2020 in Review, 2021 Preview: M&A

Having (finally) turned the page to 2021, today let’s take a look back at some of the biggest stories in sports law from the past year. 2020 was set to be a consequential year in sports even before the arrival of COVID-19. However, the pandemic only heightened the importance of a year that witnessed both blockbuster mergers and widespread layoffs in sports business, overdue support for athletes’ expression in social justice movements, and on-the-fly adjustments of how sports are watched and played.

Much of 2020’s chaos that rearranged the sports world will continue to have significant commercial impacts on the industry. Below are some of the fascinating stories that last year provided, and what we might expect 2021 to bring.

What happened:
Penn-Barstool Partnership
Perhaps the most surprising deal transpired at the beginning of the year with Penn National Gaming turning heads during Super Bowl week. The company announced that it had purchased a 36% stake in Barstool Sports for $163 million, valuing the Boston-based sports media group at $450 million. The deal was widely-regarded as a win-win as the oft-in-controversy Barstool gained the legitimacy and platform of a media superpower, while Penn acquired easy access to an ideal market audience for the rollout of a much-anticipated sports betting division. The agreement came at a time with sports betting experiencing skyrocketing growth, and in the court of public opinion, gambling has gone from taboo to tantalizing as more and more legislators rush to legalize the industry in their own states. However, the Penn/Barstool combo faces an uphill battle getting their share of the market as sports betting is already dominated by established operators in FanDuel, Draftkings, William Hill, and others.

Cohen Gets the Green Light
Steve Cohen, a hedge fund manager worth roughly $14 billion, gave Mets fans everywhere something to be excited about when he purchased the team for a MLB-record $2.475 billion this past fall. However, the acquisition did not come without significant hurdles. Back in February, he and the longtime Wilpon family ownership had reportedly agreed to a deal that would have transferred 80% of the Mets to Cohen, however talks suddenly fell through and the agreement was pronounced dead. The team went back on the market and Cohen – in his second effort – faced a competitive bid from longtime Yankees superstar Alex Rodriguez and entertainer-fianceé Jennifer Lopez. Then, when it became clear that Cohen was willing to far-outspend the competition, rumors swirled that New York Mayor Bill de Blasio was “trying to kill” any sale of the Mets to Cohen, reportedly stemming from the fact that Cohen’s former company, SAC Capital Partners, pleaded guilty in a 2014 insider trading case, which cost the firm $1.8 billion in fines. Despite these obstacles, Cohen’s purchase of a 95% stake in the Mets was approved in October. So, after years of being run like a mid-market team, the New York Mets are already seeing dividends now that Cohen, a longtime Mets fan himself, is at the helm. Following promises to spend big on the Mets, Cohen has quite literally put his money where his mouth is, already adding more than $100 million to the team’s payroll through various key moves. Since 2010 (and excluding last year’s pandemic-adjusted season), the Mets have had an average payroll of roughly $124 million. With the start of the MLB season still more than two months away and potentially more moves to be made, the Mets’ payroll already exceeds $160 million and only figures to increase. According to Forbes, the Mets are the 5th most valuable MLB team and the 41st most valuable team globally.

Spotify Snags Simmons
Spotify continued its run of podcast acquisitions with another big name buy. Having already shelled out $400 million for Gimlet Media, Anchor FM, and Parcast, Spotify reportedly spent more than $196 million to land Bill Simmons’ The Ringer in an effort to grow its sports vertical. In Spotify’s words, The Ringer, launched by Simmons in 2016, is a “website, podcast network, and video production house creating an innovative blend of sports, pop culture, politics, and tech content.” According to Statista, The Bill Simmons Podcast, part of The Ringer’s robust podcasting lineup, was the 5th highest earning podcast in 2019 bringing in over $7 million. While the growth of podcasting is hard to pinpoint, the following statistics paint a picture of its vast potential: in 2020, 55% of Americans had ever listened to a podcast, 37% of Americans twelve or older listen to one monthly, and podcasts accounted for 19% of all spoken-word audio listening in the U.S., compared to 2017 when these numbers were 40%, 24% and 15% respectively.

What to look for:
NFL to hit $100 billion?
With most NFL broadcasting rights agreements set to expire in 2022, the league will sign a new contract this year with many expecting that it will be a 10 year deal that could “far exceed” $100 billion in total value – and it’s easy to see why. Out of the 50 most-viewed TV Broadcasts of 2020, the NFL dominated claiming 33 of the largest audiences, including Super Bowl LIV, which reeled in one-hundred million viewers, unsurprisingly making it the most-watched broadcast last year – for the 28th year in a row. While core aspects of the NFL’s current agreement figure to remain intact, a few key games are expected to change hands, even including America’s most popular program. Nothing is set in stone, but rumors are that ABC and ESPN will be added to the Super Bowl rotation and ESPN will receive more flexibility in its Monday Night Football (MNF) slate to ensure the best-possible matchups. Perhaps more intriguing, the NFL is reportedly considering offering ABC, ESPN, CBS, and Fox two Super Bowl broadcasts each, and auctioning off the final two at a later date. The new broadcasting agreement will likely witness one of Amazon, ESPN+, Peacock or Apple take over the Sunday Ticket package given that DirecTV seems poorly-positioned to continue the deal. Also, Amazon may become the exclusive provider of Thursday Night Football with Fox reportedly looking to move on from the package. NBCUniversal is focusing on retaining the most-watched prime-time TV show for the last nine years in Sunday Night Football. Finally, a few notes on current pricing and revenue: rates for Sunday afternoon games have been $1 billion annually, but may jump to $2 billion; ESPN has paid $2 billion for MNF, but may need $3 billion to retain the package; Sunday Ticket is priced at roughly $1.5 billion annually, but will likely be subject to a bidding war which will drive up the cost; the NFL’s annual revenue from its media rights is currently around $7.5 billion and could double to almost $15 billion. In any event, the NFL’s much-anticipated TV deal will be something to look out for as it will undoubtedly shape the broadcasting market for the next decade.

XFL game-planning for 2022
Among all the losses experienced due to the pandemic, it’s hard to argue that any sports entity suffered more than the XFL, whose debut began with a very promising start in February, only to be stopped short the next month and later, subjected to bankruptcy. Thanks to careful planning, significant funding, and an impressive marketing effort, the XFL seemed well-positioned to erase the doubts stemming from its 2001 failure and establish itself as a legitimate and profitable “minor league” to the NFL. Early returns on the XFL proved as much: the league averaged 1.9 million viewers and was projected to hit $46 million in gross revenue for the unfinished 10-game season, exceeding internal expectations. Of course – consistent with the theme – the pandemic plunged the XFL and its investors into financial ruin, forcing CEO of WWE, Vince McMahon, to sell the team to actor and businessman Dwayne “The Rock” Johnson for just $15 million. Citing the needs to restructure the organization and have fans back in seats, the XFL has no plans for a 2021 season, however expects to return in spring 2022. Accordingly, many expect Johnson, alongside business partners Dany Garcia and Gerry Cardinale, to be active in securing investments to position the XFL for a strong – and permanent – revival next year.

Sportradar on the move
In a year that witnessed the continued growth and popularity of sports betting, Sportradar, unbeknownst to most, finds itself poised for a major move. Sportradar is an international, Switzerland-based company that collects and analyzes sports data, providing it to bookmakers, sports federations, and media companies, including the MLB, NBA, NFL, NHL, William Hill, Bet365, and many more. The company employs more than 2,000 people over 30 locations across the globe and boasts Michael Jordan and Mark Cuban among its list of investors. So, why is Sportradar making the news now? Well, after receiving a B+ credit rating from Fitch Ratings, it was revealed that the sports betting powerhouse has been raising $505 million to finance a potential acquisition, reportedly with a specific M&A entity in mind. Though the identity of this target remains unknown, some have speculated that it could pursue another sports betting platform, while others predict Sportradar may look for a casino platform. In any event, most seem to agree that at some point this year Sportradar will look to go public, however disagree whether it will do so through a traditional IPO or a SPAC, the latter of which would allow the company to reach the public roughly two-to-four months faster than using the former. Regardless, it is clear that Sportradar has big ambitions for 2021. The company just appointed a former CEO of Fiserv Inc., Jeff Yabuki, to chairman of the firm’s board of directors and while its plans are still in the dark, many expect Sportradar to make lots of noise early on in 2021.

COVID-19’s Impact on Sports Broadcasting and Salaries

It’s been just over two weeks since the last live broadcast of a professional sporting event and the effects are rippling through the world of sports business. COVID-19’s arrival and subsequent spread across the United States prompted the suspensions of the NBA’s, NHL’s and XFL’s seasons, as well as the delay to the start of the MLB season and countless other disruptions throughout sports. Much like almost every other area of the U.S. economy, sports have taken an enormous hit and while fans and organizations alike are eager to see their favorite athletes return to competition, it is uncertain as to when they will be able to safely, and lucratively, do so.

Between the timing of COVID-19’s lockdown on U.S. sporting events and the ambiguous 2-to-6 month timeframe medical experts are forecasting for a full recovery, each league has tailored its own plan in response to sudden halt of play. Below is a quick summary of just a few of the major sporting organizations’ financial and/or scheduling proposals.

NBA: After announcing that players would receive full salaries on the April 1st due date, the NBA announced earlier this week that it would be reducing the pay of 100 of the leagues’ highest-paid executives by 20% for the duration of the coronavirus crisis. Moreover, the league has extended its credit limit to $1.2 billion for added flexibility in covering its coming expenses. While there is no set plan on when play for the current season will resume, league commissioner Adam Silver has insisted that regardless of timeline, the league would prefer to salvage some portion of the season and crown a champion for the 2019-2020 season. Among the avalanche of proposals of how to “save the season,” Atlanta Hawks CEO Steve Koonin, recommended permanently pushing back the start date of the NBA season to December and concluding with the NBA Finals in late summer, given the current season would optimistically end in August or September. Moreover, Brooklyn Nets point guard Spencer Dinwiddie tweeted out an interesting idea in which the NBA season would resume with a March-Madness style tournament involving all 30 teams.

MLB: The MLB reported this week that it had reached an agreement with the MLBPA on a loose framework of financial and scheduling logistics regarding the upcoming season. Perhaps the most shocking news was the revelation that IF the season is cancelled, players would receive the same amount of service time they received the season prior. This means that players with a year remaining on their contract, such as recently-acquired outfielder Mookie Betts, will hit free agency in 2021 without ever playing a game for the Los Angeles Dodgers who traded valuable assets for his services this year. Also, in the event that the season is cancelled, the MLB made it clear that players would not be able to sue for full salaries, however all players will be receiving a $170 million advance over the next two months. Despite these insurance measures, Commissioner Rob Manfred is hopeful that the MLB resumes play this summer, while he acknowledges that a full 162-game season is likely off the table. The reported contingency plan includes 1) beginning the season once there are no bans on mass gatherings that limit the ability to play in front of fans, 2) no travel restrictions, 3) medical experts determine that games will not pose a risk to the health of teams and fans. Moreover, if/when play resumes, the MLB noted that doubleheaders, a 14-team playoff format, and a neutral, warm-weather location for a November/December World Series are all in serious consideration.

NHL: While the NBA and MLB have quickly pivoted to rescuing their seasons, the NHL has not matched their optimism nor their speed in announcing contingency options. The league has not yet united around a financial agenda, yet both the Dallas Stars President and General Manager have taken voluntary 50% pay cuts. Meanwhile, the Boston Bruins and Montreal Canadiens announced layoffs as their own responses. While many see the cancellation of the rest of the season as the most realistic scenario, others have proposed a timeline similar to that of the NBA with the season picking back up in July/August and ending in August/September. Most notably, star players Alex Ovechkin and Sidney Crosby said that they would be “OK” with skipping straight to the playoffs if and when the season is able to resume, however they acknowledged the question of fair play and keeping the integrity of the sport.

XFL: I really feel for the XFL here. Riding a strong start in its inaugural season, the decision to not only suspend but cancel its remainder must have been decisively more difficult than those of other sporting leagues. The XFL was exactly at the midway point of its season having played through five weeks of its ten week schedule (excluding a two-week playoff in April). Though the eight-team football league had been dealing with declining ratings following its initial excitement, it immediately committed to paying its players’ full salaries and returning refunds or credit to its ticket holders. The XFL also announced that it will be back for a 2021 season and has great reason to do so. Ten former XFL players have already signed contracts with NFL teams for the upcoming season with more likely to follow in the coming days.

MLS: Major League Soccer was in the midst of only the second week of its season when it made the decision to postpone its season for 30 days. As updates of the spread across the U.S. have come in, the Commissioner Don Garber pushed the deadline back to May 10th, but will likely have to do so again under the current climate. Garber, however, is adamant that when soccer returns, the MLS will play a full season’s worth of games even if it means extending the calendar of the season. While there has not been an unanimous response to salary fulfillment across the MLS, one team came under scrutiny for sending an email to its game day staff suggesting they file for unemployment while naming corporate partners who might be hiring.

BIG3…?: I was hesitant to include the Big3 in this rundown of major sporting organizations, however its response to the coronavirus crisis may just elevate its status to that of the leagues listed above. For those who are not familiar with the Big3, it is a 3-on-3 basketball league composed of former NBA and college players such as Amar’e Stoudemire and Joe Johnson. The games are played half-court style with rule oddities that differentiate it from the NBA such as the addition of a 4-point shot and first team to score 60 points as the winner. As for the coronavirus’ impact on the BIG3, originally games were supposed to be played around the country in Memphis, New York and more. However, BIG3 co-founder Ice Cube announced yesterday that the organization will be partnering with the producers of reality TV show “Big Brother” in efforts to air a basketball tournament-reality TV show hybrid to fill the significant void in the sports world. It was reported that the tournament will feature 16-22 players, who be previously tested for COVID-19 and if selected, will be quarantined in a house together for the duration of the season with anyone who breaks quarantine being kicked from the house. It was also reported that some of those selected may even in former top women’s basketball players.

The idea is that the three-person teams would shuffle teams each round and once an individual player accumulates three losses they would be eliminated from contention. Then, the final three players would win cash prizes with the top prize being at least seven figures. The goal is to air the tournament starting in May and given the current sport’s climate, or lack thereof, the BIG3 will surely see a large opportunity to scoop up hungry sports fans across the country craving any form of live competition. There is no word yet on whether or not these fans will be able to bet on these contests, however given the nationwide craving to slowly restart the economy, it wouldn’t a surprise to see Las Vegas announce the lines once the details of the BIG3’s proposal are ironed out. In any event, every other aforementioned league is looking at June start/resume dates in their most optimistic scenarios, so at the very least the BIG3 has at least a month to show us all what it has to offer, and hopefully hold us sports fans over until our favorite teams are back in action.

California v. NCAA: College Endorsement Deals


What do Darius Bazley, Lamelo Ball, and MarJon Beauchamp all have in common? They are trailblazers of the new NCAA-defying movement that has seen these top talents forego their year of collegiate eligibility in order to prepare for the NBA outside of the constraints of the strict university system. While the jury is still out on whether this trend is a flash in the pan or the future of NBA development, it is clear that the NCAA is under various pressures to adapt in the new age of player self-determination, the most recent of which, coming from California lawmakers.

This past month, the state Senate and State Assembly unanimously passed the Fair Pay to Play Act that would allow players in the state to profit off of their name, image, and likeness. It is a decisive blow that would severely limit the NCAA’s authority over players at California’s 25 Division I programs. The bill would make it illegal for California schools to take away an athlete’s scholarship or eligibility for accepting endorsement money. The legislation is seeing fierce opposition from the NCAA, spearheaded by president Mark Emmert, who suggested that California universities may be prohibited from participating in NCAA championships in a letter lawmakers. While the bill will not go into effect for three years, California’s vote against NCAA amateurism will undoubtedly have immediate consequences for the association, California colleges, and top high school recruits.

(As a point of clarification, while the proposed bill will allow all college athletes to profit from endorsements, given the disproportionate popularity of college basketball and football to other collegiate sports, this piece will focus on the bill’s impact in these sports as they will likely benefit the most from it.)

As it pertains to four and five-star recruits, they should be smiling ear-to-ear at the possibility of receiving a “pre-professional” endorsement deal. Because football players currently do not have any true avenues to the NFL outside of the NCAA, the most substantial effect of the Fair Pay to Play Act for may be a surge of high school football talent to California universities. Until other states pass similar legislation, it is hard to imagine that a top player with an offer from, say, USC would choose an offer elsewhere over the opportunity to receive an endorsement deal and play for a perennial powerhouse program. The irony in this is that as California football teams improve, they are all the more likely to qualify for a championship game, in which they may not be allowed to participate. Despite this threat, in an age where draft-worthy talents have sat out bowl games to avoid injury concerns, a championship-game ban likely won’t be enough to dissuade prospects from committing to California institutions.

On the other hand, high school basketball phenoms have an ever-expanding array of non-NCAA paths to the NBA draft. Of the aforementioned players skipping college, Bazley famously received a $1 million internship with New Balance, Ball opted to play overseas in a competitive Australian basketball league (NBL), and Beauchamp has enrolled in a 12-month training program with a staff full of renowned former coaches and executives. These blue chip talents, along with others following their lead, are changing the way in which high school players think about the jump to the pros. It is too early to tell just how much their decisions will affect their draft stock, however a recent NBA mock draft has projected both Ball and fellow NCAA-to-NBL defect, RJ Hampton, to be chosen in the top 10.

The allegiance high school basketball superstars once felt to the NCAA is being eroded, which is why this bill could actually help the association. For example, take Lamelo Ball. Even though the 6’6″ point guard has been on record saying that he would have preferred to play college ball, the NCAA stripped Ball of his eligibility after his dad used him to promote Big Baller Brand and hired him an agent. Both of these infractions killed any hopes Ball would have had at a collegiate career, but what if they hadn’t? Let’s say he wanted to follow in his brother’s footsteps and play for UCLA. The fanfare around Ball is undeniable — to the point where the NBL inked a deal with Facebook to stream 52 games that would certainly have gone unwatched by a U.S. audience if the 18 year old were in the NCAA. The impact college superstars have directly benefits the collegiate association as evidenced by the “Zion effect” on ticket prices. So why wouldn’t the NCAA want the insane media coverage that follows the sport’s most prominent athletes?

The short answer is they do, but only on their own terms. Any steps towards player compensation, even from one’s own likeness, is a step closer to colleges paying athletes, which is seeming more like the inevitable future every year. Especially in basketball where other options are constantly emerging, the NCAA is particularly even more threatened by the NBA mulling the abolition of the “one-and-done” rule, which would make the association completely obsolete for the best high school players. In turn, the overall product of NCAA basketball would decline and could force a drastic overhaul of the system to incentivize at least some of the best prospects to choose college over professional and international basketball. It seems as though the California ruling may well be just the first step in a reorganization of the way the NCAA is structured, at the very least in basketball–for now.

With the developing XFL, a pro football league that would run during the NFL’s offseason, it is only a matter of time before football copies the blueprint of NCAA basketball alternatives and offers a more enticing path to the pros than does the NCAA under its shield of scholarships. It seems as though the Fair Pay to Play Act would almost administer a remedy to an already-worsening problem, but the NCAA sees one of its most valuable commodities as its authority over the players. However, even if the organization doesn’t ever want to pay players for the profit they bring, there are several convincing arguments for at least allowing player endorsements.

The most significant is the additional profit it would bring to the NCAA. Yes, part of this agreement would entail revenue sharing with the players, but right now there are two huge markets that would largely benefit both sides. One is jersey sales. It is almost unimaginable that if an Oklahoma Sooners fan wants a Jalen Hurts jersey, the only option available is a blank jersey with the number one on the back — no last name. Currently black markets have filled this gap and one can buy a bootleg jersey for cheap from China, but the opportunity is clear. Iron out a deal with the athletes to use their name, and sell jerseys for massive profit around the country.

The second market would be to revitalize the popular NCAA Football video game franchise that was discontinued in 2013 after a lawsuit ruled against the NCAA in their fight to use the names, image, and likeness of college athletes. Again, a fairly easy solution seems evident: pay the players, make the game, split the revenue. However, there is little indication that the organization seems inclined to do so and would rather ignore the obvious market opportunity.

The last reason is less tangible, but just as meaningful. What if the NCAA took initiative and righted their past wrongs? Crazy, I know, but what if? The opinion fans hold of the NCAA seems to find a new low with every passing season. Just two seasons ago the organization stripped the backup kicker at UCF of his scholarship because he profited from his Youtube channel where he posted trick-shot videos. Next year, will mark the ten-year anniversary of the NCAA vacating beloved USC running back, Reggie Bush, of his Heisman Trophy award for receiving improper benefits from the school. The NCAA has an unfavorable reputation as the tattletale big brother, which has undoubtedly contributed to the budding movement away from collegiate sports.

In any case, the direction of the NCAA as it pertains to collegiate athlete’s endorsement opportunities will be decided in the coming months. It seems likely that California’s legislation will be wrote into law without a say from the NCAA and what comes next is uncertain at best. However, other states are preparing to draft their own versions of a similar bill, which could mean a much bigger fight than the NCAA may be ready for. It appears that the landscape of collegiate sports is in the midst of a stark transition, one that will certainly place more power and financial security in the hands of the athletes that are responsible for its very success.