July 20, 2021

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Game 2 of the NBA Finals is tomorrow. Let’s go.

Peloton Recalls Treadmills, Stock Tumbles

Peloton/Design: Alex Brooks

Peloton is recalling its treadmills — Tread and Tread+ — as a result of mounting pressure following dozens of injuries and the death of a 6-year-old.

News of the recall sent Peloton’s stock tumbling below $83 on Wednesday, an eight-month low. The stock had already dropped 22% from early April to market close on Tuesday.

The connected fitness company is offering refunds for over 130,000 Tread+ machines ($4,295), and another 1,050 Treads ($2,495). 

Peloton is rolling out software updates to prevent machines from being turned on involuntarily and offering to move treadmills to a room inaccessible to children and pets in lieu of a recall.

With a recent $100 million investment to scale up logistics and a growing number of challengers on the market, Peloton can ill afford a hit to its brand.

  • A slew of competitors have received funding this year: Tonal ($250 million), Tempo ($220 million), Ergatta ($30 million), Hydrow ($25 million), Motosumo ($6 million), and LIT Method (undisclosed).
  • The company is also dealing with revelations that all of its customer data is available to any member through a leak in its software API.

Peloton CEO John Foley apologized for initially brushing off warnings from the Consumer Product Safety Commission.

Equinox in SPAC Talks with Warriors Minority Owner

Equinox/Design: Alex Brooks

As Equinox welcomes the public back in, it may go public itself.

The high-end gym and owner of SoulCycle is in talks with Chamath Palihapitiya’s Social Capital SPAC about a merger that could value Equinox at over $7.5 billion, per Bloomberg.

Equinox, which launched a line of luxury hotels in 2019, closed many locations and lost around $350 million last year. It received capital from Silver Lake at a $9 billion valuation to prop it up through the pandemic.

Should the SPAC deal go through, it would include a substantial cash injection as the gym seeks to lure customers back.

SoulCycle recently launched an at-home connected bike with guaranteed delivery in 1-3 weeks, an area where Peloton struggles.

Help may also come from the federal government. The GYMS Act, which would provide grants to gyms and fitness centers, has bipartisan support and 104 cosponsors in the House of Representatives.

Palihapitiya, a former Facebook executive, is a minority owner and board member of the Golden State Warriors. He has launched six SPACs, including one that took Virgin Galactic public.

SPONSORED BY Wilson

Wilson x WNBA

Big moves are being made in the world of pro basketball. In partnership with the WNBA, Wilson is proud to unveil the league’s new official game ball before the start of the milestone 25th WNBA season.

Made of 100% composite leather, the official WNBA game ball integrates Wilson’s Evo NXT construction featuring an enhanced grip and a soft moisture-minimalizing feel.

Wilson’s partnership milestones with the National Basketball Association (NBA) will continue to roll out throughout 2021 with announcements and activations across the WNBA, NBA G League, NBA 2K League and Basketball Africa League, and into the NBA’s 75th anniversary season in 2021-22.

Activision Blizzard Revenue Spikes in Big Gaming Quarter

Activision/Design: Alex Brooks

Activision Blizzard leveled up again, with 27% net revenue growth in Q1 2021.

“Call of Duty” was a key driver behind the company’s $2.28 billion net haul during the quarter, with in-game purchases for the franchise’s various PC and console versions growing 60%.

The company owns several more of the most recognizable titles in gaming, including “World of Warcraft,” “Overwatch,” “Crash Bandicoot,” “Hearthstone,” and “Candy Crush.”

Activision Blizzard has pursued a multifaceted strategy to recruit players, developers and fans into gaming and esports.

  • Monthly active users across “Call of Duty” titles grew 40% year-over-year, and have tripled since 2019, reaching 150 million in Q1. Much of the Activision side’s growth came from the introduction of free-to-play and mobile options for the series.
  • The company’s Blizzard segment revenue grew 7%, led by the “World of Warcraft: Shadowlands” expansion. Blizzard had 27 million monthly active users in the quarter.
  • The King segment, and its 258 million monthly active users, rode the massively popular “Candy Crush” to 22% growth. King’s advertising revenue is up 70%. 

Despite the surge in gaming during the pandemic, leading to $56 billion in global console sales in 2020, Activision Blizzard laid off around 190 employees during Q1 2021.

CEO Bobby Kotick cut his base pay in half to $875,000, but could be due $200 million in bonuses, according to activist investor group CtW.

From Zero to 100,000 — Sports Return to Full Stadiums

Tim Heitman-USA TODAY Sports/Design: Alex Brooks

After more than a year of quiet stadiums filled with cardboard faces, sports are returning to normal — fans are back, many stadiums are at full capacity, and business is booming.

In a new $10 million campaign, Bud Light said it will pay for and give away 100,000 tickets for baseball, hockey, football, and basketball games. Fans of legal age will even get a free beer.

The promotion and others like it come as more venues announce their full-scale returns.

  • Mercedes-Benz Stadium, home of the Atlanta Falcons and Atlanta United, is opening its doors on May 15 with a full capacity of 71,000. 
  • Massachusetts will allow 100% capacity on Aug. 1, including at Gillette Stadium, home of the New England Patriots.
  • Truist Park, home of the Atlanta Braves, plans to open on May 7 with a full capacity of 41,084.
  • The Texas Rangers allowed full capacity (40,300) on Opening Day this year, the only MLB team to do so.

Fans play a massive role in the success of a team or league’s business. Without them, MLB teams lost $1 billion in revenue in 2020, for example.

In March, NBA commissioner Adam Silver said he expects full capacity at stadiums next season, and NFL commissioner Roger Goodell said the same for football.

Silver has also said that 40% of NBA revenue comes from game nights with fans in attendance.

SPONSORED BY Wilson

Business of The NBA Finals: Game Balls

The NBA has had a long history of basketballs. Wilson supplied basketballs for the league from 1946 – 1983, and from 1983 to the present, Spalding held that same responsibility.

Now, Wilson reclaims its throne as the official basketball maker for the NBA, starting in the 2021 – 2021 season. The re-introduction of Wilson basketballs coincides with the the league’s 75th anniversary season. Wilson will also take over production of basketballs for the WNBA, G League and Basketball Africa League.

FOS has taken a quick look at the history of the NBA game ball, just in time for the NBA Finals this year.

James Naismith, a physical education teacher credited with inventing the game of basketball, initially played with a soccer ball. With increased interest, he called on A.G. Spalding & Bros. to create a bit larger, bouncier ball for his sport.

The first ‘basketball’ balls were made from panels of leather, then evolving to include a cloth lining.

Eventually, a molded version became what is now known as the ‘modern basketball.’

Conversation Starters

  • Ferrari posted $247 million in first quarter profit off of $1.22 billion in revenue. The luxury carmaker is moving into electric vehicles, both in its production line and on the racetrack.
  • The Indian Premier League suspended its cricket season because of a surge in coronavirus cases in India. The country of 1.3 billion now has over 20 million cases.
  • A growing number of sports teams, including the San Francisco Giants, New York Yankees, and New York Mets are requiring fans to show proof of vaccination or a recent negative COVID test to enter their stadiums.
  • Canadiens rookie Cole Caufield became the third player in NHL history to score his first two goals in overtime when he notched a winner over Toronto. Get more stories like this in Sports Section, a free, daily newsletter. Click here to subscribe.

Question of the Day

Would you buy the new Wilson game ball?

 Yes   No 

15% of respondents didn’t have a favorite NBA team.

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