Motley Fool Money - Unbundle, Re-Bundle, Sell Ads

Episode Date: January 6, 2025

Everything old is new again in streaming, and it’s about to get a lot tougher for upstarts to step into online video and advertising. (00:14) Tim Beyers and Dylan Lewis discuss: - Comcast’s push into the ad market with Universal Ads, and what it means for other players in streaming video advertising like The Trade Desk. - Disney’s plan to acquire FuboTV to clear the lave for Venu Sports and its next act in sports streaming bundles. - How streaming is getting more consolidated and vertically integrated, but streamers are still willing to try joint (16:09) You’ve probably heard of the sports betting platform DraftKings. But what about the company that powers DraftKings and a number of other sports betting platforms around the world? Anand Chokkavelu hosts Dan Caplinger and David Meier for a Scoreboard episode breaking down Sportradar. Companies discussed: CMCSA, TTD, DIS, FUBO, SRAD Host: Dylan Lewis Guests: Tim Beyers, Anand Chokkavelu, Dan Caplinger, David Meier Producer:Ricky Mulvey Engineers: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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You're still bringing the energy. You know, it's a caffeine-free Monday. Yes. It's always a coffee morning for me, Tim. It might be a hot cocoa afternoon with the snow that we've gotten here in Washington, D.C. I am very excited. I am in the winter spirit. But we have plenty to talk about before I can go frolic out there in the white stuff.

We got our first preview of some of the things that will be coming for the Consumer Electronics Show and what's going on in the state of tech streaming this week ahead of the trade show. Comcast announced its new ad-buying platform. universal ads. The company will be using its own properties in a hope to simplify the ad buying process, in particular for small and medium-sized businesses. Tim, I feel like there is already a company that does a little bit of ad buying over streaming video. There is. You might have heard of it. It's called the Trade Desk. This feels like, boy, I don't mean to sound cynical, Dylan, but does this not sound like a money grab? I mean, this totally sounds like a money grab. And it's not

necessarily a bad thing, although we don't really know too much about the details of this. But here's why I say it's a money grab. We have a lot of different companies that are competing to be the provider of record of advertisements once they've got your data. So the argument is, hey, look, you're here, we've got your data. We know best how to serve you. So we'll be the ones that serve adds to you. And this is, I mean, this has gone back a long, long time. But, you know, probably the biggest benefactors of this shift in recent years have been Amazon built a huge advertising business because, hey, we know you're buying habits. So you should come advertise inside the Amazon platform. And that has become a big business. Walmart is another one that is

profited from this. At the same time, I find it a curiosity, Dylan, that this has come really just like two months after the trade desk decided to say like, hey, we're going to create a connected TV operating system for devices because everybody else kind of has this self-interested. You know, Amazon Fire, I mean, they have their own content. You know, they're not Switzerland here. will be Switzerland. We'll give you an open platform here. So everybody wants a piece of this pie, Dylan. So there's a universal ad that's going to be materially better. Is it going to be more simplified, which is the pitch here? I don't know if that's true. But I know that, well, I have a strong suspicion, I should say, that Comcast sees the margin opportunity and has decided to seize it.

It does feel a little bit like they're doing the Apple thing of, hey, we didn't need to be first to this, but we saw how you were doing it and we like how it looks and we think we can get some margins doing it, so we're going to do it too. I suppose if you're someone who wants to advertise and you want to advertise on their programs, it doesn't really matter whether you want a Switzerland-type relationship. You are going to have to play on Universal Ads if that's the only game in town for getting onto their channels. Well, it's not clear to me that they have said it's the only way to do it, but it certainly feels like this is going to be the primary way. And there may be some strong incentives to go through universal ads. But it's a dangerous game to make it the only avenue, especially when the government has its eye on portals, which has been a thing. You know, the government has been very conscious of portals. And with, making any kind of political statements here. One of the commonalities between the outgoing administration and the incoming administration is that both have been, let's say, looking somewhat askance at big tech. They have not necessarily been buddy-buddy. We shouldn't presume that the next administration is going to be any more interested in giving free license to,

to tech companies, big mergers. I just, I think any time a company decides to exert portal control, you may be inviting scrutiny you don't want. I think one of the interesting things is, yeah, Comcast is very much seeing what's happening in big tech and saying we'd like a piece of that and we'd like to be able to have our own version of that. They, you know, in the grand scheme of advertising, look at a Facebook or a YouTube and say, hey, they have 10 million advertising.

advertisers. And we have several thousand advertisers when it comes to people who are across NBC Universal. So they clearly feel like they are a small player in this space, even though they are maybe able to possess the relationship in a way that those other players maybe couldn't for their own content. Right. And to be fair, we are also talking about lots of different ways. one of the things is probably going to be true about 2025 that makes this an interesting time to be trying something like Universal Ads is that we are seeing new bundles, new ways of getting things. I personally right now don't have access to generalized cable, but I have access to Peacock and I have access to Paramount Plus. And honestly, I've access to YouTube and YouTube

gives me most of what I want, because most things are available later on YouTube. And you know what? I'm kind of fine with that. You're fine with waiting, Tim? You don't mind waiting around? I don't mind waiting around. I don't mind waiting around. You mentioned Peacock, and I want to get an alarm meter from you on this for the Trade Desk and for Trade Desk and for Trade Desk shareholders.

I'm asking selfishly, because I am one here. Trade Desk was going to be one of the people selling NBC University. Peacock, I think that was announced back in 2021. They have been one of several companies that have been selling inventory there, I think, for the last couple of years. We don't know a lot of the details of this yet, but when you see this news, how big of a deal do you think this is for the trade desk? I don't know how big of a deal it is for the trade desk, but I do think the ground is shifting a little bit in terms of who's going to own the brokering relationship. for putting ads out into the market. That seems to be undetermined at this point. Now, to be fair,

I do think there is a big market for an independent broker that can provide, you know, good data, fair pricing, transparent pricing. I think the market needs that. So I don't see them being disrupted by this. But I think the desire for companies, and now, Now Comcast is another one of them, to take greater control of the customer relationship and leverage that customer relationship. That's going to be something that the Trade Desk is going to have to work through because everybody can see. Don't underestimate how much of this has to do with Netflix envy. I wouldn't be surprised if this is Netflix envy, Dylan. Not at all.

Yeah. They're saying like, all right, you innovated in the space. You created the category. You've got a successful business there rolling out the ads. We want a part of that. We want the membership model. We want the ad revenue. We want it all.

Absolutely. We want a piece. Don't ever underestimate envy as a motivating factor, for sure. All right. Sticking with streaming, Comcast's not the only one making moves this week. Disney also apparently nearing a deal to bring Hulu plus live TV together with Fubo. This is a smaller streamer that is known for its sports content. And the focus on sports here may be not necessarily.

a surprise because Disney has been developing venue sports with Fox and Warner Brothers, and Fubo has been a thorn in their side as they've been trying to do that, Tim. Yeah, in fact, they sued over it. A judge had actually blocked the launch of a venue. So Fubo did was starting to get some traction here from that lawsuit. And the judge said, this is according to the Wall Street Journal, that the judge said the deal, you know, this new bundle would substantially. less in competition and restrained trade. Not great. Not great. And so, you know, the partners in venue,

which are essentially the partners in Hulu and the Hulu Live Plus TV service have appealed the decision. But now it does look like by virtue of a, you know, an acquisition or a merger, I guess it would be in this case, you can make that litigation go away. It is interesting. This is what I said previously like we are talking about different types of very specialized bundles showing up like streaming does make it makes your ability to kind of make a bundle that fits you a little more compelling like i said in this case my bundle is youtube free you know i pay for it with ads and then cheap Peacock and Paramount Plus. So I get a fair amount of sports ball, which I want, and I get some decent TV programming,

and I get plenty of movies. I'm good. The only other one I've added to that is Netflix. I added that recently. So that's like kind of a very tailored bundle. You could see, Dylan, that this is going to be a thing where you have specialized bundles coming together to serve a particular niche. In this case, it's sports, but it might be something entirely different.

It may be like a reality TV bundle or, you know, cooking shows bundle. I fully expect that that comes around at some point. This is just the precursor. To be clear about what's happening here, this feels more than anything else. Like, look, we just want to move forward with our sports bundle. Can we get the litigation to stop? And I think that's what this is. Yeah, Fubo TV, I think before this deal was announced, was a sub-billion-dollar company.

And I could see Disney basically saying, like, all right, I think we can pay to make this go away for about $1.5 billion. I think that's within our wheelhouse. The venue sports bundle that they are developing with Fox and Warner Brothers focused on sports. No surprise there. It's right there in the name. Live games and event coverage from the major. professional sports leagues and major college conferences sounds very appealing. I think what's fascinating about this is Disney just spent so much time trying to untangle the multi-owned

joint venture that is Hulu and then are saying, yeah, let's hop right back into that lane with venue sports. Tim, what do you make of that? I mean, it's irony never disappoints, number one, never ever does it disappoint. So that's number one. But number two, is it tells you something about the appeal of targeted bundling. That's what I mean. So when I said that I think we can't expect to see more targeted bundling, I think Disney has woken up to realize that it might be a bit of an ask for some people to say, hey, you can get the whole big enchilada.

And if you want live TV in that Hulu bundle, it's still not that cheap. Like, you're still not that far off $100 if you want live TV in a bundle. And I don't know that that is a sale that works anymore. In the era of YouTube and very targeted streaming, like, I'm not sure I'm the only one who's like, I don't know that I need that. And just went YouTube plus my very targeted streaming services. So figuring out how to. maybe make these things a little bit more appetizing, I think is a thing. And one of the ways to do

it is to control a niche and then package the niche. So we'll see, but it's a very interesting time. Putting the story here with Fubo and Disney together with that universal ad story, I do see a little bit of a through line in that it seems like it is going to get impossible almost for smaller players to really establish themselves in streaming. Yeah. Like the trade desks of the world, they were able to kind of seize a market opportunity because the legacy players hadn't quite gotten there yet. Fubo was one of those, you know, kind of smaller players that people had thought maybe

might be able to turn into something. I don't know how easy it's going to be for anyone over the next five or ten years. That is not already a major media brand to hop into this space, whether it's on the ad side or on the content side. Yeah, that's a really good point. And it, you know, it's hard to see. And, you know, to maybe validate your point a bit here, the great cautionary tale in this space is CuriosityStream, which is now the microist of microcaps. I mean, it's, it has a, it's up 100 million, I think. Yeah, it just hasn't really gone anywhere. And they are a, for those who don't know, the ticker C-U-R-I is a, a, you know, a microcap streamer of documentaries. And it's not like that's a bad service or something that is unwanted. Like there are people who are very much in the market for like, yes, I want to see a bunch

of documentaries, but how you make that into something big is, it's just harder to see. So to your point, you're probably going to have the major media companies, but what those major media companies are doing is a different strategy to profit, which may be like creating some balkanized, very specialized content bundles and maybe not trying to make you swallow $100 to $200 a month, but trying to get you on a consistent $35 a month. And does that actually work? I don't know, but that favors the companies that already have a chokehold on content. and licensing deals. Tim, you know what one of my favorite bundles is?

Tell me. You and Monday Motleyful Money. Thanks for joining me today. Nice, nice. Well done. Thank you. Thanks, Dylan. Listeners coming up on the show,

you've probably heard about the sports betting platform draft kings, but what about the company that powers draft kings and a number of other sports betting platforms around the world? Up next, on a Chak Ballou, host Dan Kaplanar and Dave Meyer, for a scoreboard episode, Breaking Down Sport Radar. Welcome to latest Motley Fool scoreboard. I'm on in Chalk Blue. We've got longtime pools, Dan Kaplaner and David Meyer, giving a 1 to 10 rating to sports gambling data provider, sport radar, ticker symbol SRAD. First we'll hit the business, including factors like industry

and competition. A 10 is invincible. A 1 is hopeless. David's going with an 8. Dan's going with a 7. David, I know you're pretty hot on the stock. So why don't you give a us your, tell us about the business. Sure. So Sport Radar licenses sports data from leagues and sports literally all around the world. And what it does is it takes that data and turns it into a variety of different content and betting opportunities that it sells to its customers, whether it's a draft kings on the betting side or a CBS sports on the content side. The company has proven itself to be a both a smart buyer of the data and a smart seller of its products. And for that reason, I think it's a very, very good business model.

I gave a seven. I like the business model as well. David's right. There's a whole lot of betting services out there across the world. Plenty of competition in that space in a highly competitive market. I love to look at the pick and shovel plays, kind of the underlying businesses that make these industries go. These betting sites can't do what they do without the debt.

to back them up. That's what sports radar is giving them. I like it. I gave them a 7. They give the apps the data. I take that data on the apps. I convert it into losses. You might want to invest in me. Let's go on to management. 10 is Warren Buffett. One is Homer Simpson. David gives an 8. Dan gives a 7. This time we'll go with Dan. I've got a lot of confidence in founder, CEO, Carson, Carl. We like to see founders who are invested in their businesses because a 23-year veteran in the business. And prior to that, he worked at an actual betting site. And so he understands what his betting site customers need from Sports Radar. I think that helps to inform his leadership style has done well operationally, as well

as from a stock performance standpoint. Yeah, as you said on it, I gave it an eight. And I completely agree, Carlson Curl has been a great founder, CEO. Interestingly, He reorganized the company in early 2024 in order to simplify the business structure. And in the process, in my opinion, he hired a very key new executive whose name is Bashad Bizzati. Bashad is now the chief technical officer and chief AI officer. And basically, what they're doing is bringing their technology platform and their analytics platform into the modern era. I've been impressed so far, and I look forward to seeing what they do with the business going forward. For financials, a 10 is a fortress, a one is yikes.

David's going with an 8. Dan's a bit lower at a 6. Start with the bull case here, David. Yeah, it was a little rough, actually, in 2023, but growth has returned, and that's on the back of extending and expanding its deal with the NBA. and there are a number of other sports leagues around the world. I expect to see additional scale going forward as this growth persists. You got to remember the way this works is they pay money up front to get the licensing deals, and over time they monetize it.

So that's how we should see the scale from the new deals. You know, I don't think I disagree with anything David said. I think I just ding sports radar a little bit for that rough patch that he's talking about. They've shown nice revenue growth. If there's modest profitability, I like the fact that the balance sheet's relatively strong, minimal debt, significant amounts of cash available to inform, you know, strategic decisions or reinvestments in the business. It's just I like to see more consistent, you know, the fact that you kind of go through a rough patch, I think is probably the reason why our

scores differ on that score. Real quick, David, before we go on an evaluation, have a follow-up question, which is why do the apps need sport radar as kind of a middle person, between the leagues and the apps. I'll use Draft Kings as an example again. What is Draft King's core competency? It's marketing. They're not in the analytics business in terms of how do I interface with the sporting data. That's what Sport Radar is good at.

And so it's better for a company like Draft Kings and many others to go to Sport Radar to get the betting opportunity and present it to its customers. Beautiful. Let's move on to evaluation. Dan will start with you. How well will support radar stock do over the next five years? How safe is it? 10 is a short thing. One is a lottery ticket. I put five-year returns of five to 10 percent. Some might think that that's low. That's actually pretty much middle of the road for me. I like the stock is starting to gain some momentum here. New legalizations at the state level for gambling for online gambling in the U.S. I think is helping the industry overall. Question is whether that expansion will continue. I give them a safety score. of six just because I think there's some question about that future direction and the extent of future growth that we haven't already kind of seen priced into the stock. So I'm agreeing with Dan on the safety score. I also gave it a six. As you noted earlier, I am a bull. I think there's 15% plus returns available. Even after the recent rise in the stock, one of the reasons is this is the industry leader and they are a trusted partner.

They've been able to renew their contracts at higher and higher levels for a number of years. And the paradox here is actually the United States is the emerging market here. Dan pointed to legalization within different U.S. states. That is absolutely a growth. Those are the growth opportunities going forward. There's definitely risk, though. You can pay too much for the data. You could price your bets and your contents poorly.

So I also think there's risk, but I think the return potential is very much worth it. And everyone's favorite topic? Dan, is there a company in Sport Radar space you like more? So it kind of depends how you want to define the space. I'm not really sure there's any other company that does sports data the way the sports radar does. When you broaden it out to sort of the betting world more broadly, I'd go with MGM Resorts, ticker MGM. It's a betting site provider. So it might be a potential customer of sports radar.

They also have the brick-and-mortar casino resorts. They have a good loyalty program. That loyalty program has branched out to talk with other loyalty programs like the Marriott Bonvoy program. It's got exposure to the Asian Gaming Capital of Macau. I think it's an interesting play right now. So the direct competitor is a company called Genius Sports, ticker is GENI. But the one that I agree with Dan, you've got to broaden out a little bit. And one company I think that's very interesting is a maker.

and licensor of digital casino games. I've learned about this company from our colleague Bill Mann, and the company is called Evolution AB. It's a little tough to trade because it's on the pink sheets, but that is a very interesting company. And you like it more than Sport Radar, David? Yes, but it's hard to buy. Okay. That's what makes it all so worthwhile, right? Yes. Thank you to David and Dan. They're given Sport Radar. Pretty good overall score of 7.5. 1 out of 10, short of that 8.0 that would force me to own shares. Left to his own devices, though, David would have given it an 8 if you average all his scores. It's one I've been meaning to look at, actually, because David got it on my radar a few months ago. Maybe you'll look

into it as well. Listeners, premium TMF members get access to all of our scoreboard episodes, including the full archive. Those drop every weekday at 7 p.m. ET. If you want to become a Motley Fool member and join our flagship investing service stock advisor, head over to fool.com slash sign up. We'll drop a link in the show notes for where you can get that info. As always, people on the program may have interest in the stocks they talk about, and the Motleyful may have formal recommendations for or against, so don't buy us not anything based solely on what you here. All personal finance content follows Motleful editorial standards and is not approved by advertisers. For Moutlyful only picks products. It would personally recommend friends like you.

For today's show, I'm Dylan Lewis. We'll catch you tomorrow.