MLB Attendance Hits 15 Year Low but Fans Still Watching on TV

MLB2

Major League Baseball attendance declined 4.1% in 2018 (from 30,042/game to 28,830/game), with fewer than 70 million people (69,625,244) visiting league parks for the first time since 2003; it was the MLB’s 5th attendance decline in the last 6 seasons. 17 clubs experienced a YoY regression, with the Marlins (-771,910 fans) and Blue Jays (-878,605 fans) reporting the largest drop-offs; it must be noted that those clubs altered the way they calculated gate receipts prior to the ’18 season.

While MLB experienced a decline in fans at the ballpark, television viewership remains strong; Nielsen reported that between March 29th (earliest opening day ever) and September 30th (final day of regular season) the league’s 29 RSNs (Toronto not included) saw ratings rise +2% YoY. MLB games remain the most watched programming in primetime on cable television in 28 of 29 U.S. markets (Miami is the exception) and 12 RSNs carrying MLB teams are tops in their market in primetime, amongst all programmers.

Howie Long-Short: MLB blamed the attendance decline on the “historically bad weather” in April (102 games were played under 50 degrees), but they should have blamed it on the Marlins and Blue Jays accounting methods; 54% of the league’s total decline can be attributed to those 2 clubs.

Of the 12 RSNs that rank first in primetime within their market, 6 are owned by Fox Sports (Cardinals, Indians, Brewers, Yankees, Royals and Diamondbacks) and will be sold. It’s been reported that Sinclair Broadcast Group (SBGI), YouTube (GOOGL), Amazon (AMZN), Blackstone Group (BX), CVC Capital Partners and Apollo Global Management (APO) have all expressed interest in acquiring the block (22) of RSNs. Bloomberg has estimated that the assets could command upwards of $20 billion.

Advertisers value sports properties because a) they’re live (so you can’t fast-forward through commercials) and b) viewership consumption is greater for sporting events than it is for entertainment programming. In fact, the average MLB club has fans tuned in longer than the top 10 primetime television shows combined in their respective markets.

Fan Marino: The St. Louis Cardinals lead the league with an 8.05 rating on Fox Sports Midwest. On the other end of the spectrum, the Chicago White Sox were the only club to post a Nielsen rating under 1 (.68); a figure that indicates fewer than 1% of the total TV households in the Chicago market are tuning in to watch the South Siders on FSN Chicago. The Atlanta Braves experienced the league’s greatest YoY rise, with viewership climbing 79% in 2018 (to a 3.46 rating); a trip to the postseason following 3 straight years of 90+ losses explains the renewed enthusiasm.

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

Amazon Expands Presence in Sports World, Announces Partnership with IRONMAN

Ironman

Amazon (AMZN) has acquired title sponsorship rights to the 40th IRONMAN World Championship. As part of the agreement, the e-commerce giant will serve as the Official Sports Nutrition Retailer of the “iconic endurance event” (10.13 in Kailua-Kona, Hawaii); “providing participants access to a vast selection of nutritional products.” IRONMAN will receive a branded pop-up shop, (amazon.com/ironmanrace) featuring product from the event’s official nutrition partners (see: Gatorade, CLIF Bar), on the world’s largest e-commerce platform.

Howie Long-Short: Amazon’s shown interest in streaming sports content (see: Sunday Night Football, U.S. Open), so it’s interesting to note that this deal does not provide the company with broadcast rights; NBC Sports platforms, ironman.com and IRONMAN NOW on Facebook Watch will all have the event. That’s not to say this deal doesn’t make sense from the Amazon perspective. The demand for health/wellness/performance products is at an all-time high, it’s perfectly logical that Amazon would want to connect with the most committed of fitness enthusiasts.

Amazon posted (Q2 earnings) its largest quarterly profit in company history during Q2 ’18, surpassing $2 billion (posted $2.5 billion) for the first time. It was the 3rd straight quarter that AMZN surpassed $1 billion in profits. The company’s e-commerce division reported operating profit of $1.34 billion, shattering analyst expectations ($240 million); an increase in online ad sales (+132% YoY to $2.2 billion) and “efficiencies in generally all our fixed costs” were among the factors that drove higher profits (along with their high margin cloud services business). FYI, sales from Amazon’s Prime Day will factor into 3rd quarter financials. In late August, AMZN shares traded at over $2,000/share for the first time; they’re up 65% YTD, opening at $1,970.19 on Monday 9.17.18.

IRONMAN is owned by the Dalian Wanda Group, a privately held Chinese real-estate conglomerate which bought the endurance racing series in ’15 for $650 million.

Fan Marino: Not to be outdone by an American counterpart, Rukuten (RKUNY) has announced a multi-year global partnership with Spartan Race (obstacle racing series). The deal provides Rukuten with exposure at Spartan events (+ in digital advertising, content and merchandise), makes the company the official kit sponsor of the Spartan Pro Team and places the company logo on finisher shirts. The partnership officially begins with the “2018 Spartan World Championship powered by Rakuten” (Spartan’s biggest event); the Japanese e-commerce and internet company will also “power” the live stream of that event on Facebook Watch.

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

Amazon Fails to Deliver with U.S. Open Coverage  

Amazon200x200

English tennis fans have been utterly disappointed with Amazon’s exclusive broadcast coverage (in U.K. and Ireland) of the U.S. Open. 90% of the +/- 650 subscriber reviews posted assigned the Prime Instant Video service a one or two-star rating (80% gave it one-star), with most subscribers complaining about picture quality, sound quality, inability to record (or replay) matches and the limited choice of courts to watch. Subscribers (paying $10.50/mo.) didn’t appreciate Amazon’s separate highlights service any more than the live broadcast feeds, 96% of the reviews submitted about that service came with one or two star ratings. Amazon plans to add increase the number of matches available to its on-demand subscribers to compensate for any action missed.

Howie Long-Short: Amazon is paying $40 million (over 5 years) for the exclusive rights to broadcast the Grand Slam event. For comparison purposes, ESPN is paying $70 million/year for the exclusive broadcast rights (television, digital and streaming) to the U.S. Open and Open Series events here in the U.S, Latin America and Canada.

Earlier this week, AMZN shares traded at over $2,000/share for the 1st time ever. Morgan Stanley says there is still room to run though, as they’ve increased their price target on the company to $2,500 (+25% upside). Morgan Stanley analysts cited the company’s “rapidly growing, increasingly large, high margin revenue streams (advertising, AWS, subscriptions).” It does need to be noted that $2,500 is the highest price target for the company on Wall Street. AMZN shares are up 68% YTD, they’ll open at $2,002.38 on Friday 8.31.18.

Fan Marino: The U.S. Open is the first sporting event that Amazon (AMZN) has held exclusive rights to and they hardly look like a serious threat to overtake traditional sports broadcasters anytime soon, but it’s unfair to single out Amazon. Back in June, we wrote about the Australian OTT service Optus authorizing government-owned SBS to broadcast World Cup matches amidst public pressure, with coder issues preventing thousands of fans from watching games. YouTube (see: England/Croatia), DAZN (see: Serie A) and Formula 1 (see: Spanish Grand Prix) have all failed to deliver at times, as well.

If English sports fans are this upset about missing first round U.S. Open coverage, imagine what their reaction will be if they’re to miss English Premier League action. Back in June, Amazon acquired a package that contains the exclusive broadcast rights to 20 EPL games/season. One of the two full fixture rounds AMZN has the rights to is on Boxing Day (Dec. 26), giving the e-commerce giant less than 4 months to figure it out.

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

Comcast Preparing to Divest 22 Fox RSNs, To Submit 2nd All-Cash Bid by July 27th  

Comcast

Comcast (CMCSA) is reportedly lining up buyers for 21st Century Fox’s (FOXA) regional sports networks to alleviate anti-trust concerns, as it prepares a bid that would be favorable to The Walt Disney Company’s (DIS) $71 billion dollar offer (cash and stock) for FOXA film & TV assets. CMCSA is open to divesting all 22 RSNs, but believes just 8 overlap with the existing Comcast sports footprint. Reuters is reporting that the company has held conversations with publicly-traded buyout firms Apollo Global Management (APO) and Blackstone Group (BX). Just 2 weeks ago, the U.S. Department of Justice approved DIS’ bid after reaching a settlement with the mouse house to rid itself of the regional sports networks.

Howie Long-Short: It’s been assumed that the RSNs will fetch $20 billion+ (Comcast’s first bid placed a $24 billion valuation on them), so selling them off will help Comcast coffers as the company prepares to submit a 2nd all-cash bid (no dollar amounts given). FOXA shareholders are scheduled to vote on the DIS bid on July 27th, Comcast will submit their bid prior.

Rumors of P.E. firms taking down the RSNs is relatively surprising as most of the discussions surrounding potential landing spots having focused on telecom and media companies. Everyone from Amazon (AMZN) and YouTube (GOOGL) to AT&T (T) and Dish Network (DISH) has been mentioned.

I asked T.K. Gore, sports media consultant, advisor and professor, for his thoughts on who lands the RSNs?

T.K.: The RSN world is a tricky business and experience — coupled with deep pockets — matters. Look for groups like Liberty Media and AT&T to get involved given their experiences.

MSG is among the companies that has been associated with having interest in the regional networks. James Dolan has said that he’d be interested in acquiring the assets “at the right price”, noting they’re highly profitable now but a “slow, declining revenue stream.”

Fan Marino: The 22 RSNs collectively control exclusive broadcast rights to 44 NFL, NBA, MLB & NHL franchises, including teams in Detroit, Southern California, Dallas, Cleveland and Miami. The YES Network is the most valuable of the lot, worth an estimated $4 billion; the Yankees are likely to re-acquire that network.

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

BT to Carry Amazon Prime Sports Content on Cable Television

BT Group

BT has signed a carriage agreement with Amazon that will bring sports content from the Prime Video library (along with movies and television shows) to cable television (BT TV). Effective immediately, BT TV subscribers will receive complimentary access to the Amazon Prime Video streaming service, ensuring British soccer fans can to watch every ’19-’20 EPL match via their set-top boxes; Amazon recently acquired the exclusive rights to broadcast 20 matches/season in the U.K. and Ireland, beginning in 2019-2020. Financial terms of the Amazon carriage deal were not disclosed.

Howie Long-Short: It was just 3 weeks ago that the EPL announced Amazon (AMZN) and BT Sport (BT) had won exclusive rights (in U.K. and Ireland) to the last 2 broadcast packages available for 3-year period beginning in ’19-’20; each containing 20 games/season. While terms of the Amazon deal were not disclosed, BT Sport reportedly signed a pact worth $40 million/year. Back in February, the EPL announced BT won package A ($409.3 million/season, for 32 matches/season), while SKYAY took home packages B, C, D & E ($1.655 billion/season, for 132 matches/season). Content sharing agreements with both BT Sport and Sky Sports ensure BT subscribers have access to all EPL games.

As for AMZN, the company posted its most profitable quarter ever in Q1 ’18. It grew revenue +43% to $35.7 billion, while net income rose 121% to $1.6 billion. Cloud computing (+49% YoY to $5.44 billion), subscription services (+60% YoY to $3.1 billion) and ad revenue (+139% YoY to $2.03 billion) all contributed to the record quarter. AMZN shares are down 5% since SCOTUS ruled states and local governments can collect sales tax from online retailers (’92 ruling said internet was a tax-free haven) back on Wednesday June 20th, closing on Monday at $1,663.15.

Fan Marino: In addition to the EPL, Amazon has exclusive broadcast rights (in U.K. and Ireland) to the U.S. Open Tennis Championships (through ’22) and ATP World Tour. BT subscribers will also receive access to those events at no additional charge.

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

Facebook Unveils FB.gg to Compete with Twitch

Facebook200x200

Facebook has unveiled a homepage for streaming gaming content to supplement its Gaming Creator program. The new destination FB.gg, designed to compete with Twitch (think: social network for gamers), aggregates gaming videos, suggests live streaming feeds, showcases creators (discoverability is an issue on Twitch) and enables users to search content by game title. The social media giant also announced that it would be introducing functionality offering viewers the opportunity to tip ($.01/per) broadcasters, giving emerging creators the chance to monetize their work. The Level Up program has not yet been rolled out, but a select group of gamers have been allowed to charge fans ($5) to subscribe to their channels.

Howie Long-Short: Facebook is looking to take its cut of a video game streaming market that generated $4.6 billion in revenue last year; 37% of which was controlled Twitch. The company will profit from FB.gg by taking a percentage of the transaction amount when a viewer buys Facebook Stars, the virtual currency used to tip streamers. The percentage will range from 5%-30%, depending on the number of stars included within the “pack” (more stars = lower percentage).

Back in late April, Facebook reported Q1 ’18 earnings increased +62% YoY (to $1.69/share adjusted) on revenue that grew 49% (to $11.97 billion), bouncing back strongly from the Cambridge Analytica scandal. Ad revenue (+50% YoY, avg. revenue per user was $5.53), operating margin (+5% YoY, to 46%) and usership (+13% YoY) also all rose during the most recent quarter. Shares popped 8.5% after FB posted Q1 ’18 financials and have steadily climbed since, closing Tuesday at $192.40.

Twitch was acquired by Amazon (AMZN) for $970 million in 2014. The company increased concurrent viewership +21% during Q1 ’18 (to 953,000), growing its already large lead in the game streaming market over 2nd place YouTube Gaming (GOOGL, -12% to 272,000); but, Facebook (FB, +103% to 56,000) also reported significant audience growth last quarter and will enter Q3 ’18 armed with an enhanced destination for gaming enthusiasts.

As for AMZN, they posted their most profitable quarter ever in Q1 ’18. AMZN grew revenue +43% to $35.7 billion, while net income rose 121% to $1.6 billion. Cloud computing (+49% YoY to $5.44 billion), subscription services (+60% YoY to $3.1 billion) and ad revenue (+139% YoY to $2.03 billion) all contributed to the record quarter. AMZN shares are up 7.5% over the last 3 weeks and climbed past $1,700 for the first-time last week, before closing on Tuesday at $1,698.76.

Fan Marino: ESL (think: Dota 2, Counter-Strike: Global Offensive) signed an exclusive broadcast deal with Facebook Watch, as opposed to the market leader Twitch. Why? As World Esports Association Commissioner Ken Hershman points out, in addition to being a “tremendous streaming platform”, Facebook is “a social and engagement platform.” FB’s targeting capabilities and recommendation engine have enabled the esports federation to grow rapidly, from 750,000 viewers/mo. to more than 25 million within a year.

For those wondering, .gg stands for good game.

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

Amazon Acquires Exclusive EPL Rights, First Non-Traditional Broadcaster to Carry League Games

Amazon200x200

Amazon (AMZN) has acquired the exclusive rights to broadcast 20 English Premier League matches per season in the U.K., becoming the first non-traditional broadcaster to carry league games. The three-year pact, set to begin in 2019-2020, represents the e-commerce giant’s most significant live sports programming acquisition to date. AMZN will live-stream games on its digital Prime video service at no additional charge to Prime members (costs $119/year). Financial terms of the deal were not disclosed but BT Sport is reportedly paying $40 million/year for a comparable package. Late Thursday, with the league’s broadcast rights through the next cycle sold, Executive Chairman Richard Scudamore announced he would be resigning before the end of the calendar year. A successor has yet to be named.

Howie Long-Short: It’s important to simultaneously recognize the significance of this deal (i.e. a FAANG company lands exclusive rights!), while understanding that 90% of the broadcast rights available to media companies within this round were sold to traditional TV providers (i.e. linear television isn’t going anywhere, anytime soon). SKYAY will pay $1.655 billion/season for its four packages (128 games/season), a 14% discount on the expiring deal; while BT got the 5th package (32 games/season) for 8% less ($409.3 million/season) than it’s currently paying for the rights. BT picked up an additional 20 games/season at a discount rate ($40 million/season), earlier this week.

EPL clubs decided to sell the last two rights bundles (Amazon’s and the BT deal signed this week) at a cut-rate price after each failed to meet reserve prices in February’s auction and having concluding that Executive Chairman Richard Scudamore overestimated the interest from non-traditional broadcasters after the first five packages were sold to the old guard.

As for AMZN, the company posted its most profitable quarter ever in Q1 ’18. It grew revenue +43% to $35.7 billion, while net income rose 121% to $1.6 billion. Cloud computing (+49% YoY to $5.44 billion), subscription services (+60% YoY to $3.1 billion) and ad revenue (+139% YoY to $2.03 billion) all contributed to the record quarter. AMZN shares are up 7% since May 22nd and climbed past $1,700 for the first time this week, closing on Thursday at $1,689.30.

Fan Marino: The EPL’s 20 clubs currently split international broadcast revenues evenly, but top clubs like Manchester City, Manchester United and Liverpool have been lobbying for a larger percentage; arguing it’s their presence within that attracts the foreign viewer. On Thursday, they got their wish – the league’s clubs decided that any future increases in broadcast revenues would be distributed according to final league position (from ’19-’20 season forward). It should be noted that the new formula ensures the league’s top club receives no more than 1.8x the amount of the lowest-earning club.

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

NFL Provides Fans with the Worst Game-Day Experience

NFL 200x200

The Fan Experience Benchmark: U.S. Professional Sports report (10,000 surveyed) indicates that the National Football League gives its fans the worst game-day fan experience among American pro sports leagues (included Big 4 + NASCAR, PGA, MLS, WNBA and ATP). The NFL finished last in 8 of the 9 live-event experiences tracked by the Tempkin Group, scoring the lowest in parking, concessions and bathrooms. The news wasn’t all bad for the league though, it remains the most popular sport to watch on television by a wide margin; 50.8% of those surveyed enjoy watching the league on their couch (MLB 2nd with 37.9%).

Howie Long-Short: Those surveyed rated parking as the worst part of the NFL game-day experience. The price to park your car outside of an NFL stadium varies across the league, but can cost between +/- $25 and $75 (Dallas); often still requiring a 10-15 minute walk to the stadium entrance. It’s a valid concern and one that the league could (and should) solve with minimal financial impact; but, I’m not in the camp that believes the NFL has a poor game-day experience. Sure, it’s expensive, but there’s nothing better than being in the building on days like these; plus, the tailgate is great!

For those who think this survey is another sign that the league is failing, think again. Back in December, Yahoo! (AABA) agreed to pay $2 billion over 5 years to stream league games (without exclusivity, I might add) and Amazon (AMZN) recently signed a 2-year $130 million deal for the rights TNF; $15 million more/year than they paid last season. NFL broadcast deals are so large, the league could play games in empty stadiums and still generate more revenue than any other pro sports league in the U.S. In 2016, the league generated 16.35% of its total revenue ($13 billion+) from ticket sales; using that same percentage on 2017 revenue (the percentage has declined, the new revenue is from TV) and the league still generated $1.8 billion more than MLB (hit $10 billion for 1st time).

Fan Marino: Monday Night Football fans are going to have to get used to 2 new voices in 2018 with Joe Tessitore and Jason Witten, replacing Sean McDonough and Jon Gruden. Witten’s hiring is particularly confusing. He’ll make $4-4.5 million/year to be the “face of MNF”, despite never doing color commentary and lacking mainstream recognition (i.e. he’s not Peyton Manning, their 1st choice). ESPN continues to burn good money after bad (see: $14.5 million on Get Up!). If they had to have Witten, they could have for less; no one could have offered a comparable stage.

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

NBA 2K League Finds Media Rights Partner, Viewership for Inaugural Game Disappoints

nba-2k-league

The NBA and Twitch have agreed to a multi-year partnership that makes the video streaming service the league’s first official media rights partner. The agreement ensures that the inaugural season of the NBA 2K League will be broadcast live, in its entirety (up to 199 games); with all games featuring live commentary and updates from around the league. Twitch has announced plans to introduce “Extensions” to increase viewer engagement during broadcasts (they’re going to need to draw viewers first, see Fan below). Twitch is a Founding Partner (i.e. they’ll have an equity stake) of the upstart league.

Howie Long-Short: Twitch was acquired by Amazon (AMZN) for $970 million, back in 2014. The company increased concurrent viewership +21% during Q1 ’18 (to 953,000), growing its already large lead within the game streaming market over 2nd place YouTube Gaming (GOOGL, -12% to 272,000). Facebook (FB, +103% to 56,000) and Microsoft’s (MSFT, +90% to 9,500) also reported significant growth with their streaming audiences last quarter.

As for AMZN, the company posted its most profitable quarter ever in Q1 ’18. It grew revenue +43% to $35.7 billion, while net income rose 121% to $1.6 billion. Cloud computing (+49% YoY to $5.44 billion), subscription services (+60% YoY to $3.1 billion) and ad revenue (+139% YoY to $2.03 billion) all contributed to the record quarter.

Fan Marino: The NBA 2K League’s inaugural season kicked off yesterday, with Bucks Gaming and Pistons GT participating in the league’s first ever game (Pistons won 49-44). Just 9,000 watched the contest, a particularly disappointing total considering OWL’s opening day drew 408,000 concurrent viewers. This league is far from the slam dunk predicted following last month’s successful gamer draft.

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