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.


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.


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.


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”


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”


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


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’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


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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UFC Cuts Cords (and Satellite Providers), Now Exclusive to ESPN+

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The UFC, cognizant of the “amount of [linear television] subs dropping every year”, have agreed to a deal with ESPN that will make the company’s OTT service the exclusive broadcast partner of the promotion’s PPV events. The agreement will give (effective April 13) ESPN+ the rights (in the U.S.) to carry the promotions 12 annual tentpole cards through 2025 – in addition to the 20 Fight Night shows they’re already contracted to air. Moving forward, fans who wish to watch the UFC’s biggest stars (ESPN and Fight Pass will continue to show prelims and early prelims, respectively) will need to subscribe to ESPN+. That monthly subscription won’t include access to the actual PPV shows – fans will still need to purchase each of the 12 events individually, but ESPN plans to discount UFC PPV’s from $64.99 (current price) to $59.99 to offset the monthly fee ($4.99). Financial terms of the deal between the UFC and ESPN have not been disclosed.

Howie Long-Short: Just 3 months after getting into the UFC business, ESPN/ESPN+ is now the exclusive home for the mixed martial arts promotion. It didn’t take long for the company to realize “that it can use the UFC to bring ESPN+ subscribers into the big tent.” ESPN+ drew 568,000 new subscribers within 48 hours of its first UFC event.

The OTT service’s total audience is now “closer to 3 million”, but former HBO Sports President Ross Greenburg (Ross Greenburg Productions) believes that upcoming UFC PPV events will continue to drive new subs. “You can’t assume that every single UFC fan bought that first fight and those that did remain subscribers (fans could cancel within 30 days without charge). Plus, there are different fan bases for different fighters, often tied to ethnicity; the ESPN+ subscriber base will continue to grow every time they have a UFC card.” Of course, getting fans into the tent is just half the battle; once there, ESPN+ must work to retain them. 12 tentpole events and quality ancillary content should help.

The deal with ESPN relinquishes much of the upside that the UFC would experience “if another Rousey or McGregor, a big PPV draw, arrived”, but I think taking the guaranteed pay day – one likely “worth hundreds of millions of dollars” – is a wise decision. Selling UFC PPV’s is a risky business proposition. Every fighter is just one fight away from losing their invincibility (see: Rousey) and the biggest stars now make enough money that they don’t “need” (i.e. getting punched in the face becomes less attractive) to fight once they achieve superstar status (see: Lesnar). The promotion can also get “stuck” with a fighter who continues to win, but fails to move the needle with fans (see: Stipe Miocic), which can crush PPV sales figures for multiple events.

From a cost standpoint, the move to ESPN+ is a wash for fans and subscribers will get a host of additional content for their inconvenience, so it’s clear deal’s only real loser is are the cable, satellite and telco TV operators. Ross told me that the UFC’s move away from the “normal distribution channels” is going to have a major impact on iN DEMAND and DirecTV. PPV is an important part of their yearly revenue streams”; “it could be” the death knull to those businesses.

Fan Marino: UFC President Dana White has attributed 2018’s disappointing PPV buy figures to cord cutting saying, “it’s scary the amount of subs dropping every year” – so the move away from linear distribution to a digital platform aligns with his narrative. The move is also logical for the purpose of driving interest in the promotion. By partnering with ESPN+, White and Co. pick up the support of the ESPN marketing machine. The UFC has drawn twice as many viewers to ESPN as it did for comparable programming on FS1 last year. With the help of the ESPN megaphone, it’s not unreasonable to believe the promotion could regularly post events with 1 million PPV buys in 2019.

One might assume the UFC’s decision to abandon the traditional PPV model for an OTT streaming service would hurt PPV sales figures in the short-term (i.e. until OTT becomes more prevalent), but Ross says fight fans “don’t care where they watch the fight” and those that would have bought from a linear or satellite distributor will buy from ESPN+.

Promotion: ESPN+ is offering a one-year subscription (worth $50) + 1 PPV event (worth $60) for just $80 (valid only for new subs).

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Early Entrants: Vol. 3 – Blazers Vice Chair Angling for Ownership?


Blazers Vice Chair Angling for Ownership?

Portland City Commissioner Nick Fish told reporters on Thursday that the word he’s “received from Blazers management” indicates that the team “will be put on the block” – and that he’s concerned a new ownership group would look to relocate the franchise. That’s news to my sources. Jody Allen (Paul’s sister, executor/trustee of his estate) may be willing to sell the NBA club – if she has an allegiance, it’s to the Seahawks and the city of Seattle – but no decision has been made. Some suspect that Blazers Vice Chair Bert Kolde is the source of Fish’s story. There’s a belief that Kolde is angling to buy the franchise and is looking to gauge the interest of PNW investors.


Potential SPAC Exploring Purchase/Option of Multiple F1 Tracks

There are rumors circulating of London and/or New York based groups of high-level motorsport executives (think: creditable promoters, former team owners, advertisers within the sport, agency heads, real estate developers) – with access to capital – considering the formation of a special purpose acquisition company (SPAC) to purchase or option multiple Formula One (FWONK) tracks. FWONK currently takes in +/- $600 million in annual promoter fees.

The feeling is that if any one group were to acquire enough tracks (in the right markets), they’d be able to lower promoter fees (the reason races operate at losses) to the collective benefit of advertisers, fans and FWONK (less tracks to negotiate with); most importantly, it would give the sport some long-term stability. The Formula One Promoters Association has increased its pressure on FWONK over the last several weeks, disappointed with their plans to co-promote the Miami race (see: reduced or no fee) and upset with indications that 2019 could be the last running of the Mexican Grand Prix.


DAZN’s 2019 Media Rights Budget Revealed

In Early Entrants Vol. 2, we noted that DAZN Group was considering selling off the company’s B2B play – Perform Content (think: data, news, game prod.) – to fund additional rights acquisitions. Well, Jochen Lösch – the former CEO of MP & Silva – has since shed some additional light on DAZN’s grand ambitions for 2019. Lösch, speaking on a panel at the SPOBIS conference in Düsseldorf, Germany, said he’d been told first-hand by a DAZN executive that the company would be spending $2.5 billion on global media rights this year. That total wouldn’t place DAZN in the same league as ESPN (spent $8 billion+ in ‘17) or Fox (pays $1.75 billion/year just for NFL rights), but it compares favorably to what Amazon and Facebook are projected to spend – neither has ever paid more than 8-figures on a sports rights agreement.


Metrics that Matter

Disney CEO Bob Iger disclosed on the company’s Q1 2019 earnings call that ESPN+ had surpassed 2 million subscribers – less than 4 months after hitting the 1 million mark – a proclamation that has more than a few industry insiders wondering about the OTT service’s cost of user acquisition and churn rate. As one industry analyst said to me, “you can get to any number [of subscriptions] you’d like by essentially putting more marketing dollars against it. What matters is does your audience hold.” A second remarked, “great timing on the announcement considering they added 568K subs around their first UFC event on January 19th, subscribers received a 30-day free trial, have the option to cancel at any time and they didn’t have to mention churn on the call.” For what it’s worth, OTT video service churn rates are +/- 20%.

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ABC Looking to Take CBS’ or FOX’s Sunday Afternoon NFL Regionalization Package


The NY Post reported that ABC is “kicking around the idea” of making an aggressive push for the NFL broadcast rights currently held by FOX and CBS, deals set to expire at the completion of the ’22 season. ABC is looking to grow its viewership base and NFL broadcast rights have long been considered “either the top reason, or one of them, for an overall broadcast network’s success”; ABC currently sits a distant 3rd (behind NBC, CBS) in ratings among the Big 4 networks. Both Sunday afternoon packages would include the rights to broadcast the Super Bowl (on a rotating basis), noteworthy considering the ’18 game generated $414 million in ad revenue for CBS. The Sunday afternoon packages aren’t the only ones coming up for renewal, both FOX’s TNF package and NBC’s SNF package will expire at the end of the ’22 season; ESPN’s MNF package expires at the completion of the ’21 season.

Howie Long-Short: It’s important to point out that ABC didn’t pass on the NFL in 2005, as much as it was a larger strategic decision by Disney (DIS) to transfer rights to ESPN. As Scott Rosner, Academic Director of the Sports Management Program at Columbia University, explained, “the affiliate fees piece for ESPN was simply more compelling (for DIS). It lead to a net increase in revenue and gave the company leverage with all of the other ESPNs.”

ABC’s interest in the Sunday afternoon timeslots is motivated by its desire to “boost the overall health of the network’s ratings.” So, I wondered why speculation suggests Disney would be pursuing one of the Sunday afternoon windows. Wouldn’t it make more sense to go after a prime-time package?

Scott: The longstanding theory has been that viewership on Sunday afternoons gives lift to the overall visibility of your other programming; those mentions of what’s following the game, help to drive viewers to your non-sports programming.

Should ABC rejoin the mix in pursuit of NFL television rights it would be a boon to the league. As Scott said, with more players at the table than there are rights packages to be sold, “rights are certain to increase. The best content – in particular sports content – is more valuable now than it’s ever been. It’s just harder to amalgamate audience around any one property. The more fragmentation you have, the more having those kinds (NFL rights) of big properties really matters.”

For what it’s worth, FOX is currently paying $1.1 billion/annually for the NFC package, while CBS pays $1 billion/annually for the AFC package. Why is the NFC package more expensive? Fox drew 18 million viewers/game in ’18, while CBS drew just 16.5 million/game.

The NFL has repeatedly discussed its desire to be in front of the greatest number of eyeballs, so doesn’t it behoove the league to ensure ABC gets a package (over ESPN) during the next round of rights renewals?

Scott: It comes down to dollars. ESPN is paying $1.9 billion – on an average annual basis – under the terms of the current deal. The NFL’s business model when dealing with external forces is in many ways capitalism at its finest. I wouldn’t expect them to take less money (from ABC), nor should you expect them to take less money for broader exposure.

One Barclays analyst suggested that CBS’ package was most vulnerable because the company is low on cash. Would you agree with that assertion?

Scott: No, I think they’re all, to a degree, somewhat vulnerable. As for CBS specifically, positions can change dramatically before bids are due, as can ownership and strategic alliances, so I think it’s premature to think about cash positions or lack thereof. If you are cash strapped that will obviously have an impact (on your ability to submit a competitive bid), but it’s too early to say that will or won’t be the case.

Fan Marino: The NFL’s out of market rights may also be available as the league has the option to termite its existing pact with DirecTV prior to its scheduled expiration at the completion of the ’22 season. The NFL has been partners with DirecTV for 25 years, so it’s difficult to envision another provider with the league’s out of market rights, but DirecTV has acknowledged its done launching new satellites as it moves towards a streaming centric business and the league’s out of market package is at least currently restricted to satellite providers (i.e. no streaming companies). While the company would arguably have the most to lose amongst all current rights holders (it’s a customer retention/attraction tool for them, subscribers with Sunday Ticket are their most lucrative subscribers) if it were to lose its NFL content, it’s worth wondering why the NFL would even consider a company that’s thrown in the towel on their satellite business, in the next round of negotiations; Scott says, “the answer is simple. DirecTV is willing to make the offer that the NFL can’t refuse.”

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