New Tax Legislation to Curb Corporate Spending on Sporting Events


The Tax Cuts and Jobs Act, which includes legislation prohibiting corporations from deducting 50% of entertainment expenditures from their tax bill (a longstanding tradition), has businesses taking “a hard look at their entertainment budgets.” New law designed to minimize the government’s subsidy and streamline tax code will save the government $2 billion/year and $23.5 billion through 2027. Ironically, the most profitable corporations are likely to experience the least impact, as the new 21% corporate tax rate is just 3.5% (top rate of 35% with a 50% subsidy is 17.5%) above what they’re used to paying; whereas a struggling company paying less than 35% could see a significant increase.

Howie Long-Short: It’s estimated that U.S. Corporations spend “hundreds of millions” annually on entertaining clients at sporting events, so a short-term decline in team revenues could be on the horizon. While that’s not going to please team owners, it should result in some premium seating at reduced pricing for real fans. If you’ve ever wondered why corporations spend so much on tickets, check out this study. It was determined after evaluating 5 million tickets with an average price of $366/ticket (owned by 400 companies), that there’s a ROI of 1,998%!

Fan Marino: While on the topic of government legislation, MLB is urging Congress to pass a bill that would keep minor league players (considered seasonal employees, not protected by the MLBPA) exempt from federal labor laws, after several MiLB players filed lawsuits claiming receipt of as little as $1,100/mo. in compensation. That’s right, a league that generated $10 billion in 2017 revenue is lobbying to pay future talent less than minimum wage. MLB owners are ruthless; they want their prospects to work for free and then try to limit big money deals to 3 years. The MLB player cash grab is over.

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UMBC Gets $119 Million in Media Exposure within 24 Hours of Virginia Upset  


According to Meltwater, a media intelligence company, UMBC’s historic upset of number one seed Virginia generated an estimated $119 million in media exposure for the University (within 24 hours of the game); roughly 1/3 of the publicity value the school has received over the last 12 months. 37% of +/- 50,000 news stories mentioning the University over the last year, have been written since Friday night. Social media is abuzz too, with 87% of the school’s social media mentions within the last 12 months coming on Friday night or Saturday; as the UMBC athletic department built its twitter following 1,730% (as of 1p Sunday afternoon), from 5,000 to 91,500.

Howie Long-Short: The true value of the victory will be realized in the fall of 2019, when freshman enrollment is expected to swell. Noteworthy upsets at Georgia State (enrollment +28.5% in Fall ’16, beat #14 Baylor in March ’15) and Middle Tennessee State University (enrollment +16.9% in Fall ’17, beat #2 Michigan State in March ’16) provide guidance in terms of what can be expected; though, the distinction of becoming the first #16 seed to win an NCAA tournament game will give UMBC a “longer tail than your usual upset.” 1,772 freshman enrolled at UMBC in August 2017. If the school just manages to match MTSU’s enrollment increase, conceivable considering Butler increased enrollment 43% following it’s run to the ‘10 finals, it would add +/- 300 students. With in-state tuition over $5,700/semester, the win is worth a minimum of $3.5 million/year to the University.

Fan Marino: Jairus Lyles is UMBC’s best player. He hit a 3-point shot at the buzzer in the conference championship game to send UMBC into the dance, scored 28 points in their win over UVA and a team high 12 points in Sunday night’s close loss to KSU; but, no one has gotten more attention following Friday night’s win than Zach Seidel, the man behind the twitter account. Seidel, who lacked a strategy going into the game (he’s doesn’t usually handle the Twitter account for men’s basketball), has since been interviewed by everyone from The New York Times to CNN to Slam Magazine.

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MLB Ticket Sales Expected to Decline for 3rd Straight Season


MLB attendance has declined 3% since 2012 and speculation exists that 2018 attendance figures will continue to drop, perhaps by as much as an additional 3%. Teams in full rebuild mode (see: Miami, Tampa Bay, Pittsburgh), teams coming off disappointing 2017 seasons (see: Toronto, Washington), a waning honeymoon effect in Atlanta (attendance +24% last year, opened SunTrust Park) and an off-season that lacked significant free agency activity are among the reasons ticket sales are expected to decline for a 3rd straight season. Less than 73 million people attended 2017 MLB games, the first time the league has failed to hit that mark since the 2010 season.

Howie Long-Short: Declining attendance over the last 7 years likely has more to do with artificially inflated attendance figures between 2001-2010, propped up by the opening of new ballparks (i.e. honeymoon effect), than a lack of interest in the game. Between 2001-2010, 1/3 (10 teams) of the league opened new stadiums; since that time, just 2 teams have (Marlins in ’12 and Braves in ’17). If you build it, they will come…for a few years.

Fan Marino: Baltimore’s baseball team may struggle to sell tickets in 2018 (ranked 23/30 in ’17 attendance), but the O’s have a plan to develop their next generation of fans; a program entitled “Kids Cheer Free”. For the first time in MLB history, a team will allow children (under the age of 9) into the ballpark for free. Parents that purchase a regularly priced upper-deck ticket are entitled to 2 additional seats for their children. This is a well thought out promotion (runs through at least March 31 – April 29). Empty seats don’t generate revenue, kids don’t buy tickets and parents spend on their kids (food/merchandise) at the ballpark. Everyone’s a winner, except the team on the field; projected to finish with the 4th worst team in the league.

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Dallas-Based Craigslist Competitor Signs Jersey Sponsorship Deal with Mavs


The Dallas Mavericks became the 21st NBA franchise to sign a jersey sponsorship deal, agreeing to a 3-year partnership with the free local marketplace app, 5Miles. The wide-ranging partnership places the Craigslist rival’s orange logo on the team’s jersey, offers the mobile start-up signage throughout American Airlines Center and includes Harrison Barnes (team forward) as a “brand ambassador” (or spokesperson). 5Miles will also become an active member of the Mavs foundation, committed to helping with the expansion of the team’s entrepreneurial program (for DFW middle school students). Financial terms of the deal were not disclosed.

Howie Long-Short: Like Craigslist, 5Miles enables users to buy and sell products and services; the differentiator is that all transactions initiated within their app, occur within a 5-mile radius. The company is also considered an innovator in both the use and acceptance of cryptocurrency; Craigslist is anything but a technology innovator (see: website design). 5Miles has raised more than $50 million to date (all private money), including a B+ round in January 2016; a $30 million investment that valued the company at more than $300 million. Launched in ’15, 5Miles has more than 1 million users in the Dallas market (its largest market).

Fan Marino: The announcement of this partnership is the first piece of good news to come out of the Maverick’s organization in weeks. On the floor, the team is 25 games under .500; and remarkably, things have been worse off it. Sports Illustrated published an expose highlighting the “Corrosive Workplace Culture” (see: sexual harassment, domestic violence etc.) within the organization, the league fined the owner Mark Cuban $600,000 for suggesting that losing (or tanking) was in his team’s best interests and now Cuban has been accused of sexual assault. It makes you wonder if the reason financial terms were not disclosed, was because the team was forced to issue a steep discount to compensate for all the negative publicity. For what it’s worth, Cuban denied any potential sponsors pulled out of negotiations due to off-court concerns.

Dallas readers: Download the app, use the code GOMAVS and you’ll receive 2 tickets to a future home game.

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No Decision in Sports Betting Case, NBA/MLB Lobbying Against WV Sports Betting Law


The Supreme Court of the United States issued 2 opinions on Monday, but neither were on Murphy vs. NCAA (formerly Christie vs. NCAA); the case that would repeal PAPSA (federal prohibition on sports gambling) and legalize sports betting within the state of New Jersey. While the challenge is focused on the NJ’s ability to offer wagering on sporting events, the case has far reaching implications; any decision related to federalism (grants States independent power & responsibilities) and/or commandeering (illegal for the federal government to force states to adopt policy), could shape future legal arguments on gun control, marijuana and immigration. The SCOTUS will next issue opinions on April 2nd.

Howie Long-Short: The NBA and MLB are doing their best to prevent West Virginia’s sports betting law from being enacted (because it lacks the “integrity fee” they are seeking); but, their reasoning has to do with precedent, not profits. Should the State of West Virginia pass the law, they would become the 5th state (NJ, NY, PA + NV) with sports betting legislation on the books; none of which have agreed to cut the NCAA or any professional league in on the profits. As that number continues to grow, the leagues lose any leverage they may have in negotiations; and with upwards of 25 other states interested in exploring/passing sports betting legislation, the financial stakes are high. Don’t expect to see the state of West Virginia caving to the demand of the wealthy pro sports owners though, no pro sports team calls the state home; the leagues hold little leverage here.

Fan Marino: March is gambling awareness month, but nothing prevents me from betting the house on a “sure thing” like watching a bad beat. On Saturday afternoon, Purdue led Penn State 78-64 with 15 seconds remaining. Shep Garner (PSU) hit a 3, stole the ball as Purdue tried to dribble out the clock and then hit another 3; bringing the team within 8 points at the final buzzer. The point spread? You guessed it, 8.5 points.

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European Sports Business News, Analysis and Data Provider Establishes U.S. Presence


SportBusiness Group, a London-based news, analysis and data provider covering the global sports business industry, has expanded business operations to the U.S.; establishing a physical presence within the Americas for the first time. Already counting ESPN, IMG and the NBA as clients, the newly established Miami office will focus on the distribution of in-depth intelligence to clients across the biggest international sports market. JohnWallStreet had the chance to ask CEO Ben Speight about why the company decided to open a U.S. office, the focus of their news publication and where their expertise lies.

JWS: SportBusiness’ expertise has traditionally been on European media right holders. Why did you guys make the decision to expand operations across the Atlantic?

Ben: Our mission has always been to provide best-in-class information, on the best business strategies and business models being used within the sports industry. If we want to provide the richest most valuable insight to our clients then we need to be in as many corners of the industry, to be finding out better information and intelligence; hence, why we opened in the Americas. We need to be on the ground gathering that information, both for our European clients who continue to look at the U.S. because it is undoubtedly the world’s biggest sports market; but, I think increasingly the U.S. market is open minded to look at the what the top European rights holders are doing in terms of monetizing their fans. Whether that be through broadcast rights, sponsorship rights, ticketing or stadium activations. So, what we’re trying to do is be the first information publisher within the sports industry, to have the broadest and most valuable set of case studies, business intelligence and data.

JWS: SportBusiness International is your news publication. Who does it target? What sectors of the industry does it cover?

Ben: It serves rights holders, agencies, broadcasters, sponsors and stadium companies. We’re generalists in that we look at a broad range of sectors within the sports industry and developments within those sectors.

JWS: Is there a sector where the company excels?

Ben: We have specialties in media rights (broadcast rights) and sponsorship rights. We collect data on those 2 sectors, so executives who are working in those industries have the business-critical information necessary to make deals and to extract more information. The data products are geared towards rights holders and agencies. The evolution of our business has us moving away from news and more into data.

Howie Long-Short: SportBusiness Group was acquired by Riccardo Silva’s investment firm (Silva International Investments) in August 2017, joining a portfolio that includes; The Miami FC (MLS) and MP & Silva (owns, manages and distributes media rights). In December 2017, the company invested in Globe Soccer; the company that owns the rights to the annual Globe soccer awards in Dubai.

Fan Marino: Need data to prove that the U.S. is in fact the biggest international sports market? The worldwide sports media rights market is valued at $49.5 billion. U.S. rights holders take in 36% ($18 billion) of that total, with the NFL ($7.3 billion), NBA ($3.9 billion) and MLB ($3.4 billion) regarded as 3 of the 4 most valuable sports media properties in the world. The English Premier League ($4.5 billion) is the only non-U.S. based sports media property generating more than $3 billion/year in revenue. For reference purposes, the Champions League, La Liga and Serie A bring in $2.2 billion, $1.9 billion and $1.5 billion, respectively.

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Vegas Prepares for NBA Teams to Start Tanking


With the 2nd half of the NBA season underway and a draft class that will include Deandre Ayton, Michael Porter Jr. and Marvin Bagley III (+ Luca Doncic, Real Madrid), prospective lottery teams (there are 7 that are already 20+ games below .500) will soon turn their focus to the 2018 NBA Draft. Commissioner Adam Silver hasn’t figured out how to prevent teams from “tanking” (or talking about it, Mark Cuban was recently fined $600,000 for publicly admitting that “losing is our best option”), but Las Vegas odds-makers are already accounting for it; lowering the betting limits on games played between teams out of playoff contention and raising the possibility that future games could be pulled off the board. It’s important to remember that because gamblers are betting against a spread, a team’s desire to simply lose games is somewhat nullified.

Howie Long-Short: Legalized sports betting may be inevitable but, at least some analysts believe that States expecting a fiscal windfall should temper their expectations. Moody’s Investor Service notes that just 2% of Nevada’s gambling revenue comes from sports betting and that over the last 12 months, Nevada casinos have earned just $215.3 million on sports bets. Global Market Advisers, a casino consulting firm, points to the “low level of hold” (5%-7% of the amount bet is held as revenue), “low profit margins” and the “prohibitively high state tax rates (see: Pennsylvania) as reasons why the revenue potential is often overstated. Moody’s projects New Jersey will bring in $108 million in revenue (4% of the state’s gambling revenue), over the state’s first 12 months of taking sports bets.

Fan Marino: Tip: Professional handicapper Ron Boyles says to take a tanking team getting a “boatload of points” over a “playoff-bound team”. Why? Gamblers tend to overestimate a team’s incentive to lose, creating a situation where the underdog gets “more points than they normally should.”

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