Sports Finance Report: Yankees Playoff Game Blackout Avoided, Amazon’s Unique Value Proposition

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DISNEY, ALTICE USA COME TO AGREEMENT IN PRINCIPLE; YANKEES PLAYOFF GAME BLACKOUT AVOIDED

Disney (DIS) and cable operator Altice USA (ATUS) have released a joint statement stating an agreement in principle has been reached, that the companies have extended Sunday’s deadline to finalize terms of the new deal and that ATUS would continue to carry DIS channels as negotiations continued. The deal ensures NYC area baseball fans can watch Tuesday’s Yankee-Twins playoff game (8p on ESPN). The dispute is rooted in the amount DIS wants ATUS to pay to continue carrying ESPN, ABC and other DIS channels on its Optimum cable service. In comments to the media, Altice has argued that Disney has asked for an “outrageous” increase over the terms of their expiring contract, considering viewership declines. DIS responded saying that ATUS charges their average customer $160/mo., with the “bulk of that money going in to their pocket”. 

Howie Long-Short: Contract talks with Altice were the first of several Disney will have to have with cable operators over the next 2 years. In fact, contract negotiations over the next 24 months will cover more than 50% of Disney’s total pay-tv customer base; so setting the tone with this deal was crucial. DIS got a price increase (granted not as large as they had asked for) and convinced Altice to pick up carriage of the ACC & SEC networks. DIS won this round of negotiations and now appears well positioned moving forward. It’s clear cable operators will still pay for pricey sports channels despite viewership declines and streaming becoming more prevalent. 

Fan Marino: Altice becomes the first cable provider to pick up carriage of the ACC Network. DIS plans to launch the new channel in 2019. NYC Optimum subscribers win here too; now receiving access to more P5 live game action.      

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1.6 MILLION TUNE IN TO WATCH TNF ON AMAZON; AMZN OFFERS BRANDS UNIQUE VALUE PROP

The NFL is reporting that Thursday Night’s Bears/Packers game, the first to be streamed by Amazon (AMZN), saw 1.6 million people log-in to watch the game. The retail giant averaged 372,000 viewers, who watched for an average of 55 minutes; a significant increase from the 266,000 averaged during Twitter’s (TWTR) first stream last season. The comparison is noteworthy as Amazon required Prime members to log-in, while Twitter’s stream was free. 14.7 million people watched the game on traditional broadcast television (CBS).

Howie Long-Short: Amazon sold ad packages for their streamed broadcasts for $2.8 million. While the company will not state how many minutes are included within each package, they are offering advertisers a unique value proposition; the ability to track sales. AMZN is giving advertisers data reflecting the number of people purchasing or searching for a specific product, during or immediately after the ad streams. It’s a competitive advantage that not even Google or Facebook can match.

Fan Marino: Of course, the television audience destroyed AMZN’s viewership numbers. Size matters. No one is choosing to watch a game on their phone/tablet/laptop if the option to watch on a larger television screen exists.

FOX SPORTS DIGITAL AUDIENCE DOWN 300% SINCE PIVOT TO VIDEO

comScore (OTC: SCOR) has reported that publishers who have pivoted to video, have seen at least a 60% drop in overall traffic. Fox Sports (FOXA), which made the decision in June to eliminate 20 writing and editorial positions, reallocating resources towards video production, editing and promotion; saw its audience decline an astounding 300%. Unique visitors dropped from 26.4 million in 2016 to just 9 million this past August, with time spent browsing on Fox Sports digital sites decreasing from 136 million minutes to just 56 million minutes.

Howie Long-Short: At the end of 2015, comScore acquired Rentrak; combining its expertise measuring web traffic with their expertise in TV audience metrics. The company appeared to be  prepared to challenge Nielsen (NLSN), before receiving notification it was being delisted from the NASDAQ exchange for non-compliance with SEC filing requirements. In September, SCOR announced it had hired a new CFO, removed 7 members from the board, settled several class action lawsuits and is undergoing a “complex and time consuming” financial review that would delay filing statements, and any chance of being relisted, until at least March 2018. SCOR is currently being traded over the counter.

Fan Marino: Video ad spend is expected to rise from $10 billion in ’16 to $18 billion in ’20, so pivots to video are about publishers chasing ad dollars. Video is easier to monetize and is more valuable to advertisers, so on the surface it makes sense. Dig a bit deeper and you’ll notice that Fox Sports has experienced a significant decline in video viewership too (down from 1.4 million to 103K unique), meaning it is highly unlikely they are offsetting the loss of visitors with video ad dollars.         

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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 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.

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