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From: SportsMoney Premium by Mike Ozanian @ Forbes - Saturday Mar 20, 2021 07:02 am
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Mike Ozanian
Assistant Managing Editor

Welcome to a special preview of the soon-to-launch SportsMoney Premium, the indispensable new subscription newsletter on the business of sports. I’m Mike Ozanian, the founder of Forbes’ SportsMoney and your guide through our unrivaled proprietary database tracking every move in franchise valuations from across the sports world. 

With SportsMoney Premium, you’ll have access to the data and insights that make Forbes’ valuations the industry gold standard. I’ll tell you where the smart money is going, whether in the big four American leagues or in European soccer or on new frontiers like esports, online sports betting and cryptocurrencies. Sports franchises have seen tremendous growth over the last couple of decades, so there’s no better time—or place—to break down the world’s most valuable empires and biggest brands. 

This newsletter will be the go-to resource for team owners and player agents, investors and bondholders, media executives and stadium operators—anyone who has a stake in what a stake is worth. That’s where you come in. Be part of this special insider group by letting me know exactly what you think: Share your tips, comments and feedback here.

It’s going to be a wild ride, so let’s get started.
The following is a preview of the SportsMoney Premium
newsletter from Friday, March 19, 2021.
March 19th, 2021
THE BIG TAKE
Adjusted for inflation, Major League Soccer expansion fees have increased nearly eight-fold over the past decade. But Ron Burkle’s decision in late February to renege on his agreement to buy the Sacramento expansion team indicates the growth rate in MLS expansion fees has peaked. Burkle’s group was going to pay a $200 million expansion fee and invest another $300 million to build a soccer-specific stadium. Sacramento Republic FC (currently in the USL Championship league) was slated to join MLS in 2023 along with St. Louis City SC and bring the league’s roster to 30 teams.

Most MLS teams lose money every year. MLS owners fund those losses in part by divvying up expansion fees. But MLS is running out of cities to expand to. Who was going to cover Burkle’s losses? Without expansion fees, owners need revenue growth. The thinking at one point was that MLS would eventually get a bountiful TV deal. I don’t see it. MLS gets an average of $90 million a season through 2022 for national TV rights combined from Fox, ESPN and Univision, and teams get next to nothing for local broadcasting rights because ratings for many teams are miniscule. Even if MLS doubles the value of its television rights in its next deal—to $180 million a year, or $6.2 million for each of the 29 teams—it would pale in comparison with a $300 million expansion fee ($10.3 million per team). In short, the league’s economics do not justify a $500 million investment absent the ability to amortize that cost over 15 years for sizable tax benefits.
Forbes
MLS Expansion History Forbes
LITTLE DITTIES
MOST UNDERREPORTED STORY
On March 4, Paramount+ replaced and expanded on CBS All Access. The streaming service is set to include a bunch of sports programming, most notably the NFL and international soccer like the Champions League, and CBS Entertainment Group boss George Cheeks says Paramount+ will be the leader in live sports. This comes on the heels of NBCUniversal announcing it will shut down NBC Sports Network (NBCSN) by the end of 2021 and shift the bulk of its sports programming to the USA Network cable channel and the Peacock streaming service. The most fascinating part of the strategy by both Paramount+ and Peacock is that, after several years of experts predicting live sports streaming was going to be led by nontraditional digital-exclusive platforms, we ended up with established media companies controlling live sports streaming. Why? Brand power and scale.
A MORE CHALLENGING PAY-TV ECOSYSTEM
AT&T has finalized a deal to sell a minority stake in DirecTV to private equity shop TPG. DirecTV’s NFL Sunday Ticket package was once viewed as so valuable that when AT&T was negotiating to buy DirecTV in 2014, it had the right to back out of the deal if DirecTV did not renew its agreement with the NFL. (DirecTV pays the NFL an average of $1.5 billion a year for those rights through 2022, 50% more than in its previous agreement with the league.) Fast-forward to today, and according to Wells Fargo Securities, the minority stake transaction values DirecTV at about $16.3 billion, or four times EBITDA (earnings before interest, taxes, depreciation and amortization). That’s a far cry from the $48 billion ($67 billion including debt) that AT&T paid for the business in 2015. Why? At the end of 2015, AT&T reported 19.8 million DirecTV subscribers and 5.6 million cable TV subscribers under its U-verse brand, for a total of 25.4 million. AT&T had a total of just 16.5 million cable and satellite TV subscribers at the end of 2020, plus about 650,000 TV subscribers who get service over the internet.
A TEMPERED IMPACT ON NFL TEAM VALUES
On March 18, the NFL announced new long-term deals with its media partners that, according to a source, will see the league’s national media revenue rise to an average of $10.27 billion a year, split evenly among the 32 teams, up from $5.67 billion—an increase of 80%. The new deals with CBS, Fox, NBC and ESPN/ABC for weekend and Monday night games start in 2023. Amazon begins its new streaming deal in 2022 and replaces Fox for Thursday Night Football. Including DirecTV ($1.5 billion a year) and Yahoo ($450 million a year), the NFL’s current deals deliver an average of $7.6 billion a season.
Forbes
2020 NFL Media Rights Value VIP+ Variety Intelligence Platform
In September, Forbes pegged the average NFL team value at $3 billion, 7% higher than in 2019. The increase was mainly due to expectations that the league’s next national media deals would roughly double in value, so unless a huge surprise with the Sunday Ticket package is still coming, the new media deals will not significantly impact team values. One possible reason the new deals fall a bit short of the forecast: TV ratings were bad last season.

NFL REGULAR-SEASON TV RATINGS FOR 2020 VS. 2019

ESPN Monday Night Football: down 3%
CBS Sunday afternoon: down 4%
Fox Sunday afternoon: down 6%
Fox Thursday night: down 6%
NBC Sunday Night Football: down 16%
NO NEW STADIUM FOR ROMA
If you think building a new stadium in the U.S. can be tough, try Italy. AS Roma has been trying to build a new stadium for almost a decade, and its owners recently announced they would give up for the time being because of political hurdles and the pandemic, which has taken a big bite out of stadium revenue. James Pallotta got so frustrated with the stadium process that he sold the Serie A team to the Texas-based Friedkin Group in August for about $700 million. To the detriment of the team’s value, Roma currently plays in the antiquated Stadio Olimpico. Consider that during the 2018-19 season (the last full year with fans in the stadium), Roma had match-day revenue (stadium gate receipts and stadium corporate hospitality) of $37 million. By contrast, its Serie A rival Juventus, which moved into the modern Allianz Stadium in 2011, had match-day revenue of $75 million. This helps explain why, for our most recent soccer team valuations, in May 2019, we pegged Juventus at $1.512 billion and AS Roma at $622 million. 
TEXAS RANGERS TRY TO MAKE UP GROUND
The Texas Rangers are the first team in MLB to announce they will permit full attendance at their games this season. They badly need people in Globe Life Field, which opened last year without fans in attendance for regular-season baseball. Multiple sports bankers say the team’s owners had to pony up over $130 million last year in capital calls related to cost overruns for the $1.2 billion ballpark and the team’s operating losses. The cost to the city of Arlington for the new ballpark is capped at $500 million, and the team pays the rest.
hello world
Mike Ozanian
Assistant Managing Editor
I'm the assistant managing editor for SportsMoney at Forbes Media and the managing editor and cohost of the Forbes SportsMoney TV show on the YES Network. I've been compiling valuations for professional sports teams for three decades.
You can follow me on Twitter @MikeOzanian.
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