“The Next Lululemon” Raises $34 Million


Outdoor Voices (OV), an “activity and sports” brand, raised $34 million in a Series C round; led by Alphabet (GOOGL) owned GV. The company will use the capital to expand its “physical presence” (currently has 7 stores, to add 5 more in ’18), believing brick and mortar retail (and hosting events nationwide) will help them to “unlock markets online.” Often referred to as “the next Lululemon”, the digital first company has been able to stand out in a crowded athleisure sector by developing a loyal social media following (200,000 followers on IG) and effectively using pop-culture influencers (see: Harry Styles, Frank Ocean), as brand ambassadors.

Howie Long-Short: Outdoor Voices’ direct-to-consumer online platform and the R&D behind their “technical apparel” is what’s drawn the interest of venture capitalists. To date, the company has raised $56.5 million; with General Catalyst leading the prior 3 rounds. In August 2017, former Gap and J.Crew CEO Mickey Drexler was named Chairman of the Board; Drexler is credited with turning Gap into a “global megabrand” in the 1990s.

Fan Marino: 2017 was a milestone year for athleisure, as “women’s elastic knit pants” outsold blue jeans for the first time. While sales of blue jeans have been on a steady decline since 2010, at an average annual rate of 3.9%, it’s been the fast rise (avg. of 25.7% per year) of elastic knits that have enabled the versatile pants to overtake the American staple.

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MLB Takes “Next Great Leap” in Sports Broadcasting


Facebook (FB) has landed the exclusive broadcast rights to stream 25 Major League Baseball day games (primarily on Wednesdays) during the 2018 season; the first time a “big 4” U.S. sports league has awarded exclusive distribution to a social network. Industry consultant Lee Berke called the deal “the next great leap” in sports broadcasting, comparing the milestone to the migration of games from network to cable television in the mid-to-late 1980s. It’s been reported that the social network paid $30-$35 million for a package that includes; the live games (MLB network will produce the broadcasts), on demand highlight packages (for every game) and weekly recaps of all 30 teams. The first Facebook Watch broadcast will be on April 4th (Mets vs. Phillies).

Howie Long-Short: While this is a landmark deal in sports broadcasting history, it’s premature to call it a “great leap”; it’s more like a big step. A “big 4” sporting event appearing exclusively on a digital platform is noteworthy; it’s just not the game-changer that Berke implies. All 4 leagues have broadcast rights tied up through at least the balance of the decade and none are expected to forego linear television money in the next round of negotiations. There may be a day when FAANG companies control exclusive NFL, NBA, MLB, NHL broadcast rights, just don’t expect it to come anytime soon.

Fan Marino: In the hours following the announcement, Twitter (TWTR) and MLS announced their own streaming partnership; a 3-year deal gives TWTR the exclusive English broadcast rights to at least 24 live matches/season that air in Spanish on Univision (plus on-demand highlights). A week prior, AMZN announced a deal with the UFC to stream PPV events (cost $64.99) on Amazon Prime Video (do not have to be Prime member); while YouTube TV (GOOGL) locked up exclusive live streaming rights to the Seattle Sounders FC, it’s 2nd MLS deal (L.A. FC). The arms race between digital companies seeking to lure users with sports, is officially on.

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Twitter, Amazon, YouTube and Verizon Bid for TNF Streaming Rights


Twitter (TWTR), Amazon (AMZN), YouTube (GOOGL) and Verizon (VZ) are all interested in acquiring Thursday Night Football streaming rights; with the NFL reportedly seeking a multi-year deal, for the first time (since the package was introduced in ’16). Among the remaining companies, only YouTube has yet to broadcast a league game; though, CEO Susan Wojcicki has stated she would “love to stream the NFL” and her platform may be able to offer the league, the greatest potential for viewership (AMZN drew 370K for 1st ’17 game, TWTR 240K drew for 1st ’16 game, YouTube drew 1.5 million for a recent SpaceX launch). It’s unclear if its status as an existing league partner, with some TNF mobile streaming rights, will give VZ a leg-up in the competition.

Howie Long-Short: The NFL received a 47% YOY increase in the value of their newly signed TNF contract, worth $3.3 billion over 5 years; though, Fox will also get rights to broadcast the NFL draft and may receive another playoff game. If the league receives a comparable return on mobile rights (expect the percentage increase to be higher, they increased 400% from ’16 to ‘17), the new deal will be worth more than $72.5 million/year.

Fan Marino: Fox’s TNF deal touts the potential addition of a playoff game as a benefit, but the game they would likely get (Wild Card, early slot, Saturday) has been a loser for its existing rights holder (ESPN). The game has consistently drawn the lowest ratings of Wild Card Weekend since ESPN started carrying playoff games in ’15 and the network has yet to turn a profit on those broadcasts.

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Hulu May Be Growing Too Fast for Success


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

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

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

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


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

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

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

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OTT Streaming Service Lands Exclusive Sports Broadcast Rights for 1st Time


Fox (FOXA) outbidding CBS & NBC for Thursday night football (does not include digital rights), with an eye-raising 5-year $550 million/year commitment, received much of the fanfare; but, there was another broadcasting deal announced on Wednesday that deserves more attention. YouTube TV has secured the exclusive rights to broadcast L.A. F.C. (MLS) games, marking the first time a streaming service has landed primary (as opposed to television simulcast) broadcast rights. The wide-ranging partnership also gives the GOOGL-owned OTT pay-TV service naming rights on the jerseys of the expansion club. An exclusive YouTube TV channel will show +/-18 L.A. FC games (only within L.A. market) in their inaugural season, with the balance of the schedule available on ESPN & FS1 (both included within a YouTube TV subscription); there are no additional fees to access the games beyond the $35/mo. subscription cost. Financial terms of the deal were not disclosed.

Howie Long-Short: Never has a sports team chosen to forego broadcast television (affiliate stations, RSNs) in favor of live-stream exclusivity, so this partnership could shake up the industry. The proliferation of cable alternatives surely has other teams/leagues evaluating their options; teams like the Clippers, Trailblazers and Wizards are reportedly already discussing/exploring self-distribution following the expiration of their existing local rights deals. The NFL isn’t going down this route anytime soon, as they still draw massive television audiences that warrant lucrative carriage agreements (see: TNF deal); but, you can expect this trend to continue for teams/leagues playing to niche audiences.

Fan Marino: Fox is paying more ($100 million+) annually for TNF rights than NBC & CBS combined to pay last season, and both lost money; so, Fox isn’t expecting to make a profit (FOXA shares closed -4%, to $36.90 following Wednesday’s news) on the games. They did this deal to win the ratings war on 11 Thursday nights and to prop up the balance of their lineup. I had a chance to speak to San Francisco 49ers President Al Guido on Wednesday morning and asked him if Fox should have overpaid for the TNF package?

Al: You use the term over-paid. I can’t speak for Fox and how they valued the product, but Fox has valued NFL football for a long period of time and I think they would probably tell you that their business has been successful because of their purchasing of NFL football. The margin of victory (on Thursday night) has been as close as it’s been on Sundays, generally speaking the health and safety has been equal to Sundays and 37 of the top 50 programs are still NFL programs. I’m a big believer that Fox having all of the games on one network, will help them going forward.

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Playoff Fantasy Football Contest Paying Out in Bitcoin


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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