New F1 Logo Likely Infringing on 3M Trademark

F1

The new F1 (FWONK) logo, created by Wieden & Kennedy (created Just Do It for NKE), may be infringing on a pan-European trademark (and potentially trademarks in 10 other countries) registered to 3M (MMM). The new logo representing a “race track”, looks eerily like the logo used by Futuro (compression tights) to represent a “stylized knee joint”. The purpose of the FWONK rebrand, which cost an estimated $1 million, was to create a logo that would be optimized for digital platforms and merchandising; with the intention of launching the new clothing line at the season opener in March, a plan that may now need to be altered. 3M has not yet opposed FWONK’s trademark registration, but is “looking in to this matter further.”

Howie Long-Short: 3M (formerly Minnesota Mining & Manufacturing Company) owns Scotch tape, Scotch-Brite and Post-It Notes (among others); and sells more than 55,000 products. In 2016, the company generated $30.1 billion in revenue; 17x what FWONK brought in. FWONK could pay MMM for the rights to continue using the logo, but that decision would likely draw pushback from the teams; as the expense would reduce their prize pool. Alternatively, FWONK could choose to use one of the other 2 logos it applied for trademarks on; or simply revert to the old logo (the fan choice).

Fan Marino: F1 fans may not love the new logo, but they should be excited about David Hill participating in the production of F1 race broadcasts. Hill “will oversee the graphics package and the way the race is televised”. Fans may not recognize Hill’s name, but if they watch the NFL on Fox they’ll recognize some of his work; including the score bug and first-down graphics. He’s also credited with launching Fox Sports, building the Fox Sports network of RSNs (recently sold to DIS) and won an Emmy for producing the 2011 World Series. Great hire!

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Marquee MLB Free-Agents Remain on Market, Whispers of Collusion

MLB2

Pitchers and catchers report in less than a month, but marquee free agents remain unsigned (see: Arrieta, Moustakas and Hosmer); and with just 51 players (includes just 13 position players) signed thus far this offseason, for a total of $655 million, whispers of collusion exist. Last week, executives from MLB and the MLBPA met to discuss the concerns; with MLB issuing the statement “there are a variety of factors that could explain the operation of the market. We can say that without a doubt collusion is not one of them.” That’s unlikely to sway the opinion of the MLBPA, which believes there is a template (which goes against the concept of free agency) for superstar player contracts; 3 years or $20 million plus annually, but not both.

Howie Long-Short: Franchise values have increased from $18.1 billion to $46.1 billion over the last 5 years and MLB will generate $10 billion in revenue this year, so it’s not like there isn’t money to pay the players; teams have just come to the realization that the money is better spent on younger, cheaper ones. As one league executive put it, “we pay players the minimum for three years and arbitration for three or four years, and then they get paid more in free agency for their decline?” Team’s wisely aren’t looking to reward past performance, they’re paying for future production. Is it collusion if everyone comes to the same intelligent decision?

Fan Marino: Sure, it’s likely that a handful of teams are saving for next off-season when Harper/Kershaw hit the market, and it’s true that star young players are signing under-market long-term deals (to guarantee their big payday); but, the rest of the proposed excuses for the cold-stove are nonsense. Teams aren’t waiting on Boras’ guys to sign, Ohtani and Stanton weren’t stalling the market, teams like the Yankees and Dodgers aren’t concerned about the luxury tax threshold and there isn’t a team owner in the league that doesn’t want to win (in the name of profits). The cold stove is a product of baseballs fundamentally flawed economic system (i.e. no floor on team spending). I suspect a strike is on the horizon; the current CBA expires following the 2021 season.

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Verizon Aims to Be the 1st Screen Consumers Go to Find Live Sports

Verizon

Verizon (VZ) and the NBA have announced a 2-year extension that will enable NBA “League Pass” subscribers to live-stream games on Yahoo (AABA) platforms and mobile devices. The new deal enables VZ to produce original NBA content (and distribute across Oath properties), gives VZ users (around the world) access to Yahoo’s NBA fantasy sports game and requires VZ to establish a technology fund that will experiment with new formats (i.e. augmented reality, virtual reality). The move comes just a month after VZ agreed to pay $2.25 billion (for 5 years) for non-exclusive rights to stream NFL games on Yahoo Sports, AOL and go90 (among Oath assets); following prior deals that give them rights to broadcast Liga MX and National Women’s Soccer League games across Yahoo platforms. VZ Chief Content Officer Brian Angiolet has said the company intends on being “the first screen consumers go to find live sports”.

Howie Long-Short: VZ acquired Yahoo last year with the intention of building its programming around sports. Why? “Sports is the best aggregator of an audience”; among the last television programs that viewers watch live. On the NBA side, this deal gives them access to a younger demographic (the mobile audience) and should help to drive engagement (if not viewership); VZ users spend 30 billion minutes on fantasy games/annually and theoretically would want to see how their roster performs. If DraftKings is making the pivot from DFS to sports betting, could other outlets with large fantasy player databases (see: Yahoo, ESPN) be far behind?

Fan Marino: “League Pass” offers NBA fans the ability to watch 1,100+ live out-of-market games for $99/season. You can try it out for free, as VZ is giving registered users 8 complimentary “League Pass” games; tremendous news for those of us outside of Houston and L.A. that don’t want to miss the next Clippers/Rockets game (Feb. 28). The one Monday night ended with several Rockets players (Paul, Ariza, Harden) storming the Clippers locker room in search of a fight with Blake Griffin and Austin Rivers; a welcomed change from the superstar kumbaya (or banana boat rides) that we’ve grown accustomed to in the age of super-teams.

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Historically Low Snowfall Totals Hurting Ski Mountain Operators

Vail Resorts 2.0

Historically low snowfall totals across the Western U.S. has reduced visits to Vail Resorts (MTN) properties, by 10.8% this year. Vail, Park City and Beaver Creek (CO based resorts) received their lowest snowfall totals in 30 years (50% less than the next lowest winter season), while their 3 California based properties received 69% less snow than the 20-year average. Despite the lack of fresh powder, MTN reports that lift ticket revenue is up 1.6% YOY; with season pass sales (+14% YOY to 740,000) helping to offset the decline in single day visits (and lift ticket sales). Revenue declines from ski school (4.5%), dining (8.7%) and retail/rental property (11.5%), more accurately reflect the impact the weather has had on the company’s bottom line.

Howie Long-Short: MTN CEO Rob Katz has told investors the “challenging conditions” will cause the company to miss earlier earnings projections, but said the guaranteed revenue from season pass sales (+20% YOY) and investments the company has made in off-slope amenities (i.e. Park City got a $50 million renovation in ’15) would prevent further declines; even if the lack of snowfall continues. The disappointing fiscal Q1 comes on the heels of a typically slow summer for the company, reporting a loss of $28.4 million for the quarter that ended October 31st; though that figure is down from $63 million in Q1 ’17, the improvement comes as a result of a non-recurring tax benefit.

Fan Marino: The Western U.S. hasn’t had much powder, but that isn’t the case on the East Coast or in British Columbia. MTN reported that their newest acquisitions, both Stowe (Vermont) and Whistler Blackcomb (B.C.) have had strong winters thus far. Whistler’s snow conditions (96%-97% of the terrain was open Christmas Week) even abled the resort to open a week early this season!

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Puma: Female Athletes Do Not Translate on a Global Basis, Signs Entertainers

Puma

The development of the Puma SE (PMMAF) women’s division (now 1/3 of all company revenue) has helped lead the company’s revival; going from $6.3 million in ‘13 profits to $161.5 million over the first 9 months of 2017. CEO Bjorn Gulden attributes the turnaround to their relationship with Rihanna (began in ’14), believing she made the brand “hot again with young consumers”. Gulden signed Rihanna after coming to the realization that while male basketball and soccer stars translate on a global basis (see: GSW popularity in China), it is difficult to find a female athlete who could have the same impact; that female entertainers would have to fill the void. With the turnaround nearing completion, Puma parent company Kering SA (OTC: PPRUY) announced late last week it would be spinning off the sportswear brand; allocating 70% of Puma shares to Kering SA shareholders.

Howie Long-Short: NPD Group, Senior Industry Advisor, Matt Powell has been vocal that Adidas’ (ADDYY) rapid growth over the last 3 years has far more to do with their product line (see: Superstar, NMD, Stan Smith) than Kanye West; his signature line is produced in such limited quantities it doesn’t move the needle. I checked in with Matt to see if he thought Rihanna was making a bigger impact for Puma. He acknowledges Puma’s business turned after signing Rihanna, but isn’t prepared to give her the credit Gulden does; like Adidas, he says Puma’s growth (stock up 45% over last 12 mo.) has more to do with the quality of their products (see: Fierce, Fenty Creeper, Basket Platform) than her celebrity.

Fan Marino: Puma may not have big name female athletes on its roster, but it has a who’s who of female celebrities; Rihanna (59.4 million IG followers), Kylie Jenner (100 million) and Selena Gomez (132 million). For comparison purposes, the company’s biggest male endorsers; Arsenal F.C. and Usain Bolt, have 10.6 million and 7.9 million respectively. Females also accounted for 62% of all U.S. retail athletic apparel sales in 2017 (per NPD Group). Perhaps Gulden is on to something.

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Adidas Lacks Infrastructure to Grow U.S. Business

Adidas 200x200.jpg

Adidas (ADDYY) maintains an estimated 10% of the U.S. footwear and athletic apparel market, but CFO Harm Ohlmeyer says the company’s infrastructure has prevented further growth. The demand apparently already exists, but delivery issues plagued the company throughout H2 2017. The (medium-term) goal is to control 15-20% of the U.S. market share, as it does in every other market it operates within (according to Ohlmeyer); so ADDYY is focused on building out the logistics to handle the business. Ohlmeyer also noted that while Reebok remains unprofitable, he expects to see growth (in the U.S. market) from the restructured company in 2018.

Howie Long-Short: Back in November, ADDYY reported Q3 ’17 sales rose 9% (to $6.6 billion); with U.S. revenue up 23% YOY to $1.3 billion. In late December, (NKE) reported Q2 ‘18 revenue within the region was -5% YOY to $3.5 billion. The U.S. remains NKE’s largest and most profitable market, but the company hasn’t experienced double-digit revenue growth since Q3 ’16. As long as leisure (as opposed to performance) remains popular within the footwear and athletic apparel sector, ADDYY is positioned to continue to outperform (and shrink the gap with) NKE, in the U.S. Of course, personalization and customization is also trending within the industry; so, it’s possible performance gear could be in vogue, sooner than later.

Fan Marino: The NBA released a list of players with best-selling jerseys (on NBAStore.com) during Q4 2017. Steph Curry (UAA) led the way, with LeBron (NKE), Durant (NKE) and Giannis Antetokounmpo (NKE) right behind. Adidas was represented in the Top 10 by Kristaps Porzingis (5), Joel Embiid (6) and James Harden (10).

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WWE Could Replace UFC on FOX, Receive $400 million annually

WWE

The UFC’s 7-year broadcast deal (worth $160 million in ’18) with 21st Century Fox, Inc. (FOXA) is expiring in 2018 and the mixed martial arts promotion is reportedly seeking a new deal worth more than twice as much annually ($450 million). FOXA is reportedly prepared to offer +/-$200 million/year, so it’s possible (if not likely) the UFC will be finding another broadcast home. Should that occur, Dave Meltzer (Wrestling Observer) has indicated FOXA would look to acquire WWE broadcast rights (expiring in September 2019), if not the entire professional wrestling promotion; though it’s been stated McMahon has no intention of selling (owns 41.8% of the outstanding common shares, but controls 82.8% of the company).

Howie Long-Short: NBCUniversal (CMCSA) currently pays $200 million/year for the rights to broadcast WWE Monday Night Raw and SmackDown. The speculation is the next deal will be closer to $400 million annually; potentially twice what the UFC will see. That’s noteworthy because WME paid $4 billion for the UFC in July 2016, $1.5 billion more than the WWE’s current market cap. I think it’s safe to say they overpaid.

Fan Marino: Should FOXA acquire WWE broadcast rights, the prevailing feeling is that RAW would air on network television; with SmackDown moving to FS1. That’s not great news for hardcore WWE fans, as it likely means reducing RAW to a 2-hour program once again (currently 3 hours); Fox affiliates tend to air local news at 10p EST. Speaking of RAW, the 25th anniversary will be held on January 22nd at the Barclays Center. It’s now the longest running weekly episodic show in U.S. TV history.

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