Sports Finance Report: MLB Takes “Next Great Leap” in Sports Broadcasting

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MLB Takes “Next Great Leap” in Sports Broadcasting

Facebook (FB) has landed the exclusive broadcast rights to stream 25 Major League Baseball day games (primarily on Wednesdays) during the 2018 season; the first time a “big 4” U.S. sports league has awarded exclusive distribution to a social network. Industry consultant Lee Berke called the deal “the next great leap” in sports broadcasting, comparing the milestone to the migration of games from network to cable television in the mid-to-late 1980s. It’s been reported that the social network paid $30-$35 million for a package that includes; the live games (MLB network will produce the broadcasts), on demand highlight packages (for every game) and weekly recaps of all 30 teams. The first Facebook Watch broadcast will be on April 4^th (Mets vs. Phillies).

Howie Long-Short: While this is a landmark deal in sports broadcasting history, it’s premature to call it a “great leap”; it’s more like a big step. A “big 4” sporting event appearing exclusively on a digital platform is noteworthy; it’s just not the game-changer that Berke implies. All 4 leagues have broadcast rights tied up through at least the balance of the decade and none are expected to forego linear television money in the next round of negotiations. There may be a day when FAANG companies control exclusive NFL, NBA, MLB, NHL broadcast rights, just don’t expect it to come anytime soon.

Fan Marino: In the hours following the announcement, Twitter (TWTR) and MLS announced their own streaming partnership; a 3-year deal gives TWTR the exclusive English broadcast rights to at least 24 live matches/season that air in Spanish on Univision (plus on-demand highlights). A week prior, AMZN announced a deal with the UFC to stream PPV events (cost $64.99) on Amazon Prime Video (do not have to be Prime member); while YouTube TV (GOOGL) locked up exclusive live streaming rights to the Seattle Sounders FC, it’s 2^nd MLS deal (L.A. FC). The arms race between digital companies seeking to lure users with sports, is officially on.   

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William Byron: From iRacing to the Cup Series

Rookie driver William Byron made his Monster Energy NASCAR Cup Series debut at the 2018 Daytona 500. The Hendrick motorsports driver took an unusual path to professional stock car racing, learning to drive with a wheel, pedals and an HP computer (with a 17-inch monitor). Byron excelled at iRacing, “the next step after a video game”, winning hundreds of simulated races before getting into a car. JohnWallStreet had the chance to speak with William about his iRacing background, the college degree he’s pursuing (while he races at the highest level) and the sponsors on his #24 Chevrolet.

JWS: How did the skills you obtained iRacing, translate to driving a race car?

Byron: I didn’t grow up in a racing family, so everything I did was on a computer and on iRacing; that’s the only way I knew how to drive. But, it translated almost perfectly to the real car, even the racetracks were identical (iRacing laser scans the tracks). I still use it for training during the week, to keep myself fresh and just test my skills out.

JWS: You’re currently enrolled at Liberty University, pursuing your undergraduate degree.  How common are college degrees among drivers?

Byron: It’s not very common. I think there is one other guy that has a college degree in the Cup Series; but, I’ve always pursued my education. It’s important to me, it’s always been a critical part of my success and it’s something that I’ve always done. Of course, Liberty University is a sponsor and it’s important to them too.

JWS: Who are the sponsors on your car (in addition to Liberty University)?

Byron: Axalta Coating Systems (AXTA) has been with me for 2 years, they started with me last year in the Xfinity series; they’re a long-time sponsor of Hendrick Motorsports. UniFirst (UNF), the clothing company (uniforms & workwear), has a few races as well.

Howie Long-Short: AXTA reported FY17 sales increased 7% YOY (to $4.3 billion), driven by acquisition contribution; the company acquired Valspar’s industrial wood coating business in April ’17. The significant deployment of cash into M&A was among “key objectives” the company met in 2017, along with “substantial organic growth in the industrial coatings end-market, share gains in the Refinish end-market” and the launch of more than 250 new products. For 2018, the company projects net sales to grow 8-9% YOY; with EBITDA between $940-$980 million.

Fan Marino: Kevin Harvick won Sunday’s TicketGuardian 500 at Phoenix (ISM Raceway), his 3^rd Monster Energy NASCAR Cup Series win in a row. Harvick is the first driver to accomplish that feat since 2015, when Kyle Busch did it; coincidentally, Busch finished 2^nd on Sunday. Byron finished in 12^th, the best finish of his young career.

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Under Armour Using Snapchat to Sell Basketball Sneakers

Under Armour (UAA) has developed an effective formula to sell basketball sneakers to the U-16 demographic on Snapchat (SNAP). While SNAP ads run for 10 seconds, UAA has been designing their ads to run 5-6 seconds; with the call-to-action occurring within the first 2 seconds. As a result, they’ve found that consumers are watching the ad 1.5 times (thus more likely to catch message), as opposed to “clicking away from it.” Under Armour’s success on the mobile app has come in the form of lens campaigns and mobile gaming; advertising that took advantage of the platform “to move beyond video and create interactive experiences for consumers.”

Howie Long-Short: The U.S. athletic shoe market grew 2% in 2017 to $19.6 billion, with the kids’ sector growing 1% YOY. Under Armour’s footwear sector had a strong Q4 ‘17, growing 9% YOY and Founder Kevin Plank says he expects the sector (along with women and international) to drive company growth in 2018. With that said, UAA shareholders should temper their excitement. As a category, sport leisure (+17% to $9.6 billion) outperformed performance (-10% to $7.4 billion) in 2017 and there wasn’t a single performance shoe (UAA’s niche) in the Top 10, for sales. It is also worth adding that while UAA’s SNAP campaigns have been successful, NPD Senior Analyst Matt Powell reiterated, “Under Armour has always overindexed with kids and has never carried them to high school.”

Fan Marino: The U-16 crowd spends an exorbitant amount of time on SNAP, so offering a highly-engaged audience entertaining interactive experiences is a sound philosophy on Under Armour’s part. Among their recent successful campaigns were a Dennis Smith Jr. (UAA athlete) lens, during All-Star Weekend (he competed in dunk contest), and a game featuring Steph Curry. Users spent an average of 79 seconds posing next to the virtual version of the Mavs rookie, while the Curry game was played more than 3 million times; with the average user spending 3 minutes playing.

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