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 equities analyst 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.
GATORADE USING NBA DEVELOPMENTAL LEAGUE PLAYERS AS “LAB RATS”
Gatorade (PEP), the official sponsor of the NBA’s developmental league, is using their partnership with the G-League for more than just branding; they’re using its players as “lab rats”. The G-League and the Gatorade Sports Science Institute are working together to test product formulations and ingredients that will advance hydration and fueling techniques. Gatorade Head of Consumer engagement Kenny Mitchell describes a process where new products are tested at the developmental level and then launched with NBA players, who have the reach and influence to showcase the latest innovation.
Howie Long-Short: Gatorade recently introduced the GX sports fuel customization platform. The GX ecosystem combines Gatorade’s science-backed products with newly designed equipment and real-time biometric and tracking technologies, to provide athlete specific fueling recommendations. Technological innovations include a smart cap (for squeeze bottles) and a digital sweat patch. I like the decision by the Pepsi Co. subsidiary to go down the sports science route. Performance fuel pods and personalized bottles are new revenue streams for a company that needed to rebrand itself, as sales of its sugary drink have declined.
Fan Marino: Gatorade was recently fined $300,000 by the California AG for disparaging water. Yes, you read that right. In 2012, the company released an iPhone game called Bolt! The premise of the game was to run through the levels, drink Gatorade to remain fueled and avoid dangerous water that would compromise the game character’s performance. AG Xavier Becerra found the message to be “morally wrong and a betrayal of trust”. It was a video game targeting teenagers. The taxpayer’s dollars spent prosecuting this case should have been used elsewhere.
STADIUM NAMING RIGHTS DEALS FAIL TO POSITIVELY IMPACT STOCK PRICE
Stadium naming rights deals have become a lucrative source of revenue for sports franchise owners, but shareholders should not expect these deals to positively impact the company’s stock price. Sports Economist Michael Leeds studied statement rights deals over a 25-year period and has been quoted as saying “we find little evidence that the purchase of naming rights had a statistically, significant impact on the value of the companies that bought them, even less evidence that the impact was positive, and no evidence at all that there was a permanent, positive impact.” Some marketing experts will go as far as to say companies investing in stadium rights lose value, pointing to several companies that experienced financial distress or bankruptcy shortly after the deal was signed (i.e. Citigroup, ProPlayer, Trans World Airlines, Adelphia Communications).
Howie Long-Short: Rams owner Sam Kroenke is looking to sign the most expensive naming rights deal in NFL history. It’s been reported that Kroenke is asking for $600 million over 20 years. To put that number in perspective, the last 2 NFL stadium rights deals combined equaled $554 million (Falcons/Mercedes Benz (DDAIF) – $324 million/27 years, Vikings/U.S. Bank (USB) – $220 million/25 years) and just prior to making the move to Los Angeles, the Rams signed a deal worth just $158 million over 20 years for a potential new stadium in St. Louis. I wouldn’t want to be a shareholder in the company that ends up lining Kroenke’s pockets.
Fan Marino: Molson-Coors (TAP) has the best stadium rights deal in all of sports. Not only do they not pay for the naming rights to the Rockies’ Denver home (Coors Field), they have naming rights in perpetuity; and it cost them just $15 million, back in 1990. In March, the Rockies signed a 30-year extension with the state division that owns Coors Field; meaning TAP brand awareness will continue for another generation of baseball fans, on the house.
LULULEMON CEO SAYS BRICK AND MORTAR RETAIL IS HERE TO STAY
Lululemon (LULU) CEO Laurent Potdevin remains bullish on the future of brick and mortar retail, saying “people don’t want to be stuck on their phone” and those that seek “mindful lifestyles continue to crave human connections”. The company employs 10,000 “educators” to develop those connections within in their 421 stores and an additional 2,500 “brand ambassadors” worldwide to foster human engagement. Potdevin points out that Lululemon should not be grouped with other struggling athleisure apparel companies, as the brand does not sell footwear and controls its fleet of stores (competitors tend to be wholesale companies).
Howie Long-Short: Yoga’s popularity in China is growing and Lululemon is cashing in with sales in the country up 350% YOY. LULU, who has an exclusive partnership with Tmall (BABA), China’s largest B2C e-commerce platform, saw a 100%+ increase in traffic and higher conversion rates lead to a 175% YOY increase in sales on the platform. Rapid growth within the Asian market puts the company’s $4 billion revenue target for 2020 in sight.
Fan Marino: Speaking of footwear, NBA MVP Russell Westbrook is the new face of Jordan Brand (NKE). Westbrook signed a 10-year deal that will make him the highest paid endorser in the history of the company. Westbrook will also get his own signature shoe line. While financial terms of the deal were not released, Westbrook shouldn’t be short on cash. He recently signed the richest deal in NBA history, a 5 year $205 million extension with Oklahoma City.
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.