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Churchill Downs Sells Big Fish Gaming for $990 Million
Churchill Downs Inc. (CHDN) has agreed to sell its mobile gaming subsidiary, Big Fish Games, to Aristocrat Technologies for $990 million (ROI of 14%); with the transaction scheduled to close in Q1 ‘18. The sale will enable the company to refocus its efforts on growing the Kentucky Derby, expanding its casino segment, TwinsSpires.com (and other forms of real money gaming) and maximizing thoroughbred racing operations. CHDN held the gaming company for just over 3 years, having acquired Big Fish in 2014 for $885 million. While Big FishGames operated on slimmer margins than the balance of CHDN assets, it still comprised 37% of company revenue and 20% of profits; shareholders must be concerned about how the company plans to replace that business.
Howie Long-Short: Aristocrat Technologies is a subsidiary of Aristocrat Leisure Limited (OTC: ARLUF), a publicly traded gaming company that operates in more than 90 countries. The acquisition makes Aristocrat the 2nd largest social casino publisher globally (far behind Playtika). In Q2 ’17, Playtika controlled 26.1% of the total market (expected to grow to $19 billion by ’22); with ARLUF and CHDN combining for just12.2% combined.
Fan Marino: Yum Brands (YUM) has pulled out as the title sponsor of the Kentucky Derby. The Louisville based Brown-Forman Corp. (BF.B) will take over as the event’s highest profile sponsor in 2018; using the exposure to promote its Woodford Reserve bourbon. Terms of the deal were not disclosed, but it’s estimated that YUM paid $1 million/year under the terms of the agreement signed in 2006. The mint julep is the traditional beverage of the Kentucky Derby. If you’ve never had one, here is a recipe (using Woodford Reserve, of course).
Facebook Hiring “Head of Sports Programming” To Bid on Rights
Facebook has announced it is looking to hire a “top level executive” to oversee sports rights acquisitions. The “head of sports programming”, will have a budget of “a few billion dollars” to buy broadcast rights on a global basis. The social network does not intend to produce sports broadcasts; it would like to stream events, partnering with leagues or broadcasters that have linear television distribution in place.
Howie Long-Short: Back in May, Zuckerberg said “the long-term goal is actually not to be paying for specific content like that” and that he would prefer to pursue a “revenue share model”; but those comments were made under the presumption FB would be producing the broadcasts. If the plan is simply to stream events and FB isn’t pursuing exclusivity, the up-front cash outlay becomes significantly more palpable (AMZN paid $5 million per NFL game, CBS/NBC (CMCSA) paid $45 million/game for TNF). EPL rights expire in ’18, with MLB and the NFL coming up shortly thereafter (’21 and ’22, respectively). Look for linear distribution rights to increase (again) with total broadcast rights skyrocketing, as the tech giants bid on streaming rights. I do not expect FAANG to receive any exclusivity in the next round of negotiations.
Fan Marino: Whistle Sports recently announced that it was creating its first exclusive show for FB Watch, the “Next Trickshot Superstar”; a 10-episode series, hosted by Chad Johnson that features trickshot artists competing for $25,000. As a video content creator, with a following of 375 million followers/subscribers (and growing 2.5 million/week), Whistle Sports has raised $80.5 million to date; TGNA, NBC Sports and CBS Sports all participated in the company’s $29 million Series C round, announced in January 2017.
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NASCAR Remains Without Title Sponsor for ’19, RV Sales Booming
Monster Energy Co. (MNST) is signed on as NASCAR’s title sponsor for the 2018 Cup Series, the 2nd year of a 2-year $40 million contract signed in December ’16, but the company has yet to announce its intentions for 2019. MNST must decide within the next 30 days if it intends on extending the partnership through the 2020 season. On the surface, it appears that MNST is getting strong value. Sprint paid $50 million/season for title sponsorship rights between 2014 and 2016; but television ratings (down 45% since ’05) and race attendance (admission revenue down 52.7% over last 9 seasons) prevent MNST’s decision from being an easy one.
Howie Long-Short: NASCAR attendance may be down, but RV sales are booming! Thor Industries, the owner of Airstream and Jayco (THO), just reported its all-time best quarter (up 30.6% to $2.2 billion in revenue). Company shares are up 55% YTD, with competitors Winnebago (WGO) and Camping World (CWH) also experiencing strong growth this year (72% and 43%, respectively). An influx of first-time buyers (34% in ’16), a wealth of retiring baby boomers (10,000/day) and record high consumer sentiment levels (a key with large discretionary items), are driving the growth.
Fan Marino: NASCAR held its 2017 Cup Awards ceremony celebrating champion Martin Truex Jr. and providing a farewell to Dale Earnhardt Jr. (winner of NMPA Most Popular Driver award and the Bill France Award of Excellence award), but it was CEO Bill France’s odd behavior that had social media stirring. The NASCAR CEO awarded Truex Jr. his championship ring, leaving the stage without shaking the champion’s hand; he also had a notably brief introduction prepared for Earnhardt Jr., winner of the award in his late father’s name. You can watch the video here. Strange stuff.
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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.