Amazon Expands Presence in Sports World, Announces Partnership with IRONMAN

Ironman

Amazon (AMZN) has acquired title sponsorship rights to the 40th IRONMAN World Championship. As part of the agreement, the e-commerce giant will serve as the Official Sports Nutrition Retailer of the “iconic endurance event” (10.13 in Kailua-Kona, Hawaii); “providing participants access to a vast selection of nutritional products.” IRONMAN will receive a branded pop-up shop, (amazon.com/ironmanrace) featuring product from the event’s official nutrition partners (see: Gatorade, CLIF Bar), on the world’s largest e-commerce platform.

Howie Long-Short: Amazon’s shown interest in streaming sports content (see: Sunday Night Football, U.S. Open), so it’s interesting to note that this deal does not provide the company with broadcast rights; NBC Sports platforms, ironman.com and IRONMAN NOW on Facebook Watch will all have the event. That’s not to say this deal doesn’t make sense from the Amazon perspective. The demand for health/wellness/performance products is at an all-time high, it’s perfectly logical that Amazon would want to connect with the most committed of fitness enthusiasts.

Amazon posted (Q2 earnings) its largest quarterly profit in company history during Q2 ’18, surpassing $2 billion (posted $2.5 billion) for the first time. It was the 3rd straight quarter that AMZN surpassed $1 billion in profits. The company’s e-commerce division reported operating profit of $1.34 billion, shattering analyst expectations ($240 million); an increase in online ad sales (+132% YoY to $2.2 billion) and “efficiencies in generally all our fixed costs” were among the factors that drove higher profits (along with their high margin cloud services business). FYI, sales from Amazon’s Prime Day will factor into 3rd quarter financials. In late August, AMZN shares traded at over $2,000/share for the first time; they’re up 65% YTD, opening at $1,970.19 on Monday 9.17.18.

IRONMAN is owned by the Dalian Wanda Group, a privately held Chinese real-estate conglomerate which bought the endurance racing series in ’15 for $650 million.

Fan Marino: Not to be outdone by an American counterpart, Rukuten (RKUNY) has announced a multi-year global partnership with Spartan Race (obstacle racing series). The deal provides Rukuten with exposure at Spartan events (+ in digital advertising, content and merchandise), makes the company the official kit sponsor of the Spartan Pro Team and places the company logo on finisher shirts. The partnership officially begins with the “2018 Spartan World Championship powered by Rakuten” (Spartan’s biggest event); the Japanese e-commerce and internet company will also “power” the live stream of that event on Facebook Watch.

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NBA Growth to Come from Southeast Asia, Asia-Pacific Region

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China is the NBA’s 2nd biggest market (behind the U.S.), but the league believes there is room for significant growth elsewhere on the continent; namely Southeast Asia and the broader Asia-Pacific region. NBA Deputy Commissioner and COO Mark Tatum (who leads the league’s international efforts) believes the Philippines (75% of homes watched an NBA game this season), Indonesia, Thailand, Japan and Australia are best positioned to become “big markets” for the league, as the game is “growing rapidly” in those countries and the NBA has widespread broadcast distribution (25 media partners) in region. To help cultivate fans (and perhaps a few future NBA players), the league is working with local governments to implement its “Jr. NBA” program; a series of clinics designed to introduce the game to kids. The program has reached 5 million kids in Southeast Asia to date and the league hopes to reach 20 million by the end of 2019.

Howie Long-Short: Broadcast distribution was a key factor in the NBA growing so rapidly in China. The league’s partnership with Tencent (TCEHY) enables Chinese basketball fans to watch upwards of 600 league games/year via League Pass. You can’t develop a fan base, without your target audience getting to see the product.

TCEHY owns China’s top social network (WeChat) and is the world’s biggest video game publisher (think: League of Legends, Clash of Clans), but shares are down 12% to $52.41 since March 15th.  The decline started shortly after the company reported rising expenses during its Q4 earnings report.

As we noted back in October, Rakuten (RKUNY) signed a comprehensive media partnership worth a reported $225 million to become the league’s exclusive distribution partner for live game broadcasts in Japan. The company’s instant messaging platform Rakuten Viber (the official IM platform of the NBA) distributes league content to its 900 million users. The deal should result in rapid growth of the Japanese fan base.

RKUNY is best known for its Japanese e-commerce business, despite a diversified portfolio that includes banking, insurance, sports and leisure ventures. In fact, the company grew Q1 revenue +14% on the back of their Fintech business (securities). That didn’t impress investors though, who remain concerned about the company’s competition (think: Amazon); shares of the stock closed on Friday just above their 52-week low at $7.20.

Fan Marino: The globalization of the NBA hasn’t just resulted in an increase in fans, it’s been a source of player development for the league as well. The 2018 Playoffs had a record 62 international players (from 33 countries) participating. All 16 teams had at least one foreign born player, with more players coming from France and Australia (7 each) than anywhere else in the world.

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Arsenal F.C. Signs Largest Sponsorship Deal in Club History

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Emirates will remain the shirt (and training kit) sponsor for Arsenal F.C. (and all affiliated teams) through ’23-’24, signing a deal worth “in excess of” $56 million/year; the largest sponsorship deal in team history. The English futbol club and the Dubai based airline maintain the longest running shirt partnership in the EPL (it dates back to ’06). Arsenal will reportedly supplement the new deal with a sponsor on the sleeve of their uniform; a first for the club. It should be noted that Emirates also owns the naming rights to the club’s north London stadium through ’28; acquired in a prior transaction.

Howie Long-Short: While not exactly an apples to apples comparison, as La Liga/EPL shirts have corporate logos across the chest and NBA jerseys contain just a small corporate logo patch, there is a drastic difference in the revenue generated from uniform sponsorships between the leagues. The most lucrative NBA patch deal is a 3-year $60 million agreement between Rakuten (RKUNY) and the Golden State Warriors. RKUNY is paying nearly 3x the amount (annually), over a longer period ($58 million/year, 4-years), to be the shirt sponsor for F.C. Barcelona. MANU has the most lucrative jersey sponsorship deal in futbol, valued at $74 million/year (7 years).

Fan Marino: GumGum Sports is reporting that jersey sponsors maintain the best signage placement within NBA games (except for the league’s apparel provider, NKE) and that the brands participating in the 3-year pilot program, are receiving a significant return on their investment. The sports media valuation company estimates that participating brands will see at least $350 million in social media exposure alone; noteworthy when you consider there are just 30 NBA teams, not everyone has a jersey sponsor and most companies are just +/- $5 million/year. GumGum determined that Goodyear (GT, Cavs), RKUNY (Warriors) and General Electric (GE, Celtics) received the greatest ROI from the 1st half of the 2017-2018 NBA season.

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RAKUTEN SIGNS COMPREHENSIVE MEDIA PARTNERSHIP WITH NBA

The NBA and Rakuten (OTC: RKUNY) have signed a comprehensive media partnership worth a reported $225 million; making the Japanese e-commerce and internet services giant the league’s exclusive distribution partner for live game broadcasts in Japan. The company’s messaging platform, Rakuten Viber, will be an official media platform for the NBA, giving league content to the services’ 900 million users. On the marketing side, Rakuten will also now sell select NBA & team merchandise globally through its e-commerce platform. This is the 3rd major sports deal Rakuten has signed in the last 12 months, following a $235 million jersey sponsorship deal with FC Barcelona and a $60 million jersey sponsorship deal with the Warriors. CEO “Mickey” Mikitani has stated the company “wants to be a household name like Google and Facebook.”

Howie Long-Short: RKUNY is the largest e-tailer in Japan, with roughly 25% of all transactions in the country taking place on their site. However, with Japan’s aging population, if the company is to become a household name, the likes of Google and Facebook, they’ll need to grow internationally. Mikitani believes to do that, they need to hire the best talent they can find world-wide. In 2012, he implemented English as the official language of the company, so that the Japanese staff could seamlessly communicate with non-Japanese speakers. Since then, the company has started to invest internationally, acquiring U.S. cashback website Ebates and taking stake in both Lyft and Pinterest.

Fan Marino: Globalization remains the league’s most promising avenue for future growth and no American pro sports league has a bigger international following than the NBA. Perhaps that is why new Rocket’s owner Tilman Fertitta felt comfortable investing in the league, but said he “would have been scared to pay $2.2 billion for an NFL franchise”. Howie is the finance guy, but for my $2.2 billion I’m buying a pro football franchise. For all the negative talk surrounding the NFL, look at the TV ratings. Last Thursday night’s Bucs/Pats game drew 15.4 million viewers. The average 2017 NBA playoff game drew less than 5 million people. I don’t believe there is an NFL franchise with an intrinsic value less than $2 billion.

NBA expands global reach with massive deal with Rakuten

WARRIORS SIGN NBA’S LARGEST JERSEY SPONSORSHIP DEAL; TWICE THE VALUE OF THE LEAGUE’S 2ND LARGEST DEAL

The defending Champion Golden State Warriors have inked the league’s largest advertising patch deal, signing a 3 year $60 million agreement with Rakuten (OTC: RKUNY); twice what Goodyear (GT) will pay Cleveland (league’s 2nd largest deal). As part of the deal, Rakuten will also have naming rights to the teams practice facility and receive 6 other designations (i.e. the official e-commerce partner), that span longer than 3 years. Golden State had stated it was crucial they partner with a worldwide brand, to grow their global vision. The Apex Marketing Group, a sponsorship evaluation firm, has estimated RKUNY could expect to receive $32-37 million worth of exposure from the sponsorship this season.

Howie Long-Short: Rakuten, a Japanese company that owns Ebates, Viber & Kobo, is betting on a future without apps. Their gaming company, Rakuten Games, delivers titles that can be played on web browsers; as opposed to requiring installation on phones or PCs. RKUNY sees a $50 billion mobile gaming market and wants a slice. With 114 potential users in its database, I wouldn’t bet against them taking it.

Fan Marino: This is the 2nd major sports marketing partnership that Rakuten has signed within the last 60 days. The company is paying $262 million (4 years) for the rights to have their name appear across the chest of FC Barcelona jerseys. It is now a matter of when the other U.S. pro sports leagues (NFL, MLB, NHL) will implement jersey sponsorships. There is far too much money being thrown around, for those league’s owners to sit idly by. 

Warriors sign jersey-patch advertising deal with Rakuten