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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MLB, Tencent Partner to Grow Sport of Baseball in China

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MLB has partnered with Tencent (TCEHY) to grow the sport of baseball in China. As the Official Digital Broadcasting Partner of MLB within the country, TCEHY will live stream 125 games (including the All-Star Game and every game of the Postseason/World Series) exclusively on Tencent PC, Mobile and OTT platforms. The technology giant has also committed to broadcasting a series of MLB highlight shows and supporting/broadcasting youth baseball and developmental events. Super Baseball Week (April 4-8) will kick off the new partnership; 5 straight days of games featuring the league’s biggest stars (see: Trout, Judge, Bryant).

Howie Long-Short: Tencent Holdings Limited (TCEHY), one of 50 constituent stocks making up the Hang Seng Index (largest companies on HKSE, represent +/- 58% of HKSE cap), is a leading provider of comprehensive internet services in China. The company’s social messaging app WeChat has more than 1 billion users. TCEHY was recently named China’s most valuable brand for a 4th straight year, with WPP and Kantar Millward Brown assessing its brand value (how a brand powers business) at $132.2 billion (+25% YoY). Just how big of a global player is Tencent? The company’s market cap is $496 billion, $30 billion more than Facebook (FB).

Fun Fact: Just one sports related brand made the Top 100 most valuable Chinese brand of 2018 rankings, Anta Sportswear (ANPDY) at #78.

Fan Marino: MLB opened an office in China in 2007 and has maintained 3 Development Centers within the country (Wuxi, Changzhou and Nanjing) since. The fruits of those labors have started to pay off. 3 players have graduated and gone on to sign MLB contracts (“Itchy” Guiyan – O’s, Hai-Cheng Gong – Pirates and Justin Qiangba – Red Sox) and another 12 are currently playing professionally in China. The success can’t just be measured by players on the pro level, though. Since 2014, 36 players have graduated from the program and gone on to play collegiate baseball.

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Gaming Experiences “Cultural Moment”

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Last Wednesday night, between 1a-5a EST, Drake (rapper), JuJu Smith-Schuster (Steelers WR), Travis Scott (rapper) and Ninja (a pro gamer) set an all-time, non-tournament, record for concurrent viewers on a single individual’s Twitch channel (628,000, previous record 388,000) as they streamed themselves playing Fortnite; a popular online survival game with 45 million players. Curious viewers followed along (many chiming in with funny one-liners) as the foursome navigated last-man-standing, 100-man, “Battle Royales”. Despite the late start, the virtual collaboration garnered mainstream attention (see: Chrissy Teigen’s tweet); the significance of which was not lost on Twitch SVP of Marketing Kate Jhaveri who called it “a cultural moment in terms of building awareness around the appeal of social video.”

Howie Long-Short: Fortnite was developed by Epic Games, a privately held company that Tencent (TCEHY) maintains a 40% stake in. TCEHY reported in November that YTD profits were up 69%, with mobile and PC gaming driving the revenue growth; but, those figures don’t account for the recent success of Fortnite. We’ll need to wait for Q4 ’17 and Q1 ’18 financials to see the game’s impact. As for Ninja, he’s making at least $350,000/mo. in subscription fees streaming Fornite on Twitch. TIME pegged the figure at $560,000/mo. I’ve heard the number estimated to be as high as $1 million/mo.

Fan Marino: The City of Arlington and Esports Venues, LLC are investing $10 million into Arlington Convention Center to create a 100,000 SF esports stadium, the largest venue of its kind in North America. Their goal is to bring the “biggest tournaments in the esports industry to Arlington”, a potentially significant financial boon for the city if successful. How big is the opportunity? An old industrial city in Poland, with a population of 300,000, drew 113,000 people for the “World Cup of esports” last year.

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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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ALIBABA ACQUIRES MOBILE GAMING COMPANY, LAUNCHES DIVISION TO DEVELOP OWN TITLES

Alibaba (BABA) Digital Media and Entertainment Group has announced the acquisition of mobile gaming company Ejoy and its plans to launch a new games division; just 6 months after laying out plans for a $145 million venture into mobile gaming distribution. The new division will develop its own titles and leverage the resources of BABA sister platforms, like online videos and movies, to push its way in to the world’s largest gaming market. The Chinese online gaming industry was last estimated to be worth $11.8 billion and is expected to grow to $27.5 billion by the end 2017.

Howie Long-Short: While late to the game, Alibaba is not new to the gaming sector. In 2014, the company made a $120 million investment into mobile gaming co. Kabam, the developer behind Marvel: Contest of Champions and Kingdoms of Camelot. The expected growth within the industry certainly provides BABA the opportunity to carve out market share, but they have some ground to make up; competitors Tencent (OTC: TCEHY) and NetEase (NTES) currently bring in 70% (41.2% and 28.5% respectively) of all Chinese online gaming revenues collected. It is worth noting that online gaming revenues accounted for 47% of TCEHY’s 2016 total revenue.

Fan Marino: Retired gamers and nostalgia junkies spent last weekend on their couches, as Nintendo re-released its classic Super NES system on Friday September 29th. The console, originally released in November 1990, includes 21 games including classics; “Super Mario World” and “Yoshi’s Island”. The biggest complaint I’m hearing about the re-released version? The controller wires are still too short! The more things change, the more things stay the same.

Alibaba Is Making Bold Moves in Online Gaming With Newest Acquisition