Paris heads down homestretch; Sports and ESPN continue to drive Disney results; Pelicans trade $$ for distribution and top USL soccer exec goes home to Oklahoma.
SBJ Morning Buzzcast
SBJ Morning Buzzcast: August 8, 2024
(upbeat music) So did you watch the first episode of Hard Knobs featuring the Chicago Bears? Let me know. You know how much I enjoyed the off-season Hard Knobs with the New York Giants, but I missed episode one of The Bears. So let me know what you think. And this is your morning buzzcast for Thursday, August 8th. Good morning. I made Mad Corps. We are heading to the home stretch in Paris where there is already speculation about how the torch will be passed from Paris to LA 28 on Sunday evening. And yes, expect to see a Hollywood connection and even an appearance by Tom Cruise in a sort of mission-impossible skit. Team USA continues to perform with just a few days left in the summer games. As of the end of Wednesday, Team USA had 94 medals and 27 goals, top among all other countries just ahead of China. So Team USA has to feel good about their performance. Now, it may be tough to top the 2020 Tokyo Medal Hall when the US won 113 medals and 39 goals, but there's still a few days left in the games. And then what I'll be waiting for is to gauge just how much of a revenue driver the summer games have been for NBC Universal, because we saw how sports was a critical revenue driver for Disney in its third quarter results, which were announced this week. ESPN+ helped drive Disney streaming to profitability for the quarter, earning a bottom line profit of $47 million. This marks the first time that Disney streaming business has been profitable, and it comes a full quarter of what they had anticipated. So ESPN+'s bottom line for the quarter was a EBITDA of $66 million, and that helped offset a loss of $19 million from Disney's other properties resulting in a bottom line profit of $47 million. And overall, sports revenue continued to be a revenue driver for Disney. Sports revenue increased 5% year over year for the quarter to hit $4.5 billion. Domestically here in the United States, ESPN revenue also grew 5% year over year and hit nearly $4 billion. So the bottom line is ESPN continues to roll along very nicely under Jimmy Pataro and is a key, key producer for Disney. Let's stay with sports media. Another team has decided to move off Diamond Sports Group and go for broader distribution of their games. The New Orleans Pelicans will broadcast their 24-25 games this season over the year for free. This comes after the team ended negotiations with Diamond Sports Group, making them the third NBA team along with the Jazz and the Suns to move away from the RSN model. Now, here's what is interesting. My colleague, SBJ's Tom Friend, reported that the Pelicans were offered a roughly $25 million rights fee to stay with Bally's and Diamond for the season, but instead declined. And they struck a deal with great television for less than $10 million for the season. So why did they do that? Well, the team wants reach. They believe they will see exponentially larger audiences by going over the year. They'll have more viewership and they'll have more engaged viewers. The team hopes that through the larger audience reach, it can regain lost rights revenue through additional ad sales. Now, the Pelicans are also planning at some point to launch a sports only over the year network called Gulf Coast Sports and Entertainment. And that would include more sports programming. So that's a big, big undertaking and risk for the organization. Now, in addition, the team will also develop its own direct-to-consumer product this season. But if I'm a betting man, I still don't believe the Pelicans can come close to the current $25 million a year rights fee that Diamond and Bally's sports is paying and was offering. But here is what we're seeing. Some, some teams want more control. They want more distribution. They want greater reach and larger audiences. They also, seemingly, want to move away from the bankruptcy issues and the up-and-down relationship that they may have faced with Diamond Sports. Now, most of the NBA teams, there are 15 that are with Diamond Sports, want to stay in their deal, at least through this upcoming season. The money is better, they know who they are working with, and they know the logistics of how all operates. And they want to get to the 25-26 season when the new NBA deal starts and the national revenue dramatically increases. And at that time, there could be other regional and local distribution options. But some very interesting things going on in the world of sports media at the team level. Let's shift to a team story. The future of the Cleveland Browns became a bit more clear, as the team sent a letter to season ticket holders sharing more information about the Browns stadium plans and renderings of a possible $2.5 billion covered venue in the city of Brook Park. That's a suburb southwest of Cleveland. Now, the new stadium would anchor a mixed-use district, but the team didn't offer any real indications of next steps in the entire process. The team's lease at Browns stadium ends after the 28 season, so they know there's some urgency to their efforts. And the team said the more that they have explored the suburban Brook Park option, the more attractive it has become. The team likes the open space, they like the ample parking, they like the easy access points to the location, and they confirm that the stadium would feature a dome, which would allow for multi-use and many other sports events. So the team is approaching the project as a 50/50 split private and public funding with the team offering to cover any project overruns. But bottom line, there was no timeline for what's next or other details, but it's clear. The Browns are trying to build support and energy around this suburban stadium site, and the renderings are very impressive, and the team does need to move quite quickly, because like we said, their lease expires after the 28 season. And let's end around people in the news, an executive move in the soccer world, where U.S.L. Chief Commercial Officer, Court Jesky is leaving the league. He'll leave U.S.L. to lead Oklahoma City-based Echo Capital Investments Sports and Entertainment Vertical. So Echo Capital purchased a controlling interest in OKC Energy FC, that is a dormant U.S.L. club set to return to competition in 2027, and Echo will also operate a stadium in Oklahoma City's downtown. So Jesky, as president of Echo Soccer, will oversee the club and ongoing stadium development efforts, as well as future sports initiatives. So he'll be tasked with building an entire sports and entertainment business. For Court Jesky, he is going home, as the 2018 SBJ 40 under 40 honoree was raised in nearby Tulsa, and he attended the University of Oklahoma. Now Jesky has a long career in soccer. He joined U.S.L. in 2019. He became CMO in 2022. He had stints with the U.S.L. in Nashville. He spent nearly eight years in international business for MLS and soccer United Marketing, a long career in soccer. Now he goes home to Oklahoma City. Meanwhile, the U.S.L. is evaluating how it will move forward with its commercial leadership, and possibly backfilling the cheap commercial officer role that Court Jesky is leaving. And so that is your morning buzz guys. For Thursday, August 8th, I made Mad Corps. Thanks for listening to the buzz guys. Stay healthy. Be good to each other. I'll speak to you on Friday. (upbeat music) (upbeat music) (upbeat music)