There are indications that the NFL is looking to establish a franchise in London by 2022 with NFL Executive VP of International and Events saying “the next 4-5 years should be very doable”. The international metropolis has proven to be filled with fans (selling out all but one game since 2007), is a lucrative TV market (with more people than Los Angeles) and has the stadium infrastructure (Wembley, Twickenham, Tottenham) in place to house a team. The league believes a London franchise is “viable”; but concerns remain about the team’s ability to compete for a Super Bowl. Player willingness to live abroad, higher U.K. income tax rates and the strenuous travel schedule are among the issues the league still needs to work through.
Howie Long-Short: Speaking of Tottenham (who is building a new stadium the NFL is contracted to play 2 games/year at for 10 years), they are among 6 Premier League clubs (Manchester United (MANU), Manchester City, Chelsea, Arsenal, and Liverpool) looking for an increased shared of the $1.34 billion/year the league earns in overseas broadcast rights. The 6 clubs argue their popularity drives international revenues and therefore should be entitled to a larger share. The 20 clubs, which currently split the fees equally, are scheduled to meet today with revenue sharing on the discussion agenda. It’s worth noting that even the small Premier League clubs are still being paid large sums of cash. The 20th place team that was relegated last season, still made more in broadcast revenues than Juventus (OTC: JVTSF) and Bayern Munich, which won their respective leagues.
Fan Marino: As I wrote last week, it’s only a matter of time until the Jacksonville franchise relocates to London. The league isn’t going to expand, as 8 4-team divisions work, so moving a small market team seems most likely. A move from Jacksonville to London would increase the value of the Jaguars franchise by at least $1 billion. There are 2 other franchises to keep your eye on. If Buffalo and San Diego (I’m not convinced the Chargers remain in LA) fail to get their stadium situations settled, I would expect both franchises to explore London as a relocation option.
A whole new ball game: will London get its own NFL team?
The deadliest mass shooting in modern U.S. history had an immediate effect on the stock market, with MGM Resorts International (MGM) losing over $900 million in market cap (to $17.8 billion); with shares down nearly 6% (to $30.87) at the close of trading on Tuesday. The Mandalay Bay Casino, operated by MGM, is the site where shooter Stephen Paddock opened fire. With 13 properties (accounting for 57% of revenue) on the Las Vegas strip, MGM is the most exposed Sin City casino operator should tourists decide to stay away from Vegas in the wake of the tragedy. MGM shares were up 19% over the last 12 months prior to Sunday night’s massacre.
Howie Long-Short: The horrific news out of Las Vegas drove down MGM share prices, but MGM China Holdings’ announcement that the company is delaying the opening of its new hotel in Macau, from late ’17 to early ’18, certainly didn’t help. Damage from Typhoon Hato in August has been cited as the cause for the delay. Casino shares typically see a bump around a new opening and with the company banking on Asia for future growth, short-term investors were likely dismayed by the news.
Fan Marino: Shares of American Outdoor Brands (AOBC), formerly Smith & Wesson, and Sturm Ruger (RGR) are up 5.7% and 5.6%, respectively (at the close on Tuesday, from the close on Friday 9/29). Gun stocks typically rise following a mass shooting, as investors expect sales to spike amid discussion of gun restrictions. It’s disturbing to consider that there have been enough mass shootings in recent U.S. history to formulate predictive trends. JWS isn’t a political forum, but we should all be able to agree that there is no reason for a civilian to own a weapon capable of firing 400 bullets/minute.
After Las Vegas Shooting, Casino Stocks Fall and Gun Stocks Rise
Alibaba (BABA) Digital Media and Entertainment Group has announced the acquisition of mobile gaming company Ejoy and its plans to launch a new games division; just 6 months after laying out plans for a $145 million venture into mobile gaming distribution. The new division will develop its own titles and leverage the resources of BABA sister platforms, like online videos and movies, to push its way in to the world’s largest gaming market. The Chinese online gaming industry was last estimated to be worth $11.8 billion and is expected to grow to $27.5 billion by the end 2017.
Howie Long-Short: While late to the game, Alibaba is not new to the gaming sector. In 2014, the company made a $120 million investment into mobile gaming co. Kabam, the developer behind Marvel: Contest of Champions and Kingdoms of Camelot. The expected growth within the industry certainly provides BABA the opportunity to carve out market share, but they have some ground to make up; competitors Tencent (OTC: TCEHY) and NetEase (NTES) currently bring in 70% (41.2% and 28.5% respectively) of all Chinese online gaming revenues collected. It is worth noting that online gaming revenues accounted for 47% of TCEHY’s 2016 total revenue.
Fan Marino: Retired gamers and nostalgia junkies spent last weekend on their couches, as Nintendo re-released its classic Super NES system on Friday September 29th. The console, originally released in November 1990, includes 21 games including classics; “Super Mario World” and “Yoshi’s Island”. The biggest complaint I’m hearing about the re-released version? The controller wires are still too short! The more things change, the more things stay the same.
Alibaba Is Making Bold Moves in Online Gaming With Newest Acquisition
Reports indicate that Sports Direct (OTC: SDISY), the U.K.’s largest sporting goods retailer, is in talks to buy Finish Line (FINL). SDISY currently owns 8% of FINL, but a recently added “poison pill” shareholder rights plan, designed to prevent the unwanted takeover of the company, caps their potential ownership at 12.5%. It now appears that FINL’s adoption of the “poison pill” was a negotiating tactic, as opposed to a move to prevent a merger. Talks are apparently far enough along that an announcement could be made within the next several weeks.
Howie Long-Short: Susquehanna Group Analyst Sam Poser estimates that should the sale go through, the buy-out price would be $13.30. Sports Direct would continue to operate as Finish Line in the U.S., but would create a “DSW of athletic shoes” that would sell its lower priced sneakers. Considering shares are down 37% YTD, that 70% of its business comes from NKE products and that NKE is putting less stock in its wholesale business, shareholders would seem lucky to receive this bailout.
Fan Marino: FINL reports that 70% of its customer traffic comes from mobile, so the company has been focused on getting its web pages to load faster, providing customers with the ability to return products directly on the website and adding in-store beacon and geofencing technology to connect the digital and physical shopping experience. It makes no difference to me. I’m a sneaker guy, there are no technology enhancements that can be made to get me to shop from the bargain shoe bin.
Report: Finish Line In Merger Negotiations With Sports Direct
The FBI investigation that lead to the arrest of 10 people for bribery and corruption within NCAA basketball, has lead Jay Bilas, Michael Beasley and others to argue that the issues at the root of the problem are the NCAA amateurism rules that prevent college athletes from being paid. Bilas points out that coaches are not bribed to accept jobs, because a free market ensures they’re paid what they’re worth. Beasley notes that while he helped to put Kansas State on the map, watching the school increase enrollment following his time in Manhattan; he isn’t compensated for driving that growth. Those that argue in favor of the current amateur system believe full scholarships that include; a free education, medical care and stipends constitute payment.
Howie Long-Short: There is certainly an argument for repurposing the fiscal resources dedicated to keeping up in the facilities arms race (“lazy river” at UCF, flat screen locker displays at Texas, imported foosball tables at Oregon) as compensation for revenue generating athletes; but I tend to believe that a $200,000 scholarship and the opportunity to graduate without carrying student loan debt, is fair compensation for all but a handful college athletes.
Fan Marino: Beasley makes the strongest case on behalf of college athletes. Those that sell jerseys and drive enrollment/endowment growth, should be monetarily compensated. Unfortunately, the thought process behind the balance of his comments is so flawed that it undermines the logical part of his argument. Beasley added that because the majority of college players fail to play professionally, they should be paid while in college. I fail to see how ones’ future earnings are relevant to the current exploitation they may be suffering from.
The basketball world is convinced that the bribery scandal engulfing college basketball comes down to paying players
The NFL is reporting that Thursday Night’s Bears/Packers game, the first to be streamed by Amazon (AMZN), saw 1.6 million people log-in to watch the game. The retail giant averaged 372,000 viewers, who watched for an average of 55 minutes; a significant increase from the 266,000 averaged during Twitter’s (TWTR) first stream last season. The comparison is noteworthy as Amazon required Prime members to log-in, while Twitter’s stream was free. 14.7 million people watched the game on traditional broadcast television (CBS).
Howie Long-Short: Amazon sold ad packages for their streamed broadcasts for $2.8 million. While the company will not state how many minutes are included within each package, they are offering advertisers a unique value proposition; the ability to track sales. AMZN is giving advertisers data reflecting the number of people purchasing or searching for a specific product, during or immediately after the ad streams. It’s a competitive advantage that not even Google or Facebook can match.
Fan Marino: Of course, the television audience destroyed AMZN’s viewership numbers. Size matters. No one is choosing to watch a game on their phone/tablet/laptop if the option to watch on a larger television screen exists.
Amazon’s First NFL Game Draws 372,000, a Fraction of TV Audience
comScore (OTC: SCOR) has reported that publishers who have pivoted to video, have seen at least a 60% drop in overall traffic. Fox Sports (FOXA), which made the decision in June to eliminate 20 writing and editorial positions, reallocating resources towards video production, editing and promotion; saw its audience decline an astounding 300%. Unique visitors dropped from 26.4 million in 2016 to just 9 million this past August, with time spent browsing on Fox Sports digital sites decreasing from 136 million minutes to just 56 million minutes.
Howie Long-Short: At the end of 2015, comScore acquired Rentrak; combining its expertise measuring web traffic with their expertise in TV audience metrics. The company appeared to be prepared to challenge Nielsen (NLSN), before receiving notification it was being delisted from the NASDAQ exchange for non-compliance with SEC filing requirements. In September, SCOR announced it had hired a new CFO, removed 7 members from the board, settled several class action lawsuits and is undergoing a “complex and time consuming” financial review that would delay filing statements, and any chance of being relisted, until at least March 2018. SCOR is currently being traded over the counter.
Fan Marino: Video ad spend is expected to rise from $10 billion in ’16 to $18 billion in ’20, so pivots to video are about publishers chasing ad dollars. Video is easier to monetize and is more valuable to advertisers, so on the surface it makes sense. Dig a bit deeper and you’ll notice that Fox Sports has experienced a significant decline in video viewership too (down from 1.4 million to 103K unique), meaning it is highly unlikely they are offsetting the loss of visitors with video ad dollars.
One For The Writers: Jamie Horowitz Torpedoed Fox Sports On His Way Out
Disney (DIS) and cable operator Altice USA (ATUS) have released a joint statement stating an agreement in principle has been reached, that the companies have extended Sunday’s deadline to finalize terms of the new deal and that ATUS would continue to carry DIS channels as negotiations continued. The deal ensures NYC area baseball fans can watch Tuesday’s Yankee-Twins playoff game (8p on ESPN). The dispute is rooted in the amount DIS wants ATUS to pay to continue carrying ESPN, ABC and other DIS channels on its Optimum cable service. In comments to the media, Altice has argued that Disney has asked for an “outrageous” increase over the terms of their expiring contract, considering viewership declines. DIS responded saying that ATUS charges their average customer $160/mo., with the “bulk of that money going in to their pocket”.
Howie Long-Short: Contract talks with Altice were the first of several Disney will have to have with cable operators over the next 2 years. In fact, contract negotiations over the next 24 months will cover more than 50% of Disney’s total pay-tv customer base; so setting the tone with this deal was crucial. DIS got a price increase (granted not as large as they had asked for) and convinced Altice to pick up carriage of the ACC & SEC networks. DIS won this round of negotiations and now appears well positioned moving forward. It’s clear cable operators will still pay for pricey sports channels despite viewership declines and streaming becoming more prevalent.
Fan Marino: Altice becomes the first cable provider to pick up carriage of the ACC Network. DIS plans to launch the new channel in 2019. NYC Optimum subscribers win here too; now receiving access to more P5 live game action.
Disney, Altice reach deal that avoids ESPN blackout
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