Sports Finance Report: Wheels Up Pays “Seven Figures” for Exclusive Sponsorship On-Board Triple Crown Candidate Justify

by 4 months ago

LOUISVILLE, KY - MAY 03: Justify trains on the track during morning workouts in preparation for the Kentucky Derby at Churchill Downs on May 3, 2018 in Louisville, Kentucky. (Photo by Michael Reaves/Getty Images)


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Wheels Up Pays “Seven Figures” for Exclusive Sponsorship On-Board Triple Crown Candidate Justify

Wheels Up will be the sole corporate sponsor with its logo on Justify and jockey Mike Smith, as the undefeated chestnut colt attempts to become the 13th Triple Crown Winner – and just the second the last 40 years – at Belmont Park tomorrow. The member-based private aviation company has agreed to pay “seven-figures” to place its logo on Justify’s blanket and Smith’s pant leg, turtleneck and boots, in the 150thrunning of the Belmont Stakes. It’s the most ever paid for a single race sponsorship in horse racing history. Wheels Up was among the companies that sponsored American Pharoah, when the horse became the first Triple Crown winner in 37 years in 2015. Justify (and Smith) join an impressive “stable” (pun intended) of Wheels Up brand ambassadors, a list that includes Rickie Fowler, Tom Brady, J.J. Watt, Russell Wilson and Serena Williams.

Howie Long-Short: Joyce Julius & Associates determined that Monster Energy received $6.7 million in exposure value (think: TV, digital news, social) from its sponsorship of American Pharoah in 2015. Considering that Monster wasn’t the exclusive sponsor and that the brand didn’t have placement on Smith’s pant leg, “seven figures” sounds right.

Wheels Up remains privately-held, but there is one way to play the company: T. Rowe Price (TROW). The Maryland-based investment management company led Wheels Up’s $115 million round in September ’16 and co-led (with Fidelity Investments) a $117.5 million private equity round in October 2017. Wheels Up has raised $408.9 million over five funding rounds since December 2013.

For those wondering, there is a $1.5 million purse for the Belmont Stakes. The winner will take home $900,000, 2nd place gets $300,000 and 3rd place will earn $165,00. 4th and 5th place also receive prize money.

Fun Fact: The total purse for the inaugural Belmont Stakes in 1867 was $2,000.

As for TROW, the company reported that it brought in $11.3 billion in client cash in Q1 ’18 – the second-biggest quarterly haul in company history – increasing AUM by 2.3%. There’s a reason those that seek active-management want to invest with TROW. According to Bloomberg, the company’s Growth Stock Fund has outperformed 93% of its rivals since 2012. Shares hit an all-time high on Wednesday ($127.43) and closed at $125.22 yesterday.

Fan Marino: Justify has been posted as the 4-5 morning line favorite (from the #1 post), but the undefeated colt won’t be running against a full field. The group that owns Justify (see below), also owns Audible (finished 3rd in Kentucky Derby); and the collective has decided to pull the top contender from the race as it chases horse racing immortality. It’s an easy decision to criticize, but one I’d have likely made myself. Should Justify win, no one will remember who didn’t run; had Audible won, horse racing fans would forever second guess why ownership allowed a stablemate to tarnish a shot at history. It’s worth noting that should Justify win, he would become the first undefeated horse to win the Belmont Stakes since Seattle Slew did it in ’77.

Justify is co-owned by Winstar Farm, the China Horse Club, Head of Plains Partner and Starlight Racing. The group has already sold Justify’s breeding rights for $60 million.

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Amazon Acquires Exclusive EPL Rights, First Non-Traditional Broadcaster to Carry League Games

Amazon (AMZN) has acquired the exclusive rights to broadcast 20 English Premier League matches per season in the U.K., becoming the first non-traditional broadcaster to carry league games. The three-year pact, set to begin in 2019-2020, represents the e-commerce giant’s most significant live sports programming acquisition to date. AMZN will live-stream games on its digital Prime video service at no additional charge to Prime members (costs $119/year). Financial terms of the deal were not disclosed but BT Sport is reportedly paying $40 million/year for a comparable package. Late Thursday, with the league’s broadcast rights through the next cycle sold, Executive Chairman Richard Scudamore announced he would be resigning before the end of the calendar year. A successor has yet to be named.

Howie Long-Short: It’s important to simultaneously recognize the significance of this deal (i.e. a FAANG company lands exclusive rights!), while understanding that 90% of the broadcast rights available to media companies within this round were sold to traditional TV providers (i.e. linear television isn’t going anywhere, anytime soon). SKYAY will pay $1.655 billion/season for its four packages (128 games/season), a 14% discount on the expiring deal; while BT got the 5th package (32 games/season) for 8% less ($409.3 million/season) than it’s currently paying for the rights. BT picked up an additional 20 games/season at a discount rate ($40 million/season), earlier this week.

EPL clubs decided to sell the last two rights bundles (Amazon’s and the BT deal signed this week) at a cut-rate price after each failed to meet reserve prices in February’s auction and having concluding that Executive Chairman Richard Scudamore overestimated the interest from non-traditional broadcasters after the first five packages were sold to the old guard.

As for AMZN, the company posted its most profitable quarter ever in Q1 ’18. It grew revenue +43% to $35.7 billion, while net income rose 121% to $1.6 billion. Cloud computing (+49% YoY to $5.44 billion), subscription services (+60% YoY to $3.1 billion) and ad revenue (+139% YoY to $2.03 billion) all contributed to the record quarter. AMZN shares are up 7% since May 22nd and climbed past $1,700 for the first time this week, closing on Thursday at $1,689.30.

Fan Marino: The EPL’s 20 clubs currently split international broadcast revenues evenly, but top clubs like Manchester City, Manchester United and Liverpool have been lobbying for a larger percentage; arguing it’s their presence within that attracts the foreign viewer. On Thursday, they got their wish – the league’s clubs decided that any future increases in broadcast revenues would be distributed according to final league position (from ’19-’20 season forward). It should be noted that the new formula ensures the league’s top club receives no more than 1.8x the amount of the lowest-earning club.

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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 (GOLFELY, 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.

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