Sports Finance Report: NFL’s Hypocritical Stance On Gambling, Esports and Golf
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RICHARD SHERMAN CRITICAL OF NFL’S HYPOCRITICAL STANCE ON GAMBLING
Outspoken Seahawks star Richard Sherman has been critical of the NFL, questioning why a league that takes a public stance against gambling puts out daily injury reports designed to ensure a level playing field for gamblers. Sherman went on to express frustration with fan interest in fantasy football; saying the commoditization of players has resulted in a lack of compassion for real life injuries. The NFL responded to Sherman’s comments, but didn’t exactly dispute the allegations stating injury reports are “designed for competitive fairness purposes and curtails the potential for someone to attempt to gain and exploit inside information.” League owners have approved the Raiders pending move to Las Vegas, but insist that no changes will be made to the league’s gambling policy. Commissioner Goodell has been firm insisting that the integrity of the game remains the league’s number one priority and is something “we will not compromise on”.
Howie Long-Short: If the U.S. Supreme Court rules in favor of New Jersey and legalizes sports gambling within the state, a flood of others will follow (5 states have backed NJ). Should that happen, expect the NFL to quickly change its stance and turn legalized sports gambling into the league’s next revenue growth driver ($154 billion were illegally bet on sports in ’16). With a SCOTUS decision expected no later than summer ’18, fans could be legally betting on NFL games by Week 1 of the 2018 season. As for Sherman, he’s right, injury reports are for gambling purposes and the NFL’s stance on gambling does seems hypocritical; but to expect fans to care about how an injury effects a player’s mental state or family, when 26% of NFL fans make less than $40,000 and struggle to make ends meet, makes him sound both entitled and out of touch with reality.
Fan Marino: Gamblers that bet on the Chiefs/Redskins game Monday night, experienced one of the wildest finishes in recent gambling history. The Chiefs (-7) kicked a FG with 4 seconds to go, putting the team up 5 points and all but ensuring a win for those who placed their money on Washington. After the kickoff, Washington had a chance to run one last play. That play ended with a KC fumble recovery, a defensive TD giving the team a 29-20 lead and a win for those who bet on the Chiefs. The madness wasn’t over though yet. With the over/under set at 49.5 points, Kansas City had to make the XP for the over to hit. Coach Andy Reid chose to kneel on the ball, giving those who took the under reason to celebrate.
ACTIVISION BLIZZARD’S OVERWATCH LEAGUE FOLLOWING NFL, NBA, MLB & NHL TEMPLATE
Activision Blizzard (ATVI) has made some recent changes to its Overwatch League, designed to stabilize the fledging Esports ecosystem for game publishers, owners, players and sponsors. Permanent city-based franchises (plans for at least 28 world-wide), revenue sharing agreements and franchise fees ($20 million) are among the concepts ATVI has borrowed from the NFL, NBA, MLB & NHL. Moving forward, the development of a players’ union will be necessary to ensure gamers are compensated fairly. The league has announced 9 franchises, with Patriots owner Bob Kraft, Mets COO Jeff Wilpin, Rams owners Stan & Josh Kroenke and Sacramento Kings co-owners Andy Miller/Mark Mastrov among the pro sports owners that have purchased teams.
Howie Long-Short: Unlike pro sports leagues which are a collection of individually owned franchises with an elected commissioner overseeing the league, ATVI is a publicly traded company who must act in the best interests of their shareholders and they’ve done a great job of it. Company shares are up 82% YTD (500% over the last 5 years) as ATVI has proven capable of generating revenue growth without having to release new game titles. The potential for in-game advertising, creation of the Overwatch League and soaring in-game revenues (up 100% YOY to $3.6 billion in 2016) have the company well positioned for future growth. The recent release of Destiny 2 and the upcoming blockbuster release of Call of Duty: WWII, should give the company a revenue boost in the Q4.
Fan Marino: As Howie noted last week, Comcast Spectacor’s acquisition of an NLL franchise made sense because the company’s strength is in hosting events and building businesses around pro sports teams. The same can be said about pro sports team owners investing in Esports franchises. The revenue model for Esports is based on sponsorships, advertising, merchandise, ticket sales and media rights; areas which pro sports teams can leverage established relationships. In the short-term, these acquisitions seem like a no-brainer; I have long-term concerns though. I can’t envision any scenario in which a game that is popular today, remains popular in 2030. Technology evolves quickly and attention spans are short. What happens to the value of these franchises when the next big game comes along?
TIGER WOODS HELPING BRIDGESTONE GOLF GENERATE RECORD SALES
Bridgestone (OTC: BRDCY) Golf CEO Angel Ilagan recently stated that Tiger Woods is more valuable as an endorser than he is as a player, arguing he’s “the single golfer who’s had the greatest impact bringing consumers into the game”. Ilagan argues that golf enthusiasts are familiar with Tiger’s reputation as a “sports science junky”, who only plays with very best equipment; while noting the game has seen an increase of 4 million players since Woods last participated (back surgeries, DUI) in a tournament (Feb ’16). The company signed Woods to an endorsement deal in December ’16, and generated record sales growth in H1 ’17.
Howie Long-Short: Bridgestone Golf falls under the Bridgestone Corporation umbrella, best known for their rubber & tire business. Bridgestone Corp. recently reported operating income for H1 ’17 was down 7.3% (to $1.8 billion), despite sales rising 5.8% (to $15.5 billion); attributing the earnings decline to rising raw material costs. As for Bridgestone Golf, it posted the 2 most successful quarters in company history and its single highest grossing month in company history, within the first 6 months of 2017. The Japan based company trades over the counter under the symbol BRDCY.
Fan Marino: Woods remains most valuable as an endorser, when he’s playing. Paid advertising has been driving awareness of the Woods/Bridgestone partnership, but nothing can replicate the exposure and impact seeing the Bridgestone “B” on a ball that Tiger is lining up to putt on 18, on Sunday.
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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.