Sports Finance Report: Anheuser Busch Brings “Performance Based Model” To Sports Sponsorships

 

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 sports money 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.

Anheuser Busch Brings “Performance Based Model” to Sports Sponsorships

Anheuser Busch (BUD) has introduced an incentive laden sponsorship model, for both teams and leagues, that rewards performance on and off the field (think: playoff appearances, rising attendance, growing TV ratings and increased social awareness). The template for A-B’s new deals include base compensation and a series of metrics (team/league specific) that if met, would trigger a larger investment from the company. VP of Consumer Connections Joao Chueiri said, as “leaders in the industry” it was the company’s responsibility to revamp “legacy (sponsorship) models that were created on consumer behavior that is no longer there.” It is believed that Anheuser Busch is the first “major sponsor” within the sports world to implement a performance based model.

Howie Long-Short: AB Inbev announced on March 1^st its best FY earnings report in 3 years, reporting profitability growth within its 2 biggest markets (+1.9% in U.S. and +1.7% Brazil), FY17 revenue grew +9.8% YoY and EPS increased 42.8% YoY to $4.04. Should the board approve a proposed dividend on April 25^th, the total dividend for FY17 would be $4.44. It should be noted that for the 5 year period beginning in ’12, BUD’s revenue CAGR of 4.6% exceeds that of all PMCG peers. For reference purposes, BUD closed at $107.79 on 4/2.

Fan Marino: BUD has league sponsorship deals in place with the NFL, NBA and MLB, and maintains dozens of individual team partnerships but, the New Orleans Saints, Los Angeles Dodgers, Minnesota Timberwolves and NASCAR, are the first 4 sports rights holders to work with A-B under the new performance-based model. Expect the off-field portion of these deals to cause problems at some point. If Papa John’s had this type of clause in their contract with the NFL during the 2017 season, one must believe they would have invoked their right to withhold financial “rewards”; a decision that would have pressured the league to restrict players’ rights to protest. Had that occurred, it’s not unreasonable to think that some players would have refused to take the field.

Fun Fact: BUD spent $350 million on sports sponsorships in 2016. Only PepsiCo (PEP) spent more ($360 million).                      

Interested in Sports? Sports Business? Sports Finance? Sign-up for our free daily newsletter

ESPN+ to Debut April 12, Include “Hundreds” of MLB, NHL and MLS Games

ESPN has announced their upcoming direct-to-consumer subscription streaming service ESPN+ will debut on April 12^th. Integrated into a “completely redesigned and reimagined ESPN App”, the $4.99/mo. OTT offering will include “hundreds” of MLB, NHL and MLS games, “thousands” of college sports events, Top Rank Boxing, PGA Tour Golf and Grand Slam Tennis; original content (scripted shows, films, studio shows) and an “unmatched library” of on-demand sports programming are also included. The service will be powered by BAMTech, a unit of Disney (DIS) Direct to Consumer and International. DIS acquired 75% of the MLB Advanced Media spinoff, for $2.58 billion.

Howie Long-Short: On Sunday, ESPN opened its new NYC home, a 21,000 SF facility called ESPN Seaport District Studios. The network’s new morning show “Get Up!” (hosted by Mike Greenberg, Michelle Beadle and Jalen Rose) debuted from Pier 17 on Monday morning at 7a EST. Among the site’s (at the foot of the Brooklyn Bridge) unique features is a 100,000 SF event deck (controlled by the Howard Hughes Corporation, HHC) to be used for concerts and an outdoor skating rink. The Seaport District Studios are just a small piece of the $5.96 billion (market cap) HHC conglomerate though, as the company develops and operates MPC’s (Master Planned Communities) and mixed-use properties across 14 states. FY17 was a successful one for HHC. The company increased land sales at MPCs for a 3^rd consecutive year, reported its highest year of NOI (+13% to $157 million) from operating assets, placed 4 new properties into operation (from its development pipeline) and commenced on 5 others that will add $28.2 million in recurring NOI upon stabilization. Shares are up 11% (to $137.44) since we last wrote about the Seaport District Studio project in October.

Fan Marino: I fail to see who this service appeals to. Sports fans have favorite teams and watch their teams’ games, gamblers pay for services (think: NBA League Pass, NFL Season Ticket) that provide them with access to all the action and anyone willing to cut the cord (and drop ESPN), isn’t adding a package meant to be complimentary. That’s not to say there isn’t an end game here for ESPN, it’s just several years out. DIS is buying 22 21^st Century Fox (FOXA) RSNs with the intention of adding 5,500 local broadcasts to ESPN+ (as existing the broadcast deals expire). When a fan in St. Louis can get all the Cardinals and Blues games for $4.99/mo., fans in St. Louis will subscribe to ESPN+.

Oh, and touting “thousands” of college sporting events is a bit misleading, as there won’t be any P5 football or basketball included. ESPN won’t be simulcasting its most watched content on the linear network to prevent the cannibalization of its cable subscription base.

Interested in Sports? Sports Business? Sports Finance? Sign-up for our free daily newsletter