Wizards Owner Expects NBA 2K League to “Dwarf the NFL”

The NBA and Take-Two Interactive Software (TTWO) are launching the NBA 2K League in 2018; 17 NBA teams have committed to participating for a period of 3 years. Each franchise will have the opportunity to select 5 gamers at the March ’18 draft (tryouts begin in January), with the 15-week season (followed by 2 week post-season) set to begin in May. TTWO sold 43 million copies of “2K18” within the U.S. and China, so the NBA is convinced the league will be a success; but as it currently stands, there’s work to do. The NBA 2K League remains without a broadcast partner, a central gaming location (for competition) and has yet decide if competition will be held on Xbox or Playstation systems.

Howie Long-Short: The NBA isn’t the only business convinced esports is going to provide a significant return on investment; through 2016, 50 non-endemic brands had invested within esports and that number has more than doubled over the first 9 months of 2017. Non-Endemic? The term describes a second class of sponsorship; brands not traditionally tied to the business being advertised or product being sold (i.e. NBA – sneakers, balls etc.). Need an example of a non-endemic brand that earned endemic status? PepsiCo (PEP); NFL fans didn’t associate the brand with the sport until the company invested in the Super Bowl halftime show.

Fan Marino: Caps & Wizards owner Ted Leonsis believes “very quickly, esports will be the largest participatory sport with the most active participants”; further projecting the league will generate revenues that “dwarfs the NFL”. Leonsis is bullish because esports is a “global phenomenon”, but so is the EPL (players from 113 different nations have played) and that league generates less than half the revenue ($6 billion) of the NFL ($14 billion). I tend to believe what former AFL Commissioner David Baker recently told us; “it takes 60 years to grow a major league” and to while you can “flash”, to sustain success “it’s got to be multi-generational”.

‘It will dwarf the NFL’: The NBA’s going all-in on esports with the NBA 2K League

For the balance of today’s newsletter, sign-up here!

NFL, Verizon Strike $2.5 Billion Deal, In-Market Games Now Available on All Carriers 

The NFL has signed a 5-year deal with Verizon (VZ), valued at $500 million/year, that enables the telecom giant to stream in-market and nationally televised league games (and access to on-demand content) to any mobile device, Oath owned web property (i.e. Yahoo (AABA), Yahoo Sports, AOL, Go90) or connected TV nationwide; regardless of carrier, beginning in January. The new deal provides VZ with the ability to sell select in-game ad spots, but does not include the exclusivity it enjoys under the terms of the expiring contract (4 years, $250 million/year). DirecTV (T) owns the rights to stream out-of-market games through the 2022 season.

Howie Long-Short: Verizon acquired Yahoo! earlier this year for $4.5 billion, combining its media and technology assets with AOL’s (which it acquired for $4.4 billion in 2015) to form Oath; a company with 50+ brands (which also include the Huffington Post, TechCrunch and others) and a reach of over 200 million monthly unique users in the U.S. VZ sees the NFL as valuable content it can spread across Oath platforms (more valuable than the exclusivity), with Brian Angiolet, Global Chief Media and Content Officer calling football “the marquee sport” to drive an audience. He’s right and that by a mile. The NFL is averaging 15.1 million viewers/game this season; the ’17 NBA playoffs on ESPN/ABC (1st Round – Conference Finals) averaged just 4.26 million.

Fan Marino: Verizon customers have had the ability to stream NFL games on smartphones since 2010, but the remainder of the league’s fans have been blacked-out while on-the-go. Revoking Verizon’s exclusivity will result in broader availability and ultimately increased viewership for the league; but it’s the fans who win biggest with this deal. Fanatics will never again miss a minute of game action, while the casual cord-cutting fan can continue to follow the league and his/her home team.

Verizon to pay NFL $500 million a year to stream games

For the balance of today’s newsletter, sign-up here!

50% of NFL Teams Using Dynamic Pricing, Balance Value Season Ticket Holders

Dynamic pricing models are becoming commonplace in sports, with 16 NFL teams modifying ticket prices based on a variety of factors (market, opponent, weather etc.), in real-time, during the 2017 season. Both Pro and College sports teams are using variations of the model to fill seats; encouraging fans to purchase tickets to less desirable games by offering them at a lower price point. Dynamic plans also incentivize season ticket subscriptions, ensuring fan entry to the most coveted games at a fixed price. Those that oppose the model feel it’s unfair to sell tickets below the price paid by the franchise’s most loyal fans, the season ticket holder.

Howie Long-Short: Teams that use dynamic pricing models can take a share of secondary market sales. They can also respond to unexpected changes in the market (i.e. player is about to set record); using platforms like Digonex, to ensure they set the right price at the right time. Emmis Communications Corp. acquired controlling interest (51%) in Digonex back in 2014 (in a deal worth $5 million). Emmis is a public company, traded under the symbol EMMS.

Fan Marino: The Carolina Hurricanes value maximizing revenue (and season ticket holders) over attendance figures; cutting down on the number of discounted tickets sold and complimentary tickets offered (4,000 in ’14 to 1,000 this season). Team President Don Waddell has said that season ticket holders who’ve chosen not to renew during his tenure have done so because of the “people sitting next to them for free and the people sitting next to them with real cheap tickets.” The decision seems to be paying off, albeit slowly; the team has increased its season ticket holder base (from 7,000 to 7,300).

Dynamic ticket pricing use takes off, and teams hope it’ll lure fans back into sports stadiums

For the balance of today’s newsletter, sign-up here!

Baker Mayfield Discusses His Family’s Financial Struggles That Allowed Him To Pursue His Dreams

Baker Mayfield of the University of Oklahoma won the 83rd Heisman Memorial Trophy on Saturday evening; awarded to the Most Outstanding College Football Player during the 2017 season. Mayfield is the 37th QB to win the award, but the first to start his collegiate career as a walk-on. Just prior to winning the award, Baker spoke exclusively with JohnWallStreet about the financial struggles his family incurred so that he could pursue his athletic dreams.

JWS: You become the starter at Texas Tech and then decided to leave to walk-on at Oklahoma. Did TTU award you a scholarship once you became the starter, and if so, was it hard to walk away from that money?   

Mayfield: Oh, I didn’t have a scholarship; I didn’t leave one. Never had one there. It came down to not having one there and following my dreams. I dreamt of playing of playing for OU and quite frankly, my heart wasn’t in it there (TTU).

JWS: Was the cost of college a financial strain on your family?

Mayfield: Just to put in perspective, it’s why I walked on in-state at first; tuition money was pretty expensive. They (his parents) made so many sacrifices for me, just to go to OU; there is a reason why I work so hard. They’ve given a lot to put me in the position I’m in today so I want to give back and do everything I can for them.

JWS: Can you be specific and discuss some of the sacrifices that allowed you to become the Oklahoma starting QB?

Mayfield: We moved 4 or 5 times my senior year just so we could live in the same school district, so that I could finish my senior year at Lake Travis. Then, as soon as I graduated, they moved in with my mom’s parents for almost 2 years. So, that’s pretty hard. I grew up in the same house for 17 years and then all of a sudden, we move that many times and then they left that town and went with my mom’s parents. That just explains how they are, their character and what they would do for our family; and it means a lot.

Howie Long-Short: Stanford RB Bryce Love finished as the runner-up; the 5th time a Cardinal player has placed 2nd since 2009 (Gerhart, Luck, Luck, McCaffery). Love finished high-school with a 4.5 GPA, is majoring in pediatrics and human biology and plans on becoming a pediatrician at the completion of his football career. JWS got the chance to ask him why a future NFL star takes his studies so seriously?

Love: Academics is really the backbone of everything. That’s the beauty of going to Stanford; you have an opportunity to master the specific concentration that you go in to. Obviously, you can’t play football forever; once that comes to an end, you have an ability to really contribute to the world in positive ways.

Fan Marino: Mayfield’s win makes him the 6th Sooner to win the award; joining Sam Bradford, Jason White, Billy Sims, Steve Owens and Billy Vessels. Only Notre Dame and USC, both with 7, have had more. Ohio State also has 6; including Archie Griffin (’74-’75), the only 2x award winner.

For the balance of today’s newsletter, sign-up here!

Fitbit Outsells Wearables Competition in Q3, Apple Catching Up Fast

Fitbit (FIT) and Xiaomi (low-cost gadgets, China) sold more wearables than any other companies in Q3 (3.6 million units shipped), but both saw YOY sales declines (33% and 3%, respectively), as consumer demand gravitated from simple fitness trackers to multi-purpose smart watches. IDC Global Intelligence noted that sales of FIT’s new Ionic smartwatch ($300 retail) are off to an “encouraging” start, but that sales did not make up for the steep decline in its lower-priced wearables. Apple (AAPL), which placed 3rd in the quarter, grew sales 52% YOY; reporting 2.7 million smart watches shipped. Company sales were boosted by the September release of its Series 3 Watch, featuring LTE connectivity; enabling users to call, text and stream music without a phone.

Howie Long-Short: Samsung (OTC: SSNLF) President Young Sohn recently stated the company was looking to make a major acquisition within the digital health space, specifically within “preventive health and related technologies; leading some to believe the company could be looking to acquire Fitbit (FIT). Should SSNLF decide to acquire the wearables leader, expect FIT share prices to spike. Xiaomi Corp. remains private, but is contemplating an H2 ’18 IPO (Hong Kong the most likely destination); seeking a valuation of at least $50 billion. The company is pursuing a contrarian growth strategy; building 1,000 “Mi Home” stores (+/- 2x number of AAPL stores) by 2019, while targeting $10 billion in retail sales by 2021.

Fan Marino: Fitbit Labs, a research initiative designed to drive behavior change in FIT users, announced the upcoming launch (by end of 2017) of the Fitbit Mood Log; a clock style interface that will monitor mood, energy, physical activity, nutrition and sleep, observing patterns over time. The data collected will help users (and the company) to understand how one’s mental state effects their overall health and behavior. No athlete has done more for mental health awareness than NYG WR Brandon Marshall; you can read about his noble Project 375 organization, here.

Fitbit Is Back on Top of Wearables, But Apple Is Growing Faster

For the balance of today’s newsletter, sign-up here!

Nike Focuses on Supply Chain as Sales Lag

Nike (NKE) announced it will be adopting Feng Tay Enterprise Co. Ltd.’s manufacturing strategy and automation technology, enabling the sneaker giant to cut down on manpower (-30% on the A.J. XIII) while increasing output (+50% on the A.J. XIII). The change in philosophy includes the implementation of 11 new automated technologies; combined, they enable the company to complete and ship customized shoes within 3-4 days, which is less than half the initial projected turnaround time. By 2023, the company would like to offer automated customization on every shoe it produces.

Howie Long-ShortNKE struggled in fiscal Q1 ’18 (domestic revenue declined 3%, gross profit declined 4%), with several of the issues facing the company (i.e. basketball sneakers aren’t in style, heavy promotional market) unlikely to change short-term; so turning their focus to supply chain optimization is logical. Automation and smart distribution systems will make the business more efficient and increase profit margins, but it isn’t helping the company get any closer to Mark Parker’s goal of $50 billion in revenue by 2020. Nike is going to need to grow its women’s division and international business (see: China) if is going to hit that mark.

Fan Marino: Feng Tay and Nike have a storied relationship that dates to 1977; with the Taiwan-based sporting and athletic goods manufacturer first producing the AIR model in ’85. The company also first developed signature shoes for Michael Jordan in ’87 and LeBron James in ’03, produced the 1stgeneration of Shox in 2000 and both developed and produced the Flyknit Racer; one of Time magazine’s “Best Inventions of 2012”. Feng Tay trades on the Taiwan Stock Exchange under the symbol TPE:9910.

Building a Bigger, Faster Nike

For the balance of today’s newsletter, sign-up here!

Adidas Invests in Facebook for Soccer

Onefootball, a German mobile application with 25 million users across 200 countries, announced it has closed on Series B and Series C funding rounds; the company previously acknowledged raising $20 million in investment capital. Described as “Facebook for football without the social element”, the app offers news, live scores and stats for over 140 leagues in 16 languages. Focused on building a premier user experience that results in higher conversions for advertisers, founder Lucas von Cranach said that despite the captive audience (90% opt-in to receive push notifications), the company “won’t build a betting business, won’t build a merchandise business, and we won’t build a ticketing business”.

Howie Long-Short: Onefootball remains privately held, but Adidas (ADDYY) participated in the most recent round; finding value in the captive mobile fan base mentioned. Information pertaining to the amount of capital invested and valuation were not disclosed. There are several publicly-traded soccer teams. Manchester United is traded on the NYSE under the symbol MANU. You can buy A.S. Roma (OTC: ASRAF), Juventus (OTCJVTSF) and Borussia Dortmund (OTCBORUF) over-the- counter. Lazio is traded on the Borsa Italiana under the symbol BIT: SSL.

Fan Marino: As recently noted, more teams at the 2018 World Cup will wear uniforms made by Adidas (11) than Nike (10); but that won’t be the case when it comes to cleats. It’s expected that for the 2nd World Cup in a row, more than half of all players will be wearing NKE footwear; 52% wore the brand at the ’14 WC. For comparison purposes, just 36% of players wore Adidas footwear in 2014.

Onefootball has quietly raised a Series C round and added Adidas as an investor

For the balance of today’s newsletter, sign-up here!