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MWC Debating if TV Revenue and National Exposure Outweigh Late Kickoffs and Empty Stadiums
The Mountain West Conference has television contracts with ESPN (DIS) and CBS Sports (CBS) that are set to expire following the 2019-2020 academic year. In preparation for the next round of media rights negotiations, athletic directors around the conference have begun to debate if television revenue ($100 million over 7 years) and national exposure outweigh the drawbacks of late kickoff times and empty stadiums. At least one A.D. (Tom Burman, Wyoming) does not think the benefits outweigh the costs saying, “the money is not so great ($1.1 million/year per school) that we are willing to just play game times whenever TV calls”. The conference is currently performing studies to determine how television scheduling impacts game day revenue sources (beyond just ticket sales).
Howie Long-Short: Mountain West football games are valuable to the broadcast networks because they air in valuable late-night time slots. There is no value to a Mountain West game that’s scheduled opposite P5 games. Filling the stadium is nice, but even Boise AD Curt Apsey acknowledged “it would be very difficult for us to give up the TV money and make it up in ticket sales”. Mountain West games will be on television for the foreseeable future. CFB is an arms race and there is no chance that the Mountain West (or any other conference) is leaving television revenue on the table.
Fan Marino: The Pac-12 Conference has similar issues, albeit with far more lucrative television contracts ($28 million/school in ’16). ESPN slots their weekly Pac-12 game at 10:30p or 10:45p EST on Saturday evenings. When you combine those late start times with the games that air on the Pac-12 Network, which DirecTV (T) does not carry; it’s likely that east coast Heisman voters are unable to watch most of the conference’s games. That’s too bad. Arizona QB Khalil Tate (and Bryce Love) deserves to be in NYC. Here’s to hoping they manage to catch a game or two before the ballots are submitted.
Time Inc. to Launch Sports Illustrated TV Without Live Sports Programming
Time Inc. (TIME) is launching a subscription ($4.99/mo.) streaming service, built around the Sports Illustrated franchise, to help offset declining revenues from their legacy print business. Sports Illustrated TV will launch on Amazon Channels (AMZN) with 130 hours of programming (documentaries, studio shows, sports movies etc.), but no live sports. The company is working to increase distribution and is also exploring a D-T-C model. TIME hopes a large portion of the 2.8 million who subscribe to Sports Illustrated in print, will sign up for the service.
Howie Long-Short: CEO Rich Battista has been aggressive with the company’s digital (advertising, content licensing and syndication, digital-only subs etc.) and video (including television) efforts, and that focus has begun to pay off; recently telling investors he expects the company to generate $1 billion in non-print revenue in 2017. That growth hasn’t been fast enough to offset the company’s rapidly declining print revenues though. TIME just reported Q3 revenue declined 9% YOY (to $679 million).
Fan Marino: Sports Illustrated TV programming will include; a basketball lifestyle show hosted by SI.com writers Matt Dollinger and Rohan Nadkarni, a documentary series focused on athletes that were once featured in the print magazine, a gambling and daily fantasy show and sports films. I really like the concept of an archive full of sports movies; but at a time when there are 204 video streaming offerings (including subscription services) available within the U.S., I’m certain I can find comparable programming elsewhere (and likely for free).
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Sodexo Acquires Operator of Food and Hospitality Services at U.S. Sports Venues
Sodexo (OTC: SDXAY), a global event manager and catering company, has acquired Centerplate; the 4th largest operator, by revenue ($1.18 billion, 12-month prior to June ‘17), of food and hospitality services at U.S. sports and entertainment venues. SDXAY generated $1.07 billion in ’16 sports and leisure revenue, so the $675 million acquisition will more than double the company’s business within the segment. CEO Sports & Leisure Worldwide for Sodexo, Pierre Henry, explained that the acquisition is “another step in our long-term strategy to become a leading player in every market in which we are present.” Centerplate CEO Chris Verros will stay on board to lead the company’s U.S. business.
Howie Long-Short: Back in July, Jefferies analyst Kean Martin said, “Sodexo may be losing market share to Compass (OTC: CMPGY), which benefits from scale and a differentiated multi-brand strategy, particularly in the US.” Well, picking up Centerplate helps SDXAY increase U.S. market share; and 2017 acquisitions of Prestige Nursing + Care (home-care) and Morris Corporation (facilities management) strengthen the company’s multi-brand strategy. It seems as if SDXAY is headed in the right direction, after the company cut its full-year sales growth target; following a disappointing fiscal Q3 ’17 (in July). Temper your short-term expectations though, Sodexo only expects the Centerplate transaction to be “mildly accretive to earnings for fiscal ‘18”.
Fan Marino: Centerplate currently operates at the following U.S. sporting venues; Hard Rock Stadium (Miami Dolphins), Safeco Field (Seattle Mariners), AT&T Park (San Francisco Giants), BB&T Center (Florida Panthers) and Smoothie King center (New Orleans Pelicans). My personal all-time favorite Centerplate creation? The Ichiroll at Safeco Field.
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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.