15 to Watch (Week of Aug. 16)
Rick Horrow's "15 to watch"
CSN Bay Area sports business analyst Rick Horrow presents his top sports news/marketing/deal-making/business/corporate/endorsement issues for the week of Aug. 16.
Race to LA
Is San Diego the new front-runner to move to Los Angeles? With the Chargers critical of San Diego’s proposal for a new football stadium, it’s increasingly unlikely that a deal will be reached before a Sept. 11 deadline. The city must have a deal in place by that date in order to qualify for a January vote. The proposal made by the city and county called for 32% of the stadium’s cost to be funded by public money. It also includes contributions of $362 million from the Chargers, a $200 million loan from the NFL, and $187 million in PSLs. As expected, incumbents San Diego, Oakland, and St. Louis are gearing up for their “final stages” of respective stadium processes. St. Louis has made progress on its $998 million stadium, and Oakland and San Diego are awaiting their next “battles.” Clearly, the NFL will keep its eyes on the end of the season as an ultimate deadline -- with Los Angeles ready for a return to football after two generations.
Everyone wants to be like Mike
Nike’s Jordan Brand isn’t just for basketball. The University of Michigan next year will become the first college football program to be outfitted by Nike’s Jordan Brand subsidiary. The school in July signed a record 15-year, $169 million apparel contract with Nike, the largest apparel deal ever for a college program. The school’s basketball team also will wear Jordan Brand gear, one of five programs nationally to do so. Jordan has become the rarest of athletes/ambassadors, transcending his particular sport (or sports in general) like icons Arnold Palmer, Muhammad Ali, and a few others. Now, if he could just get his Charlotte Hornets to play somewhere close to his level!
Protecting the brand
What’s in a name? Apparently a lot of money. NBA legend Michael Jordan is in court, suing now-defunct supermarket chain Dominick’s for illegally using his name in an ad six years ago. Jordan is seeking $10 million in damages, claiming he will not do an endorsement deal unless it’s worth at least that amount. As part of the trial, Jordan’s attorneys said that he made more than $100 million in sponsorships last year, and nearly $540 million from 2000-2012. Jordan’s sponsors include Nike, Gatorade, and HanesBrands. As we described in No. 2 above, Jordan understands the value of his name -- and the lengths he must go to perfect it. This lawsuit has implications for all celebrities (in the name, likeness, and permissible use area) far beyond Michael Jordan himself.
Delivering content globally with ease
As the world shrinks, it’s becoming easier and more important to provide domestic audiences with international content. International telecom company Globecast recently won a project to contribute Weekly English Premier League Matches for Time Warner SportsNet. The company is picking feeds up in Europe on fiber and delivering them directly on its fiber network to a facility in LA. Another example of economic efficiencies transcending global telecasts. As transmission becomes easier and more technically efficient with companies like Globecast, look for more international exposure for all sports throughout the globe.
Sneaker wars between Adidas and Nike are heating up. Adidas formally announced a sponsorship deal with Houston Rockets star James Harden, which takes effect Oct. 1. Terms of the deal have been reported at $200 million over 13 years, a total Harden’s previous sponsor, Nike, declined to match. The long-term deal includes an exclusive signature collection, product design collaboration, and global marketing involvement, particularly in Europe and Asia. Nike is the unquestionable leader; adidas internationally and more now domestically; and Under Armour the “aggressive upstart.” In all cases, the clear winners are players, teams, leagues, and college conferences who will benefit from increased rights fees as a consequence of this sneaker war competition!
Top EPL clubs booming
The growing value of media rights is having a major impact on English soccer clubs. New valuations indicate that the 20 clubs starting this season’s English Premier League collectively are worth $13 billion. The total represents 460% growth in the 16 years since Richard Scudamore became the league’s chief executive. Among the league’s most valuable clubs are Manchester United at $2.7 billion, Arsenal at $1.7 billion, and Manchester City at $1.4 billion. In many respects, Premier League values mirror National Football League economics. The biggest differences are the imbalances between the “haves” and the “have-nots” in the EPL -- no significant television or corporate revenue sharing, and no salary cap or restraint to speak of in the EPL. Good for the top clubs, but not necessarily everyone else.
Not all PR is good, at least in the case of athlete endorsements. EA Sports confirmed that Blackhawks RW Patrick Kane will no longer be on the cover of NHL 16 and that the company has canceled his appearances for the game’s launch next month. Kane, the subject of a rape investigation in his hometown of Buffalo, is the first EA Sports cover athlete to be pulled before a game’s release. The planned cover had Kane and his Blackhawks teammate Jonathan Toews, but now Toews will appear alone. Rush to judgment, or a positive brand protecting itself? In this case, Kane may be a victim of timing, as the 2016 cover must be planned now (potentially before all the facts are known and the investigation is completed).
The season doesn’t need to start for ads to be sold. Even with Super Bowl 50 still six months away, CBS has sold a 30-second advertisement during the broadcast for a record $5 million. The amount is up 11% on the highest price this year's broadcaster, NBC, earned for its Super Bowl ads. NBC charged as much as $4.5 million for an ad during the most recent Super Bowl. When CBS last aired the Super Bowl three years ago, the average 30-second spot cost $3.8 million. Super Bowl 50 has an extraordinary cachet; first Bay Area Super Bowl in a long while; the technological magic of Levi’s Stadium; and the fact that Super Bowls are a half century old. We can all remember the first one in Los Angeles...
Fashion (and fiscal) statement
Marketing to women represents a huge growth opportunity for sports merchandise manufacturers. Vera Bradley unveiled a new collegiate line featuring 15 different schools. The line will offer a tote, a backpack, a duffel bag, a cross-body bag, and a wristlet for each of the schools through a licensing deal with IMG College and CLC. The schools include Alabama, Ohio State, and Stanford. Vera Bradley joins women’s handbag designer Dooney & Bourke, which launched its own line collegiate line last year. Kudos to the respective athletic departments and the high-end retailer for making a difference in college sports: Generating additional revenue for women’s programs (and all programs) and creating a new brand at the time college athletic directors need revenue the most.
Effecting change the right way
When the players speak, the league listens. The NBA released its 2015-2016 regular-season schedule, which features fewer back-to-back games and four-games-in-five-nights stretches for teams. The changes reflect the league’s desire to improve player health and increase rest days. The 82-game schedule will continue to run from the last week of October to the middle of April, meaning players will still play the same number of games over the same period of time. Good example of players providing appropriate input through NBAPA; and great example of Commissioner Adam Silver and the NBA continuing to develop a unique partnership with all players (not just the superstars). The future key will be the long-term impact on regular season television ratings -- expected to be minimal.
EPL & NBC
Profitability isn’t all that matters, at least as it related to EPL media rights. Although NBC renewed its deal for the EPL’s US media rights, network chairman Mark Lazarus acknowledged that the Premier League had not earned a profit through advertising during its current deal and would not in the next one. NBC will spend $1 billion over six years for the rights, which basically doubles the annual cost of NBC’s current, three-year $250 million contract. Value of relationships in international high-stakes negotiations to not be overestimated. NBC strives to hold on to one of its key iconic properties; and EPL awards pioneering royalty. A welcome result given recent “golf majors musical chairs” that has afflicted network television negotiations.
League of the future?
One innovative sports owner invests in a league of the future. RSE Ventures, a venture-capital firm co-founded by Miami Dolphins Owner Stephen Ross, is providing $1 million to the first round of funding for the Drone Racing League, which will hold its first public race later this year. The league intends to make money through sponsorships, media and ticket sales. The DRL, which hopes to recreate the success of live videogame competitions, is targeting an audience that includes videogame players and other technology-oriented people. Ross has been the quintessential entrepreneur, real estate developer, and intense sportsman for years. The Miami Dolphins purchase has given him a platform to expand his horizon, and the sporting world has benefited. Now if Ndamukong Suh and Ryan Tannehill can propel the Dolphins, he will truly be a happy man.
Scandals know no limits. The University of Minnesota will conduct an investigation into the finances and employment practices of its athletic department after AD Norwood Teague resigned due to sexual harassment allegations. Teague, who was hired by the university in 2012 after six years as Virginia Commonwealth's AD, was paid a base salary of $422,000 annually. Before he resigned, Teague was working on a fundraising campaign for a $190 million Athletes Village project, including new practice facilities for several teams and an academic and nutrition center. College scandals affect the industry at all levels: Players, schools, athletic administrators. As always, the key is speed, transparency, meaningful penalties, and the ability to restructure to reflect the investigation!
Trying something new
One network takes a one-time gamble on the importance of live streaming. Fox Sports signed a last minute deal to have YouTube live-stream the Bundesliga’s season opening match between Bayern Munich and Hamburg, marking the first time the network live-streamed content on the video sharing site. The agreement was described as a one-game-only deal to help build awareness around Fox' commitment to carry the German soccer league for the first time this season. Obviously, look for more of this in the future. As the NFL streams one of the October regular season London games, and as all networks probe to maximize profit, visibility, and reach!
Keeping up with today's digital landscap
The sports media landscape continues its expansion into the digital marketplace. Sportsmanias, a sports news aggregator site that combines a dynamic mix of professional beat writer news with team and athlete social media content is holding a digital media summit in Miami this Friday. The event will feature several panel discussions with some of the country’s top sports writers and will cover topics ranging from today’s digital landscape to tomorrow’s audience and the social media missteps. The Knight Foundation has always been a critical thought leader in ethical journalistic standards. Now, the organization is associated with Sportsmanias to host a watershed conference on the issues surrounding journalism and social media. I am honored to host and keynote at the event, which should provide significant insight into a rapidly growing concept.