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.

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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.

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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.

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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.

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Technical Issues Make “The Match” a Costly Experiment for Turner Sports

Turner Sports will refund the $19.99 paid to anyone who purchased “The Match” through their B/R Live app, after the company decided to make the PPV golf match between Tiger Woods and Phil Mickelson available to the public for free. Technical issues with the digital streaming service’s purchasing infrastructure forced AT&T’s media division to remove the paywall prior to the 1st hole, to ensure all paying customers would have access to the event. Comcast, Cox, Charter Spectrum, Verizon, Altice, DISH/Sling TV, U-Verse & DirecTV have all also agreed to issue refunds since the PPV event was available to many for free; there were no reported issues with any of the cable or satellite providers.

Howie Long-Short: What was supposed to be a showcase of AT&T’s ability to produce, activate and distribute a high-profile sporting event, turned into a costly experiment for Turner Sports. Nicholas Masafumi Watanabe (sports management professor at the University of South Carolina) had estimated that “The Match” would need 700,000 buys to break-even, it now appears Turner Sports will eat the entire +/- $14 million.

While costly, the decision to pull down the paywall and to ultimately issue refunds was a wise one. Turner turned a potential PR disaster into some positive publicity and the free access likely drew some viewers to the platform, that would not have otherwise downloaded the app (i.e. first time users).

Tech issues, that continue to mar the live streams of sporting events, highlight the sports fan’s need to retain a cable subscription. If you’re not willing to risk missing “the game”, traditional television remains the only option.

Golf has television’s oldest audience (average 64 years), so reimagining the game and using a new means of media distribution (see: streaming) to capture the younger demo was worth trying out; particularly for AT&T, as it seeks to carve its niche in the DTC streaming landscape following June’s $85 billion acquisition of Time Warner.

Fan Marino: On the course, “The Match” was a mixed bag (pun intended). While the playoff holes (played 18 2x, played make-shift 93 yard 20th hole 3x) generated some excitement, Charles Barkley (on broadcast team) acknowledged that viewers were “watching some really crappy golf”; the pair shot 69s on the par-72 course just days after Phil projected the winner would have to shoot a 63 or 64 to win. Mickelson won the event (and the $9 million prize) with a birdie on the 22nd hole; the $400K he won on side bets will be donated to charity.

Speaking of Barkley, it appears he’s corrected his infamously terrible swing; For The Win posted video of Sir Charles driving balls without his trademark hitch in the back-swing.

For those unaware, a series of messages ranging from comical (“is this 1999?”) to festive (“Happy Thanksgiving”), appeared in the airspace above Shadow Creek Golf Course on Friday afternoon. The OTT streaming service DAZN has since claimed responsibility for the stunt, calling it “retaliation” for Turner Sports overcharging for the PPV event. DAZN, which offers sports fans premium events on a low monthly subscription basis, insists “pay-per-view is a bad deal”; which made the PPV golf event an opportune time to promote the service (“Get DAZN For Free”) and their Dec. 15th fight between Canelo Alvarez and Rocky Fielding (see: “Canelo v Rocky = Free”).

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Production-Technology Showcase Disguised as Golf Match

TigerVPhil

Capital One’s The Match: Eldrick Woods v. Phil Mickelson will take place on Friday (11.23) at 3p EST. While the two will compete for $9 million, the showdown between “Tiger” and “Lefty” is as much a production-technology showcase as it is a golf match. Turner Sports plans to introduce “first-of-its-kind integrations centered on predictive data”, camera angles delivered by drone and live betting odds during a marquee sporting event for the first time (for U.S. viewers); TopTracer shot tracking (shows real-time trajectory, flight path) and Virtual Eye real-time animations will also be used during the broadcast. The PPV golf event is being sold for $19.99.

Howie Long-Short: You’ll notice AT&T (T) is the common thread throughout this deal; the company now owns (since its $85 billion acquisition of Time Warner in late ’16) Turner Sports (broadcasting the event), DirecTV, AT&T U-Verse and B/R Live (3 outlets selling the event), HBO (doing pre-fight promotion) and Bleacher Report (social, BTS coverage).

The predictive data viewers will see (think: shot probability) is being generated from an algorithm combining ShotLink Intelligence (i.e. archive with insight/analysis of every shot hit during tour play) with the unique characteristics of the course being played (Shadow Creek, Las Vegas).

You may recall the name TopTracer, as we wrote on the company’s decision to license its technology to traditional driving ranges; software that enables golfers to play virtual versions of the world’s premier golf courses, from the convenience of their neighborhood range. Topgolf Entertainment owns TopTracer, having acquired the company back in 2016 when it was still known as Protracer.

After each hole, MGM Resorts Race & Sports Books (in partnership with GVC Interactive Gaming) will update their proprietary feed to the live PPV broadcast with real-time odds and money lines. While in-game betting is going to be huge as sports betting becomes more widespread, don’t expect this event to move the needle for MGM (or any other sportsbook); only those located in NJ and NV will have the ability to act on the real-time odds displayed during the broadcast within the company’s mobile app. It’s worth noting that Shadow Creek Golf Course is an MGM Resorts International property.

Turner Sports (T) elected to forego traditional commercial spots during the PPV event to provide the audience (not accustomed to buying golf) with an optimal viewing experience, so just 3 premium brands will be marketed to viewers during the event; Capital One (title sponsor), AT&T (official wireless and data services partner) and Audi (official automotive sponsor) are all sponsoring integrations (think: drone coverage, 4K option) supposedly additive to the broadcast.

Fan Marino: Speaking of Topgolf, the company is expanding aggressively; looking to reach 50 markets by the end of 2018 as it prepares for a 2019 IPO. Executive chair Erik Anderson explained the company is “a candidate to go public for sure” because “like Starbucks, people connect with us.” Sure, Topgolf is popular, but like Starbucks? Who makes Topgolf a part of their everyday routine? Topgolf isn’t public, but Callaway Golf (ELY) owns +/-14% of the company.

Topgolf competitor Drive Shack is also making headlines, having announced NYC’s first golf entertainment complex is coming to Randall’s Island Park in 2020. The company currently has just a single location (Orlando), but 6 others are under construction. Unlike the market leader (Topgolf), Drive Shack is publicly traded on the NYSE under the symbol DS; shares are down -21% since the company reported a Q3 loss (-$15 million), while missing revenue estimates by +/- $1 million ($87 million), 2 weeks ago.

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U.K. Sportsbooks Exploring Self-Regulation to Stave Off Crippling Government Legislation

RGA

The board of the Remote Gambling Association (European trade organization) will meet later today to discuss self-regulation, a pre-emptive attempt to stave off industry crippling Government legislation within the U.K. The proliferation of mobile/digital gambling has spurred an onslaught of sports betting advertisements during sporting events, with bookmakers aggressively competing for market share. Bans on pre-watershed (see: prior to 9p) advertising and in-play ads, and a hard limit on the number of gambling ads permitted within a single commercial break (1) are amongst the most solutions that will be explored. The meeting is not expected to produce a consensus on recommended changes to the industry’s voluntary advertising code.

Howie Long-Short: The implementation of (or change to) any bylaw(s) restricting Remote Gambling Association member advertising would have widespread impact on the industry. Their membership base includes some of Europe’s largest gaming companies including; Bet365, Ladbrokes (GMVHF), Paddy Power (PDYPY) and William Hill (WIMHY).

While the focus of the annual meeting (i.e. this was not called as an emergency summit) indicates that European bookmakers understand what’s at stake (see: Italian ban on all gambling advertising), with membership divided on corporate social responsibility it’s likely that only Government regulation (or broadcaster intervention) can curb the volume and frequency of sports betting ads. That’s because unanimous participation (35 member companies) is unlikely and no one is willing to operate at a competitive disadvantage (i.e. if one continues as is, they all will). Expect this exact scenario to playout in the U.S. as the availability of sports betting expands, there’s far too much money at stake and far too little corporate restraint.

If the gaming companies won’t self-govern, perhaps the media companies selling the spots will follow Sky’s (SKYAY) lead and do it for them. SKYAY announced that beginning with the ’19-’20 season it will limit gambling ads per commercial break (1 spot/per) and as of June 2020, the company will offer technology that enables viewers to avoid gambling advertising all together. While it’s been estimated that the company earns +/- $262 million in advertising money from licensed sportsbooks and some suspect a “self-imposed limitation will cost it tens of millions in lost revenue”, I think the loss will be negligible; SKYAY will find another advertiser to take the valuable slot (remember: this is English soccer, no shortage of demand) and increase the price of their now more limited gambling inventory.

Fan Marino: Howie referenced the U.S. gambling market, so it would seem like an opportune time to mention that New Jersey issued its October sports betting report. The state’s gamblers bet 41% ($260 million) more last month than they did in September, but only took in half the revenue ($11.7 million). Why? The public side came in “at a heavier than average clip” (on NFL games) and both MLB and World Series futures were paid out during the month. DraftKings (+ Betstars NJ) once again took in more revenue ($5 million+) than any other licensee in the state, as online/mobile platforms outperformed retail sportsbooks; +/- 2/3 ($175 million) of the state’s October handle originated from a computer or handheld device.

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“new Fox” Extends MLB Deal, No Longer Favorite to Re-Acquire RSNs

MLB 200x200

MLB has extended its media rights partnership with Fox Sports through the ’28 season, signing a new 7-year deal worth +39% more ($728.6 million/year) than they’re currently receiving ($525 million/year). The new pact ensures “new Fox” will continue to broadcast the World Series, the MLB All-Star Game, 2 Playoff Series (1 LDS, 1 LCS), Saturday Game(s) of the Week and Spanish-language broadcasts (on Fox Deportes) for the next decade; Rupert Murdoch’s company also picked up the rights to produce more games (think: for possible primetime, mid-week broadcast on Fox) and to air games on the social live streaming platform Caffeine. The new $5.1 billion new pact will take effect in ’22, following completion of the current 8-year agreement.

Howie Long-Short: Opting to extend the existing deal with 3 years remaining was logical on both sides. MLB got a substantial increase on the packages’ valuation, while “new Fox” retains cornerstone programming for its revamped broadcast strategy (sports/news focused).

Back on November 1st, it appeared (and we wrote) that “new Fox” was the “front-runner” to buy back the RSNs sold in their $71.3 billion deal with Disney, but that no longer appears to be the case. Comcast, another logical destination, has also said it would not be pursuing the highly-rated cable networks; but that doesn’t mean there’s a lack of interest, as of Nov. 8th more than 40 bids had been submitted.

Chris Lencheski is an experienced global sports, media, and private equity executive with c-suite stops at Comcast-Spectacor, TPG Specialty Lending, IRG Sports and Entertainment, SKI & Company and currently an adjunct professor at Columbia University. I asked Chris, name a couple of under the radar companies that would make sense as potential landing spots?

Chris: I understand that Liberty (Media) is looking at it and Guggenheim is lurking in the background, but Sinclair is uniquely positioned because of their owned and operated channels; (in fact the largest television station operator in the US by number of stations) – they could perform well, have invested in and have wanted to further acquire sports rights but on a truly scalable format – this one such opportunity.

Another company unreported in all of this is beIN Media Group, but their acquisition of the RSNs would enable the company to do something they haven’t been able to do date (i.e. move up on the dial) even though they’ve spent an enormous sum of money over the last several years. They have access to the capital needed to buy the lot and they have access to programming capital, plus some very smart aggressive executives that have the grit for a deal like this.

As a prospective buyer, what would give you hesitation about buying the lot of Fox RSNs?

Chris: Companies with less broadcast centric strategies (think: Amazon, Facebook, even a outlier like Weibo) are pushing down the value of RSNs, but the bigger concern depends on where you think regionalization is going in a macro on-demand world. Most of the viewing public can capture just about every single item in sports in either real-time or near real-time, so the RSN specific rights to develop the Detroit market are important, but it’s more important, almost exclusively, to just that market; and the re-licensing rights of the Detroit Tigers to a 3-hour baseball game are less important than a live cutaway or access when something happens (see: DAZN’s new deal with MLB).

Fox’s most valuable RSN, YES Network (+/- $4 billion), won’t be sold as part of the lot; it’s a “foregone conclusion” the Yankees will exercise their right to re-purchase the remaining 80% of the network. I asked Chris, would any other teams look to acquire/re-acquire their own broadcast rights?

Chris: “If the Yankees re-purchase theirs, I’m certain Ilitch (Detroit Tigers) may take a serious run at purchasing their market. It would also make sense for the Southern California teams (think: Dodgers, Angels) and I would suggest a Tampa Bay Rays organization would be better off selling thru their Rays rights and creating a network for everything Tampa Bay Regional sports (than selling only their local broadcast rights).”

Fan Marino: The reason Fox sought the rights to broadcast games on Caffeine, a platform best known for the its gaming, entertainment and creative arts (think: Live Nation music concerts) content, is because they’re investors. Back in September, “new Fox” made a $100 million investment into the company and the newly formed co-owned JV Caffeine Studios; a content studio that will “create exclusive esports, video game, sports and live entertainment” programming for Caffeine. I asked Chris, why would a company focused on broadcasting live sports (and news) on linear television invest in a social live streaming platform?

Chris: That’s (social live streaming is) going to become the new normal as consumer’s age out of watching sports in certain formats and even more potential consumers age into always having a secondary screen or multitasking while you’re watching. You can call it gamification, but fundamentally a platform like Caffeine puts pressure on all the partners to expand streaming with insights across fantasy and betting (see: games blacked out) and the total value of viewership (think: stats for fantasy, betting, plus a future of snapchat/amazon style “lens” merchandising sales).

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NASCAR President Explains Sport’s Reliance on Sponsorship, Championship Race Sunday

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The 2018 Monster Energy NASCAR Cup Series season wraps up with a “winner takes all” race at Homestead-Miami Speedway on Sunday; Joey Logano, Kyle Busch, Martin Truex Jr. and Kevin Harvick are Championship 4 drivers.   

On October 1st, Steve Phelps assumed the role of NASCAR President; responsible for oversight of the sport’s commercial, media and competition. JohnWallStreet recently had the opportunity to sit down for an extended conversation with the new NASCAR President. In part 2 of our interview (part 1) we discussed the catalyst from NASCAR’s move to a tiered sponsorship model, why the sport is so reliant on sponsorship money and what teams are spending to race a car.

JWS: NASCAR plans on moving from its current single title sponsorship model (i.e. Monster Energy NASCAR Cup Series) to a tiered model (think: Olympics) for the start of the 2020 season. Is that change being driven by the desire to grow revenues or out of necessity because there are few companies willing/able to participate at a $20 million/year level, but a significantly wider pool if you lower the asking price to between $5-$10 million/year?

Steve: The primary goal was to make it easier for sponsors to work with NASCAR. Historically, if a company became the “Official X of NASCAR”, every other stakeholder would chase that sponsor for money. We’re trying to take the assets of the majority of the stakeholders in the sport and package them together. It’s far more efficient and allows our sponsors to activate intelligently against the assets that they have.

JWS: Do you expect revenues to grow from the change in sponsorship model?

Steve: I do think sponsorship revenue will grow, but the change is more about finding long-term partners that are committed to this sport; committed to activating the sport and our drivers on whatever channels of distribution they’re doing business. That’s what we need to grow the sport overall, the revenue will follow.

JWS: 75% of the team revenues comes from corporate sponsorships. Why is the sport so reliant on sponsorship money?

Steve: Our teams don’t have different revenue streams like stick and ball sports have. If you’re Major League Baseball, you have 81 home games; you’re selling a lot of tickets, hot dogs and parking. Our business model is very different. If you’re a race team, you don’t sell tickets. You essentially have two revenue streams; prize money (in part generated by broadcast revenues) and sponsorships.

JWS: NASCAR has a fanatical following in pockets of the country (notably: South, Midwest). How do you broaden the sport’s appeal?

Steve: We’re not as regional as most people think we are. The perception is that all our tracks are in the Southeast (NASCAR is nationwide except Pacific NW), all our drivers are from the Southeast (NASCAR has more drivers from California than anywhere else) and all our ratings are driven from the Southeast and that’s not a true statement. Sure, we index slightly higher in the Southeast than elsewhere, but not significantly. New York is our largest market in terms of the number of fans watching. Percentage wise it’s not, from a ratings standpoint it’s not, but we have a lot of fans all over the country.

So how do we grow it? It’s about putting on the best racing that we can (see: new rules package) and increasing the star power of our drivers; to make them more popular with our current fans and relevant with future ones

JWS: How much are NASCAR teams spending to race a car?

Steve: On the top end, you have cars that are spending $25 million – $28 million and you have some in our top series that are spending $6 million – $8 million (Editor Note: Steve suggests +/- 15/41 cars could win on any given weekend). There are things that we as a sanctioning body can do (and are doing) with our teams, to try and mitigate the arms race that happens in trying to find speed, but wind tunnel time is expensive and everyone is trying to win because our drivers are racers at heart and when you win it’s easier to attract sponsors.

Howie Long-Short: NASCAR ownership has submitted a $1.9 billion cash offer to take all outstanding shares (+/- 25%) of International Speedway Corporation (ISC) private at $42/per (+8% premium to the prior market closing price $39.06). If completed, NASCAR would combine its sanctioning body with ISC’s tracks (includes 13 on NASCAR Cup Series circuit) to create a “more unified strategic approach” to the company’s “future growth”; and to make a potential sale of the stock car racing series easier. ISC shares are up +10% since news of the offer broke, closing at $43 on Thursday 11.15.

Fan Marino: You referenced how the 2019 rules changes would improve racing on the track, but what improvements can the sport make off the track to enhance the race-day experience?

Steve: There are some blocking and tackling things that we need to continue to do better, like making sure that we have Wi-Fi available at the racetrack; people want to share their experience.

Also, because our races are so loud, trying to interact with someone during green flag racing is difficult; you’re kind of lost in your own world when the cars are on the racetrack. We believe there’s an opportunity to create an incredible immersive experience with data, video and audio for the fan sitting in their seat; so, they can feel the vibrations going through them while watching lap times, following how their driver is doing relative to other drivers and/or listening to radio communication between the crew chief and driver on their device.

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Leaked Documents Reveal Plans for “Super League”, FIFA Threatens World Cup Ban

SuperLeague

On November 2nd, German magazine Der Spiegel leaked documents (internal emails, confidential presentations) indicating 7 elite European football clubs (Real Madrid, Barcelona, Bayern Munich, Juventus, AC Milan, Manchester United and Arsenal) considered leaving their respective domestic leagues, to form a “Super League” back, in 2016. The bombshell report has reignited speculation that select clubs could “break away” with Europe’s top teams wealthier and more dominant on the field than ever before; the league would showcase 16 teams and start in ’21. FIFA and +/-6 European domestic soccer federations would be in opposition (see: lengthy lawsuit), believing the league’s formation would effectively put an end to domestic soccer, but European football has a history of clubs “breaking away”; the Premier League was formed in ’92, when the most successful English clubs sought to “maximize television revenues and retain a larger share” and opted to split from the old Football League First Division.

Howie Long-Short: Rumors of a “Super League” forming are not new, so the talk should be met with more than a little skepticism.

The UEFA strategy council met with players’ union officials and European league representatives on Wednesday. Each denied their knowledge of the proposed plan, saying it was the brainchild of “one and a half” clubs (Real Madrid and Bayern Munich). Real Madrid did not send a representative to the meeting.

If Europe’s elite clubs are to “break away”, it would be in pursuit of a financial windfall (see: broadcast dollars), while eliminating the threat of relegation (for 20 years). The 11 elite clubs “breaking away” would receive ownership in the new league, while 5 others would be invited to participate.

FIFA is already on record opposing the formation of a “Super League” and threatening to ban any player who were to participate from future World Cup competition. Their decision matters as the international governing body for the sport, but they’re not exactly impartial arbiters on this topic; back in March, FIFA proposed plans for a revamped “Club World Cup” that would debut in ’21 and include at least 12 European clubs. The quadrennial tournament (currently annual) would increase the number of participants from 7 to 24, with the teams splitting $2 billion in prize money. UEFA, which perceives an expanded “Club World Cup” as a threat to its Champions League strongly opposes the FIFA’s plan. Softbank (SFTBY) was named among the consortium of investors (includes: UAE, Saudi Arabia) that would fund the tournament.

Fan Marino: On a final note on FIFA, President Gianni Infantino said that it’s possible the World Cup would expand to 48 teams in ’22 (previously planned ’26); the decision would be contingent upon another Middle Eastern country’s willingness to share hosting responsibilities with Qatar.

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