X Games Aspen 2022, which will take place this weekend (Jan. 21-23), looks like it will be the last X Games under Walt Disney Company (NYSE: DIS) control. A source familiar with the negotiations tells JohnWallStreet by Sportico that an investment group led by The Najafi Companies (TNC) and MSP Sports Capital has signed a letter of intent to purchase the action sports brand. Terms of the deal were not disclosed, but it is believed the transaction will close toward the end of the first quarter.
JWS’ Take: The Najafi Companies is a private investment firm founded by Jahm Najafi, vice chair of the Phoenix Suns. TNC has holdings across the consumer, retail, E-commerce, sports, media and technology sectors.
MSP Sports Capital is the investment firm co-founded by Najafi and former Diamondbacks and Padres stakeholder Jeff Moorad. Unlike TNC, which invests across a broad array of sectors, MSP focuses solely on sports leagues, teams and sports-centric businesses. If the firm’s name rings a bell, it may be because of the $300 million investment it made in McLaren Racing in December 2020.
While there may be synergies within the MSP and TNC portfolios (if Microsoft can swallow up Activision-Blizzard, what can be ruled out?), neither investment firm is believed to view the X Games acquisition as part of a “platform” or “roll-up” play. Instead, a source indicates they see a chance to acquire a widely recognized brand, one that has faltered a bit in recent years, and the opportunity to re-invigorate it (and capitalize on the upside, if successful).
Sahil Bloom saw much of the same. Back in Dec. ‘21, the high-profile entrepreneur/investor publicly shared his plan to form a DAO to buy the X Games. “It is an amazing property, [with] this intense [action sports] community. It also has this incredible nostalgia [factor] associated with it for broader populations. Yet it is sitting as this under loved, tiny asset within a much larger portfolio. I see [a property] that could use a real focus, attention and love—especially around things that [further] cultivate the community.”
Bloom explained that having a passionate community “allows [a property] to foster a much deeper tie that extends beyond just one series of Games…. And ultimately as a business, that drives revenue and profits” (both from the community and sponsors). He envisions the opportunity to develop “small events, different leagues, different things that [can be] built off of the franchise.”
The X Games also tends to attract a young audience, a demo that remains critically important to advertisers and broadcasters alike and one that companies are still eager to invest in. Much like Cornhole (which ESPN networks reran more than 150 times in 2021), the X Games broadcasts can air—and re-air—without it losing entertainment value. That is in direct contrast to the Big Four sports. Whereas fans tune in to NFL, NBA, NHL and MLB games largely to see the outcomes, X Games viewers are generally tuning in to see the tricks; who medals, and thus the live nature of the event, is somewhat irrelevant. “The ability to build once and sell 10 times with [X Games] content is very real,” Bloom said.
In the short-term, the X Games are likely to continue airing on the Disney family of networks. But longer-term, it would make sense to see it lean into digital consumption, considering the engagement and interactivity possibilities on platforms such as Twitch. Anyway, the youth demo that consumes X Games content largely isn’t watching linear television anyway. Look for the X Games to evolve into a ‘heavily focused’ digital brand over time.
There are influential people within ESPN who remain passionate about the X Games. So, once the business decision was made to sell the brand, the company set out to find a buyer that would protect its legacy—as opposed to simply choosing the highest bidder. A source indicated Disney was not interested in selling the X Games to a traditional private equity investor (despite apparent interest).
Of course, that doesn’t mean TNC and MSP are buying the asset under market value. It is not as if Disney needs to sell the brand.
DIS/ESPN, TNC and MSP all declined to comment on the rumors. But Najafi and Moorad have histories as longtime sports executives who understand the various components of the industry (sponsorship, media), which would seemingly appeal to ESPN. Our source suggested there were many discussions between the Mouse House and prospective buyers about their respective visions for the X Games’ future.