Disney Merger With Fox: What Does It Mean?

I have been asked several times today by people who know that I have covered the Disney – Fox merger about what it means for the average person with a cable, satellite, or streaming services package subscription. The deal has also created a significant amount of understandable confusion regarding what Disney will end up controlling, and what assets from Fox are not part of the transaction.

The Disney acquisition of certain assets of the Fox media and entertainment empire has been in the works for several months. The driving forces behind both sides making this deal are different, but the transaction obviously helps both sides or else it would not have been completed.

In an earlier piece on this merger, I explained how Disney is looking to add content for the launch of their streaming app service to rival Netflix and Amazon, called “Disney+”. This acquisition of the 21st Century Fox assets, FX Network, National Geographic Network, and the Fox stake in the Hulu streaming service provides Disney with loads of content ownership.

Fox was looking to streamline their operations and cut themselves loose from the studio holdings that have high overhead costs associated with them. The move away from some of their more ancillary cable television holdings would allow them to focus on their core offerings of news, business news, and sports. These areas have higher profitability from the advertising sales perspective.

Many people are confused about this merger and think that Disney, which already owns ABC and ESPN, will now own Fox networks like their flagship channel, Fox News, Fox Business, and FS1. Those same people are curious as to how that would pass through the antitrust regulations of the federal government.
However, that is not the case. Fox will maintain ownership of their networks here in the U.S. and abroad as well as Fox News, Fox Business, and Fox Sports (FS1 and FS2 networks) in the newly created entity called Fox Corporation.

Disney will gain the outlying assets that I detailed earlier and will begin to seek what their CEO, Bob Iger, described in the press release as “cost synergies”; which translates into layoffs of people that they deem as redundant in the newly merged entities. Disney will also undoubtably look to expand upon the Marvel movies, and maximize merchandising opportunities by creating stand-alone movies on specific characters that were once the property of Fox.

Fox will look to expand the development of programming for their mainstream Fox network as well as gaining new rights agreements for live sports content on the Fox Sports networks. They will no longer be able to produce TV programs in their own studio which will impact their overall production costs, but they will save the overhead of maintaining 21st Century Fox and the Fox TV studio areas.

The Fox networks will be able to purchase productions made in the Disney/21st Century studios. Their sports division is heavily invested in soccer with a World Cup coming up in three years, and will continue to invest in soccer and other sports content namely the NFL package.

The merger is similar to the AT&T / Time Warner consolidation that I covered in multiple pieces over the course of that time frame through the process. It remains to be seen whether content will become limited by Disney to the other cable or satellite providers. I think the streaming content will certainly be limited, but Disney does not have a “horse in the race” like AT&T does with DirecTV on the distribution side of the business.

The deal was certainly a big win for Disney prior to the launch of their new streaming service. The media landscape has condensed and the content that is so valuable is landing in the hands of the few. The average consumer should prepare to pay a subscription fee for the Disney streaming service in addition to any other memberships they currently maintain.

The capabilities of Disney to produce outstanding content is well established, the acquisition today is going to make them even more formidable in the years to follow.

(Some background courtesy of CNN, CNBC, and The Financial Times)

Amazon Grocery Store Plan: Will It Help Or Hurt Retail?

Amazon recently announced a plan to expand into the retail grocery channel beyond their current presence resulting from their acquisition of Whole Foods. Many people know that the internet shopping giant bought Whole Foods for about $14 billion in June 2017, which provided them with a foothold into the grocery business.

The image of Whole Foods from the consumer standpoint is that it is an expensive, almost elitist place to shop for groceries that many in the general public feel they can get a better value at a mainstream grocery chain. Amazon attempted to alter this consumer sentiment around Whole Foods, but when those were unsuccessful, this could have at least contributed to their decision to enter into the retail grocery business in a way that will reach a wider gamut of consumer demographics.

The plan is to open stores in targeted U.S. markets with just a few outlets in each market to test out the concept. The first Amazon grocery store of this type will open in Los Angeles as soon as the end of 2019, if everything goes as planned.

Then, the concept would be rolled out to ten or twelve strategic geographic areas throughout the country. The new grocery brand would sell less expensive products than Whole Foods, would carry a large selection of Amazon’s private label brands, and would carry national brands that are precluded from the Whole Foods shelves based on the food product standards set by that chain.

The decision to carry those national brands would open up a pathway for Amazon to benefit from the huge amounts of money that those companies spend for shelf space and advertising at Point of Purchase type of campaigns. The new grocery brand would also provide Amazon with a way to enroll more people in Prime memberships with some sort of promotional incentive either at the point of enrollment, or for future shopping trips.

Currently, Amazon provides a 10% discount for Prime members when they shop at Whole Foods store locations. This will serve as a model for the new grocery brand in order to incentivize memberships to their Prime service. Amazon will also be able to cross-promote more items from their website during an in-store shopping experience.

Furthermore, Amazon announced in the plans for this new grocery brand that they will have a service that allows shoppers to select the items on the website and set it up for pick-up in the store location, creating what Amazon believes will be the new way that the consumer purchases groceries.

The decision will have a gigantic ripple effect on the grocery industry. The established retail grocery chains are going to have to lower their overhead costs prior to Amazon entering their industry space. That could translate into job cutbacks, layoffs, or restructuring the number of full-time workers or hours that are given out by the mainstream grocery players. The one controllable aspect of a low profit margin business such as the grocery channel is the labor cost.

The other significant component to this news by Amazon is that they are looking to lease spaces that also allow them to sell beauty and personal care products. Those types of products generally have a higher profit margin, and Amazon has their own private label brands which allow for excellent cost control.

My past writing on the food industry and the retail shopping changes that have taken place over the years have centered more on certain chains going bankrupt or discontinuing a product due to a recall or sluggish sales. This situation is rare: a new player actually joining the brick and mortar segment of the retail landscape.

The timing for Amazon is advantageous too because of the amount of large retail spaces that are vacant now with the end of Sears, Toys R Us, and a slew of regional grocery chains. The speculation is that Amazon could lease some of the former Sears locations for this new grocery store concept.

In the Northeast and Mid-Atlantic states, the amount of retail space left from the demise of regional grocery chains such as A&P and Pathmark, create a huge opportunity for Amazon to get an advantageous lease term. Then, they can reach a huge variety of demographics in that part of the country which is so densely populated.

The industry data on the grocery business in America is compelling and certainly has been on the radar screen for Amazon for a while now. The U.S. grocery business is estimated at $830 billion and between Whole Foods and Amazon’s other online business they have a 4% market share. Wal Mart has a 21% market share of the grocery business, and Amazon is looking to grow their share and get in front of mainstream consumers with their private label brands.

The competition will face some very difficult pricing pressures from Amazon entering this part of the industry, should the concept launch be successful. There are many people both in the consumer public and on Wall Street that believe that the competition will be good for the grocery industry.

Amazon entering that mainstream grocery retail space will force other grocery chains to innovate and provide new and better value propositions to their customers. The consumer stands to benefit from that standpoint.

The success of this venture will be evaluated by Amazon in the test markets that they have announced: LA, Chicago, Philadelphia, and others. The full rollout of a new grocery chain from Amazon would help solve for some of the unoccupied retail space in shopping centers around the country. It would bring brick and mortar business back within the context of a changing consumer landscape.

The outcome of this new venture is uncertain, but one thing is clear: all eyes are again on Amazon to see if they can put their stamp on a new way for consumers to shop for groceries.

(Some background information courtesy of Forbes and The Wall Street Journal)

Overload: The Impact of Social Media & The Internet On The Emotional Health Of American Society

The concept is not necessarily new or groundbreaking, but the rise in social media use, also known as “screen time” has demonstrated a definite impact on the mental and emotional health of Americans. The scientific study data is mounting to confirm this daunting trend.

The harmful effects of screen time in excess are being documented as the underlying cause of insomnia, anxiety, and depression. The blue light given off by screens causes eye strain, neck strain, and sleep deprivation. A recent medical study also concluded that the prolonged use of devices and tablets that give off this blue light causes damage to the retina.

The messaging that an average person is bombarded with daily is becoming increasingly obtrusive. The other common emotion is that people feel like they are going to “miss out” on something if they are not constantly on Twitter or Instagram.

The commonly misunderstood aspect of social media overall is that most of the communication being done is idealized, it is “stage hand” so people present the “best” version of themselves – being happy or without a worry in the world or that they have “perfect families or the perfect life”. This version eventually gets other people making constant comparisons to their own lives.
Many people then question why their lives are not “perfect” or “fun” like their contacts on social media present to the world. This leads to depression and anxiety. This leads to many people being further consumed by social media, like the fuel to the fire, as the saying goes.

The unfortunate component to social media overload is that very often those who are impacted do not realize it until it is too late. The fact that so many of our jobs or our side jobs require a presence on social media to carry out obligations of those occupations sets up a slippery slope for many people.

The expectation by a supervisor, manager, or director that we support the work of the company or organization through promotion on social media has blurred the lines of the boundaries even further. This can also be an issue with volunteer work, which in the past was a safe haven from the pressures of your “real job” and now very often these organizations are asking volunteers to “follow”, “like”, and “retweet” their social media marketing to improve their reach/frequency numbers.

The side job or main job being a freelance or independent contractor type situation is also becoming more prevalent, furthering the social media overload. The current percentage of the U.S. workforce that identifies as a freelancer is 30% of the total domestic workforce.

In a recent study on the American workforce, the Department of Labor predicted that 50% of all jobs in the U.S. by the year 2030 will be freelance/independent businesses. That increase is generated by the relative ease that the technology behind creating a website and social media profile has provided to the average person with no tech background.

The emergence of dedicated social media pages as “business pages” or “business profiles” has furthered the reliance on people being attached to their phones or devices. This increased screen time has an impact on parent/child relationships, marital relationships, and sibling interaction.

The heavy usage of social media can be, and has been, determined as an addiction for some Americans. It can cause emotional mood swings because of the constant human tendency to measure ourselves against how others are portraying themselves on social media, leading to constant feelings of inadequacy or unfulfillment.

This overuse of social media has stemmed a trend of “device free” dinner times for families, or the trend of “device free” time for couples when they get home from work or plan an evening out together. That is an indication of how far out of control this situation has become.

The recent studies by several reputable animal health journals and universities centered on the impact of social media use and pets, most specifically dogs. The pets in the studies were impacted, but dogs were found to be the most severely negatively impacted by their owner’s use of social media.

The studies found that when the pet owner spent several uninterrupted hours of social media “screen time” instead of playing with the dog, this was linked to increased rates of depression in dogs. Dogs, more than other pets, are reliant on time with their owner or human family members for play, love, and emotional support. Dogs have been scientifically proven to provide unconditional love to their human family. This loss of interactive time with their owner or family causes the dog to take on the same traits of a depressed human, which can lead to severe health problems for the dog.

A study from the University of Pennsylvania shows a direct link between the use of social media and an increase in loneliness and depression in Americans. The more time the subjects spent on the various forms of social media, their loneliness increased. That increased screen time has also damaged whatever friendships or close relationships that they had prior to the study.

In fact, there is a post going throughout social media that goes along the lines of social media being great for keeping up with people you have not seen in years, yet farther apart from the people closest to you. That great conundrum inherent in social media overload is a trend that will have increased societal implications in the years ahead.

Some countries have pushed back against the grain by banning the use of devices during school hours. Moreover, some countries have banned access to social media outlets completely. This debate will be fueled for many years to come.

The United States has seen the screen time changes play out in school districts and in a piece for the New York Times, the explanation was clarified that in many cases it was easier for the students to adapt to the “all or nothing approach”. It was better for the student to have zero screen time than an abbreviated amount of screen time. It also made the policy easier to enforce.

The impact of cyber-bullying is also of increased concern when it comes to social media use and increased screen time. The widespread nature of bullying going from the classroom to the internet is a tremendous problem for many students from grammar school through college.

Additionally, there is the threat of fake profiles that strangers put up on social media sites to meet people and the many dangers that are associated with those types of interactions. The countless news stories are evidence of this alarming pattern of activity where people have caused harm to another person or kidnapped a child through a “relationship” developed on social media.

In conclusion, the effects of excessive screen time in front of a smart phone, tablet, or other device are being documented as increasingly harmful to an individual’s mental, emotional, and physical health. The amount of neck, shoulder and back injuries as well as the eye problems that increased time staring at these devices can cause is also being documented.

The extreme attachment that people have to their smart phones and other devices today has become an epidemic. It causes increased amounts of anxiety, depression, and feelings of inadequacy in children and adults alike. This increased reliance on screen time has become detrimental to family relationships, friendships, pets, and others.

It is time to put some restrictions on this overload of screen time by putting down your phone or device and spending time with those around you, by meeting up with a friend, or playing with your dog. Your outlook will improve and your life will be more fulfilled if you can successfully implement this “device free” time into daily routine.

(Some background and statistics courtesy of University of Pennsylvania, Harvard University, New York Times, Washington Post, and New England Journal of Medicine)

The Role Of Revenue Sharing In MLB Free Agency

The blockbuster contract that the San Diego Padres agreed to terms with All Star infielder Manny Machado on just prior to the real start of Spring Training shocked the sports world. The contract (10 years at $300 million) is the largest in American sports history. The decision by the Padres to commit this much in both dollars and time to one single player will certainly be scrutinized for years by the pundits in the media as well as the casual sports fan alike.

The view here in this piece is how the record revenues generated by Major League Baseball (MLB) and the way those revenues are shared among all the member franchises made this player contract possible. The prevailing sentiment among many who cover the league within the media is that any team can afford any player if they chose to move in that direction.

This stands in stark contrast to the days when I was a kid and I was really interested in baseball and watched games nearly every day of the season. Those decades were marked by “big market” teams and “small market” teams. The teams in the big cities such as New York, Los Angeles, and Chicago could outspend the teams in smaller cities, and very often did just that, to land the superstar free players in free agency.

This created an inevitable shift in the balance of the league with those larger market teams seemingly always in contention for the World Series crown, and the small market teams being home preparing for the next season. The sharing of revenue in MLB from the media rights contracts, to major corporate sponsorships, and for streaming rights to games has leveled the playing field for the “small market” teams.

The signing of Machado, as wild as it sounds, will only increase the Padres payroll slightly to about $100 million this year. The perspective is that San Diego’s payroll was close to that number in 2018 as well. The smaller market teams, at points, have an advantage because they can give out a large contract because they have been budget-conscious with the rest of their payroll.

Machado is also still very young, so the decade-long contract that is usually given to an older player where the team risks losing production at the end of that contract term is not a significant concern with this deal. It helps the Padres that every MLB team kicks in a percentage of their local revenue which then gets among all the other teams.

The Machado deal is a bold move to make the Padres relevant again. The contract will most certainly have an impact on the other major free agent in this offseason, Bryce Harper, who remains unsigned.

Harper is represented by mega-agent Scott Boras, who will seek to get a larger and better deal for his client than the terms of the Machado contract. The Philadelphia Phillies are the main potential landing spot for Harper.

However, a couple of days ago, the Los Angeles Dodgers contacted Boras about a short-term deal for Harper. The problem for the Dodgers is that they already have a bloated payroll, and so they cannot make a 10 year commitment to Bryce Harper. The short-term scenario will be problematic for L.A. in its own right, with the contracts that they have already “on the books” so to speak.

The emergence of the Dodgers is a problem for Philadelphia, because Harper grew up and resides currently in the Las Vegas area. The West Coast is an attractive option for him, and there are some within the baseball media that have reported that if Harper was truly interested in playing in Philly that it would be a done deal already.

Then, the Phillies were dealt another blow on Tuesday, when the Colorado Rockies decided to hand an extension to Nolan Arenado, which on an average annual salary will make him the highest paid position player in baseball history. This deal now provides Boras with the leverage to get a better deal from Philadelphia for Harper, a much more established player with respect to Arenado.

The Rockies are also considered a small market team, and they most certainly could push the envelope on this contract because of the revenue sharing money that gets distributed throughout the league. The rise on local and regional sports media deals have also helped teams like the Rockies with additional revenue to spend on talent to improve their team.

It is a very different offseason in that the two top free agents remained unsigned until after Spring Training camps opened. Harper remains without a team, and could face a potential crossroads decision to either go to a team that has been very successful recently in the Dodgers on a short term deal, or go for the long haul approach with Philadelphia and be the star of an upstart team.

The decision for Machado and Arenado was easy in both their cases, they got very lucrative offers that made a lot of sense to sign. Harper has a different decision and it will also be fascinating to see how the Phillies handle the next few days. The asking price can be jacked up by Boras to $360 million, but the Phillies know that if no other team is going to produce a 10-year offer, they have no reason to go that high.

The emotions also play a role in these situations, and one side will eventually give in, sometimes it is the team and others, it is the player. The one certainty is that these signings will have an impact on the next wave of superstar free agents and will shape the league for the next ten years and beyond.

2019 Auto Show: Trucks Are Key To Industry Growth

The 2019 Auto Show in Chicago is the latest indication of where the industry is headed, and it is certainly pivoted toward growth in the truck segment. The growth of trucks, especially heavy- duty model types, or HD as the industry abbreviation denotes; represents a significant margin opportunity for auto makers.

This all comes within the backdrop of Ford announcing recalls for safety on over 1.5 million F-150 trucks from model years 2011 – 2013. This is a reminder that production realities still exist, and that no amount of money ensures that any particular vehicle will be fully free from defects or issues.

The truck market has evolved to where not just contractors, farmers, or other heavy labor job types utilize them. The HD truck market has become more mainstream over the past few years and is a trend that is expected to continue. The style of truck that was once exclusively for work has attracted casual drivers because of the towing power.

The ability to pull heavy loads is the key driver for HD truck models, according to industry experts, towing ability is the top priority for the consumer. The secondary priority is for the truck to have high tech options for entertainment and for driver and passenger comfort. Those types of examples would be a radio capable of attaching devices or heated seats.

The truck market has numerous options from small cabs, medium truck beds, and extended cabs. The heavy-duty class of trucks provide the best profit margin opportunity for automakers, especially American manufacturers. The market is dominated by Ford, Chevrolet is in a distant second, and Ram (parent company Daimler Benz) is in third.
The selling price on the new Ford HD is approaching six-figures it is hovering around $90,000 for the 2020 models. The demand is there and that is how the heavy-duty truck segment of the industry is going to move units and solve for other profit and revenue shortfalls within domestic automakers business models.

The Ram lineup of trucks is slightly less costly with their base HD Ram model at about $68,000 and the upgrades to the enhanced tech and other features packaged out at about $77,000 including the destination fees. The tech in the trucks provide amenities that passenger vehicles have currently: surround-view cameras, rear view cameras, lane warning systems, and bed-lowering systems.

It should be noted that Ram also issued a recall on their trucks on Wednesday as well for a problem potentially with the steering linkage system. The Ram series has the ability of getting a consumer into a HD model at a more modest price point than Ford, but Ford would counter with the amount of amenities and towing power that their packages provide to the consumer.

Chevrolet offers the Silverado HD with packages starting at $37,000 and with enhanced packages that drive the price up to around $70,000 per unit. The Chevy brand story is reliability, long-lasting truck performance, and the flexibility of financing the payments through GM Financial.

The Chevy also offers two V8 engine options and towing and hill assist features. They also have an “Infotainment” center option to bring entertainment to the driver and passengers for long hauls.

The Chicago Auto Show featured these Heavy-Duty trucks and Adventure SUVs and those are the two biggest trends in the auto industry. The American automakers desperately need something to differentiate themselves from their European and Asian competitors. These two categories have the added bonus of profitability.

The trend to watch will be what is already occurring at GM/Chevrolet where they are discontinuing making several passenger cars in favor of making more trucks. The executives at Ford are also weighing the streamlined approach to their regular automobile line to focus more on production of trucks, especially HD truck models.

The demand for HD trucks continues even as the price tag goes up, which for the automaker is a good situation for their profitability. The impact on the environment for these gas guzzlers and the impact of having people that are not regular truck users driving larger trucks for everyday use remains to be seen.

Follow Up: Chris Bosh Officially Retires From NBA

In a follow up from prior posts on this topic, Chris Bosh officially retired from professional basketball on Tuesday. It was an expected announcement as he has not suited up in an NBA game in three years and is 36 years old now.

However, the news is difficult because of the way he was forced into semi-retirement and then ultimately out of the sport he was so talented in playing. Bosh suffers from a blood clotting disorder that curtailed his sensational basketball career. The doctors had cleared him to play at some point in the last few years, but by that time, no team was going to take on the liability of him playing for their team and potentially dying on the basketball court.

Chris Bosh was one of the first in the modern game to play a “stretch forward” position. He was able to rebound, score from greater range from the basket including from the three-point area, and he could play the post as well. His versatility and dominance paved the way for his selection to the All Star team in 11 of the 13 seasons he played in the NBA.

Bosh began his career with the Toronto Raptors, where he was the star of a team that played largely in obscurity because of the market and the irrelevance it had with the average American fan. The team was also not very good outside of Bosh for many of the years that the Texas native spent north of the border.

He earned his free agency and used that to take less money than he would have earned in the open market going to the highest bidder on a different team in order to join up with LeBron James and Dwayne Wade with the Miami Heat. It was a startling move at the time, and it began a new trend now known as “super teams”, where star players decide together in a pact to join a team and take less money.
The move placed winning ahead of earnings, which was a rare situation especially in the NBA where the salary cap rules allow for “max level contracts” and “Bird rights” as well as being able to circumvent the cap to pay a star currently on your roster more money than any other team could offer.

Bosh was also very humble in his role with the Heat and was willing to play “third chair” behind Wade and James. He figured out how to play with his two fellow superstars and the trio spent four years together in Miami going to the NBA Finals in each of those four years. The trio would lead the Heat to back-to-back NBA championships in 2012 and 2013 respectively.

Bosh started having health issues in 2016 (see earlier posts on this site) and eventually failed a physical and was released by the Miami Heat. The two sides came to an agreement on a buyout of his remaining contract term. He was determined to resume his basketball career, but no call ever came for an opportunity for him to do so.

The NBA also had a role in that by stating that they deemed his clotting disorder to be a “career-ending injury”. The fall from the heights of stardom to being out of the league by age 33, is certainly something Bosh could utilize in his off-court interests in helping youth organizations as a mentor.

He has many interests outside of basketball including a foundation, the CB4 Foundation, that helps youth to understand the importance of both sports and education. Bosh frequently promotes the importance of reading at a variety of events throughout the country.

Chris Bosh will be remembered for the way that he played both offensively and defensively as well as the selfless nature in which he put his team ahead of his own statistics to win games. He will be remembered in Miami always for his role in those two championship teams, where his reluctance to be the main star helped the team to efficiently play together cohesively. It is hard for any competitor to give up what they love doing, and give up something that they have committed their life to doing on the highest level.

Therefore, while this decision was inevitable, it was the way in which Chris Bosh had to retire, not able to go out on his own terms, and not being able to play his last game; it is that way he left the game that is regrettable to basketball fans such as myself.

Bosh will now embark on the next chapter of his life, having fully shut the door on his basketball career. I am excited to see what he will do with this part of his life in the years ahead.

Knicks Trade With Dallas: Brilliant Or A Blunder?

My unfailing loyalty as a fan of the New York Knicks has inevitably led people to ask me about my opinion of the trade the team made last week with the Dallas Mavericks. The interest level of my friends and colleagues from my perspective as a writer, who at one point in my career, published many articles in sports writing.

The move by the Knicks front office was a bold one sending a once beloved rising star, Kristaps Porzingis to Dallas. New York also packaged Tim Hardaway Jr., Courtney Lee, and Trey Burke to the Mavericks in this deal. The Knicks received point guard Dennis Smith Jr., DeAndre Jordan, and Wesley Matthews from Dallas.

The methodology behind the trade was clear: Porzingis requested a trade in a meeting the Knicks had with him the day before the trade, the team also needed to clear salary cap space, and the Knicks had a logjam at the shooting guard position they solved by moving Lee and Hardaway, Jr in this transaction.

Lee was saddled with a big contract and did not have a defined role with the Knicks in Coach David Fizdale’s system. Hardaway Jr took far too many shots and was also very inconsistent this season while carrying a huge salary. Porzingis has not played at all because of the ACL injury to his knee and has been injured often in the early stages of his NBA career.

My opinion of Porzingis is that he was not a team-first player. He was acting like he was an All World player and he has never won anything or taken the Knicks to the playoffs. Porzingis has always been preoccupied with one thing: himself. I am not a proponent of players who act that way and I am not sorry to see him shipped out of New York.

The press conference held yesterday in Dallas officially confirmed that Porzingis will not be playing this season. The rumor mill was buzzing around NBA circles because apparently the Knicks were pushing for him to return this season. The Mavericks decided not to press the issue because their team is not going anywhere this season and Mavericks owner, Mark Cuban, is going to play the “long game” here with Porzingis.

The rumor mill was also speculating that Porzingis did not want to go to Dallas and that the Knicks made the best deal that they could for their franchise regardless of the desires of their former star player. The rumors persisted that Porzingis was planning on not signing long-term with the Mavericks; a topic that Mark Cuban quashed in the press conference by stating that Porzingis would be paired with his other European star player, Luca Doncic, “for the next twenty years”.

The media then asked Porzingis if he was on board with that plan and he replied very softly: “we are on the same page”. So the Knicks basically sent this guy packing into a situation that he was not on board with, and now he is stuck on a Mavericks team in a very similar stage in their rebuilding as the Knicks.

However, I would argue that the Knicks are better positioned to get significantly better in a shorter time frame than the Mavericks will after this trade. New York also received draft picks from Dallas that brings them to eight draft picks under their control that they can use as pieces in a trade for a star player.

The Knicks also have close to $75 million in salary cap space for next season after this trade which will allow them to get two max-level contracts and they can trade for that third star level player. The team already has some good young talent on the roster that they can develop this year, and they will have a very high draft choice based on their finish in the standings this year; potentially the first pick in the draft.
New York could have the best chances for the first overall draft selection if they finish with the worst record (which they are on pace to do so). The consensus top pick for them could be Zion Williamson from Duke. He would fit their roster and their style of play very well.

The free agent class this summer is tremendous and loaded with star players in their prime production years: Kevin Durant, Kyrie Irving, Klay Thompson, Kemba Walker, Kawhi Leonard, Jimmy Butler, and Al Horford. The Knicks are poised to land two big name free agents and could trade for a star like Anthony Davis, who requested to be traded out of New Orleans two weeks ago.

I have read the accounts that the Knicks have been told by back channels that Durant is coming to The Big Apple in free agency. In my opinion, whether they get Durant or two other big-time star level guys, either way I do not care. The fact is that they can get these guys now that they traded Porzingis.

The past versions of the Knicks would have kept Porzingis and tried to get one or two other mid-level star type players to try to pair with him and be a middle of the road team that might make the bottom half of the playoff tier in the East. The Knicks dumped a lot of salary and any chance of being even remotely competitive this year in order to have a “clean slate” to build a team starting with the 2019 free agency class and the draft.

Some feel that the trade was a blunder and that they did not get enough in return, especially in light of the fact that they are trying to move Wesley Matthews by the Thursday trade deadline or buy him out of his contract. There are fans and media analysts alike that feel that the Knicks made a bad trade, that Durant will not end up with the Knicks, and that the whole thing will be a blunder in typical Knicks fashion.

My view is different as I never thought Matthews would fit or actually play in any games for the Knicks. The acquisition of Matthews allows the team to clear even more salary cap space for next season, which could become a major factor in getting that third star to play at Madison Square Garden.

New York also received a young point guard in Dennis Smith Jr, who could become a more dynamic playmaker than any guard they had on their roster. The center position is upgraded with them gaining DeAndre Jordan, who in my view has always been undervalued by the media and fans of the sport.

The Knicks will emerge from this trade and be rid of a guy in Porzingis who complained more than he did anything meaningful for the team. They will have the opportunity to play all of their young players this year with Hardaway and Lee off the roster. That will be an invaluable period of evaluation of these players to determine how they will shape their roster for next season.

In the end, I believe that this bold move will pay off and that whether the Knicks get Kevin Durant and Kyrie Irving or not, they will be in a much better position to win than if they kept Kristaps Porzingis and had less salary cap flexibility. The next seven or eight months will tell whether my position on this trade will be correct or whether the Knicks will swing and miss on remaking the franchise into a championship contender for their long-suffering fans.

Follow Up: Sacramento MLS Bid Adds Burkle

In a follow up to multiple earlier pieces on this topic, the Sacramento bid for a Major League Soccer (MLS) expansion franchise took a positive step forward on Wednesday with the announcement that billionaire Ron Burkle has agreed to become the lead investor.

Mr. Burkle is a co-owner of the Pittsburgh Penguins of the National Hockey League, so he brings capital investment, financial long-term stability, and sports franchise ownership experience to the Sacramento bid. The Mayor of Sacramento and Mr. Burkle will be travelling to MLS headquarters in New York in February based on the reports today by The Sacramento Bee regarding this significant news.

The Sacramento bid for entry into MLS was once seen as a “sure thing”, and in the years since it has fallen onto difficulties which have prevented the capital city of The Golden State from gaining access into the premier soccer league in North America.

The lack of a bona fide billionaire investor concerned MLS to the point that Nashville and Cincinnati were chosen as expansion cities before Sacramento. The support of the community, the politicians, and the business community has never wavered and that will serve the investors of the Sacramento MLS team well once it is successful in gaining a new franchise.

The news today also included that Mr. Burkle has purchased the land for the proposed new soccer stadium in the downtown Railyards district as well as the adjacent 14 acres that will be developed into mixed-use retail, entertainment, and other options for fans prior to and after the matches held at the stadium.
This proposed stadium has been approved and supported locally for a couple of years and the Sacramento Republic minor league team still has remarkable attendance from a loyal fan base. These are all positive factors, that combined with Mr. Burkle’s expertise and financial backing, should result in Sacramento being named the 28th franchise in league history at some point in 2019.

The city attracted the attention of MLS executives by the large attendance numbers they have logged consistently over the past approximately five years. The league could also benefit from having another team in California with a rivalry built in with the Bay Area’s San Jose Earthquakes and the proximity of Sacramento with the Pacific Northwest franchises in Portland, Seattle, and Vancouver.

The city is also a mid-way point for teams in Southern California: LA FC and the LA Galaxy and can be a stopping point for Midwest and East Coast teams on road trips from LA to the Pacific Northwest. The logistics for Sacramento strengthens the bid for expansion as well.

The question now for those who have followed the expansion of MLS from the beginning is whether or not the league office will approve another round of future new franchises. The league had previously identified 28 as the number it wanted to grow to in this round of expansion.

However, in recent weeks, MLS Commissioner Don Garber has indicated that the league may decide to go beyond the 28 team number it had identified in the past. The front runners now besides Sacramento appear to be St. Louis and Phoenix. In my opinion, I think that the Phoenix bid has some issues that need to fixed before it can move forward.

Sacramento and the fans of the Republic FC have certainly been on a roller coaster ride with this team, but in the end it looks like the pieces are in place for them to finally get a seat at the MLS table.

The meeting in February will provide more insight into the future for the Sacramento bid. Then, the question of when they will join the league will be the final answer for soccer fans in that city.

Fighting For Survival: Sears & Toys R Us

The recent developments around two once-iconic American retail brands: Sears and Toys R Us, have been in the news this week with their attempts to reinvent themselves amid a changing retail sector.

The two brands have similar, but different paths that have led to their current dire predicaments. The attempts now to innovate or reinvigorate the business could still be measured as a “too little, too late” type of scenario.

The Toys R Us retail chain as we all once knew it is gone, the company declared bankruptcy, and this was the first holiday season in several decades without that retailer being in existence. The consumer feedback was that, because of that toy retailer being out of the mix, prices on toys were dramatically increased as well as difficult to find.

The Midwest had a slightly different experience as the owners of some of the intellectual property leftover from the Toys R Us era launched a “pop-up” concept called Geoffrey’s Toy Box which was featured in Kroger stores. The idea was to have a small area of the store featuring toys for the Christmas holiday season from brands which the former Toys R Us owned the rights to, since their other vendor relationships have moved on.

The results, unfortunately, were underwhelming. The consumer sentiment overall was mixed to negative in response to the concept. The cause of those reactions varied from price, to limited selection, and it will most likely not be replicated within another retailer such as Kroger, Giant Eagle, or another regional player of similar scale.

The rumor mill is spinning that the “Toy Box” concept is going to relaunch like a spin-off of Toys R Us into smaller retail spaces. The other potential scenario being discussed is to roll out Babies R Us again. Some within the media have speculated whether the Toy Box and Babies R Us could be merged in one location and smaller in size than the original spaces that they occupied in the prior iteration of the company.

In my local area, some people with knowledge of the commercial real estate developments have told me that Geoffrey’s Toy Box spin-off store is going to be built across the highway from a former Toys R Us store that is now vacant. The validity of that claim is still speculation as nothing has been confirmed by the township or the commercial real estate developer.

The group that owns the rights to Geoffrey, the mainstay giraffe character that we all loved as kids, is not confirming any definitive plans for the branding of the character or the expansion of the “pop-up” concept from the holidays. In prior articles, I have covered the demise of Toys R Us and the attempts to revive it prior to full liquidation. The idea of a smaller scale brick and mortar toy store certainly fills a void, but it has to be executed properly.

The “knock” on the Toy Chest concept was that it seemed like a half-baked idea to keep consumers from forgetting about the brand, in essence, they rushed it out into the market and it backfired.

The one situation that those involved with the Toy Chest concept have confirmed is that they are exploring ways to revamp and relaunch Toys R Us in some form. They would be wise to reestablish vendor relationships and have a comprehensive marketing plan in place before they make that sort of attempt.

In the case of Sears, my recent piece was on their most likely demise as the company is in the final stages of bankruptcy proceeding with creditors seeking to begin the full liquidation process. The court did give their chairman, Eddie Lampert, time to present a new offer to avoid the liquidation of the company.

The news media has widely reported that his bid was accepted to keep 245 store locations open and save some of the jobs that would have been lost had the chain gone completely out of existence. The plan Lampert put together has his private equity firm taking on more risk from the floundering retailer.

However, others feel it is just a ploy and that Lampert is trying to save the company only to sell off what is left of the brands, assets, and real estate holdings to benefit his own self-interest. There are still others who feel that Sears is too close to “circling the drain” to make it back to solid footing.

Some retail industry analysts maintain that Sears might be living on borrowed time for only a short period before it falls apart. It stands as a reminder that the Lampert plan to save those stores and keep some version of Sears alive has to be approved by a judge, or else the liquidation process will begin officially in the next few weeks.

Moreover, there are still others in the retail industry that believe that Sears could live on if it narrowed the focus to strictly “hard goods” such as tools and appliances and eliminated “soft goods” such as clothing and shoes. Mr. Lampert has been reticent to make this type of shift in the past, it remains to be seen if that sentiment will change in this potential “reboot” version of Sears.

The name of the game today, not only in retail but in everything: customization and niche marketing. Sears could potentially survive in a niche where they would have certain brands of tools, tires, lawn mowers, and appliances. It would require a concerted marketing plan and advertising to remind the consumer that Sears has not closed and reinforce the value proposition it provides to the customer. If those elements are not executed flawlessly, then Sears has a very slim chance of survival.

These two American brands: Sears and Toys R Us were once dominant players in the retail landscape and are now either on their last legs, or determining how to reboot themselves not to succeed, but at this point, just survive in a changing world. It remains to be seen if either of these brands can be salvaged, or if they are headed for the inevitable end that so many other retail brands have been met with in the past. Stay tuned.

MLS Expansion Update: Soccer In North America Continues Growth Trend

The expansion process for Major League Soccer (MLS) is a topic that has been featured consistently over the years here at Frank’s Forum as the league progresses towards the stated goal number of 28 franchises. The league has no shortage of interested cities, which has prompted MLS Commissioner Don Garber to publicly admit that the expansion process could go beyond 28 teams in the future.
The 2019 MLS season schedule was released on Monday, and Cincinnati will join the circuit as the newest expansion franchise with their first match set for March 2nd against the Seattle Sounders. Cincinnati will be the 24th team in MLS with Nashville and Miami both expected to join the league in 2020 ; which would bring the number of franchises to 26.

The developments in Austin have been detailed in previous pieces on this forum regarding the situation with the Columbus Crew owner trying to relocate the team to Austin. The courts in Ohio got involved and the Crew are staying in Columbus with a new ownership group, and as part of the settlement, Anthony Precourt will get an expansion team in Austin which will begin play in 2021 as the 27th franchise in MLS.

This leaves one spot remaining for the “race to 28” and several competitive bids for that spot. This has caused speculation that the league office will look at going to 30 teams, but that is still an unsubstantiated rumor. It should also be mentioned that a group of residents in Austin has started a petition against the soccer stadium construction, but the local news sources there do not think the maneuver will deter the project from meeting the 2021 timetable to join the league.

The bid by Sacramento, which seems like it has hung around forever, would be the most likely to gain approval in the immediate future. The group has a stadium plan in place with government support, they have a minor league team with an established base of loyal fans, and according to The Sacramento Bee, they will have an announcement of a new high-profile investor.

The lack of a well-heeled investor to back the franchise for the long term was the sticking point in the Sacramento bid in the last round of expansion. That allowed Nashville and Cincinnati to move ahead of them in the process. The other attribute that works in their favor at this point being a bid from California is the failed bid from San Diego. The referendum vote against the soccer stadium in Mission Valley sealed the demise of the San Diego attempt at an MLS franchise.

The league would probably consider moving beyond the 28 franchise total if Sacramento and St. Louis get their pitches solidified. The St. Louis bid, in a previous piece I wrote, was considered dead in the water because they lost the tax funding needed for the public-private stadium construction project that was central to their bid in 2017.

The St. Louis expansion attempt received new life when the Taylor family which owns Enterprise rental car (which is based in the city) joined the investors group. The plan now is for a privately funded stadium proposed for a parcel of land next to Union Station downtown with excellent public transportation access. This development, should it be approved, would give St. Louis a leg up in the competition because of the rich soccer tradition in the city as well as the relocation of the Rams football team. It is an interesting bid.

Phoenix has gained a lot of momentum of their own in recent months. That desert destination has assembled a large group of deep pocketed investors interested in bringing MLS soccer to a very large market. The issues with the bid are notable: they have no tangible stadium plan and they have no minor league team to drum up interest or fan loyalty.

The league would have to weigh the addition of another market in that part of the country balanced against the market size and demographic reach. The other factor as mentioned before with cities like St. Louis who have less competition for fans because they lost the Rams to relocation; Phoenix has several major pro sports teams which will have an impact on fan retention as well as corporate sponsorship opportunities. That certainly is a lot of risk.

Raleigh is another long-shot type bid for expansion that might end up gaining some traction due to a variety of factors: Steve Malick is the visionary behind the bid and he is well respected within MLS circles – so they have their big money investor, the city has an established minor league team with a fan base, and they have desirable demographics for an MLS franchise.

The main issue with Raleigh is similar to other bids: the stadium plan is not formalized. The proposal from Mr. Malick is to build a 22,000 seat soccer stadium on a piece of government owned land in downtown Raleigh. The original plan, according to The News Observer, was to privately finance the project.

However, an alternative plan is being discussed where some public funds could be used through the county and city levels as well as an increase in a hotel tax to help pay for the facility. Another scenario could put into place a government board to oversee the facility and have the MLS team lease the stadium from the board, which is a similar arrangement to how the arena in Raleigh, PNC Arena, is managed currently. The Austin MLS expansion plan for that stadium is a similar arrangement, but with a wrinkle, the team is going to “gift” the stadium back to the city of Austin in exchange for a sweetheart lease agreement.

The political will is going to be the driving factor in Raleigh because Malick is passionate about getting a team in the city. The political changes from the elections in November could alter the public contribution to a stadium. If the stadium proposal gains approval they have, in my view, a better shot than other analysts think. The opposite is also evidently true, if the stadium plan and the land use agreements get thwarted, their bid is dead just like in San Diego.

Detroit had a bid that looked like a “sure thing” at one point because of the billionaires involved in the investors group there, and their quick pivot away from the original stadium proposal which I have covered in previous pieces. The latest developments have Detroit on the outside looking in, so the saying goes.
The condensed version of the scenario is this: Detroit had a stadium proposal for land downtown where a jail is currently located and the investors were trying to work out a land swap with the local government to have a new jail built on a piece of land in another part of Detroit which the investors owned. The plan fell through, and the bid pivoted to add the Ford family as partners and use Ford Field, the home of the NFL’s Detroit Lions as the home venue for the MLS team.

The bid pointed to the Atlanta United using an NFL stadium and being very successful. The MLS officials that toured the site had some concerns and suggested that artificial turf is not desirable for the league games and that they would improve their chances at Ford Field (a domed facility) if they converted to a natural grass playing surface.

The investors attempted to propose to the Ford family, the city, and MLS a plan to convert Ford Field to natural grass and to change the roof of the facility to a retractable roof so that the grass could be maintained properly. That plan to retrofit would take place in the football offseason months, but the plan was defeated due to cost and other concerns.

MLS does not seem interested in Detroit using Ford Field with the way it is currently configured, so the bid is essentially on the last legs.

Tampa/ St. Petersburg had a strong bid at one point, but it has taken on some tough twists and turns in the past few months. The original investor, Mr. Edwards, sold the minor league team, the Tampa Bay Rowdies, to the owners of the MLB Tampa Bay Rays. The baseball team owners then appointed a group to run the Rowdies and oversee the MLS bid.

The investors from the Rays have indicated that they are considering keeping the Rowdies as a minor league team in the USL. The move to MLS would be complicated because the team would have to get permission from Orlando City FC because they share the same media market. This bid has an outside chance but is unlikely to move ahead.

Charlotte is an intriguing bid now that David Tepper, owner of the NFL’s Carolina Panthers has reinvigorated the investors there and has a plan to use the NFL stadium for soccer games. The previous investors had focused on attempting to get a taxpayer funded stadium built, and that proposal failed to gain public support, so Charlotte was passed over during the last expansion round.

Tepper is a billionaire with a bold vision for soccer in Charlotte, a city with so many transplanted residents from the Northeast and Mid-Atlantic that it makes sense for MLS to want to be there as well. In fact, when I wrote my last article on MLS expansion I received messages from fans in Charlotte about how excited they are with the bid because it reminds them of Atlanta with the Falcons owner getting involved.

Charlotte has some momentum here, and the stadium is not an issue as the team would play in the football stadium, and the demographics could work well for a successful bid.

Indianapolis is another bid that is certainly in limbo at this point. The positives for the bid are the strong support for their USL team, Indy Eleven, which has the second highest attendance figures in that league last season (next to Cincinnati). The three big issues for the bid are: the Crew staying in Ohio, Nashville & Cincinnati getting approved bids for MLS teams, and the stadium financing.

They have a billionaire owner already who owns Indy Eleven and owns a construction company. The Crew staying put means that geographically there is not a need for a team in Indianapolis, but if they had moved to Texas it would have put Indy’s bid into play.

The close proximity to two teams: Nashville and Cincinnati will probably make MLS think about putting a franchise elsewhere in another less represented region to grow their overall footprint.

The final issue is the stadium plan because the original proposal for public-private development of a site downtown failed to gain full political support. The fund created by the State of Indiana to fund Lucas Oil Stadium for the Colts is currently basically out of money. The potential for playing all of their games in Lucas Oil Stadium (Indy Eleven uses it currently for special games) could be a way that this bid adapts to try to stay alive, but the MLS has come down on Detroit for a similar proposal. The other factor is some within the media in the city suggesting that they stay in USL like the Tampa Bay Rowdies and just grow their presence in that league now that Cincinnati is moving up to MLS. In my view, I think the bid is dead.

San Antonio is the final city in the group of bidders remaining for MLS, and as I have covered in prior pieces on the coverage of the Crew relocation to Austin debacle, they lost the most momentum of any other expansion hopeful.

San Antonio rebooted their MLS bid when the minor league team in the city changed ownership to the same group that owns the NBA’s San Antonio Spurs. The Spurs are the most successful small-market team in NBA history, and probably in all of professional sports history.

The Spurs owners then appointed a team of experienced people to run the minor league soccer team and prepare an MLS bid. The new bid would change direction away from the prior investors plan of expanding the minor league stadium on the outskirts of the city, instead focusing on getting a stadium built in the downtown core of San Antonio, which MLS traditionally favors that type of location.

Then, the attempt at moving a team to Austin took place and MLS took so much heat for trying to move the Crew out of Ohio, yet the people in Austin spent money and energy on the proposals there, that MLS felt compelled to have to give Austin an expansion team down the line.

The San Antonio bid was dead once the Austin expansion deal was announced. The county that San Antonio falls within, Bexar County, has conceded that and has closed down all proceedings related to bringing MLS to the city. It is sad for San Antonio who had followed all of the proper channels for expansion and got beat by an “end around” by Anthony Precourt and the Austin politicians.

In the end analysis, MLS has a great deal of interest remaining in all of these potential relocation cities. The league has to be careful to not make the same mistake as prior American soccer leagues which met with failure because of over expansion.

The league has a plan for 2026, that they want to be fully expanded by that point. The speculation is that number could hover between 30 and 32 teams. In my view I think that the 32 number is too many franchises for the league to remain profitable and sustainable.

The three bids I see as having the best chances after covering this topic for the past six years are: Sacramento, St. Louis, and Charlotte. I could envision the league in those three cities doing well and that would bring MLS to 30 franchises. It will be fascinating to see which direction the league will go in the next round of expansion and if they go beyond the 28 team number or not.

One thing is certain, MLS is certainly gaining in popularity and shows no signs of slowing down anytime soon.