ESPN Acquires Soccer, Boxing Rights for ESPN+, Adding Subscribers Faster Than Expected

ESPN 200x200

ESPN has announced a multi-year deal with Italy’s Serie A to broadcast league matches in the U.S. Most games will air on the WWL’s subscription streaming service ESPN+ (340+), but a Match of the Week will be broadcast on ESPN or ESPN2; those matches also be available in Spanish on ESPN Deportes. The exclusive rights agreement with the Italian futbol league is set to begin on August 18th with Ronaldo’s Juventus debut (8.18.18) on ESPN+.

ESPN also signed a new 7-year deal with Top Rank Boxing to replace the 4-year agreement the companies agreed to back in the summer of 2017. The new pact calls for ESPN to bring fight fans 54 cards/year, 36 of which (includes 24 international cards) will be exclusive to ESPN+ subscribers.

Howie Long-Short: ESPN’s television subscription base continued to dwindle in fiscal Q3 (though not as fast as it had been), ad revenue declined (see: NBA Finals sweep) and programming costs increased, but the company still managed to post mid-single digit revenue growth (to $15.23 billion) for the quarter thanks to rising affiliate fees and “rapid growth in digital MPVD subscribers.” CEO Bob Iger added that ESPN+ is adding subscribers faster than projected. As for Disney, their cable networks business in aggregate reported a 5% decline in operating income (to $1.4 billion); their investment in ESPN+ was among the reasons given for the regression. DIS shares have fallen 2.5% since Tuesday’s earnings call, closing Wednesday at $113.98.

For those wondering about the 22 Fox RSNs, Iger did mention that “the process of selling them” is underway. We wrote on June 29th, that an “established linear player” was most likely to acquire the RSNs (minus YES); mentioning CBS (think: CBS Sports HQ), Turner Sports (T, B/R Live) and Discovery Communications (DISCA, which has made a significant push for rights in Europe) as possible landing spots. Add Sinclair Broadcast Group (SBGI) to that list. CEO Chris Ripley expressed interest in the assets on their earnings call this week, calling them, “a good fit with the broadcast footprint and operations.”

Fan Marino: ESPN’s EVP of Programming & Scheduling Burke Magnus has been vocal about making “ESPN+ home to the world’s best soccer leagues” and by proxy, “an indispensable destination” for domestic soccer fans. While it’s an admirable goal and one that would certainly grow subscriptions, it’s certainly not representative of the splintered market we have today. In fact, with rights spread out amongst so many broadcasters U.S. soccer fans are likely to have to choose the leagues/games they’re willing to forego. It’s certainly not reasonable to expect fans to sign up for ESPN+ ($4.99/mo.) B/R Live ($7.99/mo.) NBC Sports Gold ($50/season) etc. and still carry a $80+/mo. cable bundle to watch games on ESPN, Fox Sports and BeIN.

It needs to be noted that Top Rank will not be promoting the 24 international cards contained within their deal with ESPN. Bob Arum & Co. acquired the U.S. broadcast rights from Frank Warren (U.K.), Zanfer Promotions (Mexico) and Teiken Boxing (Japan).

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Stan Kroenke To Complete Takeover, Acquire Remaining 33% Stake in Arsenal Football Club

Arsenal (1)

Alisher Usmanov has accepted Stan Kroenke’s offer of +/- $700 million (at $2.3 billion valuation) for his 30% stake in Arsenal, effectively giving Kroenke Sports & Entertainment (KSE) full ownership of the Premier League club. Upon closing, Kroenke who already controlled 67% of the franchise will surpass a key threshold under UK takeover law; anyone owning more than 90% of a company’s shares can force the remaining shareholders to sell their stake. Kroenke intends on purchasing the remaining 3% of the franchise from Arsenal Holdings shareholders at a price of +/-$38,000 per share. It must be noted that KSE’s acquisition is being funded by a loan, a fact that has Arsenal Holdings shareholders particularly upset.

Howie Long-Short: Arsenal Supporters Trust (AST), the club’s largest fan group, claims that by Kroenke taking AFC private AST fans are being forced to give up their role as “custodians who care for the future of the club.” Sure, they’ll lose their access to annual general meetings and there will be a delay in financial reporting, but to suggest their participation is crucial to the club’s success is laughable; even Usmanov, who controlled 30%, hasn’t had any voting power or influence since Kroenke took majority ownership back in ’11.

Forgive me if I’m underestimating the impact of this deal. As an American sports fan, I’m used to blindly rooting for my favorite teams without ever having the opportunity to hold them accountable.

Fan Marino: Kroenke’s decision to take the club private is unlikely to make much of an impact on the pitch, but Arsenal fans are going to notice plenty of changes when their Premier League season gets started this weekend (Sunday against Man City). Unai Emery has replaced Arsene Wenger following a 22-year run as the club’s manager.

Arsenal becomes the 5th professional sports franchise under the KSE (Kroenke Sports & Entertainment) umbrella. They also own the Los Angeles Rams, Denver Nuggets, Colorado Avalanche and Colorado Rapids (MLS).

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Activision Blizzard Sells 2 Overwatch League Expansion Franchises

activision_blizzard

Activision Blizzard (ATVI) has confirmed the sale of 2 Overwatch League (OWL) expansion franchises, Atlanta and Guangzhou (China), and it’s been reported the company is in talks with McCourt Global (an LA-based holding company) to add a team in Paris; though the league has not confirmed that story. With the addition of Atlanta and Guangzhou, ATVI has now sold 14 OWL city-based franchises and it’s likely that number will continue to rise before the start of Season 2; ATVI eSports Leagues CEO Pete Vlastelica has stated it’s his intention to add 6 new cities (12 participated in Season 1) prior to the start of the ’19 season. The Georgia-based conglomerate Cox Enterprises (think: Cox Communications, autotrader.com), in collaboration with Province, Inc. (a consulting firm), will run the Atlanta franchise, while the financial and entertainment conglomerate Nenking Group bought the 2nd China-based OWL team.

Howie Long-Short: Each of the founding 12 city-based franchises paid $20 million for their spots. After a strong inaugural season (they sold-out the Finals at Barclays Center), the cost of participation has already risen by at least +50%; the next 6 franchises (including Atlanta and Guangzhou) to join the league will pay between $30 million-$60 million, depending on the volume of bidders, the market size and density of talent within the city.

Any concerns that the enthusiasm surrounding Fortnite would hurt Activision Blizzard were alleviated as ATVI reported record revenue and EPS for H1 ’18 on August 2nd. The company also set a record for mobile revenue in Q2 ’18 and grew net income +65% YoY (to $402 million) during the most recent quarter. The good times are expected to roll through H2 ’18, with several notable games scheduled for release including; Call of Duty: Black Ops 4, World of Warcraft: Battle for Azeroth and Destiny 2: Forsaken. Despite an earnings report that beat analyst expectations, ATVI shares are down 5% since; as the company’s full year forecast fell short of analyst projections. Activision Blizzard remains up 11% YTD, closing on Tuesday at $70.23.

Fan Marino: Did you know, Patriots owner Bob Kraft, Mets COO Jeff Wilpon, Rams owners Stan & Josh Kroenke, Sacramento Kings co-owners Andy Miller/Mark Mastrov, Texas Rangers co-owner Neil Liebman and the CEO of Comcast Spectacor (owns Flyers) Dave Scott are among the pro sports owners that have purchased (or made an investment into) OWL franchises? You can now add Nenking Group to the list, the company owns the Guangzhou Long Lions of the Chinese Basketball Association.

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X Games Experiences Massive Growth Across All Channels

X Games

X Games Minneapolis 2018 experienced double-digit growth on linear television and triple-digit growth across digital/streaming services and social networks. Long considered to have a niche audience, television viewership for the 4-day action sports competition rose +38% YoY across ESPN, ESPN & ABC (DIS); it was the 2nd straight X Games (X Games Aspen 2018) to experience double-digit growth. On digital/social, X Games’ YouTube Channel subscribers streamed over 26 million minutes of extreme sports competition (+646% YoY), Facebook fans tallied 4 million video views (+210% YoY) and the number of Instagram videos watched rose +225% YoY; authentic “behind the scenes” access (i.e. not staged) and instant highlights of tricks, made usage of the that app a must for second screen viewers.

Howie Long-Short: The 38% YoY increase in television viewership comes with a caveat. The 2017 Summer X Games were the lowest rated Summer X Games in history; a -35% decline from 2016. With that said, the double-digit increase is noteworthy because pay television trends are going in the wrong direction. Demo reported that Q1 ’18 viewership declined -56% within the 12-17 age demo, -48% in the 18-24 demo viewership and 34% between 25-34 year olds. When you consider those figures, you must applaud ESPN for growing X Games viewership with fans in both the 18-34 (+34%) and 12-34 (+21%) demographics.

Fan Marino: Rising attendance (+8% to 119,000) can be attributed to X Games placing a greater focus on the “X Games Experience” (i.e. giving fans entertainment options beyond just the competition). What was once solely an action sports showcase has morphed into an experience that blends action sports with art, food and music; Ice Cube, Kaskade and Zedd headlined at this summer’s Games.

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President Eric Winston Discusses OneTeam Collective, NFLPA’s Athlete Driven Accelerator

NFLPA

The NFLPA, via OneTeam Collective (its athlete driven accelerator), recently acquired a minority stake in SportsCastr Powered by FanChain; a live-streaming platform that gives anyone the opportunity to become a color commentator. The collaboration enables active and former NFL players to provide fans with unfiltered commentary on a wide range of sports. JohnWallStreet had a chance to sit down with NFLPA President Eric Winston (in his 3rd term) to find out who’s vetting the ideas on behalf of OneTeam Collective, to ask if the NFLPA plans to profit off legalized sports betting and to find out how the players can work towards a CBA that includes fully guaranteed contracts. 

JWS: Who is vetting the ideas on behalf of One Team Collective?

Eric: We have a board of guys. Obviously, Ahmad Nassar, the President of Players Inc. is involved. Modrona Venture Group and Intel sit on some of the investment committees that evaluate these deals. We also have an athlete advisory board that contributes, Kelvin Beachum, Dhani Jones, Isaiah Kacyvenski, Russell Okung; these guys are big into tech and are closely following what is occurring in the wearable-tech world. Ahmad and De(Maurice Smith) ultimately make the final decisions.

JWS: Does the NFLPA intend to profit from legalized sports betting?

Eric: We’ll see, our priority is to protect the players. I’m worried about the guy who misses a FG at the end of the game coming under investigation, or the player who drops a pass in the end zone, or falls down; the things that happen in every ballgame, now have everyone under a cloud of suspicion. That’s not a world any player should have to live in. I do think there will be some commercialization opportunities down the road (re: sports betting), but who knows what that landscape is going to look like.

JWS: Teaching “financial literacy” has been among your priorities as NFLPA President. What is the difference between your program and the financial training NFL players had been receiving?

Eric: I noticed coming up that topics being talked about were way too advanced or they weren’t applicable, talking about yield rates when we should be talking about burn rate. We should be talking about what taxes are, what a deductible is. I call them the start-up costs of life.

JWS: There’s been a lot of talk about a potential lockout following the 2020 season. Are guaranteed contracts the single biggest issue from the players’ side?

Eric: There’s nothing in the CBA right now that prevents a fully guaranteed contract, look at Kirk Cousins’ contract. Now, from an NFLPA/CBA standpoint we need to continue to break down the barriers to get guys to free agency, to give them maximum leverage to demand more player friendly terms.

Similarly, there’s nothing in the CBA language that says MLB and NBA players must have guaranteed contracts; a bunch of players just decided they’re not playing unless they get it and now that they’ve gotten it, it’s become the norm. I think that’s the approach we’re going to need to take. At the end of the day, guys like Kirk are going to have to demand guaranteed contracts or somewhat guaranteed (60%, 70%, 80%) and I think that’s how you keep inching towards it.

JWS: Chris Paul and LeBron James are the President and Vice President of the NBPA. If Tom Brady or Aaron Rodgers were at the forefront of the NFLPA’s push for guaranteed deals, do you think the issue would garner more serious consideration from owners?

Eric: Are you trying to say that I wasn’t a very good player? (laughing) I don’t know, Thomas Davis just came off our executive committee and he’s been an all-pro. Kevin Mawae is probably going to be a Hall of Famer and he was the President at one point. Drew Brees has been an Executive Committee member, so we’ve had big names. I don’t necessarily think you have to be a star player to galvanize the players and to move the needle. Our guys know who the guys in the locker room are that care and they want those guys to lead. In ’11 you saw Peyton Manning and Tom Brady put their names on that lawsuit, they’ll be there; just because they’re not a rep doesn’t mean they’re not supportive or that they’re not willing to go to war with the rest of us.  

Howie Long-Short: OneTeam Collective can offer start-ups a lot of things (access to the NFLPA’s brightest stars via licensing, marketing and content rights, research and development and mentorship for product development and marketing support), but capital is not one of them; the accelerator does not make cash investments on behalf of the players as a group.

SportsCastr Powered by FanChain is a privately held company. I’m not aware of any ways to play the start-up.

Fan Marino: Wondering what FanChain is? If SportsCastr is successful, it’ll become the cryptocurrency of choice in the global sports market; they’re currently working with various teams/leagues/media publishers to add FanChain support. In the meantime, SportsCastr users can earn tokens for participating on the platform; tokens redeemable for premium NFL player content (think: back-stage access), to purchase sports tickets or merchandise, or to send virtual gifts to NFL players.

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Mississippi Becomes 4th State to Offer Legalized Sports Betting, William Hill Partners with 11 MS Casinos

Seal of Mississippi

Mississippi became the 4th state (NV, NJ, DE) to offer legalized sports betting on Wednesday August 1st, with the opening of sportsbooks at the Beau Rivage Casino in Biloxi and Gold Strike Casino in Tunica; properties owned by MGM Resorts International. The newly passed legislation allows for sports fans in the state to place bets on individual sporting events at land or water-based “legal gambling establishments” (i.e. casinos). MS sports bettors who wish to place in-game bets will be forced to visit their local casino as mobile betting will be restricted to those on the casino’s physical premises.

Howie Long-Short: Mississippi Rep. Richard Bennett believes legalized gambling will be a boon to the state’s tourism business declaring, “Mississippi welcomes you. We hope you’ll come, wager on sports betting and see what we have to offer in the Hospitality State”; and he just might be on to something. No other state in the deep South offers legalized sports betting and neighboring Alabama is responsible for more illegal college football bets per capita than any state. Wondering how long will this advantage last? According to Dustin Gouker of LegalSportsReport.com, Mississippi’s advantage (see: no competition) is likely to last “at least a year and feasibly longer”; with Louisiana, Tennessee and Kentucky the states most likely to join the party first.

In addition to MGM, Boyd Gaming (BYD) and Caesars Entertainment (CZR) both own gaming properties in MS. Speaking of BYD, just 2 days after the company announced a market access agreement with MGM Resorts International (MGM), BYD revealed it had aligned with FanDuel Group (PDYPY) to run online and mobile sportsbook operations in the U.S. FanDuel technology will power Boyd Gaming branded online and mobile sportsbook operations, while FanDuel Group will leverage BYD’s 15 state licenses (36% of population) to operate FanDuel branded online and mobile sports betting services in those states; the deal extends to MGM properties in states where mobile sports betting is authorized.

Fan MarinoMGM got out of the gate first in MS, but William Hill has made the greatest inroads, announcing partnership agreements with 11 MS casinos (and another West Virginia). WIMHY, which now operates in all 4 states that offer legalized sports betting, has no intentions of slowing down either; in fact, they recently stated their intentions to add gaming partners in 14 more states, Rhode Island being one of them. The company will offer “operational expertise, risk management and trading data” to support IGT, should their bid be selected in the Ocean State; IGT was the only company to submit a bid to provide sports betting within RI.

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WNBA Reports Double-Digit Viewership and Merchandise Sales Growth, Announces League-Wide Sponsorship Deal

WNBA

The WNBA held its 15th All-Star Game on Saturday June 28th (in Minnesota) and unlike the 2018 MLB (-6% YoY), NBA (-1% YoY) and NHL (-10% YoY) All-Star Games, viewership increased +17% YoY (to 709,000 viewers); making it the league’s 2nd most watched ASG since ’13. The viewership increase for the midsummer game follows the first half of a season that saw the number of viewers tuning in per game rise +35% YoY across ESPN2 & NBATV and +38% YoY (to 247,000) on ESPN. It’s not just increasing television viewership numbers that indicate the league is on an uptick though, merchandise sales on the league’s website are up 50% YoY and Puma recently announced a league-wide footwear partnership with the WNBA; the company’s first deal with a pro sports league. Atlanta Dream forward Angel McCoughtry took notice of all the progress, calling 2018 “the year of the woman.”

Howie Long-Short: While the partnership deal with Puma is significant and the merchandise sales growth has been impressive, WNBA bulls might want to temper their excitement surrounding the ASG. Even with a +17% YoY increase, the 709,000 viewers that tuned in represented just the 9th largest audience in WNBA ASG history.

As for Puma SE (PMMAF), the company reported a +42% YoY increase in profits (to +/- $36 million) on revenues that rose a currency adjusted +15% YoY (to $1.2 billion) during Q2 ’18, as all regions and product segments reported double digit growth. Quarterly financials would have looked best had the euro been stronger, the national teams they sponsor performed better and if they were seeing returns (not just marketing expenditures) on their basketball business. Shares dropped -5.5% on the news and have continued decline since, closing on Friday at $487.00.

Fan Marino: EA Sports (EA) has taken notice of the rising popularity of the WNBA and acted accordingly. The company announced that gamers will have the option to create female players, in career mode, in NBA Live ’19 (launches 9/7) and that female player “abilities and perks” will be modeled after WNBA stars like Candace Parker. The announcement comes just one year after all 12 WNBA teams were included in the game for the first time. This isn’t the first-time EA Sports has included female players in its games, the company’s hockey series first included women in “Be a Pro” mode back in ’11. In that game, females and males competed against each other; all EA Sports UFC and FIFA games since have featured single-sex matches.

Fun Fact: 68% of the WNBA audience on ESPN 2 is male.

Fun Fact 2.0: Just 7% of the WNBA’s audience on ESPN 2/NBA TV is female and under the age of 35.

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Lawsuit Could Result in NCAA Adopting “Olympic Model”, Josh Rosen’s Radical Solution

U.S. District Judge Claudia Wilken will hear the case of Martin Jenkins (former Clemson football player) v. NCAA in December and determine if the NCAA’s system of capping the value of athletic scholarships promotes competition between schools or stymies the market for student-athlete services (i.e. would the value of a scholarship increase if it could be used as a recruiting tool?). Student-athletes on a whole would benefit most from an “open market” (i.e. schools can offer whatever it takes to land a recruit), but a decision that the NCAA has been in violation of anti-trust laws is far more likely to result in a “less restricted market.” One proposed solution would be for college athletics to adopt the “Olympic model”, a resolution that would allow for student-athletes to be compensated for the use of their name, image and likeness while maintaining their eligibility. Regardless of the decision Wilken makes, it’s expected that the losing side will appeal the case to the Supreme Court.

Howie Long-Short: Of course limiting scholarships to “tuition, fees, room, board, course-related books and other expenses up to the value of the full cost of attendance” stymies the market for student athlete services; college athletic departments (and the boosters who support them) value winning above all else. They spend on coaches and facilities (which were recently shown to have little to no impact on recruiting decisions), so why wouldn’t they spend on the players too if permitted by NCAA guidelines?

The Olympic model (think: endorsements, commercials for star players) makes a lot of sense, if you believe that academic scholarships are fair compensation for most student-athletes; as I do. Student-athletes in revenue generating sports are awarded scholarships worth +/-$200,000 and can graduate debt free, as their classmates finish their studies with +/-$40,000 in debt. You don’t think a college scholarship is valuable? Tell that to someone making $30,000 and paying +/- 20% (average of $351) of their monthly post-tax income towards repaying student loans.

Fan Marino: Josh Rosen, who studied economics at UCLA, has developed a solution (with 2 partners, here’s the formal presentation) that would allow for student-athletes to pursue revenue generating opportunities while in college and still maintain their amateur status. The concept is built around the use of a “Clearinghouse” that would serve as an intermediary between the players and potential endorsers (eliminating need for agents). The “Clearinghouse” would negotiate all deals and hold player funds pending graduation; players that fail to graduate, are ineligible to compete or commit felonies forfeit any money earned. It’s a radical idea, but I’m for one that incentives student-athletes to graduate. As the saying goes, most of these guys will go pro in something other than sports; the degree will come in handy.

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