Yankees, with Help from Amazon, Sinclair (and others) Reclaim YES Network

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The New York Yankees, Amazon and Sinclair Broadcast Group (along with Redbird Capital, Blackstone Group and others) have agreed to buy Disney’s 80% stake in YES Network for $3.47 billion. YES is considered the crown jewel of the 22 Fox RSNs that Disney (DIS) acquired for +/- $20 billion as part of a $71.3 billion purchase of Rupert Murdoch’s entertainment assets. The Yankees, which already owned 20% of the regional sports network, will become YES’ new majority shareholder as the club’s interest grows “close to 30%.”

Howie Long-Short: When DIS agreed to buy the Fox RSNs, it presumed that on an open market YES would command bids between $5-6 billion and that the remaining 21 networks were worth upwards $15 billion (they’re likely to fetch closer to $10 billion now), so DIS certainly wasn’t planning on taking a loss in its efforts to comply with antitrust regulations. But as the TV bundle continues to fray and the number of cord cutters/cord-nevers opting for streaming services grows, they’re simply not as valuable as they once were. The shift in perception has taken place over the last 5 years. When Fox increased their stake in YES back in ’14, it was valued at $3.9 billion – up from $3.4 billion, when the Yankees initially sold them a minority stake in ’12.

YES Network would have commanded significantly more money if it held nationwide streaming rights to Yankees games – or local streaming rights past ’19, but with MLB in control of them and no indication that they’ll be re-assigned to the individual franchises, one can understand why the purchase price was underwhelming. Harvey Schiller, former CEO of YankeeNets, told me that concerns about the viewing habits of the younger generation – whether you’re talking about cord cutting or the likeliness that they’ll follow baseball like the generations prior” may have also impacted bid prices.

Youth baseball participation is on the rise (we’ll have a story on it later this week), so I’m not particularly concerned about Gen-Z taking an interest in the game, but a perception exists – at least amongst Wall Street investors – that there’s limited demand for sports programming within that demographic. Some say that Amazon’s participation in the deal is a positive sign for the future of sports media, but that seems optimistic; Harvey says it’s more likely the company sees the deal as a “way of summing what they already have.”

The Bronx Bombers were wise to align with both Amazon and Sinclair Broadcast Group (SBGI) from a strategic standpoint. Sinclair gives the franchise the opportunity to continue to grow linear distribution, while Amazon provides them with the streaming capabilities (Prime Video) to increase OTT viewership. Harvey believes that “there’s also a sponsorship component to be made.”

On the other side of the deal, YES (has rights to Yankees, Nets and NYCFC games) provides SBGI with leverage in negotiations with New York area distributors (for channels like Stadium and Tennis Channel), while Amazon picks up the chance to “cross market their products to 4-8 million new households (it’s the most watched RSN), in a very attractive area; it’s a model I [Harvey] believe the other digitals – Hulu, Netflix – will look to follow as they seek to grow viewership.”

Now that DIS has found a buyer for YES, look for the company to unload the remaining 21 RSNs in short order. We first suggested Sinclair as a potential landing spot on Nov. 19th and their decision to take equity positions in both YES and Marquee Sports Network have done little to quail our suspicions; neither have reports that the company is “sitting on a lot of cash” and maintains the lowest debt level in company history, for that matter.

Fan Marino: MLB is among the bidders for the lot of 21 RSNs, not because they foresee a revenue growth opportunity, but out of fear that a PE buyer looking solely at the bottom line wouldn’t invest in the promotion and marketing of its small market teams. Their 2nd round bid was reported to be worth +/- $10B.

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Cubs Marquee Sports Network Closely Resembles PRISM, Not Sports Net LA

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Sinclair Broadcast Group (SBGI) CEO Chris Ripley told listeners on SBGI’s Q4 ‘18 earnings call that he’s expecting the company’s investment in the Marquee Sports Network – a joint venture with the Chicago Cubs – to net between “$40 [million] to $50 million of free cash flow” annually. With other teams’ local broadcast deals expiring “in the years to come” and an existing presence in most major markets, Ripley said he sees an opportunity to replicate the model. The joint venture between SBGI and the Cubs closely resembles what Ed Snider and a pre-goliath Comcast built with the Phillies and Flyers back in the 1980’s – a precursor to all Comcast RSNs – a cable network called called PRISM (Philadelphia Regional In-Home Sports & Movies), so one should assume SBGI is responsible for the pick and shovel side of the business (think: operations, management of the network, ad sales), while the Cubs bring the content to the table. SBGI will pay the Cubs an up-front fee for the broadcast rights and then split profits with the club on the back-end. Marquee is scheduled to launch in February 2020

Howie Long-Short: The Cubs take in +/- $700K/game (+/- $65 million/year) in local and broadcast TV revenues, but in recent years the Dodgers (+/- $2 million/game), Angels and Phillies (+/- $1 million/game) have all signed deals worth more. SBJ reported that SBGI would give the Cubs a “substantial bump in [their] annual rights fees”, but no hard figures have been reported. If Sinclair were to pay $1.3-$1.5 million/game and the team was a 50/50 partner in the network, it could mean growing team revenues by more than $100 million/year (less their share of profits from NBC Sports Chicago). As for SBGI, $50 million would be a noteworthy boost to a company that reported $206 million in net income in Q4 ’18.

Marquee will work because “ad incumbency and ad migration will be significant” for the Cubs, but as Chris Lencheski (an experienced global sports, media, and private equity executive; founder of sports consultancy group – Phoenicia and an adjunct professor at Columbia University) reminded me “not all teams are created equal” – so I’m not sure just how many more viable opportunities are really out there for SBGI. “No matter how great one team may be in their market, they likely don’t have that same hold over the customer as the Cubs do in Chicago. It doesn’t matter whether the Cubs are successful on the field or not, there are people watching and listening around Chicago and to a greater degree around the United States. You have the Yankees. You have the Dodgers. I don’t know where else you find a team with that kind of nationally-scaled customer. You’re not going to attempt this type of investment anchored to small-market one-team platforms.”

Pessimists will cite the failure of Sports Net LA to gain carriage in the market as the reason why the Marquee Sports Network is doomed, but the “very, very high subscriber fee ask” (which caused distributors to pass) was needed “to make the financing work” for the purchase of the club; in other words, the Dodgers transaction “needed to get X dollars per subscriber based on the number of subscribers it projected it would have within the market, so that the network would generate enough revenue to finance the acquisition in the first place.” There is no “huge ask on the table” here. SBGI and the Cubs will be within a financial zone of possible alignment between anyone on the cable side and anyone on the customer side.”

If teams want to be in control of their own content, it’s worth wondering why they hadn’t taken that into consideration during their last round of broadcast rights negotiations. Chris said it’s –partially the result of a changing market, “but most importantly consumption of the product and the habits of the consumer have changed; and the costs associated with creating and operating networks have declined. The cost levers to acquire and broadcast and to create new distribution revenue strategies have dropped dramatically. Costs on the pick and shovel side have dropped because of technology (and only improving with 5G) and consumption disruption, that now more than ever, means great content actually drops more to the bottom line.”

The partnership with the Cubs is Sinclair’s first stab at a regional sports network, but Chris says that it won’t be their last. “The next one up is going to be the Detroit Tigers and Detroit Red Wings. They’re really going to cash in because they’re owned by the same owner and they also own the building.” Of course, SBGI is also in pursuit of the 21 Fox RSNs that Disney has on the block.

How does ownership of the building play into a broadcast partnership?

Chris: “The context of the word subscriber is changing. I don’t want to be a subscriber to Marquee. I want to be a member and in a world where I’m watching content through my handset, that membership has quantifiable value. If I own my building, I can bring Marquee members in on non-performing or lower-performing nights. The ability to bring in a large data-set of qualified customers via a digital turnstile would make Marquee – or for that matter DAZN – a new rail of revenue for tickets.”

Fan Marino: If you’re wondering what kinds of non-Cubs centric programming Marquee will offer, look to the high school broadcast rights SBGI has been buying up in rapid fashion. Chris said, “go to Stirr, you can see just about every high school sport and the markets that they are in. H.S. sports programming makes sense because it brings an audience and helps to develop a relationship with the community at the grassroots level.”

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DOJ Changes Tune on Sports Broadcasting Monopoly

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Josh Kosman and Richard Morgan (NY Post) are reporting that the U.S. Justice Department has altered its position on The Walt Disney Company’s (DIS) acquisition of the 22 Fox regional sports networks and are said to be considering a scenario that would allow DIS to spin-off the cable networks; the company would cede operational control of the RSNs. The DOJ had initially mandated that Disney sell-off the sports networks within 90 days of the Fox entertainment deal closing to prevent a sports broadcasting monopoly, with subsidiary ESPN already owning the rights to more sports content than any other broadcaster. The news comes just days after New Fox – the perceived front-runner to take down the lot of cable assets – confirmed in an SEC filing that it would not be bidding on any of the networks. DIS reportedly remains committed to a sale before the end of February.

Howie Long-Short: The DOJ initially felt that if DIS were to add the broadcast rights to 44 pro sports teams to ESPN’s existing portfolio, that the company would be positioned to squeeze carriers in carriage negotiations; further driving up the cost of the cable bundle. While I don’t want to speculate as to why the DOJ is reportedly willing to reverse direction, there is a belief in industry circles that without DIS (or Fox) backing the RSNs (and the leverage that they hold), cable companies could/would opt to leave the costly networks off their basic tiers.

The Justice Department’s change of heart could end up saving Disney billions. New Fox’s decision to pass on what they perceive to be slow growth assets, leaves Sinclair Broadcast Group (with P.E. backing) as the last viable legacy media company capable of buying all 22 RSNs. The NY Post article said Fox’s decision to drop out of the bidding lowered the value of the sports networks to between “$9 billion and $11 billion” (or 5-6x EBITDA). If that’s true and DIS’ theoretical RSN pure play were to trade at the same 8.7x multiple ($16 billion) that MSGN does, a spin-off could net DIS $5 billion to $7 billion more (+60%) than an auction would.

That won’t be the case though. As Dan Cohen, Octagon SVP, Global Media Rights Consulting Division told me, “it’s quite different to compare a single RSN in the U.S.’ largest media market to a set of RSNs. There are factors beyond the viewership differences such as the costs, sets of rights, programming opportunities, etc. Remember, MSG owns the Knicks and Rangers. That dynamic creates stability and a guaranteed cash flow. It’s not the same as 22 RSNs whose rights are varied, where competition exists and higher costs play factors.”  

Disney paid +/-$20 billion for the RSNs as part of their $71.3 billion acquisition of Fox entertainment assets, so spinning off the networks would seem like a more attractive option than taking a +/- $10 billion loss, but if the rest of the legacy media companies are suggesting that RSNs are “slow growth” businesses – “at best” – I wondered why DIS would have interest in keeping them. Dan explained that moving forward the RSN business will be “slower growth, not slow. For the past decade+ the RSN business has been booming, a meteoric rise of the like cannot continue at that speed without slowing a bit for some time. However, growth on a RSN level will still move forward and the smart ones will develop business propositions around legalized in game betting and new interactive viewer technologies, and most certainly will need to further exploit the local digital rights as they play out.” For those who read “Early Entrants” (Vol. 1) on Sunday morning, you know that Disney is exploring entrance into the sports betting space.

Fan Marino: New Fox supposedly has a renewed focus on sports, but in the same week the company declared it was out of the regional sports networks business, it declined an option to carry the Big-12 championship game in ’19, ’21 and ’23. SBJ reported that the decision had to do with scheduling (see: they didn’t want it up against the SEC and ACC championship games), but I’m hearing that Murdoch’s company is preparing to go “all-in” on the Big 10 conference. ESPN, which aired the game in ’18 and has the rights in ’20, ’22 and ’24, is likely to pick up the 3 “odd-year” games.

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New Fox Out of Bidding for RSNs, Sinclair the Front-Runner

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New Fox has confirmed in an SEC filing that it will not be bidding on any of the 22 regional sports networks that were sold to Disney (see: $71.3 billion sale of entertainment assets), viewing the RSNs as slow-growth (or no-growth) assets. The perception that Disney has “overexposed” the RSNs has also tempered Fox’s interest. With countless teams and distributors privy to their detailed financials, there’s now a belief that future broadcast rights will become costlier and that carriage rate increases will be more difficult to come by (both of which would further slow growth). Sinclair Broadcast Group (with the financial assistance of a P.E. firm) is now widely considered to be the front-runner (and the last viable option) to take down the entire lot (vs. piecemeal) of cable networks – estimated to be worth between $15 billion and $20 billion. Final bids are due before the end of January.

Howie Long-Short: Remember, the Justice Department is requiring that Disney (DIS) sell-off the RSNs to prevent the company from maintaining a sports broadcasting monopoly. With ESPN under the company umbrella, DIS already owns the rights to more sports content than any other broadcaster.

Many assumed that Fox would buy back the RSNs because of their renewed focus on sports programming, but Chris Lencheski (an experienced global sports, media, and private equity executive; and an adjunct professor at Columbia University) first told you in our November 19th newsletter that not only was Murdoch’s company unlikely to re-acquire the regional sports networks, but Sinclair Broadcast Group (SBGI) was “uniquely positioned to take them down because of their owned and operated channels”; and that “they (SBGI) could perform well, have invested in and have wanted to further acquire sports rights but on a truly scalable format.”  You heard it here first, folks.

Sinclair’s ownership stake in Stadium – a 24/7 multi-platform sports network with the broadcast rights to several Group of 5 conferences – makes the RSNs more attractive to SBGI than they might be to other prospective bidders. As Chris told me, Stadium already has a name amongst “early adopters” and “cord nevers”, the technology and the existing agreements with OTT providers like Sling and Pluto; which makes the addition of the broadcast rights to the 44 pro sports teams “plug and play”.

Amazon is said to be participating in discussions surrounding the YES Network (estimated value: $5 billion – $6 billion), but it’s unlikely they (or any other tech giant) will pursue the entire lot; RSN coverage is restricted by the leagues to a defined local footprint (see: YES Network only available within metro NYC) which limits their value to a global enterprise. While 40+ companies were said to be involved in the first round of bidding, without the tech companies (+ Comcast, Charter and now Fox) DIS is unlikely to pull in offers anywhere near the $25 billion Guggenheim Securities originally pegged the RSNs at.

Fan Marino: The Sinclair sports portfolio includes the Tennis Channel, the “fastest growing” network in television; now in 61 million homes (+ 41% over last 2 years) after gaining 5 million subscribers (more than any other Nielsen-measured cable network, just 1/13 to add subscribers) in December ’18. If you’re a fan of the sport, you need the channel; it aired more live coverage than any single-sport network last year (2,300+ hours of matches).

ICYMI: It was recently revealed that the Cubs would be launching their own sports network come 2020 in partnership with SBGI. That’s a wise decision. Sinclair can offer widespread distribution and brings much-needed experience in both carriage negotiations and game production to the venture; issues that have plagued other start-up sports networks (see: Pac-12 Network).

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Cubs Split from Bulls, Blackhawks and White Sox to Launch Their Own RSN

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NBC Sports Chicago has agreed to a new 5-year multi-platform media rights pact with the Chicago Bulls, Blackhawks and White Sox, pending NBA, NHL and MLB approval. As of October 2019, all 3 teams’ regular season (excluding nationally televised broadcasts), pre-season and spring training games, plus Bulls and Blackhawks 1st round playoff games, will air exclusively on the Chicago RSN; WGN will no longer have broadcast rights to games. The news would also seem to confirm long-standing speculation that the Chicago Cubs are poised to launch their own television network come February 2020 (start of Spring Training); the team’s games will remain on NBC Sports Chicago through the end of the 2019 season.

Howie Long-Short: The Cubs, Bulls, Blackhawks and White Sox are currently equal partners (along with NBC Sports Group) in NBC Sports Chicago, but the Cubs are the network’s crown jewel. The Bulls, Blackhawks and White Sox will all see their stakes in the RSN rise from 20% to 25% come October ‘19, but it’s worth wondering if the network will run into carriage issues without the broadcast rights to North Sider baseball games?

Chris Lencheski is an experienced global sports, media, and private equity executive with c-suite stops at Comcast-Spectacor, TPG Specialty Lending, IRG Sports and Entertainment, SKI & Company and currently an adjunct professor at Columbia University. I checked in with Chris to get his thoughts the subject.

Chris: No, there won’t be any significant carriage issues. There’s more than enough people who are interested in the White Sox, Blackhawks and Bulls. The issue becomes if the various cable companies begin to push back on the $4.35 or $4.50 per subscriber fees during the next set of carriage negotiations. While that’s possible – they’re pushing back on lots of things –  NBC Sports Chicago will still have live professional major league sports and that content is still the best content you can have; you can’t make any more of it and there’s a finite amount of live sports programming in Chicago.

The Cubs decision to form their own “Marquee” (note: that’s the proposed name) network was derived from the Rickett’s family’s desire to continue growing revenues, but that doesn’t mean the team plans to go direct to consumer. Instead, the Chicago baseball club will align with a cable operator that can offer widespread distribution (think: Sinclair Broadcast Group) and bring some much-needed experience in both carriage negotiations and game production to the venture; issues that have plagued other start-up sports networks (see: Pac-12 Network). I asked Chris if there is any potential fiscal downside to the Cubs decision to start their own RSN?

Chris: No, even if the new network fails to generate the $3 – $4 per subscriber that NBC Sports Chicago gets, Marquee is still going to spin off significantly more revenue than the 20% that the team was going to get under the terms of their previous deal. Given that the franchise generates 3-4x the ad dollars in market (relative to the other 3 Chicago teams), the advertising dollars’ migration to Marquee is going to be significant; and that’s before any hybrid DTC model is applied, which will afford advertisers even more dynamic integration to Cubs fans.

In addition to their interest in partnering with the Cubs on an RSN, Sinclair has been mentioned as a potential investor in the YES Network (80% is for sale, $5-6 billion valuation) and is known to be in pursuit of the other 21 Fox RSNs currently on the market; CEO Chris Ripley recently called them “good fit with the [company’s existing] broadcast footprint and operations (from a cost savings standpoint).” The publicly traded (SBGI) telecom conglomerate, which owns more local TV stations than any other company in U.S., envisions the regional sports networks as the catalyst needed to grow their expansive cable business.

Fan Marino: Howie spent a lot of time talking to Chris about the financial impact of the Cubs decision to launch an RSN, but I wanted to find out how a Cubs owned television network would impact the on-field product?

Chris: Simply put, the team is going to generate much more free cash flow over the next several years. That will allow them to sustainably compete for players with the Yankees, Red Sox and Dodgers – all of whom have RSN-type models contributing to their ability to be competitive.

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MLB Attendance Hits 15 Year Low but Fans Still Watching on TV

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Major League Baseball attendance declined 4.1% in 2018 (from 30,042/game to 28,830/game), with fewer than 70 million people (69,625,244) visiting league parks for the first time since 2003; it was the MLB’s 5th attendance decline in the last 6 seasons. 17 clubs experienced a YoY regression, with the Marlins (-771,910 fans) and Blue Jays (-878,605 fans) reporting the largest drop-offs; it must be noted that those clubs altered the way they calculated gate receipts prior to the ’18 season.

While MLB experienced a decline in fans at the ballpark, television viewership remains strong; Nielsen reported that between March 29th (earliest opening day ever) and September 30th (final day of regular season) the league’s 29 RSNs (Toronto not included) saw ratings rise +2% YoY. MLB games remain the most watched programming in primetime on cable television in 28 of 29 U.S. markets (Miami is the exception) and 12 RSNs carrying MLB teams are tops in their market in primetime, amongst all programmers.

Howie Long-Short: MLB blamed the attendance decline on the “historically bad weather” in April (102 games were played under 50 degrees), but they should have blamed it on the Marlins and Blue Jays accounting methods; 54% of the league’s total decline can be attributed to those 2 clubs.

Of the 12 RSNs that rank first in primetime within their market, 6 are owned by Fox Sports (Cardinals, Indians, Brewers, Yankees, Royals and Diamondbacks) and will be sold. It’s been reported that Sinclair Broadcast Group (SBGI), YouTube (GOOGL), Amazon (AMZN), Blackstone Group (BX), CVC Capital Partners and Apollo Global Management (APO) have all expressed interest in acquiring the block (22) of RSNs. Bloomberg has estimated that the assets could command upwards of $20 billion.

Advertisers value sports properties because a) they’re live (so you can’t fast-forward through commercials) and b) viewership consumption is greater for sporting events than it is for entertainment programming. In fact, the average MLB club has fans tuned in longer than the top 10 primetime television shows combined in their respective markets.

Fan Marino: The St. Louis Cardinals lead the league with an 8.05 rating on Fox Sports Midwest. On the other end of the spectrum, the Chicago White Sox were the only club to post a Nielsen rating under 1 (.68); a figure that indicates fewer than 1% of the total TV households in the Chicago market are tuning in to watch the South Siders on FSN Chicago. The Atlanta Braves experienced the league’s greatest YoY rise, with viewership climbing 79% in 2018 (to a 3.46 rating); a trip to the postseason following 3 straight years of 90+ losses explains the renewed enthusiasm.

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Pro Wrestling Business Experiencing Boom

The pro wrestling business is experiencing a boom, as evidenced by the newly signed U.S. broadcast television deals for WWE “Monday Night RAW” and “SmackDown Live” (worth $468 million/year), the scheduling of the largest indie wrestling event ever on September 1st (“All In”) and the news that Ring of Honor and New Japan Pro Wrestling sold-out (18,500 seats) Madison Square Garden for their “G1 Supercard” in April ‘19; the first wrestling show at MSG without a McMahon promoting, since 1960. The next marquee event on the wrestling calendar is WWE SummerSlam, Sunday Night in Brooklyn. Brock Lesnar and Roman Reigns are the main event; Ronda Rousey will take on Alexa Bliss for the WWE RAW Women’s Championship. Fans around the world can live-stream the event on WWE Network, August 19 at 7pm ET; there is a 30-day free trial period for all subscribers.

Howie Long-Short: Q2 ’18 was another landmark quarter for the WWE. The company posted record quarterly revenue (+31% to $281.6 million) and reported it had nearly doubled operating income (to $21.2 million) from the prior year quarter, news that sent share prices to a new all-time high ($85.93) on Thursday July 26th. The +31% revenue increase represents the company’s greatest YoY sales increase in 2 years.

In addition to strong financials, WWE reported significant growth in digital engagement; video views rose +58% YoY (to 14.4 billion) and the number of hours consumed watching WWE content across digital/social grew a staggering +71% YoY (to 509 million). The company also just crossed the 30 million subscriber threshold on YouTube, a figure that represents a larger following on the platform than that of the NBA, NFL, MLS, MLB, NHL, PGA TOUR and NASCAR combined. While YouTube subscribers don’t directly correlate into dollars, WWE Network subscriptions do; and the company reported paid subs rose +10% (to 1.8 million) during the quarter ending June 30th. Co-President George Barrios said the company plans on growing its international subscriber base by adding more localized content and languages.

WWE shares are up +/- 275% over the last 12 months, closing at $79.01 on Thursday. Concerned the WWE trades at too high a multiple (60x ’19 earnings estimates)? Consider the company trades at less than 25x ’20 earnings projections.

New Japan Pro Wrestling is owned by the Japanese card game company Bushiroad (privately-held). You can play the promotion via the Japanese television network, TV Asahi Holdings (trades under the ADR THDDY) or the Japanese music artist management company, Amuse, Inc (TYO: 4301). Both are minority shareholders. Ring of Honor is a subsidiary of the Sinclair Broadcast Group (SBG).

Fan Marino: The WWE recently announced it will host the company’s first all-women’s PPV event, entitled Evolution, on October 28th. The event, which will be live streamed on the WWE Network, will feature more than 50 female competitors from Monday Night Raw, SmackDown Live, NXT and NXT UK rosters. While current stars like Sasha Banks and Ronda Rousey are sure to be in attendance, so too are WWE Hall of Famers Trish Stratus and Lite; both already confirmed to be participating.

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ESPN Acquires Soccer, Boxing Rights for ESPN+, Adding Subscribers Faster Than Expected

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ESPN has announced a multi-year deal with Italy’s Serie A to broadcast league matches in the U.S. Most games will air on the WWL’s subscription streaming service ESPN+ (340+), but a Match of the Week will be broadcast on ESPN or ESPN2; those matches also be available in Spanish on ESPN Deportes. The exclusive rights agreement with the Italian futbol league is set to begin on August 18th with Ronaldo’s Juventus debut (8.18.18) on ESPN+.

ESPN also signed a new 7-year deal with Top Rank Boxing to replace the 4-year agreement the companies agreed to back in the summer of 2017. The new pact calls for ESPN to bring fight fans 54 cards/year, 36 of which (includes 24 international cards) will be exclusive to ESPN+ subscribers.

Howie Long-Short: ESPN’s television subscription base continued to dwindle in fiscal Q3 (though not as fast as it had been), ad revenue declined (see: NBA Finals sweep) and programming costs increased, but the company still managed to post mid-single digit revenue growth (to $15.23 billion) for the quarter thanks to rising affiliate fees and “rapid growth in digital MPVD subscribers.” CEO Bob Iger added that ESPN+ is adding subscribers faster than projected. As for Disney, their cable networks business in aggregate reported a 5% decline in operating income (to $1.4 billion); their investment in ESPN+ was among the reasons given for the regression. DIS shares have fallen 2.5% since Tuesday’s earnings call, closing Wednesday at $113.98.

For those wondering about the 22 Fox RSNs, Iger did mention that “the process of selling them” is underway. We wrote on June 29th, that an “established linear player” was most likely to acquire the RSNs (minus YES); mentioning 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) as possible landing spots. Add Sinclair Broadcast Group (SBGI) to that list. CEO Chris Ripley expressed interest in the assets on their earnings call this week, calling them, “a good fit with the broadcast footprint and operations.”

Fan Marino: ESPN’s EVP of Programming & Scheduling Burke Magnus has been vocal about making “ESPN+ home to the world’s best soccer leagues” and by proxy, “an indispensable destination” for domestic soccer fans. While it’s an admirable goal and one that would certainly grow subscriptions, it’s certainly not representative of the splintered market we have today. In fact, with rights spread out amongst so many broadcasters U.S. soccer fans are likely to have to choose the leagues/games they’re willing to forego. It’s certainly not reasonable to expect fans to sign up for ESPN+ ($4.99/mo.) B/R Live ($7.99/mo.) NBC Sports Gold ($50/season) etc. and still carry a $80+/mo. cable bundle to watch games on ESPN, Fox Sports and BeIN.

It needs to be noted that Top Rank will not be promoting the 24 international cards contained within their deal with ESPN. Bob Arum & Co. acquired the U.S. broadcast rights from Frank Warren (U.K.), Zanfer Promotions (Mexico) and Teiken Boxing (Japan).

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Indie Wrestling Event to Draw 10,000 Fans, Largest Non-WWE Show Since ‘99

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The largest indie wrestling event ever, entitled “All In”, will take place in Chicago on September 1st; when more than 10,000 fans attend a show promoted by Cody (formerly Cody Rhodes, WWE legend Dusty Rhodes son) and The Young Bucks (Matt and Nick Jackson). 10,000 tickets sold represents a significant accomplishment in squared circles (pun intended), as no pro wrestling promotion besides the WWE or WCW has drawn the figure since Lucha Libra in ’93; and there hasn’t been a promotion targeting English speaking fans to fill 10,000 seats since 1984. Sears Centre Arena (capacity 10,218) will host the self-financed event and the card will be comprised of stars from Ring of Honor (ROH), New Japan Pro Wrestling (NJPW), National Wrestling Alliance and Impact Wrestling. Tickets went on sale on Sunday May 13th and sold out in just 29 minutes.

Howie Long-Short: This is NOT a Ring of Honor event. Cody and The Young Bucks (stars within the ROH promotion) took all the financial risk associated with putting on the event, a gamble that appears will pay off. While the 3 wrestlers will profit on the event, it must be noted that “All-In” wasn’t designed to be a cash grab (the highest priced ticket was $153). Cody decided to put the event on when Wrestling Observer Newsletter editor Dave Meltzer tweeted that he didn’t think ROH could sell 10,000 seats. In other words, it was a “bet.”.

Ring of Honor is a subsidiary of the Sinclair Broadcast Group (SBGI). On May 9th, the company reported Q1 ’18 revenue grew 6.1% to $626.9 million. CEO Chris Ripley said, “advertising revenue was soft” (many stations not carry the Super Bowl or Olympics), but because the company’s “distribution revenues ($314 million) now make up approximately half its media revenues ($643 million)” the “business model very resilient to ad market volatility.” Shares are up 12.6% since reporting a “first quarter that came in well ahead of guidance in all key financial metrics.”

Fan Marino: In addition to Cody and The Young Bucks, New Japan Pro Wrestling (NJPW) Heavyweight Champion Kazuchika Okada, NJPW fan favorite Kenny Omega, NWA World Heavyweight Champion Nick Aldis and former WWE Heavyweight Champion Rey Mysterio will all be on the card. Rumors are circling that former WWE star turned MMA fighter, CM Punk, could also make his return to wrestling on the card.

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Wide-Spread Corruption Within Tennis’ Lowest Levels

Tennis

An independent task force has determined that “tennis is responsible for more suspicious betting than any other sport”, resulting from wide-spread corruption at the sport’s lowest levels. 14.5% of the 3,200 players polled in the investigation reported 1st hand knowledge of match-fixing. The review panel offered a dozen proposed solutions to curb match-fixing including; a ban that would prevent betting companies from participating as sponsors, discontinuing the sale of official live scoring data and the elimination of gambling on the game’s lower levels. It must be noted that the study did not indicate a “widespread problem” at the sport’s top level and found no evidence of cover-ups or collusion by International Tennis Federation (I.T.F.) officials. The final report will be released in its entirety this fall.

Howie Long-Short: The report incorrectly attributes the I.T.F.’s 2012 deal with Sportradar, (worth $70 million) to distribute live scores from low-level tournaments around the world, for the “tsunami” of corruption within the sport’s lower levels. While it’s true that the deal provided bookmakers with the ability to offer odds on Futures events, that market existed prior to the partnership. The insufficient prize money offered at Futures events is what make them susceptible to manipulation.

It’s simply misleading to insinuate the sport would be better off without Sportradar’s Integrity Services, as the report suggests. As Sportradar’s Director of Communication, Alex Inglot, told us last month, “we’ve identified over 3,506 matches (that have been manipulated) since 2009 and have initiated or supported well over 200 sporting sanctions and 24 criminal convictions.” You can read our full-length interview with Alex on preventing corruption, here.

While privately-held, there is one way to play Sportradar; EQT Holdings Management (EQGP). The publicly traded private equity/venture capital firm with 11 exits (IPO/M&A) to its name, invested $55 million into the company in July ’12. In October ’15 the company raised another +/- $45 million; Revolution led the round that also included Michael Jordan, Mark Cuban and Ted Leonsis.

Fan Marino: Speaking of Tennis, 2017 was a banner year for the Tennis Channel, no television network added more subscribers (12 million) and 2018 has gotten off to an equally strong start. In January, the network announced it would be doubling the number of live tournaments aired on its OTT service, Tennis Channel Plus. Then in March, the network reported subscriber revenue had grown +42% YoY. Viewership numbers were also impressive in March, as events at Indian Wells (+19%) and Miami (+21%) drew big YoY increases. The network has also added several high-profile sponsors in Q1 2018 including; BMW, Pfizer, Bristol Meyers Squibb, Clorox, Ford Motor Co., Weight Watchers, Alfa Romeo.

Sinclair Broadcast Group (SBGI) owns the Tennis Channel. Sinclair is awaiting the Department of Justice’s approval on its $3.9 billion acquisition of Tribune Media (and their 42 television stations). Should the deal be approved (SBGI just agreed to sell 23 stations to comply with FCC rulesSBGI would own channels in 215 networks in over 102 markets (in an unprecedented 70%+ of the country).

The company has had a rough start to 2018, as its share price has declined +/- 30% over the last 90 days (since Jan. 19). Its “fake news” scandal, certainly didn’t help.

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