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

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

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Fanatics Expresses Interest in StubHub, May Be Too Late

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

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

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

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

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Expect NFLN to Retain Exclusive Live Rights

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

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

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

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

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

NLL Looking to Raise Profile Through Digital Storytelling    

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

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Pac-12 Considering 12p EST Kick-Offs, Weighing Exposure & TV Revenue vs. Gate Attendance

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Pac-12 Commissioner Larry Scott told reporters at the conference’s media day gathering (on 7.25) that he would “like to see one or two games this season” kick off at 12p EST. The games, which would be played on campus (i.e. not at neutral site locations), would give the conference the opportunity to increase viewership in the Eastern Time Zone; Scott said that the conference’s existing late-night time slots – and the resulting lack of exposure – have been a source of “a lot of frustration” amongst Pac-12 coaches and fans, who believe an ‘East Coast bias’ exists to their detriment. The Pac-12 commissioner will need a few athletic directors to buy-in to the idea, the conference has said it will not force a school to play in the morning time slot.

Howie Long-Short: The Pac-12’s (P12) failure to place a team in the College Football Playoff the last two seasons has increased the pressure on Larry Scott to position the conference for a return to the four-team tournament. One former College Football Playoff Committee member acknowledged that teams on the west coast playing late at night “get overlooked”, so re-scheduling games for times when a larger percentage of the population (and the Committee) is awake sounds logical – but it doesn’t solve the P12’s core issue; member institutions are fishing from a smaller pond. A lack of exposure isn’t keeping Pac-12 schools from making the CFP, their inability to field teams capable of finishing with less than two losses is.

Earlier start times would theoretically appeal to a greater percentage of fans in the Eastern Time Zone and despite the competition from the SEC, B1G and ACC, could also potentially result in a increased viewership; remember, games scheduled at noon EST benefit from the reach of broadcast television vs. the smaller pay-TV universe watching late night games. Former senior Fox Sports programming & strategy executive turned industry consultant Patrick Crakes said “the total gross viewers pool in the late window across ESPN, FS1 and P12N is 1.5 million to 2.5 million. A top-level interconference matchup at 12 EST could draw 3 million – but it would probably have to include one of the Los Angeles teams.

The P12 would be making the move to appease alumni and media members on the East Coast, but former CBS Sports President Neal Pilson doesn’t believe that a 12p EST start will crush ratings in the Mountain and Pacific Time Zones. He reminds that the “folks out West are used to early starts. The NFL starts games at 10a PST on Sundays.

CollegeFootballTalk’s Bryan Fischer reported that schools located in the Mountain Time Zone would be “chief candidates” to test out the viability of a morning kickoff. That makes sense. The conference should figure out if 10a is feasible before it looks to make 9a work.

Ratings aside, Pilson believes that creating inventory for the 12p EST time slot makes a lot of sense from a media rights standpoint. He said, “ultimately the value of the remaining Pac-12 game inventory rises if its teams are getting regular exposure at 12p EST and inevitably Scott will be able to command more money from their current partners – or another network will bid for the conference’s games playing in that window.” He’s right and with 12p EST far more valuable than late nights, rights fees for those games should increase. The conference’s current Tier-1 rights holders – ESPN/ABC and Fox (which wants to put a marquee game in the timeslot) – are likely to have interest, but keep an eye on Turner/AT&T; the company is said to desperately want to acquire more premium sports rights.

Pac-12 fans have complained for years about hosting too many night games, but morning kickoffs likely weren’t what they had in mind. One former Big-12 (B12) athletic director was “certain that it’s going to be hard for schools to pull a live audience at 9a on a Saturday.” He speaks from experience. B12 schools in the Central Time Zone often host 11a local-time kickoffs and “nobody likes it – and that’s two hours later [than what the P12 is proposing].”

That same source was as concerned with the revenue that would be lost with a 9a kickoff as he was with the absence of a raucous home crowd. With ticketing revenues remaining “an important part of athletic department proceeds” and schools having just 6 or 7 home games to monetize, the thought of willingly foregoing revenues would seem like “a tough sell for athletic directors already up against the budget.”

Fan Marino: Proponents of Scott’s idea point to schools like Arizona, that practice in the early morning before temperatures get too hot in the desert, and claim that kicking off at 12p EST wouldn’t have a negative impact on a student athlete’s routine – or on the team’s on-field performance. The former CFP Committee member we spoke to disagrees. He said, “home field advantage is exacerbated with an unusual game-time, particularly when the home team is playing a team that traveled several hours the day before” (which is often the case). As for the athlete’s well-being, Wazzu Coach Mike Leach said that his players would have to rise at 4:30a to follow their existing pre-game routine for a 9a kickoff. I have a difficult time imaging athletes lacking sleep – even at 20 years old – are going to perform to the best of their abilities.

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EGF, ESPN WWOS Partner, To Host Interscholastic High School Esports Championship

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In Early Entrants: Vol. XV (July 22), we wrote that The Walt Disney Company/ESPN plans to take a central role within the gaming space. While details remain scant, we’ve heard that the house of mouse intends on solidifying the fractured amateur video game landscape. Rumors are floating that additional details will be coming down the pike sooner than later.”

The Electronic Gaming Federation (EGF) and ESPN Wide World of Sports Complex have since announced the formation of the national interscholastic high school esports championship tournament. Participating teams will qualify by advancing through a series of regional competitions throughout the 2019-2020 academic year. The inaugural event will take place June 12-14, 2020, live from the ESPN Wide World of Sports Complex at The Walt Disney World Resort in Orlando, Florida.

The EGF is essentially striving to become the NCAA of amateur competitive gaming. Formed in ’13, the organization has put on over 2,000 high school and collegiate esports matches.

Howie Long-Short: To understand the significance of the partnership, one must realize that “the development, growth and ultimately the maturation found in the professional esports space has been missing from the high school and college ranks.” Rod ‘Slasher’ Breslau, one of two individuals tasked with launching ESPN’s esports vertical, explained that “there are high school kids – who are literally the best in the world at a game – that are playing recreationally at home because their school doesn’t have a formal esports program. The tier 2 and tier 3 leagues below the pro level don’t include an academic component. Their only focus is getting players to the top league. Many of the high school and college aged kids – oftentimes from Asia – playing in those leagues wouldn’t be competing if they went to school.”

ESPN will host an Apex Legends tournament at X Games 2019 and recently held the ‘Collegiate Esports Championship’, so Thursday’s news doesn’t exactly come out of left field. Breslau said that while the network’s “editorial coverage [on competitive gaming] gets good traffic, tournaments are always going to bring in more eyeballs, more viewers on the Twitch Stream; and you can sell video ads against that. Video ads are the bread and butter of ESPN’s products, so it’s no surprise they’re now making a bigger esports play.” The worldwide leader has the platforms, but lacks the credibility amongst gamers  – which explains their interest in partnering with EGF.

ESPN is also motivated to present esports in a manner familiar to their core audience. Aligning with an entity that serves as the ‘NCAA of high school and collegiate video gaming’ and adopting infrastructure that allows for interscholastic rivalries helps to make competitive gaming easier for the esports novice to understand.

Aside from the credibility gained, Schrodt said Disney and its ESPN Wide World of Sports Complex was the right partner because the company represents “the gold standard” within sports and entertainment. EGF seeks to provide meaningful experiences for gamers and Schrodt believes that “giving kids the opportunity to go to Walt Disney World, like so many professional athletes have over the years”, helps to accomplish that goal.

It must be noted that EGF isn’t the only organization looking to help create the next generation of esports stars. PlayVS, which has raised $46 million to date, is also looking to create a nationwide interscholastic association. Breslau said that the investment capital raised had initially given PlayVS an advantage, but that the legitimacy gained from the ESPN deal helps EGF to close the gap. Both companies are inevitably going to face competition from the NCAA, so Slasher suggested that an eventual merger could make sense to stave off a challenge from the old guard.

Fan Marino: Rick Fox recently sold his team’s spot in the League of Legends Championship Series for $30.25 million. Games that were popular in the late 80s and early 90s are no longer popular today, so paying millions of dollars to acquire esports teams tied to a specific game has always struck me as a risky proposition, but Breslau says, “it’s become a case of ‘too big to fail’. So much money has been invested into games like League of Legends, that it would take an incredible catastrophe for the game’s popularity to decline far enough that there weren’t enough people playing it for it to exist at a professional level. League of Legends, Fortnite, Overwatch and Counterstrike, they’ll all be around in 2050.

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Early Entrants: Vol. XV – Disney to Enter esports Space, Plans to Solidify Fractured Amateur Video Gaming Landscape

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

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Disney to Enter esports Space, Plans to Solidify Fractured Amateur Video Gaming Landscape

Esports insiders tell JohnWallStreet that The Walt Disney Company/ESPN plans to take a central role within the gaming space. While details remain scant, we’ve heard that the house of mouse intends on solidifying the fractured amateur video game landscape. Rumors are floating that additional details will be coming down the pike sooner than later.

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Upstart Football Leagues Short on Capital, Finding AAF “Scared All the Potential Investors Off”

Speculation exists that the Pacific Pro League’s scheduled debut – now set for July ’20 – is very much at risk. Sources tell JohnWallStreet that the league – which had initially planned a 2018 start – is short on capital and finding that there’s “a lot of skepticism and pessimism surrounding upstart football leagues.” It’s unclear if funding was pulled or if founder Don Yee never had the necessary financing in place to begin with (i.e. the cause of the delays), but we’re hearing that “Don has been looking for capital and given the AAF’s recent collapse – and the XFL’s emergence – he’s found it to be particularly challenging.

Apparently, the Fan Controlled Football League also “needs more money to launch.” The FCFL has delayed its inaugural season – originally planned for 2019 – until the winter of 2020 in hopes of finding an investor willing to foot the bill.

The American Flag Football League managed to successfully complete two seasons (no short feat as evidenced above), but industry insiders are questioning if there will be a third. We’ve heard that “the league is out of money.” Founder Jeff Lewis is currently in capital raising mode, but as noted with the Pac-Pro and FCFL there’s little money to be had – “the Alliance scared all the potential investors off.

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Wealthy Owner Has TBT on Stable Financial Ground

Despite a crowded summer hoops calendar, an inability to drive significant sponsorship or merchandising revenues and the costs associated with a time-buy on ESPN, one league that doesn’t have financial issues is The Basketball Tournament. Of course, the single elimination tournament benefits from having a deep pocketed owner willing to eat the losses. Sources with knowledge of the league’s finances tell JohnWallStreet that TBT still exists in its 6th season because “Jon Mugar personally writes a check to the winner each year (worth $2 million).” The Star Market heir isn’t concerned about the league’s annual P&L, he sees the winner-take-all competition as “his little sports ownership play.” Mugar does hold out hope that the league will “be able to spin their new hyper regional live event model into a deal to a larger media company that would invest in its future.

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Outland Trophy Finds Presenting Sponsors, Again

The Outland Trophy – awarded to college football’s top interior lineman – will have presenting sponsors again, in 2019. The Football Writers Association of America and the National Foundation for Infectious Diseases will announce later this week that they plan to partner on a public awareness campaign bringing attention to the importance of flu prevention. The 2019 Outland Trophy presented by the National Foundation for Infectious Diseases will be awarded during ESPN’s The Home Depot College Football Awards on December 12.

Fun Fact: Arizona’s Rob Waldrop, a 2x consensus All-American, beat out future NFL Hall of Famer’s Will Shield (Nebraska) and Willie Roaf (Louisiana Tech) for the award in 1993.

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TV Deals with ABC/ESPN, FOX “Magnify the Risk of Failure” for XFL

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The XFL has announced a pair of three-year deals with The Walt Disney Company and Fox Corp. The high-profile agreements ensure all 43 league games of the 2020 season will air on network or cable television. More than half are slated to be split between the ABC network and Fox network with the remainder set to air on ESPN or Fox Sports 1. While most tend to believe that wall-to-wall coverage increases the league’s chances of success, former CBS Sports president (and current television consultant, Pilson Communications) Neal Pilson suggested that it also “magnifies the risk of failure.”

Howie Long-Short: There’s no doubt that with more than half of the league’s games set to air on network television that the XFL will have the chance to showcase their product (i.e. fans will find it), but Pilson warns that widespread exposure puts a bullseye on the league’s back. “Television can be as damaging as it is beneficial. If there aren’t enough viewers to spread across all of these networks – which I wonder about – or if the networks fail to show viewership growth, there won’t be an excuse for the lack of interest.”

Pilson’s skepticism stems from his concern that “the league will now be under the spotlight – from a ratings standpoint – from day one” and his belief that having games on “so many competing networks will dilute viewership numbers. The assumption is that being on two or three networks will double or triple the number of people watching and that’s simply not true – unless people are going to watch three, four, five games every weekend, which seems unlikely.” That doesn’t mean he would have advised Oliver Luck & Co. otherwise. “When you have the opportunity to gain this type of exposure, you take it and accept the risks that I’ve been talking about.

Unlike the AAF’s deal with CBS, the XFL isn’t buying network time. Disney and Fox will cover the costs of production and handle game production; they’ll also retain all of the in-game ad inventory. While that should ensure NFL-like broadcast quality and save the league hundreds of thousands of dollars on a per-game basis, it also means they’ve lost 1 of 4 revenue streams and “ultimately you need to have revenue to survive.”

In addition to broadcast rights fees, pro sports leagues generate revenues through sponsorship & advertising, merchandising & licensing and ticket sales. Pilson expects the league to have “some sponsorship & advertising partners” on board for the 2020 season and believes it will collect a “limited amount of merchandising & licensing revenue” in year 1. As for ticket sales, he said, “playing football in cities like New York or Washington in February is a high-risk proposition and given that ticket prices are expected to cost significantly less than NFL seats, even if they do sell well, I don’t believe ticketing is going to drive league revenues. I have a hard time seeing the league realize any significant revenue streams in year 1.

Vince McMahon has earmarked $500 million for the XFL’s rebirth, so he can float the league for a while, but for it to succeed long-term they’ll need to build “fan loyalty and enthusiasm on the local level” and Pilson doesn’t believe that’s going to be easy. “The cities that they’re putting teams in – New York, Washington, Dallas, Seattle – are all strong NFL markets. How many fans in those locales are going to be truly committed to another professional football league?”

Fan Marino: Sports-media consultant Marc Ganis told the WSJ that the league’s only “real competition” between February and May is March Madness, but that’s patently false. The XFL season is 13 weeks long (10 regular season, 3 post-season) and there are very few “off weekends” on the sports calendar during that time. Pilson reminded me that “they’re up against some tent pole events that generate serious ratings year after year; March Madness, the Kentucky Derby, the Daytona 500, The Masters, the NFL draft, the NBA and NHL Playoffs.

There’s also the start of the MLB season and the XFL has planted teams in cities where baseball has strong tradition (think: New York, Boston, Los Angeles, St. Louis). You can say baseball doesn’t draw well on ESPN, but “look at the local ratings on [an RSN like] YES on a Sunday afternoon.”

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Sinclair Submits Auction’s Highest Bid for Fox RSNs, Bankers Continuing to “Work the Deal”

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Bankers at Allen & Co. received final-round bids for the 21 Fox RSNs – not named YES Network (sold separately to Yankees/Sinclair/Amazon for $3.47 billion) – from Sinclair Broadcast Group (SBGI), Liberty Media (LBTYA) and the Big3 basketball league. Fox Business reported that while SBGI submitted the auction’s highest bid – worth +/- $10 billion – they’ve yet to be declared the winner; the possibility remains that one of the other bidders could still put forth a more attractive offer as bankers continue to “work the deal.” While the Fox story suggested a decision could occur “in the coming days”, Walt Disney Company (DIS) has until mid-June; the company was given 90 days from their March 20th closing (on 21st Century Fox’s entertainment assets) to unload them.

Howie Long-Short: When Disney agreed to buy the Fox RSNs it presumed that on the open market the lot would command bids between $20 billion and $22 billion – they were valued at $20 billion based on what DIS paid – so, the house of mouse wasn’t planning on taking a +/- $6 billion loss in its efforts to comply with antitrust regulations. But with the TV bundle continuing to fray, the number of cord cutters growing and “sports leagues maintaining ownership (rather than the networks) of digital rights” many of the parties expected to submit bids (see: Comcast, Fox, Amazon) remained on the sidelines.

MLB was interested in taking control over the RSNs because they feared a private equity firm – focused solely at the bottom line – wouldn’t invest in the promotion and marketing of its small market teams, not because it wants to become a “big media house”; Octagon SVP Dan Cohen (Global Media Rights Consulting Division) said that the sale of BAMTech was a “clear indication they did not want to own and operate technology” (aside from MLB Network and MLB.tv). Ultimately the cost of acquisition got too high for the league to submit a solo bid and they opted to take a minority position alongside Liberty Media, but Cohen believes that MLB ends up in a limited partner capacity with whomever the declared winner is (with an investment post-close). “They are the content creators. If you’re going to invest $10 billion dollars amidst a rapidly changing landscape, you need to be aligned with them.”

If Cohen’s hunch is correct, Sinclair is going to be named the auction winner. While he admittedly doesn’t have any “inside information”, the company has “made it clear that the RSN business is important to them. They’ve partnered with the Cubs to launch Marquee Sports Network and they’re the lead investor in the group that has agreed to buy the YES Network. If you follow the money, it’s logical they would end up with the remaining 21 RSNs.”

MLB is riding the Liberty bid to the finish line, but Cohen says that it is Sinclair prime positioned to operate the collective of cable sports networks. “They understand the local market content business – they own a lot of local markets – and on a national level, they’ve proven to be deft negotiators; look what they’ve done with The Tennis Channel” (see: fastest growing TV network).

SBGI’s familiarity with local markets should prove beneficial, but the company is still going to need to find a way to “navigate changing consumption patterns and cord cutting” (see: AT&T lost 544K TV subs, 83K OTT subs in Q1). Dan believes the way to do that is to “retain more rights and to get creative – in collaboration with MLB and the states – to monetize the sports betting opportunity. All of these potential buyers are gambling that they’ll be able to retain viewers longer during a 9-0 blowout by serving up prop bets – and acting as the intermediary [assumes the RSNs eventually obtain the local mobile rights] to place those bets. That’s where the upside is within the RSN business.”

Fan Marino: The Big3 won’t be the winner – aside from lacking the infrastructure to operate, they lack the capital; Forbes reported their bid was “heavily leveraged – but credit Ice-Cube and Co. for “reimagining the content that could live on a regional sports network.” Aligned with stars like Snoop Dogg and Beyoncé “their plan was to make each RSN a cultural initiative across sports, music and entertainment. They were going to supplement their live sports programming with concerts and original programming – leveraging their celebrity networks to provide viewers with exclusive access and BTS action.”

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Pay-Per-View Supplementing Subscription Streaming Services Is “The Future”

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Terence “Bud” Crawford will defend his WBO welterweight title against Amir “King” Khan on Saturday night at Madison Square Garden. The showdown is headlining ESPN’s first pay-per-view card since the network agreed to a 7-year distribution deal with Bob Arum’s Top Rank Boxing promotion back in October ’18.

Crawford-Khan is the 3rd boxing pay-per-view event of 2019 – corroboration that despite the emergence of OTT subscription services (like ESPN+ and DAZN) the PPV platform remains “alive and well.” Arum explained that there’s a misconception the “subscription model and the pay-per-view model are at conflict with one another, but moving forward you’re going to see that they’ll supplement each other. Look at the ESPN-UFC deal. That’s the future.”

Howie Long-Short: Bob’s right, PPV boxing has a future – despite companies like ESPN+ and DAZN making 9 figure investments into the sport – because the rights fees to the biggest fights are too expensive for a linear television network or streaming service take on. “Fighters command big purses for big fights and the only way to make the math work on those fights is to show them on pay per view.”  

I was quick to point out that the Cinco de Mayo bout between Canelo Alvarez and Daniel Jacobs is airing on DAZN – subscribers of the monthly service will get the fight for just $19.99 (or $99.99/year) – but Bob insists John Skipper’s platform is simply using the marquee bout to get subscribers in the door and “once they build up a large enough subscriber base, they too are going to price major fights above their monthly subscription fee.” He might be onto something. When I asked Matchroom Boxing promoter Eddie Hearn last December if a Wilder-Joshua matchup would air on DAZN, he said “not necessarily. We’ll go to the broadcast [platform] that puts the most amount of money up.”

Speaking of Matchroom Boxing, GGG recently signed a 3 year, 6 fight contract with the promotion – choosing Hearn and DAZN over ESPN and Top Rank (and Premier Boxing Champions and Fox). Bob acknowledged that he would have liked to add GGG to his stable of fighters but “budgetary constraints forced us – and ESPN – to make a choice; to put our bucks with 37-year-old Golovkin or a 27-year-old lineal heavyweight champion in Tyson Fury. We think you get a much bigger bang for your buck with Tyson Fury.”

Tyson Fury’s next fight will be against Tom Schwarz on ESPN+ in June. While the bout would get more eyeballs if it aired on ESPN’s linear network, Bob understands that the transition to digital is “a process” and that Tyson’s presence is necessary for ESPN+ to continue building its subscription base – “which is now more than 3 million.” Arum said, “I’ve been through this before. I remember when people asked ‘how could you abandon radio when millions of people are listening and make a fight exclusive to television when there are so few sets. You’ll see that within 10 years most of the content that we watch – including sports – will be on a streaming platform.”

Fan Marino: If you watched the Final Four, you likely saw an interview with WBC heavyweight champion Deontay Wilder in between games. Many wondered why CBS featured the boxer during college basketball’s biggest event, but the decision was “part of a [savvy] overall strategy to introduce Wilder to the American sports fan.” The network was incentivized to use the valuable time slot (segment averaged 13.77 million viewers) on Wilder with his next fight on Showtime – a CBS subsidiary.

Cross promotion is among the benefits of Top Rank’s deal with ESPN too, and Arum & Co. first got a taste of the marketing possibilities (now that they’re aligned with The Walt Disney Company) this week with the release of a recent spot co-promoting Crawford-Khan and Avengers: End Game. ESPN VP of programming and acquisitions Matt Kenny recently told Multichannel news that it’s the company’s ability to “leverage that intellectual property to create an even bigger event feel” that gives them an advantage over “the streaming services or our competitors” [when selling a pay-per-view card].

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Big 12 Becomes 1st P5 Conference to Put Football, Basketball Behind ESPN+ Paywall

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The Big 12 Conference has inked a 5-year $40 million pact (SBJ) with ESPN that will give the cable network (or ABC) the exclusive broadcast rights to the conference’s football championship games in ’19, ’21 and ’23 – they already owned the rights to the ’20, ’22 and ’24 games. The deal also provides ESPN with the exclusive streaming rights to a package of regular season football and basketball games (plus a collective of events from non-revenue generating sports). Every school (except Texas and Oklahoma) will have a football game (+ their annual spring game) air exclusively on ESPN+ and all conference basketball games not televised on a linear ESPN channel (expected to be 75+/season) will be exclusive to the platform.

Howie Long-Short: When Fox passed on the opportunity to carry the Big 12’s odd-year championship games (because they’re preparing to go “all-in” on the Big 10), we told you that ESPN would grab them. What we didn’t expect was for the conference to agree to tie football and men’s basketball broadcasts exclusively to a digital platform, so the deal is quite the coup for ESPN+. Collegiate sports rights are particularly valuable to the burgeoning OTT service because of the emotional connection fans have to their alma mater. The belief is that bond makes it “more likely [that the fan would] buy a $5 monthly subscription” to watch their team’s games than a supporter of a pro sports franchise. There may be something to that. No sports have a higher percentage of “fanatics with high net worth” than college football and college basketball.

SBJ reported that the Big 12 had been seeking $20 million/per for each of the 3 championship games – and they’re getting $30 million/per for the ’20, ‘22 and ’24 games – so there’s no question the WWL won this round of negotiations. They held the leverage because with Fox out of the bidding, “few [other] media companies” wanted to buy the rights. Inclusion of the 3rd and 4th tier television inventory enabled the Big 12 to squeeze more out of the network than they would have been able to get for just the championship games, but considering the AAC just signed a deal with ESPN worth $83.3 million/year (it’s a more expansive package, but it’s digital heavy) it’s hard to believe that their streaming rights weren’t worth more.

$40 million – over 6 years, split 10 ways – does little to close the gap between the Big 12 schools and college athletics’ wealthiest conferences. In 2018, it was projected each of the 10 schools would receive $36.5 million in media rights payouts, while Big 10 and SEC schools raked in +/- $50 million and +/- $43 million, respectively.

When the ACC Network launches in August, the Big 12 will be the lone P5 conference without its own network. This deal doesn’t change that, but with 8 of the conference’s 10 schools serving up “more than 50 exclusive events per year” to a Big 12 branded section of ESPN+, it’ll feel like one – just not on linear television. Texas and Oklahoma will occasionally appear on the streaming service as the road team, but UT’s commitment to the Longhorn Network (ESPN) and OU’s to the Sooner Sports Network (Fox) prevent those schools from producing content for ESPN+.

Fan Marino: Big 12 fans may not love paying $4.99/mo. for games they used to receive for free, but they should enjoy games kicking/tipping off in prime-time as opposed to in the early (or late) TV window; remember, unlike linear tv channels, streaming platforms can serve up several games to a subscriber at the same time. The conference’s deal with ESPN+ gives the schools the ability to determine the start times for games.

The expanded partnership between the conference and ESPN will also benefit non-revenue generating sports that previously lacked the exposure needed to recruit nationally.

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Hulu Building Live Sports Strategy Around Interactivity and Personalization

Hulu

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

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

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

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

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

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

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

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AAC Inks $1 Billion Media Rights Pact with ESPN

AAC

Sports Business Journal reported that ESPN has agreed to pay the American Athletic Conference $1 billion over the next 12 years for the broadcast rights to nearly all its live sports programming – save a “small package” of men’s basketball games that air on CBS and Navy football games controlled by CBS Sports Network. The new deal, which goes into effect prior to the ’20 college football season, will pay the schools $83.3 million/year ($6.94 million/per); more than 4x the amount they currently collect annually under the terms of the expiring agreement with the company (7 years, $126 million). The conference has yet to begin renewal talks on its package with CBS – also set to expire in ’20.

Howie Long-Short: ESPN’s decision to tie up big money, long-term in the AAC is risky business considering the conference’s member schools aren’t tied to a grant-of-rights restricting their ability to leave the conference should greener pastures arise, but the network did manage to negotiate a “conference composition clause” that hedges against financial losses should the conference’s top brands leave before the expiration of the deal. It’s safe to assume that the AAC’s existing membership base will remain intact through the ’22-’23 school year, but with every existing power 5 conference broadcast deal expiring between ’23-’25, another round of conference realignment remains a threat. The belief remains that conferences can command larger media rights deals if they expand their geographical footprint.

The AAC’s decision to ink a 12-year agreement can also be questioned – particularly if the logic behind signing a deal that long was so that the conference could claim it had a billion-dollar TV partnership. William Mao, VP Media Rights Division at Octagon, explained “in the context of a lot of these national conference TV deals, 12 years may not seem out of the norm. But given that this deal starts today and that the time horizon for the introduction of new content delivery platforms, new formats and new technologies has gotten shorter, you would think that conferences would start to look to sign shorter deals; or agreements that provided for the flexibility to entertain additional distribution opportunities as they arrive over the next five to 10 years.”

Growing media rights revenues by nearly $5 million/year will gives AAC member schools some much needed financial support – as recently noted, the UConn athletic department fell $42 million short of its $89 million budget last year. The deal should also help to raise the profile of the AAC schools (assuming the volume of games on ESPN’s linear outlets remains unchanged). In addition to football and basketball games remaining on the ESPN family of networks (ESPN, ESPN2, ESPNU), the new deal guarantees the broadcast of select Saturday football telecasts on network television (ABC).

ESPN plans to air the “majority of [conference] basketball games” and “about half of the football games” on ESPN+ (along with baseball, softball and soccer), so much like the recently announced UFC deal, the network’s agreement with the AAC is about getting subscribers “into the big tent.” Jimmy Pitaro & co. figure that they can get alumni of the American Athletic Conference schools to sign-up for the service with football and basketball and then keep them as subscribers with high-profile UFC bouts, original content (think: 30 for 30, Kobe: Detail) and a collective of tier 2 and 3 live sports (think: MLS, Top Rank Boxing).

Even with the rights fee increase, the disparity in media rights revenues generated by AAC schools and those in the P5 conferences remains great. The Pac-12, which desperately needs to grow its annual payouts, still pays its member schools more than $31 million/year; the Big Ten leads the way with annual payouts exceeding $50 million/school.

The AAC has been marketing itself as the 6th power conference, but this deal indicates they’re not there just yet. Aside from the financial component, “4/5 power conferences have a linear network of some sort. The American just inked a deal for the next 12 years that does not include a linear conference network. It’s difficult to claim you’re one of the power conferences when you lack the one thing that almost all of them have.”

Fan Marino: The deal gives ESPN valuable college football/basketball programming for the ESPN+ ecosystem and the schools receive a significant increase in annual media rights revenue, so it makes sense on both sides. If there’s a loser, it’s the AAC fan that will experience an increase in the monthly cost (+$4.99) to watch their favorite team(s) play. But fans willing to pay $4.99 are invested in the outcome of their alma mater’s games and the deal with ESPN/ESPN+ gives AAC schools the financial resources (think: better coaches, facilities) to improve the quality of their athletic programs. One could argue that while it’s going to cost AAC fans more to watch every game on the schedule under the terms of the new media agreement, their teams are better positioned to compete in the NCAA Tournament or a big 6 bowl game because of the move to ESPN+.

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