Sen. Hatch Outlines Plans for Federal Sports Betting Oversight

Orrin Hatch

A 37-page discussion draft, originating from the office of outgoing Senator Orrin Hatch, has outlined plans for federal oversight of the U.S. sports betting market. The proposed legislation would force each individual state to seek the approval of the U.S. attorney general prior to introducing new sports betting regulations, require licensed operators to use official league data to determine the outcome of wagers through at least Dec. 31, 2022 and “create a mechanism for authorities to target unlicensed” domestic sportsbooks and unregulated off-shore operators. A National Sports Wagering Clearinghouse would also be formed to track all bets placed, in real-time, to monitor for potential signs of corruption (think: suspicious betting patterns). Hatch’s plan also calls for measures to limit sports betting advertising and to prevent against problem gambling.

Howie Long-Short: Hatch (R-Utah) has been calling for federal sports betting oversight since PASPA got struck down in May, but the discussion draft referenced is the 1st piece of legislation to make its way to Capitol Hill since. Unfortunately for those lobbying for its support, the proposed bill is unlikely to have legs; the congressional session ends on January 3rd and Hatch is in his final term, meaning someone else will need to champion the cause during Congress’ 115th 2nd session for the legislation to pass. It’s possible that Senator Chuck Schumer (D-NY) could serve as the bill’s torch bearer come 2019, there are rumblings he and Senator Hatch could meet in the coming weeks with the intent of introducing a bi-partisan product before the current session adjourns.

I had the chance to connect with Dustin Gouker Managing Editor of LegalSportsReport.com and asked him if he’s expecting federal sports betting legislation to pass in 2019.

Dustin: I don’t see the will for Congress to get involved here, especially with the way this bill is written. Having the states pass laws and then implementing a mechanism for the federal government to approve them, isn’t a real way to regulate sports betting at the federal level.

U.S. pro sports leagues are in favor of Hatch’s federal framework (which also covers collegiate athletics) because of the requirement that gaming operators use official league data (needed for: reliability, transmission speed) to grade bets. It’s not the integrity (or royalty) fee some had hoped for, but it’s the leverage the leagues needed to ensure their slice of the sports betting revenue pie. Those opposed to federal legislation (AGA, gaming operators) say gaming integrity can be maintained without official league data; Las Vegas sportsbooks have managed to do it since the 1950s.

The concept of a clearinghouse is fascinating, if not a particularly new one. In fact, U.S. sportsbook operators (in collaboration with state and tribal gaming regulators, and law enforcement) recently announced the formation of the Sports Wagering Integrity Monitoring Association (SWIMA); a private, national, non-profit organization that will monitor integrity and fight fraud (including multi-state criminal enterprises) as sports betting continues to expand across the country.

As it currently stands, 8 states have legalized sports betting legislation to their books (Delaware, Mississippi, New Jersey, New Mexico, Pennsylvania, Rhode Island and West Virginia).

I asked Dustin Gouker (Managing Editor, LegalSportsReport.com) what Nevada casinos do (without a clearinghouse) to prevent a racket from going book-to-book placing large bets?

Dustin: The books communicate with each other and there are data companies who work with them. It’s not like you can go in anonymously and place these giant bets and manipulate the market; they know who you are, if you’re placing sizable bets. It’s not a clearinghouse, but if there is something suspicious going on, it’s going to get flagged by the data companies, with the data companies or with the leagues. There’s communication going on, it’s just not formal in terms of a publicly known organization.

Fan Marino: MGM has inked non-exclusive official data partnerships with the NBA, NHL and MLB. Each league will provide real-time official data (via Sportradar, the exclusive sports betting data provider to MGM GVC Interactive) that MGM will use to create in-game betting odds. It’s in the leagues’ best interest to sign non-exclusive partnerships because of their ability to sell the data countless times over, but there’s another reason (beyond avoiding accusations of forging a data monopoly); forcing all licensed operators to use official league data will help to stop off-shore gambling (because without the data, they can’t offer in-game odds) and move those bettors back to regulated markets.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

10 Million Illegally Stream Wilder/Fury, Pirated Streams Cost Showtime Millions

Showtime has yet to release the final viewership figures for last Saturday evening’s pay-per-view boxing match between Deontay Wilder and Tyson Fury, but The Ring’s Mike Coppinger has reported that the fight is tracking to “surpass 300K buys.” The PPV event’s buy total would have been higher had the premium cable network been able to prevent unauthorized streams of the broadcast. The U.K. based piracy tracker Muso estimated that 9.98 million people worldwide watched the boxing card via an unlicensed stream, including more than 1.9 million fans in the U.S. Muso CEO Andy Chatterly said “this is a huge audience that is, to all intents and purposes, being ignored”, a statement that implies rights holders are doing little to “bring fans back to legal content” (see: turn them into paying customers).

Howie Long-Short: Showtime priced the PPV event at $74.99 (for comparison purposes, The Match was $19.99), so Chatterly’s hunch that the price “put some fans off” (thus driving them to piracy) is likely accurate.

It’s impossible to peg just how many fans illegally streaming the fight would have bought the show had it been more difficult to obtain a pirated stream, but if just 5% of the 2 million illegally watching in the U.S. did, Showtime would have seen an extra 100K buys; at $75/per, that’s $7.5 million in lost (or stolen) revenue. I had the chance to connect with Deltatre VP of Technology Sheri Green and asked her what rights holders can do to prevent against unauthorized streaming?

Sheri: While there really isn’t a good way to stop someone from pointing a camera to a screen and sharing events online, there are certainly ways to prevent the pirating of OTT streams by applying Digital Rights Management (DRM) such as Widevine, Playready, PrimeTime, Modular, and others. The bad news is that there is no one size fits all DRM solution for all platforms, browsers, and streaming protocols, so if rights holders and content distribution outlets want to offer their events across many platforms (iOS, Android, Smart TV’s, web, etc.) they have to adapt their streaming workflows to use multiple DRM services and at least two streaming protocols (HLS and Dash). The implementation costs can really add up fast so many rights holders are weighing out that cost with the risk of piracy and in some cases taking their chances. Until one of these solutions “wins” as the industry standard, this will remain a daunting and costly endeavor. 

I should also really emphasize the importance of protecting content from the “inside job”. The first line of defense is to know who has access to the content, limit who has access to it, and examine closely how it is shared with media outlets. Some of the biggest and most harmful hacks and leaks in our industry have come from employees and contractors who have trusted access to content somewhere along the distribution pipeline.

300K buys isn’t a particularly impressive figure (Mayweather/Pacquiao did 4.6 million), but when you consider that break-even was 250,000 buys, that neither fighter had ever fought on U.S. PPV before (see: limited name recognition) and that it was the highest grossing heavyweight PPV fight in 15 years (Roy Jones Jr. and John Ruiz did 525K in ‘03), Showtime has to be pleased. It’s important to note that the projected numbers do not account for digital purchases of the PPV event, movie theatre tickets sold or overseas PPV buys (BT Sport carried the fight in the U.K.).

Piracy streaming domains and YouTube live links were the top sources of pirated streams in the U.S., but Ripple.is (12.8%) and Vipleague.ic (9.4%) also had significant viewership on a global basis; YouTube Live had 18.3% of all viewers illegally streaming the fight. Deltatre VP of Technology Sheri Green explained how piracy streaming domains get a hold of a live broadcast event.

Sheri: Piracy streaming domains likely gain access in a variety of ways ranging from “inside jobs” (as mentioned above) to level 3 hacktivist activities. This is usually not just one guy sitting in his basement, there are several contributors to these piracy domains along with some web crawling automation scripts that are written to scan well known media outlets to look for open streams. 

Deltatre Senior Director of Technology Tom Quinn added “there are networks of people around the globe who collaborate in the process of sniffing out and exposing premium content. When one person has cracked a stream, they might post the URL on Twitter or Reddit where millions of anxious viewers are waiting for the opportunity to stream the exposed content. Breaches spread like wildfire for premium content, especially sports.

Fan Marino: Showtime’s next PPV boxing card (Jan. 19th) will feature Manny Pacquiao and Adrian Broner. Bob Arum once told me that “if a show pencils out to do 100,000 homes we’re not going to put it on PPV” and if it’s “going to do 250,000-300,000 homes, then it’s a question and we very well may go on PPV.” That comment aligns with the break-even point on the Wilder/Fury fight and makes me wonder why the premium cable network would place Pacquiao/Broner on PPV. There’s no demand to see a 40-year-old Pacquiao take on a fighter who has failed to get a win in his last 2 outings (loss vs. Jessie Vargas, draw vs. Mikey Garcia); I can’t see any way the show does more than 200,000 U.S. PPV buys. This is a card that should be airing on Fox.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Pac-12 Programs Suffer as Scott Runs Conference “Like He’s the Commissioner of MLB”

Pac

The Oregonian wrote a scathing exposé on the wasteful spending habits plaguing the Pac-12 conference under the guidance of commissioner Larry Scott. The Pac-12 spends significantly more than any other P5 conference on rent, salaries and travel, despite generating considerably less revenue than the wealthiest conferences in college athletics. Scott has since rejected the allegations saying one needs to evaluate the conference as a media entity (see: ESPN, FOX), rather than comparing it to the other P5 conferences; “certainly when it comes to financial results.” Scott defiantly added, “trying to look at the amount of square footage that we’ve got and the headcount and the rental expense compared to another conference is just not an apples-to-apples comparison. It’s hard to even respond to (the allegations in the Oregonian story) if you don’t understand that those are two (business models are) fundamentally different things. What we do for the amount (it costs) to run the TV network compared to (our) peers is admirable.”

Howie Long-Short: Larry Scott claims that the Oregonian “mischaracterized” the conference’s inefficient nature, but here are the facts; the conference spent $6.9 million on its office/studios last year, $3.1 million on travel expenses and $8.4 million on salaries (for Scott and his top 5 employees). By comparison, the SEC paid $318,000 to rent its headquarters in Birmingham, AL, just $788,000 on travel and no other conference spent more than $4 million on commissioner/top exec salaries; Scott alone earns $4.8 million/year. The conference is “operating lavishly (spent $49 million last year) and producing significantly less revenue (paid out $31 million/school, $10 million less/school than SEC in ’17) for its members.”

Scott’s points as they relate to square footage and the bloated headcount are valid, 80 of the conferences 112 full-time employees work for Pac-12 Network and 90% of the floor space at conference headquarters is dedicated to “studios, production bays, control rooms and a host of directors, technicians, equipment and talent”; but, there is no logical reason for the office to be in “one of the most expensive commercial real estate footprints in the country.” Claims that the network would suffer from a “recruitment perspective” or that the conference would generate additional sponsorship revenue by being in downtown San Francisco are laughable. Prior to Scott’s arrival, the conference operated far more modestly 25 miles outside of the city.

Former Oregon and Washington State A.D. Bill Moos said Scott “runs the Pac-12 like he’s the commissioner of Major League Baseball.” The problem with that is, while Major League Baseball generated more than $10 billion in ‘17 gross revenue, the Pac-12 Conference took in just $509 million during the ’16-’17 school year. Scott’s champagne taste and beer budget is undeniably draining resources that would otherwise be allocated to the Pac-12 member institutions.

Those who defend Scott point to the equity he’s built up in the Pac-12 Network, but the network generates $10 million/year less than the SEC’s lucrative broadcast deal. College athletics is an arms race and in the short-term (at least through ’24, next round of media rights negotiations), the Pac-12 Network puts the conference’s athletic departments at a $60 million competitive disadvantage.

Fan Marino: You can fault Larry Scott for a lot, but I refuse to blame the commissioner for the conference’s recent on-field/on-court struggles (no team in college football playoff for 2nd straight year, no team got out of NCAA tournament’s first weekend). Pac-12 schools are recruiting from a smaller pond (simply less talent by volume in the West) and no amount of revenue can off-set that differential (see: heat map reflecting where football talent originates).

Scott isn’t particularly well liked by Pac-12 fans as the conference network’s limited availability (see: not on DirecTV) and late broadcast time slots force fans to miss games (not me, I’m regularly up past 2a watching Arizona go 5-7). In fact, those who caught Washington’s victory over Utah in the Pac-12 Championship Game likely heard the chorus of boos that rained down on the commissioner as he was awarding the Huskies their trophy. Speaking of the Pac-12 title game, attendance for the game at Levi’s Stadium was an embarrassment; move the game to Las Vegas and it will sell out like the conference basketball tournament does.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

MLS, Liga MX Explore North American Superleague

liga-mx-mls

Liga Bancomer MX President Enrique Bonilla recently disclosed that the Mexican soccer league has explored a potential merger with Major League Soccer; the 2 leagues entered into a formal partnership (includes Campeones Cup) for the first time, in March ‘18. Bonilla said, “the main idea is that we (the North American clubs) have to grow together to compete. If not, there is only going to be the rich guys in Europe and the rest of the world.” The proposed superleague would include clubs in +/- 50 North American markets.

Howie Long-Short: The idea of a North American superleague is fun to think about, but I certainly don’t expect it to occur. MLS Commissioner Don Garber has long stated that the league’s owners wouldn’t consider promotion/relegation and a top division with 50 teams seems unlikely; with plans for 28 clubs (26 awarded to date), MLS is already structured as the largest top flight soccer league in the world.

Bonilla’s idea may not come to fruition, but the logic behind it is solid; multi-national corporations (think: Coke, Pepsi, GM) and broadcasters would be highly interested in reaching +/- 50 North American markets. Together, MLS and Liga MX would hold the leverage necessary to close the sponsorship and media rights revenue gap with Europe’s top leagues.

MLS and Liga MX would benefit each other in ways beyond dollars and cents. “Liga MX brings the fans (already most watched league in US), purchasing power (Latinos accounted for 68% of U.S. soccer viewership in ’17) and talent. MLS brings the wealth and the infrastructure.”

Fan Marino: On average, MLS clubs grew revenue +7.5% YoY (to $34.6 million) in 2018, despite a slight decline in league attendance (-1.4%, 21,803); that’s because the average ticket revenue per game (see: less comps, slight increase in prices) surged nearly +10%.

Television viewership rose (for a 5th straight season) +5.7% (to 27.8 million) in 2018 (across all windows/networks), on par with the NFL through Week 12 (+5%), but the increase comes with a caveat; 6 of the games that aired on the Fox broadcast network had the benefit of highly watched World Cup Games leading in. It also needs to be noted that linear viewership on both ESPN (-8%) and FS1 (-15%) declined YoY on a stand-alone basis.

According to Forbes, MLS club valuations increased +7.6% YoY (to +/- $240 million), but remove the league’s 3 most recent additions (Atlanta, Minnesota, LAFC) from the calculations and the average valuation only climbed +3.6% (to $232 million). That said, Forbes valuations are historically conservative (see: controlling interest in D.C. United sold at +64% premium). Atlanta is the league’s most valuable franchise, worth an estimated $330 million; they also lead the league in attendance (53,000) this season.

The success the Atlanta organization has had off-the-field has been matched by the team’s performance on it. Atlanta United FC heads into Saturday evening’s (12.8, 8p EST) MLS Cup Final (vs. Portland Timbers) as a heavy favorite (-500). It’ll be fascinating to see if the league’s championship game posts its highest rating of the season. The July 15th contest between Atlanta/Seattle drew 1.59 million viewers in the wake of the FIFA World Cup Final, the most watched MLS match since ’04.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

PDP Acquires Land for Ballpark, One Step Closer to Bringing MLB to the City of Roses

Portland Baseball

The Portland Diamond Project (PDP) has announced an agreement in principle with the Port of Portland to acquire a 45-acre parcel of land on the Williamette River, to be used for the construction of a 32,000 – 34,000 seat, retractable roof, state of the art ballpark and some additional development (see: outdoor amphitheater). PDP, the city and local counties will now work on bringing a 2nd Major League Baseball team to the Pacific Northwest. Little information is known about the group privately funding the project, but Craig Cheek (a former Nike EVP) is leading the Portland Diamond Project and both Russell Wilson and former Trailblazers TV PBP man Mike Barrett, are among the faces being used to promote it; all 3 are invested in PDP. PDP hopes to have a team playing in the new park by Opening Day 2022.

Howie Long-Short: PDP has several hurdles to clear before MLB comes to the City of Roses, none bigger than landing a club (either via relocation or expansion) that would play in the stadium; Cheek has made it clear that this is not a “build it, and they will come” situation (think: Sprint Center in KC). The lack of public transportation available near the site (see: just one bus route currently exists), questions about who will pay for the infrastructure necessary to make the site a viable option for a pro baseball team to call home (think: road construction, new public transportation options) and the potential for development to negatively impact the area’s environmental ecosystem are all issues that will need to be addressed, but the group has the support of Portland Mayor Ted Wheeler; Wheeler said he looks forward to “moving this initiative forward.”

The acquisition of the Williamette River property instantly makes Portland MLB’s stalking horse (think: Los Angeles and the NFL); teams (see: Oakland, Tampa Bay) unable to get public financing for new stadium projects, now have a perceived viable relocation option.

Oakland and/or Tampa Bay could end up relocating, but I suspect MLB ultimately awards Portland an expansion franchise (if the city is to get one); the commissioner is on record expressing his desire to expand from 30 to 32 clubs. Don’t expect much pushback from league ownership. MLB is going to sell expansion clubs for between $800 million and $1 billion and it’s difficult to envision the league’s owners leaving $66.6 million/per on the table; even if it means a diluted share of future media rights.

Fan Marino: Should the Portland Diamond Project come to fruition, the deal would more closely resemble the development of Nationals Park in Washington’s riverfront business improvement district than the Warriors new arena under construction in Mission Bay San Francisco (a safe/clean area). The PDP plan is being touted as a “transformative landmark project” that would “catalyze economic development” in an industrial part of town (it’s been used for cargo & metalworking storage for decades).

Since Nats Park went up in 2008, the number of families living around the stadium has quadrupled (to 3809), household income has risen 127% (to $78,265) and value of real estate in the neighborhood has increased 130% (to $2.65 billion); as new residential towers, a waterfront boardwalk and dozens of restaurants have replaced low-income housing projects, fenced off gravel pits and empty lots. The ballpark is also now generating so much stadium related tax revenue, that the city made an additional $17 million payment on the building’s construction loan in 2017.

On the surface those numbers appear impressive, but Dennis Coates an economist at UMBC doesn’t buy into the notion that Nats Park has positively impacted the area’s economy. Coates said, “it is very common for people to say, ‘just stand here and look at all the cranes,’ and attribute that to the stadium” but, “it is one big shell game. This is not income growth; it’s redistribution. It’s money that was being spent in Northern Virginia or Georgetown, and now it’s being spent near the ballpark.”

Coates isn’t wrong, the substitution effect is in play here, just not at levels we’ve seen in other cities; 65% of those moving into the neighborhood of the stadium are from outside the District. Rising property values and an expansion of the city’s tax base are also undeniably positive developments for the city, that can be tied directly to the construction of the sports venue.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Le’Veon Bell’s Costly Decision, Top HS RB Moving to Defense in Search of Payday

Bell

When Pittsburgh Steelers running back Le’Veon Bell failed to report to the team by the league’s CBA mandated November 13th deadline, he became the first player to have received his club’s franchise tender (guaranteeing the player a one-year salary worth the average value of the top 5 player salaries at the position), elect not to sign it and sit out an entire season since Washington Redskins defensive lineman Sean Gilbert did it in 1997; Gilbert signed a massive $46.5 million pact with the Carolina Panthers the following offseason. Bell, who received the team’s franchise tag for a 2nd season in a row in 2018 (he played for $12 million in ’17), is determined to sign a lucrative long-term contract before putting his body at further risk.

Le’Veon’s contract struggles (and the short career spans of NFL running backs) made an impact on North Carolina high school standout Quavaris Crouch; the nation’s top RB prospect has decided he’ll play on the defensive side of the ball next year. Crouch said he “wants to be smart about (his financial future)” and “realistically, I feel like (playing) linebacker is the best (long-term career move).”

Howie Long-Short: It’s impossible to construct an argument that would position Bell’s decision to sit out the 2018 season as a wise one. Had he reported following the teams’ 10th game, he would have earned +/- $6 million for the remainder of this season and gained a year’s credit towards free agency; meaning, the club could only force him to play under the franchise tag for one more season (worth the average value of the top 5 player salaries in the league). Instead, he’s missed an entire year in the prime of his career (which won’t help his HOF aspirations), forfeited the entirety of the $14.5 million tender (would have been 8% of team cap) and should the club opt to retain his services, will remain under the control of the Pittsburgh football franchise for at least 2 more seasons. Pittsburgh could tag Bell again, but it would cost them between $25-$26 million against a $190 million cap and the emergence of James Connor (850 rushing yards, 10 TDs & another 450 yards receiving with 1 TD) would seem to make Bell’s presence unnecessary; he’ll scheduled to become a free-agent in March.

Le’Veon Bell turned down lucrative extensions in ’17 (would have paid him +/- 50% more than the 2nd highest paid RB at time) & ’18 (5 years, $70 million) and walked away from the $14.5 million franchise tender this season. Todd Gurley is currently the league’s top paid RB ($15 million). For Bell to get a deal worth even +33% more than Gurley on an annual basis and recoup the $14.5 million missed out on in ’18, he’ll need to land a deal worth at least $74.5 million over its first 3 years. There is NO chance Bell is getting a deal worth $25 million/year, an agreement that would tie him with Derek Carr & Andrew Luck as the 6th highest paid players (on an annual basis) in the league; behind just Rodgers, Ryan, Cousins, Garoppolo and Stafford.

Bell received some bad advice, several times over, but his desire for long-term security in a league where the average RB career is 2.5 years is understandable (as a 2nd round pick in ‘13, he’s earned just $16 million over 5 seasons); which is why I too would have advised Quavaris Crouch to change positions. The NFL has become a passing league, teams view players at the position as replaceable and they’re using multiple guys to fill specific roles.

Sure, Adrian Peterson made just under $100 million in his career, but that’s $30 million more than the next highest paid RB of his generation; by comparison, pass rushing linebackers Khalil Mack, Von Miller and Justin Houston are playing under 6 year deals worth $141 million, $114 million and $100 million respectively. Crouch will certainly get paid if he can reach the QB as a pass rusher on the collegiate level, but he’s not done scoring touchdowns just yet; the H.S. running back is reportedly looking for a program that will allow him to carry the ball in goal line packages.

Fan Marino: One club that is expected to have interest in Bell should he hit free agency is the NY Jets. With $106.5 million to spend and a QB under a cap friendly rookie contract, the club is expected to add offensive playmakers (and protection) for rookie QB Sam Darnold. I had the chance to chat with Jets Hall of Fame QB Joe Namath at the March of Dimes luncheon on Tuesday afternoon and asked him if he thought the Jets should invest heavily in the running back position this upcoming offseason?

Namath: I would start with the offensive line because all the running backs in pro football are good. Some will separate themselves, some are special; John Riggins, Jimmy Brown, Barry Sanders, Marcus Allen. Cats like that are special, but the remainder need a strong offensive line.

I’m with Joe. As a Jets fan, I’m not interested in Bell. Those in his corner will tout his NFL leading 406 touches last season, but he didn’t have a single carry for 30 yards and he’s hardly the ironman that total would imply; Bell missed nearly 25% of the team’s games during his time in Pittsburgh, including most or all of 3 consecutive playoff losses. The Jets haven’t been to the playoffs in 7 seasons (going on 8), but I’m certain when they get back that they’ll want their highest paid players on the field.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

MLB Commissioner Says League is Exploring the Purchase of Fox RSNs

Manfred

Major League Baseball Commissioner Robert D. Manfred, Jr. was honored (along with Joe Namath, Stephen Espinoza and the ’18 U.S. Olympic Women’s Ice Hockey Team) at the 35th Annual March of Dimes Sports Luncheon on Tuesday afternoon. The event which drew 700+ sports & media industry leaders from around the country was expected to raise more than $1 million dollars for the March of Dimes; an organization that works to improve the health of mothers and babies to prevent birth defects, premature birth and infant mortality. JohnWallStreet had the chance to connect with the 10th Commissioner in MLB history to ask him about a few timely stories (see: Yankees/YES Network, Fox Sports Extension, legalized sports betting, Bryce Harper, MLB Cold Stove & Cindy Hyde-Smith).

JWS: The Yankees are going to re-acquire control of the YES Network. The Cubs have discussed doing the same in 2020. Does MLB want its teams to control their broadcast rights? Does the league care who ends up buying the other 21 Fox RSNs?

Manfred: We’re very interested in the RSN sale process and have preferences in terms of who the owners are going to be. Candidly, we’re looking at the RSNs ourselves.

JWS: MLB renewed its media rights partnership with Fox Sports (includes World Series), with a +39% increase in value 3 years early. As teams’ current deals expire, would you expect local broadcast rights to grow at a similar rate?

Manfred: Yeah, I think that content is going to continue to increase in value as we move forward. It may be different bidders, different companies that are involved, but I think the most important point is that content has durable value.

JWS: Legalized sports betting is going to generate newfound revenue streams for the league, but where else do you see MLB able to grow the revenue pie in the short-term?

Manfred: Well, I’d point to three. I think the DAZN deal is an example of Major League Baseball going to a different platform than we’ve used traditionally, to get our game to more fans; different fans than those involved with a more traditional cable model. I think the second one that you mentioned, sports gaming, is an important opportunity for us moving forward and we’re going to continue to press ahead in the sponsorship area; we’ve grown our number of national sponsors and I think we can continue to grow sponsorship, particularly in the gaming area. Then last in terms of the uniform, we’re going to have a branding on the front of our uniform for the first time ever in ‘20 and I think that’ll open the door to additional opportunities.

JWS: Scott Boras recently said that Bryce Harper was worth $400-$500 million and cited the $ increase in the Nationals’ valuation (from $480 million to $1.675 billion) during Harper’s time in Washington as support for the outlandish demand. How much credit (if any) would you give Harper for increasing the value of the Nationals franchise over the last 6 seasons?

Manfred: I think most economists would tell you that the valuation of players is more related to marginal revenue, than it is to asset value; but as you know, the facts and Mr. Boras don’t necessarily meet all the time.

JWS: Last offseason, we had a cold stove; few big money long-term deals were handed out. The players’ union ended up filing a grievance against 4 teams (Marlins, A’s, Pirates & Rays) for failing to spend revenue sharing money. Are you expecting a similar process to play out this off-season?

Manfred: I don’t want to make predictions about the free agent market, but what I will say is if you look back at the results of last year’s free agent market and how players performed this year, the results kind of makes sense.

Howie Long-Short: JohnWallStreet published a piece yesterday entitled “MLB Caught Donating to Perceived Racist Politician”. MLB acknowledges the donation to Cindy Hyde-Smith should not have been made (a failure in protocol enabled it to occur) and has since implemented measures to prevent a similar situation from occurring in the future. No matter who MLB donates to someone is going to be upset. So, I asked the Commissioner, does it makes sense for the league to be making any donations at all?

Manfred: We’ve actually had conversations about this internally. Part of our political process in the United States has always been financial support for candidates. It’s hard when you have an organization as large as ours, with as many issues as are impacted by the political process, to be completely out. We are very cognizant however, that in today’s world those kinds of donations run the risk of being controversial with segments of our society.

Fan Marino: Commissioner Manfred mentioned “continuing to grow sponsorship” in the gaming area, but some of you may be asking, when did MLB announced a gaming partnership? The answer is immediately after the March of Dimes luncheon. A press conference was held on Tuesday afternoon to announce that MGM Resorts International would be the league’s first official gaming & entertainment partner. The deal gives the gaming company (which also had pacts in place with NBA and NHL) access to MLB’s official data feed, “enhanced statistics on an exclusive basis” and the right to use MLB league/team intellectual property (think: logos). Financial terms of the deal were not released.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

MLB Caught Donating to Perceived Racist Politician

MLB 200x200

Major League Baseball has asked Mississippi Senator Cindy Hyde-Smith to return the $5,000 donation made to her re-election campaign after Popular Information revealed that the league made the fiscal contribution to the polarizing politician, inciting strong fan backlash; Hyde-Smith was caught on video making offensive comments that have stoked racial tensions. MLB’s PAC (political action committee) donates to politicians to obtain the influence necessary to retain its antitrust exemption (means: as a state centric business, MLB is not subject to federal commerce laws); the league has also benefited from the passing of the Save America’s Pastime Act, a law designed to minor league salaries low (see: no minimum wage, no overtime). The Republican incumbent will face Democrat Mike Espy (attempting to become state’s 1st African American Senator) in today’s special runoff election; she’s a heavy favorite to win.

Howie Long-Short: The league has insisted the donation was made “in connection with an (early November) event that M.L.B. lobbyists were asked to attend” and that they were unaware of Hyde-Smith’s comments at the time, but the campaign didn’t report the contribution until 11.23; nearly 2 weeks after her inflammatory comments went viral. Even if you take MLB’s word at face value, that they didn’t ignore Hyde-Smith’s inflammatory remarks in their own best interests (hoping no one would notice), it’s fair to ask why the league hadn’t proactively demanded the campaign return the funds once they were made aware of what she said; of course, the same could be asked of Walmart, AT&T, Pfizer, Union Pacific and Boston Scientific.

While $5,000 may not sound like a large donation from a business that generates more than $10 billion/year, it’s the maximum amount permitted by law.

The decision to donate to Hyde-Smith was a poor one, but contributions to political campaigns are common practice. In fact, “the Office of the Commissioner of Major League Baseball PAC donated $245,500 to dozens of federal candidates (across both parties) during the 2018 election cycle.”

It must be noted that Popular Information also disclosed that SF Giants owner Charles Johnson and his wife Ann each individually contributed $2,700 to the Hyde-Smith campaign. The Johnson’s are going to have a tough time selling the public they were unaware of what Hyde-Smith believes in. Just one month earlier, Ann made a $1,000 donation to a Super PAC called the “Black Americans for the President’s Agenda”; the group responsible for the racist radio ad targeting black voters, that aired during the Arkansas midterm congressional election cycle.

Fan Marino: Getting caught donating to a perceived racist is a bad look for a league that touts diversity (see: Jackie Robinson Day) and inclusion (see: Play Ball initiative, ambassadors for inclusion).

Mississippi has no major-league baseball teams, but the state is home to 2 minor-league clubs; the Biloxy Shuckers and the Mississippi Braves. The Shuckers are the Brewers Double-A affiliate, while the Braves are Atlanta’s Double-A team.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Youth Soccer Program Following Retail Playbook in Pursuit of 1 Million Participants

supersoccerstars

Super Soccer Stars is America’s most popular grassroots national youth soccer program with a presence in 24 cities, across 13 different states; combined they reach 150,000 children between the ages of 12 months and 8 years. Armed with a new CEO and a “large private capital raise”, the for-profit company ambitiously seeks to reach 1 million kids within 5 years. JohnWallStreet sat down with Super Soccer Stars new CEO Adam Geisler to discuss the ideal age for kids to begin “deliberate practice” (i.e. formal instruction), the lessons he learned at Authentic Brands Group that he’ll bring to Soccer Super Stars and why private equity firms is investing money in youth sports.

JWS: Explain the difference between “deliberate play” and “deliberate practice”? At what age is it appropriate for kids to begin formal training/instruction?

Adam: Our focus is on owning what we’re calling “deliberate play”. We want kids to have fun and enjoy the sport while learning the fundamentals, versus the flip side which is deliberate practice. We believe that the decision point for privatization should occur at 8 years old, but today with parents so focused on driving their kids’ success, we’re seeing “deliberate practice” happen as young as 5; which is what’s causing the decrease in youth sports participation.

JWS: You spent time at Authentic Brands Group, a company that buys distressed brands and revitalizes them. You’re taking over a sport with participation flat or in decline (depending on who you ask). What lessons (i.e. what worked) did you learn at ABG that will be transferrable to a youth sports organization?

Adam: Jamie Salter (CEO at Authentic Brands Group) realized that the future of retail and brands was changing and that it’s necessary to become a “platform business”; that’s no different than what we’re doing here. We have a customer base today of 150,000 kids and our goal is to reach 1 million kids within 5 years; so, we’re not going to just offer soccer. We’re going to introduce other sports to reach that goal and we’ll have scalability and efficiency across the platform.

It’s no different than when Authentic Brands Group bought Nautica. Running Nautica as a single operational company was not efficient for VF Corp. (the prior owners), but ABG’s strategy was if we found the best company to make apparel, the best company to make footwear and the best company to make underwear, then we could scale the business with best-in-class partners and have real efficiency to revitalize the brand. We have a beachhead of soccer and we’ll add best in class brands for some of these other sports (see: lacrosse, basketball). I think our playbooks are very similar.  

JWS: Your hiring was announced along with a “large private capital raise.” Why do P.E. firms want to be in the youth sports space?

Adam: They see the same vision that we see in terms of building this new sports platform, professionalizing it with technology, service and a content platform; because, we are a content company. We’ve developed the best content for 2-8 soccer in the entire country. We built it in one of the most challenging markets in the U.S. (New York City). We’ve honed it, developed it, grown it; so, the opportunity is to bring that content to as many people as possible, throughout the country.

Howie Long-Short: Did you know? The privatization of youth sports has created a $15.5 billion industry, one that is expected to grow to $41.2 billion by 2023; expect a rise in travel participation and an increased dependence on software (think: league registration, travel arrangements, game venues etc.) to improve management efficiencies, over the next 5 years.

Fan Marino: While highly unlikely to impact kids in the Super Soccer Stars program, soccer players are at risk for head injuries as they mature (because heading becomes a bigger part of the game) and a recent study indicated that women are more susceptible to the injuries than men are. The Einstein Soccer Study at the Albert Einstein College of Medicine determined that “women who headed the ball a similar number of times to men (ages 18-50) in a 12-month period exhibited 5x more extensive brain tissue damage than men”; equally concerning, damage was found in 8 brain regions within women as opposed to just 3 within men.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Tour Based Model Positions Start-Up Pro Lacrosse League to Succeed

PLL

The Premier Lacrosse League (PLL) intends on becoming the sport’s preeminent outdoor pro league (will challenge Major League Lacrosse). 6 teams (20 players/per) will compete in the PLL’s inaugural season (starts June ’19), a 12-stop tour-based schedule that will include an All-Star game and playoffs; NBC Sports Group will carry the game broadcasts. The PLL has been able to secure the sport’s best talent by offering full-time salaries, healthcare benefits and equity interest to all players.

Lacrosse star Paul Rabil (first lax player to top $1 million in endorsements) and his brother Mike (co-founder and CEO) are the brains behind the new single-entity lacrosse venture. JohnWallStreet recently sat down with Paul to learn more about the new league. In part 1 of a 2-part interview (P2 will be released next Wednesday) we spoke about why the PLL is positioned for success, the league’s unique player compensation model and its tour-based schedule.

JWS: You can argue that in the last 50-60 years, we’ve seen the successful emergence of just a single domestic pro sports league (MLS). Why is PLL going to become the next success story?

Paul: I would disagree that MLS is the only sports league that’s seen or up-ticked success over the last 50-60 years and argue there’s never been a time where we’ve seen so much growth in sports, specifically non-big four sports. If you begin to look at individual sports, we’ve seen the tour-based model work most recently with the UFC, as well as the emergence of World Surf League, PBR, Drone Racing League and eSports. 

Mostly though, success is defined by a sports property’s achievement of goals and expectations. NFL and NBA teams are targeting billion-dollar valuations, while many leagues are built and shaped to reach profitability – or “X” amount of millions of dollars in annual EBITDA. The PBR and UFC have both sold within the last decade, and the WWE trades on the NYSE. I would consider those three successes.

JWS: How will PLL define success?

Paul: For us, success will be defined by the enterprise value we create for our players, investors, and employees. We’ll drive toward success by building a robust media and broadcast plan, signing corporate partnerships, hitting major ticket sales numbers, and rolling out a merchandise business; as well as our youth lacrosse initiatives. We’re off to a nice start with earned media and the ongoing attention we’re continuing to aggregate post-launch of the PLL – we hit 60 million impressions within the first week of the PLL announcement.

JWS: PLL has touted full-time wages for players. How does PLL define “full-time wages”?

Paul: We define full-time wages by compensating our players within the median wage for full-time workers in the US – according to the Bureau of Labor Statistics. Historically, professional lacrosse has offered part-time wages to its players, where salaries average below the national poverty line for part-time workers in the US. We’re investing in our players – with increased wages, benefits, and equity in the PLL. This way, our players and league are aligned on the outset, so the product on field can continue to improve (see: more time for practice, training) and they can invest in their media and brand development (see: grow within the lacrosse community).

JWS: The players are going to share in the league’s success as they’ll be entitled to an equity stake. Does their decision to play in PLL prevent them from playing in other lacrosse leagues?

Paul: Our players are under effective agreements that are exclusive to professional outdoor lacrosse (i.e. they cannot play in MLL). Many of them will be playing in the National Lacrosse League (see: indoor lacrosse), which from a timing perspective, is played during the winter (ends in May). That way, our players will be able to play and draw salaries from both indoor and outdoor professional lacrosse.

JWS: The PLL is going to operate on a tour-based model (think: NASCAR, PGA), creating a final-four like atmosphere (think: multiple games, FanFest, corporate village) in each of the 12 cities it visits. Why the tour-based model over a more traditional city-based one?

Paul: We thought critically and creatively about the build of the PLL, and call our solution an “inside-out” approach. What’s most important in any pro sports league is your talent – which has to be the best in the world – your competition, and your distribution. We knew we had the best players. Then we needed to create the most competitive environment – which meant 6 independent teams, governed by top-tier coaches, a college draft, training camp, regular season, all-star break, playoffs and a championship. And finally, with the aforementioned in-place, we needed a major network partner for mass distribution of the live games. Which we secured with the NBC Sports Group.

Traditionally, if you look at pro sports from an operator’s perspective, you see a city-based model with individual owners. And if you don’t own a venue, you aren’t able to optimize your schedule – home and away games – or the broader business opportunity; from parking and concessions revenue to other ancillary opportunities. Niche team sports leagues are often low-priority tenants on a lease, playing in non-preferred venues, with little flexibility in the scheduling; making it difficult to find a media partner.

The other issue we identified with a traditional city-based model was that if you’re not in 30+ markets (i.e. the NFL, NBA, NHL) – or if you’re the MLL and are in fewer than 10 markets – than the city-based model actually does not achieve national recognition or prominence.

With 6 teams in the PLL, we decided that being tour-based could not only capitalize on operational opportunities like securing premier pro sports venues over a single weekend in a major market city, but would also allow lacrosse fans nationwide to feel included, rather than ostracized for not having a team based in their market. Put simply, a tour-based model makes us a national sport overnight.

Lacrosse has grown rapidly over the last 15 years and we’re seeing the emergence of new hotbeds in the South, Midwest, Pacific NW and out West; it’s no longer just a Northeastern sport.

JWS: How do you keep a fan engaged throughout the season if their favorite team/player is going to play once/season at “home”?

Paul: We have to get the competition right. This is not a showcase series. Fans will not feel like their teams aren’t competitive because they’re not anchored to a city. Our gamedays will embody the best players in the world, competing to win, with the goal of capturing a PLL Championship at the end of the year. That’s at the core of the PLL.

Our investment into our teams and player narratives will capture the attention of lacrosse fans and net new sports fans. Our players are world-class talents, with dynamic personalities and origin stories. And much like the UFC showcased their athletes and competition with The Ultimate Fighter, we plan to create original shows around our athletes and teams, additive to the live broadcast. That’s where the intersection of fandom lives.

Additionally, our major media rights partnership with NBC Sports Group will showcase professional lacrosse like it’s never before been witnessed. Every game will be broadcasted live – with 19 games on broadcast television. Production quality will be at its finest. This way, fans everywhere can watch their favorite teams compete every week of the season.

Finally, major sports leagues galvanize fan bases with fantasy sports and gambling. We’re being strategic here, and are prioritizing stat-keeping on behalf of our players and teams, as well as rolling out league-wide standings and playoff predictions. Fans care about player trades, waiver wires and player pools. They care about the next stars of the college draft. There will be performance incentives and bonuses for top players and coaches.

As a group, if we get all of those things right, a tour-based model becomes a function of operating, and the prevailing subject matter is team competition and player performance.

Howie Long-Short: It’s known that The Raine Group, Chernin Group, Creative Artists Agency and Blum Capital are among those funding the league. There’s a series of family offices and angel investors (including former NE Patriots player Chris Hogan) that have also invested, but have elected to remain private.

Fan Marino: While youth participation in football has declined (-23%) over the last 5 years, Lacrosse has experienced explosive growth over (+35% to 2.17 million participants) that time; curious if only because the suspected cause of decline in football participation is related to head injuries and lacrosse also subjects players to hits to the head. NYIT researchers recently released results confirming “subtle cognitive declines” in lacrosse player studied over the course of a season. I asked Paul why he suspects the threat of brain injury has impacted participation in one sport but not the other?

Paul: I would suspect the challenge plaguing football is the volume of helmet-to-helmet collisions and tackling during every play – especially through the art of contact at the line of scrimmage between offensive and defensive linemen, as well as running backs. In lacrosse – while a contact sport – tackling is illegal, as is any form of helmet contact. In our sport, the emphasis in contact is on stick-checking to dislodge the ball from a player’s crosse. While contact and concussions occur in all sports – even soccer and basketball – lacrosse gear is intended to protect primarily from stick-checking, or the rubber ball making contact with a player’s head – wherein lies the helmet protection.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!