Back in May I recommended buying shares of Madison Square Garden (MSG) as they represented the best publicly traded sports team ownership option. The company owns the New York Knicks, New York Rangers, New York Liberty, and the world famous Madison Square Garden venue. Since that article I have become bearish on Madison Square Garden shares due to the NBA lockout (Original Aritcle Here). Earlier last week NBA commissioner David Stern cancelled all NBA games through the month of November and the season is in jeopardy of ever starting as players and owners seem further apart in negotiations.
Earlier in the year I wrote an article that listed companies that would be hurt the most by the NFL lockout and the possibility of losing an entire season. For fans and those companies they received good news that there would in fact be a season. It seems less optimistic that there will be a majority of a NBA season, if one at all. Today, I write this article to encourage and warn investors about companies that could be affected large and small by a partial NBA lockout or a full season lockout.
Affected the Most -- Companies with Team Ownership:
Madison Square Garden (MSG) $26.22 – The company owns the New York Knicks and the Madison Square Garden venue. A full season lost would hurt earnings and revenue and the company will likely redo estimates on these numbers once they know more about the season. The Knicks averaged almost 20,000 people per home game during the 2010-2011 basketball season. The great momentum of several acquisitions and a playoff appearance is wiped away from the impending lockout. Madison Square Garden will be hit heaviest of any publicly traded company influenced by the NBA. Going into the lockout shares were downgraded by several analysts who predicted the company’s losses from ticket revenue could be extremely impactful on shares.
Comcast (CMCSA) $22.17 – Comcast has a majority ownership stake in the Philadelphia 76ers. At last count the company owns over 60% of the NBA’s Philadelphia 76ers and the NHL’s Philadelphia Flyers through its subsidiary. The sixty billion plus (by market capitalization) Comcast is not dependant on the revenue from its sports ownerships. The company will however lose out on advertising and its media segment showcasing and cross promoting its own sports teams.
Affected Moderately --Television Content
Time Warner (TWX) $34.18 – Time Warner’s ownership of the TNT channel will bring a potential loss of programming and advertising revenue for its cable network channel. TNT began airing NBA games in 1998 and since then has been airing some of the biggest games of the year. The network currently has the rights to the NBA All Star Game, certain marquee matchups and the majority of the NBA playoff games. Last year had great ratings during the Playoffs for the networks and it would be a big blow to the Time Warner subsidiary if the season does not at least play a shortened season.
Disney (DIS) $34.64 – Disney’s ABC network is currently scheduled to air fifteen games beginning in December. There is a doubleheader of NBA games on Christmas Day featuring Miami Heat at Dallas Mavericks and Chicago Bulls at Los Angeles Lakers. These games are usually great with advertisers as people are at home watching the games after the day’s present openings and celebrations. Disney’s ESPN brand airs over fifty games from December until the end of the season. ESPN has been one of the bright spots in Disney’s earnings as the sports network continues to post gains in advertising revenue and viewership and remains the dominant sports brand in the United States. ESPN has other sports it airs and will be able to plug in other content like Sportscenter and other sports talk shows. The missed out advertising revenue from NBA matchups will be felt though when the company reports earnings.
Affected Moderately -- Ticket Brokers
Live Nation (LYV) $8.17 – Ticketmaster, which merged with Live Nation last year, is the largest ticket broker in the United States. The National Basketball Association is one of the four major sports here in America and the lockout is already hurting arenas and their employees. No games means no tickets sold, no concessions at games, and no souvenirs sold at the games. Last year the Indiana Pacers were last in average attendance with just over 13,500 per contest. The Chicago Bulls were first in average attendance with a rate of 21,791 people per game. Thirty teams selling tickets for their forty one home games adds up to a nice amount of revenue for Ticketmaster through the fees it collects on each transaction.
Ebay (EBAY) $30.75 – Ebay’s Stubhub website sells tickets to consumers from its users. The site charges fees for buyers and sellers to complete transactions together. Season ticket holders are frequent users of the site as they attempt to sell the tickets of games they cannot attend to recoup some of their money. Similar to Ticketmaster, Stubhub will miss out on hundreds of games being s old that could earn fees for the companies. Stubhub is a small part of the auction giant’s almost $40 billion market capitalization.
Affected Slightly -- Advertisers
Pepsi (PEP) $62.96 – Pepsi is the owner of Gatorade which is a major sponsor of several NBA stars and the official sports dink of the National Basketball Association. The lockout will not have a huge impact on Gatorade sales or Pepsi’s revenue. The company is listed here because they will lose out on television time, great advertising opportunities to fans, and free publicity of their drinks at games.
Coca Cola (KO) $67.39 – Similar to Pepsi, Coca Cola will miss out on commercials and advertisements featuring the athletes that are sponsored by its Sprite and Vitamin Water brands. There will likely be no impact on the shares or revenue but they are a big part of the advertising market in the National Basketball Association.
Nike (NKE) $93.92 – Nike is a major sponsor of athletes around the World. Being one of the major four sports the NBA has lucrative sponsors like Nike who put money into advertising during games, at stadiums, on jerseys, and for individual players. Nike already had a scare with the NFL lockout and the loss of a full NBA season could hurt their brand and sales especially of its Jordan subsidiary. Nike started as a shoe company and it is possible that the company will sell fewer shoes this year due to the lockout for the first time.
Under Armour (UA) $81.04 – Under Armour is a growing sports apparel company that has expanded from the NFL and College Football markets into other sports. It is a small player in the NBA but it does have sponsorship deals with four NBA players. The newest signee of Under Armour is Derrick Williams, who was the number two overall pick in this year’s draft. If Williams sees no playing time this year it will be hard to make his sponsorship deal worth it for the small company. As Under Armour attempts to break into the footwear market it needs to continually sign athletes and attempt to get fans to emulate them.
Affected Slightly -- Video Game Maker
Take Two Interactive (TTWO) $14.41 – The most sold NBA video game is the NBA2k series put out by 2K Sports, a subsidiary of Take Two Interactive. Take Two is a smaller video game maker with a market capitalization of $1.25 billion currently. The company does not have a vast library of games and enjoys reoccurring revenue from its sports games when it is not making Grand Theft Auto games. The Grand Theft Auto games are of course the biggest moneymaker for the company but it is nice to have annual games that fans will play. This year’s game NBA 2K12 was released in October and does not future any players from the 2011 NBA draft but instead focuses on the legends of the game that users can play as.
Positively Impacted? -- Lingerie Basketball League
Rick’s Cabaret (RICK) $7.54 – Now hear me out before you laugh it off but the largest publicly traded strip club may actually benefit from this year’s lockout. Several days ago the company announced it was forming its own basketball league which would feature its dancers … I mean employees. The company made headlines with this move and actually held a press conference to show off the girl’s uniforms which feature even shorter shorts than John Stockton had back in the day. The league will probably lack in the “talent” that the WNBA has but could generate viewers with male fans around the league. Currently ten teams will play around the country with no details being announced as far as venues. This company operates 23 gentleman’s clubs around the country and has a market capitalization of just over $75 million. Consider watching the headlines about this basketball league. The fact that the company has been in the news will already positively impact the company as it will generate more visitors and website traffic.
*All prices were as of close on November 10th, 2011
I own no shares in any companies listed above.