NHL's $1B Loan — Osaka Invests — Warriors Revenue Down 70%

Friends,

To put it simply, yesterday was a wild day.

With social media platforms worldwide dominated by Wall Street, Robinhood, and Reddit (we thought 2020 was weird?), a lot of sports business news got swept under the rug.

Today, we’ll switch it up — covering a few topics from yesterday rather than a deep-dive on one individual idea.

First up?

The NHL.

Enjoy.

The National Hockey League Borrows $1 Billion

With the National Basketball Association (NBA) expecting to lose about 40% of their annual revenue due to the ’ inability to attend games, they raised $900 million from notes issued in the private placement market in December.

The notes are for 3-4 years in length, and each NBA team received $30 million to help with protection against potential liquidity issues during the pandemic.

Now, it’s the NHL’s turn.

The National Hockey League (NHL) has raised around $1 billion in new debt, also through private placement (Source).

The capital will sit in a central facility where each NHL team will be able to draw up to $30 million — similar to the NBA plan — for “cash-flow issues, payroll costs, and other operational issues.”

A billion dollars is obviously a big number, but it’s not exactly surprising.

NHL Commissioner Gary Bettman says that the league is preparing for losses to surpass $1 billion this year alone, and “it would be cheaper for us to shut the doors and not play.”

The reasoning?

Game-day income accounts for ~50% of annual NHL revenue.

This is the way I think about it…

The NHL has three main revenue streams:

• Media Rights

• Tickets & Merchandise

• Sponsorships

The problem?

Media rights are fixed — due to long-term contracts — and ticketing & merchandise income is essentially non-existent without fans in the stands.

That leaves sponsorships as the only variable left for the NHL to maximize monetization, which they have already done with helmet & division sponsorships.

Most NHL teams appear to be properly capitalized to weather the storm, and some probably won’t even utilize the new credit facility.

Still, it’s something worth keeping an eye on.

Naomi Osaka Invests In The NWSL

We’re only a few weeks into the new year, but it’s hard to believe anyone is having a better 2021 than Naomi Osaka.

Already the highest-paid female athlete globally, earning more than $37 million in 2019-20, the three-time Grand Slam tennis champion has continued to run up the score.

Already, Osaka has announced new endorsement deals with Louis Vuitton and TAG Heuer.

Now, Naomi Osaka appears to be expanding her business empire even more.

What am I talking about?

The National Women’s Soccer League (NWSL).

Osaka announced yesterday that she has invested in the North Carolina Courage of the NWSL, becoming a co-owner of one of the league’s best teams, as the Courage have won six trophies in four years.

Here’s what Osaka said on Instagram:

In my opinion, that’s pretty cool.

Sure, the league is still small, but it’s expanding.

By investing in the NWSL now, Naomi Osaka is not only getting equity in a growing league, but she is also able to adequately diversify her growing investment portfolio through a non-correlated asset.

Here’s a cool stat:

The average North American professional sports organization has grown 12% annually in value since 1991, which handily beats the ~8% return of stocks.

For Osaka, it’s onward and upward.

Warriors Losing 70% Of Revenue Without Fans

With new NBA franchise valuations being released last week, we’ve heard a lot about the Warriors going from a $450 million valuation in 2010 to a $5.2 billion valuation in 2021.

The interesting part?

Due to their rapid growth, including a privately funded $1.6 billion arena in downtown San Francisco, they’re set to lose more money this year than the average NBA team.

How much?

About 70% of their total revenue, according to owner Joe Lacob.

Including home basketball games, their new arena — the Chase Center — is supposed to host 200-250 events in a given year.

This year that won’t happen. 

The result?

The 44 suites, 32 courtside lounges, and 60 theater boxes inside the Chase Center will go unfilled, costing the Warriors ownership group hundreds of millions of dollars.

That’s obviously significant.

With few options available, their main solution revolves around getting fans back into the arena.

To do so, the Warriors have put together a plan that includes rapid PCR tests at the door for entry, costing them $30 million in total but allowing them to fill the Chase Center up to 50% capacity.

Now, the key is seeing if that plan gets approved.

In California, the same state that forced the San Francisco 49ers to play home games in Arizona, I doubt that they’ll allow it.

Have a great weekend, and we’ll talk on Monday.

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