JohnWallStreet

Businesses regularly seek out ways to manage downside risk. Airlines hedge fuel prices. Agricultural companies hedge weather-related perils. Canadian sports franchises will even hedge the USD/CAD exchange rate. “They all value stability in, and the forecast-ability of, their costs and revenues,” John Abbamondi (CEO, LongBall Capital) said. But sports properties have historically been unable to protect against their greatest liability–player underperformance. While traditional disability insurance covers injuries that sideline a player for an extended period, there’s been nothing to protect teams against the broader set of happenstances that can influence performance. Traditional disability also often excludes certain body parts (think: pitcher with a history shoulder injury) and almost always has a deductible period. “The idea that you have billion-dollar companies, with hundreds of millions of dollars in expenses, and little ability to hedge downside risk, probably only exists in sports,” Abbamondi said. That may be changing, though; at least, for Major League Baseball (MLB) clubs. LongBall Capital recently introduced Comprehensive Player Impairment & Disability Insurance. The new league-approved product pays out when a player’s ‘runs above replacement’ (an overall measure of a player's on-field performance) dips below a certain threshold, regardless of why. The former Brooklyn Sports & Entertainment CEO believes the coverage, more commonly known as ‘Disability Plus’, has the “potential to transform competitive balance within leagues, and alter how teams view contracts and manage their cash.” hashtag #sports hashtag #sportsbiz hashtag #insurance hashtag #risk cc: JohnWallStreet Shiraz Rehman Ryan Dastrup, PhD Jacie Brandes Randall Friedman https://lnkd.in/gy_sh8sg

Diamond Sports Group’s bankruptcy case appears to be nearing a conclusion after more than 18 months. The regional sports broadcaster recently disclosed plans to shed 11 of the 12 Major League Baseball (MLB) team contracts held this past season as part of its reorg (including four that expired). Those clubs must now renegotiate terms with DSG or find an alternative local distribution solution for 2025 and beyond (note: Diamond remains contractually obligated to five). The latter does not necessarily mean a hard pivot from the established pay TV ecosystem. In fact, baseball, appears to be advising its clubs to remain in the cable bundle. While counter to the media narrative, it has become directionally obvious that guaranteed affiliate fee economics are the surest way to preserve local media revenues–even if the team’s new channel gets tiered and/or commands a lower sub fee than budget for (and after accounting for the macro decline in distribution). MLB would like to see its clubs supplement local cable television distribution with a direct-to-consumer streaming option (and perhaps a small number of OTA games). The league views that combination as the best approach to maximize reach and revenue. Most organizations look to be taking the direction. It was recently announced that MLB will handle production and distribution for the Cleveland Guardians, Milwaukee Brewers, and Minnesota Twins moving forward. The league has managed both for the Arizona Diamondbacks, San Diego Padres, and Colorado Rockies the last two years. In addition to those six clubs, the Chicago White Sox (Chicago Sports Network) and Texas Rangers have partnered on or are considering starting their own RSN projects. cc: Patrick Crakes Ryan Dastrup, PhD Randall Friedman Jacie Brandes JohnWallStreet https://lnkd.in/gK_zWFYQ

Sports properties tend to target large, mature, and oftentimes local companies, with a history of sponsorship spending for their highest profile partnerships assets (think: jersey patches). Those are the types of entities that have historically had the budget to invest, ability to activate, and desire to collaborate in/on them. Not the Brooklyn Nets. It is hard to imagine many of the team’s existing fans were familiar with Berlin-based GetYourGuide before the startup was announced as the new patch partner in late September. While the travel booking and tourism marketplace has 75,000 experiences listed on its platform, just 192 of them are located in Brooklyn (as of Oct 1). The team’s previous partner was Webull, a Chinese-owned electronic trading platform that launched less than a half decade ago. “The Nets fan base is increasingly global, and our team is excited to capitalize on [that] momentum by expanding our reach even further through unique partnerships,” Catherine Carlson (EVP of Global Partnerships, BSE Global) said. But GetYourGuide (and Webull) increasingly fit the profile of what sports properties should be looking for in large-scale sponsorship partners–growth stage companies with millions of dollars in venture funding. Even if those entities have never spent in sports before and/or are located in a different city. cc: Jacie Brandes Randall Friedman Ryan Dastrup, PhD Adam Grossman JohnWallStreet hashtag #RevenueOverReplacement hashtag #sports hashtag #sportsbiz hashtag #sponsorship hashtag #revenue hashtag #partnership hashtag #tourism https://lnkd.in/ghfcYEMN

Sports fans will pay up to attend ‘must-see’ events and ‘once-in-a-lifetime’ experiences (see: UFC’s $22mm gate at Sphere). In fact, they’re 1.3x more likely to spend on hobbies, luxury goods, and experiences than non-sports fans. The problem volume sports properties and most other rights owners have though is few of their games qualify as either–even if the fan has a premium seat. It’s simply too easy to catch the next one, and the overall experience often isn’t great regardless of where one sits (think: traffic, lines). Rights owners can’t solve for every pain point that fans encounter on their way to the stadium, during their time there, and on the return trip home. But an increasing number are coming to realize that they are allowing others to dictate the fan’s experience with their product by failing to take ownership of as much of the outing as possible. That “is not the optimal strategy,” Flavil Hampsten (president of property sales, Elevate) said. Elevate acquired Zinc Agency is NOW Elevate Experiences, an event solutions company, in August and subsequently introduced Elevate Experiences to help sports properties concerned about the experiential and revenue leakage that exists try to plug it. The company offers a menu of premium experiential add-ons that fans and corporate clientele can bolt onto ticket packages. The goal is to ‘elevate’ an otherwise routine night at the ballpark into a memorable experience. #sports #events #experiences #revenue #sportsbiz #sales cc: Ryan Dastrup, PhD Randall Friedman Jacie Brandes JohnWallStreet Lara Toscani Weems Dustin Vicari Will Steinberg https://lnkd.in/geBRE4qX

Much of the conversation involving private equity in sport has focused on LP investments in professional teams and leagues (or the prospect of private capital in college sports). However, a multitude of integrated point solutions, created to solve specific industry challenges (think: sports-centric CRM or data warehouse) and support sports properties by driving operational efficiencies, growing incremental revenues, and/or better engaging fans have emerged within the last half decade. If one believes in sports’ macro trajectory and recognizes that the ongoing influx of smart money into the space will only push rights owners to become more sophisticated in the years ahead, then it is easy to understand why multiple operators and PE-backed groups –including Hextec– are actively pursuing, or kicking tires on, the idea of creating an all-in-one sports enterprise software solution (think: Adobe in the marketing space) or integrated technical toolkit. “There is a unique opportunity to create a centralized solution for sports organizations’ B2B needs, leveraging data and analytics, to drive additional revenue across categories such as sponsorship, fan engagement, and ticketing,” Nathan Janick (VP, Shamrock Capital) said. “The sports market continues to grow rapidly with a huge inflow of institutional capital; however, the infrastructure of these organizations needs to catch up. That dynamic naturally creates an opportunity for software and tech enabled services to help these franchises and rightsholders as it has across other sectors over the past 10-15 years.” #data hashtag #software hashtag #tech hashtag #consolidation hashtag #MandA hashtag #sports hashtag #sportsbiz https://lnkd.in/gU5UuC3q

It is widely believed that the Federal Reserve Board will cut its benchmark interest rate at the Federal Open Market Committee (FOMC) meeting on Wednesday September 18. Should that occur, the expectation is mortgage rates, which have risen substantially in recent years, will decline soon thereafter. Housing market activity has moved (pun intended) in harmony with interest rates. As the latter increased, the number of houses sold decreased. That trend should reverse if mortgage rates decline as expected. And if houses start selling again, there is reason to believe it will have a substantial impact on rights holder and rights owner revenues. “Historically, American consumers reevaluated their media, entertainment, and internet choices during this time of transition,” Ben Shields and Sean R.H. Bratches wrote in the case study entitled ‘ESPN Navigates a New World Order’. “Based on precedent, it [is] reasonable to predict that traditional pay TV might fall even more precipitously once the housing [market] eventually [gets going again].” Adam Grossman explains in JohnWallStreet's latest hashtag #RevenueAboveReplacement column. cc: Jacie Brandes Ryan Dastrup, PhD Randall Friedman https://lnkd.in/gX-G45vF

Artificial intelligence (AI) applications are delivering measurable results across sports. Rights owners using them have improved fan retention rates, incrementally grown revenues, and altered training methods and workloads to optimize for individual player health. But sports’ AI revolution comes with a catch–organizations without strict policies and procedures surrounding its use are exposed to significant legal, financial, and ethical liabilities. And yet, few teams have policies and procedures in place. Sports organizations that proactively develop and implement comprehensive AI policies will be the ones best positioned to capitalize on the tech’s capabilities and mitigate the serious liabilities. cc: JohnWallStreet Shripal Shah Ryan Dastrup, PhD Jacie Brandes Randall Friedman https://lnkd.in/g5xQSh59 #AI hashtag #Policy hashtag #Procedures hashtag #Sports hashtag #sportsbiz hashtag #artificialintelligence

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