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 sports money 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.
SmackDown Live Moving to Fox Network Television, WWE Signs $1 Billion Agreement
Fox Sports has confirmed reports that the Fox broadcast network will be the home of WWE SmackDown Live, effective Friday October 4, 2019. The 5-year deal, worth an estimated +/- $200 million annually, gives Fox exclusive rights to the “2nd-longest running weekly episodic cable television show in U.S. prime time history” (Monday Night RAW is 1st). By signing with Fox, the show will move from cable to network television; though it will air on Friday evenings, the least watched television night. In related news, USA Network has announced that is has renewed its contract with the WWE to retain the exclusive broadcast rights to Monday Night RAW.
Howie Long-Short: This isn’t news as much as it is confirmation for JWS readers, as we first wrote of the deals back on May 22nd. Come 2019, Monday Night RAW and SmackDown Live will generate 3.6x ($468 million/year) what the company currently brings in ($130 million) for its 2-weekly prime-time shows. WWE isn’t done yet either, broadcast deals in 5 of their 6 largest international markets are also coming up for renegotiation. WWE now projects the company’s 7 largest TV deals in aggregate will grow from $235 million in 2018 to an average of $542 million by 2021.
The formal announcement of the Monday Night RAW and SmackDown Live deals sent WWE shares up +9.5% last week ($72.82). WWE is up +67% since the news first broke in mid-May and has grown +260% over the last 12 months. Of course, WWE is having success on both the television and streaming fronts; reporting WWE Network (OTT platform) paid subs grew 5% to 1.56 million in Q1 ‘18.
Fan Marino: Vince McMahon has committed to spending $500 million, not the $100 million originally reported, on the XFL over the first 3 years. Players (40 man rosters, +/- $75,000 salaries), coaches and a “broad-based insurance plan” (cost min. $10 million/year) are expected to be the biggest expenses. The league is scheduled to debut in February 2020. While $500 million will give the league some runway, I simply don’t think the competition level will be good enough to give it staying power; and if a wave of top high school prospects decided to forego college to pursue pro careers in the XFL, the NFL would simply renegotiate their CBA to enable HS prospects to enter the 2021 draft. The current NFL CBA expires following the 2020 season. It’s worth noting that WWE shares are up 117% since Vince sold $100 million worth in January, money he’s using to fund the startup league.
Gray Television Acquires Raycom Media, ACC Network Through 2019
Gray Television, Inc. (GTN) has agreed to acquire Raycom Media for $3.65 billion, including $2.85 billion in cash. The combined entity will own 142 stations in 92 markets (predominantly in the South and Midwest), enabling it to reach 24% of all U.S. households, and making it the 3rd largest station owner in the country; only Sinclair + Tribune (62%, 102 markets) and Nexstar Media Group (39%, 100 markets) own more stations and neither has more top-ranked (all-day Nielsen ratings) stations (62). Gray intends on selling stations in the 9 local markets (think: Knoxville, Toledo, Waco) where Raycom Media also operates to ensure regulatory approval. Raycom President and CEO Pat LaPlatney will become Gray’s President and Co-CEO, GTN shareholders will assume 89% ownership of the combined entity.
Howie Long-Short: This deal slipped under the radar as the pending Sinclair/Tribune deal and ongoing Fox/Comcast/Disney dance have received most of the attention of late. In the short-term, the combined Gray + Raycom entity should see revenues grow by $15 million (Raycom contracts converting to Gray’s rates) and experience $40 million in cost savings resulting from duplicate station/corporate expenses. Longer-term, strength in numbers (households) will provide the station group with leverage in its negotiations with broadcast operators and cable distributors (note: local news channels are still valued). Gray Television Inc. (GTN) shares are up +23% since the merger was reported, closing on Friday at $15.80. Raycom Media is not publicly traded; the company is employee-owned.
Fan Marino: You may not be familiar with Raycom Media, but subsidiary Raycom Sports currently controls production and distribution for ACC telecasts as ACC Network. That changes in August 2019 though, as ESPN and the ACC have signed a 20-year pact that will give the WWL media (TV and digital) rights to broadcast the league’s football and basketball games on a new linear network (ACC Network currently operates as a digital channel). That’s good news for the conference’s member schools as the ACC distributed the least amount of money ($26.6 million) to its members, among P5 conferences, in 2017; the new network is expected to boost payouts by at least $10 million/annually. It’s worth noting that Raycom does maintain syndicated TV rights to ACC athletic contests through 2027.
What is JohnWallStreet?
JohnWallStreet, located at the intersection of sports and finance, is 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 business news, in easily digestible bites, with commentary from both the sports money and sports fanatic perspectives.
We’ll cover publicly traded professional teams & stadiums (MSG, RCI, BATRA, MANU), television networks (DIS, FOXA, CMCSA, CBS, TWX, MSGN), apparel & footwear companies (NKE, UAA, ADDYY, FL, LULU), equipment companies (GOLF, ELY, FIT), ticketing companies (EBAY, LYV) content and facilities providers (CHDN, DVD, ISCA,TRK, LMCA). 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.