Mayweather Walking with $100M Means Media Sector Undervalued

Steve Kanaval |

The old-line sports like boxing and horse racing seemed to be grabbing at some old methods of extracting cash this weekend as the Mayweather versus Pacquiao fight and the Kentucky Derby took center stage. At one time, these two sports easily attracted the highest percentage of consumer attendance and wagers in their heyday. Leading up to the fight, the hype seemed fitting for the big stage of Las Vegas, but also gave off a sense that this was more the end of boxing as we know it, as the next generation embraces MMA and there are no heavyweights in sight even with two Klitschko’s.

Boxing as we know it is dead, and Floyd Mayweather snuck across your lawn with $100 million like a thief in the night. For the majority of the fight, we watched as he ran from Pacquiao, then off with his check. But this really signals the end of a 10-year charade by famed boxing promoter Bob Arum. Bob...the boxing business model is officially broken. But it doesn't have to be!

What does this mean? It means that the consumer thirsts for LIVE content and are willing to pay for it, but they don't want to stuck with a crappy fight. Imagine if we had a heavyweight bout where they actually fought. Imagine what the payout would be! 

This is why Netflix (NFLX) is trading at nearly $600 per share at a $30 billion valuation. It’s on its way to becoming Amazon (AMZN) , which is currently worth $200 billion because the consumer has an unsatiable need for content, and they are willing to pay top dollar for LIVE content. Go check out the ticket prices for the fight in Vegas, StubHub sold 980 tickets at an average price of $6300, and a top price of $43K. That’s a big number even if you are bringing Beyonce. 

Pay Per View was $89 plus an additional $10 for HD, which everyone paid. The soaring license fees for bars to show the fight averaged $5,000, another sign that consumers LOVE LIVE content. Ask the NFL and ESPN and MLB and the NCAA. This live content runs college sports behemoths like the Ohio State University's and University of Texas' $100 million-plus football revenue, and also carries on its back the franchise values of the NFL, MLB, NHL and the NBA. Ask Michael Jordon, who recently reached billionaire-status thanks in large part to his ownership of the Charlotte Hornets, how valuable live content has become.

The Rising Tide of Content Lifts All Boats

Explaining the inexhaustible demand for content in the age of smartphones can only be described by looking at the past when television was introduced to the mainstream in the 1950s. The experts declared that the radio industry was dead –  and the TV would run radio off the map. What they discovered was the consumer would watch TV while listening to the radio in the background, and they wanted all content all the time in as many delivery platforms as the market could create. Well, the same occurs today with content, which is why Google (GOOG) owns YouTube and Jay Z is bought Tidal, a music streaming company.

Content is still undervalued. Go look at GoPro (GPRO) , valued at $6 billion, and tell me that if the company executes correctly, the user-generated content GoPro is creating will not have value. It will all have value – from every Periscope.tv view to every cell phone on the globe, where the user is creating mountains of content everyday, waiting to be viewed by the always thirsty consumer. If you don’t believe me, ask Floyd “Money” Mayweather. Content is still making long strides into the next generation.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CBS CBS Corporation Class B 60.18 -0.39 -0.64 4,843,048
GPRO GoPro Inc. 9.70 -0.12 -1.22 3,398,923
TWX Time Warner Inc. New 93.80 -0.34 -0.36 3,837,971
AMZN Amazon.com Inc. 740.34 -3.31 -0.45 3,561,307
DIS Walt Disney Company (The) 98.50 -0.44 -0.44 7,737,193
GOOG Alphabet Inc. 750.50 2.58 0.34 1,452,484
NFLX Netflix Inc. 120.81 3.59 3.06 8,953,590

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