G-League Now a Viable Alternative to NCAA Basketball, Gatorade Goes Sugar-Free

G-League

There were 79 underclassmen and 12 international players eligible for last night’s NBA draft, in addition to those in the 2017-2018 senior class, but just 60 were selected by NBA franchises; meaning hundreds will pursue free-agent contracts (or tryouts) with the hopes of landing a G-League (formerly D-League) roster spot. Though G-League salaries start at just $35,000 (up from $19,000), the league offers players the opportunity to receive round-the-clock, world-class coaching and compensation for their skill-set (hence the large number of underclassmen); while players have the chance to remain stateside and focused on reaching the NBA. For those reasons, the league is also considered an alternative to college basketball for elite high school prospects who fail to meet the NBA’s age requirement (19); back in April Darius Bazley became the highest profile recruit to forego college (previously committed to Syracuse) and international basketball (see: Brandon Jennings, Emmanuel Mudiay) to join the G-League. It is possible to make six figures playing in the G-League, as the NBA added roster spots for 2-way players last year – those designated to split time between their G-League team and NBA affiliate. 2-way players can earn up to $385,000/season.

Howie Long-Short: $35,000 as a league minimum salary sounds low, particularly when considering that NBA2K 1st round picks take home the same amount, but at least two-thirds of the league’s players make $70,000 (+ housing & medical); more than a respectable living for 5 months of work. That’s an important distinction to make when considering whether the G-League is a viable alternative to the NCAA; remember, shoe companies are said to have been paying elite prospects +/- $100,000 to attend affiliated universities (see: Adidas, Brian Bowen, Louisville).

The G in G-League stands for Gatorade, a subsidiary of PepsiCo. Inc. (PEP). Back in January, we reported that domestic Gatorade sales had slipped for the time since 2012 (-.5% to $5.9 billion in fiscal 2017), as health-conscious consumers were opting for alternatives to the sugary sports-drink. In Q1 ’18, Gatorade “improved sales performance and trajectories”, but that didn’t stop the company from introducing “Gatorade Zero” this week; the first sugarless (and carb-less) product in the company’s 53-year history. The introduction of “Gatorade Zero” comes on the heels of a marketing campaign by Body Armor portraying the market leader as out of touch with the needs of the modern athlete. Despite a down year in 2017, Gatorade still controls 75% of the $8 billion market sports drink market.

Fan Marino: The G-League is a true minor league (27 teams), developing players who can contribute to NBA franchises. In fact, 53% of all players on an NBA rosters at the close of last season spent time in the G-League. Of course, not everyone is in favor of the G-League capitalizing on kids who failed to achieve their dreams of being drafted. Warriors coach Steve Kerr believes “if you’re truly trying to do what’s right for the kid, and the kid declares for the draft and doesn’t get drafted, you know what? Welcome him back (to school).”

Fun Fact: As the 1st, 2nd and 3rd picks in last night’s draft, DeAndre Ayton, Marvin Bagley III and Trae Young will earn $8.2 million, $7.3 million and $6.6 million respectively, in their rookie seasons.

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

Australian OTT Service Fails During World Cup, Linear TV Comes to the Rescue  

Optussport_app

Australian telco provider Optus has issued a “gesture of goodwill for Australian fans,” authorizing government-owned SBS to broadcast all remaining group stage World Cup matches. The concession (Optus has broadcast exclusivity) comes amidst public pressure, as coder issues prevented thousands of fans from watching games via the OTT service Optus Sport throughout the first weekend of the World Cup. Optus CEO Allen Lew said he has “absolute confidence” that the issues impacting delivery have been corrected. The company has yet to confirm it will retain exclusivity on the games it controls within the Round of 16 and Quarterfinal round; the OTT service is scheduled to carry 2 games in each of those rounds.

Howie Long-Short:  Between the loss of angry subscribers and the company’s decision to remove the $15 paywall restricting Optus Sport content through August 31st – a move that ensures Australian soccer fans can watch the first few weeks of EPL action – Optus has “taken a hit”, but Lew insists “it’s not significant in terms of Optus’ bottom line”. Lew does admit the company “made a mistake” in purchasing World Cup rights. For information purposes, Optus acquired exclusive World Cup broadcast rights from publicly-funded SBS for $8 million.

Optus, the 2nd largest telecom company in Australia, is a subsidiary of Singtel. Singtel, a Singaporean telecommunications company, trades over the counter under the symbol SGAPY. Back in mid-May, the company posted Q4 and full year (ending in March) financials. Though Q4 profit was down 19% (to $781 million), the company posted full year net profits that rose 41.5% to $5.45 billion. Singtel Group CEO Chua Sock Koong pointed out that “Optus gained market share in Australia underscoring its network and content strategy.” Shares are down 8.5% since the company reported, closing on Wednesday at $23.32.

Fan Marino: The proliferation of OTT services introduced to the consumer have at times lead many to forget that streaming technology remains less than perfect (remember the Mayweather/McGregor fight?). Broadcast cable remains the safest option if watching the game remains is your number one priority.

Did you know that the Australian national team is known as the Socceroos? The team lost to France (2-1) last Saturday in their first group stage match. They’ll take on Denmark (which defeated Peru 3-0 in the other Group C match) in their second game later this morning (8a). Just don’t expect much from the Socceroos – they’re considered among the worst (if not, the worst) teams in the tournament.

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

Mo Bamba Talks Shoe Deals, Marketing Strategy and the Harlem to Harvard Narrative

NCAA Basketball Tournament - First Round - Nashville
NASHVILLE, TN – MARCH 16: Mohamed Bamba #4 of the Texas Longhorns looks on against the Nevada Wolf Pack during the game in the first round of the 2018 NCAA Men’s Basketball Tournament at Bridgestone Arena on March 16, 2018 in Nashville, Tennessee. (Photo by Andy Lyons/Getty Images)

On Tuesday evening, sports collectibles leader and exclusive trading partner of the NBA/NBPA, Panini America (@PaniniAmerica) held a pre-draft event at the NBA Players Association offices for VIP collectors and hobby stores. Donte DiVincenzo (Villanova), Chandler Hutchinson (Boise State), Michael Porter Jr. (Missouri), Trae Young (Oklahoma) and Mo Bamba (Texas) were in attendance to take pictures, sign autographs, participate in a basketball clinic, and talk about the excitement of seeing their first Panini trading cards. JohnWallStreet had a chance to talk with Mo Bamba about his official visit to Harvard, attending the Darrel Morrey Sloan sports analytics conference (2x) and the impact playing for a Nike school (Texas) will have on who he decides to sign a shoe deal with.    

JWS: You took official visits to Texas, Duke, Kentucky, Michigan and Harvard. How serious was your interest in attending the Ivy League school?

Mo: Harvard was very much a real thing for me simply because it’s one of the best schools in the world. If I could use basketball as a platform to get in there, it would turn some heads and maybe someday I could be (looked at as) one of the top influencers in the world. As the recruiting process went along, eventually I realized that it wasn’t a viable landing spot for me, but someday there will be a 5-star prospect who will be the first to go to Harvard and do things the right way as far as being an academic all-star. I wanted to be that guy. I fell in love with the Harlem to Harvard narrative.

JWS: You’ve attended the Darrel Morrey Sloan sports analytics conference twice. Was there a single message that’s resonated with you?

Mo: There was one panel with David Falk (agent) on it and he was talking about how there was this tennis player whose parents were asking him to market their son, to maximize his earning potential. He told them that there wasn’t much he could do for them, that winning was the best thing an athlete could do to market themselves.    

JWS: That’s interesting because one would assume you would have had a better chance to win a college basketball championship had you gone to Duke or Kentucky. Do you have any regrets about going to Texas?

Mo: The only thing I regret about the recruiting process is not committing earlier. I bet on myself. I didn’t need an institution to back me up.

JWS: You have yet to sign a sneaker/apparel deal. Does the fact you played for a Nike school have any impact on who you will end up with?

Mo: No, not necessarily. I went to Under Armour camps, I went to Adidas camps and I got the feel for different shoes. I’ve also considered Puma. Ultimately it just comes down to who I feel closest to and who will put the best plan in motion for me as a professional basketball player.

Howie Long-Short: Earlier this week, we wrote that Puma (PMMAF) had announced its re-entry into the $1.131 billion U.S. basketball market with the signing of Marvin Bagley III (5 years). That was just the start of things — the company has since announced the hiring of Jay-Z as Creative Director, locked up DeAndre Ayton (plus Michael Porter Jr. & Zhaire Smith) and signed Walt Frazier (1st basketball player to endorse brand) to a life-time deal. While the company made has made headlines bringing in 2 top rookies and the rap icon, their choices are puzzling. Big men traditionally do not move shoes and celebrity ambassadorships rarely result in increased sales (save Rihanna/Puma). Jay-Z may not help the company sell any sneakers, but he should be able to help them land stars that are signed to his Roc Nation Sports agency.

Trae Young is another guy who Puma had been targeting. Young ultimately selected Adidas over Puma and Nike. It’s worth pointing out that neither Bagley, Ayton, Porter Jr., Smith nor Young signed with the company that outfitted their collegiate team.

Fan Marino: With a 7 foot 10 inch wingspan, Mo Bamba is set to become the “longest” player in NBA history (or at least the 19 year history of the NBA draft combine – Manute Bol reportedly had a 8 foot 6 inch wingspan); for comparison purposes, that .5 inch wider than Rudy Gobert’s and 2 inches wider than Shaq’s.

However, unlike those traditional bigs, Bamba can run. At May’s combine, the time he posted sprinting ¾ of the length of the court beat the times put up by Russell Westbook and John Wall at their respective combines. With a skill-set like that, it’s no surprise experts have Bamba projected to go as high as 3rd in this evening’s draft. DeAndre Ayton is expected to go first to Phoenix. The Sacramento Kings are expected to pick between Marvin Bagley and Luka Doncic at #2.

Moments after being drafted tonight, Mo Bamba’s first Panini NBA trading card will be made available on the Panini Instant (#PaniniInstant) online platform (https://qr.paniniamerica.net/2myjt) along with other NBA Draft Picks.

Speaking of DeAndre Ayton, he signed an exclusive autograph/collectibles deal with Panini America on Wednesday afternoon. Panini plans to feature the Arizona center on packaging for 2018-2019 products and his autograph can be found in packs of NBA and collegiate licensed packs. Suns fans will have the chance to buy his first card shortly after he shakes the commissioners hand.

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

Adidas Tempers World Cup Sales Expectations

2018-Russia-World-Cup-Travel-Guide.jpg

Adidas AG (ADDYY) has tempered merchandise sales expectations in Russia for this summer’s World Cup, citing international sanctions (see: Ukraine crisis) that have weakened the ruble as declining oil prices have slowed the Russian economy. In 2014, (hosted Sochi Olympics) ADDYY had over 1,100 stores across Russia/CIS, but over the last 4 years the company has closed 500 of them and reallocated the marketing dollars accordingly. The absence of several prominent teams (see: U.S., Italy, Netherlands) is also expected to have a negative impact on merchandise sales.

Howie Long-Short: Though Adidas currently does just “a little more than half” the sales total it did during its ‘14 peak ($1.3 billion, 3x Nike’s total w/in market) in Russia, the company now operates at higher margins in the region as a result of strict cost discipline and an increase in pricing. Adidas reported a -16% sales decline in Russia/CIS (and -5% decline in EMEA) in Q1 ’18 with CEO Kasper Rorsted attributing the disappointing result to “challenging market conditions”.

Though Adidas has acknowledged it won’t approach the total sales figures that it did in ’14 (Brazil), the company is expecting sales of team soccer jerseys (the most popular merchandise item) to set a record during this World Cup. Twelve (up from 9 at ’14 WC) of the 32 teams competing in Russia (including the host country) will be wearing ADDYY kits, the most of any apparel provider (Nike is 2nd with 10 teams). For reference purposes, ADDYY sold 8 million jerseys in 2014.

It’s worth noting that Adidas is also the manufacturer of the official match ball. German soccer consultant PR Marketing projects the company will sell 10 million balls after moving 14 million “Brazuca” balls in ‘14.

On May 3rd, Adidas reported that efficiency savings drove bottom line growth +17% (to $647 million) in Q1 ’18. Accounting for currency effects, sales rose roughly 10% YoY (to $6.4 billion) with the company’s Adidas Originals line and running, training and soccer verticals driving the growth. North American sales rose +21% YoY and sales in China rose +26% YoY, with the Asia-Pacific (+15%) and Latin America (+10%) markets also experiencing double-digit growth during the most recent quarter. ADDYY shares are down -16.5% over the last 2 months, but remain +10.5% YTD; closing on Tuesday at $110.28.

Fan Marino: The U.S. team’s absence from the tournament may hurt total merchandise sales, but it hasn’t had a negative impact on domestic viewership through the first 4 days. Matches on Fox and FS1 have averaged 2.24 million viewers (including 4 million+ for Germany/Mexico & Brazil/Switzerland), a 32% increase over the Group Stage average from the last 4 World Cups combined.

Telemundo (CMCSA) is experiencing similar success thus far. The network drew 6.56 million TV viewers for the Mexico/Germany game, making it the most watched Group Stage match in Spanish-language TV history and the most watched sporting event in network history.

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

Gaming Streams Outdraw Most Cable Programs as Nearly 9 Million Watch Friday Fortnite

Fortnite

More than 8.8 million unique viewers live streamed Week 4 of Friday Fortnite, an invite-only tournament for prize money hosted by well-known streamers (see: Ninja, Keemstar) and sponsored by UMG; making it the most watched gaming competition to date. To put that figure in perspective, 5.3 million people tuned into coverage of the 1st Round of 2018 NFL Draft, the 2017 MLB LCS averaged 6.3 million viewers, 7.9 million people watched the season finale of AMC’s “The Walking Dead” and the 2nd most watched NBA Conference Finals in 16 years drew just over 9 million fans. Moving forward, it’s expected that esports/gaming competition will continue to regularly outdraw traditional television programming; Statista projects the number of gaming viewers worldwide to reach 743 million people by 2019, up +22% from 609 million in 2016.

Howie Long-Short: Back in March, we wrote about Fortnite experiencing a “cultural moment”; Drake (rapper), JuJu Smith-Schuster (Steelers WR), Travis Scott (rapper) and Ninja (a pro gamer) set the all-time, non-tournament, record for concurrent viewers on a single individual’s Twitch channel (628,000, previous record 388,000) as they streamed themselves playing the game between 1-5a EST.

Both the live streaming video platform and the popular online survival game (45 million players) have only grown in popularity since that early morning in mid-March. Twitch now boasts of 3.2 million broadcasters (+60% since ‘17), with 49% of all broadcasts (less than 1% existed in Sept. ’17) on the platform built around “Fortnite” content. That’s a noteworthy stat, as no other game has controlled more than 40% of Twitch channels dating back to 2016. Of course, it’s not just Twitch benefiting from the Fortnite craze; the game now also “holds the record for the most video game-related uploads in a single month on YouTube.”

Fortnite was developed by Epic Games, a privately-held company that Tencent (TCEHY) maintains a 40% stake in. TCEHY reported in May that Q1 ’18 net profit rose 61% YoY (to $3.6 billion) on $11.5 billion in revenue (+48% YoY), with mobile (revenue +68% YoY) gaming and video streaming (revenue +75%) driving the growth. PC gaming revenues were flat, but that’s mostly indicative of impressive Q1 ’17 figures and the fact the company has yet to monetize “PlayerUnknown’s Battlegrounds” or Fortnite in China. Tencent plans to launch the games in the country in the coming months (see: upside). It’s worth pointing out that TCEHY is Asia’s 2nd most valuable publicly traded entity. As for Ninja, he’s making at least $500,000/mo. from subscription fees, game sales, brand deals and donations on Twitch.

Fan Marino: Epic Games has invested $100 million to fund Fortnite tournament prize pools, with the competition set to debut later this year; so, interest surrounding the last-man-standing, “battle royale” game is only going to increase. At $100 million, the prize pool is more than 4x greater than the 2nd largest sum ever offered in a competitive gaming prize pool, which was $23 million for DotA 2’s 2017 esports tournament. Of course, $100 million is just 1/3 of a single month’s revenue for Fortnite – the game generated $296 million in April, up a staggering 134% since February.

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

Yankees Seek to Re-Acquire YES Network, Hold Buyback Option

YES_Network_logo

The New York Yankees have expressed interested in re-acquiring the 80% of the YES Network controlled by 21st Century Fox (FOXA), if FOXA is to proceed with the sale of its film and TV assets (including 22 RSNs). The team reportedly holds a buyback option in the event the network (the most valued/viewed RSN among FOXA lot) goes up for sale. Last week, we wrote that Comcast (CMCSA) had submitted a $65 billion all-cash offer for 21st Century Fox’s (FOXA) assets that trumped the $52.4 billion all-stock offer that The Walt Disney Company (DIS) placed in December; DIS is expected to submit a counter bid. Yankee Global Enterprises, the holding company that owns the baseball club and NYCFC, controls the remaining 20% of YES.

Howie Long-ShortFOXA initially purchased a 49% stake in the YES Network for $1.862 billion in 2012. In 2014, the company acquired an additional 31% at roughly the same $3.8 billion valuation. The 1st place Yankees are drawing the network’s highest ratings since ‘12 and YES also controls the rights to broadcast both Brooklyn Nets and NYCFC games, so it’s certainly not unreasonable to expect FOXA to sell the asset at a valuation north of $4 billion. This means the team would be re-acquiring the network at a loss. That may not be of concern for the franchise though, as they likely value the ability to own/distribute their content with the recent proliferation of direct to consumer platforms/services.

According to Moody’s Investor Service, if Comcast were to acquire FOXA assets the combined entity would carry +/- $170 billion in pro-forma debt; more than every company in the world not named AT&T/Time Warner (which just completed a $85 billion merger).

Fan Marino: Back in April, Forbes released its rankings of the most valuable Major League Baseball teams. The Yankees topped the list with a $4 billion valuation, making them the 2nd most valuable team in all of sports; behind only the Dallas Cowboys ($4.2 billion). The team generated $619 million in revenue last year, 96.5% more than the league average ($315 million). Forbes has the NYY valued at +/- 6.5x revenue, slightly higher than what the Houston Rockets sold for in 2017; for comparison purposes, the Carolina Panthers recently sold for less than 6x revenue. I continue to maintain that David Tepper got a good deal.

The Yankees have signed the PBP voice of the YES Network (for Yankee games) to a 3-year extension (network option for 2 more years) worth more than $1 million/year. The deal makes Michael Kay the highest paid local broadcaster in MLB. Kay takes home a higher annual salary than some of the team’s biggest stars; Luis Severino, Gary Sanchez and Aaron Judge will make $604K, $620K and $622K respectively this season.

Fun Fact: The value of the NYY has compounded 15% annually since George Steinbrenner group bought the team for $8.8 million in 1973.

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

Puma Steals Bagley III from Nike, Announces Entry into U.S. Basketball Market

Puma

Marvin Bagley III has signed a 5-year footwear and apparel deal with Puma, rumored to be worth up to $9 million annually, the largest rookie shoe deal since Kevin Durant signed a 7-year $60 million deal with Nike in 2007. Bagley, projected to be a Top 5 selection in Thursday evening’s NBA draft, will become the first NBA player to be sponsored by Puma since Vince Carter signed a 10-year $50 million deal with the company back in 1998; Carter terminated the deal in his Sophomore season to sign with Nike. Puma is negotiating with several other rookies (Trae Young has been mentioned) in the 2018 draft class and will reportedly target veterans with expiring shoe contracts later this fall, as the company looks to re-enter the lucrative U.S. performance basketball shoe market (down 13% from $1.3 billion peak in ’15).

Howie Long-Short: Puma is coming on strong and now taking aim at the U.S. market; in addition to their aggressive basketball ambitions (Nike controls 81.3% of the market including Jordan brand), the company announced it has signed a lease for 24,000 SF on 5th avenue for a North American flagship store. Puma has surpassed Under Armour and is now third in sales among athletic apparel brands, behind just Nike and Adidas.

Puma SE, a subsidiary of Kering, trades over-the-counter under the symbol PMMAF. The German athletic footwear and apparel brand reported net profit rose +36% YoY (to $82.5 million) in Q1 ’18, with sales increasing double-digits across all product categories and markets (+15.6% in U.S.). China/Asia experienced “exceptionally high growth” (+35%), while the running, training and sportstyle categories grew the fastest. PMMAF also increased FY18 sales (from +10% to +10%-12%) and EBIT (from $354-$377 million to $360-$383 million) guidance during the April earnings call.

Fan Marino: Nike won’t be pleased with this decision, considering they’ve been paying for Bagley’s allegiance since 2012. In 2008, the Bagleys filed for Chapter 7 bankruptcy, claiming household income of $44,000. Four years later, shortly after Nike sponsored the Phoenix Phamily (the team Bagley III played on, coached by Marvin Jr.), the family moved into a California home estimated to be worth between $750,000-$1.5 million; rent in the area ranges from $2,500-$7,500/mo. The elder Bagley has acknowledged the family used Nike money to “make ends meet.”

That kind of arrangement isn’t atypical, The Oregonian released a piece back in March detailing how sneaker companies skirt NCAA regulations by targeting the family members of star prospects who control their own AAU programs; offering a “blank check” for their allegiance. What is unusual, is Bagley took Nike money and then signed with Puma; analysis of 2017 NBA first round picks indicates that most players signed professional shoe deals with the company that sponsored their grassroots team. It’s worth noting that Bagley’s deal with Puma includes a commitment from the brand to continue funding his father’s AAU program.

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

DraftKings Raising $200 Million to Complete Pivot to Sports Betting

Draft Kings

DraftKings is raising a $150-$200 million funding round to complete its pivot from a DFS company to a legalized sports betting business (with web-based and mobile offerings). Earlier this month, the company announced it had partnered with Resorts Atlantic City (land-based casino partner required) and formally applied for a New Jersey State Gaming License, so that it could take sports bets within the state. No information pertaining to valuation has been disclosed.

Howie Long-Short: DraftKings is reportedly telling investors that it’s expecting DFS to continue driving corporate profits for “years to come” as nationwide legalization will be a slow process. I give the company points for honesty, but that’s not news that will excite me as a prospective investor. The company lost $92 million on $160 million in revenue in ’16, so it’s reasonable to assume it wasn’t profitable in ’17 on $192 million; and with DFS set to begin losing market share to legalized sports betting (see: Yahoo! DFS, FanDuel in Europe) one can’t assume 2018 will be any better. The announcement of this round would seem to imply the company currently lacks the runway to complete a pivot that it acknowledges will take time.

Axios has also reported that Platinum Eagle Acquisition Corp. (EAGLU) has expressed interest in a reverse merger; an expedient and cost effective way for a private company to trade on a public exchange. No details have been released relating to the equity percentage at which EAGLU would acquire the company or the valuation DraftKings holds; FanDuel calculated its fully diluted value to be $1.2 billion in 2017, though its user base is smaller (6 million versus 10 million).

The Legal Sports Report has reported that Kindred Group (STO: KIND-SDB) is also kicking the tires on a potential DraftKings acquisition. That news is interesting as KIND-SDB announced back in May intentions to enter the U.S. market and it’s believed that a subsidiary (Kambi Group) is working with DraftKings to develop a mobile sports betting product. The European online gaming and sports betting company, best known for subsidiaries Unibet and 32Red, did just shy of $1 billion in revenue last year.

Fan Marino: Penn National Gaming (PENN) is another company that has an opportunity to get in on New Jersey’s sports betting gold rush. The company, along with Greenwood Racing, owns a proposed OTB site in Cherry Hill that could qualify for a sportsbook under a bylaw that covers “former racetracks”. The joint venture also owns the Freehold Racetrack.

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

American Express Seeks to Solve Fan Pain Points at 118th U.S. Open

Amex

The first round of 118th U.S. Open was completed on Thursday at Shinnecock Hills (Long Island). Just 4 players (Dustin Johnson, Russell Henley, Ian Poulter and Scott Piercy) finished under par (all shot -1) as 15-20 mph winds made for a tough opening round; the field combined for 189 double-bogeys or worse. JohnWallStreet was in attendance and had the chance to speak with Lindsay Ulrey, Director, Global Experiential Marketing & Partnerships at American Express (AXP) about why the company dedicates such a large portion of its marketing budget to the U.S. Open, what it looks to accomplish at the event and how it measures success. 

JWS: The U.S. Open (Golf) and the U.S. Open (Tennis) are the two big experiential events on the American Express calendar. How did you select those events as opposed to something with broader appeal like the Super Bowl?

Lindsay: We’re lucky that we have a team of great researchers and we know that our card members are passionate about golf and tennis, specifically. So, it’s extremely important that we explore opportunities in both of those spaces, where are card members are, and that we show up in relevant ways that allow us to really have their back in those moments.

JWS: What does American Express look to accomplish at a marquee event like the U.S. Open?   

Lindsay: At our very core as a company we’re about service, so when we come to an event like this we really try to dig into what the customer needs are. We’ve been a partner of the U.S. Open for 12 years and with that, we’ve learned what the pain points are; what are the things people could really use help with on the grounds and what are the ways we can really surprise and delight them, in ways that are unexpected. You can look at the American Express radios that we do, giving fans the SiriusXM live feed in their ear. That’s a really unique benefit that addresses a pain point, as fans aren’t in front of their TVs to receive the broadcast commentary; now they’re actually able to hear the broadcast in their ear, on the golf course, while watching in real time.

JWS: What are some of the other pain points you guys have been able to solve?

LindsayOne of the things we know about fans of golf is that they spend between 7-10 hours on a golf course. One major way we can come in as a service brand and play an important role is by having a place where our card members can come, relax, recharge and connect with their friends; so, for the first time this year, we have the American Express Card Member Club up on the 10th hole. It’s open to any card member and they can bring three guests. We have a whole bar, interactive programming and a view the fans are just loving.

Another thing we constantly hear from our card members is that it’s very hard to see what is happening on the golf course. So this year, every card member can simply show their card and we’re giving out complimentary binoculars.

We are also doing a couple of other things around the grounds that are more surprises as opposed to mitigating pain points. One example is the Epic Puttexperience that the USGA is putting on. It’s extremely popular, so we’re offering a priority access line for card members so that they can get to the front of the line faster.    

JWS: How do you gauge success for an event like the U.S. Open?

Lindsay: When looking at an event like this, a lot of it is, how happy are we making our card members? Things that can’t be measured. We like to say at times that we’re in the happiness business. Really, it’s about offering things that make people feel love for the brand and having people walk away saying this event wouldn’t have been what it was without American Express.

Howie Long-Short: There’s a perception that golf is out of favor (total rounds down), but the U.S. Open’s economic impact report indicates otherwise; the sport has grown revenues +22% ($84 billion) over the last five years. As for the U.S. Open specifically, the economic impact of that event has declined over the last half decade. The 2018 event is expected to generate $120 million for Eastern Long Island. For comparison purposes, the 2012 tournament at Olympic Golf Club spawned between $140-$170 million, the ’15 tournament at Chambers Bay generated $140 million and Oakmont did $120-$135 million the following year.

As for AXP, the company reported net income grew +31% YoY to $1.6 billion, despite expenses (think: rewards, member benefits & partnerships) rising 10% to $2.5 billion. They reported $9.72 billion in Q1 ’18 revenue (+12% YoY), with cardholder spending (+12%), loans (+16%) and the company’s global issuing business (+3.5 million cards) all showing steady growth. CEO Stephen Squeri, who took control of the company back in February, has been pleased with what he’s seen during his first few months on the job saying, “we feel good about our progress…we expect revenues to be up at least 8 percent this year and EPS to be at the high end of the $6.90 to $7.30 range we set back in January.”

Fan Marino: American Express doesn’t limit their partnerships and promotions to country club sports, the company has established them across the sports world (see: NBA StoreESPN+). NBA fans will be excited to learn of their most recent collaboration with Lionsgate. American Express is offering card holders exclusive access to purchase $5 tickets to an early screening of the Uncle Drew (Kyrie Irving’s character) film on June 19th – more than a week before it opens in theaters nationwide on June 29th. Tickets can be purchased here through Atom Tickets.

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

Comcast Submits $65 Billion All-Cash Offer for Fox Film/TV Assets, Including 22 RSNs

CMCSA

Just 24 hours after the announcement that a federal judge had approved AT&T’s $85 billion takeover of Time Warner, it was reported that Comcast (CMCSA) submitted a $65 billion all-cash bid for 21st Century Fox’s (FOXA) film and TV assets (including 22 RSNs); trumping the $52.4 billion all-stock offer that The Walt Disney Company (DIS) had placed in December. Comcast’s interest largely surrounds FOXA’s 30% stake in Hulu, as the acquisition would give CMCSA controlling interest in the OTT service (already own 30%). NBCUniversal CEO Steve Burke stated, “we would be very very interested in growing that business.” In fact, it’s possible that if Comcast’s offer were to be selected, the company wouldn’t even end up controlling the RSNs; language within their bid indicated the company would match any regulatory commitments made by DIS; including to “divest… any of the RSNs.”

Howie Long-Short: FOXA shares rose +7.7% (to $43.66) on Wednesday following report of the Comcast bid. DIS closed up +2% (to $106.30), while CMCSA shares remained flat ($32.32) as investors expressed skepticism about the company increasing their debt level to 4x earnings; necessary to finance both the Fox deal and their purchase of Sky PLC (SKYAY).

It’s certainly worth noting that Comcast’s bid places a +/- $24 billion valuation on the 22 RSNs.

SKYAY is another name to watch. If DIS counters CMCSA’s bid, it’s possible that Fox will up its bid (currently $14.38/share) for the European pay-tv provider. Fox currently owns 39% of the company and was planning to acquire the remaining 61%, with the intention of flipping the asset as part of the proposed $52.4 billion transaction. Should a bidding war arise, John Janedis, an analyst at Jefferies LLC said it wouldn’t be unreasonable for the winning bid to reach $80 billion. For reference purposes, Comcast bid $16.72/share for 61% of Sky. The domestic cable/internet provider wants the asset (and Star – India) to expand its business overseas.

Fan Marino: AT&T’s (T) acquisition of Time Warner (TWX) includes several sports-related properties including Turner Sports, Bleacher Report and the newly launched Bleacher Report Live service; an untethered (i.e. no subscription needed) premium sports streaming service. T also takes controlling interest in the country’s largest pay television distributor, DirectTV. TWX shares rose 2% on Wednesday to $97.95, while T shares declined 6.2% (to $32.22) on the news.

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