Moag and Company Sports Notes (8 February 2019)

Date: Feb 2019

Trivia

The Celtics and the Lakers have met in the NBA finals numerous times. When did these two teams first meet in the NBA Finals?

Last Week’s Answer: In 1967, the Green Bay Packers beat the Kansas City Chiefs 35 to 10 to win Super Bowl I.

Football:

Information obtained from the Kansas City Chiefs' tax return forms covering a period from '08-10 shows that there is "little correlation between the team’s on-field performance and how much money it makes," according to the K.C. Star. In '10, the Hunt family, which owns the Chiefs, made nearly $40M in gross operating income. The club was "overseeing a major renovation at Arrowhead Stadium, a project that would provide the Chiefs with more robust earning potential locally." The '08 season was "miserable" on the field, as the Chiefs won only two games. Still, they sold $51.8M in tickets, collected $4.7M from parking and made $2.8M from fans buying concessions. By comparison, the Chiefs in '10 clinched a playoff berth for the first time in four years, but revenue from ticket sales was down 20% from '08. It "didn’t matter much to the bottom line, though, thanks to the share-one-share-all structure of the NFL." The Chiefs grossed $302M from all revenue streams in '10, compared to $231M in '08. Nearly a third of 2010's total "came from two league entities: NFL Ventures and NFL Enterprises," which oversee the league’s marketing arm and controlled media, respectively. Add in the Chiefs' share of the TV contract and that is "nearly two-thirds of the gross receipts before a single ticket, parking pass or cup of beer was sold." That was "more than enough to cover its biggest expense each and every year," which in '10 was the $148M paid in salaries. The equal distribution of TV revenue is a "testament to the NFL’s desire for financial parity among its franchises." In '09, Forbes "pegged the Chiefs’ revenue" at $235M, but the actual number was $273.9M. After expenses, Forbes "pegged the Chiefs’ operating income" at $47.8M, which was "more than twice what was reported to the IRS".

Penn State football brought in more than $100M in revenue for FY '17-18, "dwarfing previous figures," according to STATECOLLEGE.com. PSU football brought in $34M from ticket sales alone and $32.65M for media rights. The official total sits at $100,240,568 for the fiscal year ending June 30, 2018, which is up from '16-17 when the program brought in $81.2M and just $68M in FY '13-14. The football team had $45.2M in operating expenses for FY '17-18. While Penn State football is the athletic department's "biggest money maker by a wide margin," the program is joined by men's basketball ($3.7M) and men's ice hockey ($514,094) in the "positive cash flow department." In total, PSU athletics made a net profit of $10.18M in FY '17-18, thanks to a revenue stream of $165,373,274 against $155,184,697 in operating expenses. In FY '16-17, the school had $144,017,055 in revenue and $138,724,055 in expenses.

Baseball:

After adding the owners of the Minnesota Twins and Detroit Pistons to his bid for the Fox RSNs, Liberty Media Chair and Atlanta Braves Owner John Malone is now "expected to woo other teams as well in the consolidated offer" in a strategy that "includes a promise to team owners that he will continue to sell games to local broadcasters," according to the N.Y. Post. Sources said that other team owners who "could potentially join Malone’s consolidated bid" include the Arizona D-backs' Ken Kendrick, the Milwaukee Brewers' Mark Attanasio and the Cleveland Browns' Jimmy and Dee Haslam. A source also said that a "spinout of the RSNs is still an option if Disney finds the bids unsatisfactory". Fox Business' Charlie Gasparino reported the 22 RSNs are "likely to fetch" around a total of $13B, a "far cry from what they initially wanted," which was in the $20B range.

Atlanta Braves President & CEO Derek Schiller said the team was “just learning of” the pending merger between SunTrust Bank and BB&T that was announced, but he said SunTrust’s contract for the naming rights to the Braves’ ballpark “is constructed to deal with a situation like this." Schiller, who is attending the MLB winter owners meeting in Orlando, said, “We've been in touch with SunTrust and will wait for them to come to us with what they want to do.” The combined company will merge under a new name, which has yet to be determined. The Braves in ’14 signed a 25-year deal with SunTrust ahead of the ballpark’s ’17 opening that is worth more than $10M annually. In addition to the SunTrust Park name itself, there is the high-end SunTrust Club right behind home plate that is a key part of the Braves’ premium seating mix. That also will need a new name.

Other:

Disney during its Q1 earnings report said it now has 2 million subscribers for ESPN+, "double the number it had" just five months ago, though it is "still losing money," according to CNBC. ESPN paid $300M for UFC rights, and the package made its debut on ESPN+ on Jan. 19. ESPN+ will "probably need 3 million subs just to cover that one rights contract," though they have already "had some nice sub adds. You’ve really got to look at now how they have to cover rights costs against something where they can only get revenue from the people who are actually going to watch". There is "no question" ESPN will make ESPN+ profitable, but the “big unknown right now in terms of timing is online betting, which is going to be the bonanza for ESPN since it has a lock on the majority of live sports". Disney Chair & CEO Bob Iger during the company's earnings call yesterday said that ESPN was "already talking about wagering and broadcasting information of interest to bettors" in some of its programming.

Sources: SportsBusiness Daily; The Athletic; ESPN.com; The AP; K.C. Star; STATECOLLEGE.com; N.Y. Post; CNBC

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