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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ESPN, Fox Sports Submit Joint Bid for UFC TV Rights

Fox Sports ESPN

ESPN (DIS) and Fox Sports (FOXA) have submitted a joint bid worth at least $320 million annually, to split exclusive television broadcast rights to the Ultimate Fighting Championship (UFC). Reports indicate that ESPN would contribute between $120 million and $180 million per year, to add +/- 15 premium live-events to its new ESPN+ service; with Fox Sports committed to spending $200 million per year, for the bulk of the TV package. There had been speculation Endeavor would hold on to UFC broadcast rights and distribute them direct-to-consumer following the company’s $250 million acquisition of the digital video broadcasting provider Neulion.

Howie Long-Short: In 2016, Endeavor paid $4 billion for the UFC expecting to cash in on this round of rights negotiations; but, poor ratings (-22% on Fox, -17% on FS1 in ‘17) and the pending availability of WWE television rights, lowered expectations dramatically. Initial reports had the company seeking $450 million/year, but by late 2017 Fox was offering just $200 million/year to extend broadcast rights into 2019.

This deal makes too much sense, for everyone involved, not to be completed. Endeavor could take in as much as $380 million/year, a figure that seemed unfathomable back in December.  The Walt Disney Company would acquire some much-needed content for ESPN+ and Twenty-First Century Fox (FOXA) would retain the bulk of the UFC TV package, while holding firm on their $200 million offer. Sure, they’re paying $80 million/year more for less programming; but, they retained live assets (Fox wants to be 80% live sports, news) and are still well positioned to pursue the WWE contract.

Fan Marino: It’s not nearly as rare as one might think for DIS and FOXA to share broadcast rights. Both ESPN and Fox Sports carry Big Ten athletics, Pac-12 athletics, MLS and USMNT matches.

As for the UFC fanatic, this deal means they’ll be forced to spend an additional $4.99/mo. (ESPN+) on fights, that they previously had access to with a cable subscription.

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Yahoo! Exits European DFS Market


Less than a year after entering the European market, Yahoo! (AABA) has decided it will cease hosting paid-entry daily fantasy sports contests for its overseas users. The decision, effective at the completion of the English Premier League season (May 14), will leave free contests (including season-long offerings) as the only options available on the U.K. platform. Yahoo! isn’t the first DFS provider to pull out of Europe, FanDuel engaged U.K. users in 2016 before deciding to re-allocate marketing resources to a U.S. market with 5x the number of DFS players (53 million to 10 million).

Howie Long-Short: Yahoo! is exiting the U.K. DFS market for the same reason U.S. DFS operators are gearing up for legalized sports betting; there is no market for “substitute” gambling, when in-game betting is a reality. Those that play fantasy sports for fun, compete in free season-long competitions; while those that want in the action, have sports gaming apps at their disposal.

DraftKings UK, Sportito and PlayON are the biggest remaining DFS players in Europe. DraftKings has raised capital from 21st Century Fox (FOXA). Sportito is a joint venture between ASAP Italia and SportRadar. EQT Holdings Management (EQGP), a publicly traded private equity/venture capital firm with 11 exits (IPO/M&A) to its name, led Sportradar’s +/- $55 million P.E. round in July ’12. As for PlayON, despite the company’s $43 million valuation; there are no ways invest in the company.

Fan Marino: Speaking of DraftKings, the company recently announced a partnership with the Arena Football League, that will give users the ability to compete in newly formed contests while watching league games within the application. It’s the 2nd broadcast rights deal the DFS company has signed within the last 6 months. In October, DraftKings secured rights to live stream EuroLeague games (applies to players participating in contests $3+).

As non-traditional players (think: FAANG) begin acquiring sports rights, keep an eye on the gaming companies. DraftKings CEO Matt Kalish hit the nail on the head when pointing out that what DFS players (and gamblers) “really want is a one-stop shop”, where you can play (and in the future gamble) and “consume game content” in the same location.

DraftKings has made no secret of their intention on moving into the sports betting space, should SCOTUS rule it legal. Corporate spokesman James Chisholm was quoted as saying DFS companies are “perfectly positioned to succeed (think: 10 million users) in a legal sports betting market.” The company has hired a “Head of Sportsbook” and is reportedly “contacting potential casino partners.”

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


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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Pac-12 Networks Lags Far Behind Big Ten, SEC Networks


SNL Kagan, a media research firm, has published a report detailing the average subscription fees for 26 national sports networks; data that reflects just how far Pac-12 Networks (P12) lags behind the Big Ten (B10) & SEC Networks. While the B10 and SEC command average subscriber fees of $.48 (+30% since ‘12) and $.74 (launched in ’14), respectively, P12’s average subscriber fee has declined 63% to $.11, over the last 5 years. Just 4 of the 24 national sports networks that existed in 2012, have failed to increase their average subscriber fee since (Olympic Channel -11.5%, Tennis Channel -17.5%, beIN Sports -35%) and P12 experienced the sharpest decline among the group. The Sportsman Channel ($.06), Outdoor Channel ($.06), Outdoor Television ($.05) are the only national sports networks that command less per subscriber than P12 does.

Howie Long-Short: College networks operate on a tiered structure where subscribers within “home markets” pay higher subscription fees than “out of market” subscribers. So, as a network expands distribution and adds out-of-market subs, the average per sub fee will decline. In 2016, P12 signed distribution deals with Dish Network (DISH) and DISH owned Sling TV; a conscious decision to add viewers at the expense of their average subscription fee. One would imagine the average fee would drop even further if the network wereable to work out its long-time impasse with DirecTV and add 37 million households nationwide.

To be fair, P12 has added 7 million subscribers within the last 5 years and the network is on solid financial ground; paying out $2.75 million to each member institution in 2018. Of course, that’s just a small fraction of the estimated $8 million that each SEC and B10 member institution earned, from their respective conference networks, in 2016.

Fan Marino: You can’t buy Pac-12 Networks, as the outlet is wholly owned by the conference’s member institutions, but you can buy shares in both the B10 and SEC. Fox Entertainment Group (FOXA) controls 51% of B10 (Universities own balance) and SEC, is a joint venture between The Walt Disney Company (DIS, 80%) and Hearst Communications.

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ESPN+ to Debut April 12, Include “Hundreds” of MLB, NHL and MLS Games


ESPN has announced their upcoming direct-to-consumer subscription streaming service ESPN+ will debut on April 12th. Integrated into a “completely redesigned and reimagined ESPN App”, the $4.99/mo. OTT offering will include “hundreds” of MLB, NHL and MLS games, “thousands” of college sports events, Top Rank Boxing, PGA Tour Golf and Grand Slam Tennis; original content (scripted shows, films, studio shows) and an “unmatched library” of on-demand sports programming are also included. The service will be powered by BAMTech, a unit of Disney (DIS) Direct to Consumer and International. DIS acquired 75% of the MLB Advanced Media spinoff, for $2.58 billion.

Howie Long-Short: On Sunday, ESPN opened its new NYC home, a 21,000 SF facility called ESPN Seaport District Studios. The network’s new morning show “Get Up!” (hosted by Mike Greenberg, Michelle Beadle and Jalen Rose) debuted from Pier 17 on Monday morning at 7a EST. Among the site’s (at the foot of the Brooklyn Bridge) unique features is a 100,000 SF event deck (controlled by the Howard Hughes Corporation, HHC) to be used for concerts and an outdoor skating rink. The Seaport District Studios are just a small piece of the $5.96 billion (market cap) HHC conglomerate though, as the company develops and operates MPC’s (Master Planned Communities) and mixed-use properties across 14 states. FY17 was a successful one for HHC. The company increased land sales at MPCs for a 3rd consecutive year, reported its highest year of NOI (+13% to $157 million) from operating assets, placed 4 new properties into operation (from its development pipeline) and commenced on 5 others that will add $28.2 million in recurring NOI upon stabilization. Shares are up 11% (to $137.44) since we last wrote about the Seaport District Studio project in October.

Fan Marino: I fail to see who this service appeals to. Sports fans have favorite teams and watch their teams’ games, gamblers pay for services (think: NBA League Pass, NFL Season Ticket) that provide them with access to all the action and anyone willing to cut the cord (and drop ESPN), isn’t adding a package meant to be complimentary. That’s not to say there isn’t an end game here for ESPN, it’s just several years out. DIS is buying 22 21st Century Fox (FOXA) RSNs with the intention of adding 5,500 local broadcasts to ESPN+ (as existing the broadcast deals expire). When a fan in St. Louis can get all the Cardinals and Blues games for $4.99/mo., fans in St. Louis will subscribe to ESPN+.

Oh, and touting “thousands” of college sporting events is a bit misleading, as there won’t be any P5 football or basketball included. ESPN won’t be simulcasting its most watched content on the linear network to prevent the cannibalization of its cable subscription base.

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ESPN Gains Leverage for Future NFL Rights Negotiations

ESPN 200x200

ESPN (DIS) President Jimmy Pitaro values the cable network’s relationship with the NFL, having made it a priority to meet with league execs within his first few days on the job; but, unlike John Skipper, who was bound by provisions within cable and satellite carriage agreements to carry NFL games (or have their rate cut), Pitaro is free to operate in the best interest of the network. Between 2010-2015, ESPN worked to remove a provision from its affiliate deals, giving the network the leverage it desperately lacked during the last round of negotiations (when it agreed to pay $1.9 billion/season for the league’s least valuable rights package). While Pitaro views the network’s relationship with the league as a “top priority”, recent announcements by the NFL to re-assign ESPN’s playoff game to Fox (FOXA) and to give FOXA the rights to carry a competing NFL draft show, have placed the relationship in jeopardy beyond the ’21 season.

Howie Long-Short: ESPN will have more leverage with the league in the next round of negotiations, but there is also going to have more competition (at least if it seeks streaming rights) with Facebook, Amazon, YouTube etc. all looking to acquire live sports content. The good news for ESPN is that the NFL is going to seek “duel revenue streams” in the next round of broadcast negotiations, awarding television rights to the linear players and streaming rights to FAANG. The league is still a firm believer in traditional broadcast television, meaning ESPN/ABC will only need to outbid CBS, FOX, NBC to retain NFL rights.

Fan Marino: The NFL’s legal tampering period began on Monday and several high-profile unrestricted free-agents having already committed to signing contacts with new teams. Kirk Cousins (Vikings: 3 Years, $84 million), Allen Robinson (Bears: 3 Years, $42 million) and Malcolm Butler (Titans: 5 Years, $60 million) were among the those to sign lucrative deals with new franchises. Andrew Norwell (Jaguars: 5 Years, $66.5 million), Sammy Watkins (Chiefs: 3 Years, $48 million) and Case Keenum (Broncos: 3 Years, $36 million) are also all now off the board. NFL free agents can finalize contracts at 4p EST today, the official start of the 2018 league year.

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


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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Amazon Interested in Premier League “Super Pack”


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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Rays RSN Extension Reportedly Worth More Than $1.3 Billion


The Tampa Bay Rays are reportedly closing in on a local television contract extension with Fox Sports Net, worth an average of $82 million/year, through ’33 season; more than 4x the annual average of their expiring contract ($20 million). Despite poor attendance figures, Florida’s A.L. baseball team has historically drawn solid T.V. ratings. The club finished the ’17 season ranked 18th among league teams, after finishing 13th the year before; making the team’s games the most-watched cable programming on prime-time television within the Tampa Bay/St. Petersburg market, during both seasons. Under the terms of the expiring deal, Fox will pay $35 million for rights to broadcast games during the 2018 season.

Howie Long-Short: Assuming the deal is completed, the Royals (existing deal expires in ’19) and Marlins (existing deal expires in ’20) would be among the teams to benefit next from baseball’s booming local TV market. Project Wolverine (Marlins) projected T.V. revenues would exceed $50 million by 2021, a figure many doubted possible considering they’ll receive just $17 million, $18 million and $20 million over the last 3 years of their existing deal; but, while that figure remains ambitious (the team is last in the league in ratings), it no longer appears out of reach. Tampa’s new deal starts at $50 million/season in 2019.

Fan Marino: The Marlins held historic fire sales after the ’97, ’05 and ‘12 seasons, but according to the metric WAR (wins above replacement) no team has ever “traded more WAR from the proceeding season” than the 2018 Marlins. The team traded last season’s NL MVP Giancarlo Stanton (Yankees), Marcell Ozuna (Cardinals), Christian Yelich (Brewers) and Dee Gordon (Mariners).

Assuming the FCC approves the $52.4 billion sale of FOXA assets to Disney (DIS), expect Rays games to appear on ESPN’s new $4.99/mo. OTT service ESPN+ (launches late March, early April) no later than Opening Day 2020.

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