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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Study Finds Super Bowl Ads Worth the Spend

SuperBowl

30-second advertising spots during the February 4th Super Bowl are selling for more than $5 million (40% of U.S. TV households will be watching), but a collaborative study between Stanford University and Humboldt University (Germany) found that Super Bowl advertisers continue to see meaningful post-game sales during other major sporting events (i.e. March Madness, World Series), within the same calendar year, indicating the spend is worth it. Those that built a social media presence or digital campaign to follow their Super Bowl ad, were successful in keeping their product(s) on the consumer’s mind through baseball season. Companies that were the sole advertiser within a specific product category received the greatest long-term value (see: BUD, PEP). Long-term advertisers received a boost in sales during Super Bowl week, despite the product being purchased before the event (i.e. the ad has yet to run).

Howie Long-Short: Just 10 Super Bowl ad spots remain, so the study is unlikely to impact ad sales (and NBC’s bottom line) for this year’s game. If there are going to be immediate beneficiaries, it’s going to be CBS (rights to ’19 SB) and FOXA (rights to ’20 SB); the rights holders of the next 2 Super Bowls. NBC Universal (CMCSA) said it expects to generate $500 million in Super Bowl ad revenue, a figure in line with the total generated for the last 2 years. Advertisers aren’t worried about the NFL’s declining attendance, that trend hasn’t translated to the Super Bowl; last year’s game drew 111.3 million viewers, the 5th most watched TV event of all-time.

Fan Marino: Mean Joe Greene and Joe Namath participated in iconic Super Bowl commercials, but a lesser known collegiate All-American starred in one of my all-time favorites; Terry Tate as “Office Linebacker”, installing workplace discipline in a 2003 Reebok spot. At 6’5, 300 pounds, with 4.3 40 (yard dash) speed and collegiate All-American (Morgan State) game tape, Lester Speight (his real name) should have been an NFL star; position changes and injuries derailed his promising career. He never played in a professional football game.

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Peloton Introduces Internet-Connected Treadmill at CES

Peloton

Peloton, known for reinventing the stationary bike, introduced an internet-connected treadmill offering on-demand built-in live workouts, at CES on Tuesday. Designed to mimic the boutique fitness studio class experience, the $3,995 Peloton Tread offers workouts for athletes of all levels; accounting for their varying tastes in music. The hardware includes an HD touchscreen 3x larger (32 inches) than the one on the Peloton bike, ensuring the user maintains a clear view of the screen when he/she steps off the machine to do floor exercises; along with a 20-watt sound bar and 59 individual shock absorbing-slats (as opposed to a single belt), reducing the impact on the user’s feet. The company also announced it would be introducing additional equipment, like weights, though no pricing info was disclosed.

Howie Long-Short: In 2016, the company tripled its annual revenue to $170 million. The treadmill market is 5x larger than that of the stationary bike, so the new product should help keep revenues rising. The digital health start-up with 8,000 classes, 600,000 subscribers (at $39/mo.) and 29 retail locations, closed on $325 million Series E financing round in May 2017 (among the largest digital health deals of the year) with a valuation +/- $1.25 billion. The company has raised nearly a half billion dollars to date ($444 million), but nearly all that money is privately held. There is one way to play Peloton though, NBCUniversal (CMCSA) was one of 8 investors to have participated in the most recent investment round.

Fan Marino: CEO John Foley is quick to note that Peloton isn’t competing with legacy equipment providers NordicTrack or ProForm, “hardware companies” of “yesteryear”; seeing his unicorn but at the nexus of “fitness, technology and media”. In his opinion, it’s not Peloton’s hardware that has created its rabid following, but the “content, software, community motivation, and programming” that makes their products “super engaging and super fun.” I’m not sure high-intensity cardio workouts are fun, but at least they’ll be affordable to the masses; Peloton introduced a financing plan reducing the monthly price of the treadmill to roughly 2 gym memberships.

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Playoff Fantasy Football Contest Paying Out in Bitcoin

FanDuel

The NFL Playoffs start tomorrow (Tennessee at Kansas City, 4:35p EST) and FanDuel is giving daily fantasy football players the chance to win Bitcoins (BTC); the first time a sports-tech company has awarded cryptocurrency as a consumer promotion. FanDuel will host a free single-entry contest (aka the Bitcoin Bowl) that will award the winner a single Bitcoin; and a second multi-entry contest, that costs $3 to enter and offers a multi-tiered payout (winner receives 2 Bitcoins). The deadline to enter and select a lineup is kickoff of the Tennessee/Kansas City game.

Howie Long-Short: FanDuel has raised capital from the following public companies (or subsidiaries of public companies) KKR & Co. (KKR), Google Capital (GOOGL), Time Warner/Turner Sports (TWX), NBC Sports Ventures (CMCSA) and Comcast Ventures (CMCSA); so, there are no shortage of ways to play the fantasy sports outfit. As for the popular cryptocurrency, the WSJ reported that Peter Thiel’s venture capital fund bet $15 million to $20 million on Bitcoin; upon release of that report, BTC prices shot up 14% to $15,447. The digital coins were trading at +/- $15,150 on the evening of January 4, 2018.

Fan Marino: Facebook (FB) has entered the DFS space, launching TheScore Fantasy on Facebook Instant Games; accessible only through their Messenger application. The mobile game currently enables you to play NFL, NBA, NHL, MLB & Premier League contests, but only against your friends and there is no monetary incentive to win. It’s not a game for the hardcore DFS player, but the simplistic interface and small roster sizes (just 5 players) could make it attractive to the next generation of football fans; those not yet of age (18) to play DFS.

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NFL Remains TV’s Biggest Draw, Khalifa Draws Huge Audience for G-League Game

AdAge published their Top 50 most watched broadcasts of 2017 and despite a 9% YOY NFL ratings decline, 37 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. The highest rated non-NFL sporting event was Game 7 of the World Series (#13, 28.2 million); Game 5 of the NBA finals was the NBA’s highest rated game (#23, 24.5 million).

Howie Long-Short: On a network basis, Fox (FOXA) had the most sporting events in the Top 50 with 15; including the Super Bowl, 4 NFC playoff games and 2 World Series games. CBS and NBC (CMCSA) each had 13. ABC (DIS), which does not have regular season rights to the NFL, had just 5 of the Top 50 broadcasts. NFL ratings are down, but ad sale revenue is up 2%, makegoods are down and the average cost per spot is up 1% from the 2016 season.

Fan Marino: Former adult film star (and social media influencer) Mia Khalifa is building a name for herself within the sports world; co-hosting a show on Complex News’ YouTube channel with Gilbert Arenas and starting a Twitch channel to play NBA2K and NHL ‘17. Now she’s using the platform to call G-League games (watch her co-stream Grand Rapids vs. Fort Wayne, here). With 10 minutes to go in the 1st quarter of last night’s game, more than 3 million people had visited her Twitch page. It’s obviously not an apple to apples comparison, but just one NBA game this season had 3 million viewers (GSW vs. OKC on November 22nd). I may not ready to give up Mike Breen, Marv Albert and Ian Eagle for Khalifa; but it appears there is an audience who is and prefers a co-hosted stream to the traditional broadcast.

DESPITE ANOTHER RATINGS SLUMP, THE NFL REMAINS TV’S TOP DOG

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Amazon Takes on The Sports World; 25 Companies That Will Be Affected

Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.

Amazon Expands Brand Registry Program, Now Includes Nike

In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.

Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD

Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).

Amazon Entering Private-Label Sportswear Business

In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).

Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477

Howie Long-ShortAMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.

The Pursuit of Exclusive Broadcast Rights

In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.

Names to Watch: CBS, DIS, FOXA, CMCSA, FB, GOOGL, NFLX, AAPL, SKYAY

Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.

Twitch: The Future of Game Broadcasts?

Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.

Names to Watch: CBS, DIS, FOXA, CMCSA, TWX, RCI, MSGN

Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.

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NFL Sends Out RFP for Thursday Night Football, Open to Altering Package

The NFL is soliciting bids for its Thursday Night Football broadcast package, encouraging interested media companies to bid on both television and streaming rights. The RFP indicates the league is open to altering the package, with the number and dates of games (like TNF on Christmas Day) up for negotiation. Bids are due in early January. The league-owned NFL Network will continue to carry at least 7 games, per existing linear television affiliate agreements.

Howie Long-Short: Richard Sherman wrote a column on the Player’s Tribune entitled “Why I Hate Thursday Night Football”, citing injury, safety and quality of play concerns. Sherman isn’t the only player to feel that way (see: RoethlisbergerBrees), so why does the league insist on playing the games? The NFL made $500 million from its ’17 Thursday Night Football broadcast package; CBS and NBC (CMCSA) paid $450 million (each got 5 games) for television rights and Amazon (AMZN) paid $50 million to stream games 10 games. Oh, and people are still tuning in; the lowest rated TNF game drew 10.6 million viewers (3.3x the amount of the highest rated NBA game this season).

Fan Marino: Here’s a solution. CFB held its conference championship games on the weekend of December 2nd. Play Saturday triple headers (1p, 4p, 8p EST) the last 4 weeks of the season (no NCAA games) and add one on Christmas (in ’18 Christmas falls on Tuesday, so teams playing would get a bye the week prior). There’s no reason to concede that day to the NBA. That leaves 3 games; add 2nd MNF games (7p and 10p EST) to the last 3 weeks of September (there is already one in Week 1).

NFL RFP Suggests League Is Open To Changing “TNF” Package

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