15 to watch (Week of Sept. 6)
Biz Ball trends to watch this week
CSN Bay Area Sports Business Insider Rick Horrow presents his top sports news/marketing/deal-making/business/corporate/endorsement issues for the week of Sept. 6.
Are you ready for some football?!
In a major defeat for commissioner Roger Goodell on the eve of the NFL season, Judge Richard Berman overturned the four-game suspension of New England Patriots QB Tom Brady for his role in the Deflategate scandal. The league will appeal the decision, though it appears unlikely the NFL can keep Brady off the field when the season starts on Thursday. This is just the latest Goodell suspension to be overturned upon appeal. Other examples include the Saints Bountygate scandal, Ray Rice, and Adrian Peterson. Goodell is planning to skip the season-opening game this Thursday in New England, but with Brady planning to take the field, broadcaster NBC can expect to see a significant increase in ratings. For all of the negative PR surrounding Deflategate, the league’s media partners – who will pay a combined $5 billion this season – must be happy with the attention the scandal is getting and judge Berman’s ruling to let Brady play. The New England fan base acted like it won another Super Bowl as the Berman decision was announced – the luster has not worn off even a week later. Globally, last year’s numbers showed the average NFL team was worth $1.43 billion, up 23 percent more than the year before (the biggest year over year increase since 1999). Despite courtroom setback, the brand continues to excel.
And are you ready for some fantasy football?!
Other than Deflategate, arguably the biggest story heading into the NFL season is the growth of the billion-dollar fantasy sports industry. In additional to fantasy stalwarts CBS, ESPN, and Yahoo, new daily fantasy providers DraftKings and FanDuel are spending millions of dollars in an attempt to lure new players. One company that’s generating new content around this industry is Sportsmanias, which is releasing a new feature on its app to provide personalized player alerts and feeds. The feature is agnostic in the sense that it’s compatible with the major fantasy platforms. With over 60 million fantasy players spending $465 million per year – a $26 billion annual industry (and growing faster than any sports industry market segment!). The Sportsmanias campaign features a simple plan: download the app, import your team, and “dominate your league.” Most ads are based on gaining the competitive advantage (either for money, pride, or both).
For the NFL, the LA threat looms large
The NFL offseason always represents a massive game of relocation musical chairs, as coaches, veterans, and rookie players scramble to find the appropriate housing. But no summer in recent memory brought more relocation uncertainty, as at least one, if not two, NFL teams is likely to move to LA next year. Such players as the Raiders' star rookie Amari Cooper, the Rams' Tavon Austin, and their attentive agents from Lagardere Unlimited, must now not only deal with their current season housing situations, they may want to think very short term lease. As the season starts, the deadline winds down for incumbents Oakland, San Diego, and St. Louis. However, my experience confirms that most of these deals are done at the last minute, with a realistic deadline looming. Carson, Inglewood, Coliseum, downtown, and other Los Angeles sites can plan – but they must continue to wait.
US Open enters its second week
The event will generate an estimated $700 million in economic impact for the New York market over the next two weeks. That total doesn’t even include sponsor spending. As Williams attempts to complete the “Serena Slam” – winning all four Grand Slams this calendar year - she’s helped bring new advertisers to the sport. In addition to official US Open sponsors JPMorgan Chase, IBM, and American Express, new companies like Dick's Sporting Goods are buying inventory within live match coverage. Serena Williams has become a definitive US Open “cottage industry,” boosting awareness, corporate activation, advanced ticket sales, and other economic indicators 20-25 percent this year. The weather has not hurt either. Clearly, two-week tournament records will be shattered.
College football season rolls on...
But it’s a costly one for many athletic departments. While the Power 5 Conferences say that approval of a cost-of-attendance measure was inevitable, the stipends are exacerbating an existing imbalance between the Power 5 and the other leagues and within conferences. Most D-I programs already operate at a loss, and that’s before accounting for the new expense, which can cost more than $1 million per year. Across D-1, more than $160 million is being earmarked for cost-of-attendance stipends. Professional sports grapple daily with reconciling the “haves” vs. the “have-nots.” With the new recruiting of high school superstars that will become the inevitable norm, the Power Five conferences (and their teams) face the same competitive issue.
Home stretch of the NHL’s expansion efforts
Las Vegas and Quebec have begun the final stage of the NHL’s expansion process. The third stage reportedly involves the NHL reviewing the applicants’ business plans and revenue projections. While the NHL has not revealed the details of the process, the stage is scheduled to end this month. The NHL last expanded in 2000 with the addition of the Minnesota Wild and Columbus Blue Jackets. At the time, the teams paid expansion fees of $80 million. That figure reportedly could jump to $500 million in the next expansion. Look for the expansion process to parallel the ongoing arena/lease negotiation/drama in Arizona. Seattle has not formally applied, but many insiders would love a franchise to be relocated there – depending on the arena financing timetable.
MLB in Portland?
A Portland group is renewing its effort to bring a MLB team to the market and has been in contact with the league office about its ambitions. The group, led by Portland-based Sports Management World Wide President Lynn Lashbrook, has long wanted to lure a team to the city, either by relocation or expansion. While nothing specific is in the works, an MLB expansion fee could nearly double the $500 million the NHL reportedly is considering. Commissioner Rob Manfred has not brought up expansion since his tenure began, and most markets seem to be settled beyond a relocation threat/leverage. Nevertheless, leagues always enjoy nurturing a possible expansion/relocation candidate for future action.
Money in flight
Alaska Airlines has signed a 10-year, $41 million deal for the naming rights to the University of Washington’s football stadium. The deal is the largest of its kind in college sports. More than half of Alaska Airlines’ spending will go to directly to student-athlete scholarships and welfare. As part of the deal, UW has also created an Athletic Village presented by Alaska Airlines, which incorporates all of the athletic facilities located around the football stadium. College athletic directors rejoice every time a new naming deal is done. It helps confirm and crystallize the revenue sources available: naming, stadium alcohol sales, unique merchandise/uniforms, etc.
Prokhorov goes all in... again
Mikhail Prokhorov is nearing a deal to buy all of the Barclays Center and the Nets from Bruce Ratner’s Forest City Enterprises. Prokhorov has been in talks to buy the remaining 55 percent of the arena and 20 percent of the Nets that he does not already own. The Nets are valued at an estimated $700 million, but after subtracting $210 million of debt, the franchise has an equity value of $490 million. Ironic that Prokhorov seeks to consolidate arena and stadium ownership as his “veteran player strategy” seems to have passed its point of reasonable success. The NBA usually likes owner consolidation processes, regardless of who owns the franchise.
Seeking record franchise sales
As originally reported by the Pittsburgh Post-Gazette, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, the Pittsburgh Penguins are asking for a record $750 million for the franchise, but could accept less money if a potential buyer is willing to forgo development rights on the old Civic Arena site. If the Penguins get their asking price, it would be the most paid for a US-based NHL franchise, more than doubling the previous high of $320 million that was paid for the Devils in 2013. This clearly may be the right time for the sale of NHL franchises -- $500 million expansion announcement, record revenues, labor peace, enlightened management. The proof will be if and when an actual sale is done and a price is announced.
International presence opportunity
Jacksonville Jaguars owner Shahid Khan hopes to extend his team’s contract to play a regular-season game in London each year through 2030. The London home game accounts for 15 percent of the team’s local revenue. Though the NFL recently signed a 10-year deal to play games at EPL club Tottenham Hotspur’s new stadium, Khan said he would prefer to continue to play games at Wembley Stadium. NFL International continues to thrive with executive Mark Waller looking to expand revenues and reach. Mexico, Germany, Brazil, China, and other markets seem poised for NFL attention.
Los Angeles Clippers C DeAndre Jordan has parted ways with his representatives at Relativity Sports. Jordan informed his agents of the decision a few days after the NBA fined the Clippers $250,000 for violating rules designed to keep teams from offering players unauthorized business or investment opportunities. The Clippers made the violations during their pitch to Jordan on July 2, as they apparently discussed marketing opportunities that the NBA said included a third-party endorsement deal with Lexus. Jordan’s decision highlights the volatility of the team sport agency business. Here today, gone tomorrow. Obviously, incumbent on agencies to provide ongoing financial, endorsement, and contract assistance to stay ahead of mercurial athletes.
Fool me three times, shame on both of us
As originally reported by the Miami Herald, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, Marlins owner Jeffrey Loria once again is expected to make sweeping changes to his baseball operations staff at the end of the season. Loria has hired 10 managers in his 13 years as the Marlins owner, including notoriously moving GM Dan Jennings to the dugout this season despite Jennings having no managerial experience. Loria’s relationship with Jennings reportedly has become strained during this disappointing season. Even with a new stadium and their World Series history, the relationship between South Florida fans and the Marlins continues to be strained. In many ways, this offseason may be a watershed one for the franchise.
Quest for improved fan experience, more revenue
The Cleveland Cavaliers are looking to expand their in-seat concession ordering options at Quicken Loans Arena through a partnership with a local app company. During a 22-game trial run last season, customers using the Tap.in2 app spent an average of $32 per arena visit. Fans who used the app received their orders in an average of fewer than six minutes, and the technology was used by 25 percent of the 5,000 potential customers. Another example of combating “de-couching” – the perilous choice between first-class high-tech home and mobile media vs. the new stadium/arena experience. Kudos to the Cavaliers for taking this issue on directly.
Rooney Rule to college sports
Pac-12 commissioner Larry Scott said he would support a version of the NFL's Rooney Rule in college sports. The Rooney Rule requires NFL teams to interview minority candidates for head coaching and senior football operation jobs. Among D-I football schools, only 11 football coaches are black. Larry Scott has become a pioneer amongst conference commissioners – the minority hiring rule applied to colleges may be long overdue, appropriate, and a move in the right direction!