Yahoo! Exits European DFS Market

Yahoo!

Less than a year after entering the European market, Yahoo! (AABA) has decided it will cease hosting paid-entry daily fantasy sports contests for its overseas users. The decision, effective at the completion of the English Premier League season (May 14), will leave free contests (including season-long offerings) as the only options available on the U.K. platform. Yahoo! isn’t the first DFS provider to pull out of Europe, FanDuel engaged U.K. users in 2016 before deciding to re-allocate marketing resources to a U.S. market with 5x the number of DFS players (53 million to 10 million).

Howie Long-Short: Yahoo! is exiting the U.K. DFS market for the same reason U.S. DFS operators are gearing up for legalized sports betting; there is no market for “substitute” gambling, when in-game betting is a reality. Those that play fantasy sports for fun, compete in free season-long competitions; while those that want in the action, have sports gaming apps at their disposal.

DraftKings UK, Sportito and PlayON are the biggest remaining DFS players in Europe. DraftKings has raised capital from 21st Century Fox (FOXA). Sportito is a joint venture between ASAP Italia and SportRadar. EQT Holdings Management (EQGP), a publicly traded private equity/venture capital firm with 11 exits (IPO/M&A) to its name, led Sportradar’s +/- $55 million P.E. round in July ’12. As for PlayON, despite the company’s $43 million valuation; there are no ways invest in the company.

Fan Marino: Speaking of DraftKings, the company recently announced a partnership with the Arena Football League, that will give users the ability to compete in newly formed contests while watching league games within the application. It’s the 2nd broadcast rights deal the DFS company has signed within the last 6 months. In October, DraftKings secured rights to live stream EuroLeague games (applies to players participating in contests $3+).

As non-traditional players (think: FAANG) begin acquiring sports rights, keep an eye on the gaming companies. DraftKings CEO Matt Kalish hit the nail on the head when pointing out that what DFS players (and gamblers) “really want is a one-stop shop”, where you can play (and in the future gamble) and “consume game content” in the same location.

DraftKings has made no secret of their intention on moving into the sports betting space, should SCOTUS rule it legal. Corporate spokesman James Chisholm was quoted as saying DFS companies are “perfectly positioned to succeed (think: 10 million users) in a legal sports betting market.” The company has hired a “Head of Sportsbook” and is reportedly “contacting potential casino partners.”

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The Fiscal Value of a Historic Upset in NCAA Tournament

March Madness

Yahoo! Sports (AABA) studied the financial impact of a low-major upsetting a top 3 seed in the NCAA tournament; using Lehigh (15 seed, beat Duke, ’12), Florida Gulf Coast (15 seed, beat Georgetown, ’13), Georgia State (14 seed, beat Baylor, ’15) and Middle Tennessee (15 seed, beat Michigan State, ’16) as subjects in their case study. Following historic wins, all 4 schools experienced an increase in freshman enrollment (+ 28.5% in applications, GSU), increased media exposure during the tournament ($346,000 worth, FGCU), a bump in merchandise sales (+ $500,000 YOY) and a flood of alumni donations (+ $454,000 YOY, Lehigh). Ultimately, Yahoo! Sports was unable to put a definitive value on a monumental upset (too many variables); but, they found that the figure was significant enough, that the schools have chosen to “reinvest millions in pursuit of another.”

Howie Long-Short: An increase in freshman enrollment is the most valuable of the benefits a Cinderella story receives. At Georgia State, Georgia residents pay just shy of $6,000/semester; while out of state students pay just over $15,000/semester. The school’s acceptance rate increased 17.4% in the fall of 2016, bringing the total number of students to 50,000. For the sake of round numbers, we’ll assume they added 7,500 students that fall. Even if they were all in-state students, the school is generating an extra $45 million/semester. No wonder school officials agreed to build the men’s basketball team a new training facility!

Fan Marino: Of course, the longer a team remains in the tournament, the more exposure its sneaker and apparel provider will receive. Nike (NKE) has the best chance to place a team in the Final Four, 70% of the 68 teams that were selected are sponsored by the company. Under Armour (11) and Adidas (9) also have a chance to reach San Antonio; Russell Athletic is going to need a miracle; their only squad in the dance is the Texas Southern Tigers. It must be noted Texas Southern won their play-in game over North Carolina Central 64-46.

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NCAA Pay-To-Play Scandal Explodes, 20 Programs Named, Alleged Payments Up to $100K

Ayton Check

Pat Forde & Pete Thamel (Yahoo! Sports, AABA) have published several damning articles implicating at least 20 players and over 2 dozen Colleges and Universities in the NCAA’s corruption case. Citing “hundreds of pages of documents” recovered from the FBI’s investigation, emails between runner Christian Dawkins and agent Andy Miller (ASM Sports) and a spreadsheet (detailing expenditures) maintained by Dawkins as evidence, the stories paint a picture of an amateur system that is failing. Nearly every top program (UNC, Duke, MSU) is referenced, with payments ranging from $70 lunches (Miles Bridges, MSU) to $73,500 in loans (Dennis Smith Jr., NC State). It is important to distinguish between the FBI investigation (bribery, travel act conspiracy etc.) that has resulted in the arrest of 4 coaches and the one the NCAA will conduct (upon completion of the FBI investigation) related to impermissible benefits (players, teams in Forde/Thamel stories).

Howie Long-Short: Pay-to-play scandals have been going on since at least the early 80’s (great 30 for 30 called Pony Excess, here’s the trailer), so this isn’t a new phenomenon; what’s new this time around, is the FBI’s involvement. Landmark changes are coming to college athletics, but until the NBA allows H.S. prospects to enter the draft again, a black market will continue to exist. As the #1 pick in the 2017 draft, Markelle Fultz will earn $15.36 million over the first 2 years of his contract. There’s simply no way he can be compensated fairly (relative to the value he brings to the University) playing a year of college basketball. If he took $10,000 from ASM Sports under the current system (as alleged), a nominal stipend isn’t preventing him from taking it in the future.

Fan Marino: Late Friday evening, ESPN (DIS) reported that the FBI had intercepted a call between Arizona Head Coach Sean Miller and Dawkins relating to a $100,000 payment, meant to ensure 5-star prospect Deandre Ayton enrolled at the school. Dick Vitale wasted no time calling for Miller’s immediate dismissal, despite Mark Schlabach (wrote story) never personally hearing the audio recording (or having read the transcript) or applying any logical thought to the report before speaking; Ayton committed to AZ in Sept. ’16, the alleged FBI call was said to have been recorded in June 2017. Miller may be guilty, but a conversation (that may or may not have happened) about a potential payment and having evidence money changed hands, are two different things. Calling for someone’s job based on hearsay is irresponsible at best, malicious at worst and Vitale’s look-at-me schtick has been tired since the late 90s. It’s time for ESPN to retire him.

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NBCU to Stream Sunday Night Football to Mobile Phones, Broadcasts to Include Local Ads

NBCUniversal (CMCSA), which has been streaming Sunday Night Football to desktops, tablets and connected TVs since 2008, has acquired the rights to stream SNF to all mobile devices, including mobile phones for the first time. The deal also provides NBCU’s cable, satellite, traditional and virtual MVPD partners with authenticated streaming rights. The NBCU mobile stream will contain both national and local affiliate ads (for 1st time). SNF is primetime television’s #1 show; NBCU also owns the rights to the #2 rated show, TNF.

Howie Long-Short: NBCU had the ability to add rights to stream games to mobile phones after Verizon gave up exclusivity as part of its recent 5-year $2.5 billion deal with the NFL. In exchange for conceding exclusivity, the telecom giant picked up the rights 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. Verizon won’t have the rights to sell national ads though, as NBCU maintains exclusive control over the inventory; now offering advertisers expanded reach through VZ (and NFL mobile) platforms.

Fan Marino: Speaking of football on NBC, there are rumors that the XFL (a WWE/NBC collaboration) could be making a return. The WWE didn’t exactly deny the rumors, saying Vince McMahon “has established and is personally funding a separate entity from WWE, Alpha Entertainment, to explore investment opportunities across the sports and entertainment landscapes, including professional football.” If the league does get a reboot, don’t expect NBC to be a part of it this time around; the network, hungry for football, didn’t own any NFL rights back in 2001.

Twitter Envisions Future Where Fans Might Pay A Dollar To See A Buzzer Beater

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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

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Cuban Foresees Upcoming Boom, Compares Opportunity to Dotcom Era

Dallas Mavericks Owner and Shark Tank investor Mark Cuban, foresees an upcoming boom; with investment opportunities unlike anything we’ve seen since the rise of the dotcom era, in the late 1990s. Cuban is qualified to speak on the subject, having sold Broadcast.com to Yahoo! (AABA), at the peak of the dotcom bubble, for $5.7 billion (in stock). In an a short interview with Brandon “Scoop B” Robinson, on Scoop B Radio, Cuban pointed to several fields that could experience similar growth over the next few years including; “deep learning, machine learning, machine vision, bio analytics and biomechanics.” As for his thoughts on virtual reality, “I don’t think that’s going to be quite as successful as people think”.

Howie Long-Short: Cuban mentions several technological advances that may not be in everyone’s vernacular, so I’m going to try and explain them. Machine learning is the practice of using algorithms to parse data, learn from it and then make determinations based on the large amount of data the machine was trained on. Deep learning is a technique for implementing machine learning, that relies on artificial neural networks (like a brain), where large amounts of data are run through the system to train it. Machine vision refers to a computer’s ability to see (think OCR). Bio analytics relates to the measurement of substances within a biological system, while biomechanics focuses on the movement or structure of living organisms.

Fan Marino: While Cuban may not be particularly bullish on VR from an investment standpoint, the technology appears useful within the sports world. Set to launch in 2018, RBI-VR (from Monsterful VR) will be used by MLB players to enhance pitch recognition and timing, while minimizing the risk of injury. RBI-VR compiles and calculates data to recreate the throwing mechanics, biomechanics, vertical and horizontal release point of any pitcher in the league with near 100% accuracy. Considered by the MLB Player’s Association to be “best-in market”, the technology has been built with input from an advisory board that includes Lloyd McClendon, Dusty Baker, Gene Orza, Don Mattingly and Edgar Martinez.

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