Welcome back to The Varsity, our thrice-weekly private email on the big money and even bigger egos
that fuel the sports business. Welcome to the dog days of summer: The NBA Finals and NHL Stanley Cup Final are over. Marchand is already training for the Nathan’s Famous Hot Dog Eating contest on July Fourth.
Speaking of the NBA Finals: Hearty congrats to former Fox Sports and Learfield exec Adam Holzer, who absolutely nailed his NBA Finals prediction, hitting the exact viewer average of 10.3 million across all seven games. The small-market series was destined to fall below 10 million until last night’s Game 7 averaged 16.4 million viewers on ABC.
🚨 Pod alert: Premier Lacrosse League’s Paul Rabil rejoins the Varsity podcast on Wednesday for a conversation focused on his league’s growth. And make sure you listen to Alexi Lalas’s appearance on yesterday’s pod, where he explains why he’s so bullish about next year’s World Cup.
Obits: As a native Washingtonian, I would be remiss if I didn’t acknowledge the passing of FedEx founder Fred Smith, who owned a piece of the Commanders from 2003-21. (Smith, of course, helped put pressure on Dan Snyder to sell both before and after Smith sold his own stake in the team.) There was also an outpouring of affection for Scott Miller, the longtime baseball writer who died over the weekend. USA Today’s Bob Nightengale called him “a brilliant writer and an even better human.” ESPN’s Jeff Passan said Miller was “as nice of a guy as you’d find in the press box.”
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- Ian on A.I. entering the arena: In case you missed it, Puck is getting into the business of artificial intelligence with The Hidden Layer, a new, twice-weekly newsletter from Ian Krietzberg, one of the industry’s most respected reporters. Ian’s email officially debuts on July 7 (sign up early here), but until then, we’ll be sharing his insights across Puck. Here’s Ian…
The Pacers folding to the Thunder on Sunday night brought the NBA season to a close, ushering in what promises to be a long, dramatic offseason, with my Knicks eyeing a path to a 2026 championship (please!). And although the postseason conversation was dominated by talk of outrageous plays, too many turnovers, Reggie Miller, and The Officiating, if there was an undercurrent that dominated the playoffs, it was sports betting, which has been getting an A.I.-powered makeover.
For a long time now, both DraftKings and FanDuel have been leveraging machine learning within their platforms in a variety of ways. In part, this involves personalization that greases their respective customer acquisition pipelines. But A.I. is also, ostensibly, a prediction engine—although it remains nearly impossible to forecast which team will give up a lead, which star will suffer a critical injury, or which player will decide to go full T.J. McConnell.
That hasn’t stopped people from trying to use the technology to make bets, and its widespread availability has given rise to a number of A.I.-powered betting assistants—e.g., SportsAI, which supposedly offers the “most accurate and profitable predictions on the market.” Of course, if it were actually possible to game the betting system with A.I., I don’t know if betting would exist. The house, after all, always wins. —Ian Krietzberg
- The Lakers’ local deal: Mark Walter’s recent record-breaking offer for the Lakers, which values the team at $10 billion or more, obviously takes into account its historic brand identity, revenue, and share of the NBA’s epic new media rights deal. Another side perk: At a time when Main Street Sports recently emerged from bankruptcy and most of the remaining R.S.N.s are getting cliffpathed to smithereens, the Lakers have an astonishingly robust regional sports network deal.Back in 2012, Charter launched the Spectrum SportsNet R.S.N. in partnership with the Lakers, with the team’s local media rights secured through 2032, and a team option to extend the deal for five more years. The Lakers are paid close to $200 million per year for these rights, so there’s zero chance they’d walk away on their own. Sure, Charter could look to back out of the deal at some point. Back in 2013, Comcast’s Houston R.S.N. filed for bankruptcy to nullify its money-losing deals with the Rockets and Astros. The question is whether Charter, a conservative company, would go for that sort of nuclear option.
- What to make of the Pac-12–CBS deal: The halcyon days of the Pac-12 are long gone, of course, following the departure of signature institutions like UCLA, USC, Oregon, Washington, Stanford, etcetera. But the downsized conference’s new media deal with CBS is a sign that some brand equity remains, and yet more evidence that college football is one of the final pillars of the linear bundle.The conference had been negotiating the CBS deal, which guarantees broadcast coverage for its biggest games, for the better part of a year, facing the headwinds of a sports rights market that has become tighter, with linear channels looking to cut costs, and streaming companies pursuing marquee events that they can eventize, as they say. Sources stayed mum on the financial terms, but the conference is also looking to land one or two other rights deals. And in a sign of the times, it is also reportedly looking to extend an invitation to Texas State.
For CBS, the agreement provides more live college football content for a price that didn’t break the bank. CBS picked up a handful of Pac-12 games that it will simulcast across its broadcast channel and Paramount+: the football and basketball championship games, and three regular season football and basketball games. The cable channel CBS Sports Network will carry an undisclosed number of games. The deal squares with CBS Sports’s strategy of earmarking top-tier games for broadcast, and leaving tonnage for cable and satellite.
- MLS’s billionaire moonshot: Major League Soccer has experienced a fair amount of success in its 30 years of existence. But retired soccer star and current Fox Sports commentator Alexi Lalas believes the league’s owners need to start digging deeper into their pockets to attract star players. “My ultimate dream for Major League Soccer is some morning to wake up and to find out that MLS has called a press conference where [commissioner] Don Garber steps up to the microphone and says, This is a moonshot. We are actually going to be the best league in the world,” Lalas told me on yesterday’s episode of the Varsity podcast, adding (still as Garber), “All 30 owners are deep-pocketed. These are billionaires. These are smart people. We are going to do everything within our power to do that. Obviously, that translates into spending more money.”Lalas also offered a historic comparison: He played for the Italian club Padova in the mid-1990s, back when Italy’s Serie A had the reputation as the best league in the world. Eventually, though, London became the financial nexus of the international order, teeming with Middle Eastern, Russian, and Chinese wealth, and the English Premier League was transformed by a new generation of spend-happy owners. “The players did not go to England for the weather or the food,” Lalas said. “They went there for the money. The same thing can happen to North America. If players can get paid—and if they don’t lose credibility when it comes to their international aspirations—they will come here.”
- Should Netflix co-opt YouTube’s strategy?: YouTube has created sports media stars and influencers like MrBeast and Dude Perfect and others, ad infinitum. In What I’m Hearing, his must-read private email, my partner Matt Belloni wrote about the growing sense that Netflix should take on YouTube by investing in shortform content. “In a note to clients this week, the Wells Fargo analyst Steven Cahall argued why ‘shorter form content could be Netflix’s next big investment,’” Matt wrote. “Citing the S.V.O.D. success of traditional-length shows from YouTubers MrBeast and Ms. Rachel, Cahall went a step further. Unlike those two, whose Amazon and Netflix pacts are non-exclusive, he suggested that exclusive multiyear deals with top creators for shortform content would be a ‘growth path that broadens Netflix’s engagement.’”Matt continued: “It makes sense. Having vanquished its Hollywood competitors, and with growth slowing, Netflix is increasingly chasing YouTube, the clear leader in time spent. Why not just treat digital rivals like the broadcast networks of 2017, and throw Shonda-level cash at big creators to set them up on Netflix?... I do think that to maintain its brand, Netflix would need to position this creator content as the ‘premium’ version of YouTube. Better than free, basically, or the cream of the digital crap—sorry, crop. Maybe offer it via a separate tab or interface, so Dude Perfect isn’t sitting next to a $200 million Martin Scorsese movie. But picking off top creators to populate a Netflix shortform hub seems like the natural next step in helping a TV-centric platform compete more on mobile and tablets—and, as the data has shown, young people are watching more shortform on bigger screens, too.
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And now, on to the main event…
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The newly separated TNT Sports will keep bidding on sports packages… but rights holders are wondering if they’ll see big numbers in the Gunnar Wiedenfels era.
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Earlier this month, when David Zaslav announced he would divorce Warner Bros. Discovery’s growing-ish studios and streaming business from its cable assets, there was panic aplenty. In Hollywood, the creative community feared that an historic studio would become enfeebled without the sustenance of an EBITDA-rich, if declining, cable networks business. And in the cable industry, there was a looming fear that these zombie networks were headed on a journey into irrelevance. Was CNN going to crumble into Cheddar? Could the old Discovery nets be weighted into oblivion by My 600-lb Life, 1000-lb Sisters, and 1000-lb Roomies—all of which are real shows, by the way.
In the sports media world, the anxiety coalesced around the viability of TNT Sports. Even after losing its NBA rights, TNT Sports remained one of the most active companies in the space. And yet, there were already chills in the industry about its go-forward plan. When ESPN exercised its out in its Major League Baseball contract earlier this spring, TNT Sports C.E.O. Luis Silberwasser reached out to Rob Manfred to see if there was anything he could pick up. Those talks never got serious. It was the same story when Formula One approached TNT. And again when the Pac-12 tried to find a home for its rights. Was Silberwasser grinfucking these guys to conceal his diminishing ambitions in light of the deal? Meanwhile, all of this was heightened by the fact that, post-split, the WBD cable assets would be overseen by Gunnar Wiedenfels, Zaz’s C.F.O., who is known for his P&L Ozempic artistry.
Anyway, there’s still a long way to go before we get a clear idea about TNT Sports’s new role in the business, but early signs indicate that GunnarCo will remain a significant bidder. Silberwasser is still negotiating for UFC rights, according to several sources. (The league’s deal with ESPN expires at the end of the year.) Admittedly, TNT Sports is a long shot—they’re going up against ESPN, Amazon, and Netflix—but they’re still in the running. And in a yet-to-be-announced deal, TNT Sports has sublicensed additional College Football Playoff games from ESPN. Also, it’s worth recalling that Wiedenfels himself greenlit TNT Sports’s French Open deal last summer and its NASCAR deal just prior. These are not the moves of a company that’s retrenching, but rather recalculating. After all, Gunnar really has no other good options.
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This rampant anxiety is entirely understandable. Reality is dawning on league executives that the industry may be moving past this current golden era of rights auctions—where streamers, backed by parentcos with trillion-dollar market caps, were bidding against declining businesses fighting for their lives. Those days seem numbered. What will TNT Sports be when NBA rights go on the block again 11 years from now?
As the industry consolidates and reshuffles, everyone is becoming more broadly aware that some bidders, like GunnarCo, will have to temper their ambitions. Last year, when NBCUniversal announced plans to spin its cable channels off into Versant, the spinco’s new C.E.O., Mark Lazarus, did nothing to calm nerves among rights holders. He said he planned to negotiate for sports rights, but only after the Versant spinoff becomes official later this year.
These sorts of secular industrial transformations always play out gradually and in fits and starts. For generations, broadcasters have picked off the choicest sporting events while cable channels have been reliable buyers of tonnage. Now, as cord-cutting has decimated cable channels’ distribution numbers, leagues are looking for other platforms to carry the bulk of their games. So far, streamers have shown little interest in those types of deals. Laz and Gunnar may even find themselves, down the line, with the opportunity to pick up packages that fit beneath the streamers’ thresholds. Or, put another way, they’ll need to. Both Lazarus and Wiedenfels know that sports drives what remains of the declining cable business. If they want their networks to be successful, they’re going to have to make decisions that prioritize and grow sports, or else their companies won’t… exist.
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On YouTube’s sports ambitions: “Why would YouTube be interested in live rights? What if second screen experiences became first screen experiences? For example, you're watching a Formula One race with your favorite podcasters, but instead of an image, or the times of each driver on the screen, it was the actual race. If this is how young people are consuming things, why not give them the benefit of seeing the actual product with their favorite content creators, instead of as a second screen?” —A Varsity subscriber
On YouTube’s NFL deal: “YouTube’s NFL bid represents a calculated move to solve its biggest monetization challenge: transitioning users from low-value mobile viewing to high-value connected TV experiences. Mobile advertising rates are significantly lower than traditional TV rates, and YouTube needs to capture more of the premium advertising dollars that flow to living room screens. NFL games are uniquely positioned to drive this migration because they’re appointment television—viewers actively plan to watch and seek out the best possible experience. Unlike casual content that users might passively consume on mobile, NFL games create strong motivation to find a bigger screen. This makes football content an ideal ‘forcing function’ to get users to set up YouTube on their smart TV or streaming device for the first time. Once users go through the friction of connecting YouTube to their TV for an NFL game, they’ve crossed a crucial behavioral threshold. The platform can then leverage this new viewing habit for other content—their regular YouTube subscriptions, YouTube TV, and premium programming all become more likely to be consumed on the big screen going forward.” —A Varsity subscriber
On churning off Peacock: “I get Peacock for free with Xfinity internet, and I would subscribe anyway to watch the 3-5 times that Purdue plays basketball on the streamer, but I would cancel during the offseason. Getting the NBA probably changes that, but I’d still turn it off during the summer.” —A Varsity subscriber
DAZN and confused: “This is easily the best email subject line of the year.” —A media executive
On the Varsity’s description of Peacock’s strategy as being “all in on a Patrick Mahomes and Bethenny Frankel gambit”: “That’s such a great line!! So funny.” —A media executive
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Puck founding partner Matt Belloni takes you inside the business of Hollywood, using exclusive reporting and insight to explain the backstories on everything from Marvel movies to the streaming wars.
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Ace media reporter Dylan Byers brings readers into the C-suite as he chronicles the biggest stories in the industry: the future of cable news in the streaming era, the transformation of legacy publishers, the tech giants remaking the market, and all the egos involved.
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JULIA IOFFE & LEIGH ANN CALDWELL
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