Amazon Takes on The Sports World; 25 Companies That Will Be Affected

Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.

Amazon Expands Brand Registry Program, Now Includes Nike

In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.

Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD

Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).

Amazon Entering Private-Label Sportswear Business

In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).

Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477

Howie Long-ShortAMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.

The Pursuit of Exclusive Broadcast Rights

In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.

Names to Watch: CBS, DIS, FOXA, CMCSA, FB, GOOGL, NFLX, AAPL, SKYAY

Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.

Twitch: The Future of Game Broadcasts?

Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.

Names to Watch: CBS, DIS, FOXA, CMCSA, TWX, RCI, MSGN

Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.

To join our free daily email newsletter list, sign-up here!

Disney Close to Acquiring 21st Century Fox’s RSNs, All-In on ESPN and Live Sports

The Walt Disney Company (DIS) is close to acquiring Twenty-First Century Fox’s (FOXA) movie and television productions assets, including their valuable regional sports networks, in a deal that could be announced as early as next week. Under the terms of the proposed agreement, DIS would also receive FOXA’s stake in Nat Geo, Star Network (in India), SKYAY and Hulu; while FOXA maintains its news division, broadcast network and FS1. The enterprise value of the assets DIS is said to be looking to acquire exceed $60 billion.

Howie Long-ShortDIS is looking to go all-in on ESPN and live sports programming; both on a national and now, local basis. In the evolving media landscape, scale matters and adding FOXA’s MLB, NBA & NHL local broadcast rights make the ESPN+ OTT streaming service (set to launch in ’18) far more compelling. Should the deal be completed (CMCSA remains in contention, though FOXA prefers DIS stock), current FOXA shareholders would receive one share of the company following the close of the transaction; plus, additional shares of DIS in a fixed exchange ratio.

Fan Marino: Murdoch hasn’t been high on RSN’s for some time now, as he’s watched broadcasting rights rise at a faster rate than affiliate revenue can grow; but DIS isn’t taking on a sinking ship. A 2016 Nielsen study found that sports fans consider RSNs to be their most valuable cable channel and the 5th most important channel within their entire cable bundle (behind the 4 broadcast networks). In St. Louis, where hockey and baseball games draw massive audiences on Fox Sports Midwest nightly, viewers rated the RSN more important than any other channel (including the broadcast networks); Detroit fans rated their RSN 2nd most the important channel within their bundle.

Disney and Fox are closing in on deal, could be announced next week: Sources

For the balance of today’s newsletter, sign-up here!

Fox Sports Implicated in Corruption Scandal, Alleged to Have Paid Bribes for Media Rights

Fox Sports (FOXA) is among the media outlets that have been implicated in a widespread corruption scandal. The company allegedly paid bribes to FIFA executives to guarantee future media rights and expand its reach from Argentina to the U.S. Alejandro Burzaco, a government witness and the former CEO of sports marketing company Torneos y Competencias SA, testified that Fox Sports executives were aware of the bribery. The accusations stem from a 2015 corruption case, brought by the FBI and IRS, accusing three former FIFA executives of wire fraud, racketeering and money laundering. Those accusations forced the resignation of FIFA president Sepp Blatter and have resulted in guilty pleas from 12 officials to date. Fox Sports and Televisa have yet to comment, while Globo has denied any wrongdoing.

Howie Long-Short: The U.K. Competition and Markets Authority is currently taking a deep dive in to FOXA’s culture, before it decides if it will allow the proposed $15.4 billion acquisition of the remaining interest in Sky Plc (SKYAY); so, these allegations could be costly. The three accused FIFA executives are facing jail time. FOXA “won” (there was no bidding process) the right to pay $200 million to broadcast the 2018 World Cup in English — a tournament that won’t include the United States. There are no winners in this story.

Fan Marino: Speaking of the World Cup, Italy, Chile and Holland also failed to qualify and their unexpected absence means that Adidas (ADDYY), not Nike (NKE), will outfit the most teams in Russia. Germany, Argentina and Spain will be among a dozen squads wearing the three stripes. Nike will still have a large presence at the quadrennial event, with 10 teams including; England, Brazil and Portugal sporting the swoosh. Puma would have had the 3rd largest representation (now they’ll share that spot) had Italy and Ghana qualified as anticipated; Uruguay and Switzerland are also aligned with Puma and will participate.

Fox, Globo Among Broadcasters Linked to FIFA Corruption

For the balance of today’s newsletter, sign-up here!

Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

 

A Streaming Service for the Sports Fan

Sports fans that are considering cutting the cord may want to look at the channel lineup for FuboTV; a sports-centric, OTT, live TV streaming service that offers fans the “most sports for the least money”. Originally introduced as a skinny bundle for soccer fans, the service now carries a variety of sports on 37 (of 65) channels (both regional and national) including; FS1, FS2 and NBCSN. The $40/mo. niche bundle is looking to stand out in a crowded streaming TV market that includes; Hulu (TWX), YouTube TV (GOOGL), DirecTV Now (T), Playstation Vue (SNE) and Sling TV (DISH). Amazon (AMZN) and Verizon (VZ) will also be introducing streaming bundles soon.

Howie Long-Short: FuboTV has raised $75.6 million to date, with several publicly traded companies investing in the streaming provider. 21st Century Fox (FOXA), Sky (SKYAY) and Scripps Networks Interactive (SSP) all participated the $55 million Series C round that closed in June; so there are no shortage of ways to play the OTT streaming service.

Fan Marino: FuboTV has 100,000 soccer-loving subscribers, but is counting on their next 100,000 subscribers to be fans of traditional American sports. The carriage deals they’ve signed to date have given them some valuable programming (like the World Series), but you can’t convince the American sports fan to cut the cord without ESPN’s network of channels. ESPN (DIS) holds the rights to the College Football Playoffs (and NBA) through 2025 and MNF through 2021. If your key differentiator as an OTT streaming service is your sports programming, you must carry those games. The success of the service, at least as it is currently marketed, depends on it.

The next 100,000 subscribers: FuboTV’s skinny bundle moves beyond live soccer

For the balance of today’s newsletter, sign-up here!

NIKE PRESENTS LONG-TERM VISION AT INVESTOR DAY

In 2015, Nike (NKE) Chief Executive Mark Parker, a Phil Knight disciple, projected company revenue would hit $50 billion/year by 2020. Fast forward to Wednesday’s investor day and the $50 billion mark no longer appears realistic. Speaking in broad strokes, Parker presented the company’s long-term vision; offering up padded stats that project 50% of future sales growth coming from “innovation”, 75% of future revenue growth coming from “international” expansion (read: China) and “huge opportunities” in women’s footwear. NKE has even taken a page out of Silicon Valley’s playbook, disrupting the company’s long-time sales model in hopes that partnerships with Amazon and Instagram will help the company reach Parker’s goal.

Howie Long-Short: Parker’s $50 billion revenue target was always ambitious, considering NKE would have had to grow revenue 63% (from the time of his comment) to achieve it. 2015 was an outlier year, with record growth in both the apparel and footwear industries. Parker expected the trend would continue for the balance of the decade, but that hasn’t been the case. Sales growth slowed to just .1% over the last 90 days. I’m confident in saying, $50 billion by 2020 simply isn’t going to happen.

Fan Marino: Forbes released their list of the 40 most valuable brands in sports. Nike finished first with an estimated value of $29.6 billion, up 9.6% from their ’16 valuations. ESPN (DIS) ($15.8 billion, -4.2%), Adidas (ADDYY) ($7.9 billion, +12.9%), Sky Sports (SKYAY) ($5.5 billion, +10%) and Under Armour (UAA) ($4.4 billion, -20%) rounded out the Top 5.

Editor Note: The summary for this story was written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

For the balance of today’s newsletter, sign-up here!

2018 DRL WORLD CHAMPIONSHIP TO BE HELD IN SAUDI ARABIA, TRYOUTS OPEN NOVEMBER 15

The Drone Racing League (DRL) has announced it will hold its 2018 Allianz World Championship in Saudi Arabia, next September. The 7th and final event of the DRL season will consist of 8 FPV (first person view) pilots racing custom-built drones, that travel more than 90 MPH, through a complex 3D racecourse; with the winner earning the title of “World’s Greatest Drone Pilot”. The race will be televised in 87 countries, on cable networks including; ESPN, OSN, Sky Sports and Fox Sports Asia.

Howie Long-Short: The DRL holds several dozen patents on the core technology that enables drone racing. They use the league to showcase the technology. The company is privately held, but has raised more than $32 million to date; including a $20 million series B round in June. Looking to play the DRL? SKYAY lead their Series B round and participated in both their seed and Series A rounds. Liberty Media Corporation (LMCA), Allianz (OTC: AZSEY), World Wrestling Entertainment (WWE) and MGM Television (OTC: MGMB) are all also invested in the company.

Fan Marino: The DRL consists of 16 professional pilots competing in 6 regular season races before a short postseason whittles it down to 8 qualifiers, competing for the World Championship. Think you can compete in the DRL? The league is holding annual open tryouts, beginning on November 15th, using their Steam simulator. All you need is a computer and an Xbox or drone controller to participate.  The Top 24 competitors will advance to a live racing simulator tournament with a chance to compete for $75,000 and 1 of 16 spots in the 2018 season.

For the balance of today’s newsletter, sign-up here!

MANU EXEC BELIEVES U.S. TECH COMPANIES SET TO BID ON PREMIER LEAGUE BROADCAST RIGHTS

Sky Sports (SKYAY) paid $6.9 billion for the television broadcasts rights to the English Premier Football League, but their existing 3-year contract expires at the end of the 2018-2019 season. With a steady decline in television viewership, there is no guarantee Murdoch’s company will submit a bid meeting or exceeding the terms of their current deal. Manchester United (MANU) Vice Chairman Ed Woodard remains unconcerned; believing the next deal will fetch 30-40% more, with content hungry tech companies like Facebook, Amazon and Netflix waiting to “enter the mix”.

Howie Long-Short: MANU reported financial results for the full year ending June 30th, with revenues up 12.8% YOY (to ($789.2 million). Growth is being attributed to the Sky Sports contract, which helped to increase broadcasting revenues 38.2% YOY (to $263.6 million) as well as increased revenues from commercials, sponsorships, retail and licensing. The only negative for the company was losing 15% over the course of the year on digital output. As for Woodard’s optimism, I wouldn’t be so confident. Total media rights?  Perhaps. For a television deal, I still think his best bet is Murdoch looking to protect his trophy asset.

Fan Marino: Forbes released a list of the world’s most valuable soccer teams, and MANU came out on top with a valuation of $3.69 billion. Barcelona, Real Madrid, Bayern Munich and Manchester City rounded out the Top 5. On the field, the Red Devils won the 2016-2017 Europa League Title. The championship qualifies them for the 2017-2018 Champions League, the most prestigious (and lucrative) competition in European football.

Manchester United Dreams of Mark Zuckerberg’s Billions