New Tax Legislation to Curb Corporate Spending on Sporting Events


The Tax Cuts and Jobs Act, which includes legislation prohibiting corporations from deducting 50% of entertainment expenditures from their tax bill (a longstanding tradition), has businesses taking “a hard look at their entertainment budgets.” New law designed to minimize the government’s subsidy and streamline tax code will save the government $2 billion/year and $23.5 billion through 2027. Ironically, the most profitable corporations are likely to experience the least impact, as the new 21% corporate tax rate is just 3.5% (top rate of 35% with a 50% subsidy is 17.5%) above what they’re used to paying; whereas a struggling company paying less than 35% could see a significant increase.

Howie Long-Short: It’s estimated that U.S. Corporations spend “hundreds of millions” annually on entertaining clients at sporting events, so a short-term decline in team revenues could be on the horizon. While that’s not going to please team owners, it should result in some premium seating at reduced pricing for real fans. If you’ve ever wondered why corporations spend so much on tickets, check out this study. It was determined after evaluating 5 million tickets with an average price of $366/ticket (owned by 400 companies), that there’s a ROI of 1,998%!

Fan Marino: While on the topic of government legislation, MLB is urging Congress to pass a bill that would keep minor league players (considered seasonal employees, not protected by the MLBPA) exempt from federal labor laws, after several MiLB players filed lawsuits claiming receipt of as little as $1,100/mo. in compensation. That’s right, a league that generated $10 billion in 2017 revenue is lobbying to pay future talent less than minimum wage. MLB owners are ruthless; they want their prospects to work for free and then try to limit big money deals to 3 years. The MLB player cash grab is over.

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NFL Merchandise Sales +40 YOY, Remains Biggest, Fastest Growing League

NFL 200x200

NFL TV ratings were down another 10% for the 2017 season, indicating the league may not be as popular as it once was; but, Fanatics sales figures tell another story. The company reported that NFL fans spent 40% more on team apparel (jerseys, shirts, jackets etc.) YTD, then they did in Q1 ‘17. CEO Doug Mack also put to rest any talk that the NFL is losing popularity. Despite being Fanatics’ biggest league partner in terms of merchandise sales, it’s the company’s fastest growing league partner (YOY).

Howie Long-Short: The NFL acquired 3% of Fanatics in May 2017 for $95 million, at a $3.17 billion valuation; which was more than 2x revenue at the time. Noteworthy, as retailers Dick’s Sporting Goods (DKS) and Hibbett Sports, Inc. (HIBB) currently have market caps ($3.68 billion, $444 million) worth roughly half of what they generated in 2017 sales ($7.92 billion$973 million). That’s of no concern to NFL owners though, one was quoted as saying he could see Fanatics growing “anywhere from 8-10x”.

Fan Marino: NFL draft season is upon us (draft is April 26-28). It’s a particularly heavy QB class, with 6 players (Darnold, Rosen, Allen, Mayfield, Rudolph, Jackson) having the chance to be selected on Day 1. The NYJ, looking for a QB since ’69, gave up 3 2nd round selections (to Indianapolis) for the right to move from the 6th spot to the 3rd spot. One would think that would guarantee the team a QB, but ProFootballTalk isn’t so sure; Mike Florio believes Saquon Barkley (RB, Penn State) is the guy the team is targeting. As a Jets fan, I know where this is going (WATCH).

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Gaming Experiences “Cultural Moment”


Last Wednesday night, between 1a-5a EST, Drake (rapper), JuJu Smith-Schuster (Steelers WR), Travis Scott (rapper) and Ninja (a pro gamer) set an 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 Fortnite; a popular online survival game with 45 million players. Curious viewers followed along (many chiming in with funny one-liners) as the foursome navigated last-man-standing, 100-man, “Battle Royales”. Despite the late start, the virtual collaboration garnered mainstream attention (see: Chrissy Teigen’s tweet); the significance of which was not lost on Twitch SVP of Marketing Kate Jhaveri who called it “a cultural moment in terms of building awareness around the appeal of social video.”

Howie Long-Short: Fortnite was developed by Epic Games, a privately held company that Tencent (TCEHY) maintains a 40% stake in. TCEHY reported in November that YTD profits were up 69%, with mobile and PC gaming driving the revenue growth; but, those figures don’t account for the recent success of Fortnite. We’ll need to wait for Q4 ’17 and Q1 ’18 financials to see the game’s impact. As for Ninja, he’s making at least $350,000/mo. in subscription fees streaming Fornite on Twitch. TIME pegged the figure at $560,000/mo. I’ve heard the number estimated to be as high as $1 million/mo.

Fan Marino: The City of Arlington and Esports Venues, LLC are investing $10 million into Arlington Convention Center to create a 100,000 SF esports stadium, the largest venue of its kind in North America. Their goal is to bring the “biggest tournaments in the esports industry to Arlington”, a potentially significant financial boon for the city if successful. How big is the opportunity? An old industrial city in Poland, with a population of 300,000, drew 113,000 people for the “World Cup of esports” last year.

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UMBC Gets $119 Million in Media Exposure within 24 Hours of Virginia Upset  


According to Meltwater, a media intelligence company, UMBC’s historic upset of number one seed Virginia generated an estimated $119 million in media exposure for the University (within 24 hours of the game); roughly 1/3 of the publicity value the school has received over the last 12 months. 37% of +/- 50,000 news stories mentioning the University over the last year, have been written since Friday night. Social media is abuzz too, with 87% of the school’s social media mentions within the last 12 months coming on Friday night or Saturday; as the UMBC athletic department built its twitter following 1,730% (as of 1p Sunday afternoon), from 5,000 to 91,500.

Howie Long-Short: The true value of the victory will be realized in the fall of 2019, when freshman enrollment is expected to swell. Noteworthy upsets at Georgia State (enrollment +28.5% in Fall ’16, beat #14 Baylor in March ’15) and Middle Tennessee State University (enrollment +16.9% in Fall ’17, beat #2 Michigan State in March ’16) provide guidance in terms of what can be expected; though, the distinction of becoming the first #16 seed to win an NCAA tournament game will give UMBC a “longer tail than your usual upset.” 1,772 freshman enrolled at UMBC in August 2017. If the school just manages to match MTSU’s enrollment increase, conceivable considering Butler increased enrollment 43% following it’s run to the ‘10 finals, it would add +/- 300 students. With in-state tuition over $5,700/semester, the win is worth a minimum of $3.5 million/year to the University.

Fan Marino: Jairus Lyles is UMBC’s best player. He hit a 3-point shot at the buzzer in the conference championship game to send UMBC into the dance, scored 28 points in their win over UVA and a team high 12 points in Sunday night’s close loss to KSU; but, no one has gotten more attention following Friday night’s win than Zach Seidel, the man behind the twitter account. Seidel, who lacked a strategy going into the game (he’s doesn’t usually handle the Twitter account for men’s basketball), has since been interviewed by everyone from The New York Times to CNN to Slam Magazine.

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Daytona Champ Finishes 10th at Fontana, Names 2 Stocks He Likes/Owns


On Sunday, 2018 Daytona 500 winner Austin Dillon participated in the Monster Energy NASCAR Cup Series Race at Auto Club Speedway in Fontana, CA. Martin Treux Jr. won the pole and swept the stages, becoming the 1st NASCAR driver in history to accomplish that feat. Dillon finished 10th, for his 2nd Top 10 of the season. Prior to leaving Los Angeles for Fontana, JohnWallStreet had a chance to connect with Dillon to discuss a few names within his personal stock portfolio, to find out why a 100-year-old company would look to sponsor a car and to ask why he’s still racing in the Camping World Truck Series.

JWS: When we last spoke to you in September, you mentioned that Nintendo (NTDOY) and Cabela’s (CAB) were among the names in your personal portfolio. NTDOY is +25% since Sept. 30th and CAB was acquired by Bass Pro Shops at a 19% premium to its closing price on September 30th. Can you tip us off to a few other names that you like within your portfolio?

Austin: Dow (DWDP) is probably my favorite company. They’re huge behind STEM and have so many engineers around the world building great products. I also have stock in Coca Cola (KO), it’s a good company and I’ve always been a huge Coke fan.  

JWS: In addition to DWDP, Bass Pro Shops and American Ethenol (Growth Energy), AAA is a sponsor on your car. That company was founded in 1902. What are they looking to get out of a NASCAR partnership?

Austin: The youth movement is big to them. It’s a very old brand, but they want to let the younger demographic know about how many people they help service across the U.S. NASCAR is doing a good job of showing the youth movement (amongst drivers) and catering to our younger fans.

JWS: You recently participated in a Camping World Truck Series race. You’re a Daytona 500 Champion. Why are you still racing on that level? 

Austin: We had a new partner come in, an app (GoShare) that wanted to run in truck series. They came up with the idea to do it in the truck series because they’re kind of like an Uber for truckers. So, if you want your house moved, you can call them instead of calling a moving service and anyone with the right equipment can come and help move your stuff.

Howie Long-Short: Auto Club Speedway is owned and operated by International Speedway Corp (ISCA), a publicly traded corporation that also owns 12 other tracks including; Daytona International Speedway and Talladega Superspeedway. Other assets include Motor Racing Network (nation’s largest independent sports radio network), Americrown Service Corp. (concessions company) and Daytona One (retail, dining and entertainment development). On January 25th, the company reported full-year 2017 revenue ($671.4 million) grew to levels it hadn’t seen since ’10, sending share prices up 10.6% (to $45.30). Shares hit a high of $47.15 on February 1st, before settling back down to $44.25 at Friday’s close.

Fan Marino: You’ve been on a whirlwind media tour since winning at Daytona and mentioned that your favorite experience was doing Shaquille O’Neal’s podcast. As a 4x NBA Champion, did Shaq have advice for you?

Austin: He said, “take your mother out to dinner with your wife and take the trophy with you, after dinner leave the trophy with your mom and go and get like 5 or 6 more.”

Editor Note: Austin has not yet given the trophy to his mom, he’s holding on to it a bit longer; though he has plans to in the future.

Editor Note 2.0: Austin has a YouTube show, BarnLife. You can check out previous episodes, here.

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Sneaker Companies Offering “Blank Checks” to AAU Programs Run by Parents of Star Players


The Oregonian released a piece worth reading, detailing how sneaker companies skirt NCAA regulations by sponsoring grassroots teams run by the family members of top prospects. Sponsors are permitted to provide shoes, uniforms and cash for under-funded travel to teams; but, the story describes a system where Nike, Adidas and Under Armour are targeting the family members of star prospects who control their own programs, offering a “blank check” for their allegiance. The cash being pocketed by the family (it’s alleged Josh Jackson’s mom gets $10,000 mo.) equates to a “direct endorsement” of the player, an “extra benefit” that theoretically would make a prospect ineligible under NCAA guidelines. Of course, the sneaker companies are writing these checks, are doing so for good reason; an analysis of 2017 NBA first round picks indicated that most players signed professional shoe deals with the company who sponsored their grassroots team(s).

Howie Long-Short: Basketball sneaker sales have fallen off a cliff in the last 24 months, down 26% to $950 million. Nike (NKE) controls 80% of the market, with Under Armour (UAA) in a distant 2nd place (12.1%). Adidas (ADDYY) accounted for less than 5% of all U.S. basketball sneaker sales in ’17; but, Mark King, the President of Adidas Group North America, has said the brand will “focus on improving its basketball products this year.”

Fan Marino: The NCAA has never investigated the Bagley case, but the circumstances appear to be particularly questionable. In 2008, the Bagley’s filed for Chapter 7 bankruptcy; claiming a 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 Bagley’s moved into a California home estimated to be worth between $750,000-$1.5 million; with rent in the area ranging from $2,500-$7,500/mo. The elder Bagley readily acknowledge he was using Nike money to “make ends meet.” That’s not great news for Duke fans. In 2010, Renardo Sidney (Mississippi State) was declared ineligible after it was found his family received “preferential treatment” from Reebok. It was later announced Reebok had signed Sidney’s father to a $20,000/year consulting agreement. Duke is headed to the Sweet 16, but their appearance very well may be vacated at a later date.

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March Madness Continues to Generate Record Television Ad Spend, Growth Rate Slowing

March Madness

The NCAA men’s basketball tournament remains “the second largest post-season sports franchise, trailing only the NFL playoffs”, in terms of television advertising expenditure; but, the ad spend growth rate for the Big Dance trails that of the NBA, MLB and NFL post seasons, over the last 5 years. Though 97 advertisers (a record) spent $1.28 billion (also a record) on television advertisements during March Madness ‘17, that total has grown just 3.3% annually since topping $1 billion for the first time in 2012. For comparison purposes, the NFL is growing +9.7% annually with advertisers having spent $1.55 billion during the most recent postseason. The NBA (3rd largest post season franchise) has experienced 11.7% YOY growth over the same period, with brands increasing their total postseason ad expenditure to $934 million in 2017.

Howie Long-Short: The prohibitive cost of advertising during the NCAA tournament, relative to global audience size (or lack thereof), is likely the biggest reason March Madness’ ad spend growth rate trails the NFL, NBA and MLB postseasons. NCAA bylaws preventing companies from using the names (or likeness) of the college athletes in their advertisements, also places them at a competitive disadvantage relative to the pro sports leagues. It should be noted that the NCAA’s ad spend growth rate is “in line with rights fees increases.” For informational purposes, General Motors (GM, $83 million), AT&T (T, $66 million) and Coca-Cola (KO, $56 million) spent the most among advertisers during the 2017 NCAA men’s basketball tournament.

Fan Marino: Loyola University-Chicago won its first NCAA tournament game since 1985, upsetting the University of Miami on a 3 pointer at the buzzer; a highlight that will live in March lore forever. Among those in attendance were 98-year-old team chaplain Sister Jean Dolores-Schmidt. Dolores-Schmidt is no front-runner. Prior to November (she broke her hip keeping her out of action), she had only missed 2 games since ’94. She has a plaque in the school’s hall of fame, had her own bobble head night at the arena and still issues scouting reports on upcoming opponents. Her 11th seeded Ramblers are scheduled to play 3rd seeded Tennessee on Saturday. No doubt, she’ll have some thoughts on how to stop Grant Williams; UT’s unanimous all-SEC first team selection.

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