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.
NFL SPONSORS EXPRESS CONCERNS WITH DECLINING RATINGS AND POLITICAL UNREST
Several NFL sponsors have contacted the league’s front office to express their concerns with declining TV ratings and the political unrest that has engulfed the league, for the first 7 weeks of the season. Long-time sponsor Papa John’s (PZZA) has told the league that in-game sales have fallen, since President Trump’s first comments on NFL player protests, back on September 22nd. USAA, another official league sponsor, has confirmed that it too has been in contact with the league office about the issues. Despite 45’s call for the league to suspend players that fail to stand for the national anthem, the NFL has taken the position that it will allow its players to freely express their beliefs as they see fit.
Howie Long-Short: According to a new Harris Poll, PZZA has surpassed Pizza Hut (YUM) as the most popular pizza chain brand; but that popularity isn’t correlating with revenue growth. While YUM is up 17% this year, PZZA is down 21% YTD. Analysts expect PZZA to report Q3 revenues have grown 1.5% (to $428.73 million) YOY; with Pizza Hut (YUM) expected to report 10.5% growth (to $626.42 million) over the same period. Unfortunately for PZZA shareholders, popularity doesn’t guarantee success.
Fan Marino: League sponsors are contractually bound, so there is no immediate threat of revenue loss for the NFL. Any existing concerns are related to a potentially negative financial impact on future negotiations. The current collective bargaining agreement runs through the 2020 season, so the league isn’t going to be able to force players to stand before that. To be clear, there are some billionaire owners who defend the player’s right to protest. 49ers Owner Jed York was quoted as saying “Our country is more important than a slight economic impact.” At least one of these guys has his priorities in line.
NFL INTENDS ON TERMINATING VERIZON’S EXCLUSIVE MOBILE BROADCAST RIGHTS DEAL
There are indications that the NFL intends on terminating Verizon Communications’ (VZ) exclusive rights to broadcast games on mobile devices, at the completion of this season. Under the terms of the expiring 4-year $1 billion agreement, only Verizon cellular subscribers can stream live game broadcasts; regardless of cable provider. It is still possible that Verizon could retain the title of “official wireless service provider” of the NFL and continue to stream games, while the NFL grants some of its other partners’ permission to broadcast games on mobile devices.
Howie Long Short: The NFL must end mobile exclusivity because their broadcast partners (ESPN, CBS, FOX and NBC) pay a fortune for the rights to carry games and want to make those games available on as many platforms as possible. Some have expressed concern that additional mobile distribution will further contribute to the decline of the league’s television ratings, but no one prefers to watch a game on a small computing device. An increase in mobile distribution will correspond with an increase in “Digital in TV Ratings” (method to account for all viewers across devices with program content and commercials that match the linear TV airing); which is good news for the league, its broadcast partners and their advertisers.
Fan Marino: While NFL television ratings are down 5% from 2016, the decline has yet to influence ad sales. In fact, ad sales were up 2% for the month of September; increasing from $504 million to $513 million. It should be noted that the NFL’s total ad inventory increased by 2% for the ’17 season, as did the cost of an ad (7% to $515K).
NIKE PRESENTS LONG-TERM VISION AT INVESTOR DAY
In 2015, Nike (NKE) Chief Executive Mark Parker, a Phil Knight disciple, projected company revenue would hit $50 billion/year by 2020. Fast forward to Wednesday’s investor day and the $50 billion mark no longer appears realistic. Speaking in broad strokes, Parker presented the company’s long-term vision; offering up padded stats that project 50% of future sales growth coming from “innovation”, 75% of future revenue growth coming from “international” expansion (read: China) and “huge opportunities” in women’s footwear. NKE has even taken a page out of Silicon Valley’s playbook, disrupting the company’s long-time sales model in hopes that partnerships with Amazon and Instagram will help the company reach Parker’s goal.
Howie Long-Short: Parker’s $50 billion revenue target was always ambitious, considering NKE would have had to grow revenue 63% (from the time of his comment) to achieve it. 2015 was an outlier year, with record growth in both the apparel and footwear industries. Parker expected the trend would continue for the balance of the decade, but that hasn’t been the case. Sales growth slowed to just .1% over the last 90 days. I’m confident in saying, $50 billion by 2020 simply isn’t going to happen.
Fan Marino: Forbes released their list of the 40 most valuable brands in sports. Nike finished first with an estimated value of $29.6 billion, up 9.6% from their ’16 valuations. ESPN (DIS) ($15.8 billion, -4.2%), Adidas (ADDYY) ($7.9 billion, +12.9%), Sky Sports (SKY) ($5.5 billion, +10%) and Under Armour (UAA) ($4.4 billion, -20%) rounded out the Top 5.
Note: The summary for this story was written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.
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.