On January 14th, the WNBA and WNBPA reached a tentative agreement on a new collective bargaining agreement that will run through the 2027 season. The deal calls for increases in player compensation (+53% in total cash comp.), “landmark benefits for motherhood and family planning” and improved travel conditions. In exchange for an increased commitment from the league’s owners, the players have agreed to report to training camps from the start; a decision that could force some of the league’s stars (who will be able to earn as much as $500K/year, roughly triple last season’s ceiling) to forego lucrative opportunities to play overseas in the offseason. Commissioner Cathy Englebert said the new labor deal is evidence that the league is “making a big bet on women.”
Howie Long-Short: The reason that Englebert suggested investing in the largest female sports league in the world is a ‘gamble’ is because WNBA teams still lose money. While that’s certainly not ideal, it’s not the end-all be-all in pro sports – as long as team owners believe they are “building value” in their franchises. The problem for WNBA owners right now is that their increased commitment to the players has a direct correlation with rising short-term losses and it’s difficult to argue that teams are building value when there is no demand for them on the open market. One high-ranking WNBA executive said to get to the point where prospective investors are “placing a multiple on revenues, [teams] need to grow revenues on an annual basis.” The insider suggested the league would need to increase revenues +/- 2.5x for a robust marketplace – as there is for MLS clubs – to exist.
Establishing long-term labor peace was a critical first step in the league’s efforts to grow the top line. Aside from ensuring the 2020 ‘silver anniversary’ season tips off as scheduled, the insider we spoke to explained that “[team owners] weren’t going to make forward investments in the league – which is what the union [sought] – without having the confidence that [the players are on board with the direction it’s headed].” With a new CBA in place, WNBA leadership can now turn its focus to “bringing in additional sponsorship partners and [finding] new ways to get on trend with media distribution, gambling and esports.”
The July ’19 hiring of Cathy Englebert is the chief reason to believe commercial success is on the horizon. Historically, the WNBA’s most senior employee held the title of President, but Englebert – formerly the CEO of Deloitte – has been hired as Commissioner and has the power to unilaterally make decisions in the best interest of the league. Our source said “while talented, the previous leadership never [maintained] the full P&L responsibilities on a business.” To the contrary, Englebert led a large transformation of a Big Four firm (towards emerging technologies), growing revenues by +30% in the process. There’s seemingly little reason to doubt she’ll have comparable success in her new role.
The lack of corporate sponsorship and advertising dollars currently being invested in women’s sports (<1% of the total spend) indicates there is plenty of room for revenue growth. The league plans to collectively market its product to grow that aspect of the business. Our insider explained that the “network effect [generated by] having all of the teams cross promoting and creating inventory [for the league] will create the opportunity for a national buy, if you will.” The belief is that the league’s whole is worth significantly more than the sum of its parts.
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