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.
NBA Wants 1% of All Money Gambled, Equates to 20-29% of All Revenue
In November 2014, Adam Silver became the 1st U.S. sports commissioner to openly support the legalization and regulation of sports gambling; suggesting a federal bill (as opposed to state initiatives, like NJ) and touting the potential benefits for the NBA (i.e. share in profits). On Wednesday, the NBA set their price (1% of all bets, not just on NBA games) to participate (in lobbying Congress for a national bill); seeking legislation that would authorize legalized gambling from mobile phones and kiosks, in addition to casinos and racetracks. The league also wants to limit prop bets that can be easily fixed, implement an age restriction and ensure a “rigorous licensing plan” is in place for sports betting operators. The NBA will allocate gambling revenue to the real-time monitoring of wagers and games.
Howie Long-Short: League attorney Dan Spillane touted the NBA’s plan as a solution that would offer “sports fans a safe and legal way to wager on sporting events while protecting the integrity of the underlying competitions.” That sounds nice, but as American Gaming Association President, Geoff Freeman said, “let’s get real about eliminating the illegal market, protecting consumers and determining the role of government – a role that most certainly does not include transferring money from bettors to multi-billion dollar sports leagues.” The NBA is in this for the money, and there is a lot of it to be made. In 2017, Las Vegas took in between $4.5 billion and $5 billion in wagers; just a fraction of the $400 billion Silver believes (AGA says $150 billion) is gambled annually on the black market. If even $50 billion is bet on NBA games (which sounds high based on the AGA estimate), the league would take in $500 million in new revenue; or roughly 12% of the NBA’s total revenue ($5.9 billion) in 2017.
Fan Marino: The average Las Vegas casino realizes a profit of between 3.5-5% of revenue. The NBA’s proposed 1% fee amounts to between 20-29% of total revenue; which would seem excessive. Need a reason not to gamble? If you had the Bruins -1.5 (vs. Devils) on Tuesday night, you had the game won (Bruins had a 3-1 lead) with time expiring; then this happened (notice the clock). The final score was Bruins 3, Devils 2.
Gatorade Sales Decline for the 1st Time Since ‘12
For the first time since 2012, domestic Gatorade (PEP) sales have slipped; -.5% to $5.9 billion in fiscal 2017. Health conscious consumes opting for alternatives to a sugary sports-drink and increased competition from upstarts like BodyArmor (no artificial sweeteners, coloring), have cut into Gatorade sales. Despite the negative news, the company still owns 75% of the U.S. market-share (Powerade has 18%, BodyArmor has 3%). Powerade sales remained flat, while BodyArmor doubled sales over the same period.
Howie Long-Short: Back in October, PepsiCo Inc. (PEP) CEO Indra Nooyi indicated the sales decline was temporary, attributing it to a down summer and slowing convenience store sales; but, trends showing consumers leaning towards healthier alternatives indicates PEP has a larger fundamental problem on its hands. Particularly, when you consider that Gatorade makes up +/- 20% of the company’s North American sales; but, Gatorade Organic (no artificial sweeteners, coloring) is responsible for just $20 million (out of $7 billion, .003%) in revenue since the products’ ’16 launch. The product simply hasn’t caught on.
Fan Marino: Gatorade is title sponsor of the NBA’s official minor league basketball organization. The league has been actively seeking distribution, signing noteworthy (these are not your father’s NBA on NBC broadcasts) deals with both Twitch and Eleven Sports. JWS recently sat down with porn star turned Twitch G-League color commentator Mia Khalifa, to discuss co-streaming and the future of sports broadcasting.
Allstate Signs on as Hot Chocolate Series Title Sponsor, Invests in Endurance Sports
Allstate Insurance Company (ALL) has signed-on as the title sponsor of RAM Racing’s Hot Chocolate 15K/5K Series; the company’s longest sustained commitment to endurance (or lifestyle) sports. The 2017-2018 Hot Chocolate Series makes stops in 17 U.S. cities (the ’18-’19 schedule is not yet finalized) and 3 locations abroad; with 15 of their 15K races, placing among the top 25 largest distance events of the year. RAM Racing, known as the leading endurance race producer, has had more than 1 million people run in their events since the company’s 2007 start (a single race in Chicago). Financial terms of the 3-year deal were not disclosed.
Howie Long-Short: Despite news that catastrophic loss is up 16% (to $2.64 billion) over the first 9 months of ’17 (from ’16 figures), ALL shareholders were likely pleased with the Q3 ’17 earnings report. The company reported earnings increased 24% YOY (to $587 million, $1.60/share) as total revenue grew 4.8% YOY (to $9.6 billion). Premium and contract charges (+4% YOY) and an increase in net investment income (+12.7% YOY) stoked the growth.
Fan Marino: Allstate may be new to endurance running, but the brand is synonymous with college football. ALL has been the title sponsor of the Sugar Bowl since 2003 and has its Good Hands logo on the field goal nets at 90 different collegiate stadiums. More fun facts: The “W” imprinted on Wilson tennis racket strings inspired the NFL to place the shield logo on nets at the 2002 Pro Bowl; the first time the league used the netting for branding purposes.
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 Securities & 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.