Italy Issues Blanket Ban on Gambling Advertising, Sponsorships

Bet365

Effective January 1st, 2019, all forms of gambling advertising and sponsorships will be banned under Italian law. Gambling operators, media outlets, sport groups and event organizers are all required to follow the new Dignity Decree; failure to do so will result in administrative fines up to 5% of the value of the advertising or sponsorship, per violation. The government intends on issuing larger fines (up to $+/- $570,000) to those who advertise gambling services/products to kids. Deputy Prime Minister Luigi Maio has expressed intentions of lobbying the EU for a Union-wide ban.

Howie Long-Short: Gambling is synonymous with Italian futbol. Stadiums are named after gambling companies and gaming companies are represented on club kits as primary sponsors. To put the significance of this ban in perspective, Alun Bowden, Senior Consultant, Eilers & Krejcik Gaming called it, “by far the most significant thing to happen in online gambling this year and yes I include PASPA in that.”

The Italian government issued this ban to strengthen consumer protection laws and all money raised from fines paid will be invested into programs designed to fight gambling addiction, so while gaming operators (and their shareholders) are upset, they’re unlikely to find much sympathy from the public, here.

That will change though if Serie A clubs start to struggle financially, a likely outcome when club sponsorship deals expire (existing agreements can be fulfilled); gaming companies invest +/- $135 million/year in Series A sponsorships and Italian clubs (see: AC Milan, 2-year ban) are already struggling to meet UEFA Financial Fair Play rules.

Several Italian clubs are publicly traded including Juventus, AS Roma and Lazio.

Fan Marino: Maio won’t have to lobby hard in England, senior gaming execs (think: Philip Bowcock of William Hill, Peter Jackson of Paddy Power Betfair) there are already asking the government to implement regulations; concerned children are being subjected to far too many gambling-related ads on television (particularly, tied to sporting events). Of course, a blanket ban on advertising is beneficial to the giants of the industry as it becomes more difficult for small outfits to take mindshare.

It’s worth noting that Australia also now has a ban on gambling related advertisements during sporting events. While no ban is needed here yet, it’s easy to foresee one coming down the pike if the competition for legalized sports bettors begins to look like the infamous DFS competition of 2015. Perhaps the time is coming sooner than later, CBS is reportedly “all-in” on gambling related advertising.

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Fiat Chysler Union Workers Strike to Protest Ronaldo Transfer

Fiat Chysler union workers in Melfi, Italy have gone on strike protesting the +/- $117 million transfer fee (largest in Serie A history) paid to bring Cristiano Ronald to Juventus. The Italian trade union released a statement saying, “it’s unacceptable that, while for years you have continued to ask FCA (Fiat Chrysler Automobiles) and CNHI (Case and New Holland Industrial) workers to make enormous sacrifices on an economic level, the company spends hundreds of millions of euros on the purchase of a footballer.” The statement went on to suggest “the company should invest in car models which guarantee the future of thousands of people rather than make just one person rich.” The strike, which began on the evening of July 15th will run through the morning of July 17th.

Howie Long-Short: The Agnelli family, which owns a controlling interest (63.77%) in Juventus, also has a 29.1% stake in Fiat (owns Ferrari); making the union workers and Ronaldo “employees of the owner.” Fiat workers (those lucky enough not to be on “state sponsored layoff schemes”) haven’t seen raises in a decade as the company has continually told employees “that times are tough and that we must resort to social safety nets in anticipation of the launch of new models which never arrive”, so their anger is understandable. Unfortunately (for leverage purposes), the strike is likely to have little impact on corporate profits; the factory is just 1 of 7 Fiat controls in the country and the union reportedly doesn’t have many workers there. Fiat is claiming that a recent investment in the company will enable all workers to return to work by 2022.

Fiat and Juventus are independent companies and each manages their own finances, so it’s not as if Juventus pulled capital from Fiat’s investment fund (as the statement alluded). In the event the 2 companies did commingle funds, one must think Ronaldo’s arrival would have a positive long-term impact on company finances; JVTSF revenues/profits are “strongly influenced by the performance of sports results and in particular the UEFA Champions League”. A Ronaldo led Juventus team would certainly be expected to qualify for the UEFA Champions League annually.

Fan Marino: As mentioned last week, it’s possible (if not likely) Ronaldo will appear against his former squad on U.S. soil. Real Madrid is scheduled to play Juventus in the International Champions Cup in Washington, D.C. on August 4th.

There should be a few other opportunities to see Ronaldo in the U.S. this summer. Juventus will make appearances in both Philadelphia (July 25, vs. FC Bayern) and Harrison, NJ (July 28, vs. Benfica); and will take on the MLS all-stars in New Orleans on August 1.

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Juventus Spends $340 Million to Land Ronaldo, Shares Up 42% Over Last 7 Days

Juventus

Cristiano Ronaldo has signed a 4-year contract with Serie A club Juventus worth $50.5 million/year. In addition to the annual salary, Juventus will pay Ronaldo’s former club Real Madrid a transfer fee of $140 million bringing their total investment in the Portugese futbol star to more than $340 million. Ronaldo, who earned $61 million last season, is taking a pay cut to join Juventus.

Howie Long-ShortJVTSF shares popped +31% ($1.34) on Tuesday’s news that Ronaldo had officially signed, before closing at $1.18 (+16.25%). The stock has climbed +42% over the last week; word that Ronaldo could be leaving Spain for Italy first broke on Monday July 2nd.

I wonder if enthusiastic JVTSF shareholders are aware that Italy’s council of ministers recently approved a ban on gambling advertisements (existing agreements can be fulfilled), within the country, come 2019. They should be, because the ban extends to soccer clubs sponsored by gaming companies. More than half of Serie A teams currently have deals in place with gambling related companies and the pending loss of those sponsors has begun to cause “extreme worry” within the league. It’s been estimated that the ban could cost the teams more than $821 million.

Earlier this year, Forbes valued Juventus at $1.472 billion, just 3.3x revenue. For comparison purposes, Real Madrid was valued at $4.088 billion (5.5x revenue). The Carolina Panthers sold at 6x revenue ($2.3 billion).

In February, JVTSF reported half-yearly financials for the first half of 2017-2018. The franchise posted profits of +/- $50 million. Unlike publicly traded American pro franchises, JVTSF revenues/profits are “strongly influenced by the performance of sports results and in particular the UEFA Champions League”. This past season the club reached the Champions League quarterfinals, before losing to Real Madrid.

Fan Marino: Despite his age (33), Ronaldo’s transfer fee increased from 2009 when Real Madrid paid Manchester United $133 million (accounting for inflation) for the 5x Ballon d’Or winner.

Ronaldo may be the best player in the world, but the annual value of his team contract lags far behind both Messi ($84 million) and Neymar ($73 million). However, when you add the $47.5 million/year (most of any futbol star) he makes from endorsements, appearances and licensing, Ronaldo becomes the 2nd highest paid soccer player in the world; Messi remains 1st taking in $111 million/year.

It’s possible (if not likely) Ronaldo will appear against his current squad on American soil. Real Madrid is scheduled to play Juventus in the International Champions Cup in Washington D.C. on August 7th.

There should be a few other opportunities to see Ronaldo in the U.S. this summer. Juventus will make appearances in both Philadelphia (July 25, vs. FC Bayern) and Harrison, NJ (July 28, vs. Benfica); and will take on the MLS all-stars in New Orleans on August 1.

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News of Potential Ronaldo Transfer Sends Juve Shares Skyrocketing

Juventus

Cristiano Ronaldo appears to have agreed to a transfer from Real Madrid to Serie A champions Juventus Football Club S.p.A. Ronaldo’s contract maintains a release clause enabling him to leave Los Blancos (not for a direct rival) if a “reasonable offer” were to be obtained; Juventus has reportedly submitted a bid worth +/- $117 million (could end up as high as $140.5 million) for the Portuguese star. Should the transfer be completed, Juve will pay Ronaldo +/- $35 million/year through ’22. It’s expected that the UEFA Champions League champions will look to replace Ronaldo with Brazilian star Neymar.

Howie Long-Short: Ronaldo’s pending departure from Spain is as much about him feeling slighted by Real Madrid during his case with the Spanish tax authorities (he’s since settled for $22 million) as it is about his desire to dominate another one of Europe’s top divisions. While there are annual rumors of a return to Manchester United (or PSG), it appears the discussions this time around are for real.

Word first broke that the 5x Ballon d’Or winner could be headed to Juventus on Tuesday. Since July 3rd shares of publicly traded Juventus (OTC: JVTSF) have skyrocketed +18%; closing at $.98 on Thursday. The increase places the value of the franchise at $964.5 million.

In February, JVTSF reported half-yearly financials for the first half of 2017-2018. The franchise posted profits of +/- $50 million. Unlike publicly traded American pro franchises, JVTSF revenues/profits are “strongly influenced by the performance of sports results and in particular the UEFA Champions League”. This past season the club reached the Champions League quarterfinals, before losing to Real Madrid.

Fan Marino: Should the deal go through, it’s possible Ronaldo will appear against his current squad on American soil. Real Madrid is scheduled to play Juventus in the International Champions Cup in Washington D.C. on August 7th.

There may be a few other opportunities to see Ronaldo in the U.S. this summer. Juventus will make appearances in both Philadelphia (7.25.18, vs. FC Bayern) and Harrison, NJ (7.28.18, vs. Benfica); and will take on the MLS all-stars in New Orleans on August 1st.

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Stadium Naming Rights Under-Utilized Revenue Stream in EPL

MANU 200x200

A recent study by corporate finance advisors Duff & Phelps indicated that Manchester United (MANU) would earn an additional $36.6 million/season in revenue, if it were to sell the naming rights to Old Trafford Stadium; which the team reportedly will not do. Manchester City currently has the league’s most valuable naming rights deal (with Etihad), worth $26.7 million/season. While naming right sponsorships are commonplace in the United States (only Arrowhead Stadium, Soldier Field and Lambeau Field remain; the Raiders will certainly have one in Las Vegas), they are an under-utilized revenue stream within Europe; just 8 of 20 EPL clubs have deals in place.

Howie Long-Short: It was recently reported that MANU generated record revenue (+6% YOY to $841.6 million), boosted by a $55.4 million payment for winning Europa league, in 2016-2017; making the Red Devils the highest revenue-generating futbol club in the world, in the process. Real Madrid, which held the title for the previous 11 years, placed 2nd; Juventus (JVTSF) finished 10th ($505.2 million). It must be noted that the list only accounts for revenue accrued and does not take any debts incurred into account. MANU reported on February 8th that Q2 ’18 revenue increased 4% YOY (to $229.5 million).

Fan Marino: Selling the naming rights would be a prudent decision (regardless of the price) that would benefit shareholders, but there is some debate as to how achievable the $36.6 million figure is. Historic venues will always be referred to by their original name, reducing the value of the building’s naming rights; sponsors pay a premium for new buildings with no prior association. They broke ground on Old Trafford in 1909 and the venue has hosted World Cup matches (’66), Euro ’96 and the ’03 Champions League Final. I doubt a sponsor would pay more than the $30 million/year (for 20 years) that the Rams are seeking, for their new stadium in Inglewood.

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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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Juventus Building a Global Brand

Juventus Football Club (JVTSF) is looking to build its brand internationally, authorizing the sale of licensed team products in Japan, China and Australia. The Serie A champions are introducing several new product categories as part of the global expansion, including bespoke leisurewear, an exclusive luggage collection and car accessories. All products will be available on e-commerce platforms, like VIP.com, and within select brick and mortar retailers within each region.

Howie Long-Short: VIP.com is a subsidiary of the Chinese corporation Vipshop, which trades on the NYSE under the symbol VIPS. VIPS shares are up 42% since news broke Sunday evening that Tencent Holdings (OTC: TCEHY) and JD.com (JD) are investing $863 million in to the company. TCEHY is putting up $604 million for a 7% stake, while JD spends $259 million for a 5.5% stake. The companies paid a 55% premium for the shares, in what is being perceived as an aggressive attempt to defend against BABA.

Fan Marino: President Andrea Angelli had the one-year ban for his role in a mafia related ticketing scandal lifted, but Italian Football Federation doubled the club’s fine (to $710,000) and will force the team to play its January 22nd match vs. Genoa, with one of the stadium’s main sections closed. Losing the advantage of a rowdy home atmosphere could alter the league’s final standings. The club currently sits one point behind 1st Place Napoli and one point ahead of 3rd Place Inter Milan.

Juventus introduces licensed products in Asia and Australia as part of global expansion

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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?