Chinese Footwear/Apparel Brands Would Benefit from Escalation of NBA-China Tiff

The Chinese government’s reaction to Daryl Morey’s tweet (and the NBA’s response to it) sparked conversations about the billions of dollars that the National Basketball Association has at risk in Asia and the “ripple effects” that a prolonged boycott of the league would have on U.S. footwear and apparel companies. As Matt Powell (NPD Group) explained, “all of the western brands are leaning heavily on China for their growth. If the growth in China slows, then the overall growth of those brands will slow dramatically; and there’s no place to make it up.” However, little attention has been paid to how the controversy effects the Chinese footwear and apparel providers; namely Anta and Li-Ning, the two with ties to the NBA.

Howie Long-Short: While tensions have seemed to cool in recent days (or at least they had until LeBron decided to speak last night), Powell isn’t sure “the situation has ended.” But even if it gets worse, don’t look for a significant drop in basketball shoe sales on the Chinese mainland. Even in a worst-case scenario, “if the Chinese government decided it would no longer show NBA games, [it’s unlikely they would order] the population to stop playing basketball. The Chinese are committed to sport and elevating the health of their people.” Blacking-out all NBA games on an extended basis (currently just Rockets games are unavailable) would certainly dampen viewership and perhaps result in lower basketball participation rates, but any loss in domestic shoe sales would likely be offset by an uptick in ‘patriotic spending’.

Wall Street analysts have suggested that should the NBA-China situation escalate it would be to the benefit of brands like Anta and Li-Ning. Powell laid out a scenario where “the government encourages its people to buy Chinese as opposed to Western products” (i.e. patriotic spending). Should that happen, the Chinese people would be likely to comply; remember, the Chinese consumer is “Chinese first and a fan of the NBA second.” Of course, Anta and Li-Ning products are also immune to the headwinds that western competitors like Nike and Adidas face from the greater U.S.-China trade war.

It was reported that 11 of 13 Chinese sponsors listed on the NBA China website – including Anta Sports – have suspended or ended their partnerships with the NBA. Anta has said it would be “suspending contract renewal negotiations” with the league, though it’s unclear what that means; the company is not believed to be an official sponsor. As for the players Anta sponsors, it appears as if those deals are safe. Gordon Hayward said that “[the company] reassured him that his contract was fine, that there is no issue.” FYI: Klay Thompson is also signed to the brand. Li-Ning has C.J. McCollum.

Speaking of Anta (OTC: ANPDY), shares of the company are +90% YTD. Competitor Li-Ning (OTC: LNNGF) is having an even better 2019, up +216% YTD; the best among all footwear/apparel companies. The rising popularity of branded sportswear in China and a growing Chinese middle class are driving both companies.

Anta and Li-Ning have also “elevated their game” of late, introducing high-end products (as opposed to playing in the mid-market where they established their niche) and working to enhance their retail presentation. The growing popularity of the game of basketball certainly hasn’t hurt, either, but Powell says, “the biggest delta seems to be their willingness to fight back.” He explained that the Chinese brands “appear to be suddenly responsive to the market share losses they’ve experienced. For years, they stood by as the Western brands [took business from the Chinese consumer]. It appears they’re now working to gain some of that share back.

To be clear, Nike isn’t nearly as dominant in China as it is here in the U.S. where it maintains +/- 75% of the basketball shoe market. Phil Knight’s company and Adidas each control +/- 20% of the Chinese market.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

NFL Sees Reddit as Content Engine, Way to Reach Differentiated Audience

Reddit

The National Football League has announced a content and advertising partnership with the “social news aggregation, web content rating and discussion” platform, Reddit. As part of the deal, the league has established an official Reddit account (r/NFL, 1.5 million members), committed to hosting a year-round series of “Ask Me Anything” (AMA) discussions and will create an original video series for the Reddit community using content generated during those Q&A sessions. The Wall Street Journal reported that the league is not paying Reddit to operate on their platform. Instead, the company will share in video sponsorship revenues.

Howie Long-Short: The NFL’s decision to embrace ‘The Front Page of the Internet’ – as it has Facebook, Instagram, Twitter, YouTube, Snapchat and most recently TikTok – signals the platform’s arrival as a mainstream social media outlet, a far cry from its early roots as a hipster outlier. Reddit may be growing rapidly, but it’s not a new company; it was founded back in 2005 by Serena Williams’ husband Alexis Ohanian and his college roommate Steve Huffman.

The NFL “wants to be anywhere fans are spending time” and with 9 million fans visiting league-related communities on the platform monthly (it has 330 million total users), Reddit certainly fits the bill. NFL vp, digital media business development, Blake Stuchin explained that it also has “a really differentiated audience. There are many users on Reddit that are not on other social channels.” According to ComScore, 43% don’t use Snapchat, 33% don’t have an IG profile, 28% aren’t on Twitter and 17% are without a Facebook page. These fans tend to be younger and are predominantly male.

Sub-reddits, which allow the user to “focus on a specific interest or topic,” make the platform ideal for storytelling. Stuchin said that from a marketing standpoint, Reddit gives the league the opportunity to showcase the players and their personalities; something it “[doesn’t] really do anywhere else.”

Stuchen described the NFL’s ongoing AMA series (at least once/mo.) as a “first of its kind” amongst American pro sports leagues. “The questions will be sourced directly from the Reddit community and players, coaches, front office executives and some of [the league’s] biggest fans will have a chance to tell their stories, in their own words.

It’s important to point out that the behavior displayed by Reddit users during AMAs is “endemic to the platform.” As Stuchin said, “there are a lot of places where rights holders can do Q&A, but Reddit users are trained to ask questions, vote their favorite questions up or down and actively participate in the conversation daily.” That engagement-level is attractive to the NFL and presumably will be to advertisers too.

The league sees these AMAs as a “news or content engine for all of NFL media.” Stuchin envisions “quotes or topics discussed during AMAs being turned into an Instagram post, a tweet, an NFL.com article or a feature article on NFL Network.” The town-hall style discussions will also be converted into video content and redistributed on the platform (as well as on the NFL’s social channels, NFL.com & NFL Network).

The partnership’s success will ultimately be determined by three metrics. The number of people reached (and the experience those fans have with the content being produced for Reddit), the amount of revenue generated by the league’s newest advertising unit and the amount of content (from AMAs) that the league can recirculate across its various media distribution endpoints.

Fan Marino: Daryl Morey’s tweet in support of Hong Kong protestors set off an international firestorm last week, so it’s worth wondering just how receptive the NFL will be to its AMA guests taking controversial questions from fans. Stuchin told the WSJ that “generally, the participants will be representing themselves, first and foremost, and not necessarily the views of the NFL.”

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Early Entrants: Vol. XXI – Miami Businessman Buying MLS Club?

Editor Note: ‘Early Entrants’ is a series of sports business ‘rumblings’ before the news breaks.

MLS

Miami Businessman Buying MLS Club?

A well-connected private equity source says that Joe DaGrosa, Jr. – chairman of General American Capital Partners and owner of the French Ligue 1 club Girondins de Bordeaux – is strongly considering the purchase of an MLS club. It’s not clear which team DaGrosa is targeting, but it’s not believed to be Inter Miami CF (despite living in the city); he wants to be the controlling owner and that’s not realistic in an ownership group that also includes both Jorge Mas and David Beckham. Orlando would make sense; the team has a willing seller and plays just an hour (by plane) from home. One league office executive said that MLS was not aware of any discussions surrounding DaGrosa and the purchase of a franchise.

Pac-12

Pac-12 Commissioner Reinvents Himself, Long-Term Future Remains in Doubt

Jon Wilner’s (The Mercury News) recent story on the reinvention of Larry Scott (and his management style) indicated that the changes the Pac-12 Commissioner has made have been favorably received by the member institutions. While that may be true, it certainly does not mean that Scott’s contract will be extended beyond its current expiration date (spring ’22). One high ranking Pac-12 administrator told JohnWallStreet that “[Scott] has some support at the president/chancellor level (as opposed to at the athletic director level) – Michael Crow (ASU) and Gene Block (UCLA) are in his corner, but there’s been a lot of turnover in the room and those coming in are asking tough questions about how the conference got into this position (see: +/- $20 million/year behind the B1G in broadcast revenues). His long-term future [in the position] hinges on finding a strategic media partner (i.e. not a P.E. investment) to take a stake in the [Pac-12] network.” ESPN and Fox Sports would be obvious candidates. Sinclair would make sense too.

SpencePorter.jpg

Spence-Porter Projections All Over the Board

Mike Coppinger (The Athletic) reported that the Errol Spence, Jr. v. Shawn Porter fight was “tracking over 300,000 buys.” Bob Arum has since disputed that projection claiming “the actual number is around 170,000 buys.” The two well connected boxing insiders we spoke to (one on the network side, one on the promotion side) said that the truth is likely somewhere in the middle. One said “extrapolations and experience tell us a range that I’d bet my house on – 275,000 to 300,000 (max).” The other, not nearly as bullish, said the figure “isn’t as low as Arum is saying – it was over 200,000 – but it didn’t get to 250,000.” For comparison purposes, Spence v. Mikey Garcia (March ’19) did 305,000 buys. Anything less than that total would have to be considered a disappointment for Fox.

Chargers.jpg

Chargers May Not Be Long for L.A.

It’s been widely reported that the Los Angeles Chargers have struggled to sell personal seat licenses to SoFi Stadium (set to open next year), but even the most pessimistic of fans wouldn’t have imagined that the team is +/- $350 million below their initial sales target. As noted on October 10th, one high ranking team executive told JohnWallStreet that the Bolts have sold just +/- $50 million dollars’ worth of PSLs to date; by comparison, the Rams have peddled +/- 10x that total. The tepid interest in the San Diego transplants has become a concern for executives at the league’s highest level. If the market continues to reject the franchise, one must wonder how long the team stays.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Chargers +/- $350 Million Short of Initial PSL Sales Target

Chargers

The Los Angeles Chargers are struggling mightily to sell personal seat licenses at their new home in Inglewood (slated to open in ’20). One high ranking team executive said that Dean Spanos’ organization is +/- $350 million short of their initial $400 million target. Rams owner Stan Kroenke is understandably upset about his tenant’s inability to move PSLs. Those revenues along with a $200 million NFL G-6 loan are supposed to go towards the new venues’ constructions costs (+/- $5 billion) and he’s is responsible for the difference.

Howie Long-Short: The Rams have long history in the L.A. basin (’46-’94) and Kroenke spearheaded the league’s return to the city, so the Chargers status as both a newcomer and as second class citizens in the market has made it difficult for them to sell high priced products. The club is learning the hard way that there’s a finite amount of time and money that people are willing to spend on pro football. Remember, the Rams also have the better on-field product and Los Angeles is a town that craves star power. Chargers PSLs are a tough sale.

It’s not uncommon for projections on a large-scale construction project to be slightly off, but by nearly 87.5% is an abnormally wide miss. The initial study conducted by Conventions, Sports & Leisure International (a Legends subsidiary) suggested that the market could support $1 billion worth of PSL sales (Rams: $600 million, Chargers: $400 million). When the Chargers stumbled out of the gate with CSL’s suggested pricing, a second study was done and the team’s sales target was lowered to $150 million. But Spanos’ club isn’t even close to reaching that number. Our source said that while the Rams are pushing $500 million in PSL sales, the Chargers have sold just +/- $50 million worth. Executives at the league’s highest levels are said to be concerned.

The Chargers aren’t responsible for picking up the short-fall in PSL sales (if there is one) and are entitled to keep all game day revenues, so one can understand why some believe Spanos “got a sweetheart deal.” But if the club continues to struggle to sell tickets and suites, it’s not certain that his franchise is any more valuable in Los Angeles than it was in San Diego. Remember, this isn’t baseball where the teams control local media rights. There are no local rights in the NFL – the league maintains national TV deals and each franchise is entitled to 1/32 of the revenue. Just moving from a small market to a big market will not – on its own – boost team revenues.

The size of and money in Los Angeles (along with the CSL study) likely convinced Kroenke, Spanos and the league that demand for NFL football in the market was greater than it is. Of course, the Rams owner won’t have an issue paying down the debt if the Chargers come up short by a few hundred million dollars; he’s estimated to be worth $9.7 billion.

If the market continues to reject the club it’s worth wondering if a return to San Diego could be in the team’s future. The team executive we spoke to said that was unlikely. While the Chargers are contractually obligated to play at SoFi Stadium long-term, it’s believed that Kroenke – already upset that the number pledged to cover the debt was cut – would be willing to negotiate an early exit. The problem is, San Diego isn’t taking a Dean Spanos owned team back; a Chargers return to the city would be contingent upon the franchise being sold.

The Chargers’ decision to leave San Diego never made much sense. Sure, the team was unable to get a new publicly funded stadium there, but the city has just one other pro sports team and it plays during the spring and summer months. There are no other teams to compete with for sponsorship dollars (or eyeballs) in the fall and winter.

To be clear, no one (not the Rams, Chargers or the league) is discussing relocation. In fact, the individual we spoke to that is tied to the stadium deal believe it’s premature for anyone to even begin to panic. “As the building comes up out of the ground more people will see that it’s real and sign-up [for tickets].” In the meantime, all the team can do is “market harder and play better.”

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Lawsuit Holding Up Redevelopment of Oakland Coliseum Site, Manfred Threatens Relocation

A's

Oakland Mayor Libby Schaaf confirmed on Tuesday that Major League Baseball Commissioner Rob Manfred has threatened relocation of the Athletics if the city fails to drop a lawsuit filed to prevent Alameda County from selling its stake in the land on which the Oakland Coliseum sits to the team; the city wants the county’s fifty-percent share, but lacks the funding necessary to make the purchase. A’s owner John Fisher intends on redeveloping the 155-acre site to help pay for a new $850 million ‘privately financed’ waterfront ballpark (along with residences, retail, remediation and transportation). Manfred has made it clear that construction of the Howard Terminal ballpark and the Coliseum redevelopment project (which does not include construction of a new sports venue) are a package deal and unless the lawsuit goes away, the city risks losing the team to Las Vegas.

Howie Long-Short: Alameda County wants out of its investment in the Coliseum property (owns 50%) and is inclined to accept the A’s $85 million offer. The problem is California law requires that “publicly owned surplus lands be considered for affordable housing before they are leased or sold” and the city claims that the county failed to act ‘in good faith’ by privately negotiating with the team before it was given the chance to discuss assuming ownership. Until the lawsuit is settled, the A’s seemingly never-ending search for a long-term home is on hold.

The 49ers, Warriors, Kings and Raiders (in Las Vegas) have all broken ground on new venues during the Fisher-Wolff era, so one could understand MLB’s frustrations. Manfred certainly doesn’t want to move a franchise with a storied history in the Bay Area, but Andy Dolich (president of the sports consultancy Dolich Consulting) reminds “it’s the commissioner’s job to increase the net value of every team in the league and the A’s have been playing in an older ballpark while looking for a new venue since Fisher took over thirteen years ago. The league is saying it’s time to do something [in Oakland] or we’ll look at other markets.

Fisher needs the revenues from a redeveloped Coliseum site to fund his Howard Terminal vision. Dolich says there is a real opportunity to build a “retail, residences and transportation hub” where two outdated venues (Oracle Arena is adjacent to the Coliseum) and a vast amount of concrete currently reside.

It must be noted that “many people believe the most logical solution is to build a new ballpark – much less expensively – on the Coliseum site. It could become what the Giants have seen develop in Mission Bay; research, businesses and homes all moving in because it sits in the middle of a transportation hub that already exists.” That isn’t the case at Howard Terminal, far and away the most problematic site the team has looked at. As Dolich explained, “the complexity and costs associated with building right on the water (it’s the 5th most active port on the west coast) are prohibitive.”

Dolich doesn’t believe Manfred’s relocation threats are serious. “The club has proven over time, across various ownership groups, that the market is more than spacious enough for two successful baseball teams and there’s no available market better than the one they are in.” That said, he does see Las Vegas as a viable baseball market. That’s not the case with Nashville, where a group recently issued stadium renderings. “In Oakland, the team draws from all of Northern California; Sacramento to Salinas and east to the Nevada border. Nashville lacks the next realm of fans outside the immediate city. It’s too small of a market.

There is no connection between the Raiders pending move to Sin City and Manfred’s threat. Remember, Henderson, NV was among several cities outside of Arizona that obtained an RFP from the Diamondbacks in the wake of their settlement with Maricopa County. It’s no secret that the Las Vegas suburb would like to bring a third pro sports franchise to the market.

Fan Marino: Did you know? The A’s-Rays wildcard game set an all-time attendance record (54,004) for the round.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

NBA Will Take Stand on Social Justice Issues IF It’s Good for Business

Rockets200x200

Houston Rockets general manager Daryl Morey sent out a tweet on Sunday night saying “Fight for Freedom. Stand with Hong Kong.” The simple message in support of pro-democracy protestors upset NBA media partners, sponsors and basketball officials in mainland China. Morey eventually deleted the tweet after the Rockets issued a statement calling his comments “regrettable”, but the damage was done; the Chinese Basketball Association, Li Ning and the Shanghai Pudong Development Bank Card Center all announced they would be suspending their partnerships or affiliations with the franchise and/or league.

The timing of the controversy could not be worse. The Nets and Lakers are scheduled to play a pair of games and commissioner Adam Silver and Nets governor and Alibaba co-founder Joe Tsai are set to hold a press conference in China this week. CCTV (China’s State broadcaster) has announced it will not be showing the pre-season exhibitions and fans and local celebrities alike are planning to boycott the games.

Howie Long-Short: It’s not often that a single tweet from the general manager of a sports team sets-off an international firestorm. Len Elmore, a 10 year ABA/NBA player, former attorney and current faculty at Columbia University, explained that Morey’s comments quickly made waves halfway around the world because “the Chinese are particularly attuned to social media and they really believe it’s injurious to have a negative image passed over social channels.” Presumably the Chinese aren’t pleased with the optics that mass rallies against their government presents.

The league put out a statement on Weibo saying it was “extremely disappointed in [Morey’s] inappropriate comment”, a clear indication that it’s only willing to take a stand on social issues when it’s good for business. China remains the league’s largest international market and one it cannot afford to lose (much of the NBA’s future growth is expected to come from Asia). How big is the Chinese market? Elmore says, “NBA China – not including sponsorship pacts – is currently worth $4 billion per year. There are 500 million people in the country watching games on television and 300 million playing the game of basketball.”

Silver’s comments Monday saying “that Daryl Morey is supported in terms of his ability to exercise his freedom of expression” is nonsense. Remember, Morey pulled his initial tweet down. It’s unlikely he did so because his feelings on the protests suddenly changed.

It’s important to point out that the Chinese have suspended relationships with the NBA and the Houston based franchise – they have not put an end to them. Elmore called it a “shot across the bow”, but says there’s no real teeth to the threat. “In the long-run the Chinese government recognizes the value of the NBA and isn’t going to cut ties. There’s too much money at stake for them to get radical in their response.” Tencent says they are planning to blackout Rockets games and could theoretically maintain a boycott of the franchise indefinitely, but that won’t hurt Houston’s bottom line; overseas media rights are sold collectively.

Tsai bought the Nets with the intention of tapping into the Chinese market, so his comments siding with the authoritarian regime were to be expected, but as Elmore points out “they failed to address the [Chinese government’s] attempt to erode the civil liberties of Hong Kong citizens or the democratic reform that’s not taking place – even though it was promised.

Fan Marino: Elmore agreed that league’s business in China runs counter to the narrative that it’s the most ‘woke’ of the pro sports leagues. “[The NBA] talks about being a value based, progressive organization – particularly relating to civil liberties and human rights. To say they respect the history and culture of China, when communism has ruled [the country] for the last 70 years, there have been brutal regimes and most recently they’ve been imprisoning Chinese Muslims is hard to reconcile.” The league won’t refer to the individual who owns a franchise as an “owner”, but they’ll do business in a control state. The NBA has lost all credibility as a socially conscious organization now that “people can – rightly or wrongly – point to money being a determining factor in their decisions.

It’s disappointing that outspoken personalities like LeBron James, Steve Kerr and Gregg Popovich have failed to speak out in support of the protesters – and by proxy Morey. Elmore says we shouldn’t be surprised. “They’re not going to speak out as quickly [as they did with Donald Sterling or the discriminatory legislation against the LGBT community in North Carolina], simply because of the business ramifications.” Unfortunately, Morey being forced to walk back his comments is likely to have a chilling effect on others taking a public stand on controversial issues in the future.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

In-Arena Sportsbook About Branding – Not Revenue – for William Hill

Capital One Arena

Monumental Sports & Entertainment (MSE) has announced that William Hill (WIMHY) is set to become its official sports betting partner. The British gaming operator plans (pending an existing lawsuit and licensure from the state lottery) to open an “all-purpose sports betting complex” at Capital One Arena before the end of 2019 (William Hill CEO Joe Asher says early ’20 is more likely). The D.C. venue hopes to be the first professional sports arena in North America with a retail sportsbook on its premises. Illinois has also passed legislation that will grant venues within the state the rights to host a sportsbook.

Howie Long-Short: For as much media attention as this story has gotten, the partnership is relatively inconsequential to William Hill’s bottom line. Phillip de Winter, Head of Business Development at FanHub, said to “look at the international markets. 90% of sports betting revenues come from mobile. The money and future is in mobile.”

That’s not to say the deal is insignificant to the English bookmaker. de Winter explained that “retail stores are as much about branding as anything else. [William Hill] is a big player in Europe and in other markets, but they lack brand equity in the U.S. Having 20,000 people walk past their store in a stadium is great marketing for the company.” For that reason, de Winter believes we’ll continue to see WIMHY open new stores in the U.S. As it currently stands, William Hill operates 143 locations across ten states.

The U.S. market has become increasingly important to European-based gaming operators. Sara Slane, founder of Slane Advisory, explained that “stringent [domestic] regulatory changes have forced [U.K. based] gaming operators to close down thousands of storefront shops. In addition, recent restrictions on advertising and higher gaming tax rates in numerous European countries have compelled global operators to diversify [their business] and double down in growth markets.”

It’s important to point out that Monumental Sports & Entertainment is not a direct stakeholder in the on-premises betting operation. The company will not take bets, share in the book’s profits or set lines; it will simply serve as the landlord to the gaming co. MSE presumably will profit from the in-stadium advertising spend William Hill has committed to as part of the deal.

The addition of a retail sportsbook could change the pre-game, post-game and half-time (at least for Capitals ticket holders) experience, but those concerned it will draw fans away from the game and potentially impact the home-court/ice experience can relax. de Winter reminds, “to place a bet in-person at a stadium means that the fan must get out of their seat. If the action is happening in real-time, that fan is missing plays. During game play, fans are much more inclined to log-on to an app and place a bet from their seat as opposed to potentially missing the highlight of the day.

D.C. CFO Jeffrey DeWitt said the plan is to have mobile sports betting in place by early 2020. A lawsuit stemming from the D.C. Lottery’s decision to award the gaming contract to a single operator (Intralot) without a competitive bidding process is holding up the roll-out. Once sorted out (and licensed), William Hill will be able to introduce a mobile sports betting application to fans within a two-block radius of the arena.

Fan Marino: NBA bylaws prevent teams from offering retail sports betting inside of the arena, so every entrance to the William Hill sportsbook – from within the building – will be closed during Wizards games. Ticket holders who wish to place a bet can do so via a mobile application. The alternative will be to exit the arena and enter the sportsbook from the street. It’s unclear if Capital One Arena intends on permitting re-entry for those leaving the game to place an in-person wager.

Capitals fans should be able to place bets in-person without exiting the building. The NHL has not voiced opposition to the idea.

The in-stadium sportsbook will be busiest on days the building is hosting games, but MSE hopes the place turns into a destination when the home teams aren’t playing. The book will be open from 9a-1a, with the public able to enter from the arena’s exterior.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Landing Top Overall Selection in Draft, Star Defenseman Changes Trajectory of Devils’ Business

Devils

The Devils will play their (sold-out) home opener tonight – the team’s first game since selecting Jack Hughes with the number one overall selection in the 2019 NHL Draft. All-star defenseman P.K. Subban will also make his New Jersey debut after coming over in an off-season trade from Nashville. The two high profile additions have raised team expectations, excited the fan base and as newly appointed team president Jake Reynolds said “changed the trajectory of [the] business.”

Howie Long-Short: To ensure the organization was prepared to capitalize on the newfound opportunities that the June additions would bring the team built out its sales and content infrastructure “overnight”. The size of the sales staff grew +45% (from 60 to 105 employees), while the content team added nine new faces bringing its total head count to eleven.

The excitement surrounding the franchise is translating to fans coming to the Prudential Center.” Reynolds said that 90% of 2018-2019 season ticket holders renewed for the 2019-2020 season (10% made their decision after learning the team was set to land Hughes), the club is among the top ten in the NHL in new season ticket sales and individual game sales are up +150% YoY. Despite the “significant uptick” in ticket sales the Devils are not sold out for the upcoming season.

Fans of opposing teams are now interested in seeing the Devils too. In fact, the club currently ranks 2nd – only behind the defending Stanley Cup champion St. Louis Blues – in YoY ticket sales growth on StubHub. The NHL also scheduled New Jersey to play in four other teams’ home openers, a league record indicative of its newfound standing as a ‘must-see’ team.

The expanded content team has also produced immediate dividends. Reynolds said the team has broken “every single internal record related to social engagement, website traffic and video views – with each metric up at least +200% YoY. [The club] is 3rd in the NHL in Instagram engagement and 4th in the NHL in Twitter interactions since the draft.

There’s financial upside to the team’s content production strategy, too. Reynolds says, “the future of the sports business is direct-to-consumer marketing; building a database, finding meaningful ways to engage fans and then finding ways to monetize [those channels].” For the Devils it’s also the present. The organization is one of just a few professional sports teams running pre-roll ads on social video content.

On the sponsorship front, the team signed two new deals over the summer; neither has been announced.

Fan Marino: “There’s an incredible amount of talent on the ice that is going to allow [the team] to compete not just in the short-term, but for years to come.” As constructed, Reynolds believes the team has a five-year window to win the Devils 4th Stanley Cup. In addition to Hughes and Subban, the team features the ’17 number one overall selection Nico Hischier and the top pick in the ’10 draft Taylor Hall.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Flutter Entertainment, The Stars Group to Form World’s Largest Online Betting & Gaming Operator

Flutter Entertainment, plc (LON: FLTR) has reached an agreement to purchase The Stars Group (NASDAQ: TSG) for $6 billion – a 40% premium on Tuesday’s closing price – in an all-share deal. The ‘Combined Group’ would become the world’s largest online betting and gaming operator (worth +/- $12 billion). On a proforma basis, the two companies combined to generate $4.67 billion in revenue in 2018. For perspective, no other gaming outfit pulled in more than $3.6 billion last year (GVC Holdings).

The ‘Combined Group’ will be well diversified from both a geographical and product offering standpoint. While FLTR maintains a significant international presence – particularly in the U.K., Ireland and Australia – TSG’s ownership of Sky Betting and Gaming ensures that the new entity will hold a podium position in Spain, Italy and Germany. The FoxBet brand positions the ‘Combined Group’ to pursue the burgeoning U.S. market. On the product front, the ‘Combined Group’ will be able to offer sports betting, online poker, online casino, daily fantasy and free-to-play games.

Pre-tax cost synergies worth upwards of $175 million, the ability to streamline backend technology – which is extremely costly on a state-by-state basis – and the chance to offset bets between the FanDuel and FoxBet brands are viewed as additional benefits of the merger.

Howie Long-Short: Flutter Entertainment is the entity that was formed out of the Paddy Power and Betfair merger. The conglomerate also includes the FanDuel, TVG and SportsBet brands. Company shares rose +5% on Monday’s news.

In addition to Sky Betting and Gaming, TSG owns PokerStars, BetStars and Full Tilt Poker. The company’s share price has skyrocketed +30% since word of the acquisition leaked.

Upon closing, Flutter shareholders will control 54.64% of the new entity. TSG shareholders own the remaining 45.36%.

The U.S. market is where the growth opportunity lies for gaming operators, but Sara Slane, founder of Slane Advisory, believes FLTR’s interest in TSG is driven by their desire to stabilize their existing business. “Stringent regulatory changes in the U.K. have forced gaming operators like William Hill and PaddyPower to close down thousands of storefront shops. In addition, recent advertising restrictions and higher gaming tax rates in numerous European countries have compelled global operators to diversify and double down in growth markets.”

A TSG takeover is an efficient way for FLTR to grow their domestic footprint. Remember, FanDuel has market access deals in place through Boyd Gaming. Slane explained that “in states with multiple skins, the [Combined Group] will now be able to market two brands to two distinctly different audiences. That should theoretically help capture a bigger piece of the total available revenue pie.

It remains TBD if the ‘Combined Group’ retains both the FoxBet and FanDuel brands in the U.S., but I’ve struggled to come up with a logical reason why they would shutter one. Slane agreed saying that “FoxBet has a big media presence and a free-to-play product on a national scale and FanDuel has tremendous market access. They make for a compelling pair.

Further consolidation seems likely to occur between international gaming operators and U.S. based companies like FanDuel, that have always been a mobile-first operation. One well-respected gaming industry authority explained that domestic gaming companies “are unique in that they have significant brick and mortar portfolios and are operating with double-digit debt loads. It’s simply harder to do mergers and acquisitions with companies at that scale.” DraftKings is positioned similarly to FanDuel, but with a much higher debt load. It’s reasonable to suspect they too are a candidate to be bought by a major international player. William Hill and Bet365 would be the ones to watch.

Fan Marino: U.S. based gamblers will find that FLTR has a “quality product”, but Matt McEwan, executive editor of SportsBettingDime.com (a free sports betting news and information service), believes that is the only positive in the deal for punters. “When two really big players come together they gain a lot control within the industry. The [‘Combined Group’] now has pricing power and that is not good for bettors shopping early lines.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Expect NCAA to Move Goal Posts on Name, Image and Likeness

NCAA 200x200

California Governor Gavin Newsom signed a bill (SB206) last Friday – the news was disclosed during an episode of Uninterrupted’s ‘The Shop’ on Monday – that will permit collegiate athletes in the state to both profit off their name, image and likeness (NIL) and hire an agent to represent them come January 1, 2023. NCAA bylaws currently forbid student-athletes from taking benefits beyond the value of a scholarship and considers individuals who have profited from their participation in college sports (or hired an agent) to be ineligible. The governing body has yet to issue comment on “next steps in California,” but previously maintained that the “bill would remove that essential element of fairness and equal treatment that forms the bedrock of college sports.” SB206 does not allow colleges and universities to pay student-athletes directly.

Howie Long-Short: Newsom, a former collegiate athlete himself, believes the bill will “initiate dozens of other states to introduce similar legislation.” That seems like a safe bet. Back in August, New York introduced a statute akin to SB206 that would also award 15% of athletic department ticket sales revenue to student-athletes; and South Carolina recently announced it would consider its own version of a ‘Fair Pay’ bill.

The NCAA rightfully believes “that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field.” SB206 gives the California schools a significant recruiting advantage, which is why Wisconsin A.D. Barry Alvarez said his school would no longer be scheduling non-conference games against them. The NCAA could try to exclude California colleges and universities from sanctioned competitions (think: March Madness), but the eight Pac-12 schools not located in the Golden State are certain to oppose any outcome that would further the competitive disadvantage that the conference is at. Remember, for every game a P12 team plays in the NCAA tournament, the conference gets a $1.7 million pay-out over six years.

The more likely outcome is the NCAA decides to move the goal posts once again. The COO at one P5 school pointed to the organization’s history of “overcoming tough challenges” (think: Title IV, Ed O’Bannon lawsuit) and suggested “this [will be] no different than that.” ‘Fair Pay’ is a “massive shift in how the NCAA currently thinks and operates”, but our source strongly believes that “everybody in the profession will come together to figure out the best way to resolve name, image and likeness for collegiate sports and the student-athletes.

The cat is out of the bag now that SB206 has been signed into law – the NCAA has until 2023 to figure out a solution. Our source suggested it won’t take nearly that long and said he/she expects coaches, administrators and the governing body to immediately begin working on re-balancing the playing field.

It’s highly unlikely that major national corporations will look to sign relatively unknown college kids over mainstream celebrities, so most (let’s exclude the footwear companies from this discussion) of the NIL deals that will be struck will be done on a local level. While it is possible – okay, likely – that boosters will line the pockets of football and basketball prospects, one must wonder what happens at schools where those dollars generate little ROI in the form of wins? One could argue that NIL makes it more likely talent will concentrate at the top, but that dynamic already exists.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!