All That and a Bag of Mail

Rejoice, it’s Friday!

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As soon as we finish “Lock It In” today I’ll be hopping in the car for the drive up to Knoxville to watch Georgia-Tennessee this weekend. If you’re an Outkick VIP who will be in town for the game, we’re having a meet-up tonight in Knoxville. Details are on the VIP message board; you can RSVP there.

If you haven’t signed up for Outkick VIP, you can sign up here.

For the rest of you, keep your eyes open for a man with two-thirds of a mustache who will be hanging out in Knoxville.

Here we go with the Friday mailbag:

Leif writes:

“Thoughts about the sad decline of Sports Illustrated?”

This is the story of a print brand being completely disrupted by the creation of the Internet.

If they could go back in time, I think what SI should have done was to immediately go subscription only and make none of their content available online for free. (I believe there are many businesses that are going to ultimately wish they had done this instead of trying to make money off digital advertising.)

The only media company ballsy enough to do this in the early days of the Internet was the “Wall Street Journal.” Now everyone is rushing to charge for online readership and putting their content behind paywalls, but in the early days of the Internet the idea was that everything should be free because digital advertising revenue was going to be substantial enough to replace the lost revenue arising due to the disruption of print advertising.

This was the conventional wisdom and it took real bravery to stand up to that conventional wisdom.

Which is why most people didn’t do it.

If SI had continued to run their print publication while simultaneously creating robust online offerings they could have established themselves as a premium destination for online sports readership. I suspect they would have been “The Athletic” before “The Athletic” existed. In fact, they probably would have kept “The Athletic,” which now employs many SI writers, from ever being created.

Instead of doing this SI tried to be everything to everyone, win in print and win online simultaneously. That was ultimately an unwinnable proposition because they were fighting a two-fronted business war.

And it’s a demise that wasn’t difficult to predict.

Here’s what I wrote about the future of Sports Illustrated on Outkick back in March of 2013. 

Remember, this was written almost six years ago:

“Which raises the big question: Can any sports media print and digital duality survive in today’s era without a major corporate benefactor to support both avenues of distribution? Basically, what makes Sports Illustrated different from The Sporting News, another venerable publication that recently ceased publication and now exists as an online only brand?

The easy answer in the wake of Time Warner’s proposed divesture of the magazine is — nothing.

SI is a dead magazine walking.

That’s troubling because I’m 33 — confession, I’m still old school, I subscribe to the print New York Times, SI, and the New Yorker — and remember what it was like sprinting to the mailbox as a kid to see what was on the cover of the latest SI. I remember reading the magazine from cover to cover in an age when many of us stuck with bad newspapers in mid-major cities were never exposed to great long form sportswriting. SI was a lifeline to a lot of us, a window into a larger sports world beyond the AP feed and a box score. But does anyone under the age of forty look forward to the arrival of SI now? Is there a single kid in America who sprints to his mailbox to see whether or not the latest SI has arrived? I doubt it. Because by the time SI arrives all of the news is already out there, usually for days in advance, often as well or better written by other publications that you can read for free on the Internet. 

So what’s the future of SI?

It’s not very bright, a company half digital and half print cannot stand. Eventually the magazine will die, it’s just a matter of time. Maybe that happens in a decade, maybe it happens in fifteen years, but sooner — and I’m betting on sooner — or later it won’t make sense to still publish a print-edition of SI. This means SI’s real future is entirely online.

The issue with this is that SI has a company structure predicated on the obscene profits of the magazine industry. How quickly can a company retrench and become as lean as the Internet demands? And does SI’s brand even work as a major site on the Internet? Keep in mind that no one goes to SI for scores or games or the nuts and bolts of the contests themselves, we go for sound writing and analysis, the kind of long form profiles that used to only exist in SI.

SI employs too many people to make a living on that brand on the Internet.”

If you go read that article from 6.5 years ago, I pretty much nailed the future of SI.

I feel bad for the employees losing their jobs there, but SI’s Internet business won’t — and can’t — support the existing infrastructure of a print company.

It seems pretty clear to me that what will happen now is the new ownership of SI will attempt to use the site’s brand name to squeeze online profit out of a legacy brand in a way that serves to dilute the value of the overall brand to the point that a decade from now, or maybe even less time than this, there will essentially be nothing left of the SI most of us grew up with.

That’s sad for those who are employed there, but it’s also how business works.

The SI business was disrupted by other, better businesses with lower costs designed to work on the Internet.

When the Internet started SI had to make a decision about what to do. Their decision was to try to remain relevant in print while also being relevant to everyone online for free. That duality was untenable from a business perspective.

There is, or soon will be, no print business model for SI and I suspect they will be run online as a kind of Forbes-ish company. Where essentially Forbes, which at one point was a high prestige and high profile magazine brand, sells its brand value to the lowest common denominators on the Internet until it’s essentially worthless.

The business model seems pretty clear, suck all the profit out of SI while you can, and then toss its collapsed business on the Internet pyre.

Todd writes:

“‘Great Wins and Loses’ with Rich Greenfield.  I think your hypothesis about the ‘Bundle Bubble’ is correct. The NFL will be fine but the NBA, MLB and NHL, all of which are more dependent on regional/cable TV deals, are in long term trouble. Ultimately, both the players and the owners will make less. That brings me to a comment a buddy of mine made a few years ago.  He said “if you made the maximum pay in the NBA $100,000 per year, you’d have the same guys playing.”  Think about it, what’s Lebron going to do? Go to Medical School? What percentage of the players in the NBA would still be playing if the max pay was $100,000?”

The biggest business story in sports, which many are still missing and have been missing for years, is that the cable and satellite bundle’s sports contract payments are predicated on massive amounts of non-sports fans subsidizing outrageous sports rights TV deals.

That is, most people with cable and satellite subscriptions are paying outlandish amounts of money for sports programming they never watch.

These dollars, which are effectively a sports subsidy, have driven up team values and player contracts to an insane level not supported by the dollars being spent by real fans.

If your games air primarily on broadcast television — like the NFL — I think you’re likely to be okay because those deals are still economically viable because they are directly connection to the amount of national consumption of content occurs.

But if your games air on cable you have to be asking yourself what the floor is on the total number of cable and satellite subscribers there will be.

Because that floor is where your TV contracts are coming from in the decades ahead.

While you may have long term rights deals signed, what’s going to happen in the next go around of deals?

Let me explain what I mean by using ESPN as an example. (If you find this story fascinating you should really go buy my newest book, “Republicans Buy Sneakers Too.”)

Back in 2013 there were 100 million ESPN subscribers. Now there are around 81 million. In the space of just six years ESPN has lost roughly 20% of its overall subscriber base.

So what’s the floor here? In other words, in 2025 or 2030 how many people will still have cable and satellite subscriptions to ESPN?

Back in 2016 I laid out this forecast on ESPN’s subscriber trend:

“So if we’re very conservative and project that ESPN continues to lose 3 million subscribers a year — well below the rate that they are currently losing subscribers — then the household numbers would look like this over the next five years:

2017: 86 million subscribers

2018: 83 million subscribers

2019: 80 million subscribers

2020: 77 million subscribers

2021: 74 million subscribers

At 74 million subscribers — Outkick’s projection for 2021 based on the past five years of subscriber losses — ESPN would be bringing in just over $6.2 billion a year in yearly subscriber fees at $7 a month. At $8 a month, assuming the subscriber costs per month keep climbing, that’s $7.1 billion in subscriber revenue. Both of those numbers are less than the yearly rights fees cost in 2017. (Remember that these yearly rights fee costs will keep rising in the years ahead too).

Uh oh.

It seems pretty clear that within five years ESPN will be bringing in less subscriber revenue than they’ve committed for sports rights.”  

So far my subscribers numbers, if anything, have been too positive for ESPN.

So we’re headed for around 74 million subscribers, at best, for ESPN in 2021.

And as I noted three years ago, by that point the money ESPN has already committed for sports rights will lead to losses for the company.

(By the way, if you read the Outkick archives, you can see that we’ve nailed this SI and ESPN story years and years before most even realized what was going on. In many ways, and I probably need to write this article, the rise of online streaming options is to ESPN’s business what the rise of the Internet was to Sports Illustrated’s business.

In fact, what’s ESPN trying to do right now? The same thing SI tried to do — maintain its existing cable business while simultaneously attempting to launch an online streaming option, ESPN+.

But it’s nearly impossible to preserve a legacy business while simultaneously pivoting to a streaming business.)

So after 2021 how low will the number of cable and satellite subscribers be?

We really don’t know what the floor is.

But we do know that many of these big media companies are starting to panic about where this floor might be. How do we know this? Look at all the major carriage battles breaking out all over the country. Dish Network has locked out Fox, DirecTV is threatening to lock out ESPN, Comcast won’t carry the ACC Network, all of these major media companies are fighting massive battles because their money is vanishing.

Now this isn’t a cable and satellite problem that’s unique to ESPN — I’m using them as an example here because they are the biggest brand in sports media and because they stand to lose far more than any other company based on what ESPN costs a month to all cable and satellite subscribers — but this problem is one that is likely to be a huge issue for sports businesses reliant on this bubble for rights fees and player salaries.

That’s why, for instance, DirecTV going public with the fact they didn’t want to keep the NFL Sunday Ticket was such a big story. We’ve never seen a sports rights partner, at least not to my knowledge, every question the money they have spent on football before. DirecTV would have walked away from the NFL Sunday Ticket if they could have and, significantly, the NFL didn’t let them walk away because no one else would bid what they had bid.

That’s significant.

It’s not just that DirecTV overpaid, it’s that everyone else in media realized they overpaid and wouldn’t overpay more than they would.

These are how bubbles pop, suddenly.

If the NFL is overpriced, my god, how much must the NBA, which has a pinprick of the NFL’s audience, be overpriced?

Now, again, I think broadcast television sports are different than those that air on cable and satellite, but I think you’re starting to see the market respond to what I’ve been pointing out on Outkick for several years.

As for the second part of your question, this is an absolutely fascinating question on salary.

I don’t even think you need to just limit it to the NBA though. How many guys playing pro sports today would still play if the most they could make was $100k?

I think it’s a huge percentage based on two things: 1. these jobs are fun and $100k is still a decent salary and 2. how many guys would have substantially better financial opportunities outside of sports such that they’d be making $100k+ in any other profession?

I think it’s very few players.

So I suspect this is one of the very few jobs out there where the people making $30 million+ a year to do it would still do it for $100k a year too.

In fact, it may be the only job in the country where this is the case.

I can’t imagine a doctor, lawyer, teacher or plumber for instance, continuing to do the same job if you told them they’d be making 1/30th what they make now in the years ahead.

Maxwell writes:

“Why is Nashville pushing so hard for an MLB team when there’ve been no expansion talks or hints of teams moving? Do you think the city is a good fit for a pro team?”

I think Nashville will get an MLB team at some point in the 2020’s.

If you haven’t kept up with this story, a group attempting to bring a team to the city released plans for a downtown stadium earlier this week.

I’m not sure which stories you’ve been following, but there have been a ton of expansion stories — MLB is likely to add two teams in the years ahead — and the Rays and A’s have been talking about moving for years.

Here’s what I think is key to Nashville’s quest to get a team and support that team once they are here: a downtown ballpark.

Downtown Nashville is absolutely filled with tourists now every day of the week all year around. It used to be a joke to call Nashville Nashvegas, but it really is a miniature Las Vegas now.

This city does major events — witness the NFL Draft spectacle — better than almost any city in the country.

The number of tourists in town who would walk to a downtown stadium and fill it up on a regular basis would, I believe, be massive. (The one thing Nashville needs more of is good entertainment options for families. Shutting down Opryland, a popular theme park many of us in the area grew up going to as kids, probably ranks as the most disastrous business and tourist decision in this city’s history). Couple the tourist traffic with the already growing population in the region and I’m not really worried about the team having fans.

Especially when the plan is to make it a 35 or 40,000 seat stadium.

The goal would also be to make it a retractable roof baseball stadium that could be used for Final Fours or concerts. Meaning you’d go from a venue just used to host 81 baseball games to one that would host 120+ events a year. (The city wouldn’t be on the hook for paying for this stadium, it would be privately financed).

I just don’t have any doubts at all Nashville could outdraw cities like Oakland and Tampa, for instance, when it comes to major league baseball.

This is a rapidly growing town with really good baseball talent and really good baseball interest.

It’s also gaining an increasing amount of big business interests, which could all be in line to spend big money on naming rights and support for the venue.

That’s especially true when you consider there wouldn’t be much season competition with the Preds or the Titans. The baseball season would barely overlap with the Titan season at all — just in September — and it wouldn’t overlap that much with the Preds season either. (Even with a long playoff run there would only be a six week overlap with the Preds. And if the Preds didn’t make a playoff run the season overlap would be a couple of weeks.)

So I think it will happen.

The other United States cities, by the way, in the mix for an expansion team or relocated franchise would be Portland, Las Vegas, and Charlotte.

But I think the trend lines for Nashville are better than the trend lines for those other cities.

So I believe Nashville get a major league team at some point in the 2020’s.

Jackson writes:

“Who is your son blaming the Braves loss on haha? And are you a fan?”

I root for the Braves now because I want my nine year old son to be happy.

And last night he wasn’t happy.

I had to sit him down and give up a talk about the third b (thankfully we aren’t at the birds and the bees yet, but we are, unfortunately, at the Braves.)

So I told him the Braves haven’t won a playoff series since 2001 and that they’ve lost the opening game of a playoff series nine straight times.

And he just looked up at me — with his Ozzie Albie chain hanging around his neck — and said, “But dad, why can’t they just play like they do in the regular season in the playoffs?”

And I said: “Son, Braves fans have been asking that question since way before you were born. No one knows.”

And he was just crushed.

It was a really tough conversation to have.

I hate that I had to share the real sports world of an Atlanta Braves baseball fan with him.

JDS writes:

“Is Elizabeth Warren a serious candidate to beat Trump like Biden was?”

Well, as you can see from the above Tweet, Elizabeth Warren has now become a pretty big gambling favorite to be the Democratic nominee.

Can things change between now and when the primary votes start? For sure. But we’re less than four months out now from Iowa voting. It’s getting harder and harder to make a move if you’re someone other than Biden and Warren. (I think Bernie Sanders’s recent heart issues will torpedo his candidacy. Because I think Democrats worst nightmare is nominating someone to run against Donald Trump and then that candidate having a heart attack after he’s the nominee).

Wild things can still happen, of course — could Hillary suddenly jump back into the race looking for a rematch against Trump? — but lacking something such as this I think you have to start asking whether Warren’s ascendancy is related to Biden’s connection to the Ukraine incident. Are some Democratic voters nervous about Biden’s connection to the Ukraine mess and ready to pick someone who isn’t involved in any way with this scandal?

Maybe.

Certainly, at minimum, it hasn’t helped Biden at all.

But regardless of the nominee, the Democrat nominated will be a serious candidate to beat Trump because of how evenly divided the country is right now.

I happen to believe, however, she’s not as good of a choice as Biden.

I keep saying this because it’s true and I think so many other people are incentivized to make this race seem much more complicated than it is, but the truth remains pretty simple: tell me who wins these four states and I’ll tell you our next president will be: Pennsylvania, Michigan, Wisconsin, and Minnesota.

Most of the states are already determined, red or blue, this election will be decided among Big Ten voters in the Midwest.

Now I’m not a doom and gloom guy when it comes to the presidential race — even if you hate Trump our unemployment rate just hit a fifty year low today of 3.5% — because I believe the country will probably be fine no matter who wins.

But I haven’t seen anything from Elizabeth Warren that makes me think she’s going to be a much better candidate with those Big Ten voters than Hillary Clinton was.

And Trump will have hundreds of millions of dollars he didn’t have in 2016 to target his message to the swing voters in those particular parts of the country.

So while it may not be the case very often in the college football playoff, the Big Ten holds the (presidential) title in its hands.

Thanks for reading the mailbag.

Hope you guys have fantastic weekends and look forward to seeing some of you in Knoxville.

If you want to attend our event tonight go sign up here.

And you can go play our free college football pick’em here too and do your best to win $10k of my money this week.

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