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The year that was

Folks, with just a couple of weeks left for the year to end I thought now would be the perfect time for a good old year-end review or, as is fashion nowadays, sports-wrapped. So sit tight, we’re taking a ride through the business of sports.

On the players' side of things, this was the year of excess. Investors poured money into different sports as if it was a Black Friday sale. It all began with Messi’s move to Inter Miami. The deal (I’ve written about it here) was unprecedented on so many levels. In June, Jaylen Brown signed the biggest contract in NBA history with the Celtics. Moving to football, Chelsea spent close to $550 million on transfers in the summer window. Here in India, Hardik Pandya’s transfer to Mumbai Indians for $2 million plus an undisclosed fee made waves. In the usually quiet world of Golf we had John Rahm ditching the PGA for the glitz of LIV Golf, a phenomenon we covered in The Signal. Finally, to top it all off, Shohei Ohtani signed for the Los Angeles Dodgers in a $700 million over 10 years deal, making it the world’s largest Buy-Now-Pay-Later scheme. Clearly, there has never been a better time to be a sportsperson. 

With so much money pouring in, surely the business of sports is thriving right? Eh. A major source for all the players’ money is the extremely lucrative media rights. Despite that, this was the year of bargains for sports broadcasting. 

Let’s start with Europe and its prized asset: football. The English Premier League’s domestic media rights were up for sale this year. The League netted a cool $8.4 billion contract from Sky and TNT Sports. However, a closer look at the numbers reveal a not-so-great picture. The deal is a mere 4% increase from the last one. The number of games available for broadcasting has gone up. So has the contract duration. Both of these changes reflect a marked departure from the Premier League’s earlier standpoint of ‘less is more’ with respect to broadcasting.

Italy’s premier football league, Serie A has had a similar fate. The league was expecting $7.7 billion for its domestic media rights. Instead, they settled for $4.5 billion and several caveats. In France, the Football Association scrapped its media rights auction because no-one was willing to offer the minimum price it expected. Germany, which will have its media rights sale next year is already looking sceptical. Its top flight league, Bundesliga, has signed a deal with a private equity firm to shore up its revenue. 

In hindsight, these deflated numbers shouldn't be surprising. Europe’s big problem in broadcasting stems from the duopoly of Sky and DAZN. The two own the domestic broadcasting rights of every top-tier league in the Big Five; a less than ideal situation to drive up valuations. What makes it all the more saddening though, is the fact that the European Union had warned of this trend back in 2003. For the optimists, there’s hope. International broadcasting deals are yet to happen and that’s where the real money usually is.

Moving eastwards, we have Saudi Arabia. The Kingdom’s foray into sports hasn’t materialised into anything substantial. They sold their football league’s international media rights to IMG for a pittance. In Golf, its LIV tournament finally found a broadcaster in CW (yes, the same CW that made Riverdale) but reports suggest there’s no money exchanged in the deal and that the two will share advertising revenue. Of course, the Saudis are not in it for the money. At least for now. 

Which finally brings us to our last stop, the USA. No major broadcasting deals were pending this year but there was much churn over what’s in store for the next. Why? NBA’s media rights are up for sale next year. The league would reportedly be looking to triple its value from the previous contract. That’s easier said than done. Like I said before, sports broadcasting is going through the year of bargains and there’s reason to believe it will extend to next year. 

Traditional media giants such as Disney and Warner Bros (NBA’s current media rights holder) are under enormous pressure from Wall Street to cut costs. As per a New York Times report, Disney’s ESPN will have to pay an average $2.7 billion annually over the next decade just to show the NFL. This comes at a time when ESPN’s core revenue stream of linear TV is facing headwinds. At Warner Bros, the situation is much worse as the company has racked up $45.3 billion in gross debt. Its CEO has already warned of a ‘lousy’ ad market next year. 

The only way the NBA could match its asking price is if it pits these traditional media giants with the tech giants such as Apple and Amazon. A bidding war is unlikely as neither of the two parties would want to overpay. Not because they’re strapped for cash but because the economics behind breaking the bank for one sport property isn’t clear yet. In that case, the NBA could also explore the NFL strategy of breaking the league into  packages for maximum participation.

All of this presents a rather peculiar picture of the business of sports. On the one hand, investors are pouring in money as if it’s a Black Friday sale. On the other, the main source of recouping that money is going through a fundamental shift. The picture is getting muddled further by the entry of nation states who don't even want to recoup that money. Does that mean there’s a bubble in the sports business? If yes, what would happen if it goes bust? I guess we’ll find out soon.

⚡️Quick Singles

🏏💵🇮🇳: Indian Premier League (IPL) franchise Rajasthan Royals is in talks with American investment firm Footpath Ventures to raise a $50-80 million round, according to The Economic Times. The round will see participation from other investors and, once completed, value the franchise at  ~$800-850 million post-money. Earlier this year, Tiger Global Management was reportedly exploring an investment in the franchise, which won the first edition of the IPL. The Royals already have US private equity firm RedBird as part of their captable by virtue of  a 15% stake it purchased in 2021. Dig deeper: Why private equity firms are making a beeline for IPL teams.

🏈🇧🇷🌎: The National Football League (NFL) will expand its international presence to South America, with the Arena Corinthians in Sao Paulo, Brazil, hosting a regular season game of the American pro league. The league said Sao Paulo was chosen “over Madrid”, with increased hopes of the Spanish capital hosting a game sometime in 2025. NFL’s hosting of its regular season games at international venues has now been greenlit by its franchise owners, doubling the number of international inventory from four (currently) to eight in 2025. In 2023, the NFL played two regular season games in Frankfurt, and three more in London. A similar number of games are expected to be played in Germany, Brazil, and London in 2024.

🎾📺: Netflix’s cautious foray into live sport will continue with ‘The Netflix Slam’ — an exhibition tennis match featuring the legendary Rafael Nadal and his compatriot Carlos Alcaraz, currently ranked second in the world. The one-off match is scheduled for 3 March 2024, and will take place at the Mandalay Bay Resort and Casino in Las Vegas. The announcement comes after Netflix hosted and live-streamed its first “sport-adjacent” event last month with Netflix Cup, a celebrity golf tournament featuring athletes from its F1 show Drive to Survive and golf show Full Swing.

👕🇮🇳7️⃣: The Board of Control for Cricket in India (BCCI) has decided to retire the number 7 jersey, made iconic by Mahendra Singh Dhoni, India’s 2011 World Cup-winning captain. Once retired, it means that no Indian cricketer will be able to sport that number in the future. He becomes the second Indian cricketer  whose jersey has been retired. Sachin Tendulkar’s iconic number 10 was also folded in 2017, after Indian all-rounder Shardul Thakur sporting it on debut, before he switched to 54.

🆕🏏🏆: The Board of Control for Cricket in India (BCCI) is planning a “Tier 2” white-ball tournament similar to the Indian Premier League (IPL), according to a Moneycontrol report. The league, the report adds, could start as early as September or October 2024. The BCCI could look to the game’s shortest T10 format—a ten-over contest between two teams—for this tournament, and is reportedly mulling over age caps for players, conscious of the IPL’s popularity being potentially cannibalised. Such a tournament could potentially eat into bilateral cricket tours, and confirm a slow pivot to franchise cricket’s dominance over international cricket. 

⚽️💵: Football clubs spent a record $881.1 million (£701 million)  in agent fees in 2023, according to a report by the sport’s governing body Fifa. The amount was a sharp 42.5% increase from 2022, when clubs spent $623.2 million (£492 million) on agent fees. Among those, English clubs accounted for a third ($280 million or £221.1 million) of these fees, while Saudi Arabian clubs paid agents $86 million (£67.9 million). These numbers come at a time when Fifa is looking to introduce new regulations for agents to crack down on speculation as a key source of fees and introduce a cap. These new rules, due to come into effect in October, are currently being challenged in courts across Europe.

📖 Weekend Reading

Getting Griner Out: The inside story of her arrest, detainment and release from Russia (ESPN)

From January 2022: How Shohei Ohtani Made Baseball Fun Again (GQ). From September 2022: The clout of Shohei Ohtani, Japan’s greatest baseball star (The Economist)

The American Who Fell In Love With Soccer And Brought Himself $1 Billion of Heartbreak (Wall Street Journal)

That’s all for this week. If you enjoyed reading The Playbook, please share it with your friends, family, and colleagues. Please also subscribe to it (for free) if you haven’t already. 

You can reach out to me at adarsh@thesignal.co with any feedback (good, bad, or ugly), tips, and ideas. I'd love to hear from you!

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