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In this edition of Scoreboard, we look at how the return of the National Football League starts the clock ticking on a crucial renegotiation of its $5bn media rights deals, wonder about the true value of English Premier League clubs following Leeds United’s promotion back into the competition, explain the rationale behind David Beckham’s bet on an esports team that plans to go public, and more.
The NFL kicks off contest for America’s biggest media deal
The National Football League has kicked off its 2020 season — get this — on time. Little else about American football will be normal, though.
There are the now-customary health and safety precautions necessary for playing through a pandemic.
And, amid a global reckoning over racial injustice, NFL commissioner Roger Goodell pledged to support player protests this year, after apologising to the likes of Colin Kaepernick and others who took a knee against police brutality in seasons past.
Both coronavirus and the social justice movement may influence a different game taking place off the field: negotiating the next round of NFL media rights.
Existing contracts between the League and its US media partners, currently valued at over $5bn per year, will expire over the next two years. The most valuable — ESPN’s $1.9bn annual rights deal for Monday Night Football — ends in 2021.
The stakes could not be higher. In a year in which the pandemic has scuttled production for many television programmes, networks are relying on the NFL to stage a complete season and stave off further “cord-cutting” by cable customers.
In a normal season, NFL programming accounts for 28 per cent of national audience impressions — viewer exposure to ads — at NBC, CBS, and ESPN, and a huge 60 per cent at Fox, according to media and telecom analysts at MoffettNathanson.
The firm predicts the total annual value of the next NFL media contracts will rise by 57 per cent to $8.8bn, strengthening the NFL as the most valuable media property in the US.
As such, the NFL holds massive power, perhaps more than ever, in its relationships with media companies. That could help it in any negotiations if this season is disrupted.
What if an outbreak of Covid-19 forces the postponement or cancellation of games? Or could protests during the national anthem — which more than half of US sport fans over age 35 find offensive, according to a study this month by Octagon — dent football ratings?
These are the near-term challenges for the NFL. Media companies have their eyes on the bigger prize.
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Leeds United and the Premier League’s billion pound question
How much is a Premier League football club worth?
Andrea Radrizzani, owner of Leeds United, promoted back into English football’s top division after 16 years, provides a bullish view.
Speaking to the Financial Times, the Italian media entrepreneur revealed a five-year plan for Leeds to take a slot just behind the so-called “Big Six” of the League’s richest clubs; Liverpool, Manchester City, Manchester United, Chelsea, Tottenham Hotspur and Arsenal.
If that is achieved, Radrizzani reckons Leeds will be worth between £600m and £1bn. Is that realistic?
This week, Mike Ashley, the British retail billionaire and owner of Newcastle United, castigated the Premier League for allegedly blocking a consortium led by Saudi Arabia’s sovereign wealth fund from completing a £300m takeover — suggesting the going price for a club outside the Big Six.
Within that elite group, the Glazer family orchestrated a heavily leveraged £790m buyout of Manchester United in 2005. The club, listed on the New York Stock Exchange, has a market capitalisation of $2.7bn.
But the more than £1bn that Manchester United has paid in loan interest charges, fees, dividends and other costs related to the takeover suggests a very different ownership model will be needed for those wanting to build a club’s value before selling it on.
Last year, Jim Ratcliffe, founder of £18bn petrochemicals group Ineos, was told he needed to offer over £2bn to acquire Chelsea. Months later, he acquired French side OGC Nice for just €110m instead.
“How do you get to a £2bn-plus valuation for [a club in] a league with total revenue of £5bn and total net operating profit before tax of £500m?” asked Bob Ratcliffe, Jim’s brother, who runs OGC Nice.
Radrizzani insists there remains a keen market for Premier League clubs. He claims to have rejected takeover offers in recent weeks, instead seeking new investment into the club at a £270m-£300m valuation.
Still, while US sports franchises have been sold for billions of dollars in recent years, such prices have not been matched in the Premier League, the most valuable domestic competition in the world’s favourite sport.
The true worth of an asset is what a buyer is willing to pay for it.
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David Beckham and esports battle for a new generation of fans
More than seven years after retiring from professional football, David Beckham has signed onto a new team.
The former England captain is a shareholder in Guild Esports, which as revealed by the FT this week, is planning to raise £20m in an initial public offering. Beckham is betting that his international profile can draw eyeballs to its London-based team of professional gamers.
Those eyeballs belong to the elusive generation of under 35s, also coveted by traditional sports with ageing fanbases, such as Formula One, golf and cricket.
Juventus chairman Andrea Agnelli has warned that football risks losing its status as the world’s leading spectator sport if it can’t retain Gen Z fans who are also being drawn to gaming titles such as Fortnite.
“We see esports as being in the same conversation and rivalling many of the traditional major sports in a matter of five years,” Carleton Curtis, executive chairman of Guild, told Scoreboard.
Just like traditional sports teams, Guild hopes to attract sponsors, sell merchandise and win prize money in tournaments to generate revenue.
But it’s not as simple as growing the team. The market has to get a lot bigger.
Global esports revenues which totalled just $194m in 2014 grew to $980m in 2019, still just a fraction of the €28.9bn European football market.
At the start of the year, PwC projected that esports revenue would hit $1.8bn by 2023.
That figure appears understated thanks to the pandemic, which meant viewers turned to streaming platforms such as Amazon’s Twitch for a gaming fix in the absence of real sport.
That helps explain why the share prices of video games publishers Activision Blizzard and Electronic Arts have soared this year. The Guild October IPO will test whether investors also believe young people will keep their attention on esports long into the future.
“Our hope is they become lifelong fans of Guild in really short order,” said Curtis.
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Cities considering hosting the Olympics should compare the financial risk with models applied to natural disasters, pandemics and war, according to researchers at the University of Oxford in the latest academic warning about the cost overruns related to the Games. The International Olympic Committee reacted angrily to the findings, arguing the study takes a “fundamentally flawed approach.”
DAZN, the online video streaming group owned by billionaire Leonard Blavatnik, is slashing staff numbers, particularly in the US and Brazil, as it looks to mitigate the losses from the pandemic.
Europe’s top football clubs are facing a €3.6bn revenue shortfall over the next two years because of the pandemic, according to Andrea Agnelli, chairman of the European Club Association, who painted a bleak picture of the sport’s current finances.
The UK government is reviewing plans to allow spectators to attend live sports events from October, as prime minister Boris Johnson fights to limit the virus.
The English Premier League will screen all matches in the UK this month, bowing to pressure from supporter groups, who have warned that fans would have been left without the ability to watch their teams because of restrictions on attending stadiums.
World Athletics, under pressure to provide more financial transparency following past corruption scandals, released its annual accounts for the first time. The organisation led by Sebastian Coe posted a $17.3m loss in 2019, an improvement from a $27.6m loss a year earlier.
Eddie Jones has taken up a consulting role with San Diego Legion, the Major League Rugby team based in California. The England head coach is the latest high profile signing for the competition seeking to grow the appeal of rugby union in the United States.
A new NFL season is upon us, and with it a chance to get to know a new crop of gridiron stars. Television networks traditionally introduce team rosters with players announcing their own names and college alma mater. Their disaffected nonchalance was parodied in this 2012 Key & Peele sketch. Check it out — we think Xmus Jaxon Flaxon-Waxon has MVP potential.
Scoreboard is written by Samuel Agini, Murad Ahmed and Arash Massoudi in London, Sara Germano, James Fontanella-Khan, and Anna Nicolaou in New York, with contributions from the team that produce the Due Diligence newsletter, the FT’s global network of correspondents and data visualisation team.