NEW YORK, NY - OCTOBER 27: Jeff Bezos, Chairman and founder of Amazon.com and owner of The Washington Post, addresses the Economic Club of New York, at the Sheraton New York Times Square Hotel, October 27, 2016 in New York City. Bezos discussed the future of Amazon, space travel, and his ownership of The Washington Post. (Photo by Drew Angerer/Getty Images)
Editor’s Note: Welcome to a daily column we run here at BroBible breaking down the day’s biggest stories in sports finance with commentary from the equities analyst and sports fanatic perspectives. It comes to us via our friends at JohnWallStreet, publisher of a free e-mail newsletter focused on sports related public equities and their subsidiaries. You can sign up here.
Amazon Takes on The Sports World; 25 Companies That Will Be Affected
Amazon has been credited with killing everything from book stores to electronics retailers since its 1994 launch. Now, with a market cap +/- $570 billion and $16 billion in annual operating cash flow, the company is taking aim at the sports world. In our final newsletter of 2017, we look at 4 of AMZN’s recent initiatives and the 25 companies most likely to be affected in 2018.
Amazon Expands Brand Registry Program, Now Includes Nike
In June, Nike (NKE) agreed to join Amazon’s brand registry program; seeking to curb counterfeiting and non-licensed selling within the e-commerce marketplace. The partnership also supports the athletic apparel and sneaker brand’s initiative to boost revenue through a shift to digital and DTC sales, relying less on struggling retailers. Competitors Adidas (ADDYY) and Under Armour (UAA) already have direct-sales deals in place with AMZN.
Names to Watch: FINL, DKS, FL, HIBB, BGFV; LON: SPD, LON: JD
Howie Long-Short: Athletic apparel and sneaker retailers count on NKE (70% of FL business comes from NKE); but NKE launched its “Consumer Direct Offense” strategy in fiscal Q1 ’18, increasing e-commerce business 19% YOY. Mediocre retailers beware, the company is maintaining just a few dozen wholesale relationships as it looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years).
Amazon Entering Private-Label Sportswear Business
In October, Amazon (AMZN) announced it was entering the private-label sportswear business and working with the same Taiwanese suppliers, Makalot Industrial Co. (TPE: 1477) and Eclat Textile Co. (TPE: 1476), that some of the world’s biggest athletic brands use. Elcat’s involvement is particularly noteworthy as the company manufactures high-performance sportswear for Nike (NKE), Lululemon Athletica (LULU) and Under Armour (UAA).
Names to Watch: NKE, UAA, ADDYY, LULU; TPE: 1476, TPE: 1477
Howie Long-Short: AMZN wants to be in the private-label clothing business because it pushes retailers to sell inventory on the e-commerce site. Should a retailer choose not to, AMZN will simply produce the item themselves and compete directly against the brand.
The Pursuit of Exclusive Broadcast Rights
In September, the company hired Brian Potter to lead its sports video business. In November, Jim DeLorenzo, head of sports, Amazon Video, said the company was pleased with viewership numbers, engagement and the reliability/quality of the cloud-based streaming service during its season long experiment streaming Thursday Night Football (10 games, $50 million); though it is too early to say if the company will pursue future exclusive sports broadcasting rights. The company has since done deals that will deliver Prime subscribers 37 ATP tour events (previously owned by SKYAY), the AVP Beach Volleyball tour each of the next 3 summers and docu-series on Michigan Football.
Names to Watch: CBS, DIS, FOXA, CMCSA, FB, GOOGL, NFLX, AAPL, SKYAY
Howie Long-Short: NFL Senior VP, Digital Media, Vishal Shah recently said “we continue to think some of the best days are ahead [for traditional TV partners] despite some shifts in the media landscape.” That doesn’t sound like linear television will be excluded in the next round of negotiations, but the NFL is encouraging interested media companies to bid on both television and streaming rights for the leagues TNF package; leaving the door ajar for the tech giants to receive exclusivity for the first time.
Twitch: The Future of Game Broadcasts?
Twitch, the live-streaming platform most often associated with video games, has agreed to stream up to 6 live G-League (Gatorade sponsored NBA minor league) games. Broadcasts will include interactive overlays (viewers can click a team name/logo for player, team, game and season stats), a loyalty program to reward viewer engagement during broadcasts (i.e. custom emotes for group chat) and the ability for users to provide their own live commentary (over the game feed) via the Twitch co-streaming feature.
Names to Watch: CBS, DIS, FOXA, CMCSA, TWX, RCI, MSGN
Fan Marino: NBA Commissioner Adam Silver has gone on record stating he’d like to see changes in the way sports broadcasts are presented; pointing out the lack of live stats and chatter surrounding the broadcast, that gamers have become accustomed to. I’m not ready to give up Mike Breen, Marv Albert and Ian Eagle for Towelliee; but it’s worth watching to see if anyone else is.
Sports Media Start-Up Using Niche Sports (and Facebook) to Build Audience
FANTOM, a Facebook (FB) based platform, is delivering live sports (20+ games including JUCO playoffs) and sports personalities to a social audience. Having partnered with 30+ rights holders and 20+ personalities, the sports media startup generates authentic (see: passion) content that brings “fans closer to the field” while their signature Catapult product (for brands and rights holders, FANTOM is free for viewers) ties custom content to a transaction (i.e. ROI). In their first year, the company broadcast from the NBA Finals, World Series and partnered with 10 sports leagues; including Ultimate Frisbee (AUDL) and Indoor Football League.
Howie Long-Short: FANTOM is taking a wise approach, embracing FB as opposed to trying to drive traffic away from it. The company understands that the “one show for one million people model is dead”. Facebook has 2 billion visitors/day and advanced targeting technology that gives niche sports a chance to find their audience; FANTOM is the place where fans can find those sports. The company is privately held and there are no ways to play it, for now.
Fan Marino: FANTOM isn’t bringing fans “closer to the field”, it’s bringing fans on the field; as San Antonio Spurs fans got to experience last night with ESPN Radio talent and FANTOM co-founder Ari Tempkin live from AT&T Center. You aren’t going to find NFL and NBA games on FANTOM, but if you have a taste (no pun intended) for Major League Eating it might be for you.
Joe Favorito (@joefav) recently did a Q&A with FANTOM co-founder Zack Rosenberg. You can check it out here.
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What is JohnWallStreet?
JohnWallStreet is not a person or location, but a destination for the educated sports fan.
While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related finance news, in easily digestible bites, with commentary from both the equities analyst and sports fanatic perspectives.
We’ll cover publicly traded professional teams & stadiums, television networks, apparel & footwear companies, equipment companies, ticketing companies, content and facilities providers. If it trades on Wall Street, and has a sports angle, it’s in our wheel house.
Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.