THU, OCT 03, 2024

Alexander Sherman

CNBC MEDIA & SPORTS REPORTER

The Kickoff

A responsible look at women's sports exuberance

Last week, when I spoke to media executive-turned-investor Jeff Zucker, he said the biggest story in sports business right now is the growth of women’s sports. (Spoiler alert: This week’s guest for The Four Questions, Endeavor Executive Chairman Patrick Whitesell, says the same).

“In women’s sports, we have seen record-setting levels of interest in the WNBA, NWSL, and women’s college basketball, and I expect women’s sports to continue to grow as top female athletes continue to break through culture,” Zucker told me.

Followers of women’s athletics already know some of the highlights: The NCAA women’s basketball finals had higher ratings than the men’s final this year. Late last year, the National Women’s Soccer League agreed to new domestic rights deals worth $240 million with Amazon, CBS, ESPN and Scripps – a 40-fold increase over the league’s previous deal.

The WNBA struck a new media rights deal of its own in July for $2.2 billion over 11 years, with a reevaluation after 2028 that could lead to even higher fees. That's a significant increase over the $60 million per year the league made in its previous rights deal, but it's still a far cry from the $7 billion per year the NBA will bring in, illustrating how much room there's still to run.

The WNBA has been the flag bearer for women’s sports as a growth play and an investment opportunity in all facets: team ownership, merchandising, sponsorship and expansion. The regular season ended Sept. 19, and the ratings statistics are staggering.

It was the most-watched WNBA regular season ever across ESPN platforms, up 170% from last year with an average of 1.2 million viewers per game.

The WNBA had its highest total attendance in 22 years, up 48% from last season.

WNBA merchandise sales from the league’s online store and in-person New York City location were up a combined 601% from 2023, according to a league spokesperson.

If you didn’t think there was general exuberance around the WNBA, the legendary CBS newsmagazine show “60 Minutes” just dropped a 13-minute segment on the league’s rise this past Sunday.

But whenever it feels like everyone is piling in one side of a trade, I believe it’s CNBC’s job to look at the other side. Every investment opportunity comes with risk. So, what’s the bear case for women’s athletics?

I asked LionTree media banker Alex Michael to give me a bear-case scenario as a part of this thought exercise. While he’s also excited about the growth in this space, here are three things to consider across the media and sports landscape:

1. Media landscape shifts

Most of the value in professional sports is propelled by media rights deals, and we’re in an unusual sweet spot right now for sports. Linear TV networks like CBS, Fox and NBC (CNBC's parent company) are paying huge increases to keep sports to maintain relevance.

Meanwhile, streaming services backed by huge technology companies such as Amazon, Apple and Google have started to bid on sports as a way to entice new subscribers.

That’s a concoction that’s led to many buyers for scarce content – a boon for sports rights.

But now most rights are locked up for a while, and there’s likely to be consolidation among some of the buyers in the years to come. If linear TV continues to morph into streaming, the desperation among legacy networks to own sports may diminish or simply end.

And if streamers end up taking over for broadcast networks as the major buyers of rights, they may strike deals for women’s sports similar to Apple’s deal with the MLS, Michael said. That deal is predicated on the MLS reaching certain subscriber goals to get paid more by Apple.

That’s not a great model for any sport outside of football and basketball, he said.

“Less established sports that may not be able to deliver the types of subscriber numbers across a national platform may suffer when they’re told the money is no longer guaranteed,” he said.

2. Expansion risks

Not all cities are created equal. Not all stadiums are created equal. Not all teams are created equal.

The WNBA plans to expand to 15 teams by 2026.

There’s no guarantee the league will be able to fill up stadiums in new locations, especially if the Caitlin Clark effect starts to wear off in the years to come. The ratings for Clark games vs. non-Clark games have been startling. Clark’s nationally televised appearances averaged 1.18 million viewers per game, while all other WNBA outings drew a relatively subdued 394,000, according to Sportico.

“The success of leagues and attendances are not spread equally,” said Michael. “Will new locations generate fervent women’s sports fan bases, or not?”

3. End of pandemic bounce

More broadly, it’s also possible live events are still experiencing some irrational exuberance as a pandemic hangover effect, Michael said.

“Real life entertainment is still on a high from the pandemic,” said Michael.

Simply attending any live event is still fun for a great deal of people after years of avoiding it. But in terms of an investment, it matters significantly if women’s sports turns into something that weathers all cycles — leagues that build die-hard fan bases while still regularly attracting significant casual fandom.

None of these obstacles will likely stop the massive inflow of cash ticketed for women's sports in the coming years. But for anyone thinking about return on investment, it's worth considering the market dynamics.

A couple of news & notes:

We told you it was coming last week, and now it's official: Upstart professional wrestling league AEW has renewed its media rights deal with Warner Bros. Discovery. The all-in multiyear deal, which includes marketing considerations and promotional opportunities, is worth $170 million, I'm told.

I caught up with AEW CEO Tony Khan — he told me he'd circled Oct. 2 as the day he wanted to announce the deal for months.

"TNT and TBS really wanted to keep this partnership together," Khan said.

The deal is for AEW's signature franchises "AEW Dynamite" and "AEW Collision." It doesn't appear to prevent AEW from inventing new events or series and selling them to a different media partner. Khan declined to comment on that prospect.

Warner Bros. Discovery Chairman and CEO of US Networks Kathleen Finch told me the deal's big selling point is bringing AEW to Max, WBD's streaming service. That hasn't been the case up until now, where matches have just lived on cable TV.

Still, keeping the matches on TNT and TBS is also important because it's a way to bring an 18-to-49 audience to cable TV, which is getting harder and harder by the year.

"That’s about as tough of a demographic to reach as possible," Finch said.
A pretty bizarre scene Wednesday when bankrupt Diamond Sports Group told the U.S. Bankruptcy Court for the Southern District of Texas that it will stop carrying all but one of the 12 Major League Baseball teams it televised this past season. Only the Atlanta Braves will stick with Diamond.

The news caught MLB off guard, and MLB declined to comment beyond the league's lawyer telling the court that the league was "sandbagged by the news."

Still, gaining access to 11 teams' media rights is probably in the league's long-run best interest. MLB commissioner Rob Manfred has been outspoken about wanting to rethink the regional sports media model, which doesn't easily translate to a post-pay TV world. CNBC's Lillian Rizzo has more details here.

On the Record

Courtesy: Endeavor Group

In an homage to both Passover and Craig Kilborn’s old bit, ‘Five Questions,’ we’re asking the decision-makers in sports and media Four Questions.

Endeavor is one of the largest global sports and entertainment companies in the world. It owns 51% of TKO Group Holdings, the parent company of the UFC and WWE; the talent agency WME, which represents hundreds of professional athletes through WME Sports; events including the ATP Tour’s Miami Open and collector car auction company Barrett-Jackson; and, sports data and technology through OpenBet.

Patrick Whitesell, Endeavor Group’s executive chairman, answers this week’s Four Questions.

1. I asked Jeff Zucker this question last week, and will ask you this week: What’s the biggest story in sports business today?

Whitesell: 2024 will be remembered as a pivotal year when women’s sports entered a new era of growth, influence and cultural engagement. You have the WNBA rights term worth $2.2 billion over 11 years with league expansion going from 12 to 15 teams. Caitlin Clark’s impact on the WNBA continues to resonate, breaking media and attendance records. You’ve got ESPN’s $115 million, 8-year deal to broadcast the NCAA Women’s Basketball tournament. National Women’s Soccer League’s Nielsen ratings are up 95% from last year with 2024 attendance projected to surpass 2 million – and the Angel City FC became the world’s most valuable women’s sports franchise at $250 million. The question going forward will be if these trends can broaden out and be sustained in other women’s sports.

2. People have been talking about a sports bubble for decades, but rights fees have just kept going up. We are entering a phase now where the biggest rights are now tied up for a few years. In that time, the media landscape is likely going to change quite a bit. Are we finally at the point where you expect sports rights fees for at least some leagues to stall out or even decline?

Sports content sits at the epicenter of today’s media landscape. Three key factors drive its value: real-time engagement, a vast and diverse fan base, and consistent predictable scheduling.

The real inflection point will come when we face the convergence of declining traditional TV viewership and the volatility of streaming economics. Marquee sports leagues like the NFL or Premier League will continue to command premium fees, given their unmatched ability to engage viewers and fuel media consumption. Their cultural value remains irreplaceable, so don’t bet on them faltering. However, secondary and niche leagues could face stagnation or a decline in fees as distributors curate their rights and portfolios refine brand strategies.

Beyond the games, more sports content powers a larger ecosystem – spanning fantasy sports, gaming, panel shows, podcast documentaries, social media, and gambling – allowing potential distributors to create deeper engagement and new revenue streams. All of these ancillary factors will be considered in future negotiations.

3. The NFL recently allowed private equity investment of up to 10% in their teams for the first time. How meaningful is this? The PE firms will have no voting rights, so majority owners seem to be viewing this as purely a liquidity opportunity for them and their families. Is that all this is? Or is this new policy more meaningful than that?

The move is undoubtedly really good for the NFL and team owners. Given the stringent investment terms and narrow rights, it remains to be seen if this is actually a good thing for the private equity firms that have signed up.

4. Netflix is firmly in the sports game now after buying WWE rights (that begin in January) and a couple Christmas NFL games. Do you think the owners of the biggest sports rights will be the biggest tech companies? Is it just a matter of time?

Netflix and other tech platforms are only going to become more competitive for sports rights going forward. The sports leagues are working to ensure their content reaches the widest possible audience to maintain generational fan engagement and long-term relevance.

Tech companies’ business models can also give them an advantage. In selling the 30-second commercial, they can target ads to consumers in real-time much better than broadcast. Compared to traditional media companies, tech companies also have other ways to monetize those users outside of advertising and can think about returns on investments in sports rights differently.

That said, tech companies still need to solve the need for sports to be discussed, promoted and a part of the consumer conversation – between the actual live events. This is one area where broadcast and the linear cable networks still have the advantage.

CNBC Sport Highlight Reel

The best of CNBC Sport from the past week:

Now that Tom Brady has defeated Father Time playing football, he can sell off the time pieces on his wrist. Brady is auctioning off his collection of luxury watches through the auction house Sotheby’s. The seven-time Super Bowl champion’s collection will be available this December as part of “The GOAT Collection: Watches and Treasures from Tom Brady.” CNBC’s Jess Golden has more.
Michael Jordan is suing NASCAR. This isn’t Mad Libs. His 23XI Racing team, along with fellow team Front Row Motorsports, filed an antitrust lawsuit against NASCAR and CEO Jim France on Wednesday, arguing that they have used anticompetitive practices to prevent fair competition in the sport.
Major League Soccer is partnering with German digital media platform OneFootball to provide highlights, stats and other content to a global audience. As part of the deal, OneFootball will have access to highlights of hundreds of MLS matches each season. MLS is looking for ways to expand its international audience after superstar Lionel Messi joined the American league a year ago.
Current No. 3 ranked women’s tennis player Jessica Pegula stopped by CNBC’s “Squawk Box” to discuss the growth in sports investment, not just for tennis but also for the NHL and NFL (her parents own the Buffalo Sabres and the Bills).

The Big Number

As in, there were five different amicus briefs filed Friday supporting Venu’s case that it should exist and doesn’t actually present an antitrust risk to streamer Fubo.

For the uninitiated, Venu is the Disney-Warner Bros. Discovery-Fox joint venture, announced in February, that will give consumers a way to watch ESPN and other sports networks outside of the cable bundle.

Well, it will if it ever launches. A U.S. judge temporarily blocked the service from launching in August, deciding it was anticompetitive in response to a lawsuit brought by sports streaming service Fubo.

The briefs filed last week defending Venu came from a variety of sources, including professors, the International Center for Law & Economics, members of the House and Senate judiciary committees, and a group of state attorneys general. (I picked this week’s big number in part as an excuse to write “attorneys general.”)

The written arguments cover a bunch of different points, but the main one was that Venu is pro-competitive because it offers a far lower price ($42.99 per month) than Fubo. So, if Fubo is arguing that Venu poses an existential threat because hundreds of thousands of customers will leave their service for Venu … well, that’s because Venu offers a better deal. And that’s good for the American public and competition.

Quote of the Week

“Throughout our history, Nike has always faced pressure. Nike was born through adversity, every obstacle, every setback, was an opportunity to learn, to adjust and to improve. This is the foundational mindset at Nike, inspired by athletes and competition, and today is no different. Adversity creates sharper focus, leading to innovation and new growth. We will continue to address the challenges head on."

— Matthew Friend, Nike Chief Financial Officer

Nike shares fell Wednesday after the company withdrew its full-year guidance and postponed its investor day. Nike previously announced that CEO John Donahoe will retire on Oct. 13 and be replaced by longtime company veteran Elliott Hill.

Nike said that its Sabrina line – the basketball shoe created with New York Liberty guard Sabrina Ionescu – has grown about five times over the last year, and its Kobe shoe has nearly quadrupled. Despite those gains, senior retail research analyst at Jane Hali & Associates Jessica Ramirez told CNBC both sneakers' overall performance has underperformed the market and Adidas’s AE1 has been leading the pack in hot basketball shoes.

Nike has drawn heat from investors for falling behind on innovation. “Under Donahoe’s leadership, the company grew annual sales by more than 31%, but it got there by churning out legacy franchises such as Air Force 1s, Dunks and Air Jordan 1s — not the groundbreaking styles that turned the company into a global powerhouse,” CNBC’s Gabrielle Fonrouge explained.

Around the League

Men’s NCAA basketball powerhouse Gonzaga is joining the Pac-12 in 2026, becoming the conference’s eighth school. The Zags, who don’t sponsor a football program, will leave the West Coast Conference after the 2025-26 season.
FloSports, the media company that provides subscription streaming for 25 sports, announced it’s launching a streaming platform focused on Division 2 and Division 3 NCAA conferences. The service will debut Oct. 15 and will cost $19.99/month or $107.88/year. It will feature 12 NCAA conferences with more than 12,000 live games for the 2024-2025 season. Sports on the service will include football, basketball, soccer, baseball, hockey, rugby, wrestling, lacrosse, softball, volleyball, field hockey, cross country, fencing, golf, gymnastics, swimming, tennis, track & field, rowing and water polo.
Major League Baseball attendance rose 0.9% this season, the league’s first back-to-back increase in attendance since 2011-12 and highest aggregate in-person total in seven years. Shorter games seem to be working! The average time of game in 2024 was 2:36, the quickest in 40 years.

That’s all for this week. If you’re enjoying the newsletter, please tell friends and colleagues they should sign up, too!

Go Niners!
Alex

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