15 to Watch (Week of Sept. 20)
15 sports business trends to watch
CSN Bay Area Sports Business Insider Rick Horrow goes outside the lines the presents his top Biz Ball trends to watch this week...
DFS under investigation
Fantasy sports are under review. Massachusetts is launching an investigation into Boston-based website DraftKings as a way to learn about the company’s business practices. Among the questions investigators will try to answer are whether DraftKings contests are legal under state law and whether contests violate any federal laws. The move comes as DraftKings and its main competitors, FanDuel, spend hundreds of millions of dollars on advertising around the start of the NFL season. The legality of daily fantasy has frequently been questioned, but the game is protected by federal legislation that permits general fantasy sports. Look for investigations of all types and sizes -- congressional, state, federal, legal, etc. It’s not so much that fantasy is illegal (the loophole under the 2006 Unlawful Internet Gambling Enforcement Act is clear). Rather, it is the opportunity for taxable revenue that might drive these “investigations.”
NFL is king
The value of pro sports teams -- and NFL teams in particular -- keep increasing. As originally reported by the Forbes, the Dallas Cowboys are worth $4 billion, topping Real Madrid’s $3.26 billion to become the most valuable sports franchise in the world. The Cowboys are the most valuable franchise in the league for the ninth consecutive year. Forbes says the average NFL franchise is now worth $2 billion, a 38% increase from last year. The increased values are due in part to a $39 million increase in national television rights fees. The Forbes survey gives credence to the continuing increase of the “economic juggernaut” called the NFL -- and a potential $25 billion revenue target by the mid-2020s.
Lagardère rebranding, going global
A winning rebranding for a major sports & entertainment industry. Lagardère Group has relaunched its global sports business as Lagardère Sports, a division of Lagardère Sports & Entertainment (LS&E). The new LS&E, which replaces the name Lagardère Unlimited, is one of four major divisions of the Paris-based conglomerate. LS&E will be headquartered in London and comprises Lagardère Sports and Lagardère Live Entertainment. Lagardère Group built the company through the acquisitions of sports agencies and firms in six different nations. All of the US companies as well as sports marketing agencies Sportfive, World Sport Group, IEC in Sports, Sports Marketing & Management, and Lagardère Unlimited will be run under the LS&E brand. The agency partners with 70 European football clubs, 10,000 hours of programming, manages over 300 events, and represents more than 280 athletes. The “rebranding” represents a significant effort to integrate and consolidate the service into a global game changer in the industry.
NFL growing abroad
International sports business news. The NFL’s growth in the UK continues as league execs are looking at the possibility of playing a full season of games in the country within the next five years. The league will host three regular-season games at London’s Wembley Stadium this year. With last season’s three International Series games all sellouts, the league believes it can play even more games in the UK long-term. Meanwhile, Telstra has announced the rebrand of recently acquired business, Globecast Australia, to Telstra Broadcast Services, unveiling the new brand at the International Broadcasting Conference (IBC) in Amsterdam. The move cements Telstra’s commitment to providing deeper capabilities in media services for customers in the broadcasting industry. International headlines continue to dominate, especially with the media giants like Globecast, Telstra, and other international entities.
Major changes coming to NCAA?
Big changes could be coming to college sports. NCAA championships could be played in states that allow sports wagering, coaches could contact recruits via social media without restrictions, and men’s basketball players could enter the NBA draft multiple times without jeopardizing their eligibility, under proposals to be reviewed in Division I. These concepts are among 72 proposals that will be voted on by Division I this academic year. Of the 72 proposals being considered by the NCAA, 14 would change rules in the areas of autonomy granted to the Power Five conferences. The newfound emphasis on team and conference “competition” for high school superstars may give rise to new standardization and more uniform rules. Ironically, the discussion on whether to pay “student-athletes” is no longer as relevant as how to structure their payments in a more uniform and competitively friendly way!
NBA getting punctual
A creative (and long overdue) sponsorship deal on the verge of coming to the NBA. More than 60 years after the NBA instituted the 24-second shot clock, the league is close to signing its first timing sponsorship deal, according to John Lombardo & Terry Lefton of SportsBusiness Journal. The NBA reportedly is in advanced talks with multiple watch brands and technology companies for a deal that would designate the sponsor as the official timing partner of the league and would include all timing aspects of an NBA game. The value of this deal will not be known until companies like TAG Heuer and Tissot give their best offers. However, the agreement would include licensing rights for the watch category, national broadcast exposure, in-arena advertising, and a great opportunity to generate new revenue from a traditional use. The NBA always cares about time, and it also cares about money!
Keeping home-ice advantage
How to maintain a home-ice advantage. As originally reported by the Tampa Bay Times, a new ticket policy by the Lightning will limit season-ticket resales in an effort to keep tickets out of the hands of scalpers and secondary markets. The preemptive measure is in anticipation of higher local demand following the team's postseason run. Fans had until late August to cancel their plans due to the new ticket-resale policy. The team will also begin a partnership with a ticket resale company to collect micro and macro data on customers. Look for the following trend: Requiring season ticket holders to attend certain games and events in order to keep their priority and preferences.
Wanna earn like Mike?
The biggest athlete endorser doesn’t even play anymore. NBA legend Michael Jordan made $100 million last year from Jordan Brand shoe sales, more than the $94 million he made in on-court earnings during his 15-season basketball career. Jordan's finances were recently disclosed in a court case over the use of his likeness. They indicated that Jordan made nearly $540 million from 2000-2012 from sponsors including Nike, Gatorade, and HanesBrands. Jordan remains one of the few athletes who actively transcends sports: Muhammad Ali, Arnold Palmer, etc. Clearly, his ability to hit left-handed pitches, and manage the Washington Wizards, did not come into play in his global branding accomplishments!
Pac-12 digging in
A long-running carriage dispute continues. The Pac-12 Networks have rejected a proposal by DirecTV’s parent company, AT&T, that would have allowed carriage on the satellite provider, but threatened the networks’ business model and long-term profitability. The proposal by AT&T reportedly included an equity stake for the telecom provider and likely would have forced the Pac-12 Networks to redo existing distribution deals at a lower subscription rate. Probably too late to resolve this issue by the end of the Pac-12 football season. However, as the Los Angeles Dodgers cable dispute demonstrates, a reasonable end to the “cable wars” is necessary for the lucrative Southern California sports viewer.
Commission coming for HMR salesmen
Hendrick Motorsports continues an impressive few weeks on the sponsorship front. Lowe's has extended its longtime relationship with Hendrick Motorsports by signing a two-year agreement that will continue its full-season primary sponsorship of Jimmie Johnson's No. 48 NASCAR Sprint Cup team through 2017. Meanwhile, HMS and Johnson also have agreed to a contract extension through 2017. The deals come after another sponsor, Axalta, recently broke ground on a customer experience center on the HMS campus. Sponsorship musical chairs continues to dominate the NASCAR landscape. Bedrock motorsports companies like Lowes should always be there. Companies like Axalta should be nurtured as dynamic newfound long-term revenue sources.
Goodell losing influence?
The NFL’s judge, jury, and arbiter, no more? NFL owners are prepared to negotiate with the NFLPA about changing Commissioner Roger Goodell’s role in the league’s player disciplinary system, with a goal of reaching an agreement before the end of this season. Ceding power would be a big loss for Goodell, who negotiated for the right to rule on player appeals in the last CBA. The discipline process has dominated the media headlines since the beginning of the 2014 season. However, the revenues available for the league (and its owners and players) have never been better. Clarification of a transparent and sustaining process is necessary to continue to move the league in a unified, positive direction.
Hockey in Vegas?
Is the NHL one step closer to Las Vegas? AEG expects to have a naming-rights partner for its under construction Las Vegas arena signed within the next two months. The facility will host as many as 140 events a year if the NHL awards a franchise to Fidelity National Financial Chair Bill Foley’s group. Capacity at the Las Vegas arena will be 17,500 for hockey and 18,800 for basketball. Look for Vegas to be awarded a franchise sooner than later -- probably at a fee of over $500 million. The Seattle, Quebec City, Phoenix interplay will probably continue after that. The Coyotes may hold the key to that “second expansion slot,” if it exists.
Bucks new arena behind schedule
And is a new arena in Milwaukee one step further than expected? Milwaukee Bucks investor Mike Fascitelli said that the team will complete its downtown arena project one year later than expected and is now targeting an opening to coincide with the start of the 2018-19 NBA season. Until Fascitelli’s remarks, Bucks execs had maintained the team still planned to break ground this year on the $500 million project. Governor Walker’s presidential aspirations have had a significant impact on the Bucks local arena controversy. Since the revenues are primarily generated from team-related income taxes (which would not exist but for the arena and franchise), the public/private partnership should be relatively easy to sell and implement.
Changing plans for the fans
For one NASCAR track, timing is everything. Richmond International Raceway has asked NASCAR to move the track’s spring race from Saturday night to Sunday afternoon. RIR has scheduled two Saturday night races since 1998, and is the only track with a pair of prime-time events. However, RIR officials believe a change to the afternoon might draw a different audience. Each NASCAR track is in a competitive race within its market to remain entrepreneurial and flexible -- especially with competition amongst other sports, entertainment, and other options. Kudos to RIR to make bold moves based on fan convenience.
DFS increasing sports consumption
The Massachusetts investigation doesn’t make fantasy illegal, so how can you win your league? The SportsManias app is a game-changer in fantasy sports. Fantasy players can import their teams from CBS, ESPN or Yahoo and receive real-time news feed on their players from the top experts and news sources. This will give them an edge to make smarter roster moves. The SportsManias app makes it easy for consumer to access content from the best sources, giving them an edge while increasing traffic for media companies. It’s as simple as downloading the SportsManias app, importing your team, and dominating your league. Fantasy players are massive consumers of media surrounding their teams. A DraftKings survey found that 70 percent of respondents said their sports consumption increased after they began playing daily. A FanDuel survey found that 50 percent of users attached more sports on TV as a result of daily fantasy play. Clearly, this app is a tide that lifts all boats!