15 to Watch (Week of Oct. 25)
Rick Horrow's "15 to watch"
CSN Bay Area Sports Business Insider Rick Horrow takes you off the field with his 15 top Biz Ball trends for the week of Oct. 25.
Baseball's biggest stage is set
World Series opens in Kansas City... The New York Mets making the World Series is a big deal and fans in the city are treating it as such. Ticket resale services said that seats for Games 3-5 of the World Series at Citi Field are currently the costliest in baseball history with an average price of $1,667.82. When the Boston Red Sox made the World Series in 2013, the average ticket price for a game at Fenway Park was slightly less, averaging $1,660.96 for the Series. TiqIQ Director of Data & Operations Chris Matcovich said, “They are slightly more expensive than the Red Sox in 2013. The biggest reasons, I’d say, are the 15 years since their last appearance and the New York market.” TiqIQ found that the cheapest standing-room ticket for Game 3 next Friday "was $764 while the cheapest seat was $767." These numbers are over $100 greater than the expected top ticket prices for the first games in Kansas City, a team that has had much on-field success but in a smaller regional market.
NFL International -- successful Week 2; on to Week 3... The game between the Buffalo Bills and Jacksonville Jaguars this past weekend marked the first NFL contest to be streamed online at no cost. This was a significant event for the league, as the NFL’s deal with Yahoo could serve as a precursor to the NFL streaming its game around the world. The game, which was played overseas in London and was projected to generate at least 3.5 million separate streams, received generally positive reviews of Twitter -- the picture quality was cited by many to be surprisingly really good on phones and tablets. With the league looking to play even more games internationally in the near future, the demand for Yahoo’s streaming services can be expected to increase. Kansas City plays Detroit in the third international series game -- look for activity in Germany, Mexico, Brazil, and elsewhere in the coming years.
Fully integrated sponsorship
Global mega television deal -- Lagardere and Asian Football Confederation... Fresh off a global rebrand, Lagardère Sports is in the midst of renewing its multiyear marketing and media rights deal with the Asian Football Confederation (AFC). According to sources, the new deal between the leading sports, entertainment, and media agency and the AFC, led by likely FIFA presidential candidate Sheikh Salman bin Ebrahim al-Khalifa of Bahrain, will supplant a current $1 billion agreement forged in 2009 that is scheduled to run through 2020. The deal will reportedly comprise exclusive media and marketing rights for major events sanctioned by the 47-member AFC. While Lagardère Sports COO Andrew Georgiou has yet to formally confirm that a renewal has been inked, he shared with Reuters that the two parties had "had negotiations and expect to renew the contract." “It’s a long-term deal,” Georgiou said. “We have all the commercial rights and we see the relationship between sponsorship, the media sales and the digital platforms as being much more related to one another. "We’re creating digital platforms now where sponsors are able to incorporate in their sponsorships access to digital platforms and we are incorporating sponsors as part of our broadcast platforms. A sponsor that’s looking to sponsor AFC now can actually integrate a lot more into the live programming, post-produced programming, into digital platforms, and we do the production as well. It’s quite an integrated approach and we see real growth in value as a result.” As the international sports business approaches one trillion dollars annually, mega-deals between super-agencies and large rights holders will continue to be the norm.
Would 2024 Olympics make LA an elite global city?
Los Angeles and the 2024 Olympics -- getting closer? Casey Wasserman, co-chair of the 2024 Olympic bid for Los Angeles, is beginning to cite the bid as more than just a sporting event, but a humanitarian effort for the city. Amidst a struggle with homelessness and education, Wasserman spoke at the Future of Cities: Leading in LA, saying, “A city like LA can do a lot of things. Let’s be honest, if we don’t host the games, we have no opportunity to elevate this city. We have no opportunity to show the world what LA is. We have no opportunity to unite the city around a singular event. And we still have those other problems.” Mayor Eric Garcetti often talks about his city being one of the three or four greatest cities in the world, and if the summer Olympic Games were to come to Southern California in 2024, many believe the event would push the city into elite status. Wasserman sees LA having a tremendous opportunity to become the poster child for IOC bidding reform, placing a greater weight on sustainability, including the use of existing sports venues. The Olympics would help create additional revenue for the city and ultimately help address the issues of educational inequality and homelessness in the process.
Upgrading the facilities
NBA opening week... Adam Silver presides over a league rich with sponsorship, television revenue, fan interest, and newfound stability. As always, facilities are key to all of that. The Atlanta Hawks are currently working on a plan with Atlanta Mayor Kasim Reed to give their home Philips Arena a major facelift. The planned renovations of the arena could total $150-$250 million, and the team has retained a firm to design the overhaul. The renovations would help keep the team downtown, next to the new stadium being built for the neighboring Atlanta Falcons. The city and team are talking about using public funding to help aid this process, and while a total amount of funding has yet to be disclosed, Mayor Reed is on board with this idea. Hawks Owner Tony Ressler, who bought the team this past June, made it clear that one of his first goals was giving the 16-year-old arena a makeover. As of now, plans could include a wall of suites on one side of the arena and would “involve connecting disjointed corridors for better flow of fans and opening corridors to the game action.” A long-term facility plan, coupled with new ownership and on-court resurgence, could elevate the Hawks to elite NBA status.
Ready for daily fantasy basketball?
NBA opening week: Fantasy dominates the landscape... NBA Commissioner Adam Silver recently called for federal regulation of daily fantasy operators, but also said that the league will continue its partnership with FanDuel despite multiple investigations into industry trade practices and questions over the legality of the contests under federal and state gambling laws. With the recent developments concerning the scandal within daily fantasy sports (DFS), Commissioner Silver said that he is “nervous” about the recent drama but welcomed the growing scrutiny as a path to regulation that will protect fantasy players. Silver said on the issue, “There should be a regulatory framework; there should be increased transparency for consumers. I think it would ultimately aid the industry. In fact, I think we're seeing the marketplace impacted, because there's not a clear regulatory framework right now.” With the NBA setting the precedent and electing to keep their partnership with FanDuel, expect individual franchises and other leagues to do the same with respect to their deals with companies in the daily fantasy space.
NCAA keeping distance
College sports and fantasy: Careful progress... The NCAA is continuing to distance itself from daily fantasy sports, most notably sites DraftKings and FanDuel. The NCAA called off planned talks to iron out differences after having already told the sites privately that they would be barred from advertising during men’s and women’s March Madness basketball tournaments this upcoming year. The NCAA sent a letter to both DraftKings and FanDuel cancelling a meeting with them in light of several official inquiries, including those by the FBI and the New York Attorney General, into the fairness and integrity of the games. In addition to March Madness not being allowed to advertise for daily fantasy sports, SEC Commissioner Greg Sankey said that the conference has asked the SEC Network, which ESPN owns, not to air ads for DFS. The Pac-12 and Big Ten Networks still air these ads, but that is subject to change amidst this drama. The NCAA has further asked daily fantasy sites to stop offering fantasy games based on college sports, and NCAA Executive Vice President/Championships & Alliances Mark Lewis wrote, “We believe that your product should not be offered in the college space for a variety of reasons, and we do not believe a further meeting with your organizations will change that view.” As with other teams, leagues, and entities, fantasy will continue to survive until further notice -- largely because of the significant attention, advertising revenue, and sponsorship brought to the equation.
From niche to mainstream?
Professional Bull Riding -- rekindling a popular niche sport... In line with the start of the Built Ford Tough Series World Finals on Professional Bull Riding (PBR) circuit, entertainment company WME-IMG purchased PBR for around $120 million. While the company may think they have gotten a deal here, they are aware of the risk they are taking with the purchase. The rise of extreme sports and mixed martial arts has shown that “there’s an appetite for live events that put fans closer to the action,” and with a recent rise in bull riding on a global stage is a large contributing reason as to why WME-IMG were willing to take this risk. PBR now stages events in the US -- including New York City, Chicago, and Las Vegas -- Mexico, Brazil, and Australia. Under its new ownership, WME-IMG plans on taking bull riding to China to tap into a massive untouched market, as well as making bull riding a mainstream sport -- not a niche market sport. One of the sport’s main selling points is its “danger” aspect, something that fans have clearly grown to love with hard-hitting sports like football and MMA. By taking advantage of this and further expanding the sport’s licensing agreements, WME-IMG Chief Content Officer Mark Shapiro said, “In the future you can see us putting sensors on our bulls or sensors on our riders so that when you're watching at home, you can see their blood pressure, you can see the amount of strength that a bull is using.” The PBR has all a niche sport might need -- passionate fans, appropriate demographics, sponsor interest, television compatibility. Look for the PBR to skyrocket in coming years.
Beckham's boys in Miami?
MLS finally coming to South Florida? As David Beckham continues his push to bring an MLS club to Miami, new investors are hopping on board. Sources say that the newest member to Beckham’s crew is outgoing MLSE President and CEO Tim Leiweke. Leiweke was cited to have played an instrumental role in bringing the English soccer star to play for the LA Galaxy, and the two have stayed close since then. Beckham’s group has been negotiating with the City of Miami and Miami-Dade County to build a soccer-specific stadium adjacent to Marlins Park, and Leiweke has been cited to have been meeting with Miami-Dade politicians over the past several weeks to accelerate the deal. A source said that have “made significant progress since Leiweke joined the talks, and hope to have an agreement reached before Christmas.” City of Miami officials said that a vote on a proposed stadium for Beckham’s potential MLS club “could go before the Miami city commission as early as December, with a referendum going before Miami voters in March. South Florida has a mixed history of public/private facility partnerships. I was involved in the first Miami Arena and the attraction of the Miami Heat in the mid-1980s. Since the huge fan fare surrounding the first MLS press conference over a year ago, political false starts and controversy has been the norm – maybe this stadium will be a welcome Christmas present after all.
Nike and Michael Jordan -- ongoing synergies... Under Nike’s plan to double its Jordan Brand revenue to $4.5 billion by 2020, a new Jordan brand store has just opened in Chicago’s loop to help reach the company’s goal. While Chicago marks the first Jordan Brand store, Nike has plans of opening similar stores in New York, Los Angeles, and ultimately Toronto. To keep track of the brand’s individual success, Nike plans to begin reporting Jordan Brand financial results separately instead of lumping them into its basketball division. The new store in Chicago pays homage to Michael Jordan beginning at the store’s exterior – just the Jumpman logo and the address, 32 S. State St., are listed. The multi-story store is sure to be a massive success for the basketball-crazed city of Chicago, of which has not gotten over the glory days of MJ. The Jordan brand is diversifying into other sports and regions, but Chicago is always “ground zero” for profitability.
Texas re-ups with Nike
More Nike revenue -- the juggernaut continues... Nike and the University of Texas have reached a deal to extend the school’s contract -- a 15-year deal that is expected to be college sports’ richest. Under Armour was trying to slide in and make pitch to Texas when the school could not initially reach an agreement with Nike, but they are no longer in the picture. A source said that the contract’s total value is expected to approach $200 million, but would certainly be higher than the one University of Michigan signed with Nike -- 15-years worth $169 million. The school is set to receive $13 million annually, up a considerable amount from the $3.2 million the school will receive this year under its current Nike deal. That number could be bumped up to $15 million though, as Texas has been the top seller of t-shirts, hats, and other merchandise in college athletics for nine straight years. Texas football fortunes improving, basketball program stabilizing, and athletic directorship resolution around the corner -- possibly good times ahead for the Longhorns.
Evening the field
More “comfortable role model athletes...” United States Silver Medal-winning freeskier Gus Kenworthy recently announced that he is gay. Kenworthy, who is considered to be at the height of his career and the top athlete is his sport, cited that he has been wondering how his choice to come out will impact his current sponsorships. In an action sport like freeskiing, sponsorships make up a large majority of an athlete’s income; Kenworthy said that he makes about 80% of his $500,000-$1 million a year from sponsorships alone. As of now, he has contracts signed with Nike, Atomic, GoPro, and Monster. With “legitimate income on the table,” Kenworthy is “worried” about how his announcement will resonate. He said, “Everyone wants to wear a Red Bull or Monster or Rockstar cap, a T-shirt and jeans and skate shoes. Everyone drives the same type of car and listens to the same kind of music. The industry isn’t the most embracing of someone who’s different.” What happens now with his sponsors is certainly something to watch -- the X Games in January is Kenworthy’s next big event. More athletes feel comfortable about publicly expressing their sexual preference -- and more sponsors are embracing the opportunity.
Leaving the Trop?
Tampa Bay Rays stadium situation close at hand? The St. Petersburg City Council has approved a plan to let the Tampa Bay Rays out of their Tropicana Field contract. Citing this as “a long-sought breakthrough that allows the team to explore new stadium sites outside St. Petersburg and inside Pinellas and Hillsborough counties,” the Rays would actually have to pay a higher cost than what the team had previously agreed to if they were to leave Tropicana Field in 2020. City Council member Jim Kennedy’s plan would require the team to pay a $5 million charge for demolition and $4 million a year once they vacate the ballpark. So if they leave in 2020, the club would pay $33 million. The Rays’ lease runs out in 2027. Kennedy and City Council Chair Charlie Gerdes have both said that they "acted with urgency" after the Braves "revealed plans to build a spring training stadium in Pinellas, which would have vied for the same tax revenue the Rays would need for a stadium." Long overdue move to allow the Rays more flexibility to find a permanent regional home well before their 2027 lease expiration date. Good for baseball, good for the region, and good for the Rays.
Russia cutting World Cup costs
World Cup preparations: Russian deadlines... Russia’s Ministry of Sports has finally agreed on the cost of construction for the Kaliningrad stadium in preparation for the 2018 World Cup. According to the Deputy Prime Minister of the Kaliningrad region, the country’s Ministry of Sports agreed that the cost of the new stadium should not exceed $296 million. Stadium Kaliningrad is to be built on October Island, but construction pricing had been stalled over the amount of groundwork required for the stadium. The capacity is set to be greater than 35,000, but will eventually be reduced to around 25,000 following the World Cup. Expenses for the 2018 soccer tournament have been cut by around $71 million, according to a Russian government decision. This price cut will reduce overall costs of implementing the World Cup program by over $100 million for the host country Russia. For once, a budget line item that speaks to cost reduction rather than cost overrun.
Reevaluating long-term business strategies
ESPN restructuring? Citing an ultimate goal of creating an important competitive advantage for his business over the long term, ESPN President John Skipper has elected to continue laying off employees at a high rate. So far, the sports network has cut around 300 of its employees loose. The layoffs have affected every part of ESPN’s business, with the production and technology groups getting hit the hardest, sources said. One longtime employee of the company described the atmosphere in Bristol as the worst he has ever seen -- two-thirds of the company’s layoffs come from ESPN’s main headquarters. Entrepreneurial networks continue to reevaluate their long-term business strategies -- globalization, Internet, 3-D, rights fees, etc.