Sports Finance Report: How Much Value Do Athletes Bring To The Brands They Endorse?

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How Much Value Do Athletes Bring To The Brands They Endorse?

Under Armour’s (UAA) disastrous Q3 earnings report has ignited a debate about the value athletes bring to the brands they endorse. Steph Curry, Tom Brady, Cam Newton and Bryce Harper all wear the UAA logo, but that star-power wasn’t able to prevent company sales from declining 12% in Q3 ’17; nor has it helped to attract teens to the brand. Those that believe in athlete sponsorships will tout the brand equity received; the value a company realizes from associating their product with a recognizable name.

Howie Long-Short: As a rule of thumb (Jordan being an exception), endorsements do not correlate with significant revenue growth. In fact, among the Top 10 selling sneakers of 2016, only one was associated with an active athlete; Nike’s (NKE) Kyrie (Irving) 2 finished 10th. It’s worth noting that on Thursday evening, Adidas (ADDYY) signed Zach LaVine to a 4-year contract worth up to $35 million. I would not classify that as money well spent.

Fan Marino: Adidas CEO attributes Mark King attributes UAA’s lack of success capitalizing on endorsement deals to the “milquetoast” personalities of their athletes (i.e. Brady, Spieth); while pointing out that ADDYY athletes “Carlos Correa and James Harden have personality”. There is no way that Carlos Correa is moving merchandise. The average sports fan wouldn’t know it, if they were sitting next to him. Harden has a long beard, but even former Rockets coach Kevin McHale acknowledged that trying to lead a team isn’t in his “personality”. If he isn’t capable of being a leader on the floor (and in the locker room), what real value can he bring ADDYY off it?

Papa John’s Blames NFL for “Polarizing Customer”, Pizza Hut Says NFL Has No Impact on Business

Papa John’s Pizza slashed full-year revenue and profit forecasts and blamed same store sales missing analyst estimates, on the company’s association with the NFL. PZZA CEO John Schnatter believes the political controversy that has engulfed the league this season has had a negative effect on ratings (down 7.5% from ‘16). Schnatter was quoted saying “NFL leadership has hurt Papa John’s shareholders. The controversy is polarizing the customer, polarizing the country.” PZZA shares are down 8% since the announcement. The company has pulled all advertising associated with the NFL.

Howie Long Short: Not all NFL sponsors feel the way Schnatter does. Kohl’s (KSS) is said to be working with the league on a holiday ad campaign, Buffalo Wild Wings (BWLD) recently went on the record stating that they do not anticipate any decline in key sales figures because of their relationship with the NFL and Pizza Hut (YUM) CEO Greg Creed said the company isn’t seeing any impact on their business. PZZA blaming poor sales on the NFL, is like the NFL blaming declining television ratings on hurricane coverage; perhaps it’s had a slight impact, but to place the sole blame there belies the fundamental issues with the business. The stock is down more than 26% this year.

Fan Marino: I always wonder why people in New York and New Jersey order from Domino’s (DPZ), Pizza Hut (YUM) or Pappa John’s (PZZA), when there are so many better local options. In NYC for a few days and not sure where to find the best slice? Barstool founder Dave Portnoy has a “pizza review” series to help you out.

Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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Blockchain Technology Finds Niche in Esports Ecosystem, Activision Blizzard Reports Record 3rd Quarter

Companies are using blockchain technology to solve problems that have developed as esports have evolved. Network Units, whose pre-ICO begins on November 8th, has developed an online gaming platform with a built-in player conduct and reputation management system. The platform is designed to eliminate the toxic members of communities who abuse others, exploit the system and cheat the game. Esports.com, which kicked off its ICO period on November 1st, provides a platform for merchandise sales, licensed gambling and user generated educational content. The platform is sold as a solution to eliminating problems related to low community engagement.

Howie Long Short: Activision Blizzard (ATVI) reported a Q3 record with $1.9 billion in revenue generated (+17% YOY) and the company raised full-year revenue guidance from $6.4 billion to $6.68 billion ($2.08/share); crediting the growth to the success of September’s Destiny 2 launch and the King mobile games division (i.e. Candy Crush Saga), which reported growth for the first time since Q1 ‘16. Keep an eye on the company’s much anticipated Overwatch esports league which will debut in December, just don’t expect it to be an immediate revenue generator. CEO Robert Kotick has tempered expectations saying, “the first season is really about building a solid foundation.”

Fan Marino: The audience for video game streaming is 600 million and growing, so streaming sites are aggressively working to add streamers. Twitch, the Amazon (AMZN) owned streaming site, grew its number of concurrent streamers 67% in Q3 (to 25K); as the company began offering smaller streamers’ the opportunity to generate revenue. For comparison purposes, YouTube (GOOGL) Gaming (the next most popular site) had just 8,200 concurrent streamers.

Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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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.