The rise of Esports, higher quality laptops (features include: smaller chips, better cooling systems and battery technology) and hit game titles (i.e. PlayerUnknown’s Battlegrounds) are driving a PC gaming rig resurgence. Gaming consoles currently dominate the market; with Sony (SNE) and Nintendo (NTDOY) expected to ship a combined 28 million consoles this year, compared to just 7 million PC gaming units. That gap is expected to close though, as PC gaming rig sales are on pace to grow 6.6% YOY through 2020; despite the gaming industry as a whole expecting a 3.8% annual decline. Console manufactures Sony & Microsoft (MSFT) have begun releasing upgraded versions of their machines to prevent further gamer deflection.
Howie Long-Short: When NTDOY reported their fiscal Q1 (period ending June 30) profits and earnings in July, the company reported profits of $145 million with revenues that had increased 150% YOY (to $1.37 billion). The success of the Switch console (sold 1.97 million in quarter) and mobile games (up 450% YOY to $80 million in revenue), Pokeman Go and Super Mario Run, have driven the stock price up 60% over the last 12 months.
Fan Marino: PlayerUnknown’s Battlegrounds, an online multiplayer survival game, has been downloaded more than 10 million times since March and holds the record for most concurrent players on Steam (multi-player gaming platform). The game consists of 100 players that parachute onto an island, scavenge for weapons and equipment, and kill others while avoiding death themselves. The last player standing is the winner.
PC Gaming Is Back in Focus at Tokyo Game Show
Sky Sports (SKYAY) paid $6.9 billion for the television broadcasts rights to the English Premier Football League, but their existing 3-year contract expires at the end of the 2018-2019 season. With a steady decline in television viewership, there is no guarantee Murdoch’s company will submit a bid meeting or exceeding the terms of their current deal. Manchester United (MANU) Vice Chairman Ed Woodard remains unconcerned; believing the next deal will fetch 30-40% more, with content hungry tech companies like Facebook, Amazon and Netflix waiting to “enter the mix”.
Howie Long-Short: MANU reported financial results for the full year ending June 30th, with revenues up 12.8% YOY (to ($789.2 million). Growth is being attributed to the Sky Sports contract, which helped to increase broadcasting revenues 38.2% YOY (to $263.6 million) as well as increased revenues from commercials, sponsorships, retail and licensing. The only negative for the company was losing 15% over the course of the year on digital output. As for Woodard’s optimism, I wouldn’t be so confident. Total media rights? Perhaps. For a television deal, I still think his best bet is Murdoch looking to protect his trophy asset.
Fan Marino: Forbes released a list of the world’s most valuable soccer teams, and MANU came out on top with a valuation of $3.69 billion. Barcelona, Real Madrid, Bayern Munich and Manchester City rounded out the Top 5. On the field, the Red Devils won the 2016-2017 Europa League Title. The championship qualifies them for the 2017-2018 Champions League, the most prestigious (and lucrative) competition in European football.
Manchester United Dreams of Mark Zuckerberg’s Billions
Nike (NKE) reported fiscal Q1 ’18 revenues remained flat YOY ($9.07 billion), with net income declining 24% to $950 million ($.57/share); attributing the loss in profits to gross margin decline (180 basis points to 43.7%) and a higher effective tax rate. The company posted strong revenue growth internationally (particularly in China, up 9%), but a 3% decline in the North American market weighed down the overall results. NKE launched its “Consumer Direct Offense” strategy during the quarter, designed to increase higher margin DTC sales and plans to spend the balance of fiscal ‘18 focused on global growth. An investor day is scheduled for October where the company will expand on its turnaround plan and partnership with Amazon (AMZN).
Howie Long-Short: For the first time, NKE chose not to report “future orders” (a metric beloved by investors). Future orders are a critical metric that measures wholesale demand. Nike argues that the measure no longer matters as the company is focused on building its retail business. Website revenues did grow 19% YOY and retail locations reported same store sales were up 5% over the same time, but retail still only makes up 28% of company revenues. Perhaps it isn’t coincidental that the decision came as orders weakened.
Fan Marino: Nike Elite Youth Basketball League, the company’s grassroots basketball division, has been served by the FBI with a subpoena as part of its investigation in to corruption within NCAA basketball. While the EYBL was not named in the case, Merl Code, who ran the division prior to leaving for Adidas (ADDYY) was. 3 of the 4 schools named thus far (USC, Arizona & Oklahoma State) are Nike schools, so I had been waiting for this shoe to drop. The 4th school, Auburn, has a contract with Under Armour (UAA). Now, it’s only a matter of time until the investigation ensnares them too.
Nike’s China sales are booming, as demand wanes in North America
Television programmers, operators and sports leagues have reportedly expressed interest in working with WinView; seeing the company as a potential new revenue stream in a changing sports media landscape that includes second screen viewing. The free ad-supported mobile application syncs with the live TV broadcasts and enables fans to make “prop” bets on sporting events; with the most successful players winning small cash prizes. The company plans to add an entry-fee option that will give users the opportunity to win larger payouts and intends on integrating with smart TVs so its service to run alongside game broadcasts.
Howie Long-Short: WinView owns a significant amount of intellectual property, securing 41 patents on its second screen live sports prediction platform. The company, which boasts of 130,000 users, raised a $12 million Series B round in May. Both Graham Holdings (GHC) and Discovery Communications (DISCA) participated in that round. The financing is being used to add sports to the platform (currently MLB, NBA & NFL are offered) and to expand beyond American sports through collaboration with DISCA’s Eurosport network.
Fan Marino: A prop bet is a novelty bet on an occurrence (or non-occurrence) within a sporting event (i.e. player X will run for more/less than 100 yards). Not confident in your ability to pick a winner? Tony Romo, who has been calling out plays before they occur, is doing color on the Bears/Packers game tonight. That’s your chance to win some money. Just follow his lead.
WinView pitches new proposition
Mark Cuban stated earlier this week that pro sports leagues can prevent cord cutting, by “advertising the fact that watching a game on television is the best viewing experience”. Cuban insisted that despite their popularity, streaming services like Facebook (FB) and Amazon (AMZN) are not viable competitors to cable and satellite providers for sports programming. While acknowledging streaming services have effected television broadcast ratings, the Broadcast.com founder pointed to the buffering issues created by bandwidth requirements/constraints, as the primary reason why TV remains a fans best option.
Howie Long-Short: NBA media rights are tied up through the 2024-2025 season, so Cuban isn’t negotiating through the media here. He’s right, television is currently the best way to watch a sporting event. Technology moves fast though and we’re not far off from a day when games on broadcast on cable, satellite and OTT streaming services are indistinguishable.
Fan Marino: I watched the Jags/Ravens game last Sunday morning; via the Amazon website, on my laptop. The feed was good, I didn’t experience any buffering, but the picture clarity wasn’t always HD quality. I’m not streaming games if the option to watch them on cable or satellite exists.
Sports leagues have ‘failed miserably’ at keeping viewers glued to their TVs, Mark Cuban says
MLB owners unanimously approved sale of the Miami Marlins franchise, from Jeffrey Loria to an investment group led by Bruce Sherman (46%) and Derek Jeter (4%), for $1.2 billion ($800 million in cash, $400 million in debt). Sherman, a venture capitalist, will act as the controlling owner; Jeter will oversee baseball and business operations. The sale is expected to close within the next week.
Howie Long-Short: The Sherman/Jeter group plans on slashing payroll (from $115 million to as low as $55 million), lacks the liquid capital necessary to carry a large payroll in the future and has no front office experience. This deal was approved because there simply were no other viable ownership options for the Miami franchise. The only other bidder Jorge Mas, balked at paying $1.2 billion for a business that is losing $70 million this season.
Fan Marino: Jeter & Co. have already started with some high-profile payroll cuts. Last week the group fired special assistants Jeff Conine (Mr. Marlin), Jack McKeon (who lead team to 2003 World Series Championship), Andre Dawson and Tony Perez. Giancarlo Stanton, who leads MLB in Home Runs and slugging, is 2nd in RBIs, 3rd in WAR (wins above replacement) and 4th in OPS (on base + slugging) is going to be the next to go; if the team can find someone to take the 10 years and $295 million remaining on contract. Christian Yelich and Dee Gordon are also likely to be traded. Marlins fans have seen this story before, it will be their 4th fire sale in the franchises’ 25-year history.
Baseball owners approve sale of Marlins to Derek Jeter group
Facebook (FB) and the NFL have announced a multi-year partnership that will bring game highlights and recaps to the Watch platform. Users worldwide will be able to view video from all 256 NFL regular season games + the playoffs & Super Bowl; while domestic users also get access to programming content from the league’s production arm, NFL films. It is important to note that the agreement does not provide Facebook with the rights to deliver live NFL game action. Financial terms of the agreement have not been released.
Howie Long-Short: Seems like a sensible partnership. Facebook adds premium content to their burgeoning Watch platform; while the NFL gets access to 2 billion users world-wide. The NFL needs to grow its game internationally for the value of its franchises to continue to skyrocket. U.K, Mexico, Germany and China are going to be the first to adopt the game.
Fan Marino: It’s only a matter of time until the Jaguars move to London. The Rams saw a 100% increase in value (from $1.4 billion to $2.9 billion) after moving from STL to LA; while the Chargers saw a 36% bump ($1.525 billion to $2.08 billion) after making the move from SD to LA. Jacksonville plays in the NFL’s 4th smallest market and London has a larger population than Los Angeles. Once Shad Khan can get the votes, he’s gone.
The NFL partners with Facebook to distribute game highlights and recaps on the social network
AT&T (T) subsidiary DirectTV is offering NFL Sunday Ticket subscribers offended by recent on-field player protests, the option to cancel the service and receive a full refund ($280). Sunday Ticket policy expressly states that refunds are not issued once the season begins, but the satellite provider has decided to make exceptions for customers who cite players kneeling during the national anthem as the reason for their cancellation. DirectTV does not intend on releasing the number of customers who choose to cancel the service.
Howie Long-Short: Sunday Ticket is DirectTV’s competitive advantage, so customers who cancel the NFL package may be inclined to cancel the satellite service entirely. With that said, I strongly doubt there are enough people, with strong enough convictions, to walk away from the NFL; to negatively affect revenues.
Fan Marino: I need to correct both Fox Business and President Trump for incorrect statements made. Fox Business referred to the players kneeling and locking arms as a “national anthem protest”. The players aren’t protesting the national anthem, they’re protesting racial inequality and police brutality. As for Trump, he tweeted on Tuesday morning that “the booing at the NFL football game last night, when the entire Dallas team dropped to its knees, was the loudest I had ever heard. Great anger.” Fake News. He’s been to Jets games with Sanchez or Geno starting at QB.
DirecTV allows some NFL refunds after anthem controversy
Adidas (ADDYY) executive, Jim Gatto, has been arrested on federal fraud and corruption charges; accused of conspiring with HS coaches to drive players to sign with a school sponsored by the brand. Gatto allegedly made and concealed payments to HS athletes and/or their families. The federal indictment goes on to allege payments were made to college coaches to influence student-athletes to sign endorsement deals with the company once they turned pro. Adidas has since put out a statement saying, “We’re unaware of any misconduct and will fully cooperate with authorities to understand more.”
Howie Long-Short: ADDYY shares have taken a hit since the news broke, finishing down 2.5% on Tuesday. The good news for shareholders though is that these charges are unlikely to hurt the company long-term. Their sneaker and apparel rights deals are all long-term contracts and there isn’t another P5 program set to hit the open market anytime soon.
Fan Marino: The schools wrapped up in this; Arizona, Louisville, Auburn and Oklahoma State are going to get hit hard with sanctions. Arizona and Louisville have the most to lose; heading into the 2017-2018 season with Top 5 teams. The threat of program crippling penalties now hangs over both teams, as does the potential of self-imposing a tournament ban in a year where they have Final 4 aspirations. As an Arizona fanatic, I prefer the school let the NCAA do an investigation (which will take months), make a run at its first Final 4 since 2001 and worry about vacating wins later.
A college basketball bribery scandal leads to arrests of 10 people — including an Adidas executive
Comcast Spectacor, the sports and entertainment arm of Comcast Corporation (CMCSA), purchased the expansion rights to the Philadelphia franchise of the National Lacrosse League. The team will begin play in December 2018; with home games set to be played at the Wells Fargo (WFC) Center. A fan vote will determine the team name. The NLL has an OTT streaming service with 25,000 paying subscribers. The league’s Game of the Week, which airs on Twitter (TWTR), draws an average of 350,000 views.
Howie Long-Short: Comcast Spectacor, which owns the Philadelphia Flyers, is the 4th NHL owner to buy an NLL franchise. It’s a smart acquisition for several reasons. The league demographics are attractive, with a high percentage of college grads; meaning the team should be able to demand strong returns on advertising and sponsorship opportunities. The digital first business model aligns with Comcast’s broadband business; as the service becomes essential for OTT subscribers. Most importantly, the company’s strength is in hosting events and building businesses around pro sports teams; both on the merchandising and sponsorship side. It’s what they do.
Fan Marino: Historically speaking, Philadelphia has been supportive of box lacrosse. The Philadelphia Wings won 6 championships over 28 years in the city; with the team regularly bringing in crowds of 10,000+/game. I’m bullish on their ability to build a fan base, as I don’t believe they are starting from scratch.
Fans get to vote on team name for new NLL Philly Lacrosse team