Expanded College Football Playoff Begins, Top 10 Most Valuable Athletic Programs

The long awaited expansion of the College Football Playoff (CFP) debuted December 20, 2024, with the surprise team of the season, the Indiana Hoosiers, traveling to South Bend to face Notre Dame on ABC. First round action continued on Saturday with a tripleheader from noon EST through the evening. Game temperatures in three of the games were forecasted to be in the 20s in contrast to lower 60s in Austin, Texas.

ESPN/ABC extended its media contract with the CFP through the 2031 season for an average annual payout of $1.3 billion. In an effort to reduce costs, ESPN reached a deal with TNT Sports to sublicense two first round playoff games this season and next season and then add two quarterfinal games for the 2026, 2027, and 2028 seasons. This is similar to the approach CBS employed with the NCAA Men’s Basketball Tournament to partner with TNT, TBS and TruTV as a broadcast syndicate of one of the most popular sporting events in the United States. In the new CFP format, first round games are played on campus, and the winners advance to play the top seeds at traditional bowl sites. The semifinals will also be played within the traditional bowl structure.

Expanded College Football Playoff Begins, Top 10 Most Valuable Athletic Programs

Top 10 College Athletic Program Valuations

There has been talk of private equity investment in college sports to further monetize assets and infuse schools with money in a changing landscape with revenue sharing with athletes on the horizon as part of the NCAA vs. House settlement. CNBC released a list of the top 10 program valuations.

Expanded College Football Playoff Begins, Top 10 Most Valuable Athletic Programs

The average revenue multiple for top 10 college athletic programs is 4.6x compared to the NFL average of 9x.

Breaking Down U.S. Professional Athlete Contracts

By: Andrew Pearson and Brent Shockley, CVA, CFA

The New York Mets and Juan Soto have shaken up the baseball world with a jaw-dropping $765 million deal over 15 years, averaging $51 million per season. Baseball has seen its share of blockbuster contracts lately, but this one stands out as the biggest yet. Soto now holds the record for the largest total contract value in U.S. sports history, surpassing Shohei Ohtani’s $700 million agreement with the Dodgers just months ago. The new Soto-Mets deal is nearly double the value of all but one other contract across major American sports. Here are some of the most notable deals from the NFL, NBA, and MLB:

Breaking Down U.S. Professional Athlete Contracts

A major factor in the total size of baseball contracts is their length, with deals commonly surpassing the 10-year mark, compared to NFL and NBA contracts generally falling in the 4–5-year range (with the rare exception of Patrick Mahomes’ 10-year contract signed in 2020). MLB teams may feel more comfortable committing to these long-term deals for two reasons: baseball players tend to have longer careers than their NFL and NBA counterparts, and MLB operates without a salary cap, relying instead on a luxury tax system that penalizes teams for exceeding a payroll threshold. 

One wrinkle with these lengthy deals is the time value of money – the concept that a dollar today is worth more than a dollar in the future because today’s dollar can be invested and grow. When accounting for this and adjusting some of the largest contracts in U.S. sports for the time value of money, Juan Soto’s deal still ranks as the highest contract value.

Breaking Down U.S. Professional Athlete Contracts

Applying this to the player’s average annual salary, Soto is nowhere near that of his highly paid peers. In fact, we see the NBA’s Jayson Tatum, and his Boston Celtics teammate Jaylen Brown, both earn nearly $50 million per year, dwarfing Soto’s $29.5 million per year:

Breaking Down U.S. Professional Athlete Contracts

After factoring in the time value of money, NFL and NBA players reign supreme in per year salary, with MLB players falling to the bottom four slots out of the ten contracts sampled. This is largely due to their longer contract structure, and in the case of Ohtani and Betts, the significant impact of deferred compensation agreements that extend well beyond the life of their contracts.

While record-breaking deals like Juan Soto’s redefine the upper limits of total contract value in U.S. professional sports, the blockbuster but shorter contracts of the NFL and NBA highlight the crucial role of the time value of money in maximizing players adjusted annual earnings. This demonstrates that contract size is not the sole indicator of financial success for professional athletes; rather, a nuanced understanding of contract structure and its long-term financial implications is equally critical.

Bonjour! 2024 Summer Olympics Begin in Paris, Peacock Looks to Rebound

By: Brent Shockley, Principal


Bonjour! 2024 Summer Olympics Begin In Paris, Peacock Looks To Rebound

The 2024 Summer Olympic games officially begin today and run through Sunday, August 11thThe opening ceremony will feature over 10,000 athletes aboard over 90 boats floating down the Seine River in Paris at 7:30pm local time and 1:30pm Eastern US time.  A few sports, such as football (soccer in the US), got an early start to their opening rounds on Wednesday, July 24th

A study by Oxford University found that nearly every Olympics since 1960 has gone over budget, by an average of 172%. The cost of the 2024 Paris games is expected to be approximately $10 billion, roughly 25% over its original budget.  However, this cost is well below recent Olympics.

Bonjour! 2024 Summer Olympics Begin In Paris, Peacock Looks To Rebound

The difference is largely due to event specific construction.  Unlike many host cities, 90% of the venues in the Paris Olympics are pre-existing.  The major capital expenditures include $1.6 billion for the Olympic Village, $190 million for the aquatics center, and $150 million for gymnastics and badminton. Los Angeles is utilizing a similar strategy to limit spending, along with private funding, to meet its ambitious budget of $6.8 billion for the 2028 Summer Games. 

The 2024 Olympic Games will be broadcast in the U.S. on NBC, its Peacock streaming service, and Telemundo. In 2014, NBC Universal signed an extension with the International Olympic Committee (IOC) to broadcast six Olympic games from 2021 through 2032 for $7.75 billion. NBC executives hope the 2024 Olympic games reverse the decline in Peacock subscriptions, despite recent price increases of $20 for annual plans and $2 for monthly plans. 

Peacock subscribers increased from 4 million in mid-2021 to 33.5 million during the first quarter of 2024.  However, in the second quarter of 2024, Peacock experienced its first quarterly decline losing 500,000 subscribers.  Peacock will stream weekly college football games as part of the Big Ten Conference’s new media package this fall.  In addition to Big Ten games, six Notre Dame football home games will stream on Peacock simultaneously with the linear NBC national broadcast.  Peacock will be the exclusive outlet for Notre Dame’s home game with Louisville on September 28thThe controversial move by the NFL to grant Peacock exclusivity to a playoff game last January (featuring eventual Super Bowl champion Kansas City Chiefs) angered many football (and Taylor Swift) fans but resulted in an average of 23 million viewers, the largest live streaming event in the U.S. Peacock also has the exclusive rights to Green Bay Packers vs. the Philadelphia Eagles in Brazil on Friday, September 6th.  With these strategic additions to its streaming lineup, Peacock aims to regain momentum and attract a broader audience in the competitive streaming market.

The Return of EA Sports College Football Video Game

The Return Of Ea Sports College Football Video Game

This week marks the return of the Electronic Arts (NasdaqGS:EA) college football franchise for the first time in 11 years.  The video game originated in 1993 as Bill Walsh College Football (the former head coach of Stanford University and three time Super Bowl champion with the San Francisco 49ers) but changed its label to College Football USA and then to NCAA Football.  The franchise ended after NCAA Football ’14 (released in summer 2013) because of legal disputes regarding the usage of name, image and likeness (NIL) of the players and violation of the Sherman Antitrust Act. 

The legal issues began in May 2009 with an NIL lawsuit filed by former Nebraska football player Sam Keller against EA.  Former UCLA basketball star Ed O’Bannon filed a similar lawsuit.  In January 2010, U.S. District Court of Northern California Judge Claudia Wilken granted a motion to consolidate several cases against EA, the NCAA, and the Collegiate Licensing Company.  In August 2012, O’Bannon filed a motion to include current student athletes and to allocate proceeds from NCAA football and basketball video games into trusts with the proceeds paid at the end of their eligibility.  The legal battle continued to a point where the NCAA and its major conferences did not renew its licensing deals and the franchise ended.

In early February 2021, EA Sports teased the return of its popular college football franchise, although acceptance by all major schools was not universal, citing uncertainty with ongoing legal concerns regarding NIL for players.  Although the Alston decision by the U.S. Supreme Court in late June 2021 was a narrow ruling regarding educational-related benefits to student athletes, the Court signaled an end to the practice of NCAA prohibiting compensation for NIL.  Just days later, on July 1, 2021, the NCAA officially allowed student athletes to profit off their NIL.  EA Sports announced in 2023 that NIL would be a part of the next college football video game. 

EA Sports will pay each player $600 plus a copy of the video game.  Certain players have or will receive more compensation to help promote the game.  Individual schools will be paid by tiers according to their finish in the Associated Press rankings over a ten year period through the 2023 season.  13 schools in Tier 1 will receive a minimum payout just under $100,000.  Tier 2 schools will receive approximately $60,000, Tier 3 will receive $40,000, and Tier 4 will receive $10,000. The renewed version of the game, College Football 25 is expected to sell more than 3 million copies, perhaps outpacing the popular Madden NFL series for this cycle.

The release of EA Sports College Football 25 is available on the latest generation of PlayStation and X Box game consoles.  The standard version is priced at $69.99 and is accessible starting 12am on Friday, July 19thThe Deluxe version for $99.00 or $149.99 bundle with the next edition of video game Madden will grant early access, perhaps as early as 4pm EST this afternoon.  EA reported annual revenue of $7.6 billion and EBITDA of $2 billion for the fiscal year ended March 31, 2024.  Capital IQ estimates EA’s EBITDA margin to increase from the mid 20 percent over the last three years to mid 30 percent over the next three fiscal years.

A New Chapter of College Football Begins in 2024

A New Chapter of College Football Begins in 2024

By Brent Shockley

Change has been consistent throughout the history of college football, but the sport as we know it will look very different in Fall 2024.  Four schools (Washington, Oregon, University of Southern California (USC), and the University of California at Los Angeles (UCLA) are leaving the Pac-12 Conference to join the Big Ten Conference for the 2024-2025 school year.  Utah, Arizona, Arizona State, and Colorado are departing for the Big 12 Conference.   Stanford and the University of California Berkley (Cal) are joining the Atlantic Coast Conference along with Southern Methodist University (SMU, located in Dallas).

The Universities of Oklahoma and Texas will depart the Big 12 to join the Southeastern Conference (SEC).  Many of the moves don’t make (common) sense and will result in collateral damage for others but they are driven by the billions from multi-year mega television deals.

Why is this happening?

The price of sports’ rights have been on an exponential rise since streaming and on-demand allowed consumers to bypass or completely ignore advertisers in watching dramas and/or sitcoms.  Sports are generally consumed in real-time, making it more valuable to advertisers in our streaming-happy society.  But as college sports media contracts continue to rise, the networks want a higher return on investment.  As a result, major brands in the sport are consolidating for more desirable TV matchups to attract more viewers. Conferences are dropping divisions to enhance scheduling flexibility. Many college football fans will initially struggle to adjust to the new reality of tougher schedules, more volatility in records, and, for those that wager, closer point spreads.

The future of college football will resemble the National Football League for (NFL) for good reason…. from the networks’ point of view.  NFL broadcasts represented 93 of the top 100 TV programs in 2023, up from 82 the prior year.  Three college football games made the top 100 list.  None from the National Basketball Association, college basketball, Major League Baseball, or the National Hockey League.

The CFP title game between Michigan and Washington drew 25 million viewers, second to the iconic Rose Bowl’s 27+ million viewers on New Year’s Day, which served a playoff semi-final between Alabama and Michigan.  The other playoff semi-final, the Sugar Bowl between Texas and Washington, drew nearly 19 million viewers in primetime.  Despite the frustration of fans regarding opt-outs of key players in the non-playoff bowl games to enter the transfer portal or preserve their health for the NFL draft, mid to lower tier bowls still rate higher than alternative programming (such as pro or college basketball) for networks like ESPN.

The 2024 college football postseason will look very different.

The College Football Playoff will expand from four teams to 12 teams next season.  The top four teams (with conference championships as part of the criteria) will get a first-round bye.  The other eight teams will compete in four games, the first on the evening of Friday, December 20th, and three games on Saturday, December 21st.  The initial round will be hosted on campus by the higher-ranked team.

The quarterfinals and semifinals will be played within the bowl system with the following schedule:

  • December 31, 2024 – Vrbo Fiesta Bowl (CFP Quarterfinal)
  • January 1, 2025 – Chick-fil-A Peach Bowl, Rose Bowl, and Allstate Sugar Bowl (CFP Quarterfinals)
  • Thursday, January 9, 2025 – Capital One Orange Bowl (CFP Semifinal)
  • Friday, January 10, 2025 – Goodyear Cotton Bowl (CFP Semifinal)

The reason for the Thursday and Friday semifinal games is to avoid the NFL’s Wildcard weekend which involves six games from Saturday through Monday.  The CFP national championship game will remain on Monday night but moved back on the calendar to January 20th.

The original four team playoff contract was not set to expire for another two years, but leaders amended the playoff to appease fans and to get additional revenue.  ESPN has been the exclusive broadcast partner for the current playoff system at $470 million per year and is reportedly in negotiations to pay $1.3 billion annually for the new 12 team, 11 game format.  There is support among many leaders and partners in college athletics to create a multi-network syndicate for the playoff, similar to the NFL or the NCAA Men’s Basketball Tournament.  Although ESPN may control the rights to the next playoff (reportedly over the next eight seasons), there could be pressure to sublicense some of the earlier round games to other networks.  The pressure would likely come from the Big Ten Conference, which recently signed a 7-year, $8 billion deal with Fox, NBC and CBS and ended its 57-year broadcast partnership with the ABC/ESPN after the 2022 season.  CBS and the SEC concluded a long-time relationship that gave CBS priority for its mid-afternoon telecast and exclusive rights to the SEC Championship game.  ABC/ESPN will be the exclusive broadcast partner of SEC athletic broadcasts going forward as part of a new 10-year media deal that starts in 2024.

Formula 1 in Las Vegas: The Race That Hopes You Don’t Sleep

Formula 1 in Las Vegas: The Race That Hopes You Don’t Sleep

Brent Shockley, Director at ValueScope

November 17, 2023 

Formula 1 In Las VegasFormula One/1 racing returns to Las Vegas this weekend for the first time in over 40 years.  The Heineken Silver Las Vegas Grand Prix 2023 is the start of a three-year contract with the city; although Formula 1 intends to support the race for at least 10 years and the entertainment and gaming hub of the U.S. intends on a “lifetime partnership” with the top class of international racing.  The nearly four mile track will wind through Las Vegas landmarks, hotels, and casinos with a straightaway section down the famous “Strip” at speeds reaching 212 miles per hour in cars that can range in cost from $12 to $20 million.  The Las Vegas Grand Prix is the next to last F1 race on the 2023 circuit.

The race promises to be a visual spectacle….for those in the U.S. that stay up to watch the event.  The Las Vegas Grand Prix will start at 10pm Pacific time on Saturday night, which is midnight or 1am for half of the U.S.  Typical F1 races are designed for 90 minutes but can often go up to two hours with delays.  To prep the drivers, practice runs are set for late Thursday and Friday evening with qualifying from 12am to 1am local Vegas time on Saturday ‘morning.’

The two F1 races in the U.S. this year (Miami and Austin) started in the mid-afternoon local time but this race was set later for the nighttime atmosphere of Las Vegas Strip and to appeal to international viewership, which greatly exceeds that of the U.S.  Global viewership for F1 races averaged 70 million in 2022.  By comparison, U.S. viewership averaged just over 1 million.  F1 interest in the U.S. has seen a significant increase since the debut of the Netflix series “Drive to Survive” in 2019.  Average U.S. viewership of F1 races jumped about 545,000 in 2017 and 2018 to 672,000 to 949,000 in 2021 and 1.2 million in 2022.

Formula One Group, founded in 1950, was purchased for $4.4 billion in 2016 by Liberty Media.  It operates as subsidiary of Liberty under the Nasdaq ticker FWON.K.  The subsidiary reports $2.8 billion of annual revenue and $560 million of EBITDA.  It’s current market capitalization is approximately $15 billion.  It is reported Liberty Media spent between $400 million to $500 million to stage the race, which included $240 million for a purchase of 39 acres on the northeast corner of Harmon Avenue and Koval Lane for the construction of part of the track and a three-story, 300,000 square foot paddock building constructed in less than a year.   The building is a permanent structure as the hub for future F1 races.

Despite the marketing hype beyond any Vegas headliner show or prior sporting event, preparations and demand for the race have hit a speed bump.  Locals, tourists, hotels, and businesses along the Las Vegas Strip have been frustrated throughout 2023 by construction to turn one of the World’s most famous streets into a racing circuit.  Hotels and casinos initially sold high priced ‘experiences’ in the thousands of dollars to include parties with A list entertainers, celebrity chefs and club type accommodations to view the race.  Joe Pompliano reports hundreds of private jets are set to descend upon Las Vegas paying overnight parking fees of $1,500 to $7,500 per night.   However, as the green light gets closer, general ticket sales have been disappointing, with prices dropping by 60% and hotels slashing room rates by up to 80%.

The city of Las Vegas continues to add major sporting events to its list of entertainment options and attractions.  The $2 billion Allegiant Stadium opened in 2020 as the home of the NFL’s Raiders franchise and will host Super Bowl LVIII in February 2024.  The Vegas Golden Knights, founded in 2017, are the defending National Hockey League champs.  The Las Vegas Aces are back to back WNBA champions and the city is host to part of the NBA’s Summer League. On Thursday, Major League Baseball owners approved the relocation of the A’s franchise from Oakland to Las Vegas.  A new baseball stadium along the Las Vegas strip is expected to be ready for the 2028 baseball season.  The city had no major sports franchises prior to 2017.

*The ValueSport blog is a look at the hybrid world of sports and business.  It is published by the professionals at ValueScope, a leading business valuation and advisory firm headquartered in the Dallas-Ft. Worth area.

Is it Time to Change the Name of the Most Valuable Player Award?

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Is it Time to Change the Name of the Most Valuable Player Award?

Is the Most Valuable Player really that?  Or, is he the Best Player?  Or, is that the same thing? 

The answer might not be as obvious as you think.

Consider the NFL as one of the better proxies for analysis, in part because of the hard salary cap.  The MVP is usually awarded to the player that does well personally (i.e. has some of the best stats like quarterback (QB) rating, total touchdown passes and touchdown/interception ratio, total rushing yards, etc.) and helps carry their team to wins and playoff berths.  You would think that those in consideration for the award are some of the highest paid players in the NFL.  Since they are often quarterbacks, let’s take a closer look.

It turns out of the 32 starting QBs, 12 make single digit annual salaries (yes, in the single digit millions) and 20 make double digit salaries (the vast majority over $20 million).  One would expect the MVP is most likely to come from the pool of 20 since there must logically be a correlation of salary to performance, and in turn team success.

In fact, of the 12 teams that made the playoffs this year, 6 QBs made single digit salaries and 6 made double digit salaries.  So, while 30% of the highly paid QBs made the playoffs, 50% of the lower paid guys got in.  The average salary of QBs who made the playoffs was $12.7 million, while the average salary for those that did not was $18.3 million.1

Further analysis shows that there is a negative correlation between salary and playoff seeding.  That is, some of the highest seeded teams (normally with the most wins) are the Chiefs (Mahomes), Texans (Watson), Rams (Goff), Bears (Trubisky).  In fact, the top 6 highest paid QBs are not in the playoffs at all (Aaron Rodgers, Matt Ryan, Kirk Cousins, Jimmy Garoppolo, Matthew Stafford, Derek Carr).

What’s the explanation?  In the era of the salary cap, being in the first four-year contract period (Prescott, Mahomes, Watson, Goff, Trubisky, Jackson), or taking a discount (Brees, Brady, Rivers, Wilson, Luck make $20 to 25 million) saves cap room to pay other good players, thus making the team better and, arguably, the QB more valuable.

When looking at salary relative to production, the difference is stark.  This year, Rodgers earned $1.3 million per passing touchdown thrown, while Prescott earned just $30 thousand.  In terms of salary per win, Rodgers was paid 82 times that of Prescott.

The point is value has to be considered in the context of cost (i.e. salary), as does the value of anything!  The more the cost, the less valuable, all other things equal.  Therefore, while good QBs might make more, they might be less valuable, or at least no more valuable than cheaper QBs. 

It turns out that maybe the most valuable quarterback is not the “best” (all other things equal) and/or highly paid so long as their lower salary helps create better play and wins, which apparently it does.  Sorry, Aaron Rodgers.

Nfl Mvp

1. Lamar Jackson and Nick Foles were utilized as the QB for their respective playoff teams.

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Marty Hanan is the founder and President of ValueScope, Inc., a valuation and financial advisory firm that specializes in valuing assets and businesses and in helping business owners in business transactions and estate planning.  Mr. Hanan is a Chartered Financial Analyst and has a B.S. Electrical Engineering from the University of Illinois and an MBA from Loyola University of Chicago.

 

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