Comcast Adds DAZN In Effort to Slow Migration, Claw Back PPV Boxing Revenues

Comcast

Comcast has announced a distribution deal with DAZN that will make the app available to Xfinity X1 and Xfinity Flex subscribers through their set-top box. The sports-centric streaming outfit will join the likes of Netflix, Amazon Prime Video, YouTube and Pluto within Comcast’s applications library.

Comcast is the first major U.S. distributor to partner with DAZN, but it won’t be the last. The OTT streaming service has launched an initiative entitled ‘DAZN for Operators’ designed to be a “turnkey opportunity for cable, satellite, mobile and internet providers to offer DAZN’s premium sports content [within their native environment].”

Howie Long-Short: DAZN has found “great success with platform distribution relationships” before. Namely with NTT Docomo in Japan (via mobile phone) and Sky Italia in Italy (via set-top boxes). EVP of North America, Joe Markowski, is confident that the ‘DAZN for Operators’ initiative will translate in the U.S. He says, “given the power that sport carries in maintaining and growing a subscription base, every operator is seeking out sports content.”

From the DAZN perspective this deal is about growing the number of screens with their application. Partnering with the number one cable provider in the U.S. puts DAZN in “tens of millions of households” and “opens up many more doors [in terms of other potential distribution partnerships].” It also creates a “tremendous marketing pipeline and provides the company with a platform to heavily promote key content” (think: GGG-Derevyanchenko, Ruiz-Joshua II).

Markowski acknowledges that DAZN wants to be a pure-play OTT service – DTC subs are the most valuable – but says that the company has come to the realization that as long as “entertainment is delivered through traditional linear cable” (which looks to be the foreseeable future) the business needs to deliver content within that ecosystem. Maximizing audience size has become DAZN’s number one priority.

As for Comcast, its deal with DAZN aligns with a broader strategy to increase integrations with internet content providers. The company believes it can slow subscriber migration to “connected TV platforms like Apple TV or Roku” if it can keep those viewers within its own environment. The last thing the company wants is a subscriber flipping off their TV set on a Saturday night to watch DAZN fights on their phone or laptop.

But this is as much of a revenue play for Comcast as it is a method of retaining subscribers. Remember, when DAZN inked Canelo, Joshua and GGG they took 3-6 lucrative fights/year – that otherwise would have been distributed through pay-per-view – away from cable operators. Comcast now has a chance to claw back some of those lost dollars. DAZN will pay for the right to use Comcast’s pipes and the telecom conglomerate is entitled to keep 15 percent to 30 percent of all DAZN subscriptions revenues generated through its platform (in line with the Apple app store).

Over the last 30 years it has been customary for distribution platforms to receive 50% of PPV boxing sales revenues. Canelo-GGG I did 1.3 million buys at $85. If distributors sold 100% of the buys (they didn’t, some were bought direct from the rights holder), they would have split more than $55 million. It’s not unreasonable to suggest that DAZN’s ability to court some of boxing’s biggest stars has cost PPV distributors north of of $100 million over the last 12 months.

Fan Marino: DAZN has a particularly strong fight card for the balance of 2019. In addition to GGG-Derevyanchenko (10.5) and Ruiz-Joshua II (12.7), Canelo Alvarez is fighting Sergey Kovalev on November 2nd. The company also has cards headlined by Oleksandr Usyk and Naoya Inoue and KSI-Logan Paul II in the 4th quarter. At $19.99/mo. (or $99.99 year) it’s a no brainer for the boxing fan. Comcast hopes to convey that message to the average sports fan.

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Early Entrants: Vol. XIX – Fanatics Expresses Interest in StubHub, May Be Too Late

Editor Note: ‘Early Entrants’ is a series of sports business ‘rumblings’ before the news breaks.

Fanatics

Fanatics Expresses Interest in StubHub, May Be Too Late

Vivid Seats, KKR and Booking.com have all been reported to be sniffing around a potential StubHub acquisition, but one industry insider tells JohnWallStreet that it appears as if Fanatics “just threw their hat into the ring”, too. Michael Rubin’s e-commerce giant presumably sees an opportunity to leverage the wealth of consumer data that the secondary ticketing marketplace controls. Fanatics’ bid is said to be backed by Silver Lake Partners, who is motivated to “keep [StubHub] away from [competitor] KKR.” Fanatics may have missed the boat, though. Our source believes Vivid Seats is “close to a deal.

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NFL Ad Pricing Up in 2019 – Just Not to Level Touted During Upfront

NFL ad pricing has rebounded this season – just not to the level touted during 2019-2020 upfront. AdAge reported that “the average unit cost of a 30-second in-game spot was up between 5 percent and 10 percent compared to the year-ago bazaar”, but the director of media at one prominent buy-side agency suggests the real number is between “three percent and five percent.” He explained that the “networks are bullish during upfronts, but as negotiations go on [brands] get to where they need to be.

Reason for the increase? Brands have realized there’s simply no place else to capture an audience of 25 million people. The influx of non-traditional advertisers buying primetime in-game spots (think: Facebook, Amazon, Netflix, Hulu) and a tempered political climate (as it relates to player protests) have also helped to change the narrative just one year after the networks experienced steep declines.

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Expect NFLN to Retain Exclusive Live Rights

In week 1, Thursday Night Football on NBC averaged over 22 million viewers. In week 2, NFL Network (NFLN) had the exclusive broadcast rights to TNF and viewership declined -70% to an average of 6.6 million fans. The NFL’s media strategy is predicated on reach and the league’s cable channel is in just 41 million homes (Nielsen counted 119.9 million  for the ’18-’19 season), so it’s worth wondering how NFL Network fits into the upcoming round of media rights negotiations.

EVP of media Brian Rolapp says NFLN will continue to play a prominent role come ’23 and expects that the network will retain exclusive live broadcast rights. “The NFL Network is very important to [the NFL] for a lot of reasons. We still believe the NFL fan is somewhat underserved and NFL Network helps [us to] fill [that] need. NFL Network and the RedZone channel are great properties, but also all of our digital content is produced out of that infrastructure and [the network is] really valuable to us in [terms of] how we engage our fans. The [exclusive] games are an important part of [the NFLN content strategy], so I don’t really see that changing.” Thursday night’s Tennessee – Jacksonville game (9.19) will again be exclusive to NFLN.

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MLB Moves to New CMS, NHL May Not Be Far Behind

Major League Baseball has announced that Deltatre’s Content Management System, which powers 25 of the largest sports leagues in the world (including the NFL), is now hosting their +/- 300 digital destinations; MLB had an in-house tool, but the CMS went over to Disney as part of the BAMTech sale in 2017. The decision to settle on Deltatre came after a global search and is not surprising with WWE, PGA TOUR having recently made similar moves. It’s the ability to customize and develop on top of a platform that reached 750 million unique visitors in ’18, that makes ‘Forge’ particularly attractive to MLB.

The NHL is the last of the major leagues (save MLB.tv) still running on BAMTech with the Disney entity focused on building out its own well-publicized streaming services. Insiders tell JohnWallStreet that the league will likely make a move when their current rights deal expires in 2021-22 and speculation already exists that the company will look to follow MLB’s lead.

NLL Looking to Raise Profile Through Digital Storytelling    

The National Lacrosse League made headlines in late August when it named NHL executive Jessica Berman as the league’s deputy commissioner. This week the NLL will take another positive step forward when it hosts a business summit for its players. The event, which will take place in Philadelphia on Wednesday (the day after the 2019 NLL Entry Draft), is designed to educate players on best business practices and social media guidelines. The hope is that the digital-first league can continue to raise its profile with captivating storytelling and the support of a media partner (Turner) that has committed to creating more print and video (see: highlights) content around the NLL.

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Early Entrants: Vol. XIII – Comcast Confident It’s In Best Position to Land Exclusive Carriage of NFL Sunday Ticket

Editor Note: Early Entrants is a series of sports business “rumblings” before the news breaks.

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Comcast Confident It’s In Best Position to Land Exclusive Carriage of NFL Sunday Ticket

Comcast executives are quietly confident that the company will be both the exclusive linear and digital provider of NFL Sunday Ticket come 2020. Sources tell JohnWallStreet that the belief is the company’s scale (think: cable, mobile, Xfinity and X1) will enable it to “service the property in one massive pipeline – which gives it an uninterrupted technical advantage over other bidders. Remember, the NFL has said that technical proficiency will be considered; that a digital carrier must have the infrastructure in place to host an NFL quality broadcast. That’s not a problem with Comcast. They already do streaming and they do it better than anyone else in the space.” Sunday Ticket happens to be the perfect asset for Comcast to leverage across seven or eight revenue streams within the building.

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Klutch Sports Group Exploring Strategic Transaction

There are whispers circulating that Klutch Sports Group is exploring a sale and that Endeavor is interested in buying Rich Paul’s (and LeBron James’) sports agency. Rolling up Klutch would give Ari Emanuel’s company a sports management business to compete with CAA, but more importantly it would boost their pre-IPO earnings; remember, Paul negotiated contracts worth $469 million for James, Anthony Davis and Ben Simmons over the last 12 months. There are tens of millions in commissions coming due.

As for Klutch, the plan was always to cash out before LeBron retired – they’re funds King James will need if he’s going to buy into an NBA franchise. There’s also a pre-existing relationship in place. Back in ’14, LeBron signed with WME to manage all of his entertainment and acting projects. It must be noted that United Talent Agency has also been rumored to have interest in beefing up their sports division with a Klutch alliance.

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Next NFL Sunday Ticket Package to Include Live Game Broadcasts Shot in ‘All-22’

The NFL’s most undervalued media asset is its ‘All-22’ game feed – currently only available through NFL.com’s Game Pass days after the games have been completed. But sources tell JohnWallStreet that’s likely to change come 2020. We’re hearing that “Coaches’ Film” will be included within the next Sunday Ticket package as the league looks to add value to the offering and further grow the revenue pie. ‘All 22’ won’t attract the casual fan, but the NFL believes “it will be on the mobile phone of every sports bettor and DFS player looking for an edge, because it gives the hardcore customer access to something they haven’t had access to prior – something shot for coaching purposes.”

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League of Legends Team Owners Frustrated with Lack of Revenue

Several North American League of Legends Championship Series (NA LCS) team owners are frustrated that after nearly two years, the esports league remains unable to generate meaningful revenues. In the short-term, much of the responsibility to grow the business falls on Riot Games’ shoulders, but the company has been without a head of commercial for more than a year now; until they add one, there’s little reason to believe team finances will change. One source suggested that even when a hire is made, it will be difficult for the company to increase media, sponsorship, merchandise and ticket sales. “The company is simply not structured for anything beyond their core competency – publishing games and operating a micro transaction marketplace.

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Obligation to Cut Down on Debt Load Has AT&T Exploring Sale of RSNs

AT&T

AT&T is reportedly exploring the sale of the four regional sports networks (AT&T SportsNet Pittsburgh, AT&T SportsNet Rocky Mountain, AT&T SportsNet Southwest and Root Sports Northwest) that it acquired in its $85 billion takeover of Time Warner, Inc. The company has struggled to assimilate the well-established WarnerMedia assets into its portfolio and could use the cash that the RSNs would fetch to acquire additional live broadcast rights or pay down debt; the telecom giant is more than $180 billion in the red and CEO Randall Stephenson is intent on eliminating $8 billion in liabilities before the end of 2019. Bloomberg reported that AT&T is yet to start “a formal process to sell the networks and there are no guarantees a deal will be announced.”

Howie Long-Short: AT&T is considering dumping the four RSNs because they simply don’t fit with Turner Sports’ sales strategy any longer. Octagon SVP (global media rights consulting division) Dan Cohen explained that “the RSNs control local broadcast rights, which makes them difficult to bundle with national broadband, national mobile and national pay-TV packages.” AT&T’s digital approach to the RSNs – limiting viewership to those using the company’s streaming service – also conflicts with today’s “be everywhere, all the time” mentality. Cohen said that “while limiting carriage makes sense as a method of driving MVPD subscriptions, its counter-intuitive to how millennials and Gen-Z’s want to consume content” – on the digital distribution platform of their choice.

Should AT&T decide to sell the lot of RSNs, they’re likely only going to fetch upwards of $1 billion. The inclusion of some less desirable markets (see: Rocky Mountain, PNW, Pittsburgh), the pending expiration of several T-1 media rights agreements (and the anticipated increase in price to retain those rights) and a limited pool of potential buyers have all contributed to the networks’ depressed valuation. The Pirates, Rockies and Jazz (3 of the 8 big four teams that have local broadcast deals with AT&T) are all either currently re-negotiating terms, or will be soon with agreements expiring no later than 2020-2021.

While it’s unclear how AT&T would spend proceeds from a sale of the four RSNs, Chris Lencheski (a private equity executive, a former Comcast-Spectacor executive and the CEO of Winning Streak Sports) believes that the company has an obligation to “their board and the people who trade the paper, to take what is effectively free capital from the sale and cut down on their debt load.” Lencheski reasons that the losses of David Levy and Richard Plepler also make it less likely that the company would pursue the few highly desirable properties (think: NFL Sunday Ticket) that are coming available as the prior mentioned execs had a great “lens” to the “narrative” to sell the leagues, viewers and their respective advertiser bases.

JohnWallStreet readers have been aware that AT&T’s lot of RSNs were on the market since we noted in Early Entrants Vol. XI (June 24) that Sinclair Broadcast Group (SBGI) was “desperately trying to buy” the cable channels. While that remains the case – the company has a bridge loan in place with J.P. Morgan so that it can close – Cohen says that he’s not sure SBGI is a shoe-in to take down the lot. “If the Sinclair-Disney deal goes through, they’re going to be sitting on 23 RSNs. The DOJ could certainly oppose their pursuit of four more.”

Lencheski – who was the first to peg Sinclair as the most likely landing spot for the Fox RSNs back within JWS’ Nov. 19th newsletter – doesn’t even think AT&T’s assets are worth Sinclair’s trouble. He said, “the company is in the driver’s seat on a transaction that would reshape the live sports broadcasting space. Why jeopardize that upside to buy four small [relative to market size] RSNs?

SBJ’s John Ourand noted in his weekly media column that Comcast would be another logical acquirer. The company already owns 8 RSNs (+ a stake in SNY) and the four AT&T networks all reside in Comcast cable markets. Acquisition of the lot would position Comcast behind only Sinclair Broadcast Group in an industry where scale is everything. It’s unclear if Liberty Media Corp. – another bidder for the lot of Fox RSNs – would pursue these channels. The BIG3 group is unlikely to get involved in the bidding unless the Fox lot were to hit the market once again (i.e. DOJ rejects the SBGI deal).

Fan Marino: It’s worth noting that Lencheski doesn’t believe AT&T will retain Sunday Ticket. He believes that ship has sailed, saying “they knew they weren’t going to win the rights again – otherwise they would have included it in their preps; plus they had access to what the package did numbers wise for DirecTV.” In other words, they know the new costs outweigh their upside with AT&T’s business model.

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Sonic Submits Bid to Take TRK Private, “First Step” to NASCAR Roll-Up

SpeedwayMotorsports

Sonic Financial Corp. – the majority stakeholder in Speedway Motorsports Inc. (TRK) – has submitted a non-binding proposal to acquire all outstanding shares of TRK common stock, not already under the control of the Smith family (+/- 29%). The offer for $18/share – a 31% premium to Tuesday’s closing price ($13.94) – will now be reviewed by a special committee assigned by TRK’s board. Speedway Motorsports owns and operates 8 tracks that host NASCAR series races including Charlotte Motor Speedway, Bristol Motor Speedway and Texas Motor Speedway.

Howie Long-Short: Sonic’s bid for TRK comes just 6 months after NASCAR submitted its own non-binding proposal to take International Speedway Corporation (ISC) private. That deal remains in limbo with a class-action lawsuit (over the purchase price) holding it up. If both deals were to close it would leave Dover International Speedway (DVD) as the last publicly traded track on the NASCAR circuit. That’s noteworthy because the sport needs to cut down on the number of races it holds – “having so many events de-values the experience” – but as publicly traded companies, it’s difficult for TRK or ISC to justify agreeing to host less dates; they’re required to report financials quarterly to shareholders expecting gains.

Mark Coughlin – the founder of motorculture, inc. – suggests there’s “something larger [than a change to the race schedule] at play here. It’s likely the first step to an eventual merger between NASCAR, Speedway Motorsports and International Speedway Corp. If NASCAR can control the venues, the schedule and the media rights – in essence, own the entire sport – and keep the teams as independent contractors, the entity becomes that much more attractive to outside investors and its value goes up substantially.” Remember, there were reports back in Q2 ’18 that the France family was exploring a sale.

It’s important to point out that trimming dates from the schedule doesn’t necessarily equate to declining profits. The circuit would do well by adding some cost certainty. Back “in the late 80s, NASCAR was sanctioning just 28 races and its costs were significantly down. The cost of both travel and the cars has gotten out of control since. The idea that teams essentially need a car for every race track is absurd and if F1 teams can make due with only 4 engines for the entire season – they rev up to 15,000+ RMPs – there’s no reason NASCAR teams can’t get a V8 to make 500 reliable horsepower and have it last multiple weekends.”

Coughlin says it would be “pretty easy” for NASCAR to cut expenses. Sure, the “engines wouldn’t rev as high and it would mean that the millions teams are spending on these lightweight parts and valvetrains would go to waste, but you can buy great motors from any of the manufacturers that can easily produce 500 horse power and last tens of thousands of miles.”

There’s also a case to be made that “the value of the audience not at the track is greater than the one at it. 15 years ago, 70% of track revenues were generated from tickets and sponsorship; media rights comprised just 30%. Now, it’s the opposite.”

While both ISC and TRK are in talks to go private, there’s really no urgency in either negotiation. ’20 marks the end of NASCAR’s agreements with the tracks and teams, but because such a large portion of the sport’s revenues now comes from media rights – and the tracks are entitled to 65% of that money (some of it does go to the teams) – “the real deadline is ’24 when those deals come up for renewal.” 

I asked Coughlin who would make sense as a potential acquirer. He suggested “CAA, Endeavor and Silver Lake Partners”, but said to keep an eye on Comcast. “Remember, they had an interest in NASCAR and it could very well be that instead of buying media rights, a media company decides they want to own the property.”

Fan Marino: Coughlin makes the case that NASCAR is intrinsically undervalued as a sport, which makes the investment opportunity that much more attractive if there is a roll-up. “From where attendance and television viewership were to where it is now has been a steep decline, but NASCAR remains the #1 or #2 most viewed sporting event on television – despite often airing on cable – 38 weekends/year. They have an audience that every other motorsport – including F1 – would love to have [in the U.S.]

Much like the sport’s skyrocketing costs, NASCAR’s other core issue is self-inflicted. They need to do a better job promoting their owners and drivers. Coughlin says that “they’ve de-contented the show by trying to have total control over it. They don’t let the athletes show off who they are. In the glory days of NASCAR, the margins of victory were seconds, if not minutes; so, it’s not the racing. People complain about the technical aspects, but no one cares about that stuff except the hardcore fan. It’s the lack of personalities [preventing the sport from growing again].

The drivers also need to do a better job of promoting themselves. Back in the 90s, “drivers would come into the big markets 3 or 4 days before the race. They would be on every morning show and do an interview with every newspaper. They had appearances at auto parts stores and would go out with distributors every weekend. The schedule wasn’t any more rigorous then, but that type of activation doesn’t happen anymore. NASCAR needs to get these guys to realize that they have a stake in their own future and a responsibility to the league in which they play.”

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Hulu Building Live Sports Strategy Around Interactivity and Personalization

Hulu

Hulu’s “No Sellout” advertising campaign – featuring Damian Lillard, Joel Embiid and Giannis Antetokounmpo – plays off consumer cynicism towards influencer marketing campaigns (thanks: Fyre Festival) to draw attention to the service’s live sports content. In the humorous spots worth watching (hit the links in the player names), the NBA stars offer up some refreshing “honesty” – they’re only promoting the corporate message “Hulu has live sports” because they’re being paid. The campaign, designed to poke fun at brands using paid influencers in advertisements disguised as organic content – and the influencers who act as if that is not the case – has resonated with a consumer well aware that “athletes are getting paid a lot of money to endorse these products.”

Howie Long-Short: The pursuit of live sports programming gets away from the Hulu’s core “on-demand” mission, but the game window is only 3 hours long and fans follow their teams 24 hours/day. Wayne Sieve, EVP of Thuuz Sports believes that “there’s all kinds of shoulder programming – with a shelf-life – that would be relevant to the passionate fan and supplement any live rights that they might have; and the on-demand portion of Hulu is built to service that content”.

Live sports rights are expensive and there’s “enormous competition for that 3-hour window”, so Hulu won’t be pursuing the “network feed” of games; instead, their plan is to serve up “alternative broadcasts.” The company’s sports strategy will place an emphasis on interactivity and personalization. Subscribers will be able to “choose between stats-heavy broadcast overlays or a stripped-down display”; they’ll also be able to record and watch later (for the next gen. of fans who won’t watch 2.5 hour broadcasts) and catch games on mobile devices.

It remains TBD if there is a consumer that is willing to pay for a data/insights driven broadcast, but even if there’s not Wayne sees Hulu’s addition – as well as Amazon, Facebook, DAZN etc. – to the sports broadcasting landscape as a win for fans. “The linear broadcast networks have gotten lazy. The exclusive rights deals signed before streaming became prevalent meant they didn’t have to work very hard to retain the viewer. New competition forces those with broadcast rights to make their product more compelling. They now need to provide a value proposition to the viewer greater than what can be obtained from another platform.” It’s also a win for the leagues. “As the number of bidders increases, so too does the price of their broadcast packages.”

Hulu’s (25 million domestic subs) decision to supplement its on-demand programming with live television runs contrary to Netflix’s (58 million domestic subs, 81 million international) stated strategy. While it currently serves as a differentiator between the 2 services, Sieve is expecting competitors – including Netflix – to eventually follow the company’s lead. “If you’re in the content business, you have to pursue sports programming; and if you’re going to do sports, then you have to do them live. It’s only a matter of time until everyone with this type of VOD entertainment experience offers live programming.”

Speaking of “everyone”, Hulu is owned by The Walt Disney Co. (60%), Comcast/NBCUniversal (30%) and AT&T/Warner Media (10%). Each of those companies has plans to launch their own streaming service and Disney already has ESPN+ for sports content. It will be worth watching if Hulu “rides the coattails of their parents to acquire sports rights because they can’t compete on a dollar for dollar basis with a company like Amazon.”

Fan Marino: Getting back to the commercials for a second, Howie wrote in Monday’s newsletter that “the U.S. consumer had wised up to the pay-to-wear sponsorship model, realizing that celebrities/athletes will endorse whatever they are paid to wear.” The commercial makes light of a problem that brands are encountering (which is why they’re looking outside of sports), but a Mavrck survey of over 1,000 influencers found that consumer distrust is warranted; 40% of influencers admitted to failing to follow guidelines for proper disclosure.

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NHL Experiences Growth in Non-Traditional Markets, Seeks Growth in China

NHL

NBC Sports has decided to add NHL regular season games to its programming schedule. Between NBC and NBCSN, they’ll carry 109 regular-season games during 2018-2019 season (which got underway Wednesday evening), the most in any single season since the company acquired league broadcast rights back in 2005-2006. As part of the expanded coverage, the peacock network’s sports division will introduce “Wednesday Night Hockey” (on NBCSN); featuring earlier start times (7p or 7:30p EST) and a record 17 broadcast double-headers. 13 games, including the league’s marquee events (see: All-Star Game, Winter Classic, Stadium Series), will air on the NBC broadcast network; the January ’19 NHL All-Star game will mark the first time the annual showcase has been carried live on broadcast television since ’97.

Howie Long-Short: NBC Sports (CMCSA) executive producer and president of production Sam Flood said it was viewership growth in “non-traditional NHL markets” and the “emergence of a number of rising stars” that drove the company to expand its programming schedule. By starting games earlier and carrying 17 double-headers, they’re able to air more games involving teams from the Western Conference; meaning more opportunities for fans to see emerging stars like Connor McDavid (Oilers), Patrik Laine (Jets) & Nathan MacKinnon (Avalanche).

If you’re not getting your hockey fill from NBC/NBCSN, NHL.tv (the league’s OTT subscription service) has added 50% more “local broadcast pre-game and post-game shows” plus “intermission shows”, in addition to 180 out-of-market league games; content drawn from team RSNs. Disney Streaming Services (operates NHL.tv) offers the service on a full-season, monthly and single team basis; unlike with NBA League Pass, fans do not have the option to purchase individual games or periods. It’s worth mentioning that in addition to NHL.tv, ESPN+, Disneyflix and BAM-Tech Media all fall under the Disney Streaming Services (DIS) umbrella.

NBC Sports is paying $2 billion (over 10 years) for the league’s exclusive media rights (through the ’21-’22 season). Last season, games that aired on NBC experienced a 4% YoY rise in viewership (to 1.34 million), but across all platforms (includes NBCSN & digital) the audience declined -12% (to 417K); NBCSN broadcasts really dragged the average down, averaging just 302,000 viewers/game.  Starting games earlier, showing a wider variety of teams and showcasing the league’s best players should help NBCSN post better ratings during the 2018-2019 season.

Fan Marino: While non-traditional hockey markets (think: San Jose, Las Vegas) have given a boost to viewership here in the U.S., the NHL appears to perceive China as the next horizon; in fact, the league played a few preseason games in the country (and will in 4 of next 6 seasons) in September and recently opened a youth hockey school in Shenzhen.

President Xi Jinping’s plan to have 300 million winter sports fans in the country by the start of the ‘22 Beijing Olympics has served as a catalyst for the league’s Asian growth efforts. Of course, the NHL isn’t participating in the ’18 Olympic Games and should they decide to pass on the ’22 Games, it could alienate the Chinese government and halt the league’s progress in the country. Commissioner Gary Bettman disputes that notion arguing that one tournament would not define the sports long-term growth prospects in China.

Speaking of non-traditional hockey markets, on Tuesday the NHL’s expansion committee recommended adding Seattle as the league’s 32nd franchise, the formal vote will occur in December. The David Bonderman/Jerry Bruckheimer ownership group hopes to play the club’s inaugural season at a redeveloped KeyArena in ’20-’21, but ’21-’22 may be more realistic with a player lockout pending in ‘20.

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Comcast Out of Fox Bidding War, Focused on Landing Sky

Comcast

Comcast has dropped out of a bidding war with The Walt Disney Company (DIS) for 21st Century Fox’s (FOXA) film and television assets to focus its efforts on acquiring Sky Plc (SKYAY), the “crown jewel” of the Fox portfolio. By pulling out of the competition for Fox’s entertainment assets, Comcast avoids bidding up the implied value of SKYAY; the consequence of an “arcane provision in U.K. takeover rules”. Back on July 11th, Comcast (CMCSA) improved its cash offer for the European cable provider by 18% (to +/- $19.50/share, $34 billion); a 5% premium to the latest FOXA offer. Disney has indicated in regulatory filings that it will determine if FOXA is to continue with its pursuit of SKYAY; no decision has been made and one is not expected prior to the DIS shareholder vote on July 27th (re: Fox acquisition).

Howie Long-Short: Comcast’s decision to drop out of the bidding all but ensures that The Walt Disney Company (DIS) will take down the Fox film and tv assets. Of course, DIS had always been considered the front-runner for those FOXA properties having submitted the highest offer ($71.3 billion vs. Comcast’s $65 billion) and maintaining the support of both Rupert Murdoch and President Trump. Comcast shares popped 3% on the news, but nearly all gains realized were lost by Friday’s close ($34.30).

CMCSA appears to be willing to split the spoils with DIS, taking SKYAY and leaving the balance of the Fox assets for Disney’s taking. Comcast is now well positioned financially to outbid Disney should they make an aggressive play for SKYAY. BTIG Analyst Rich Greenfield expects that to happen saying, “while it is certainly possible that Fox (and in turn, Disney) is going to walk away from Sky and not match/exceed Comcast’s offer, it does feel hard to believe.”

SKYAY is the asset that Comcast really wants. The British pay-TV service could bring both the original content and distribution (satellite & broadband) capabilities to make the alliance “a mini Comcast-NBCU”. Adding 23 million subscribers across 7 countries, also give CMCSA the international expansion it seeks as the company strives to keep up with Amazon and Netflix in the global streaming race. While Comcast seeks 100% of Sky (including FOXA’s 39% stake), the company appears willing to settle for majority ownership; it’s unclear if Disney intends on selling its stake.

I asked Dan Cohen, Octagon SVP, Global Media Rights Consulting Division which deal (SKYAY or Fox Film/TV assets) contains the most valuable sports media rights?

Dan: Sky is the stronger sports specific acquisition with a robust portfolio not only in the UK, but other significant European markets. The crown jewel is obviously Premier League, but F1, Cricket and Golf are significant as well. Sky Italia offers up premium content after just renewing Serie A rights in Italy and Sky is a player in Ireland Spain, Germany and Austria.

Editor Note: Fox assets include Star India and Fox International channels, but no domestic rights. Comcast (had they continued pursuit of Fox assets) also intended on divesting the 22 RSNs to avoid anti-trust concerns.

Fan Marino: As Dan notes, SKYAY’s portfolio of sports broadcast rights is impressive (particularly the EPL), but the control over and value of those rights remains tentative. Exclusive broadcast deals cannot be counted on to last and as MoffettNathanson analyst Craig Moffett astutely pointed out, “absent these exclusives, Sky is, well, just satellite TV.”

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Comcast Positioned to Take Down Sky, Could Drop Pursuit of Fox Assets (including 22 RSNs)

SKY

21st Century Fox (FOXA) raised its bid 30% (to +/- $18.50/share) for Sky PLC (SKYAY) on Wednesday, before Comcast (CMCSA) improved its cash offer for the European cable provider by 18% (to +/- $19.50/share); a 5% premium to the latest FOXA offer. Comcast’s offer was reportedly “recommended by Sky’s independent directors” and the company is said to have “earmarked funds to fulfill the terms of the deal”; the company hopes to complete the acquisition by October, having already received regulatory approval (had been an issue with Fox’s Dec. ‘16 bid) from the EU, Austria, Germany, Italy, and Jersey. The WSJ indicated that if Comcast were to take down Sky, the company could drop its pursuit of Fox’s film and TV assets; FOXA’s existing 39% stake in SKYAY has been a target in that deal.

Howie Long-Short: The Walt Disney Company is considered the front-runner for the FOXA properties having submitted a $71.3 billion offer; obtaining full control of SKYAY is critical to completing that transaction, which explains FOXA’s interest in the British television group.

As for Comcast, SKYAY could bring them both the original content and distribution (satellite & broadband) capabilities that would make the alliance “a mini Comcast-NBCU” and give CMCSA the international expansion it seeks as the company looks to keep up with Amazon and Netflix.

I asked Dan Cohen, Octagon SVP, Global Media Rights Consulting Division which deal (Sky or Fox assets) would best position Comcast in the sports media sector?

Dan: Sky is the stronger sports specific acquisition with a robust portfolio not only in the UK but other significant European markets. The crown jewel is obviously Premier League, but F1, Cricket and Golf are significant as well. Sky Italia offer up premium content after just renewing Serie A rights in Italy and Sky is a player in Ireland Spain, Germany and Austria.

Editor Note: Fox assets include Star India and Fox International channels, but no domestic rights. Comcast would also be divesting the 22 RSNs to avoid anti-trust concerns.

Howie: What are the 22 RSNs worth?

Dan: I wouldn’t be surprised if they could fetch as much as $28 billion. Either winner (Comcast or Disney) will be well positioned to reap billions from the sale. The capital earned from the RSN divestiture can help offset the purchase price or be applied to aggressively pursuing even more premium sports content.

FOXA shareholders were less than pleased with Wednesday’s developments, shares declined -4% on the day closing at $47.79.

Fan Marino: Speaking of 21st Century Fox, it’s being reported that despite ad revenue increasing from 4 years ago, the company is going to lose money on the ’18 World Cup. Simply put, the company overestimated (by 7-10%) the number of viewers they expected to tune-in (and guaranteed in ad deals) and are now being forced to offer “make goods” (i.e. additional air time) to advertisers. Interestingly, Telemundo won’t post a profit either; that’s surprising if only because it set network ratings records (including 125 million live streams) throughout the tournament.

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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.

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