Take Me Out to the Ball Game
Jack Norworth – 1908
As a result of the Canadian Radio-Television and Telecommunications Commission decision to classify broadband as “a basic telecommunications service for all Canadians” I figured an update was in order for Part 3 of Methods to My Madness post of last year. Previously I had postulated that the Carriers were a viable segment in order to capitalize on Cord Cutting. This segment over the past year proven to be more a commodity with streaming essentially the same regardless of carrier. With limited pricing power, I now feel this segment is more likely an indirect beneficiary rather than a driving force of Cord Cutting and am dropping this segment as a viable candidate going forward.
The other two segments, Creators and Providers, in my initial thesis remain intact. In fact, AT&T’s (T) overtures with Time Warner (TWX) enhance the argument. Casting about for a replacement segment, I ran across Mr Free At 33‘s post on “Experiencism”. Although I can quibble with his choice of wording (I think the word he was looking for is Experientialism), the heart of his message is sound being a cautionary tale on falling under the spell of excess.
While I doubt many have the will, means or gumption to head to Thailand on a whim, many are seeking “Experiencism” locally or with family and friends – and there lies my replacement! I’ve written before on my interest in business interrelationships. Localized Experientialism melds nicely into this strategy. A family visit to the circus or an outing to a sports event are just a couple of examples.
Assume you experience a Flyers game in Philadelphia. The Wells Fargo Center and Flyers are owned by Comcast (CMCSA), Spectracor (also CMCSA) manages it, Aramark (ARMK) has the food service contract and Comcast SportsNet (CMCSA yet again) the broadcast rights. So the primary lines of business are the Content Owners/Creators (Teams/Studios), Aggregators and the Experience. In sports, this model is pretty much followed across all leagues with only the companies involved changing. In this definition, The Experience includes the cleaners, concessionaires and venue managers.
Many of these companies and teams are privately held with associated interrelationships managed or owned by an entity controlled by the owner . Others, while public, pay a minimal – if any – dividend. But there are a few that do pay a healthy – and growing – dividend. Generally, to invest in this manner requires patience and a willingness to await a change in control of the team while being satisfied with bragging rights of ownership. In fact, I have to agree with Christopher Lackey in his assessment: “The sports properties, which include the suddenly not laughable Toronto Maple Leafs and Toronto Blue Jays, are doing well and increasing in value, but investing on this basis alone is not sound because if the teams achieve success they require significant reinvestment to sustain it.”
During the past year, Comcast (CMCSA) became sole owner of the Philadelphia Flyers and Liberty Media created a tracking stock (BATRA) based on the financials of the Atlanta Braves, new ballpark and nearby real estate. I also uncovered two additional teams that have – at least in part – public ownership, the Chicago Cubs (TRNC which I believe retained ownership with the Tribune changes) and Seattle Mariners (NTDOY).
With content being the driving force in landing eyeballs – which in turn lands revenue, providers and the groups providing the eperience are the more direct beneficiaries. Point in fact is Dustin Blitchok‘s article, “Which Streaming Providers Are Winning The Content War?” This was also confirmed in series of interviews by AT&T employees aired on CNBC last week. The following table presents my current take on this strategy which, as always, is subject to change.
|Comcast/CMCSA||1.57%||C,A,E,O – Philadelphia Flyers|
|BCE/BCE||4.96%||O,A,E,C – Toronto Maple Leafs, Toronto Raptors, Montreal Canadians|
|Rogers Comm./RCI||3.42%||O,E,A – Toronto Maple Leafs, Toronto Raptors, Toronto Blue Jays|
|Madison Sq Gdn/MSG||n/a||O/E – New York Knicks, New York Rangers|
|Liberty Media/BATRA||n/a||O/E – Atlanta Braves|
|Nintendo/NTDOY||0.42%||O – Seattle Mariners|
|Tribune Co./TRNC||(susp)||O – Chicago Cubs|
|NOTE: Nintendo also includes the Pokémon GO experience|
|NOTE: SMG was an ACAS portfolio company as of June 3, 2014. ARCC does not include in their portfolio a/o 3 Jan 2017 merger. Both Bloomberg and Wikipedia classifies them as a private company.|
|NOTES: C-Creator, O – Owner, A – Aggregator, E – Experience.
Yields as of 14 Feb 2017.