Friday Dump 🥟 - MJ's NASCAR lawsuit, Dolphins P/E splash, WNBA playoff push

Author

Michael Sheinfeld
October 04, 2024

Friday Dump 🥟 pumpkin spiced latte edition is here 

Each Friday, we’ll breakdown 3 sports business stories that have caught our eye throughout the week. They will be assembled in the following format:

🔴 - Stories that make us stop, think, and question.

🟡 - Stories with a hint of risk and unpredictability.

🟢 - Stories that make us feel good to go and empowered.

Mmm mmm smells like the best time of the year.

🔴 Michael Jordan’s NASCAR racing team going to court. If you had any idea Michael Jordan (yes, the GOAT basketball player Michael Jordan!) had himself a racing team, go ahead and raise your hand. Alright, thank you. Joke’s on you because we can’t tell who raised their hand or not. But regardless, 23XI Racing, the team co-owned by Michael Jordan and 3x Dayton 500 winner, Denny Hamlin, announced that it jointly filed an antitrust lawsuit along with Front Row Motorsports against NASCAR and NASCAR CEO Jim France on Wednesday, arguing that the sport’s governing body is essentially a monopoly.

  • The lawsuit is a culmination of two years of contentious negotiations between NASCAR and Cup Series teams over extending the so-called “charter” agreement, a franchise-like system that gives teams certain monetary guarantees.

    • This includes a percentage of revenue distributed to teams through NASCAR’s recently announced media rights deal that extends through 2031.

  • Last month, 13 of 15 teams signed an extension to the charter agreement that was set to expire at the end of the year.

  • 23XI and Front Row were the holdouts and called out NASCAR buying racetracks and imposing exclusivity on sanctioned locations, acquiring competitor series ARCA in 2018, preventing teams from participating in other stock races, and forcing teams to buy their parts from NASCAR-selected suppliers.

In a dumpshell…what’s interesting about this particular case is the fact that NASCAR was founded by CEO Jim France’s father, Bill France Sr. in 1948. This essentially boils down to the fact that this governing body/league has been controlled by the France family for 76 years! And by naming France individually in the lawsuit, this means he would also be required to disclose his income from NASCAR — something that has never been revealed. Will that uncover the monopolistic tendencies of the family? Could it uncover where the money is actually flowing?

Time will only tell where this lawsuit goes. In the meantime, 23XI and Front Row have put a lot on the line since not signing this extension. The two teams are at risk of losing their charters, valued anywhere from $30M to $50M apiece and there’s also a small chance NASCAR could take their two charters away from the teams.

It’s a messy situation. One that might end up going back and forth for a number of months to come down to some sort of negotiation or increase in revenue share with the new media rights deal coming up.

🟡 Give me my South Beach money. A little less than a month ago we went over the fad that has been rampaging through professional sports like a virus. Well…really it’s been hitting all sports, except the NFL. And these days, it’s no secret that sports franchise valuations (especially NFL valuations) have skyrocketed within the last few years. So much so, that owners, majority and minority, are having a hard time liquidating their “team ownership assets”. The reason for that…few people want to write a check for hundreds of millions of dollars only to realize they have no say in team-related decisions. So let’s bring in our favorite rich AF industry, the Private Equity funds, because they’re making their way to the 305. And the Miami Dolphins are in advanced talks to be one of the first organizations to take advantage of these new rules.

  • Ares Capital is in talks to buy 10% of the team’s parent in a deal that values the group at $8.1B. Oh and billionaire Joe Tsai, owner of the Brooklyn Nets, is in talks to buy another 3% at the same valuation.

  • Now you might be wondering, didn’t Dolphins owner Stephen Ross (yes Big Blue Nation, that Stephen Ross!) declined a $10B offer made by billionaire and CEO of Citadel, Ken Griffin? Why yes, he did and thank you for remembering that May 3rd story!

    • But the reason Ross declined that massive offer was because Griffin wanted complete control of the franchise.

  • This way, Ross keeps the Dolphins and majority control within the family while also getting an injection of cash.

  • In return, the potential investment would also include Hard Rock Stadium, where the Dolphins play their home games; the Miami Grand Prix, the F1 race held on its grounds; and the group’s roughly 50% stake in the Miami Open tennis event.

In a dumpshell…Ross knows how to play the game. The guy’s net worth is $17B for crying out loud! He knows it’s about maintaining control of one of America’s most prized assets (an NFL franchise), while also being able to diversify to other areas of business he finds interesting. It’s why he’s expected to put the money from the minority sale into two major endeavors: his Relevent Sports Group that negotiates European soccer rights deals with North American outlets, and his real estate portfolio in South Florida, especially in Palm Beach County.

At the same time, he brings together partners who are both well respected in the professional sports realm while not being completely on the hook when it comes to future player salaries, stadium renovations, etc.

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Photo: Gregory Fisher-Imagn Images

🟢 WNBA Playoffs without Caitlin Clark. After Caitlin Clark just wrapped up an incredible season winning Rookie of the Year honors and providing a much needed jolt to a growing sport, the WNBA is now fully in playoff-mode without its star rookie. And the viewership results are probably to be expected due to the missing Caitlin Clark Effect. However, that’s only one part of the story — when comparing these viewership trends year over year, it’s not hard to figure out this sport is gaining momentum…and fast.

  • Game 1 of the WNBA semifinals saw the defending champion Las Vegas Aces vs. New York Liberty which resulted in 929K viewers on ABC.

    • It’s notable because the game had more viewers than all four telecasts of the 2023 WNBA Finals, in which the Aces dispatched the Liberty for their 2nd consecutive title.

    • For even further comparison, in 2023, Las Vegas’ win over the Dallas Wings garnered 182K viewers in the early slot on ESPN2 and New York/Connecticut had 394K on ESPN.

  • Clearly the women are doing something right! Because the other semifinal matchup also performed well as the Connecticut Sun beat the Minnesota Lynx and pulled in 654K viewers on ESPN.

  • Now, it’s hard to sugar coat the playoffs because there’s still a discrepancy between Caitlin Clark being in the playoffs vs. out.

    • As the elimination game between Clark’s Indiana Fever and the Connecticut Sun resulted in 2.5M viewers — making it the 10th most-watched WNBA telecast of all time.

In a dumpshell…narratives can shift when comparing these types of numbers, but make no mistake, the year over year viewership increase + network TV airings is what we should be focusing on! Sunday’s games were helped with the use of both broadcast and cable in 2024, and the draw of the biggest media market in the country. ABC has far more reach than any cable channel, especially ESPN2, and that reach is magnified with a New York team in the mix.

It’s no surprise Caitlin Clark is the most popular player in the WNBA. She receives the most views, engagement, sponsorship dollars, etc. But even though she’s not competing for a title this year, it’s still important to understand the leap the WNBA has made just within the last year. And with how good of a player Clark is, don’t expect too many instances where she’s not leading her team to at least the semifinals for years to come.

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