Welcome back to The Varsity, my twice-weekly private email on the people profiting from the NCAA Tournament brackets, and not necessarily the ones filling them out. It should surprise absolutely nobody that my bracket has the Terps going to the Final Four. (Still, I had to take Auburn to win it all.)
In other home team news: As you well know, the inimitable Julia Alexander has rejoined Puck from the higher calling of streaming analytics in Big Media. Starting next month, The Varsity will be adding a third issue per week helmed by Julia and available only to those in our Inner Circle tier. I know that you’ll all upgrade ( click here) since Julia knows more about streaming than you do and you’re all charging this on your corporate card anyway. Meanwhile, anyone who gets caught forwarding an Inner Circle email—yes, we check—will be forced to do that Belichick– Jordon Hudson beach yoga routine with Marchand as your partner. ( Andrew, this weather has me in the mood for an ’82 Barolo. Ring the bell twice and leave the tray by the door with the bottle and my bracket. No loitering this time!)
🚨 Pod alert: MoffettNathanson kingpins Michael Nathanson and Robert Fishman join the cleverly titled Varsity podcast this weekend to discuss the latest blips in the media rights industrial complex. Also, make sure to listen to yesterday’s pod with former Villanova coach Jay Wright, who offers a clear-eyed vision about how the college game, and the NCAA Tournament, should evolve. I excerpt some of that below.
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ESPN logged a record 24.4 million brackets this year, up a full 10 percent from last year’s previous record of 22.6 million. One quarter of all brackets picked the Ivy League’s favorite safety school from the research triangle to win it all.
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Player of the Week: SEC Commissioner Greg Sankey
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The last time that the University of Maryland searched for a basketball coach, the blue chip basketball program circled Alabama’s head man, Nate Oats. In the end, however, Oats ended up staying at Alabama, and picked up a nice extension in the process. After the search, I had a conversation with SEC commissioner Mike Slive, who politely laughed off the recruitment effort—even though Maryland is steeped in basketball tradition, and Alabama, up until recently, has been a football school. The SEC, he intimated, was not going to lose any coach that it wanted to keep.
The SEC has always been considered a football conference, and for good reason: Alabama, LSU, Tennessee, Florida, Texas, A&M, Ole Miss, et al., are historic powers. And Slive long dreamed of leveraging that strength, and the resources it manifested, to convert the conference into a basketball beast. This year, in a slight down year for its football prowess, the SEC somehow placed 14 of its 16 schools in the NCAA Men’s Basketball tournament. This is a record, obviously, and it’s hard to imagine it ever getting eclipsed.
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Down to the J.V.: Utah Jazz Owner Ryan Smith
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The bottom third of the NBA overall standings has become a particularly interesting petri dish this season. The worst teams, a hodgepodge of beleaguered franchises and others that have been impacted by injuries, are all taking pains to put themselves in the best position to draft Duke’s Cooper Flagg, the unequivocal top pick in June’s NBA Draft. (Here in D.C., fans have marketed the Wizards race to the bottom as Poop for Coop!) Well, Ryan Smith and the Jazz apparently tried to lose too obviously, and the owner was fined $100,000 by the league for keeping the team’s leading scorer, Lauri Markkanen, on the bench during winnable games for some sort of nebulous “lower back injury.” The league takes allegations of tanking seriously—the nightmare of the Philadelphia process is still a haunting specter—and this fine has to be viewed as a public admonishment to the Jazz.
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- The luck of the Irish: The $6.1 billion sale of the Boston Celtics was breathtaking, if not entirely surprising. That number, which inches above what Josh Harris paid for the Commanders, not only set a North American sales record, but also padded the valuation of every other team in the league. I’m sure that Alex Rodriguez and Marc Lore must be thrilled at the $1.5 billion that they paid for the Timberwolves back in 2021—a deal that recently succeeded in arbitration and is set to close. Bill Chisholm, managing partner of the Symphony Technology Group and frontman of the Celtics bid, obviously knows the first rule of professional sports ownership: Make your partners money and you’ll enter the boardroom with plenty of allies. Yes, Chisholm’s bid still technically needs to win approval by the NBA board of governors. But at this price, it will sail through.The generous sale price covers more than one interesting quirk of the deal. The bid includes a $1 billion commitment from Sixth Street, the ambitious and occasionally litigious private equity firm. Sixth Street already holds a stake in the San Antonio Spurs, and could end up being one of three P.E. firms to have investments in multiple NBA teams: Arctos is invested in the Warriors, 76ers, Kings, and Jazz; Blue Owl is invested in the Hawks, Timberwolves, and Kings.But there are persistent rumors that Sixth Street has a preferred stake on the Celtics cap table, which would pose a novel wrinkle. (Other institutions tend to purchase common shares.) The board has come to accept the increased presence of private equity. But a pref, which would presumably come with some governance rights, is simply a sign of where things are heading. After all, the leagues need to get comfortable with the presence of private equity firms and their deal structures. Outside of modern oligarchs like Jeff Bezos, these teams are becoming increasingly unaffordable even for humble ole billionaires.
- The innocence of youth sports: Did you see this story? Playfly Sports, a company that sells colleges’ multimedia rights, signed its first high school. Playfly will help California’s Mater Dei, the breeding ground of NFL quarterbacks from Matt Leinart to Bryce Young, generate revenue in the “high-seven figures,” per this quote that the school’s vice president of school relations, Scott Melvin, gave to the Orange County register. Another money quote from the school administrator: “Our hope is when you come to the (football) game this fall, it’s a completely transformed experience. You have culinary experiences. You have fan engagement experiences, whether it be by a sponsor that has a football toss or t-shirt gun.”Let’s not pretend that high school sports have ever been innocent. These places have been recruiting middle school kids forever. And the relationships that many schools have with AAU teams seem shady, at best. But as N.I.L. has taken over college, you have to wonder when high school football players will look at schools like Mater Dei making “high seven figures” off their games and demand that they get paid, too. That day seems like it’s closer than ever.
- The Big East’s future: Add former Villanova coach Jay Wright to the list of emissaries who would like to see the Big East merge with the ACC to form a dominant basketball conference, an idea Mike Krzyzewski and Rick Pitino trial-ballooned earlier this year. Last month, Big East commissioner Val Ackerman told me that the conference would look into the concept. And on yesterday’s episode of the Varsity podcast, Wright offered his own spin on the still-larval notion. “Eventually somebody’s going to take a basketball school into a football conference and create a model where the basketball school gets less of the television revenue, obviously, because football brings in the most,” he said. “But they’re still worthy of being in that league because of the level of their basketball program. Those things are viable down the road when this split occurs, which I think is inevitable.”When I asked Wright to identify the types of conferences that make the most sense for this type of merger, he focused only on the ACC, because of the largely East Coast footprint combined with “the real tradition of basketball.”Wright also highlighted Big East schools, like Villanova, Georgetown, and St. John’s, which are private, academics-first schools where underwriting the football program isn’t a priority. “Schools can share more revenue with their basketball teams,” Wright said. “If those big schools allow the Big East to stay in this new model, they can compete in basketball, because they don’t have to share the money with football. And some argue that they have an advantage.”
- Hey Netflix, are you watching?: While Major League Baseball quietly but intently shops the rights package that ESPN is dropping after this season, the league was quick to hype its early numbers from its Japan showcase. The opening game, which featured the Cubs’ Shota Imanaga going against the Dodgers’ Yoshinobu Yamamoto and Shohei Ohtani, set a record with 25 million viewers in Japan.These numbers are important for MLB, as it looks to not only backfill the ESPN rights, but also negotiate a new round of media deals in 2028. League executives clearly expect that this kind of regular season audience—and an international audience—will persuade Netflix, Amazon Prime, and Google to get involved in the bidding process. Apple’s Friday night MLB deal includes some international rights. But to date, these streamers have remained noncommittal about any kind of global deal with baseball in 2028.Another metric: Fanatics sold $40 million of fan gear and trading cards around the two games, which included having 200,000 fans shopping at the Fanatics-operated MLB Official Store at the Tokyo Dome during the week. Before the first game, more than 2,000 fans waited in line to get into the store.
- Catching up with PTI: Yesterday, I had the pleasure of speaking to the bright young minds at my old stomping grounds, Gonzaga College High School here in D.C., on a panel alongside the great Mike Wilbon, whose son goes to Gonzaga. During the chat, the former Washington Post reporter and columnist, and current long-tenured PTI co-host, reflected candidly about how his day-to-day life has changed amid his journey from the newsroom to the green room. “I never wanted to be in television. I never sought television. I didn’t trust television,” Wilbon said. “I still love what I do. It’s just taken on a very different form from what I planned and was educated to do and was trained to do and interned to do. I still write a little bit. … [But] you lose it.”Wilbon spoke of being ringside in Vegas for the ’97 boxing match when Mike Tyson bit Evander Holyfield’s ear. He wrote a front page story on deadline in a half-hour, he said. “I used to write on deadline a story that could be on the front page of The Washington Post in 30 minutes,” he said. “Now it would take me seven hours to do what I used to do in 45 minutes. Those talents shift.”
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It’s a familiar story, old as time: A platform company decides it wants to take a whirl in the media business, hires up, brings in a big executive… and then decides it doesn’t want to be in the media business after all.
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Last January, when DraftKings hired Marie Donoghue as its chief business and growth officer, the sports betting company seemed to be embarking on a familiar business model transformation. The company had spent years competing with FanDuel, Penn, and Caesars, among others, in an expensive marketing battle of hearts and minds to validate the nascent wagering market. Like ride-sharing or the domestic vacation rental industries, the gaming platforms spent lavishly until, frankly, they couldn’t compete against one another with marketing dollars alone. Years ago, many of them decided to move into the content business to increase their user engagement.
Penn, famously, bought Barstool—until it was acquired by Disney to metamorphosize into ESPN Bet… a transaction that forced it to bequeath the sports bro brand back to founder Dave Portnoy. FanDuel, of course, has struck an expensive deal to acquire naming rights for Main Street Sports’s portfolio of regional sports networks—a serious erogenous zone of Varsity subscribers. And DraftKings, for its part, moved headlong into programming.
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Donoghue’s pedigree—senior stints at ESPN and Amazon Prime, where she was deeply involved with rights deals and programming contracts—seemed like an ideal fit. DraftKings launched a FAST channel and bought companies like VSiN, a programmer owned by Musburger Media that focuses on gambling-related content, which it acquired for $70 million in 2021. The Boston-based company also brought a bunch of creators from the ESPN diaspora on to the DraftKings Network, such as the opinionated Dan Le Batard; Mike Golic and Mike Golic Jr.; and Trey Wingo.
More recently, alas, DraftKings appears to have reversed course. Last summer, the company sold VSiN back to the Musburgers. During his show a couple of weeks ago, Le Batard told listeners that his DraftKings deal was ending soon and he could be a free agent. DraftKings also opted not to renew deals for Golic and Golic Jr. And DraftKings also decided to part ways with former ESPNer Wingo, who joined DraftKings Network just last fall. Right before the Super Bowl, Donoghue announced she was leaving the company, agreeing to work until April 1. DraftKings confirmed Donoghue’s departure via email, wishing her luck and crediting her “deep commitment to the DraftKings mission.”
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Sports media businesses tend to be steady and relationship-driven. But DraftKings, which only went public via SPAC during the pandemic, is in a more kinetic space. And Donoghue couldn’t have loved seeing her remit reduced as the company realized that being a media company is harder than it looks, and her role was reduced to a sports betting executive job. Sources say that Donoghue is interested in moving back to New York and getting back into the sports media business.
In retrospect, the gaming industry’s dalliance with media may have always been misguided. DraftKings started to balk at this strategy with VSiN. Sports gambling is one of the most profitable ad sales sectors on TV, but what would happen when competitors like FanDuel or MGM wanted to advertise on the platform? What was more important: the revenue or the customer acquisition cost? In the end, the strategy got complicated and the end goal became fuzzier. The juice wasn’t worth the squeeze. At the same time, perhaps, DraftKings may have also learned what ESPN already knew: Lesser stars like Golic and Wingo are talents, but not needle-movers. Their salaries and production costs could likely be put to more effective use in the consumer acquisition funnel. It didn’t matter how good the content was.
In the end, DraftKings at least realized that it doesn’t need to own the content. And it seems more content with the partnership it has with Meadowlark, the production company founded by Le Batard and former ESPN president John Skipper. (In fact, I’m told that despite what Le Batard told his listeners, DraftKings still is negotiating a renewal.) DraftKings also carries content from All the Smoke, which can be found on a bunch of different platforms. For DraftKings, marketing is as much of the focus to its content strategy as the content itself.
Indeed, this journey toward a Goldilocks relationship with media is actually a microcosm of a larger paradigm playing out across the industry. DraftKings, after all, isn’t a media company—it’s a platform. And its goal is to bring in new users at an efficient spend rate. This is little different from the question that bedevils the executives at Prime or Netflix, among others, who are figuring out what they need to produce themselves, or what they can simply license.
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On Disney’s C.E.O. search: “Jimmy Pitaro sticking with ESPN reminds me of the line in Top Gun: Maverick—‘He’s where he belongs…’—DA na na DA na na!!” —A cable guy
On Netflix and WWE: “Watching WWE Raw live at 3 p.m. ET for the first time was interesting. I really enjoyed not having to wait on a USA Network tape delay. Wishing you a better bracket than Marchand, and Duke being eliminated by low-ranked teams.” —A Varsity subscriber
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Have a great weekend,
John
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