In this podcast, Motley Fool analyst Tim Beyers and host Dylan Lewis discuss:
- Comcast's push into the ad market with the Universal Ads platform, and what it means for other players in streaming video advertising like The Trade Desk.
- Disney's plans with Fubo and its next act in sports streaming bundles.
Motley Fool host Anand Chokkavelu talks with Dan Caplinger and David Meier about sports technology company Sportradar.
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Dylan Lewis: Is cable coming for streaming and ads? Motley Fool Money starts now. I'm Dylan Lewis; I'm joined over the airwaves by Motley Fool analyst Tim Beyers. Tim, thanks for joining me.
Tim Beyers: Thanks, Dylan. Not quite caffeinated today, because it's not a caffeine day, but I'm still ready to go.
Dylan Lewis: You're still bringing the energy, with the caffeine-free Monday. It's always a coffee morning for me, Tim. It might be a hot cocoa afternoon with the snow that we've gotten here in Washington, DC. I'm very excited, I am in the winter spirit, but we have plenty to talk about before I can go frolic out there in the white stuff.
We got our first preview of some of the things that will be coming for the consumer electronics show and what's going on in the state of tech streaming this week. Ahead of the trade show, Comcast announced its new ad-buying platform, Universal Ads. The company will be using its own properties in a hope to simplify the ad buying process in particular for small and medium sized businesses. Tim, I feel like there's already a company that does a little bit of ad buying over streaming video.
Tim Beyers: There is. You might have heard of it. It's called The Trade Desk. Boy, I don't mean to sound cynical, Dylan. But does this not sound like a money grab?
Dylan Lewis: It does.
Tim Beyers: This totally sounds like a money grab. It's not necessarily a bad thing, although we don't really know too much about the details of this. But here's why I say it's a money grab. We have a lot of different companies that are competing to be the provider of record of advertisements once they've got your data. The argument is, Hey look, you're here, we've got your data, we know best how to serve you, so we'll be the ones that serve ads to you. This has gone back a long time. But probably the biggest benefactors of this shift in recent years have been Amazon built a huge advertising business, because, hey we know you're buying habits. You should come advertise inside the Amazon platform, and that has become a big business. Walmart is another one that has profited from this. At the same time, I find it a curiosity, Dylan, that this has come really just like two months after The Trade Desk decided to say, Hey we're going to create a connected TV operating system for devices, because everybody else has this self-interested. The Amazon Fire, they have their own content. They're not Switzerland here. We'll be Switzerland.
We'll give you an open platform here. Everybody wants a piece of this pie, Dylan. Is Universal Ads going to be materially better? Is it going to be more simplified, which is the pitch here? I don't know if that's true. Well, I have a strong suspicion, I should say, that Comcast seized the margin opportunity and has decided to seize it.
Dylan Lewis: It does feel a little bit like they're doing the Apple thing of, Hey, we didn't need to be first to this, but we saw how you were doing it and we like how it looks, and we think we can get some margins doing it, so we're going to do it too. I suppose if you're someone who wants to advertise and you want to advertise on their programs, it doesn't really matter whether you want a Switzerland-type relationship, you are going to have to play on Universal Ads if that's the only game in town for getting onto their channel.
Tim Beyers: Well, it's not clear to me that they have said it's the only way to do it, but it certainly feels like this is going to be the primary way, and there may be some strong incentives to go through Universal Ads. But it's a dangerous game to make it the only avenue, especially when the government has its eye on portals, which has been a thing. The government has been very conscious of portals, and without making any political statements here, one of the commonalities between the outgoing administration and the incoming administration is that both have been, let's say looking somewhat askance at Big Tech. They have not necessarily been buddy buddy. We shouldn't presume that the next administration is going to be any more interested in giving free license to tech companies, big mergers. I think anytime a company decides to exert portal control, you may be inviting scrutiny you don't want.
Dylan Lewis: I think one of the interesting things is, Comcast is very much seeing what's happening in Big Tech and saying we'd like a piece of that and we'd like to be able to have our own version of that. They, in the grand scheme of advertising, look at a Facebook or a YouTube and say, they have 10 million advertisers, and we have several thousand advertisers when it comes to people who are across NBC Universal. They clearly feel like they are a small player in this space, even though they are maybe able to possess the relationship in a way that those other players maybe couldn't for their own content.
Tim Beyers: To be fair, we are also talking about lots of different ways. One of the things that's probably going to be true about 2025, that makes this an interesting time to be trying something like Universal Ads, is that we are seeing new bundles, new ways of getting things. I personally right now don't have access to generalized cable, but I have access to Peacock, and I have access to Paramount +, and honestly, I have access to YouTube, and YouTube gives me most of what I want, because most things are available later on YouTube. You know what? I'm fine with that.
Dylan Lewis: You're fine with waiting, Tim? You don't mind waiting around?
Tim Beyers: I don't mind waiting around.
Dylan Lewis: You mentioned Peacock, and I want to get an alarm meter from you on this for The Trade Desk and for trade desk shareholders. I'm asking selfishly, because I am one here. Trade Desk was going to be one of the people selling NBC Universal's Peacock, I think that was announced back in 2021. They have been one of several companies that have been selling inventory there, I think, for the last couple of years. We don't know a lot of the details of this yet, but when you see this news, how big of a deal do you think this is for The Trade Desk?
Tim Beyers: I don't know how big of a deal it is for The Trade Desk, but I do think the ground is shifting a little bit in terms of who's going to own the brokering relationship for putting ads out into the market. That seems to be undetermined at this point. Now, to be fair, I do think there is a big market for an independent broker that can provide good data, fair pricing, transparent pricing. I think the market needs that. I don't see them being disrupted by this, but I think the desire for companies and now Comcast is another one of them do take greater control of the customer relationship and leverage that customer relationship. That's going to be something that The Trade Desk is going to have to work through, don't underestimate how much of this has to do with Netflix envy. I wouldn't be surprised if this is Netflix envy, Dylan, not at all.
Dylan Lewis: They're saying, you innovated in this space, you created the category, you've got a successful business there rolling out the ads. We want a part of that. We want the membership model, we want the ad revenue, we want it all.
Tim Beyers: Absolutely, we want a piece. Don't ever underestimate envy as a motivating factor, for sure.
Dylan Lewis: Sticking with streaming, Comcast is not the only one making moves this week. Disney also apparently nearing a deal to bring Hulu + Live TV together with Fubo. This is a smaller streamer that is known for its sports content. The focus on sports here maybe not necessarily a surprise because Disney has been developing venue sports with Fox and Warner Brothers, and Fubo has been a thorn in their side as they've been trying to do that too.
Tim Beyers: In fact, they sued over it. A judge had actually blocked the launch of a venue. Fubo did was starting to get some traction here from that lawsuit. This is according to the Wall Street Journal, that the judge said that the deal, this new bundle would substantially lessen competition and restrain trade. Not great. The partners in Venue, which are essentially the partners in Hulu and the Hulu Live + TV service have appealed the decision, but now it does look like, by virtue of an acquisition or a merger, I guess, it would be in this case, you can make that litigation go away. It is interesting. This is what I said previously. We are talking about different types of very specialized bundles showing up. Streaming, it makes your ability to make a bundle that fits you a little more compelling. Like I said, in this case, my bundle is YouTube, free, I pay for it with ads, and then cheap Peacock and Paramount +. I get a fair amount of sports ball, which I want, and I get some decent TV programming, and I get plenty of movies. I'm good. The only other one I've added to that is Netflix, I added that recently.
That's a very tailored bundle. You can see, Dylan, that this is going to be a thing, where you have specialized bundles coming together to serve a particular niche. In this case, it's sports. But it might be something entirely different. It may be a reality TV bundle or cooking shows bundle. I fully expect that that comes around. At some point, this is just the precursor. To be clear about what's happening here, this feels more than anything else, like, look, we just want to move forward with our sports bundle. Can we get the litigation to stop? I think that's what this is.
Dylan Lewis: Fubo TV, I think, before this deal was announced, was a sub-billion dollar company. I could see Disney basically saying, I think we can pay to make this go away for about $1.5 billion. I think that's within our wheelhouse. The venue sports bundle that they are developing with Fox and Warner Brothers, focused on sports. No surprise there, it's right there in the name. Live games and event coverage from the major professional sports leagues and major college conferences sounds very appealing. I think what's fascinating about this is Disney just spent so much time trying to untangle the multi-owned joint venture, that is Hulu. Then they're are saying, let's hop right back into that lane with venue sports, Tim. What do you make of that?
Tim Beyers: Irony never disappoints, Number 1, never ever does it disappoint. That's Number 1. But Number 2, is it tells you something about the appeal of targeted bundling. That's what I mean. When I said that I think we can expect to see more targeted bundling, I think Disney has woken up to realize that it might be a bit of an ask for some people to say, you can get the whole big enchilada. If you want live TV, in that Hulu bundle, it's still not that cheap. You're still not that far off $100 if you want live TV in a bundle. I don't know that that is a sale that works anymore. In the era of YouTube and very targeted streaming. I'm not sure I'm the only one who's like, I don't know that I need that. It just went YouTube +, my very targeted streaming services. Figuring out how to maybe make these things a little bit more appetizing, I think is the thing. One of the ways to do it is to control a niche and then package the niche. We'll see, but it's a very interesting time.
Dylan Lewis: Putting the story here with Fubo and Disney together with that Universal Ads story, I do see a little bit of a throughline in that it seems like it is going to get impossible almost for smaller players to really establish themselves, in streaming. The Trade Desks of the world, they were able to seize a market opportunity because the legacy players hadn't quite gotten there yet. Fubo was one of those smaller players that people have thought maybe might be able to turn into something. I don't know how easy it's going to be for anyone over the next five or ten years that is not already a major media brand to hop into this space, whether it's on the ad side or on the content side.
Tim Beyers: That's a really good point, and it's hard to see, to maybe validate your point a bit here, the great cautionary tale in this space is CuriosityStream, which is now the MicroWest of microcaps.
Dylan Lewis: It's 100 million, I think.
Tim Beyers: It just hasn't really gone anywhere. For those who don't know, the ticker CURI is a microcap streamer of documentaries. It's not like that's a bad service or something that is unwanted. There are people who are very much in the market for, yes, I want to see a bunch of documentaries, but how you make that into something big is, it's just harder to see. To your point, you're probably going to have the major media companies. But what those major media companies are doing is a different strategy to profit, which may be like creating some balkanized, very specialized content bundles and maybe not trying to make you swallow 100 to $200 a month, but trying to get you on a consistent $35 a month. Does that actually work? I don't know, but that favors the companies that already have a chokehold on content and licensing deals.
Dylan Lewis: Tim, you know what one of my favorite bundles is?
Tim Beyers: Tell me.
Dylan Lewis: You and Monday Motley Fool Money. Thanks for joining me today.
Tim Beyers: Nice. Well done. Thank you. Thanks, Dylan.
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Dylan Lewis: Listeners, coming up on the show. You've probably heard about the sports betting platform DraftKings. But what about the company that powers DraftKings, and a number of other sports betting platforms around the world? Up next, Anand Chokkavelu host Dan Caplinger and Dave Meier for a Scoreboard episode, Breaking Down Sportradar.
[MUSIC]
Anand Chokkavelu: Welcome to latest Motley Fool Scoreboard. I'm Anand Chokkavelu. We've got longtime Fools, Dan Caplinger and David Meier, giving a 1-10 rating to sports gambling data provider, Sportradar, ticker symbol SRAD. First, we'll hit the business, including factors like industry and competition. A ten is invincible, a one is hopeless. David's going with an eight, Dan's going with a seven. David, I know you're pretty hot on this stock, why don't you tell us about the business?
David Meier: Sure. Sportradar licenses sports data from leagues and sports literally all around the world. What it does is it takes that data and turns it into a variety of different content and betting opportunities, that it sells to its customers, whether it's a Draft Kings on the betting side or a CBS sports on the content side. The company has proven itself to be both a smart buyer of the data and a smart seller of its products, and for that reason, I think it's a very good business model.
Dan Caplinger: I gave it a seven. I like the business model as well, David's right. There's a whole lot of betting services out there across the world. Plenty of competition in that space in a highly competitive market. I love to look at the pick and shovel places, the underlying businesses that make these industries go. These betting sites can't do what they do without the data to back them up. That's what Sportradar is giving them. I like it, I gave them a seven.
Anand Chokkavelu: Give the apps the data. I take that data on the apps, I convert it into losses. You might want to invest in me. [laughs] Let's go on to management. A 10 is Warren Buffett, a one is Homer Simpson. David gives an eight, Dan gives a seven. This time, we'll go with Dan.
Dan Caplinger: I've got a lot of confidence in founder, CEO, Carsten Koerl. We like to see founders who are invested in their businesses. Koerl is 23-year-veteran in the business, and prior to that, he worked at an actual betting site, and so he understands what his betting site customers need from Sportradar. I think that helps to inform his leadership style has done well operationally as well as from a stock performance standpoint.
David Meier: As you said on it, I gave it an eight, and I completely agree Carsten Koerl has been a great founder CEO. Interestingly, he reorganized the company in early 2024 in order to simplify the business structure. In the process, in my opinion, he hired a very key new executive, whose name is Behshad Behzadi. Behshad is now the chief technical officer and chief AI officer. Basically, what they're doing is bringing their technology platform and their analytics platform into the modern era. I've been impressed so far, and I look forward to seeing what they do with the business going forward.
Anand Chokkavelu: For financials, a 10 is a fortress, a one is yikes. David's going with an eight, Dan's a bit lower at a six. Start with the bull case here, David.
David Meier: [laughs] It was a little rough actually in 2023, but growth has returned, and that's on the back of extending and expanding its deal with the NBA and a number of other sports leagues around the world. I expect to see additional scale going forward as this growth persists. You got to remember the way this works is they pay money upfront to get the licensing deals, and over time, they monetize it. That's how we should see the scale from the new deals.
Anand Chokkavelu: I don't think I disagree with anything David said. I think I just ding Sportradar a little bit for that rough patch that he's talking about. They've shown nice revenue growth. There's modest profitability. I like the fact that the balance sheets relatively strong, minimal debt, significant amounts of cash available to inform, strategic decisions or reinvestments in the business. It's just I like to see more consistent. The fact that you go through a rough patch, I think is probably the reason why our scores differ on that score.
Real quick, David, before we go on evaluation. I have a follow up question, which is why do the apps need Sportradar as a middle person between the leagues and the apps?
David Meier: I'll use DraftKings as an example again. What is DraftKings core competency? It's marketing. They're not in the analytics business in terms of, how do I interface with the sporting data? That's what Sportradar is good at, and so it's better for a company like DraftKings and many others to go to Sportradar to get the betting opportunity and present it to its customers.
Anand Chokkavelu: Beautiful. Let's move on to valuation. Dan, we'll start with you. How well will Sportradar stock do over the next five years? How safe is it? Ten is a sure thing, one is a lottery ticket.
Dan Caplinger: I put five year returns of five to 10%. Some might think that that's low. That's actually pretty much middle of the road for me. I like the stock is starting to gain some momentum here. New legalizations at the state level for online gambling in the US, I think is helping the industry overall. Questions whether that expansion will continue. I give them a safety score of six just because I think there's some question about that future direction, and the extent of future growth that we haven't already seen priced into the stock.
David Meier: I'm agreeing with Dan on the safety score, I also gave it a six. As you noted earlier, I am a bull. I think there's 15% plus returns available, even after the recent rise in the stock. One of the reasons is this is the industry leader and they are a trusted partner. They've been able to renew their contracts at higher and higher levels for a number of years. The paradox here is actually, the United States is the emerging market here. Dan pointed to legalization within different US states. That is absolutely a growth. Those are the growth opportunities going forward. There's definitely risk, though. You can pay too much for the data. You could price your bets and your contents poorly. I also think there's risk, but I think the return potential is very much worth it.
Anand Chokkavelu: Everyone's favorite topic. Dan, is there accompanying Sportradar space you like more? It depends how you want to define the space. I'm not really sure there's any other company that does sports data the way the Sportradar does. When you broaden it out to the betting world more broadly, I'd go with MGM Resorts, ticker MGM. It's a betting site provider. It might be a potential customer Sportradar, they also have the Brick and Mortar Casino resorts. You have a good loyalty program. The loyalty has branched out to talk with other loyalty programs like the Marriott Bonvoy program. It's got exposure to the Asian gaming capital of Macau. I think it's an interesting play right now.
David Meier: The direct competitor is a company called Genius Sports, ticker is G-E-N-I. I agree with Dan, you got to broaden out a little bit. One company I think that's very interesting is a maker and licenser of digital casino games. I learned about this company from our colleague, Bill Mann, and the company is called Evolution AB. It's a little tough to trade on because it's on the pink sheets, but that is a very interesting company.
Anand Chokkavelu: You like it more than Sportradar, David?
David Meier: Yes, but it's hard to buy.
Anand Chokkavelu: That's what makes it all so worthwhile, right?
David Meier: Yeah.
Anand Chokkavelu: [laughs] Thank you to David and Dan. They've given Sportradar pretty good overall score of 7.1 out of 10, short of that 8.0 that would force me to own shares. Left to his own devices, though, David would have given it an eight if you average all his scores. It's one I've been meaning to look at, actually, because David got it on my radar a few months ago. Maybe you'll look into it as well.
Dylan Lewis: Listeners, premium TMF members get access to all of our Scoreboard episodes, including the Fool Archive. Those drop every weekday at 7:00 PM ET. If you want to become a Motley Fool member and join our flagship Investing Service, Stock Advisor, head over to fool.com/signup. We'll drop a link in the show notes for where you can get that info.
As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy sell anything based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Motley Fool only picks products it personally recommend friends like you. For today's, show, I'm Dylan Lewis, we'll catch you tomorrow.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anand Chokkavelu, CFA has positions in Amazon, CuriosityStream, DraftKings, Netflix, The Trade Desk, Walt Disney, and Warner Bros. Discovery. Dan Caplinger has positions in Amazon and Apple. David Meier has no position in any of the stocks mentioned. Dylan Lewis has positions in The Trade Desk. Tim Beyers has positions in Amazon, Apple, Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool has positions in and recommends Amazon, Apple, Netflix, Sportradar Group Ag, The Trade Desk, Walmart, Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool recommends Comcast and Genius Sports. The Motley Fool has a disclosure policy.
