Sports Finance Report: Clarifying Trump Remarks On NFL Tax Breaks; World Cup Ratings Killer

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President Trump sent out a tweet on Tuesday morning rhetorically asking “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!”. The statement has caused some confusion amongst the public, as the NFL voluntarily relinquished its federal tax-exempt status in 2015. However, the league does still receive subsidies (worth billions), on the state level, for the construction of privately owned stadiums. In October 2016, the Nevada state legislature approved the expenditure of $750 million, in public money, for the construction of Mark Davis’ new Las Vegas football stadium.

Howie Long-Short: It is important to distinguish fact from fiction. While it is true that the league office was tax-exempt prior to 2015 (NHL and PGA Tour still are), the 32 teams were not. All revenues generated from sponsorships, broadcast deals, and ticket sales have always been taxed. The only untaxed money were league office profits, estimated to be worth $10 million/year. A drop in the bucket for a company that will generate $14 billion this year.

Fan Marino: 45 also found time to opine on ESPN SportsCenter Anchor Jamele Hill, saying “with Jemele Hill at the mike, it is no wonder ESPN ratings have tanked, in fact, tanked so badly it is the talk of the industry!” Hill, who previously referred to the President as a “white supremacist” is currently on suspension from the network for a 2nd violation of “social media guidelines”. I’m no fan of SC6, but I’m certain cord cutting, the proliferation of streaming/OTT services and a shift to digital media consumption, all rank higher on the list of reasons why ESPN subscription numbers (and hence ratings) are down.

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The NBA and Rakuten (OTC: RKUNY) have signed a comprehensive media partnership worth a reported $225 million; making the Japanese e-commerce and internet services giant the league’s exclusive distribution partner for live game broadcasts in Japan. The company’s messaging platform, Rakuten Viber, will be an official media platform for the NBA, giving league content to the services’ 900 million users. On the marketing side, Rakuten will also now sell select NBA & team merchandise globally through its e-commerce platform. This is the 3rd major sports deal Rakuten has signed in the last 12 months, following a $235 million jersey sponsorship deal with FC Barcelona and a $60 million jersey sponsorship deal with the Warriors. CEO “Mickey” Mikitani has stated the company “wants to be a household name like Google and Facebook.”

Howie Long-Short: RKUNY is the largest e-tailer in Japan, with roughly 25% of all transactions in the country taking place on their site. However, with Japan’s aging population, if the company is to become a household name, the likes of Google and Facebook, they’ll need to grow internationally. Mikitani believes to do that, they need to hire the best talent they can find world-wide. In 2012, he implemented English as the official language of the company, so that the Japanese staff could seamlessly communicate with non-Japanese speakers. Since then, the company has started to invest internationally, acquiring U.S. cashback website Ebates and taking stake in both Lyft and Pinterest.

Fan Marino: Globalization remains the league’s most promising avenue for future growth and no American pro sports league has a bigger international following than the NBA. Perhaps that is why new Rocket’s owner Tilman Fertitta felt comfortable investing in the league, but said he “would have been scared to pay $2.2 billion for an NFL franchise”. Howie is the finance guy, but for my $2.2 billion I’m buying a pro football franchise. For all the negative talk surrounding the NFL, look at the TV ratings. Last Thursday night’s Bucs/Pats game drew 15.4 million viewers. The average 2017 NBA playoff game drew less than 5 million people. I don’t believe there is an NFL franchise with an intrinsic value less than $2 billion.

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The U.S. has failed to qualify for the 2018 World Cup. A devastating 2-1 loss to Trinidad and Tobago combined with wins by Honduras and Panama, means that the USA will not be participating in next summer’s tournament in Russia. It will be the first time since 1986 that the USMNT did not qualify for the quadrennial soccer event.

Howie Long-Short: Fox Sports (FOXA) paid $200 million for the English rights to broadcast the 2018 World Cup, so financially this loss hurts them as much as anyone. Some will argue they’re losing as little as 3 big draws during the Group Stage (11 of 20 highest rated soccer games of all-time included USMNT), but I think it’s a ratings killer. The casual viewer is now out and I would think a lot of potential advertisers would be too.

Fan Marino: I can’t believe the USMNT lost to the 99th ranked team in the world, needing just a tie, with a World Cup berth on the line. The disappointment is beyond my ability to express it in words.

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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.

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