Investors Overlook Tech Issues, Pump Another $47 Million Into FloSports


FloSports has dropped the broadcast feed during a D.C. United match three times already this season, there were log-in issues during the team’s debut on the platform and bars in The District have consistently reported an inability to show games on more than one screen, but the negative publicity associated with the technical difficulties experienced during MLS matches (the highest profile league on the streaming service) has done little to dampen investor interest. Back on June 3rd, Flo announced a $47 million Series C round of funding (total raised: $79.2 million) led by Discovery Inc. and WWE. The company will use the money to “grow coverage of new and existing sports.”

Howie Long-Short: The technological struggles Flo has experienced are not unusual in the streaming space. As one well-respected industry veteran explained, “FloSports, Deltatre, FuboTV, DAZN, Endeavor – name any OTT provider you want – they’ve all had problems at one time or another because streaming live video at high concurrency, with live ad insertion and geo-fencing is really hard. When you start syncing together multiple partners and technologies, something is bound to go wrong.” The companies that will ultimately be successful long-term will fail small and fast and quickly work to solve those issues.

The investors that participated in Flo’s Series C round – including Discovery, which is all-in on building niche sports communities (see: GolfTV) – are all aware of the technical issues that exist, so it’s reasonable to believe that the company has identified the root cause of the breakdowns and has a plan to address them. It also seems likely that the group, which also includes Causeway Media Partners LP, Fertitta Capital and DCM Ventures, understands that sports rights are increasing in value and that companies capable of building an audience are well-positioned for the long-haul. Flo has proven capable of acquiring rights (see: the primary media partnership it inked with the Colonial Athletic Association) and its subscribers have an affinity for the service (remember, many of these sports lacked a home before OTT came along).

With annual recurring revenues and subscribers both up at least +50% YoY and the number of net subs. added in Q1 ’19 having exceeded all new registrations in 2018, Flo’s business model seems to be working. Detractors say there is no audience for much of their content and that they’re overpaying for tier 3 and 4 rights, but as the industry stalwart referenced explained “when the number of subscribers [for each niche sport] are rolled up in aggregate, they’re significant in volume; and the company has shown an ability to acquire and retain subs. FloSports’ valuation is going to be higher in a year or two than it is right now.” While we’re making predictions, look for Flo to make a play for more mainstream sports rights as they become available starting in ’21.

It’s reasonable to believe that United leadership is less than pleased thus far with its OTT partner, but there’s little reason to suspect they’ll look to void the deal. The club opted to work with FloSports because of the money available was too good to pass up. Content they had been giving away, is now bringing $13 million over the next 4 years. Flo can also provide the team with data about its fan base that it couldn’t get from linear television – insights it can use to then target those individuals.

Fan Marino: United fans upset with Flo have a valid bone to pick. Blackouts aside, the streaming service has failed to provide the “behind-the-scenes access” and Spanish language commentary it promised. Both Flo and the team say they are committed to both endeavors, but that’s unlikely to placate fans paying $8.99/mo. Remember, just about every other MLS team makes its games (and should programming) available to fans on basic cable.

The problem for United fans is that there is no alternative. If they want to watch the teams’ full slate of games, they need to subscribe to the service. Flo is the exclusive broadcast home for 21/34 matches.

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Disney Agrees to Divest 22 Regional Sports Networks


The Department of Justice has approved The Walt Disney Company’s (DIS) $71.3 billion ($38/share, increased bid from $52.4 billion, includes +/- 50% in cash) acquisition of 21st Century Fox (FOXA) television and film assets, after reaching a settlement with DIS that calls for the company to divest FOXA’s 22 regional sports networks. U.S. A.G. (Anti-Trust Division) Makan Delrahim, concerned DIS’ control of the RSNs would create a potential monopoly, said that the settlement ensures “sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution.” The settlement, which requires DIS to divest the RSNs within 90 days of closing, requires approval from a judge; but that is a formality. DISintends on pursuing a 3rd party buyer for the RSNs, as opposed to submitting a new offer; FOXA is not thought to be interested in retaining the assets.

Howie Long-Short: DOJ approval gives DIS an advantage over Comcast (CMCSA) in the competition for the Murdoch empire, just two weeks after Comcast submitted an all-cash bid worth $65 billion ($35/share). While the approval alone won’t win DIS the assets (Comcast is expected to submit a counter offer), it won’t hurt considering it’s been thought the FOXA board has long preferred to sell the assets to DIS in the belief the Comcast bid is bound to face anti-trust concerns. That’s debatable. CMCSA would also divest the RSNs and FOXA’s stake in Hulu is really the only asset that might draw anti-trust concerns; and that doesn’t appear to be a major hurdle. It’s been thought FOXA assets could draw upwards of $43/share.

It should be noted that if the DIS deal goes through as is, FOXA shareholders would own 19% of the joint company. FOXA shares are up +11% (to $49.79) since DIS submitted their latest offer on June 20thDIS hasn’t fared as well, the stock is down -1.25% (to $104.77) over that same period.

Fan Marino: While the Yankees are likely to repurchase YES Network, that still leaves 21 RSNs and a lot of regional sports broadcast rights for taking. Sure, it’s possible that FAANG will pursue exclusive broadcast rights, I would bet on an established linear player making a play to acquire the 5th most important channel on a subscriber’s cable package. CBS (think: CBS Sports HQ), Turner Sports (T, B/R Live) and Discovery Communications (DISCA, which has made a significant push for rights in Europe) are all possible landing spots.

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Discovery Inc. Acquires International PGA Tour Broadcast Rights, To Spend $2 Billion Through ‘30


Discovery Inc. (formerly Discovery Communications, DISCA) has signed a 12-year deal with the PGA Tour for the rights to broadcast more than 140 tournaments per year – including about 40 PGA Tour events – outside the U.S. Discovery committed to spending $2 billion before the deal expires in 2030, with a portion of that capital allocated to building a “Netflix like” OTT platform that will become “the new global home of golf.” The pact encompasses both television and streaming rights, so effective 2019 international golf fans in 220 markets will also see the events air on existing DISCA-owned linear television stations. The company will sublease broadcast rights in some markets to help offset costs.

Howie Long-Short: This isn’t Discovery Inc.’s first foray into sports broadcasting, the company owns Eurosport (think: Pan-European ESPN, reaches 700 million people) and has committed $1.4 billion for the rights to broadcast the Olympics in Europe through ’24. They also hold a stake in Fubo TV (from their Scripps acquisition), a sports-centric streaming service.

DISCA is buying international sports rights because domestic sports are simply too rich for their tastes. For reference purposes, NBC has agreed to pay $7.65 billion for exclusive U.S. television and online broadcast rights through the ’32 Olympics. The PGA Tour’s existing U.S. broadcast distribution deals with NBC Sports, ABC Sports and The Golf Channel (including individual pacts for each of the 4 majors) expire in ’21.

Despite growing Q1 ’18 revenue +43% YoY (reported basis) to $2.31 billion (including international networks +28%), DISCA reported a Q1 ’18 loss. Net income dropped to an $8 million loss — after generating a $215 million profit in Q1 ’17 — due to “lower operating results, higher restructuring charges, other transaction costs associated with the acquisition of Scripps and a higher interest expense.” Company shares are down 10% (to $21.09) since the company reported on May 7.

Fan Marino: Discovery CEO David Zaslav isn’t worried about the price tag, calling the PGA Tour “the most compelling international sports IP in the world.” That’s not the case if you’re measuring by popularity (it’s closer to 10th) and it’s certainly not true when you consider that the deal excludes both the Masters and U.S. Open (next weekend at Shinnecock Hills), the Tour’s 2 most watched events (PGA Championship comes in 3rd).

Zaslav believes this deal works out in the end because “local matters” (i.e. fans root for their countrymen) and that the PGA tour is a particularly diverse organization. Did you know that 25 of the Top 50 golfers are from outside the U.S. and the Tour’s 85 players hail from 25 different countries?

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Sports-Centric Streaming Service Raises $75 million From TV Programmers


Fubo TV has announced it has closed on a $75 million Series D round, increasing the total amount that the company has raised to $150 million; including a $55 million Series C round in June ’17. The sports-centric digital TV service will use the newly raised capital to expand its engineering and product teams (plans to double staff, open 2nd office by end of ’18), increase its marketing budget and acquire additional content rights. Launched in 2015, the live TV streaming platform has found a niche targeting sports fans (offering 30,000 sporting events/year); surpassing 100,000 subscribers in September 2017. While impressive, the company still lags far behind Sling TV (2.2 million) and DirecTV Now (1.2 million) in terms of market share.

Howie Long-Short: Existing shareholders (and TV programmers) 21st Century Fox (FOXA), Sky (SKYAY) and Scripps Networks Interactive (DISCA) all exercised their pro-rata rights, participating in the latest round; while AMC Networks (AMCX) invested in the company for the first time. While it appears to be an ill fit on the surface, Fubo TV isn’t the only web TV provider that TV programmers have invested in. The Walt Disney Co., pending final approval of its 21st Century Fox acquisition, controls 60% of Hulu; Comcast owns 30% and Time Warner owns 10%. It’s also worth pointing out that A&E, Discovery Communications, AMC and Viacom are invested in Philo.

Fubo TV’s business model is predicated on both recurring monthly subscription fees and ad sales. Despite having just launched “server side ad insertion” in January, ad sales represent a “low single-digit percentage” of total revenue. The company is expecting an overall revenue run rate of $100 million within 12 months.

Fan Marino: Fubo TV’s $45/mo. package, marketed as “a real sports package, for the real sports fan”, contains 85 channels; a collection of local TV networks (think: ABC, CBS, FOX), national cable networks (think: FS1, NFL Network), RSNs (think: MSG, YES, NESN) and difficult to find conference networks (think: Big 10 Network, Pac-12 Network). The bundle includes more sports channels than any other competitor, but lacks the most valuable (to a sports fan) national cable network; ESPN. Is ESPN (and ESPN2) worth the additional +/- $55/mo. required to retain your cable bundle? Probably not, but I’m not signing up for an OTT service without it.

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Discovery Communications to Launch “Netflix for Sports” For ’18 Winter Games


Discovery Communications (DISCA) controls the exclusive rights to broadcast the 2018 Winter Olympics (+ the ’20, ’22 and ’24 Games in Paris) across Europe (excluding Russia) and will use the Pyeongchang Games to introduce a new interactive streaming platform that has been described as Europe’s “Netflix for sports”. Eurosport Player will offer fans of the Olympics the ability to watch “every minute, every athlete and every sport, live and on-demand”; enabling the company to aggregate a wide variety of viewing data (across all platforms, both live and catch-up), as it works towards the launch of a DTC subscription service for “superfans” of niche sports. DISCA will air the ’18 Games on linear television, across the continent (50 countries), on its Eurosport (think ESPN) channel.

Howie Long-Short: In 2015, DISCA paid $1.6 billion for the next 4 Olympic Games (including $180 million for the ’18 Games), but company CFO Gunnar Wiedenfels says the games won’t impact full-year profits; lucrative content licensing agreements (i.e. BBC, Amazon in select countries) have already helped the company recoup much of its commitment. Of course, DISCA is on the hook for just a fraction of the $7.65 billion NBC agreed to pay for U.S. TV and online rights through ’32.

Fan Marino: Alibaba (BABA) has launched its first “major branding effort” with the Olympic games (part of a 10-year partnership), a 3-ad story-telling campaign meant to showcase the company globally. While one ad focuses on the company’s values and history championing small businesses, the other 2 convey true Olympic tales; one of a rower who stopped in the middle of a race to let ducks pass and another of a Kenyan Ice Hockey team that had previously never experienced ice. Get your tissue boxes ready.

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Facebook Hires Eurosport CEO to Negotiate Sports Streaming Rights Deals, No Interest in TNF


Facebook (FB) has hired Eurosport Chief Executive Peter Hutton to lead its multi-billion dollar global sports rights initiative. The move is yet another strong indicator (they bid $600 million for rights to Indian cricket, losing to Star India) that the social networking service sees live sports as a key part of its streaming growth strategy. The hiring appears timely as the deadline to submit bids for the rights to stream the EPL in Europe is Feb 9. Hutton isn’t expected to begin his new role until after the completion of the Winter Olympics though, making Facebook appear to be an unlikely destination for the Premier League now.

Howie Long-Short: Discovery Communications (DISCA) owns Eurosport, the home to the next 4 Olympic Games (through ’24) in most European markets. DISCA paid just $1.44 billion for European rights to the games, across all platforms, which is a fraction of the $7.65 billion NBC is paying for television and online rights to the games through ’32. The company reported Q3 earnings in early November; revenue was up 6% YOY (to $1.65 billion) led by its international portfolio, but net earnings remained flat as U.S. subscriptions continued to decline. CEO David Zaslav said at the time, that the company was looking forward to leveraging the Scripps Networks Interactive portfolio upon the closing of the $14.6 billion acquisition (to occur in early ’18). The company will report Q4 and full-year 2017 financials on February 27th.

Fan Marino: Facebook has decided against bidding on the NFL’s Thursday night package. Noteworthy, as the company has bid on the package in past years and the league’s Sunday (through ’22) and Monday night (through ’21) packages are tied up for the next several years. As for TNF television rights, Fox and Disney (would put games on ABC) are both likely to bid; while CBS & NBC, who shared the rights this year, are looking to pay less (paid $450 million in ’17).

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Eurosport, the Discovery Communications (DISCA) owned sports network, has signed a strategic advertising and content partnership with SNAP Inc. (SNAP) for the ’18 South Korean Winter Olympics. Announcement of the agreement marks the first-time SNAP has publicly committed to a European, multi-language Olympics deal; though the company is experienced putting out content for the Olympics, having partnered with NBC (in the U.S.) for the ’16 Games (will again in ’18). The partnership will bring Snapchat users across Europe professionally curated (i.e. Our Stories, Publisher Stories) mobile video content; including behind-the-scenes action from Olympic events and user-generated video from the athletes and influencers.

Howie Long-Short: DISCA paid $1.44 billion for European rights to the games, across all platforms, through ’24; just a fraction of the $7.65 billion NBC (CMCSA) is paying for television and online rights to the games through ’32. Partnering with SNAP gives DISCA an opportunity to sell potential advertisers on a different demographic; one that is younger and more digitally minded. It also brings the games to viewers who may not otherwise watch on linear television; with 25% of U.K. smartphone users now using Snapchat daily. Eurosport should turn a healthy profit on the ’18 Winter Games.

Fan Marino: Softball, karate, skateboarding, sport climbing and baseball are sports that will be debuting at/returning to the Olympics in 2020. While one can certainly debate the merits of sport climbing; it’s talk of poker, foosball and pole dancing coming to the Olympic games, that have me all worked up. Can we all agree that “sports” using a casino, bar or strip club as a primary venue, are not worthy of competing in the Olympic Games?

Discovery’s Eurosport Pacts With Snapchat for 2018 Winter Olympics


Television programmers, operators and sports leagues have reportedly expressed interest in working with WinView; seeing the company as a potential new revenue stream in a changing sports media landscape that includes second screen viewing. The free ad-supported mobile application syncs with the live TV broadcasts and enables fans to make “prop” bets on sporting events; with the most successful players winning small cash prizes. The company plans to add an entry-fee option that will give users the opportunity to win larger payouts and intends on integrating with smart TVs so its service to run alongside game broadcasts.

Howie Long-Short: WinView owns a significant amount of intellectual property, securing 41 patents on its second screen live sports prediction platform. The company, which boasts of 130,000 users, raised a $12 million Series B round in May. Both Graham Holdings (GHC) and Discovery Communications (DISCA) participated in that round. The financing is being used to add sports to the platform (currently MLB, NBA & NFL are offered) and to expand beyond American sports through collaboration with DISCA’s Eurosport network.

Fan Marino: A prop bet is a novelty bet on an occurrence (or non-occurrence) within a sporting event (i.e. player X will run for more/less than 100 yards). Not confident in your ability to pick a winner? Tony Romo, who has been calling out plays before they occur, is doing color on the Bears/Packers game tonight. That’s your chance to win some money. Just follow his lead.

WinView pitches new proposition