Woods, Mickelson to Play Head-to-Head Thanksgiving Weekend

tiger-phil

Tiger Woods and Phil Mickelson will compete in a made-for-TV golf exhibition Thanksgiving weekend (no precise date has been set, though it’s expected to be Friday 11.23), live from Las Vegas. The longtime rivals will play 18 holes for $9 million (winner take all), just $3 million less than total purse at the ’18 U.S. Open. “The Match” will be a pay-per-view event accessible across several AT&T-Time Warner assets (think: B/R Live, DirecTV, U-verse). No information pertaining to pricing has been disclosed.

Howie Long-Short: AT&T Inc. (T) acquired the TV rights to the competition, so Warner Media’s Turner Sports will produce the event; HBO, TNT and B/R will provide shoulder programming. WarnerMedia was formed following AT&T’s $85.4 billion acquisition of Time Warner in June.

Speaking of which, T issued its first earnings report (Q2) with the Time Warner properties under its umbrella. The WarnerMedia division (former Time Warner assets) reported a +7% YoY revenue increase (to $7.8 billion), $1.1 billion of which was included in AT&T’s consolidated results; accounting for the 16 days between closing and the end of the quarter. The news wasn’t all positive though, cord cutting and the shift to internet video had AT&T’s Entertainment division (think: DirecTV) reporting a -8% YoY decline (to $11.7 billion). Q2 earnings rose 15% YoY (to $.91/share), but the mixed results had share prices falling -4.5% on the news; they’ve since recovered, closing at $32.49 on Thursday.

Fan Marino: I’m failing to see the appeal here and we don’t even have a price point yet. Those excited about the event will tout the opportunity to watch 2 all-time greats compete head-to-head, but this isn’t Sunday at Augusta. There’s nothing at stake except money and Woods and Mickelson aren’t exactly broke college students trying to pay off college loans; Woods has earned $113.5 million to date on tour, while Mickelson has cashed PGA Tour checks worth more than $87.5 million.

It’s also a particularly busy weekend on the sports calendar with Week 12 NFL games, college football rivalry games and college basketball’s pre-season tournaments. AT&T should be able to pull the country club crowd, assuming the event is priced like a single game on NBA League Pass ($6.99) and not a PPV fight ($49.99), but I’m doubting that the average sports fan is willing to pay for a golf themed TV show on day that includes Kyler Murray vs. Will Grier, the Apple Cup, the Civil War and a Top 5 CBB matchup between Kansas and Tennessee.

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Comcast Preparing to Divest 22 Fox RSNs, To Submit 2nd All-Cash Bid by July 27th  

Comcast

Comcast (CMCSA) is reportedly lining up buyers for 21st Century Fox’s (FOXA) regional sports networks to alleviate anti-trust concerns, as it prepares a bid that would be favorable to The Walt Disney Company’s (DIS) $71 billion dollar offer (cash and stock) for FOXA film & TV assets. CMCSA is open to divesting all 22 RSNs, but believes just 8 overlap with the existing Comcast sports footprint. Reuters is reporting that the company has held conversations with publicly-traded buyout firms Apollo Global Management (APO) and Blackstone Group (BX). Just 2 weeks ago, the U.S. Department of Justice approved DIS’ bid after reaching a settlement with the mouse house to rid itself of the regional sports networks.

Howie Long-Short: It’s been assumed that the RSNs will fetch $20 billion+ (Comcast’s first bid placed a $24 billion valuation on them), so selling them off will help Comcast coffers as the company prepares to submit a 2nd all-cash bid (no dollar amounts given). FOXA shareholders are scheduled to vote on the DIS bid on July 27th, Comcast will submit their bid prior.

Rumors of P.E. firms taking down the RSNs is relatively surprising as most of the discussions surrounding potential landing spots having focused on telecom and media companies. Everyone from Amazon (AMZN) and YouTube (GOOGL) to AT&T (T) and Dish Network (DISH) has been mentioned.

I asked T.K. Gore, sports media consultant, advisor and professor, for his thoughts on who lands the RSNs?

T.K.: The RSN world is a tricky business and experience — coupled with deep pockets — matters. Look for groups like Liberty Media and AT&T to get involved given their experiences.

MSG is among the companies that has been associated with having interest in the regional networks. James Dolan has said that he’d be interested in acquiring the assets “at the right price”, noting they’re highly profitable now but a “slow, declining revenue stream.”

Fan Marino: The 22 RSNs collectively control exclusive broadcast rights to 44 NFL, NBA, MLB & NHL franchises, including teams in Detroit, Southern California, Dallas, Cleveland and Miami. The YES Network is the most valuable of the lot, worth an estimated $4 billion; the Yankees are likely to re-acquire that network.

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Comcast Submits $65 Billion All-Cash Offer for Fox Film/TV Assets, Including 22 RSNs

CMCSA

Just 24 hours after the announcement that a federal judge had approved AT&T’s $85 billion takeover of Time Warner, it was reported that Comcast (CMCSA) submitted a $65 billion all-cash bid for 21st Century Fox’s (FOXA) film and TV assets (including 22 RSNs); trumping the $52.4 billion all-stock offer that The Walt Disney Company (DIS) had placed in December. Comcast’s interest largely surrounds FOXA’s 30% stake in Hulu, as the acquisition would give CMCSA controlling interest in the OTT service (already own 30%). NBCUniversal CEO Steve Burke stated, “we would be very very interested in growing that business.” In fact, it’s possible that if Comcast’s offer were to be selected, the company wouldn’t even end up controlling the RSNs; language within their bid indicated the company would match any regulatory commitments made by DIS; including to “divest… any of the RSNs.”

Howie Long-Short: FOXA shares rose +7.7% (to $43.66) on Wednesday following report of the Comcast bid. DIS closed up +2% (to $106.30), while CMCSA shares remained flat ($32.32) as investors expressed skepticism about the company increasing their debt level to 4x earnings; necessary to finance both the Fox deal and their purchase of Sky PLC (SKYAY).

It’s certainly worth noting that Comcast’s bid places a +/- $24 billion valuation on the 22 RSNs.

SKYAY is another name to watch. If DIS counters CMCSA’s bid, it’s possible that Fox will up its bid (currently $14.38/share) for the European pay-tv provider. Fox currently owns 39% of the company and was planning to acquire the remaining 61%, with the intention of flipping the asset as part of the proposed $52.4 billion transaction. Should a bidding war arise, John Janedis, an analyst at Jefferies LLC said it wouldn’t be unreasonable for the winning bid to reach $80 billion. For reference purposes, Comcast bid $16.72/share for 61% of Sky. The domestic cable/internet provider wants the asset (and Star – India) to expand its business overseas.

Fan Marino: AT&T’s (T) acquisition of Time Warner (TWX) includes several sports-related properties including Turner Sports, Bleacher Report and the newly launched Bleacher Report Live service; an untethered (i.e. no subscription needed) premium sports streaming service. T also takes controlling interest in the country’s largest pay television distributor, DirectTV. TWX shares rose 2% on Wednesday to $97.95, while T shares declined 6.2% (to $32.22) on the news.

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YouTube TV, Hulu Engaged in Sports Sponsorship Arms Race

hulu-youtube-tv-logosjpg

A brand awareness campaign is among the ways (exclusive content and user experience are others) that an MVPD, OTT live-streaming service or VOD platform can distinguish itself from the competition and drive growth. Over the last month, rivals YouTube TV and Hulu have announced noteworthy sponsorship transactions (without disclosing financial details) surrounding marquee sporting events. Below is a brief each deal:

  • YouTube TV will remain (was in ’17) the presenting sponsor of the World Series, (“World Series Presented by YouTube TV”) through the 2019 season. As part of an expanded partnership, the subscription streaming service will also add MLB Network to its base package. For an additional fee, YouTube TV subscribers will eventually have the option to add MLB.tv (provides regional broadcasts of games) to their package. “On-air callouts”, a national advertising campaign and in stadium signage are also included within the deal.
  • YouTube TV will become the first-ever presenting sponsor for the NBA Finals. The deal, which runs through at least ’19, will also make the company the presenting sponsor of the WNBA and G-League Finals. On-court and in-arena signage, ABC ad spots, “in-game callouts” and branding across the league’s digital and social channels, are also included within the pact.

It must also be noted that YouTube TV has also landed exclusive streaming rights to Los Angeles FC and Seattle Sounders games.

  • Hulu has signed on as an official partner of the NHL & NHLPA for the 2018 Stanley Cup Playoffs and Stanley Cup Finals; a “comprehensive partnership” that will “cross all league touch points including NBC Sports, the NHL’s digital and social channels, as well as camera-visible, in-stadium inventory within all U.S. venues.”
  • Hulu also signed a deal with Turner Sports, to sponsor NBA playoff games on TNT. A “Presented by Hulu” graphic will be prominently displayed on “opening graphic cards, custom billboards and scorecards” throughout all first-round coverage, Conference Semifinals action and Western Conference Finals broadcasts. NBA on TNT talent will appear in ad spots promoting the streaming service.

Howie Long-Short: The success YouTube TV had using live telecasts of the 2017 World Series to drive subscriptions initiated this competition between rivals; but, YouTube TV isn’t the leader in this space. In fact, the size of its subscriber base (300,000+) has the company competing with Hulu (450,000) for a distant 4th place. The oldest service, Sling TV, leads with 2.22 million subscribers; while AT&T’s (T) DirectTV Now comes in second with 1.2 million. Sony’s (SNE) PlayStation Vue is 3rd with +/- 500,000 monthly subscribers.

Fan Marino:  For reference purposes, Sling TV is a subsidiary of DISH Network (DISH). Google (GOOGL) owns YouTube TV and The Walt Disney Co. (DIS), pending final approval of its 21st Century Fox acquisition, controls 60% of Hulu; Comcast (30%) and Time Warner (10%) own the balance.

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Comcast Drops Big Ten Network from All But 9 “Home Markets”

Big10

Comcast Corporation (CMCSA) has dropped Big Ten Network from its cable offerings in all but 9 “home markets”, explaining several factors played into the decision; “ranging from the costs programmers charge us to carry their channels and the amount of viewership, to available alternatives.” Subscribers in Illinois (IU, ILL, NW) Indiana (IU, PUR), Maryland (UM), Michigan (UM, MSU) Minnesota (UM), New Jersey (RU), Ohio (OSU), Pennsylvania (PSU) and Wisconsin (UW) will continue to receive the conference network. Iowa (IU) & Nebraska (NU) are the only “home markets” excluded from the list, as Comcast does not provide services to residents of those states. CMCSA has stated there are no plans to cut the network from the remaining “home markets.”

Howie Long-Short: The timing of this decision is likely related to a recent report indicating the Pac 12 Network average subscriber fee declined 63% over the last 5 years (to $.11), while the Big Ten Network (B10) fee increased 30% over the same time (to $.48). Rising carriage fees are directly correlated to the “(rising) costs programmers charge us to carry their channel”; and with basketball season over and football season not starting for another 4 months, CMCSA sees the opportunity to lower the amount it pays the conference to carry the channel.

If in fact the decision is final, their loss would be a gain for Time Warner (TWX), DirecTV (T), DISH and Verizon (VZ); carriers that offer the network nationwide, as passionate Big Ten football fans will switch providers before missing a big game. For those interested in owning a piece of the Big Ten Network, you can invest in Fox Entertainment Group (FOXA); they control 51%, with the 14 member Universities owning the balance.

Fan Marino: College football programs utilize different accounting methods, with some schools allocating a larger percentage of their conference payouts to the sport (in FY16 it ranged between 45%-85% at Big 10 schools); making it tough to compare apples to apples. If you remove the conference payout ($16.1 million) from the ledger, the picture becomes clearer.

In 2016-2017, Michigan ($40.3 million), Ohio State ($24 million) and Penn State ($16.3 million) had the football programs within the conference, that generated the largest surplus (discounting the payout); while Purdue ($11.97 million), Minnesota ($13.4 million) and Indiana ($14.6 million) operated at the biggest losses. Of course, it’s not a coincidence that Michigan, OSU and PSU finished 1st, 3rd and 2nd, respectively; while Purdue, Minnesota and Indiana ended that season that season 10th, 5th and 11th out of 13 teams. The more a program wins, the more revenue it generates. Northwestern, a private institution, does not release its football program’s financials.

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March Madness Continues to Generate Record Television Ad Spend, Growth Rate Slowing

March Madness

The NCAA men’s basketball tournament remains “the second largest post-season sports franchise, trailing only the NFL playoffs”, in terms of television advertising expenditure; but, the ad spend growth rate for the Big Dance trails that of the NBA, MLB and NFL post seasons, over the last 5 years. Though 97 advertisers (a record) spent $1.28 billion (also a record) on television advertisements during March Madness ‘17, that total has grown just 3.3% annually since topping $1 billion for the first time in 2012. For comparison purposes, the NFL is growing +9.7% annually with advertisers having spent $1.55 billion during the most recent postseason. The NBA (3rd largest post season franchise) has experienced 11.7% YOY growth over the same period, with brands increasing their total postseason ad expenditure to $934 million in 2017.

Howie Long-Short: The prohibitive cost of advertising during the NCAA tournament, relative to global audience size (or lack thereof), is likely the biggest reason March Madness’ ad spend growth rate trails the NFL, NBA and MLB postseasons. NCAA bylaws preventing companies from using the names (or likeness) of the college athletes in their advertisements, also places them at a competitive disadvantage relative to the pro sports leagues. It should be noted that the NCAA’s ad spend growth rate is “in line with rights fees increases.” For informational purposes, General Motors (GM, $83 million), AT&T (T, $66 million) and Coca-Cola (KO, $56 million) spent the most among advertisers during the 2017 NCAA men’s basketball tournament.

Fan Marino: Loyola University-Chicago won its first NCAA tournament game since 1985, upsetting the University of Miami on a 3 pointer at the buzzer; a highlight that will live in March lore forever. Among those in attendance were 98-year-old team chaplain Sister Jean Dolores-Schmidt. Dolores-Schmidt is no front-runner. Prior to November (she broke her hip keeping her out of action), she had only missed 2 games since ’94. She has a plaque in the school’s hall of fame, had her own bobble head night at the arena and still issues scouting reports on upcoming opponents. Her 11th seeded Ramblers are scheduled to play 3rd seeded Tennessee on Saturday. No doubt, she’ll have some thoughts on how to stop Grant Williams; UT’s unanimous all-SEC first team selection.

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Interest Lacking in TNF Package, Fox Submits Highest Bid

NBC Thursday Night Football
NBC THURSDAY NIGHT FOOTBALL — Pictured: “NBC Thursday Night Football” Logo — (Photo by: NBC Sports)

Just three linear television networks submitted bids for the NFL’s Thursday Night Football package; Fox (submitted the highest bid), CBS & NBC. Twenty-First Century Fox (FOXA) reportedly bid more than the combined $450 million that CBS & NBC (CMCSA) paid in 2017. Both companies have acknowledged that they lost money on the package last season (advertiser interest declined) and stated they would be submitting lower bids for rights to the games in 2018. ABC/ESPN did not submit a bid, as the company did not think it could turn a profit at the going rate; nor did Turner, as it did not believe the league would sell the rights to a cable network (TWX is also tied up in a potential merger with T). TNF ratings on CBS and NBC are down 20% since 2015.

Howie Long-Short: When FOXA decided to sell $52.4 billion worth of assets (TV, film & RSNs) to DIS, the company restructured focusing on news coverage & live sports; so, adding TNF rights aligns with the new strategy, even if the games don’t immediately turn a profit. It’s reasonable to ask why Fox would outbid its competitors for a property that loses money. Simply put, they hope TNF can boost ratings on shoulder programming and want the opportunity to promote the network’s other shows. TNF remains a Top 5 primetime program. While it is the least valuable NFL package, it still maintains tremendous value relative to other television programming.

Fan Marino: NBC has the rights to the 2018 Super Bowl. Al Michaels (PBP), Cris Collinsworth (color) and Michelle Tafoya (sideline) will call the game. It will be the 10th time Michaels has called the Super Bowl. One individual that will be noticeably absent from the NBC broadcast is Bob Costas (who stated last February that he expected to call the game). Perhaps, in hindsight, it wasn’t the best idea to predict the demise of the country’s most popular sport.

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NY Sports Fans No Longer Need Cable, MSG Now Available on DIRECTV NOW

DIRECTV NOW has added MSG Networks (MSG, MSG+) to its programming lineup, becoming the 2nd live TV streaming service to make the RSNs available nationwide. While news of the distribution deal broke back in September, the channels just became available to subscribers through the networks’ live streaming and video on demand platform, “MSG GO”. It should be noted that DIRECTV NOW subscribers within the greater New York metro area (and all of NY State), have access to all MSGN content (i.e. no blackouts).

Howie Long-ShortMSGN, spun off from MSG back in 2015, reported Q1 ’18 revenue grew 3% YOY (to $157 million). It’s not surprising to see the company simply plugging along, as 90% of MSGN revenue comes from affiliate fees; fees negotiated to span extended periods of time. Earlier this month, the company announced plans for a $150 million share buyback plan. DIRECTV NOW is an AT&T (T) subsidiary.

Fan Marino: The addition of MSG Networks (MSGN) gives DIRECTV NOW subscribers access to Knicks, Rangers, Islanders, Devils, Sabres, Liberty (WNBA) and Red Bulls (MLS) games. The OTT service also carries the YES network, home of the Yankees and Nets. NY sports fans (except for Mets fans) no longer need cable. Of course, once ESPN renegotiates the contracts for the 22 RSNs it acquired from FOXA and adds MLB games to ESPN+; Mets fans can join in on the cord cutting fun.

DIRECTV NOW Just Added MSG & MSG+

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NFL, Verizon Strike $2.5 Billion Deal, In-Market Games Now Available on All Carriers 

The NFL has signed a 5-year deal with Verizon (VZ), valued at $500 million/year, that enables the telecom giant to stream in-market and nationally televised league games (and access to on-demand content) to any mobile device, Oath owned web property (i.e. Yahoo (AABA), Yahoo Sports, AOL, Go90) or connected TV nationwide; regardless of carrier, beginning in January. The new deal provides VZ with the ability to sell select in-game ad spots, but does not include the exclusivity it enjoys under the terms of the expiring contract (4 years, $250 million/year). DirecTV (T) owns the rights to stream out-of-market games through the 2022 season.

Howie Long-Short: Verizon acquired Yahoo! earlier this year for $4.5 billion, combining its media and technology assets with AOL’s (which it acquired for $4.4 billion in 2015) to form Oath; a company with 50+ brands (which also include the Huffington Post, TechCrunch and others) and a reach of over 200 million monthly unique users in the U.S. VZ sees the NFL as valuable content it can spread across Oath platforms (more valuable than the exclusivity), with Brian Angiolet, Global Chief Media and Content Officer calling football “the marquee sport” to drive an audience. He’s right and that by a mile. The NFL is averaging 15.1 million viewers/game this season; the ’17 NBA playoffs on ESPN/ABC (1st Round – Conference Finals) averaged just 4.26 million.

Fan Marino: Verizon customers have had the ability to stream NFL games on smartphones since 2010, but the remainder of the league’s fans have been blacked-out while on-the-go. Revoking Verizon’s exclusivity will result in broader availability and ultimately increased viewership for the league; but it’s the fans who win biggest with this deal. Fanatics will never again miss a minute of game action, while the casual cord-cutting fan can continue to follow the league and his/her home team.

Verizon to pay NFL $500 million a year to stream games

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MWC Debating if TV Revenue and National Exposure Outweigh Late Kickoffs and Empty Stadiums

The Mountain West Conference has television contracts with ESPN (DIS) and CBS Sports (CBS) that are set to expire following the 2019-2020 academic year. In preparation for the next round of media rights negotiations, athletic directors around the conference have begun to debate if television revenue ($100 million over 7 years) and national exposure outweigh the drawbacks of late kickoff times and empty stadiums. At least one A.D. (Tom Burman, Wyoming) does not think the benefits outweigh the costs saying, “the money is not so great ($1.1 million/year per school) that we are willing to just play game times whenever TV calls”. The conference is currently performing studies to determine how television scheduling impacts game day revenue sources (beyond just ticket sales).

Howie Long-Short: Mountain West football games are valuable to the broadcast networks because they air in valuable late-night time slots. There is no value to a Mountain West game that’s scheduled opposite P5 games. Filling the stadium is nice, but even Boise AD Curt Apsey acknowledged “it would be very difficult for us to give up the TV money and make it up in ticket sales”. Mountain West games will be on television for the foreseeable future. CFB is an arms race and there is no chance that the Mountain West (or any other conference) is leaving television revenue on the table.

Fan Marino: The Pac-12 Conference has similar issues, albeit with far more lucrative television contracts ($28 million/school in ’16). ESPN slots their weekly Pac-12 game at 10:30p or 10:45p EST on Saturday evenings. When you combine those late start times with the games that air on the Pac-12 Network, which DirecTV (T) does not carry; it’s likely that east coast Heisman voters are unable to watch most of the conference’s games. That’s too bad. Arizona QB Khalil Tate (and Bryce Love) deserves to be in NYC. Here’s to hoping they manage to catch a game or two before the ballots are submitted.

Mountain West weighs TV money versus controlling game times

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