Sports Finance Report: Amazon Coming For Nike, Pro Teams Dump Trump
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AMAZON ENTERING PRIVATE-LABEL SPORTSWEAR BUSINESS; TO COMPETE WITH NIKE, LULULEMON
Amazon (AMZN) is 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). Both manufacturers have begun to produce limited quantities for AMZN, as the company looks to test the market before entering in to long-term contracts.
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 product themselves and compete directly against the brand. That’s not good news for retailers (LULU shares dropped 4.9%, UAA down 2.8% since Friday’s announcement), but it does offer manufacturers a viable new revenue stream. Eclat expects its new e-commerce clients to generate up to 12% of company revenues in 2018, with the potential for that percentage to grow significantly.
Fan Marino: There are no shortage of media stories pointing to the end of the athleisure trend, so hearing that AMZN is first looking to get into the space is big news for those of us who live in joggers. Bezos isn’t known to be late to the party, so I’m betting this concept of dressing comfortably isn’t going out of style anytime soon.
PRO SPORTS TEAMS NO LONGER STAYING AT TRUMP PROPERTIES
President Trump has blurred the lines between sports and politics and lost some high-profile hotel guests in the process. At least 17 teams (out of 123 in NFL, NBA, MLB & NHL) had stayed at Trump owned properties in the years leading up to the start of his Presidential campaign; 16 of which no longer do. The New York Post reach out to all 123 American pro sports franchises, 105 responded to their inquiry; 0 would confirm its players currently stay at Trump properties, though most declined comment as to why they were going elsewhere. Warriors Coach Steve Kerr explained why Golden State chose to make a change saying “he continually offends people, and so people don’t want to stay at his hotel.”
Howie Long-Short: NBA teams pay roughly $20,000/night for rooms and food. If you figure each of the 11 teams that no longer stay at the Trump SoHo, came to NYC an average of 3x/year (to play Knicks and Nets; some Eastern Conference, some Western Conference), that property alone has lost $660,000/year in revenue.
Fan Marino: More than 1/3 (12 teams) of the NBA stayed at the Trump SoHo, as recently as 2010 (1 remains); with stars like Russell Westbrook raving about the property in the press. Losing their business isn’t just costing Trump revenue, he’s losing free advertising from valuable social media influencers. According to Opendorse, an online platform that connects brands with athletes, a single Russell Westbrook (5 million followers) tweet is worth a minimum of $20-$30K. Westbrook came in at #30 on their 2016 Top 100 highest-paid athlete endorser list.
CUBS PARTNER WITH FACEBOOK; TO EXPLORE SELLING OTT RIGHTS SEPARATE FROM TV RIGHTS
The Chicago Cubs television broadcast contact with NBC Sports Chicago expires in 2020 and the team is exploring selling OTT streaming rights, separate from a new linear TV contract. The Cubs partnered with Facebook (FB) this past season on a test run, simulcasting 4 games, and came away pleased with the results. The 4 games averaged 222,000 unique viewers, with first 3 averaging 259,000 (no marketing was done for the 4th game). For comparison purposes, the 2016 WS Champion Cubs averaged just 156,000 viewers for their local TV broadcasts (35% increase from ’15).
Howie Long-Short: The next round of TV contracts (for all leagues/teams) may not dramatically rise in value as the television audience continues to shrink, but the aggregate for live broadcast distribution rights will keep professional sports revenues on an upwards trajectory. Selling OTT rights separate from linear rights is a no-brainer as it provides a wider audience and another lucrative source of revenue. The structure of these contracts is going to be interesting to follow. Zuckerberg has already expressed that unlike traditional broadcast rights deals, he’s far more interested in rev-share partnerships than he is in paying out billions in guaranteed rights fees.
Fan Marino: Cubs Manager Joe Maddon was ejected from Game 1 of the NLDS for arguing an umpire’s call on a play at the plate. Maddon wasn’t upset with the rule itself (preventing a catcher from blocking the plate without possession of the ball), but the interpretation (the trajectory of the ball put the catcher in the runner’s path to the plate). Maddon went on to explain that not all rules are good rules, using Chicago’s unpopular soda tax ($.01/ounce) as an example. Perhaps Madden has a point. 9 days after implementing the tax, lawmakers voted to repeal it. As for the Cubs playoff series against the Dodgers, Justin Turner hit a 3-run walk-off home run on Sunday night to give the Dodgers a 2-0 series lead.
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 Security & 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.