The Ohio State University is the most valuable college football program, valued at $1.5 billion (up 59.6% YOY); according to a study by Ryan Brewer, an associate professor of finance at IU-PUC. Brewer analyzed teams as if they would be sold on the open market, as a professional franchise; using 2016 revenues and expenses, making cash-flow adjustments, risk assessments and growth projections. The Football Bowl Subdivision saw teams increase in value by an average of 26% (YOY), the result of increasing revenues (+19% YOY) and cash flow (+26% YOY). The SEC had 5 of the Top 10 most valuable teams and the highest average team value ($523 million).
Howie Long-Short: T-Boone Pickens has donated (i.e. given away) $500 million to Oklahoma State University. I know Oklahoma State’s program is worth more than $285 million on an open market. In fact, every single program on the list is; and I would think by at least 100%.
Fan Marino: OSU back-up QB Joe Burrow astutely pointed out that his team is worth $1.5 billion, yet he’s not being paid. He fails to mention his scholarship is worth at least $200,000, he’ll graduate with no debt and he’s been given the opportunity to receive an education from a school he may, or many cases may not, be otherwise qualified to attend. He’s welcome to go play professionally (and get paid) in Canada (CFL); but he won’t, because he’s got a better deal at Ohio State.
How Much Is Your College Football Team Worth?
The Men’s ATP (Tennis) tour has announced that the Finals of Next Gen ATP Tournament (Nov. 7-12) will feature electronic line calling for all shots, for the first time at an ATP sanctioned event. The Hawk-Eye Live system shows replays of close shots on stadium screens, so that both the competitors and the fans in the stadium can determine where a ball landed. The technology is currently utilized on contested replay reviews at other tour stops. The season ending tournament will showcase the top players under the age of 21, and include several other experimental rule changes including; 4 game sets, no lets and a serve clock.
Howie Long-Short: Hawk-Eye is a subsidiary of Sony (SNE). While terms of the 2011 acquisition were never released, it was estimated SNE paid upwards of $32 million for the ball-tracking technology.
Fan Marino: The Hawk-Eye Live system uses 10 cameras, set at the center and base lines, to calculate the path of the ball. The system reportedly has a 2.6mm error rate. While that is impressive from a technological standpoint, fans should be concerned about the false transparency it creates. Hawk-Eye makes its decisions based on modelled reconstructions, not the actual video; yet encourages its viewers to believe the reconstructed image without acknowledging room for error. In other words, don’t believe everything you see!
HAWK-EYE SET TO REPLACE OFFICIALS AT NEXT GEN ATP FINALS IN ITALY
Forbes released its annual list of NFL team valuations and for the 11th straight year the Dallas Cowboys are on top, up 14% YOY ($4.8 billion). The Patriots, Giants, Redskins, 49ers and Rams also scored valuations north of $3 billion. On average, team values increased by 8% YOY (up to $2.5 billion), with the NYJ being the only team that did not see growth YOY. Valuations have skyrocketed over the last 5 years. In 2012, the Cowboys were the only team worth $2 billion; now all but 5 teams are, with the lowest valued team at $1.6 billion (Buffalo).
Howie Long-Short: Operating profits were on average a record $101 million/team last year, with every single team making at least $40 million; but somehow Forbes doesn’t think the Jets increased in value. It’s laughable to peg the team at just $2.75 million. NBA teams are now going for $2 billion+. The Jets/Giants each own 50% of a $1.2 billion stadium. If a NY based NFL team ever hit the market, the number would be closer to $4 billion than $3 billion.
Fan Marino: The Raiders are up 14% YOY (behind only ATL, DAL and N.O.), so from a fiscal perspective, the decision to announce the move to Las Vegas was the correct one. Then you see this, this, and this, and know the league should have done more to keep the team in Oakland.
The Dallas Cowboys Head The NFL’s Most Valuable Teams At $4.8 Billion
CBS, NBC (CMCSA), FOX (FOXA) & ESPN (DIS) expected to generate $2.5 billion in advertising revenues during the 2017 season; but a 12% YOY ratings decline in Week 1, followed by a 15% YOY decline in Week 2, may indicate the networks will fall several hundred million dollars short of that estimate. A 10% viewership decline would likely cost the networks more than $200 million in potential earnings. Between the Sept. 7 start of the NFL season and the end of Week 2, shares of DIS, CMCSA & CBS were down 3, 5 and 7% respectively; with shares of FOXA up 2%.
Howie Long-Short: Look for the league to change its stance on legalized gambling should the ratings continue to slide.
Fan Marino: How come no one wants to talk about the fact that since 2009, only 3 QBs drafted (and still starting) have won a playoff game (Russell Wilson, Cam Newton and Andrew Luck). The product is stale.
NFL TV Ratings Slide Worries Wall Street
XTECH Protective Equipment has revolutionized football equipment; utilizing military grade XRD foam to create state of the art shoulder pads. The 6 year old company manufactures and distributes pads marketed as the lightest weight, most protective product on the market. Super Bowl Winning Coach Brian Billick is an investor in the company, which now boasts of players on 28 NFL teams wearing its product including; Khalil Mack, Eli Manning and Odell Beckham Jr.
Howie Long-Short: XTech has an exclusive contract with XRD Impact Protection for using its foam in NFL, college and youth football pads. XRD is owned by Rogers Corporation (ROG), a technology company focused on creating innovative solutions for power electronics, advanced foams for cushioning and protective sealing, and high frequency printed circuit materials. The company reported net sales of $201.4 million for Q2 ’17 (up 27.9% YOY) and gross margins of 40% (a record), up 180 basis points.
Fan Marino: Players like the pads because they can hit hard without feeling anything. Don’t take their word for it? Watch Founder Bob Broderick slam his bare hand with a helmet.
Revolutionary shoulder pads catching on in NFL
Research firm NPD Group reported that Adidas (ADDYY) has overtaken Jordan Brand as the 2nd best seller of U.S. sport footwear (NKE, which they track separately from Jordan Brand, remains number one). ADDYY sales rose 41 and 45% respectively over the last 2 quarters, increasing the company’s market share to nearly 13% (NKE has 44%, Jordan Brand has 9.5%). The rapid growth is stunning when you consider the company had just 4% of the market and forced its CEO out, as recently as 2015. NPD Group’s Matt Powell said “I’ve never seen a brand in the sneaker industry grow this fast.”
Howie Long-Short: Basketball shoe sales were down 40% for the month of August, with UAA sales down 50%, Jordan Brand sales down 33% and NKE sales down mid-single digits. That trend didn’t seem to effect Adidas though, their basketball sneaker sales rose 40%. When you’re hot, you’re hot.
Fan Marino: “Yeezys jumped over the Jumpman”, but it has little to do with Kanye’s signature line. His sneakers are produced in such limited numbers, their sales don’t move the needle on the company bottom line. The Superstar, NMD and Stan Smith are driving the Adidas resurgence.
Adidas passed Jordan Brand as the 2nd-biggest U.S. sports shoe brand. That’s a big deal.
ESPN (DIS) released confidential NBA financial records indicating 9 of the league’s 30 teams lost money during the 2016-2017 NBA season; despite the teams combining to generate $530 million in net income. While the league has a $24 billion TV contact that is equally shared amongst its 30 franchises; each team negotiates their own local media rights deals, giving a significant financial edge to the teams in the largest markets (The Lakers received $149 million from Time Warner (TWX) for ’16-’17 season, while the Grizzlies received a league low $9.4 million). With total league revenues determining the salary cap (and floor), local revenues keep teams profitable, and that has small market owners concerned. If the large market teams can pay significant luxury tax penalties while remaining profitable, they can theoretically hoard stars and alter the competitive balance within the league.
Howie Long-Short: There is no need to pass around a collection basket for NBA owners. For starters, the net income figures used in this report only reflect “basketball operations”. Several teams own their own arenas. Non-basketball related revenues generated are not included in the calculations. More importantly, the value of these franchises continues to rise with each sale. Leslie Alexander just sold the Rockets for $2.2 billion, 15x (after inflation) what he paid for them just 25 years ago. It is important to remember that no one loses money owning a professional sports franchise.
Fan Marino: The small market owners are worried about the size of local media rights deals altering the league’s competitive balance? What competitive balance? 4 teams have a chance to win the 2017-2018 NBA Championship (BOS, CLE, GSW, SAS). While we are talking about competitive balance, you want the worst team to have the #1 pick. Lessening those odds to prevent tanking is a bad idea.
A confidential report shows nearly half the NBA lost money last season. Now what?
2011 College Basketball POY, Jimmer Fredette was the leading scorer in the Chinese Basketball Association last season, averaging 37.6 PPG, while winning the league’s MVP award. He was rewarded with a two-year $3.6 million contract (he’ll return to the Shanghai Sharks) and a new shoe contract. Chinese footwear brand 361 Degrees has just unveiled a signature shoe line for the former BYU star. No information pertaining to the price of the shoe or the terms of the agreement were released.
Howie Long-Short: 361 Degrees International Limited has over 5,500 shoe & sporting goods retail stores in China. The company trades over the counter under the symbol OTC: TSIOF. The company reported that H1 ’17 revenues rose 9.5% to $2.8 billion Yuan, with footwear sales making up 46.8% of the company revenues. Look for that number to continue to grow. Chinese fans consider Jimmer a “god”; they are going to buy these shoes.
Fan Marino: No American has had more success in the Chinese Basketball Association than Stephon Marbury. The 2x NBA All-Star won 3 CBA Championships and a CBA Finals MVP award, during 9 seasons in China. At 40 years old, Marbury has recently expressed interested in returning to the NBA.
Fox Sports (FOXA) laid off +/- 20 writers back in June, announcing they would be eliminating the writing staff to invest in more lucrative video production. For the first time since that announcement, digital page view figures have been released. According to Richard Deitsch of Sports Illustrated (TWX), Fox Sports’ websites lost 88% of its website traffic between the end of the written era, May 27-June 25 (143.9 million views), and start of the all video era, August 19-September 17 (16.7 million views). It is worth noting for comparison purposes that ESPN had 83.4 million unique digital viewers during the month of August.
Howie Long-Short: I’m going to reserve judgement on the pivot until Q3 financials are released. It’s entirely possible that the company is running lean, having dumped +/- 20 salaries, while generating more ad revenue from the video content. Of course, advertisers aren’t going to continue paying high ad rates if the company has no page views.
Fan Marino: Jamie Horowitz, who loves himself a hot take and was behind the pivot, is no longer running things at Fox Sports. Company President and CEO Eric Shanks said at the time of Horowitz’s dismissal that the company would continue to “execute our playbook”. As a fan, I’m booing the play calls and asking for a new offensive coordinator. Give me high-quality in-depth investigative reporting, not the most outrageous comments a carnival barker can shout on video.
IMG College, which holds multi-media and sponsorship rights to more than 90 schools, has agreed to a blockbuster merger with Learfield, which holds rights to 130 other collegiate athletic programs; meaning together they will control the marketing and media rights for 70% of D1 programs and 90% of P5 conference schools. Industry experts speculate the new company could be worth more than $2 billion. Learfield CEO Greg Brown is expected to lead the new entity. Terms of the deal are expected to be finalized in the coming days.
Howie Long-Short: WME-IMG is a privately held company, but you invest in it through Japanese internet/telecom giant, Softbank (OTC: SFTBY). Softbank invested $250 million into the company at a $5.5 billion valuation in 2016. That investment has done well. WME-IMG recently closed on a $1.1 billion investment round with the company valued at $6.3 billion.
Fan Marino: College Presidents looking to shake up their athletic department should place their first call to IMG President, Tim Pernetti and offer him a blank check. Prior to being made the “fall guy” in the Mike Rice scandal; he oversaw a successful Rutgers football program, set fundraising records at the school and negotiated the deal that brought the University into the Big10. I don’t believe you can hire a better A.D. than Tim Pernetti.
IMG College Negotiating Merger With Learfield To Create Media Rights Juggernaut