Comcast Drops Big Ten Network from All But 9 “Home Markets”

Big10

Comcast Corporation (CMCSA) has dropped Big Ten Network from its cable offerings in all but 9 “home markets”, explaining several factors played into the decision; “ranging from the costs programmers charge us to carry their channels and the amount of viewership, to available alternatives.” Subscribers in Illinois (IU, ILL, NW) Indiana (IU, PUR), Maryland (UM), Michigan (UM, MSU) Minnesota (UM), New Jersey (RU), Ohio (OSU), Pennsylvania (PSU) and Wisconsin (UW) will continue to receive the conference network. Iowa (IU) & Nebraska (NU) are the only “home markets” excluded from the list, as Comcast does not provide services to residents of those states. CMCSA has stated there are no plans to cut the network from the remaining “home markets.”

Howie Long-Short: The timing of this decision is likely related to a recent report indicating the Pac 12 Network average subscriber fee declined 63% over the last 5 years (to $.11), while the Big Ten Network (B10) fee increased 30% over the same time (to $.48). Rising carriage fees are directly correlated to the “(rising) costs programmers charge us to carry their channel”; and with basketball season over and football season not starting for another 4 months, CMCSA sees the opportunity to lower the amount it pays the conference to carry the channel.

If in fact the decision is final, their loss would be a gain for Time Warner (TWX), DirecTV (T), DISH and Verizon (VZ); carriers that offer the network nationwide, as passionate Big Ten football fans will switch providers before missing a big game. For those interested in owning a piece of the Big Ten Network, you can invest in Fox Entertainment Group (FOXA); they control 51%, with the 14 member Universities owning the balance.

Fan Marino: College football programs utilize different accounting methods, with some schools allocating a larger percentage of their conference payouts to the sport (in FY16 it ranged between 45%-85% at Big 10 schools); making it tough to compare apples to apples. If you remove the conference payout ($16.1 million) from the ledger, the picture becomes clearer.

In 2016-2017, Michigan ($40.3 million), Ohio State ($24 million) and Penn State ($16.3 million) had the football programs within the conference, that generated the largest surplus (discounting the payout); while Purdue ($11.97 million), Minnesota ($13.4 million) and Indiana ($14.6 million) operated at the biggest losses. Of course, it’s not a coincidence that Michigan, OSU and PSU finished 1st, 3rd and 2nd, respectively; while Purdue, Minnesota and Indiana ended that season that season 10th, 5th and 11th out of 13 teams. The more a program wins, the more revenue it generates. Northwestern, a private institution, does not release its football program’s financials.

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Endeavor Acquires Digital Video Broadcasting Company

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Endeavor has acquired the digital video streaming provider NeuLion, Inc. (NLN) for $250 million ($.84/share) in an all-cash deal; a 112% premium on the share price at last Friday’s close. NLN, which specializes in digital video broadcasting, distribution and monetization, will become a privately held subsidiary of Endeavor (formerly WME-IMG) upon the Q2 ’18 close of the sale. The announcement comes just months after NeuLion announced “it was selling some non-core assets to an affiliate of Fortress Investment group for $41.5 million”. NLN has struggled to replace the revenue lost following its loss of the NHL as a client to competitor MLBAM in August ‘15; revenue declined 8% YOY in Q4 ’17.

Howie Long-Short: You can’t invest in Endeavor (despite a long-rumored IPO), but with publicly traded rights holders valuing the technology that enables them to reach their consumers directly; there are several other was to invest in OTT service providers. Disney (DIS) owns 75% of BAMTech, NBCUniversal (CMCSA) developed PlayMaker Media and Turner Broadcasting System (TWX) owns “a majority stake” in iStreamPlanet. Don’t forget, you can also play Delatre via WPP; an investor in Bruin Sports Capital.

Fan Marino: Endeavor (which owns the UFC) worked with NLN on the dissemination of last summer’s McGregor/Mayweather mega-fight and while the fight had the 2nd most buys in PPV history (4.3 million), it was also marred by widespread technical difficulties. While that experience may not have gone perfectly for some viewers, it gave Endeavor the opportunity to see the platform’s upside; and with the UFC struggling to find the $450 million/year annually it seeks in TV money, retaining their own rights and going DTC may be the company’s best option.

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Fox to Pursue WWE TV Rights, Let UFC Walk If Successful

WWE

As we wrote in January, the UFC’s 7-year broadcast deal (worth $160 million in ’18) with 21st Century Fox, Inc. (FOXA) expires at the end of 2018 and the size of the extension the promotion is reportedly seeking ($450 million annually), has created the possibility (if not likeliness) the companies will be heading for a divorce (FOXA offered $200 million). It now appears as if FOXA will pursue WWE TV rights (expiring in September 2019), with the intention of passing on the UFC should they be successful. FOXA is selling the wrestling organization on the attractive opportunity to air their feature program, Monday Night Raw, on broadcast television (i.e. in 115 million homes); the show currently draws 3+ million viewers/week on USA Network. The WWE will announce their decision on a U.S. TV partner between May and September.

Howie Long-Short: NBCUniversal (CMCSA) currently pays $200 million/year for the rights to televise WWE Monday Night Raw and SmackDown. The WWE is reportedly seeking $400 million annually on their new deal, a figure FOXA is far more inclined to pay for their content than the UFC’s. That makes sense to me, the WWE can script their outcomes and ensure their stars’ staying power; a UFC champion is always one fight away from never competing again. WWE shares hit an all-time high earlier this week ($38.77), closing on Thursday at $37.91.

Fan Marino: Ronda Rousey spent her first 2 Monday Night Raw episodes engaged in a feud with Stephanie McMahon and Triple H, that will culminate in a tag-team match (Ronda will be paired with Raw General Manager Kurt Angle) at WrestleMania. One would think the curiosity surrounding Rousey would have TV ratings on an uptick, but that hasn’t been the case. In fact, ratings have declined in the hours Rousey has appeared on the show. The WWE must be disappointed in lack of pop the signing provided.

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Comcast Spectacor to Renovate, Not Rebuild Wells Fargo Center

Comcast Spectacor has decided to invest $250 million into a full-scale renovation of Wells Fargo Center (22 years old), as opposed to building a new venue. The addition of new court and rink-side suites, 2 lounges, widened concourses and revamped player locker rooms are among the planned upgrades. The construction will take place over the next 3 summers (to be completed in ’21), so not to interfere with the Philadelphia Flyers’ or 76ers’ (anchor tenants) home schedules. Estimates on a tear-down and build-new plan (on the same site) were projected to be in the $750 million range.

Howie Long-Short: In addition to the Wells Fargo Center, Comcast Spectacor owns the Philadelphia Flyers, the Maine Mariners (ECHL), the Philadelphia Wings (NLL) and the Philadelphia Fusion (OWL). The Comcast Corporation (CMCSA) subsidiary paid off the balance remaining on the initial constructions loans back in 2016, freeing up cash flow needed for the renovations. For FY17, CMCSA reported adjusted EBITDA increased 6.2% to $28.1 billion; but, Corporate, Other and Eliminations, the sector of the business that contains Spectacor and Xfinity mobile, weren’t responsible for that increase. In fact, the sector experienced a $1.4 billion loss in ’17 (compared to a $919 million loss in ’16).

Fan Marino: No NHL team had a better record than the Flyers (18-5-2) over the first 2 months of 2018. The catalyst for the success was early December decision by coach Dave Hakstol to assign stars Claude Giroux and Jakub Voracek to 2 different lines. Since then, Giroux is tied for 2nd in the league in points (46), Voracek is tied for 12th (39) and the team has gone from out of the playoff picture to just two points behind Washington for first place in the Metropolitan Division. It must be noted the team has lost its first 3 games in March, though one was a shoot-out loss.

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Amazon Interested in Premier League “Super Pack”

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Amazon is reportedly interested in acquiring a “super pack” of English Premier League (EPL) broadcast rights; a package that would give them 40 live matches/season, near live rights to all 380 games/season and the ability to show highlights. The rights would span 3 seasons (’18-’19 through ’21-’22) and in theory, help the e-commerce juggernaut bring new subscribers to their Prime service. The EPL, looking to offset the loss of value (-14% from last round of negotiations) from the first 5 packages that were awarded, has additional incentive to work out a deal with AMZN; the organization is considering launching its own OTT service and wants to use the next 3 seasons to gauge the potential for streaming success.

Howie Long-Short: Of the 5 rights packages awarded thus far, Sky Sports (subsidiary of Sky PLC, SKYAY) won 4 of them; for $1.655 billion/season. On Tuesday, Comcast Corp. (CMCSA) made a $31 billion offer for the European pay TV provider, driving SKYAY share prices up 21% (to $74.58). While that’s good news for SKYAY shareholders, the offer likely has DIS execs fretting. SKYAY was the “crown jewel” of DIS’ $52.4 billion offer for FOXA assets. DIS now must decide if it will proceed with the FOXA deal without SKYAY or look to outbid CMCSA for an asset it desires.

Fan Marino: The term “near live rights” refers to a networks ability to re-broadcast games shortly after their conclusion. That must be a European phenomenon. I find second screen devices (and platforms like Twitter) critical to the sports viewing experience. If the game isn’t live, you’re eliminating the use of those devices for the purposes of social interaction, game updates etc. Of course, you also must manage to avoid the score of the game while it’s being played; good luck with that!

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Star Vizn Gives Users the Chance to Train with Star Athletes

Roy Jones

Star Vizn, an online training platform that enables users to refine their craft by watching (and listening to) hall of fame trainers, has launched IOS and Android applications. Offered in a variety of sports/disciplines (basketball, football, boxing, cardio, gym fitness etc.), legends like Jerry Rice, Dominique Wilkins and Roy Jones Jr. lead subscribers through a series of exclusive, behind-the-scenes, 12-week training regimens. JohnWallStreet had a chance to speak with Star Vizn CEO Adam Joosten about the company’s niche, competitors and hardware aspirations.

JWS: Where does Star Vizn fit into this vast world of niche/boutique fitness?

Joosten: Growing up, I had done all the at-home fitness videos; but, I didn’t enjoy doing push-ups and regular workouts. So, I set-out to design fitness programs around your favorite sports and athletes; morphing what somebody is already passionate about, with a fitness program built around it.

JWS: As companies like Orangetheory and Peloton have grown in popularity, some of their instructors have gained cult-like followings; almost becoming fitness influencers. While your product is app based, do you view those companies as competitors?

Joosten: We’re more competitors with companies like that, than we are with your standard Beachbody or Daily Burn; companies that are doing traditional general fitness. They (Orangetheory, Peloton) did a great a great job of making fitness fun, which is what the core emphasis for Star Vizn is. We added the different sports element to interval training.

JWS: I read that Star Vizn has its own line of hardware. Do you see yourselves as a hardware or software company?

Joosten: The hardware is a way to accentuate the different software programs; so, for the audio workouts, having headphones that improve that experience. We want people to be able to stay on Star Vizn and be able to purchase anything that they need, as opposed to buying a fitness program and realizing they need a jump rope and having to go somewhere else. Right now, we’re just selling resistance bands for our fitness programs and headphones for our app; but, over time we’ll definitely have more hardware (hint: a watch is coming).

Howie Long-Short: Star Vizn has raised just $2 million of friends and family money, less than half the amount Orangetheory has raised ($4.8 million). Peloton, a hardware company first, has raised $444.7 million over 7 rounds; but, nearly all that money is privately backed. There is one way to play Peloton. NBCUniversal (CMCSA) was one of 8 investors to have participated in the company’s May ’17 Series E investment round ($325 million).

Fan Marino: Roy Jones Jr.’s boxing program was among the first to launch; smart choice, his promo video has me ready to run through a brick wall. I had the chance to interview Roy about a variety of topics including his thoughts on the Deontay Wilder/Luis Ortiz fight (March 3rd). The interview will run in our Heavyweight World Championship preview edition on March 2nd.

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Hulu May Be Growing Too Fast for Success

Hulu

For 3 straight nights (Friday 2.16 – Sunday 2.18), Hulu experienced widespread log-in issues that prevented subscribers from viewing NBA All-Star Weekend and the 2018 Winter Games. The glitch on Sunday night occurred around 9p EST, the scheduled tip-off time for the All-Star Game (on TNT) and during NBC’s prime time Olympics coverage. It hasn’t been a strong month for the live streaming service; technical issues during the Super Bowl, including blank screens during the last 2 minutes, forced Hulu to offer one-month credits to those affected. No other live streaming service (i.e. DIRECTV Now, Sling TV or PlayStation Vue) reported issues during Sunday evening’s events.

Howie Long-Short: Research by the Boston Consulting Group indicates a striking correlation between revenue growth and company mortality (read about Compaq); in other words, the faster a company grows, the shorter its expected lifespan. Moderate growth is proven to be lower risk; Hulu is growing quickly (here’s a story headlined, “Does Hulu’s Rapid Growth Spell Trouble for Netflix and Amazon?”). While subscribers are up 41.6% (to 17 million) over the last 18 months, the company is now spending over $1 billion/year on advertising and lost $920 million in 2017 (up from $531 million in ’16). Losses are expected to increase 80% to $1.7 billion in ’18. CMCSA, FOXA, DIS & TWX will be investing another $1.5 billion into the company this year. Shareholders should be concerned about the cost of customer churn; companies that fail to deliver when most desired, don’t stay in business long.

Fan Marino: While on the topic of live streaming services, YouTube TV (GOOGL) announced it would be adding TNT, CNN, TBS, MLB Network and NBA TV to its service; while subsequently increasing the cost of the offering from $35 to $40 (note: Hulu’s 50 channel package is also $40). The average cost of a broadband plan in the United States is $66.17; tack on $40 for YouTube TV and you’re now paying over $100/mo. What exactly is “skinny” about that?

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Intersection Streaming Olympic Coverage on “Thousands of Digital Screens” in NYC, CHI & PHI

Intersection

NBC Olympics, a division of the NBC Sports Group (CMCSA), has announced a partnership with Intersection that will bring exclusive content from the PyeongChang Games to “spaces where the American audience now consumes media”; throughout New York, Chicago and Philadelphia. Beginning tomorrow February 9th (and running through February 25th), NBC Olympics will produce custom content to keep urban residents up-to-date on the Winter Games. Intersection, operating at the forefront of the smart city revolution with products like LinkNYC (information/advertising kiosks that offer free wi-fi), will air morning highlights, medal counts and real-time alerts on “thousands of digital screens across our cities and transit hubs.”

Howie Long-Short: Intersection was founded in 2015, when Sidewalk Labs (GOOGL) acquired Control Group and Titan Outdoors and merged the companies. In November, Intersection closed on a $150 million venture round for the global expansion of its advertising supported Wi-Fi network (NYC and London were their first 2 cities). Graham Holdings Company (GHC, former owner of the Washington Post) led the round; Sidewalk Labs did not participate. On November 1st, GHC reported Q3 profits declined .4% YOY; despite a 6% increase in revenue. Struggles within their education (i.e. Kaplan, -3% to $376.8 million) and television segments (-10% to $101.3 million) offset the growth in their other businesses (+46% to $179.1 million).

Fan Marino: If you can catch a last-minute flight to PyeongChang, you can still get seats to the opening ceremony (unheard of, ALWAYS sells out). Of course, there are several reasons why; it’s outdoors, the temperature is projected to be in the 20s and tickets start at +/- $400.

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SMI Reports NFL Regular Season In-Game Ad Revenue Declines for 1st Time Since 2014

NFL 200x200

For the first time since the Standard Media Index (SMI) began tracking in-game NFL advertising revenue, the total dollars declined YOY (-1.2% to $2.42 billion). While the cost of spots rose 1.2% to $505,000, as the demand remains high (particularly in the upfront marketplace); the marginal per spot increase was more than off-set by a rise in “make-goods” as viewership declined 9.7%. The data includes all ads shown on ESPN, CBS, NBC & FOX NFL broadcasts between September 7th and December 31st (the NFL’s 2017 regular season).

Howie Long-Short: The reduced spend by automotive (-5.4% YOY) & consumer electronics companies (-3%) had the greatest impact on the total revenue generated, as those two categories represent the NFL’s biggest spenders. Several categories that generate a smaller percentage of the league’s advertising revenue increased their ’17 spend, including; insurance (+30%), alcoholic beverages (+16%) and fast-food restaurants. For reference purposes, total NFL in-game ad revenue was up 9.6% (to $2.38 billion) in ’15 and 3% ($2.45 billion) in ’16.

Fan Marino: Despite the declining viewership, the NFL remains TV’s biggest draw; 37 of the Top 50 most watched broadcasts of 2017 were NFL games, up from 28 in 2016 (Olympic year) and matching the league’s total from 2015. 9 of the Top 12 were NFL games and Super Bowl LI was the most watched program. 11 other playoff games made the list, as did 6 Sunday Night Football games, the season opener on NBC and 18 CBS and Fox Sunday afternoon windows.

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Interest Lacking in TNF Package, Fox Submits Highest Bid

NBC Thursday Night Football
NBC THURSDAY NIGHT FOOTBALL — Pictured: “NBC Thursday Night Football” Logo — (Photo by: NBC Sports)

Just three linear television networks submitted bids for the NFL’s Thursday Night Football package; Fox (submitted the highest bid), CBS & NBC. Twenty-First Century Fox (FOXA) reportedly bid more than the combined $450 million that CBS & NBC (CMCSA) paid in 2017. Both companies have acknowledged that they lost money on the package last season (advertiser interest declined) and stated they would be submitting lower bids for rights to the games in 2018. ABC/ESPN did not submit a bid, as the company did not think it could turn a profit at the going rate; nor did Turner, as it did not believe the league would sell the rights to a cable network (TWX is also tied up in a potential merger with T). TNF ratings on CBS and NBC are down 20% since 2015.

Howie Long-Short: When FOXA decided to sell $52.4 billion worth of assets (TV, film & RSNs) to DIS, the company restructured focusing on news coverage & live sports; so, adding TNF rights aligns with the new strategy, even if the games don’t immediately turn a profit. It’s reasonable to ask why Fox would outbid its competitors for a property that loses money. Simply put, they hope TNF can boost ratings on shoulder programming and want the opportunity to promote the network’s other shows. TNF remains a Top 5 primetime program. While it is the least valuable NFL package, it still maintains tremendous value relative to other television programming.

Fan Marino: NBC has the rights to the 2018 Super Bowl. Al Michaels (PBP), Cris Collinsworth (color) and Michelle Tafoya (sideline) will call the game. It will be the 10th time Michaels has called the Super Bowl. One individual that will be noticeably absent from the NBC broadcast is Bob Costas (who stated last February that he expected to call the game). Perhaps, in hindsight, it wasn’t the best idea to predict the demise of the country’s most popular sport.

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