SBJ Unpacks: TKO Group ‘won’t explore’ more Endeavor assets - Clone

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TKO Group ‘won’t explore’ more Endeavor assets as Q3 revenue hits $681 million

On the heels of TKO Group Holdings announcing that it will acquire Professional Bull Riders, On Location and IMG from Endeavor Group Holdings for $3.25 billion, TKO President and COO Mark Shapiro was emphatic that TKO will not consider the acquisition of any further Endeavor assets.

“We won’t sign an NDA. We won’t explore. We won’t read materials -- nothing whatsoever,” Shapiro said. Endeavor is exploring the sale of sports assets including OpenBet, tennis’ Miami Open and Madrid Open, part of an anticipated sell-off as private equity giant Silver Lake takes Endeavor private. Shapiro noted that Ari Emanuel, TKO’s CEO, may bid on some of the Endeavor assets in a purely personal capacity.

Shapiro made his comments during TKO’s Q3 earnings call on Wednesday evening. TKO, the parent company of UFC and WWE, reported revenue of $681 million and net income of $58 million for the three months through September. TKO’s revenue was split almost evenly between UFC ($355 million) and WWE ($326 million).

Fewer events lead to revenue drop for UFC

UFC’s Q3 revenue of $355 million was down 11% from the same period last year, largely the result of reduced media rights and content revenue, which fell 19% to $216 million. That drop-off was largely the result of a less active event calendar, with one fewer numbered event and two fewer Fight Nights versus the same period in 2023. The drop in media revenue was partially offset by a $10 million (16%) increase in sponsorships, thanks in part to record sponsor revenue from UFC 306, the first to ever have a title sponsor (Riyadh Season).

Shapiro downplayed UFC CEO Dana White’s recent comments about the promotion potentially getting into boxing, telling shareholders on Wednesday that a formal strategy is not yet in place. However, Shapiro also noted the fragmented sport of boxing offers a “growth opportunity,” though the company likely won’t pursue the acquisition of any existing boxing properties.

International gains for WWE

Year-over-year comparisons for TKO are complicated by the parent company’s merger of UFC and WWE that closed in September 2023, so the company’s financial performance in last year’s third quarter only partially reflects the inclusion of WWE’s business. WWE’s quarterly revenue of $326 million represents a 14% year-over-year increase when compared to the promotion’s combined -- that is, both pre- and post-TKO merger -- revenue from the same period last year. Emanuel on Wednesday highlighted WWE’s growing momentum overseas -- it held 18 international events in Q3 2024, versus 11 such events in the same period last year -- and said that WWE “Raw” moving to Netflix in January will provide a further global push.

Shapiro noted that TKO is still combining UFC and WWE, not to mention will soon fold in PBR, and suggested shareholders could “expect more margin accretion” thanks to greater cost efficiencies and joint sponsorships across the owned properties.

TKO is in the process of refinancing its credit facility, including a new seven-year, $2.75 billion term loan and five-year, $205 million revolver, which is expected to close before the end of the year.

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Cardinals’ Bill DeWitt III addresses legalization of sports betting in Missouri

As Cardinals president Bill DeWitt III watched the live results on the Tuesday vote to legalize sports betting in Missouri, he felt like he was on the verge of watching his team blow a lead in the ninth inning. Turns out Missouri voters became the equivalent of having Jason Isringhausen or Bruce Sutter on the mound.

At 2:30am CT on Wednesday, legal sports betting passed in Missouri by a spread of just 5,000 votes with three million ballots cast, reports SBJ’s Mike Mazzeo. DeWitt: “It’s an incredibly thin margin of victory. It’s incredibly satisfying, and I would also call it somewhat of a relief.”

Missouri will have 14 online sportsbook skins -- one for each of its six professional sports teams, one for each of its six casino owners and two untethered licenses which will presumably go to DraftKings and FanDuel. There are also 19 retail sportsbook skins -- one for each of 13 land-based casinos, and one for each of the six pro teams. DeWitt did not know whether all of them will activate.

DeWitt and the Cardinals were still evaluating how they want to proceed, with one sportsbook partner or multiple partners. They could end up putting a retail sportsbook adjacent to Busch Stadium in their Ballpark Village. DeWitt said there is not a ready-made concept, so they would want to talk with their sportsbook partner and developer Cordish Companies on the best way to activate.

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Braves see 7% year-over-year revenue growth in Q3

The Braves reported revenue of $291 million for the three months ending Sept. 30, marking a 7% year-over-year increase, reports SBJ’s Chris Smith. Nearly 60% of the team’s total revenue was from home games at Truist Park, with baseball event revenue rising 7% to $173 million in the quarter.

Growth in baseball event revenue was driven largely by new sponsorships as well as increases from season tickets and existing sponsorships. Home game revenue was actually down on a per-game basis, falling 3% to $4.2 million per home game in Q3 2024 vs. the same period last year. That decline, along with a 21% drop in retail and licensing revenue, was driven by decreasing home game attendance, which fell some 4% across the full 2024 regular season. It was still the team’s third consecutive season with over 3 million tickets sold, and Braves President and CEO Derek Schiller told shareholders on Wednesday that the Braves have 20,000 fans on their season-ticket wait list. Revenue from broadcasting, which includes both local and national media rights, grew 2% to $71 million.

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The case for private equity for teams, leagues

A few years ago, Wild owner Craig Leipold was thinking it might be time to take some money off the table. Team valuations had skyrocketed since he’d acquired the Wild in 2008, and Leipold had just endured a year-plus of COVID lockdowns effectively shuttering his team’s home arena for both hockey and non-game events, such as concerts.

While Leipold offloaded 10% of the team, he encountered a hurdle: Rising team values had priced out most potential buyers. Leipold: “To get an investor at that point to come in and buy 10% of the team, it was going to cost them $70 million. That’s real money, and those investors are harder and harder to get.” 

The increasingly popular alternative? Private equity. As SBJ’s Chris Smith reportsin this week’s magazine, at least 24 teams across the nation’s other top leagues have at least one institutional investor on their cap tables. That activity is largely built on a single, fundamental tenet: North American pro sports have for decades ranked among the safest, most uncorrelated and value-accretive asset classes out there. And here are the teams and leagues taking investment.