon, DraftKings x Thuzio held a “Kickoff Bash” to celebrate the start of the NFL season and the launch of the DraftKings Sportsbook in Hoboken, NJ. Nick Mangold, Tiki Barber, Brandon Jacobs and WFAN host Mike Francesa were on hand to watch the games, take pictures and sign autographs. JohnWallStreet had the chance to catch up with Ezra Kucharz (Chief Business Officer, DraftKings) to ask a few questions about the company’s relationship with Buffalo Wild Wings, the prospect of Super Bowl squares and why DraftKings shouldn’t be valued as a sportsbook.

JWS: CEO Jason Robins recently spoke about capturing the underground gambling business (think: March Madness brackets, Super Bowl squares). Can we expect to see the DraftKings Sportsbook selling squares for Super Bowl LIII?

Ezra: We’re going to be responding to what the fans want. If fans want brackets and squares, they’re going to see brackets and squares. Yes, we intend to sell squares for February’s Super Bowl; Jason (Robins) talked about that last week at TechCrunch.

JWS: Jason was also recently quoted saying it was his belief that the company would hold a $10 billion valuation if 30 states were to legalize sports betting. To do that, the company would have to generate $770 million in earnings (if you used a 13x multiple). Is that a reasonable target to hit within 3 years?

Ezra: As it relates to valuation metrics, we’re not a sportsbook. We’re a technology company that does sports and entertainment. We happen to do games and now have sportsbook as one of our components, so our valuation metrics are going to be different than a traditional sportsbook.

JWS: FanDuel has the Meadowlands (a high traffic destination). DraftKings recently signed a partnership with a casino in Waterloo, NY (a low traffic destination). Is it fair to say that DraftKings is focused on the mobile/online sportsbook business as opposed to the retail business?

Ezra: We’re going to be driven by what the consumer and fans want and what they’ve resoundingly said is they want an online mobile sportsbook. Right now in New Jersey, if you want to make a wager, you can drive to the Meadowlands or to Monmouth racetrack, right? Or you can sit on your couch, take out your phone, download an app and gamble from your couch. You’ll see us do some things in retail, but we’re taking our time to figure that out.

JWS: While on the topic of retail, Buffalo Wild Wings (BWW) had made headlines about wanting to get into the sports betting business. DraftKings has a DFS partnership with BWW. Has the company had any discussions with BWW about a partnership on the sports betting side?

Ezra: No, we’re focused on fantasy sports with them right now. I think it’s premature, you know, I think everybody wants to see where it’s going to roll out and how it rolls out.

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76ers COO Lara Price Offers Insight on Engaging Fans in Both the Home Market and Abroad

20180618_Lara_Price_Adweek_Portraits-16

SportBusiness Summit 2018 will take place next Tuesday/Wednesday (September 18/19) at the W South Beach hotel. A world-class line-up of speakers and panelists – from FIFA, UEFA, La Liga, Premier League, DAZN, Twitter, Sportradar, BeIN Sports, Miami Marlins and Philadelphia 76ers – will offer attendees the data and insights needed to identify new business opportunities and potential revenue streams in markets across the world. Who’s driving sport and where are we heading, the U.S. sports betting revolution, trends and issues in Global TV rights and private equity in sports are among the panel discussion topics. SportBusiness will power the “know the fans” panel featuring Lara Price (Philadelphia 76ers COO, Keith Bruce (Formula 1 Experiences), Chip Bowers (Marlins President of Business Ops) and Sandy Brown (Commissioner of MLL). JohnWallStreet had a chance to catch up with Lara Price, the 76ers COO, for a brief preview of the forthcoming discussion.

JWS: Philadelphia is a passionate sports town and its fans have been known to be vocal when their teams don’t perform well. How does the 76ers approach to fan engagement change when you have a winning team (like last year) vs. the losing-filled “process” years?

Lara: Early on we made sure we were transparent with what we were going to do (i.e. The Process). In the past, we let the team’s record speak for itself.

One of the specific things we did (during the down years) was to create one-on-one touchpoints with our fans. With the help of basketball operations (and in partnership with Firstrust) we arranged a private dinner with our Row 1 seat holders. Coach (Brett) Brown and the coaching staff gave a two-hour tutorial about how we were developing each of our players and the franchise’s mindset on the rebuild. He also met with season ticket members pre-game and answered their team-related questions; Scott O’Neil (HBSE CEO) and Chris Heck (76ers President of Business Operations) also met with our season ticket members.   

JWS: Do you tone down fan engagement when you’re losing because there is less interest or do you need to crank it up because it is more difficult to sell tickets?

Lara: We crank it up. As you’re building your base, it’s easier to do the one-on-one touch points that I mentioned earlier; as your base gets bigger, it becomes more difficult to provide all those touchpoints. We do an event now for season members and invite 5,000 people. It becomes difficult to get a player (or coach) one-on-one with every single person. So, now we must become more creative to bring those special moments to our fans; we must figure out how we’re going to touch more people with personalized content or touchpoints.

JWS: The 76ers top 2 players are foreign born – Joel Embiid (Cameroon) and Ben Simmons (Australia). I wrote a piece earlier this week discussing how country pride trumps team loyalty amongst Latino baseball fans. I’d imagine there is similar enthusiasm for Joel and Ben (and thus the 76ers) amongst basketball fans in their native countries. What has the team done to specifically to engage Australian fans?

Lara: We have global ambitions, not just in Africa and Australia, but in China too; we played in London last season. Having several foreign-born players brings international scope to the 76ers. Building content (in some cases in their native tongue) around each of those players is very important to us. That means having people write stories, cover the team and provide information so that we can continue to grow those markets. We’re not there with every market yet, but we have one Mandarin-speaking producer (result: Weibo ranking has gone from #26 to #5) and now we’re focused on getting coverage for each foreign-born player in their respective international market (roster also includes players from: Croatia, Antigua and Turkey).

With Ben specifically, we worked with the league office and we were able to do a sponsorship with Four’n Twenty; an Australian meat pie (Ben’s personal favorite). So, we brought them to the U.S. and activated them here in the arena (note: league rules dictate how teams can market internationally).  We’ve gone over there (Australia) a couple of times to engage other Australian companies (to get them to work with us) and we’re playing against the Melbourne International team in a preseason game; Australian television is interested in broadcasting the game because Ben is so popular over there.

Howie Long-Short: Despite the 76ers winning just 75 games between over a 4-year span (’13-’14 through ’16-’17), the team managed to quadruple its season ticket base. Heading into the ’18-’19 season (as a favorite to win the Eastern Conference), the franchise is sold out of season ticket memberships and has 11,000 people on its waiting list; a total that surpasses Allen Iverson’s glory days.

Four’n Twenty is a subsidiary of Patties Foods. The Australian food manufacturer (they also make baked goods, frozen fruits and pre-made desserts) trades on the Australian Stock Exchange under the symbol ASX: PFL.

Firstrust Bank is a subsidiary of privately-held Semper Verde Holding Company.

Fan Marino: The 76ers rebuild has been a success because Ben Simmons (selected #1 overall) and Joel Embiid (#3 overall) have turned into All-Star caliber players (they also selected Markelle Fultz #1 overall). Come the ’22 draft though, NBA teams may not have to pick in the Top 3 to land a franchise caliber player. 2022 is the year the NBA is expected to re-allow HS seniors to enter the draft, meaning the player pool will be deeper than it’s ever been; the hybrid class will contain the best HS seniors as well as the best college (or international) prospects (as it would in a typical year). Of course, that means that 2023 is likely to have a weak class as the best prospects from the 2022 freshman class never made it to college.

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Sports Pope Pontificates on NFL Ownership, NFL Issues and Start-Up Football Leagues

Francesa

On Sunday afternoon, DraftKings x Thuzio held a “Kickoff Bash” to celebrate the start of the NFL season and the launch of the DraftKings Sportsbook in Hoboken, NJ. Nick Mangold, Tiki Barber, Brandon Jacobs and WFAN host Mike Francesa were on hand to watch the games, take pictures and sign autographs. JohnWallStreet (a proud Mongo) had the chance to sit down with Mike Francesa, ask a few questions and listen to the “Sports Pope” pontificate on NFL ownership, NFL issues and start-up football leagues. 

JWS: Several weeks ago, there was an article in the WSJ asking if you owned an NFL team, would you sell it now or hold on to it (despite the league’s problems). What would you do?

Mike: There’s always been the feeling that this is the golden age to own a team, that team valuations could do nothing but go up, but with the problems that the NFL has I think it’s very much an arguable point one way or the other. There’s nothing that approaches the NFL regular season in terms of excitement, in terms of ratings, in terms of attention or anything else; but the NFL has a very soft underbelly right now. It’s got huge cultural problems (see: anthem). It’s got huge safety issues (see: concussions, CTE). There’s a bad relationship between the players and owners. It’s got a lot of issues and it doesn’t know how to solve them. So, on one side you have an embarrassment of riches. On the other side, you have a very soft underbelly right now. 

JWS: So how does the league solve those issues?

Mike: The NFL has got to find a (Art) Modell. It’s got to find a (Pete) Rozelle. It’s got to find someone who can guide them through their problems. No one at the NFL right now has been a visionary. When the league took off it was Rozelle, Modell and (Gene) Klein as the triumvirate that put the TV thing together. The other unsung hero was Wellington Mara because he was willing to share equally, even though he was New York; Jerry Jones would never have done that. That was the great vision for the NFL. Everybody would share equally. Someone must become that kind of visionary either in the front office or as an owner to take care of their problems. Of course, they also have a product that overcomes a lot of their problems.

JWS: Is there a current NFL owner or executive capable of stepping into that role of league visionary?

Mike: I haven’t seen them yet. There’s some brighter guys, but they’re older. It’s got to be one of the younger guys who still has years (i.e. will maintain influence for some time). (Broncos owner Pat) Bowlen had a lot influence years ago, no longer.

JWS: The NBA has a visionary as Commissioner and the owners-players relationship is stronger in the NBA than the NFL. If you had $2.5 billion dollars, would you buy an NFL team or an NBA team?

Mike: I would still buy the NFL team because the money that is there before you even sell a ticket, is so extraordinary from television; it’s still so unequal compared to the rest of the other sports. You’re right. NBA owners maintain a better relationship with their players than other sports. The league also promotes its players better than the other sports. So, relationships are important, but the NFL is even above relationships; it’s a machine. The machine right now has some ball bearings missing though, it needs to straighten out its problems.

JWS: Last Thursday night’s NFL season opener (on NBC & NFL Network) between Atlanta and Philadelphia experienced a 10-year viewership low for the league’s kickoff game (-13% YoY). Why wasn’t there more interest in opening night? If you were an NFL owner, would you be worried about declining viewership?

Mike: First of all, that was not the most attractive of matchups. It’s just not. Those are not marquee franchises. There’s a lot of marquee franchises, neither one of those teams is one of the national marquee franchises. That’s number one.

They’re (the NFL) having issues that they shouldn’t have. The Nike commercials should not supersede their season opening and it did; it became part of the theme of their opening. That’s their fault. That’s them leaving a problem lingering. When you have a problem, solve the problem. Their running away from the problem and hiding under the covers, and trump has buried them on this issue. Absolutely buried them. They’re (NFL owners) afraid of him. Trump plays directly to his base. He’s fearless. They’re scared to death to upset anybody. Trump treats it (player protests) as an issue that’s a positive and plays it directly to his base, so he is playing offense. They’re playing defense.

I don’t worry about that (declining attendance), they’re (the NFL) still so far ahead. They (NFL owners) don’t want any more slippage. That’s what they’re worried about.

Editor Note: Television ratings for the Week 1 Sunday afternoon timeslots reversed course. Fox regional games rose +5% YoY, Fox’s national game saw a +1% bump and the CBS single-header jumped +23% YoY. The final game of the weekend, the Sunday Night Football thriller between the Packers and Bears, experienced a -9% YoY decline; particularly disappointing for NBC execs considering the ratings for last season’s SNF debut were impacted by a hurricane.

Howie Long-Short: On Monday, the Alliance of American Football (debuts on February 9th) announced it would be introducing a mobile betting platform that will enable fans to watch the game and place in-game bets on the same screen. MGM will serve as the league’s exclusive in-game gambling partner and host the gambling business on their app (as the licensee) for the league’s first 3 seasons. The partnership will enable MGM to better assess odds and offer more props to bet on (think: speed of ball release), as they’ll have access to next-gen stats generated by wearable technology. That’s noteworthy, as the player’s unions of the Big 4 sports leagues all vehemently oppose the sharing of data collected by wearable technology.

MGM is currently licensed to conduct business in just NV and NJ, but remember back in August the company signed a market access agreement with Boyd Gaming giving it the ability to operate in 15 states.

Despitesolid second quarter results” (revenue +2%, EBITDA +3%), MGM failed to meet analyst top and bottom line expectations in Q2 ’18; news that caused a -9% decline in the share price. CEO Jim Murren attributed the misses to waning demand (i.e. bookings) at the company’s Las Vegas casinos (Caesers reported the same problem). Despite the Q2 shortfall, Murren said he expects Q3 to be the best in company history; he also reiterated the company’s plan to repurchase $600 million in “ridiculously undervalued” stock. MGM shares will open on Monday just below their 52-week low at $26.95.

Fan Marino: Speaking of start-up football leagues, at least 3 (Alliance of American Football) will debut in the next 2 years. Is there room for a spring football league? Can any of these leagues be successful?

Mike: No chance, no how. The chance is zero. I’ve said it many times before, there is no room for another football league. This league (the NFL) consumes all. There’s no room in terms of stadium leases, cities, players or sponsors; there’s no room for anybody else.

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