WSJ: Just 7 Ways to Publicly Invest in Sports, JWS: Not the Case

wsj-wallstreetjournal

The WSJ published a recent story asserting there are few ways to directly invest in sports, a notion we dispute. The article deemed just 7 publicly traded equities to be sports-related and based their conclusion, that fans are better off watching and playing sports than investing in them, on the performance of 2 exchange traded funds; one of which (FANZ) has beat the S&P since its July ’17 inception, which would seem to counter to their argument. The article cites Matt Hougan, the CEO of Inside ETFs, and his belief that most of the economic value within sports (ownership and player contracts) “comes in private transactions”, to support the author’s thesis; but fails to pay consideration to the revenue streams that support those contracts (and generate ownership profits). It’s worth noting that JohnWallStreet follows over 100 sports-related equities.

Howie Long-Short: Sports teams generate revenue from 4 sources; broadcast rights, ticket sales, sponsorships and merchandising. Several publicly traded equities use a similar business model; Churchill Downs (CHDN), International Speedway (ISCA), Dover Motorsports (DVD) and Speedway Motorsports (TRK), and thus should also be included on the list. Others, like Acushnet Holdings Corp. (GOLF) and Callaway Golf Company (ELY), are undeniably directly tied to sports; and no one would claim your basket was unfocused if companies like Nike (NKE), Lululemon (LULU) and Fitbit (FIT) were to be included. Oh, and don’t forget Activision Blizzard’s (ATVI) new esports league (Overwatch); their inaugural season starts today.

Fan Marino: The story names the New York Knicks, New York Rangers (MSG), Atlanta Braves (BATRK), Manchester United (MANU) and Borussia Dortmund (BORUF) as the teams you can purchase equity in. The Toronto Blue Jays, Toronto Maple Leafs (RCI), Juventus F.C. (JVTSF), A.S. Roma (ASRAF) and SS Lazio (BIT: SSL) are also all publicly traded.

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Adidas Invests in Facebook for Soccer

Onefootball, a German mobile application with 25 million users across 200 countries, announced it has closed on Series B and Series C funding rounds; the company previously acknowledged raising $20 million in investment capital. Described as “Facebook for football without the social element”, the app offers news, live scores and stats for over 140 leagues in 16 languages. Focused on building a premier user experience that results in higher conversions for advertisers, founder Lucas von Cranach said that despite the captive audience (90% opt-in to receive push notifications), the company “won’t build a betting business, won’t build a merchandise business, and we won’t build a ticketing business”.

Howie Long-Short: Onefootball remains privately held, but Adidas (ADDYY) participated in the most recent round; finding value in the captive mobile fan base mentioned. Information pertaining to the amount of capital invested and valuation were not disclosed. There are several publicly-traded soccer teams. Manchester United is traded on the NYSE under the symbol MANU. You can buy A.S. Roma (OTC: ASRAF), Juventus (OTCJVTSF) and Borussia Dortmund (OTCBORUF) over-the- counter. Lazio is traded on the Borsa Italiana under the symbol BIT: SSL.

Fan Marino: As recently noted, more teams at the 2018 World Cup will wear uniforms made by Adidas (11) than Nike (10); but that won’t be the case when it comes to cleats. It’s expected that for the 2nd World Cup in a row, more than half of all players will be wearing NKE footwear; 52% wore the brand at the ’14 WC. For comparison purposes, just 36% of players wore Adidas footwear in 2014.

Onefootball has quietly raised a Series C round and added Adidas as an investor

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Study Reveals Why Digital Growth is Crucial to the Future of European Soccer

KPMG published an interesting study on what would happen to English Premier League clubs, if the money generated from league broadcast rights (the most lucrative in Europe) were to be subtracted from the teams’ bottom lines; a viable concern when you consider that broadcast revenues can be worth up to 45% of an EPL team’s gross revenue. KPMG bases the study on the premise that revenue from broadcast rights is precarious; that consumer behaviors change and there are no guarantees that humans will watch television, stream video etc. in the future. What KPMG found, was that the most fiscally sound clubs were the ones that maintained the largest social presences. Those clubs are most successful in closing commercial partnerships and selling out their stadiums; factors that would help to reduce the impact, that a total loss of broadcast revenue would bring.

Howie Long-Short: The EPL’s overseas rights expire in 2019 and are expected increase in value during the next round of negotiations; so, while a fascinating study, not one that should cause immediate concern. Overseas rights for the current 3-year period, total roughly $3 billion Euros (domestic rights for the same period equal $5.1 billion Euros). There seems to be a consensus that while domestic rights may be close to capping out in value, interest from international players like Facebook (FB), Google (GOOGL) and Amazon (AMZN) is likely to send overseas rights soaring. Those rights fees will be split evenly amongst EPL teams, as the “Big 6” conceded their effort to secure a greater percentage of overseas TV money.

Fan Marino: La Liga clubs FC Barcelona (206 million) and Real Madrid (204 million) maintain the largest social followings in Europe, and it isn’t close. 3 EPL clubs; Manchester United (MANU) (111 million), Chelsea FC (76 million) and Arsenal (63 million) round out the Top 5. Bayern Munich (61 million), Juventus (JVTSF) (45 million) and Paris St. Germain (45 million) have the largest digital followings within their respective leagues and all place within Europe’s Top 10.

Data shows why digital growth is more important for football clubs than precarious broadcast revenues

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NFL PLANNING ON LONDON FRANCHISE BY 2022

There are indications that the NFL is looking to establish a franchise in London by 2022 with NFL Executive VP of International and Events saying “the next 4-5 years should be very doable”. The international metropolis has proven to be filled with fans (selling out all but one game since 2007), is a lucrative TV market (with more people than Los Angeles) and has the stadium infrastructure (Wembley, Twickenham, Tottenham) in place to house a team. The league believes a London franchise is “viable”; but concerns remain about the team’s ability to compete for a Super Bowl. Player willingness to live abroad, higher U.K. income tax rates and the strenuous travel schedule are among the issues the league still needs to work through.

Howie Long-Short: Speaking of Tottenham (who is building a new stadium the NFL is contracted to play 2 games/year at for 10 years), they are among 6 Premier League clubs (Manchester United (MANU), Manchester City, Chelsea, Arsenal, and Liverpool) looking for an increased shared of the $1.34 billion/year the league earns in overseas broadcast rights. The 6 clubs argue their popularity drives international revenues and therefore should be entitled to a larger share. The 20 clubs, which currently split the fees equally, are scheduled to meet today with revenue sharing on the discussion agenda. It’s worth noting that even the small Premier League clubs are still being paid large sums of cash. The 20th place team that was relegated last season, still made more in broadcast revenues than Juventus (OTC: JVTSF) and Bayern Munich, which won their respective leagues.

Fan Marino: As I wrote last week, it’s only a matter of time until the Jacksonville franchise relocates to London. The league isn’t going to expand, as 8 4-team divisions work, so moving a small market team seems most likely. A move from Jacksonville to London would increase the value of the Jaguars franchise by at least $1 billion. There are 2 other franchises to keep your eye on. If Buffalo and San Diego (I’m not convinced the Chargers remain in LA) fail to get their stadium situations settled, I would expect both franchises to explore London as a relocation option.

A whole new ball game: will London get its own NFL team?

MANCHESTER UNITED ROLLS OUT STREAMING SERVICE FOR 24/7 CLUB NETWORK; NO SATELLITE SUBSCRIPTIONS REQUIRED FOR ACCESS

Manchester United’s (MANU) 24/7 club television network; MUTV, is now available for streaming within the UK and Ireland via mutv.com. The network, which will not require a satellite subscription, is charging roughly $6.40/month for subscriber access on desktop, mobile and tablets. If you are already a subscriber to Sky (SKYAY) or Virgin TV (LILA) or to the Sky digital television platform, there is no additional charge for access. The digital version of MUTV will include Legends matches, under 23 and Academy games, first team highlights, live audio of all first team matches, exclusive interviews, behind the scenes access and film presentations.

MUTV NOW AVAILABLE ONLINE TO UNITED FANS IN THE UK AND IRELAND

Howie Long-Short: Real fans in the UK already have Sky (SKYAY), but this might be good for my MANU fans Stateside with a VPN!

Fan Marino: The ROI here is poor. $6.40/mo. for access to highlights and interviews? At least for ESPN’s $7.21/mo. (carriage fee per subscriber within bundle) you get live NFL and NBA game broadcasts.

MYSTERY CHINESE INVESTOR PREPARING TO PURCHASE 8% OF MANU SHARES

A mystery Chinese buyer is reportedly preparing to line up and purchase publicly traded shares of Premier League franchise, Manchester United (MANU) in an attempt to control upwards of 8% of the futbol club. The Glazer family currently owns 80% of MANU, while the remaining 20% is held by investment funds in New York and London. It has been rumored that some members of the Glazer family would be willing to part with a large chunk of shares.

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Chinese investor making moves to line up Manchester United shares, according to reports

Howie Long-Short: Forbes values the franchise at $3.69 billion, while MANU has a market cap in the range of $2.75 billion. Perhaps this mystery individual is onto something.

Fan Marino: Red Devils’ fans have never been pleased with the way the Glazer family operates. A new, powerful, voice in the room would be a welcomed addition.

TINDER IN TALKS TO SPONSOR MANU KIT

Tinder (MTCH) is in talks with English Premier League club, Manchester United (MANU), to sponsor the team’s new kit. The deal would place Tinder’s flame logo on the left sleeve of player jerseys. Worth a reported $16 million, it would become the most lucrative sponsorship of its kind for English clubs. While it may seem like a surprising match for the dating app, it would actually be their second futbol partnership. The company currently has a shirt sponsorship deal in place with Italian Serie A side Napoli.

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Tinder is reportedly planning to sponsor Manchester United’s new uniform for $16 million

Fan Marino: I’m a grown man, so I don’t buy jerseys. If I were 20 again, I would not be buying a jersey with a corporate logo on it. Reminds me of a stadium giveaway.