by Frank Maduri

Follow Up: CVS – Aetna Merger Could Be Challenged

In a follow up to earlier pieces on this topic, the mega-deal that merged CVS and Aetna in the healthcare sector totaling about $70 billion could be challenged in federal court. The federal judge, Richard Leon, on Monday indicated that he could stop the activity of both companies to join forces and keep them as separate entities while he weighs the consumer impact of the merger.

This is out of the ordinary as the merger has met approval through the Justice Department and the federal court proceeding is often a mere formality. It should also be noted that Judge Leon is the same court officer which presided over the controversial AT&T / Time Warner merger proceedings; that was a recent topic here on Frank’s Forum, because of the content sharing issues taking place in that industry.

It is not a coincidence that Judge Leon, who has received plenty of criticism for his handling of the AT&T/ Time Warner merger, is now considering putting the brakes on this CVS/Aetna planned consolidation. The conflict of interest issue can be raised very easily in the case of CVS/Aetna because of what each entity specializes in separately.

The merger of a major healthcare/retail pharmacy company with a major health insurance carrier presents plenty of ethical concerns that could mollify the public interest. The concern is that Aetna-insured patients, whether it is individual policies or employer-provided policy coverage will be forced to fill prescriptions for medication at CVS locations exclusively.

A related concern for the consumer is when their employer-provided coverage changes to Aetna from another carrier, which then could force them into an prescription arrangement with CVS after the individual has a long-term routine and trust with another pharmacy. A similar concern was raised during the discussions of the merger in some forums online regarding rural areas that will require the consumer to drive farther to a CVS location if they are insured through Aetna, and in areas of the U.S. where CVS does not have a large presence.

In fair balance, some proponents of the merger state that it will provide better care for less cost. The addition of Aetna to their ranks will help CVS gain leverage with PBMs for the negotiation of pricing on prescription medications, which I covered in an earlier related piece.

The federal court could make this situation both very interesting and very difficult for those involved at CVS and Aetna. Judge Leon used words like “less convinced” that the merger was not an anti-trust violation. That is a very bold statement on the record and certainly could be motivated by the flack that the judge received in the AT&T decision.

Americans have long been concerned by anti-trust or monopolies because they represent, at the core, a break from our national ideals of competition in the marketplace as well as limiting consumer choice. The American consumer favors both choice and competition to create favorable conditions for price and service. The limitation of either of these market forces is looked upon rather negatively in the court of public opinion.

Both CVS and Aetna have to be alarmed that they are potentially being painted with the monopoly brush, and that this deal could unravel in the eleventh hour, unhinged by a judge who is essentially trying to rectify a previous miscalculation with the AT&T decision, which looks more like a monopoly with each passing day.

The central question is whether or not the combination of CVS and Aetna is within the best interest of the consumer. It is starting to look like that answer may alter one of the largest healthcare mergers in American history.

(some background courtesy of Reuters, CBS Market Watch, and CNBC)

by Frank Maduri

Follow Up: Big Pharma Bust? The Takeda – Shire Merger

The mammoth deal that is the Takeda acquisition of the Ireland-based, Shire Pharmaceuticals, has had more bumps in the road than the New Jersey Turnpike. The regulatory review processes in China, the United States, and the E.U. each had their own type of issues relative to this enormous merger proposal.

The news this week is that now that the regulatory hurdles have been largely negotiated successfully (the European Union approved the deal on November 21) the former chairman of the board of Takeda has now come forward to the media in opposition of the merger.

Kunio Takeda, the last member of the family whose name is “on the door”, so to speak, who served in the top position for a period of 16 years; is against the deal because of the high level of risk the company is taking by swallowing up Shire. The full stockholders meeting which will feature a vote on this controversial strategic move will take place on December 5th.

The former chairman leads a group of investors that is also opposed to the deal and this move yesterday to bring those concerns to the media is a concerted attempt to subvert the perception of this proposed acquisition ahead of the crucial vote on the 5th. The merger is not without scrutiny, as many different factions from industry experts, to Wall Street analysts, to shareholders in Europe and the U.S. alike all had doubts that this merger could ever be consummated.

The risk to Takeda is heightened by their recent purchase of Baxalta, and many within the inner circles of the industry were openly questioning their pursuit of a consolidation of Shire. The Irish drug maker, at that time, had sold off their oncology portion of the business and trying to compete in a rapidly changing pharmaceutical landscape.
Takeda will take on significant debt overall from their own balance sheet, to the costs of pulling together a deal of this magnitude ($62 billion), and taking on the debt that Shire has accumulated on their balance sheet. This is the rationale behind the opposition that is being demonstrated within Takeda in recent days.

The argument could be made that Takeda could have stood pat with their success in diabetes and hypertension medications. The company looks to push through this M&A activity with Shire as a way to crack the Top 10 pharmaceutical companies in the world. It is apparent that some of the regulators have not considered that we have seen “too big to fail” companies in other industries collapse after biting off more than they could chew. It would be a devastating blow to the overall pharma industry if Takeda went down the path to ruin because of this deal.

The original concerns from the beginning of this proposed deal are still lingering around: the value of the return to the shareholders, the debt taken on by Takeda to make it happen, and the overall valuation of Shire being perhaps inflated. These components, both collectively and individually, do not seem to be throwing the merger train off course here, with some industry news outlets reporting that reps from both companies expect that the deal will be completed in the first week of January.

Takeda is looking at the diamonds in the Shire pipeline, but reportedly have looked at other brands in the Shire domain as potential targets for sale to help pay down some of the enormous debt that will be incurred. These two companies on their own are huge, so the redundancy and lost jobs is another functional reality of such a large merger.

It remains to be seen whether the consumer will benefit from this deal, if it will translate into better leverage for the combined company with the pharmaceutical distributors, it could become a scenario where they jump up the prices on medications to help offset the debt load. This is where the consumer concerns over this merger could become an unfortunate reality.

(Some background information and statistics courtesy of Seeking Alpha, BioSpace.com, CNN, and Asia Nikkei)

by Frank Maduri

Giving Tuesday: Being Charitable To Those In Need

The Tuesday following Thanksgiving is known as Giving Tuesday. It was a movement started about six years ago by a New York City YMCA on 92nd Street in concert with a component within the United Nations.

The movement has gained international following and is a time when people are called upon to be charitable to those in need. The worthy causes out there can be overwhelming, so it is important to think about what resonates the most with you.

This is particularly important when you have a budget with which to give, which is the case with most people. The causes that are the “closest to your heart” will become the priority. In the event that you are new to donating, then check out Charity Navigator or Guide Star, two websites that inspect and rank charities based on their financial responsibility, transparency, and the amount of funds that go to the cause versus administrative/fundraising costs.

The past holiday weekend featured news and promotions for stores and for online shopping deals. The weekend is an ideal time to get gifts for your loved ones for Christmas. The point of today, Giving Tuesday, is to give back to those who are less fortunate, to help advance research of various diseases, and to pool our resources to help solve the problems in our society.

The act of charity is seen by some as not a popular thing in what many people portray Americans as consumed by materialism or their own self-gain. I disagree with the portrayal and know that many Americans are very generous, and although we are the wealthiest nation, we are also the most generous nation on Earth.
The platform of social media will be used to raise awareness and funds on Giving Tuesday as Facebook, Twitter, and The Bill & Melinda Gates Foundation will all be doing matching of some kind based on the gifts given today by generous Americans.

This is a good time to take a personal inventory of all that you have in your life that you are grateful for, and to think about how you could give of your excess resources to help those causes or people that really need assistance. Your generosity will help many worthy organizations to provide services and programs to people who are struggling and suffering.

Here are some worthy causes and four star rated charities that could be a potential partner for your donation activity today:
Salvation Army: www.salvationarmyus.org
Alzheimer’s Foundation of America: www.alzfdn.org 866-232-8484
Catholic Charities 800-919-9338
Food For The Poor: www.foodforthe poor.org 800-427-9104
National Suicide Prevention Lifeline 800-273-8255
Samaritan’s Purse: www.samaritanspurse.org
Zero- The End of Prostate Cancer: zerocancer.org 888-245-9455
MAP International : www.map.org 800-225-8550

Thank you for your support of Giving Tuesday and for giving to “the least of these”. God bless you.

by Frank Maduri

Follow Up: AT&T Content Ownership & The Impact On The Consumer

The debacle which was the AT&T merger with Time Warner, which is now known under the name Warner Media, has been a topic featured on this blog several times in the past. The detrimental effect it would have on competition in the media landscape is also a topic that has been part of my prior work on this merger.

It was widely reported that an outage of HBO occurred last week for customers of Dish and Sling TV services. It is hard to believe that AT&T / Warner Media had no role in engineering this outage to damage the competition with AT&T owned DirecTV standing to gain potential subscribers as an outcome.

This type of disruption or potential withholding of content is precisely what the Department of Justice was concerned about relative to AT&T merging with Time Warner. This potential misuse of the control of content or content ownership to damage the competitors of DirecTV was a central focus of the DOJ lawsuit in this merger earlier this year.

In that court proceeding, one judge made the decision to allow the merger to proceed, no jury was involved. The judge sided with AT&T in “buying” their version of the case that they wanted to reinvent AT&T for the long haul. The government argued that the merger would impact competition because it would give AT&T too much influence and control over content. The government argued that AT&T would use that control to provide favorable pricing for their own enterprise, DirecTV, at the expense of Dish, Fios, Comcast, and other cable television providers. It was a conflict of interest that the government was concerned about with this merger.

The exact situation has played out and could become a factor when the content of certain premium HBO programs comes up for distribution as well as the March Madness NCAA basketball tournament which Turner Sports (part of Warner Media) has the rights to broadcast. The new AT&T/Warner Media could jack up the prices on that content to the competition, while at the same time create advantageous promotional pricing for DirecTV in order to siphon off subscribers from their competitors.

DirecTV Now is a service that allows people to stream content without having a satellite dish attached to their residence. The service is opening up a new subscriber base to the DirecTV platform with less equipment and front-end costs. The development is one that can be viewed as positive, and the reviews are good overall for the service to this point. In some ways, this advancement will help competition because it gives the consumer another option if they are not a candidate for a satellite dish and they may feel locked in to one cable television provider.

However, this service can become problematic if AT&T influences the content available on this service and withholds that content from their competition in some way. This ties in to the other big media news of the Warner Media streaming app-based service that is built and being pushed to launch ahead of the long-awaited Disney app launch. Warner Media is trying to beat Disney to the punch on getting their streaming service up and going in the marketplace.

The question within the media industry at this point is whether that is a smart strategy by Warner Media if they rush the service to market and then have some glitches that lead to customer disappointment.

In the event that the outage or the disruptions that have involved Warner Media content and the competition for DirecTV in the marketplace are, in fact, valid that is a sad state of affairs for the whole industry. This has led to some analysts with greater knowledge of the industry space than myself to produce some insightful commentary pieces on the potential for the Department of Justice to reintroduce legal proceedings to reverse the merger.

That would certainly create a ripple effect throughout the media, telecommunications, and cable/satellite TV services industries all at the same time. The counterpunch to that effort was a group of businessmen writing op-ed type pieces of their own to implore the court system to not entertain the reversal of the merger. It is going to get interesting.

The issue in my own view of this situation is not the streaming services being offered to provide more choices to the customer. The issue is that you cannot set the playing field up in a way that is going to unfairly treat competition in the marketplace or set the rules up so that one party gains from them and everyone else is at a competitive disadvantage. That is what I want all the readers out there to think about in this circumstance; because those consequences will be felt across other industries that will have a much greater impact on your life than just being able to watch a program on your television set.

(Some background courtesy of Reuters, CNBC, CBS MArketwatch, and CNN)

by Frank Maduri

Certified Transitional Farming: Impact On Eating Organic

The challenges of organic farming have been an area that I have covered in previous articles on other related subjects such as GMO, pesticides, the seed market, and the overall food supply. The transition of farmland that has been devastated by pesticides, herbicides, and other agricultural chemicals is an involved process.

The certified transition process identified by QAI (Quality Assurance International), is frequently a three- year endeavor by the farmer in order to properly prepare the land to produce organic crop yields. The larger farming operations can afford the significant financial outlay to convert the land from what is known as a conventional farm into an organic farm.

However, the small and mid-sized farming operations, such as family owned farms with smaller yields, could easily struggle with the burdensome costs especially on the front end which becomes a deterrent for overall agricultural land use reform toward organic farming in America. The QAI goal of organic farming growth found that the overall acreage of transitional land use for organic food production could be enhanced by financial incentives underwritten by corporations and other interested parties.

The organization also determined that if a farm had at least 51% of their total usable crop space being verified as “in transition”, then that farm could use the QAI seal for transitional organic farming on their products. This helps to raise awareness of the transition process, it helps the farmer because it provides visibility as well as profitability to aid the transition, and it helps the consumer because they are purchasing a product that will benefit them while ensuring that more organic products can be made in the future. It is the definition of a “win-win scenario”.

The estimates available from the USDA state that only 1% of all farmland in the United States is suitable for organic farming. This is a shocking statistic for many who have not closely followed this situation. My prior work has detailed the destruction of the soil used in farming by GMO containing seeds, dangerous pesticides, and harmful herbicides. These products have caused destruction to bees, birds, and other wildlife as well as being linked to several different types of illnesses in humans.

The trend toward organic eating, the utilization of organic cleaners, and the use of organic products for personal care use is a positive development in America over the past decade to fifteen years. That change notwithstanding the organic product pipeline cannot be sustained or made scalable for the long term without an increase in usable farmland.

The process for being Certified Transitional is difficult and the steps become increasingly demanding as the farm moves through the stages from year 1, 2, and 3. The optimal goal is to have each farm “graduate” into certified organic status by the end of year 3 in the process. The people at QAI achieve this by surprise audits and random sampling of crop yields to ensure that the organic transition is following the proper protocols. It should be noted that QAI is a USDA accredited organization.

The organization also has consultants that can help the individual family run farms or medium sized farms with the application process for the Certified Transitional program. The farm will be inspected at least once per year for the three- year transition process. The QAI certification personnel will review the inspection reports and have a procedure where any deficient areas can be reviewed and resolved with follow up type visits. The final step would be to have the organic certification awarded once all the requisite steps are completed.

The involvement of certain companies, such as Kashi, helps farmers with the cost of transitioning their land to organic use. Most of those farms would be unable to participate in the process based solely on the financial commitment needed to move forward through the three years of increasingly rigorous standards required to earn the organic certification.

The commitment by Kashi to source ingredients from farmers that are participating in the Certified Transitional program helps provide much needed financial resources to the individual farms through the process. The QAI inspections and the verification of the day-to-day operations of each farm in the program is an expensive scenario for the farm, especially the front-end cost.

The farms in the transitional program cannot use GMO seeds or any type of chemical agents in their farming practices. This can be challenging for a farm in transition because the cost of organic seeds can be prohibitive. The vast majority of seeds for staple crops such as corn, wheat, soybean, and sugar beet are genetically modified in some way.

The certified transitional farms that have agreements to be ingredient suppliers with major food producers such as Kashi, have some help in offsetting the costs of the process. This is imperative in the U.S. where autoimmune disease, celiac disease, and other types of cancers are on the rise. The ability for gluten free, organic products to become more mainstream will help drop the price points on certain products so they can be more affordable for people across all economic backgrounds.

The Certified Transitional farming process is a bold step in the right direction for the future of organic food availability in our country for decades into the future.

by Frank Maduri

Addendum To MLS Expansion – Election Day Results Impact The Process

An addendum update to the post yesterday on Election Day referendum ballot measures and the impact on the Major League Soccer expansion process:

San Diego residents voted against the Soccer City proposal of the referendum overwhelmingly. The vote all but ends the bid by Landon Donovan and his partners for landing an expansion franchise in that city. The biggest issue that I perceived with that proposal was, although the stadium and other development was going to be completely privately financed, the public was unsure that an affirmative vote on the land use for that purpose without any guarantee by MLS of them getting an expansion team was a sound choice for the land.

However, the football stadium for SDSU did get approved as well as the campus extension for the school to include the “Innovation Zone”. The public evidently understood the need for the campus extension and also understood the need for a place for the school’s football team to have an updated and appropriate venue to host games. The SDSU football team is already in the city and has a tradition going back decades, it is a safer play to vote that proposal through to the next stage. It also should be noted that the taxpayers have been paying for repairs and upkeep on the enormous Qualcomm Stadium since the Chargers moved almost two years ago. It is time to tear down that facility and replace it with a smaller, less costly venue on that site.

This vote by San Diego residents gives both Phoenix and St. Louis a better shot at landing the one remaining expansion slot left for MLS.

In Miami, the voters approved the ballot measure to allow Beckham and his partners to negotiate the lease and terms of the development of the stadium in the Freedom Park project. The issue remaining is two-fold: the group has to get approval by the city council and can have only one dissenting vote so they need 4 of 5 votes cast to approve the development moving forward. They also must face the reality that the site will not be ready for 2020 opening day and will have to explore temporary stadium sites in the area if MLS wants the team to launch in 2020.

Many moving parts, but the vote yesterday in two cities brought some clarity to the process.

by Frank Maduri

MLS Expansion Update: Election Day Impacts Both San Diego & Miami Expansion Bids

The Election Day ballots impact very important and significant policies which will affect every American. The impact of the referendum questions will shape reform of tax laws, allocate funding for infrastructure projects, and formulate training programs for jobs; among many other important initiatives.

The referendum vote will also impact sports in certain cities, especially in San Diego and Miami. The voters in those two respective cities will have a choice to make on allocation of tax payer money for land use for new stadiums for two potential Major League Soccer (MLS) expansion franchises.

The San Diego residents will have to decide what to do with the city owned land that currently is occupied by the football stadium once used by the Chargers in the Mission Valley area of the city. The team vacated the city and relocated to Los Angeles prior to the 2017 NFL season. The city has been paying for the land and maintenance on the aging stadium, now they have to determine the next use for that complex.

One proposal is for San Diego State University (SDSU) to use the land for a smaller football stadium that would have a secondary use as a soccer venue for an MLS team. The rest of the land would be used for an extension of the campus and part of it would be dubbed an “Innovation Zone” for different academic/research pursuits.

The second proposal is for Soccer City which would be primarily a soccer specific stadium with a secondary use as a college football facility for the SDSU team. The plan also calls for entertainment and retail development as well as a park facing the river. The plans are both similar and would both include a facility with multi-purpose use, but the difference is how each party plan to pay for the development.

Soccer City will be funded by private financing and will require no tax money outlay from the residents. The SDSU proposal will pay for the stadium and campus extension through public-private funds, donations from alumni/benefactors, and revenue generated from the gate from football games/events.

The extension of the campus, according to local media reports, is seen as a crucial element for the university at this point. The land available to achieve this needed expansion is limited, and the football team does need a place to play as well, but not the scale of the NFL stadium on the site.

The group of business and civic leaders backing the soccer team need a stadium or else the expansion bid has no hope of survival. I covered the referendum vote for the Chargers proposed new stadium in the downtown waterfront years ago (a plan that was voted down by residents) and that vote ultimately led to the team relocating to Los Angeles.

The voters of San Diego have been here before, and they can turn the fortunes of either the university or the soccer team very quickly in one direction or another. It is worth noting that if neither proposal gains 50% of the vote, then the proposal with the majority of the votes would be the winning proposal for the land.

The stakes are high, MLS prefers the soccer team to be the primary tenant for revenue stream control, and so even though both proposals allow for a facility to host soccer matches, if the Soccer City plan loses, MLS is unlikely to approve the bid.

Conversely, if the campus extension fails, then the university is back to the drawing board on where it can potentially put this new “Innovation Zone” in a rapidly shrinking area of available land that is scalable for such usage.

The fact that the people have the determining factor here, rather than a group of elitists and politicians is, in my view, an excellent way to make such a far-reaching civic decision. It is completely American in the way that it was conceived and San Diego deserves credit for multiple times placing the residents above their own personal gain.

In Miami, the expansion of MLS to that very important market is already approved, but the stadium site is elusive. I have reported on this situation in the past, and lead investor and former international soccer superstar, David Beckham and his partners in this endeavor have struck out on six potential sites in the past few years.

The Freedom Park proposal, as I covered previously on this site, is a $1 billion stadium and entertainment complex proposed by Beckham and his well-financed partners on a site that is currently a public golf course. The voters must decide whether to allow the group to bypass the competitive bidding process to negotiate a lease with the City of Miami directly.

Those with knowledge of the deal report that it is a 99 year lease with the city. The issue with the land is that it was once used as a waste treatment facility with an incinerator known as “Old Smoky” and to tear up the golf course and disrupt the land to build a stadium and multiple structures on the property would create an environmental cleanup that would be very costly.

The mitigating factor is that the private investors are going to pay for all the construction and all of the costs of developing the site. The proposal calls for no tax payer contribution.

The referendum needs to pass for Miami to be able to move forward with the stadium plans to meet the 2020 entry into MLS. The way forward if the vote goes against them is unclear, and could create a tremendous stumbling block to a expansion bid that has been riddled with problems from the start.

Election Day will have implications that are far-reaching for residents in cities and towns across America. In the case of San Diego and Miami, two major markets will have referendum votes that will shape sports and entertainment in those two respective cities for decades into the future.

(some background courtesy of MLS.com, Miami Herald, Sports Illustrated, and NBC 7 San Diego)

by Frank Maduri

Remembering Those Lost

It is the time of year in my Catholic faith where All Saints Day and All Souls Day approach on the calendar (All Saints Day is November 1st and All Souls Day is November 2nd for those who are unaware) when I begin to think about those that have gone to their rest from this life.

The souls of those who have gone before me have eternal life in my belief system. This was achieved by the Death of Jesus Our Lord and Savior, which provides all who believe in Him with eternal life and freedom from sin.

Our lives touch so many people from who we interact with at school, at work, in our neighborhoods, our families, and in our church/faith communities as well. I remember fondly, and I am inspired by those that have gone before me. I push myself every day to spread messages of hope and love in their honor.

I know that we all have that in common, we all have someone that we remember, we have all been touched by the loss of a friend, relative, colleague, or co-worker. Some have been impacted by the loss of someone in all those categories and others in just one or two; we all have experience with loss. We all have experience with what that can do within the human condition.

In my own experience, my faith helps me to move forward from loss because of the belief that the loved one or friend is in a much better place. However, the human emotions that grief and loss can cause are still profound. The simple reality that you will never see the person again in this life, will never have another conversation, that is a stark reality.

Those emotions usually come from another common human tendency to take things for granted. We tend to think that our lives will remain the same for the foreseeable future, until one day, usually suddenly, our lives change.

It is in this way that we need to be grateful and count our blessings, we need to be reminded that time is precious, and we need to take the time to enjoy each day as a gift. This change in outlook and being grateful for everything and everyone in our lives can dramatically shift your approach to every other aspect of your life.

The important way to remember those that have died and gone before us, is to take some component of that person and incorporate that into our own lives. The way that someone served the community, gave to those in need, took care of a family member, or made friends with strangers – these are just some examples of how we can make changes in our lives to honor those that have gone before us.

These changes can be very personal and can seem overwhelming, but they can be done incrementally. They can be done at your own pace. It is important to remember that we have to take the time each day to be thankful for what we have and for the people that we have present in our daily lives.

I hope that this helps so many people who will be entering the holidays thinking of those that have gone before us. I hope it provides a different outlook and perspective. I hope that you can all find ways to remember those that have gone before us from this life in your own daily interactions with others.

by Frank Maduri

MLS Update: Columbus Crew Saved From Relocation Austin FC Moves Forward As Expansion Team

This is an update to an earlier piece on the potential relocation of the Columbus Crew franchise in Major League Soccer (MLS) to Austin, Texas. The whole situation has taken, over the past week, some dramatic twists and turns.

My earlier piece on this topic focused on the politics and business anglings of Crew “principle operator” Anthony Precourt and his company Precourt Sports Ventures (PSV). The article centered upon the process of getting a soccer stadium approved for the McKalla Place vacant plots of land in North Austin.

That measure passed the City Council and the plan was for Precourt to relocate the Crew to Austin and rename the club Austin FC to begin play in 2019. The plan calls for PSV to pay for the construction of the stadium which the city of Austin will take ownership of and then lease back the stadium to the team for games.

However, the Crew relocation is being held up by court litigation in Ohio which has certain laws on the books, one notably known as the “Modell Rule”. This was named for Art Modell, the owner who notoriously and ingloriously moved the Cleveland Browns to Baltimore, where they became the Ravens. It was put in place to have a mechanism to protect professional sports franchises in Ohio from future similar circumstances.

The campaign started by the fans and other interested parties in Columbus was called #SaveTheCrew and it gained traction both in the courts and in the consciousness of the people of Ohio. Then, it gained national recognition because this attempted relocation by PSV of the Crew, which are an original MLS franchise, would have gone down as the most significant violation of fan loyalty in the history of American soccer. It could even be seen as one of the worst moves by an owner in American sports history.

The City of Columbus won the bid for an MLS franchise in the 1990s after being up against Cleveland for the rights to be the league entrant in the region. The tipping point in favor of Columbus at that time was the commitment by the city to build the first soccer specific stadium in the United States at that time.

Unfortunately, Crew Stadium as it was known then (MAPFRE Stadium as it has a corporate sponsored name now) was built on the outskirts of the city limits and has nothing else nearby. It lacks certain amenities for fans and does not have really any luxury boxes or other premium seating which could be used to increase revenue as well as provide a better fan experience.

The #SaveTheCrew movement attracted the attention of Jimmy Haslam, the owner of the Cleveland Browns of the NFL. Haslam assembled a group of investors from his network and they are deep in negotiations to keep the Crew in Columbus. They are actively working with a group called the Columbus Partnership on a new stadium proposal as part of retaining the team in the city.

The new stadium would most likely be located downtown with plenty of accessible public transit options and be close to other points of interest for fans and visitors attending a game. The future use for their current stadium is unknown, but it should be noted that many fans do not like the location of the current stadium.

The news that the Crew are most likely staying put in Ohio led to the inevitable question: what happens to the Austin FC proposal and all the work that people from the league office, Austin officials, and PSV put forth to get a stadium plan for McKalla Place done?
It appears likely that MLS will use an “investor transition” option in this situation. If you recall, in my earlier articles on this topic, I explained that the MLS franchises are not owned by individual men or women or ownership groups like the other sports leagues. MLS is structured as a single-entity meaning that the MLS owns the teams and they have interested investors assigned to each one.

That was the loophole that MLS tried to take with the Ohio lawsuit, arguing that Precourt did not “own” the Crew outright, so they could not sue him. The league is now looking to make the Haslam group the investor for the Columbus Crew, and then they will transition Precourt / PSV to be the investor of a new team in Austin.

That essentially means that Austin FC will still be joining the league in 2019 as an expansion franchise, and that the plans to build a stadium in McKalla Place will move forward as scheduled.

The MLS got what it wanted in the end, it kept an original franchise with a dedicated and established fan base in Columbus and will get a new downtown stadium for the Crew to increase revenue in that market. In addition, they will get access to Austin, the largest U.S. metro area without a major pro sports team, and they will gain that market with no competition for dollars.

In a pure business sense, it was all orchestrated well, but it has an effect on people in both cities as well as in the expansion process. This situation has both winners and losers, like any other situation of the type.

The winners here are MLS, Columbus, and Austin as well as the fans in those cities. The losers are those who are not in favor of building a stadium in that part of Austin, and the other entrants in the expansion process and their fans. The entry of Austin as an expansion team rather than a relocated team, means that only one spot remains in the expansion phase that the league identified to get to 28 teams.

The cities of Phoenix, Sacramento, Charlotte, Raleigh, San Antonio, Indianapolis, Detroit, and Tampa/St. Petersburg are all under consideration for what we all thought was going to be two expansion slots. Those bids each have issues which I have covered in past pieces here on this site.

The Sacramento bid stands out as having the most to lose by Austin now grabbing that other spot. Sacramento was once favored to get a team and is constructing a new stadium downtown but they had some partners leave the investor group. The league has stated that without a big financial investor they will not be awarded an expansion team.

San Antonio also likewise has a doomed bid because the league will never put another team that close to Austin and put a fourth team in Texas. They come out on the losing end due to these developments.

The Tampa/St. Petersburg bid just had an investor change to the group that owns the Tampa Bay Rays of MLB, which is a deeply resourced and financed group. It remains to be seen if that helps their bid for the last seat at the table.

In the end, the precedent set by the team and the league working together to keep the Crew in Columbus is a good one for MLS. The last situation they need as a league is for teams to start moving around the map. They need stability in their franchises. It is great for the fans and the Crew employees and staff to stay in the place they know as home.

The City of Austin gets a shot here to have a big league sports team and the impact that will have on the region and on the expansion process for MLS will be felt for years to come.

(some background courtesy of The Austin Statesman, The Columbus Dispatch, and America Soccer Now, MLS website)

by Frank Maduri

Follow Up: CBS / Viacom Merger News: The Saga Continues

The CBS and Viacom saga continues to loom within the media landscape following the sexual misconduct allegations against former CBS Chief Executive, Les Moonves, which led to him being removed from that post recently. This has caused many within the financial sector to have renewed speculation regarding the potential for a CBS merger deal with Viacom to get back on track.

In a follow up to earlier pieces on this topic, the interplay between CBS, Viacom, and their common parent company, National Amusements (NAI) has been a mess over the past couple of years. The struggle between Moonves and Shari Redstone from NAI and the discord that conflict created within the CBS board has shaped most of the news around this merger over the past several months.

The removal of Mr. Moonves from the equation seems to indicate that the merger will take place at some point between CBS and Viacom. This can be simply because no other external entity has indicated any type of interest level in obtaining CBS at this point.

The potential merger of these once-joined media conglomerates (CBS and Viacom were once under the same roof until they split apart several years ago) would make sense from a financial perspective as Wall Street analysts have stated that the merged CBS-Viacom unit would have a better valuation. Some analysts have estimated that the total valuation would increase in value between 20-30% compared to the two remaining single entities.

While that valuation impact is significant, the most critical issue facing CBS at this point is to find a new CEO. The reports have been centered around the likelihood that this candidate will be hired externally to bring a fresh perspective to the network and the corporation.

In my prior work on this topic, the dynamics between Ms. Redstone, Mr. Moonves, and Viacom head Bob Bakish were explored. The interpersonal issues between all of these figures has been at the center of the saga between CBS, Viacom, and NAI. The reports from multiple media outlets are that the new external CEO of CBS will be the individual in charge of the combined CBS – Viacom and not Mr. Bakish.

This added responsibility increases the importance for CBS to find the right candidate on what is probably a very short list of people who have the requisite skills and background to run such a complex, diversified combined media corporation.

The terms of the settlement in court between NAI and CBS stipulate that NAI cannot initiate any offers to consolidate CBS and Viacom for a period of two years. However, the settlement does not preclude either CBS approaching Viacom or vice versa, with a potential merger bid.

The likelihood of that happening after a new chief executive is named at CBS is seen as highly possible. In my prior work within this merger proposal saga, I have always maintained that Verizon would be the “dark horse” that would come out of the woodwork and purchase CBS for some inconceivable amount of money.

The media landscape has evolved though, and my view is starting to shift in thinking that Verizon may not be interested in CBS at all. They may not be interested in the capital outlay and the organizational changes that would need to take place in order to integrate CBS into the Verizon umbrella.

The other major networks and “old media” companies are out of the mix for CBS for mostly anti-trust reasons. Some have rumored that maybe CBS – Viacom combine and then merge again with a major studio such as Lions Gate or another television outlet such as AMC. In my view, that could happen because both CBS and an outlet like AMC would have to grow larger or else be swallowed up by another conglomerate.

The rumor that a “new media” entity such as Amazon, Apple, Netflix, or Google could snap up CBS seems unlikely at this point too. That sort of consolidation is delivered at a significant cost because of the complexity of the merger, the legal proceedings involved, and the integration of the key business units within CBS into an existing corporate and operational structure.

The content that CBS controls is a tremendous asset, and at the end of the day, content is king. The CBS app called All Access is a subscription-based service that has a robust base of viewers. It will be interesting to see if those variables are a motivating factor toward a “new media” entity taking a shot at consolidating CBS, especially if they would also hold the rights to the Viacom content.

The major shifts in the media industry this year have created a climate where CBS and Viacom both must make some sort of strategic growth move in order to stay relevant. It may become a merger of necessity rather than joining together willingly and with enthusiasm. The combined entity of CBS-Viacom would have certain strengths that would help them compete in an increasingly competitive and margin conscious industry.

The content and streaming app as well as other business units could position CBS – Viacom to better meet the demands of viewers that are changing the way they access media, television, and movies. The timing will all be predicated on how long it takes for CBS to complete their search for a new CEO.

The changes in the media and television industry has already seen some incredible M&A activity during 2018. The future for both CBS and Viacom could highlight the industry merger news in the new year ahead.

(Some background information courtesy of CNBC and AP)