Sports Finance Report: Comcast Drops Big Ten Network from All But 9 “Home Markets”

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.

Comcast Drops Big Ten Network from All But 9 “Home Markets”

Comcast Corporation (CMCSA) has dropped Big Ten Network from its cable offerings in all but 9 “home markets”, explaining several factors played into the decision; “ranging from the costs programmers charge us to carry their channels and the amount of viewership, to available alternatives.” Subscribers in Illinois (IU, ILL, NW) Indiana (IU, PUR), Maryland (UM), Michigan (UM, MSU) Minnesota (UM), New Jersey (RU), Ohio (OSU), Pennsylvania (PSU) and Wisconsin (UW) will continue to receive the conference network. Iowa (IU) & Nebraska (NU) are the only “home markets” excluded from the list, as Comcast does not provide services to residents of those states. CMCSA has stated there are no plans to cut the network from the remaining “home markets.”

Howie Long-Short: The timing of this decision is likely related to a recent report indicating the Pac 12 Network average subscriber fee declined 63% over the last 5 years (to $.11), while the Big Ten Network (B10) fee increased 30% over the same time (to $.48). Rising carriage fees are directly correlated to the “(rising) costs programmers charge us to carry their channel”; and with basketball season over and football season not starting for another 4 months, CMCSA sees the opportunity to lower the amount it pays the conference to carry the channel.

If in fact the decision is final, their loss would be a gain for Time Warner (TWX), DirecTV (T), DISH and Verizon (VZ); carriers that offer the network nationwide, as passionate Big Ten football fans will switch providers before missing a big game. For those interested in owning a piece of the Big Ten Network, you can invest in Fox Entertainment Group (FOXA); they control 51%, with the 14 member Universities owning the balance.

Fan Marino: College football programs utilize different accounting methods, with some schools allocating a larger percentage of their conference payouts to the sport (in FY16 it ranged between 45%-85% at Big 10 schools); making it tough to compare apples to apples. If you remove the conference payout ($16.1 million) from the ledger, the picture becomes clearer.

In 2016-2017, Michigan ($40.3 million), Ohio State ($24 million) and Penn State ($16.3 million) had the football programs within the conference, that generated the largest surplus (discounting the payout); while Purdue ($11.97 million), Minnesota ($13.4 million) and Indiana ($14.6 million) operated at the biggest losses. Of course, it’s not a coincidence that Michigan, OSU and PSU finished 1^st, 3^rd and 2^nd, respectively; while Purdue, Minnesota and Indiana ended that season that season 10^th, 5^th and 11^th out of 13 teams. The more a program wins, the more revenue it generates. Northwestern, a private institution, does not release its football program’s financials.

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

SoftBank Led Consortium Offers FIFA $25 Billion for Expanded Club World Cup, Nations League

A consortium of Middle Eastern/Asian investors (including SoftBank Group, SFTBY) has offered FIFA $25 billion for a 49% stake in an “expanded version of (the) Club World Cup” (annual competition featuring the winners of 7 regional tournaments) and a “proposed global league for national teams” (to be known as the Nations League). The proposal, to span 12 years but otherwise lacking detail, was rejected by the FIFA Council pending additional information; despite support from President Gianni Infantino, who could use the platform as the basis for his 2019 re-election campaign. FIFA, which traditionally generates revenue via ticket sales, sponsorships and media rights, has never sold control of its competitions.

Howie Long-Short: The sheer size of this offering is staggering. $25 billion would represent a 47% increase in revenue for an organization that currently generates $5.5 billion/WC cycle and +/- $100 million (just $37 million in ’17) for the Club World Cup.

To clarify, $12 billion was offered for a national-team competition, with the remaining $13 billion allocated for a quadrennial tournament comprised of the world’s top club teams; including at least 12 from Europe. There are many reasons why this deal will never be completed, but club valuations must be at the forefront. For $13 billion, the mystery investment group could buy Arsenal, Chelsea, Liverpool, Juventus, Tottenham Hotspur, Paris Saint-Germain, Borussia Dortmund, AC Milan, Athletico de Madrid, West Ham United, AS Roma and Inter Milan, run their own 12 team tournaments and still have nearly a half billion dollars in the bank.

The European Club Association also formally opposes the formation of any tournament that would compete with the UEFA Champions League, worth $15 billion over 4 years. Even if the financial aspect were to be overcome (unlikely), the association has said it would like to cut back on the number of games its teams play in the name of player health.

Fan Marino: Lakers minority owner Patrick Soon-Shiong (also owns L.A. Times and S.D. Tribune) and D.C. United CEO (and Swansea City minority owner) Jason Levien are closing in acquiring Erick Thohir’s majority stake in the MLS franchise, at a league-record $500 million valuation. That figure sounds outlandishly high to me. Forbes (2017) pegged the league’s most valuable team at $315 million (L.A. Galaxy), the United at $230 million and you can buy an expansion franchise for just $150 million. The United generated $25 million in 2016 revenue. Even if they doubled revenue in their new soccer specific stadium (opens in July), the team isn’t worth 10x revenue; NBA franchises sell for 8x, NFL franchises sell for closer to 6x.

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