Jeter’s Project Wolverine Projects Unobtainable Revenue Milestones

An Aug. ‘17 document circulated by Derek Jeter, meant to solicit investment capital, projects a “cash-flow” profit of $68 million for the Miami Marlins in 2018; despite the team losing $50+ million last season. Entitled Project Wolverine, the plan assumes a rise in ticket sales (52% by ‘20), corporate sponsorships (117% by ‘21) and television rights (215% by ’22) that will give the franchise $10 million in profits in ’19, $15.8 million in ’20 and $22 million by ’21. Those appear to be pie-in-the-sky projections though, as the document assumed an immediate renegotiation of the television contract (with a $44.8 million up-front payment) and there are no indications FOXA (or soon to be rights holder, DIS) intends on renegotiating the contract prior to its 2020 expiration. The team currently has the lowest paying television contract in the league.

Howie Long-Short: After slashing payroll ($36 million thus far) and accounting for a one-time payment of $50 million, that each MLB team will receive in ’18 from the sale of BAMTech (to DIS), the team will turn a profit in ’18; it just won’t be anywhere close to $68 million. Without a revised television contract, the profit drops to $23 million. The document also assumes a player payroll of $100 million with pension payments (currently sits at $104 million without accounting for pension payments) and a $5 million/year stadium naming rights deal, which has yet to come to fruition.

Fan Marino: MLB accepted the Sherman/Jeter group’s $1.2 billion offer, despite knowing the group was paying an estimated $400 million more than the franchise is worth; and, $200 million more than the next highest bidder was willing to pay. The group will continue to cut payroll, so it can show a profitable business model and raise the $200 million they still seek to cover in debt and expenses. Somehow, there is still money for Jeter though; the team will pay him $5 million/year to act as the team’s CEO. No wonder Dan LeBatard got so heated!

Derek Jeter business plan projects big profits and spike in Marlins attendance

To join our free daily email newsletter list, sign-up here!

NFL Remains TV’s Biggest Draw, Khalifa Draws Huge Audience for G-League Game

AdAge published their Top 50 most watched broadcasts of 2017 and despite a 9% YOY NFL ratings decline, 37 were NFL games; up from 28 in 2016 (Olympic year) and matching the league’s total from 2015. 9 of the Top 12 were NFL games and Super Bowl LI was the most watched program. 11 other playoff games made the list, as did 6 Sunday Night Football games, the season opener on NBC and 18 CBS and Fox Sunday afternoon windows. The highest rated non-NFL sporting event was Game 7 of the World Series (#13, 28.2 million); Game 5 of the NBA finals was the NBA’s highest rated game (#23, 24.5 million).

Howie Long-Short: On a network basis, Fox (FOXA) had the most sporting events in the Top 50 with 15; including the Super Bowl, 4 NFC playoff games and 2 World Series games. CBS and NBC (CMCSA) each had 13. ABC (DIS), which does not have regular season rights to the NFL, had just 5 of the Top 50 broadcasts. NFL ratings are down, but ad sale revenue is up 2%, makegoods are down and the average cost per spot is up 1% from the 2016 season.

Fan Marino: Former adult film star (and social media influencer) Mia Khalifa is building a name for herself within the sports world; co-hosting a show on Complex News’ YouTube channel with Gilbert Arenas and starting a Twitch channel to play NBA2K and NHL ‘17. Now she’s using the platform to call G-League games (watch her co-stream Grand Rapids vs. Fort Wayne, here). With 10 minutes to go in the 1st quarter of last night’s game, more than 3 million people had visited her Twitch page. It’s obviously not an apple to apples comparison, but just one NBA game this season had 3 million viewers (GSW vs. OKC on November 22nd). I may not ready to give up Mike Breen, Marv Albert and Ian Eagle for Khalifa; but it appears there is an audience who is and prefers a co-hosted stream to the traditional broadcast.

DESPITE ANOTHER RATINGS SLUMP, THE NFL REMAINS TV’S TOP DOG

To join our free daily email newsletter list, sign-up here!

Amazon Takes on The Sports World; 25 Companies That Will Be Affected

Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.

Amazon Expands Brand Registry Program, Now Includes Nike

In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.

Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD

Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).

Amazon Entering Private-Label Sportswear Business

In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).

Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477

Howie Long-ShortAMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.

The Pursuit of Exclusive Broadcast Rights

In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.

Names to Watch: CBS, DIS, FOXA, CMCSA, FB, GOOGL, NFLX, AAPL, SKYAY

Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.

Twitch: The Future of Game Broadcasts?

Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.

Names to Watch: CBS, DIS, FOXA, CMCSA, TWX, RCI, MSGN

Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.

To join our free daily email newsletter list, sign-up here!

Adidas Takes Macro View, Competing with Netflix for Share of Wallet

Adidas Global Creative Director Paul Gaudio believes the company isn’t just competing with rival footwear and apparel manufacturers (i.e. NKEUAAPMMAF etc.), but with anyone “competing for share of wallet.” Gaudio’s premise assumes that consumers have a fixed budget for recreational purchases and weigh the value of a product not just against its immediate competitors, but against all other products under consideration prior to purchase. ADDYY isn’t the first company outside television and film to be threatened by the blue-chip company; in 2016 Darden (DRI) CEO Gene Lee said the restaurant industry was competing with what he calls today’s “new necessities” (including: smart phones and NFLX) for discretionary dollars. ADDYY reported a Q3 ’17 sales increase of 9% YOY (to $6.6 billion) and profit that increased 30% YOY (to $610 million).

Howie Long-Short: While I admire Mr. Gaudio’s macro view on consumer spending, U.S. consumer confidence remains near a 17 year high. Consumer confidence measures feelings about current and future economic conditions, with an optimistic consumer purchasing more goods and services. If consumer confidence remains high, NFLX isn’t a threat to ADDYY; however, if consumers begin to pull back the reigns on spending (should the economy falter) it’s reasonable to think they will begin asking if that new pair of NMDs is worth forgoing 12 months of binge watching.

Fan Marino: Kanye West got Kim Kardashian a portfolio of blue-chip stocks including; Disney (DIS), Apple (AAPL), Amazon (AMZN), Adidas (ADDYY) and Netflix (NFLX) for Christmas! The portfolio included; 920 shares of DIS (valued at +/-$98,500) and 955 shares of ADDYY (valued at +/- $96,500). That sure beats the luggage I got for Hanukkah as a 16-year-old. Thanks dad (eye roll).

Adidas considers Netflix as competition

For the balance of today’s newsletter, sign-up here!

Ticketmaster Accused of Gouging Rugby Fans

Scottish rugby fans have accused The Scottish Rugby Union (SRU) of failing to monitor (and ultimately stop) Ticketmaster, the official ticketing partner of the Six Nations Championship, from selling seats at inflated prices (and collecting exorbitant booking fees) on company owned secondary sites; Seatwave and GetMeIn! Tickets are listed for the more than 10x face value ($118 seats are selling for $2,500) and the perceived conflict of interest has forced the SRU to act. The rugby organization is reportedly speaking to Ticketmaster about removing seats from their secondary sites, while it explores launching a non-profit resale site of its own; where seats are resold at face value or below.

Howie Long-Short: Rare negative news of late, for the LYV subsidiary. Live Nation Entertainment reported its best Q3 of all-time, with the company’s ticketing segment reporting its strongest quarterly adjusted operating income ever. LYV also touted the the introduction of the first open source digital ticketing platform in sports (for NFL) and the increased scale of its Verified Fan product (expects to save fans $100 million in ’17); though clearly not to the scale needed to handle primary distribution of Six Nations Championship tickets.

Fan Marino: If Howie can discuss Scottish rugby, Chilean soccer is fair game. Turner Broadcasting (TWX) won the exclusive broadcast rights to Chilean soccer matches, for the next 15 years; with a $1.3 billion bid. Fox Sports (FOXA) was the favorite to land the rights, but a spokesman for the Chilean soccer commission said regulatory concerns stemming from the DIS deal “influenced the decision.” For comparison purposes, the Argentine Football Association accepted a 5 year $1.03 billion offer from Fox Sports Latin America in March.

Scots rugby bosses ‘failing fans’ over ticket resales with Six Nations briefs going for 10 times face value

For the balance of today’s newsletter, sign-up here!

DIS’ Acquisition of Star Sports Draws International Attention

Disney’s (DIS) acquisition of Twenty-First Century Fox (FOXA) assets received attention within the domestic sports world for the 22 regional sports networks included in the deal, but on a global scale, it was the purchase of Star Sports that generated the most noise. Star recently acquired the rights to the Indian Premier League (IPL) through ’22, for $2.55 billion; a rapidly growing league with a television audience that grew 22% YOY. The network also owns the rights to 76% of national team matches, ICC events and a host of other fast growing sports within the country (hockey, badminton, F1); giving DIS a significant share of India’s sports television market. Star’s digital/mobile platform Hotstar, owns the valuable streaming rights to the IPL.

Howie Long-Short: The massive draw of the IPL made Sony Max (the previous rights holder) the most watched television channel in India during the tournament; so expect the annual 2 month competition to be an advertising and sponsorship boon for both Star and Hotstar, and ultimately DIS’ bottom line. The rights aren’t coming cheap though; Star Sports will pay nearly 3x the amount Sony (SNE) paid, for half the term period.

Fan Marino: F1 held the Indian Grand Prix from 2011-2014, before Bernie Ecclestone halted the race due to issues with government taxation; despite the track holding a contract that assures them rights to 2 more races. It appears as if the race could be coming back though under Liberty Media (FWONK) management. New F1 CEO Chase Carey said in September, “there are places around the world that present us with great opportunities to grow the sport over time and certainly a country like India with the success and the growth it has had in recent years, makes it an exciting opportunity down the road.”

Why IPL could be the golden goose of Disney-Fox’s massive $52.4 billion deal

For the balance of today’s newsletter, sign-up here!

ESPN Gets Big Boost with Addition of 22 RSNs

Disney (DIS) announced that it is acquiring 21st Century Fox’s film and television assets, including; Sky Sports (U.K.), Star Sports (India) and 22 regional sports networks (valued at $20 billion to $23 billion) for $52.4 billion in stock (plus an additional $13.7 million in net debt assumed). The 22 RSNs are the cable television homes of 44 (out of 81) professional MLB, NBA & NHL franchises; producing more than 5,500 live game broadcasts each year. FOXA isn’t exiting sports all together; the company will retain the rights properties that air on the Fox broadcast network (NFL, World Series etc.). FS1, FS2 and FOXA’s stake in the Big 10 network are also not included in the transaction.

Howie Long-Short: This is a sports deal as much as it is entertainment play for DIS; with +/- 40% of the deal’s value tied up in the RSNs. Fans consider RSNs to be their most valuable cable channel and the 5th most important channel within their entire cable bundle (behind the 4 broadcast networks). They also command the 2nd highest monthly fees within a cable bundle (behind ESPN), so ESPN certainly acquired quality content. Murdoch, of course, isn’t nearly as high on RSN’s; he’s watched broadcasting rights rise at a faster rate than affiliate revenue can grow. Assuming the deal is approved by antitrust regulators, FOXA shareholders will receive 0.2745 DIS shares for each share they own. DIS shares closed at $110.57 on Thursday.

Fan Marino:DIS is launching its OTT service, ESPN+, in ’18. When the existing RSN contracts expire, look for the WWL to pursue streaming rights for those 5,500 local broadcasts. That’s the valuable content it needs to draw subscribers to the new platform. If you live in Detroit and can get Wings, Tigers and Pistons games on ESPN+, and Lions games on Yahoo! (all accessible on mobile); there is no longer a need to subscribe to a cable bundle.   

What Disney will do with Fox’s regional sports networks

For the balance of today’s newsletter, sign-up here!