BOSTON – If you are a fan of the “Business side of Sports,” there is a MUST READ newsletter that will keep you updated on the most current events and their potential impact in the financial world. John Wall Street (Get it?) publishes a daily e-news and it’s as simple as it gets. Sometimes, it covers breaking news and announcements and their potential impact on the publicly traded companies involved. Sometimes, JWS posts interesting Q and A’s, other features include some expert Financial insights from “Howie Long-Short,” commentary and analysis from the legendary sports finance fan and pundit “Fan Marino.”
One example, run today with permission from JWS editor Corey Leff, is the Q and A with Major League Lacrosse and former Johns Hopkins grad Paul Rabil. The Hopkins lax legend, the first $1M player in lacrosse, plays for the NY Lizards of the MLL and he’ll be watching the NCAA Lacrosse Championship this weekend at Gillette in Foxborough.
The NCAA Lax Final Four is the hidden gem of college sports. Sure, there’s hoops and the annual CFP playoffs, and maybe, toss the College World Series in for good measure, but this weekend’s NCAA Lax is an event that every sports-minded family in New England should consider, alongside your Memorial Day BBQ, the Celtics and Red Sox Alum Game during the current homestand.
Here is a link to subscribe to John Wall Street – CLICK HERE. And, here is the May 25th version of the newsletter:
Paul Rabil: The Fastest Growing Sport in North America, Preview of Final Four
The N.C.A.A. lacrosse Final Four is taking place this weekend in Boston, with Maryland, Duke, Albany and Yale playing for the championship. We thought it would be an opportune time to catch up with pro lacrosse player and entrepreneur Paul Rabil. In a wide-ranging two-part interview, we discuss everything from the growth of the sport to the differences between its two pro leagues. In part 1 (part 2 will follow on Tuesday) Paul talks about the double-edged sword that is club lacrosse, he how collegiate scholarships are allocated and previews this weekend’s games.
JWS: Lacrosse has grown from a niche sport played in two pockets of the U.S. (Long Island and Maryland) and Canada to a game played around the world. Can you briefly expound on the sport’s growth trajectory over the last 15 years?
Paul: Lacrosse has been the fastest growing team sport in America for the past 15 years. We’ve gone from a couple hundred thousand people playing to now 2 million. Moreover, we have 6 million fans; those are people that used to play, they’re parents of kids who play now, people who have touched a stick and watched a game. Ten years ago, we had nine participating countries in the World Games. Fast forward to this summer – the World Games are in July, in Israel – we have 58 countries participating. So, we’re seeing international growth and North American growth.
JWS: The privatization of the sport (see: club programs) has expedited its growth, but doesn’t that strategy hurt the game long-term?
Paul: The double edge sword is that it (club lacrosse) makes our sport more exclusive of new entrants. What I’d love to see our sport get to, with the assumption that we have enough great coaches in all markets across the country, is a revival of rec lacrosse; so, league fees would sit at $100 versus in some cases $2,500 to $5,000 per season. Right now, 37% of families that have a child playing youth lacrosse are spending north of $1,000/year on fees and travel. That said, there are positives to privatization of youth lacrosse. You get good coaches, players who are competitive and improving quickly, and they’re building team camaraderie and community.
Additionally, we’re seeing growth in non-profits that are working with and targeting urban market communities to offer playing opportunities for free. They’re usually funded by private ownership groups, or brands like Warrior are coming in and underwriting equipment.
JWS: Help the readers understand why families would be willing to spend upwards of $5,000 for their child to participate in a youth sport?
Paul: There was rampant early recruiting taking place over the past decade and privatized lacrosse or club lacrosse programs were building their stock based on being able to get a player a verbal commitment as early as 8th grade. So, what that was doing was causing this trickle-down effect on families to spend more to try and get their kid into college sooner. Late last year, the NCAA came in and said that recruits must wait until July 1 of their junior year of high school to commit to a school and that you can’t even have contact with a club coach, if you’re an NCAA head coach. That’s allowed us to kind of reset and focus on getting sticks in hands.
JWS: Parents are spending a fortune on club lacrosse, but of the +/-200 players playing in Boston this weekend, few are on full scholarship. Can you explain how scholarship allocation differs between revenue generating sports and a non-revenue generating sport like lacrosse?
Paul: Fully funded lacrosse programs get 12.6 total scholarships, designated by the NCAA as equivalency scholarships, meaning they can parse them out however they want. In basketball and football, you’re not given that choice – if a player is on scholarship, it’s called an headcount scholarship, which means it’s a full ride. For equivalency scholarship sports, some players are on 10% scholarship, then there are other players that are #1 in their class, and get a full ride; so, they’re accounting for 1 full of those 12.6 scholarships.
JWS: You mentioned Warrior, but Nike and Under Armour are also subsidizing youth lacrosse. Unlike AAU basketball, where sneaker companies seek to establish an early relationship with future NBA stars, there is no big payday on the back-end if a lacrosse player turns out to be an all-time great. What do the equipment/apparel providers get out of the deal?
Paul: 57% of lacrosse participants are Gen-Z and they’re highly affluent. 63% of families with a child playing lacrosse spend $250/year or more on hard goods. So, if they (equipment/apparel providers) can reach that audience through sponsorship, they can create brand loyalty or brand affinity and it’s more likely the next stick purchase will be with that brand. The brands also know that if they are sponsoring the Baltimore Crabs (example of a local club team), that it’s more likely that the operators of that club will encourage the families (of the players) to purchase their goods from that sponsor. So, there are sales coming in two different ways, through affinity and encouragement of coaches.
Howie Long-Short: Warrior Sports was founded in 1992 by Dave Morrow, a two-time collegiate All-American and a co-founder of MLL. Back in 2004, New Balance was seeking a growth opportunity (lacrosse was first gaining popularity amongst high-school kids) and acquired the company for an undisclosed amount. At the time, New Balance was competing with Reebok (NOT Adidas, Puma or Under Armour) to become 2nd (behind Nike) in U.S. footwear sales. New Balance is a privately held entity, there are no ways to invest in the company.
Fan Marino: The NCAA lacrosse Final 4 will take place this weekend in Boston. I asked Paul for a to give us a preview and for his prediction.
Paul: This weekend we have Maryland, who has been there traditionally over the past eight years and has one of the more storied programs in college lacrosse in terms of success and legacy. You have Duke, who is one of the more prominent ACC schools and has been on the rise over the last decade. You have Albany, who is new to the Final Four; the exciting team led by the best freshman in the country – he’s Native American – his name is Tahoka Nanticote. Then you have Yale, an Ivy League school that has been knocking on the door (of the Final Four) for a long time; and they have one of the best seniors (Ben Reeves) in the country. My prediction is a Maryland/Albany final and hopefully an Albany winner – and the reason I say that is because Scott Marr, their head coach, is a Hopkins grad (Editor Note: Paul played at Johns Hopkins).
Nike, Not Under Armour To Become MLB’s Official Uniform and Apparel Provider
Sports Business Daily reported that Nike, not Under Armour, will be the official on-field uniform and apparel provider of MLB come 2020. Back in December 2016, Under Armour announced it had made a 10-year commitment to replace Majestic Athletic (since acquired by Fanatics) as the league’s supplier of game-day outerwear, base layer undershirts and year-round training apparel. It now appears they’ve asked out of the deal, looking to reduce overhead amidst declining U.S. sales (down -1% in Q1 ‘18, forecasting a mid single digit net revenue decline in ‘18); a decision that will save the company +/- $50 million. Fanatics, which acquired the rights to make and sell fan gear at retail as part of UAA’s 10-year pact, is expected to retain those rights; the company announced a similar product licensing agreement with the NFL earlier this week.
Howie Long-Short: UAA has openly spoken about its intention to simplify operations and run leaner, so the decision to cut back on what equates to a brand marketing expenditure aligns with that philosophy. Investors were pleased to see the talk wasn’t just lip service, as shares closed +2.5% on Thursday; at their highest level since July ’17 ($20.58).
That’s not to say that being the official outfitter of a pro sports league doesn’t bear returns. Analysts suggest long-term agreements could boost sales by “hundreds of millions per year.” That should bode well for Nike shareholders as the company also holds NFL and NBA uniform and apparel licensing agreements through the middle of the next decade. Adidas is the official supplier of NHL team uniforms.
For reference purposes, on May 1 UAA reported a $30 million loss for Q1 ’18 on revenue of $1.19 billion; the company’s second straight losing quarter. Looking for some reasons to believe the company is headed in the right direction? Total revenue grew +6%, apparel was up +7% (to $766 million), international sales rose +27% (now roughly 25% of total revenue) and DTC sales grew +17% (to $352 million, now 30% of total sales) during the latest quarter.
Fan Marino: Did you know that Puma, not Under Armour, is now third in sales among athletic apparel brands? Nike and Adidas hold the first and second spots, respectively.