Sports Business

Sports Business

1. NBA opening week. The 2015-16 regular season begins, amidst unparalleled business success (television revenues, franchise values, awareness, attendance, and lack of Sterling-related controversy). While the NBA Global Games are certainly a time to share the great sport of basketball around the world with those who otherwise have limited exposure to the NBA, it also serves a vital purpose of helping the league and teams deepen their business connections. The Orlando Magic’s recent trip to Rio de Janeiro, Brazil, is the latest example demonstrating the Magic and NBA’s serious intentions of tapping into the Brazilian market. A trip that featured multiple community service events, including lessons for local kids put on by the players, culminated in an exhibition game against hometown club Flamengo. A large reason for trying to win over the hearts of Brazilian fans is because, as Magic CEO Alex Martins summarized, is that last January and February – the prime summer-vacation months for Brazilians – the Magic "played several regular-season games at Amway Center that each drew more than 2,000 ticket-buying fans from Brazil and one game that drew about 3,000 fans from Brazil." Magic executives have been trying to promote their own brand for over a year now in an attempt to develop relationships with major Brazilian companies to attract them as new sponsors. This is just the latest example of an American sports league making a valiant push to expand its reach across the world, taking advantage of a largely untouched market – especially with the Olympics coming next year.

 

2. NFL International – streaming game in London, and other news. Next Sunday marks the first exclusive global free streaming of an NFL game – more to come as the league evaluates its revenue potential from this platform. We will be there to cover and report all aspects of the event. In addition, football continues to evolve globally with games in London and talks of bringing the Pro Bowl overseas, but the Houston Texans firmly believe there is a chance the team could play a regular season game in Mexico City next year. Texans President Jamey Rootes said, “We’ve always expressed that we have an interest in participating internationally as a road team. We’ve made it clear that we’re most interested in doing that in Mexico.” The team has commented that they do not want to play a home game away from their home turf, but would definitely be interested in playing a road game across the border. This would not mark the first time an NFL game would be played in Mexico City – the Arizona Cardinals defeated the San Francisco 49ers before a crowd of 103,467 at Estadio Azteca back in 2005. Houston represents a great ambassador for the league in Mexico, a city close to the border that could help draw in a great deal of sponsorships and fans for a potential game.

3. International television deals – part of trillion dollar sports industry. Just this past week, Lagardere Sports has announced it has won host broadcasting contracts to five sports events across three continents in November, ever expanding its global reach. These events include the International Weightlifting Federation World Championships in Houston, Texas, the World Wushu Championships in Jakarta, Indonesia, the Race of Champions mixed motorsports event in London’s Olympic Stadium, the Tour of Taihu Lake cycling race in China’s Jiangsu Province, and the Scottish Open Badminton Grand Prix in Glasgow’s Emirates Arena. In regard to the company’s new plans, Peter Angell, Senior Vice President of Media - Production at Lagardère Sports said, “Following a busy summer…we are delighted to expand our production business with new clients on three continents. The fact that all these events will take place during the same month demonstrates the wide-ranging expertise, resourcefulness and depth of the Lagardère Sports production team across our offices in London, New York, Stockholm, Lausanne and Singapore.” Just the tip of the iceberg, as more mega-agencies are making larger deals across the pond. Over 55 percent of the trillion dollar annual sports business is international broadcast related.

4. Bouchard in court. Tennis player Eugenie Bouchard filed a lawsuit yesterday against the USTA that alleges the sport’s national governing body was negligent, leaving her to slip and fall in a locker room during the U.S. Open. Bouchard in the suit says that she "has suffered severe pain and economic loss after the Sept. 4 incident." The suit was "filed in U.S. District Court in Brooklyn" and seeks "unspecified monetary damages." Shortly after a match in the Billie Jean King National Tennis Center, Bouchard slipped and fell on the tile floor of a physiotherapy room that is inside the locker room, slamming her head against the ground. She later withdrew from the U.S. Open and tournaments in China and Japan. Bouchard claims that the USTA "didn't keep the locker room in a 'safe and suitable condition' because the organization failed to maintain, clean and repair the floor, which led to her fall" (AP, 10/14). Bouchard in the suit says the fall was induced by "a slippery, foreign and dangerous substance on the floor." Her attorney, Benedict Morelli, said that the substance "was a cleaning agent that was intended to be left on the floor overnight when the room would no longer be used." In N.Y., Ben Rothenberg notes Bouchard is "asking for a jury trial." Morelli said, "We could be talking about millions and millions." But he added with her still experiencing symptoms, "we don't know the extent yet". Given her recent performance, much of her future income may be derived from a legal court, rather than a tennis court.

 

5. Sports social responsibility. In an unprecedented alliance of most of the larger sports properties – including the NFL, NBA, MLB, MLS, and NCAA – Miami Dolphins Owner Stephen Ross’ nonprofit Ross Initiative in Sports for Equity (RISE) detailed its plan to launch a nationwide campaign against racism. Racism has been a constantly prevalent issue around the world, especially in sports, that needs to be addressed and enforced more strictly. RISE plans on running a series of PSAs across major sports on major sports networks, including ESPN, Fox, CBS, NBC, and Turner. These PSAs will also air in venues during and during game broadcasts. Some of the world’s most recognizable athletes, such as Lebron James Tom Brady, Stephen Curry, Antonio Brown, Larry Fitzgerald, and DeMarcus Ware, are inviting fans to “take a Rise to Win pledge at the organization’s website.” To combat racism, RISE also plans “activation at stadiums and arenas, a series of town hall meetings that address inclusion issues, and an education program designed for athletes, coaches and parents.” Kudos to Steve Ross for taking an initiative that is long overdue – along with the need for a partnership with all leagues, teams, players associations, and agents!

6. Retail bounty. Nike just made a bold prediction: $50 billion in annual revenue and doubled women’s business coming within the next 5 years. With the ongoing expansion of Nike’s subsidiary Jordan Brand and its women’s department, Nike was able to predict this impressive marker and goal it set for itself. Nike Brand President Trevor Edwards said that the company's women's business is expected to rise to $11 billion by '20 from $5.7 billion this year, and its e-commerce business is expected to jump from about $1 billion this year to $7 billion in five years. Meanwhile, Parker said that it is time for the Jordan brand to "move beyond the confines of the past thirty years of being largely limited to men's basketball." By signing the University of Michigan as the brand’s first football team, Nike has made that intention clear and has already started to act upon it. Nike’s popularity and market size in China continue to grow, providing the company with a sizeable amount of revenue that is only projected to increase. While $50 billion in annual revenue is certainly an ambitious goal for Nike, it can be done. The goliath sportswear company has always proved doubters wrong – now Jordan, women, and China lead the way.

 

7. Adidas “response.” James Harden’s Adidas deal, worth a whopping $200 million over 13 years, is expected to go beyond signature shoes and on-court apparel. With the signing of Harden, the company has stated that they are trying valiantly to “reboot” their basketball business and that inking Harden is the first step in this long process. While Harden’s first signature shoe is not expected to release until late 2016 or early 2017, Adidas is banking on Harden’s off-court sense of style and fashion to create apparel opportunities beyond the court. Adidas GM of Global Basketball Chris Grancio discussed how the company has an association with the Japanese designer Yojhi Yamamoto called Y-3, and that the company could start working with Harden to produce merchandise for those clothing lines “as we start to bring his personality to life in the products we make.” Sneaker and retail wars between Adidas, Nike, and Under Armour good for everybody – teams, leagues, players, college athletic programs, etc. – especially with the revenue and rights fees generated.

8. Major League Baseball Championship Series. Revenue bonanza for baseball, as well as the Cubs, Mets, Blue Jays, and Royals – another positive defining moment for Commissioner Manfred.The Houston Astros announced they would push back plans to renovate Minute Maid Park, citing the club’s surprise playoff push would not allow enough time to complete the renovations before the start of the 2016 season. The team plans of removing Tal’s Hill in center field, moving the center field fence from 436 feet in to 409 feet as well. Also planned is an elaborate redesign of a 92-foot-tall observation tower/elevator, a field-level club section, mezzanine seats and a redesigned concourse with bars, concessions, and stores. Astros Presidents of Business Operations Reid Ryan said that all of these plans will “remain in play” for 2017 and beyond, but will definitely not be completed for the upcoming season. The renovations are now potentially going to be completed in two off-seasons instead of one, as the Astros count on making the playoffs again next year due to their rapid special year in 2015. Pleasant problems for the Astros to face.

9. Fantasy hot seat. The ongoing controversy surrounding daily fantasy sports continues with the recent announcement that the DOJ and FBI have begun looking into whether the business model of daily fantasy sports operators violates federal law. FBI agents have been contacting customers of DraftKings to inquire about their experiences with the Boston-based company, marking the early stages of what is poised to be a thorough, drawn-out investigation. A DraftKings spokesperson commented on the investigation, "It is entirely predictable that the government would follow up on the misleading reports about our industry. We have no knowledge of the specifics of any federal investigation but strongly disagree with any notion that our company has engaged in any illegal activities." The popular site FanDuel has also been identified; a large reason for the investigation stems from the issue that sites may have encouraged and accepted deposits and bets from states where these contests were prohibited. This marks the first time that the federal government has officially begun to evaluate the industry’s legal status. Clearly, the 2006 law allows for this kind of activity, and the initial hearings were to be based primarily on revenue business practices – and how to tax them.

 

10. College football viewership increases. Leading up to this past weekend’s rendition of “College Gameday” in Ann Arbor at the University of Michigan, ESPN had been averaging 1.95 million viewers per show – the pregame show’s best figure through Week 6 since 2011, when it was averaging just over 2.0 million viewers. A season high of 2.23 million viewers tuned it to see hosts Rece Davis, Lee Corso, Kirk Herbstreit, and co. make their pregame predictions for the Alabama-Wisconsin matchup in Ft. Worth, Texas. Those 2.23 million viewers mark Gameday’s best show audience since November 24, 2012, when it aired from the Notre Dame-USC game in Pasadena, California. These numbers are a great sign for ESPN, as the network hopes they will continue to grow as the season continues. This season marks college football’s second year under the new playoff format, so when conference titles and playoff football begin, “College Gameday” should expect more viewers to turn in.

11. NHL after three regular season weeks – business stability; potential expansion? Las Vegas is still making a push to get an NHL team, and Fidelity National Financial Chair Bill Foley is at the forefront of that effort. Foley, the leader of the bid for Las Vegas, continues to try and convince the league and NHL Commissioner Gary Bettman that the city is more than just casinos and gambling, that there is a demand for hockey that can be sustained. Foley said, “I don’t believe (Bettman) believes how Las Vegas responded in terms of season ticket deposits. We have 13,500 season-ticket deposits, and these are not casinos. This is the people of Las Vegas. We have deposits for a team that doesn’t exist for an arena that is not yet built. That’s when it all started coming together.” Foley and those involved in the city’s bid hope to be given a team by early 2016 so that they can start organizing the franchise and putting the necessary pieces in their respective places. Foley went on to talk about how Las Vegas is a city that over 40 million visit on a yearly basis and that they will support his franchise if it comes to fruition, “It’s going to be talked about in China, Russia, everywhere across the world.” NHL expansion seems a certainty – especially with the $500 million expansion fee. Las Vegas seems to be included as part of a Seattle, Arizona, Quebec City relocation/master plan discussion.

 

12. International soccer – television rights bonanza. While official details have not yet been released, sources said that ESPN outbid beIN Sports, Fox Sports, and NBC Sports this week for a U.S. package of European soccer rights that include to 2020 European Cup and its qualifiers, European World Cup qualifiers, and the planned UEFA Nations League tournament of friendlies. The same sources said that ESPN has agreed to pay more than $110 million for the rights – an exponential increase from the rights fees UEFA is currently making. The goliath sports network currently pays $16 million for both English and Spanish rights to two European Cups – 2012 and 2016 – and Fox pays around $50M for Spanish- and English-language rights to the '16 Euro and '18 World Cup qualifying packages that it sublicenses to ESPN. Meanwhile, Univision won the Spanish-language rights to the same package of events in a deal said to be around $70 million. Neither network has actually signed a contract yet, but that is expected to happen in the near future to finalize all terms. As global soccer continues to become a “mainstream offering” in the United States, expect the rights fees to continue to skyrocket.

13. U.S. soccer – sponsorship and revenue bonanza. The Chicago Fire just announced that after a four-year deal with Quaker, the team has partnered up with coating company Valspar to make them their official sponsor. Along with their name on the front of the jersey, the partnership will include integration into a number of fan and community initiatives. The company, which will be the Fire’s official paint, will receive entitlement of Toyota Park’s stage for home games and comes a cornerstone partner of the new $20 million PrivateBank Fire Pitch training facility. Terms for the new deal have not yet been disclosed, but sources say that it “is likely valued” between $2.5-$3 million annually over three years. If those figures are true, they would rank among the top half of the league in terms of jersey sponsorship, but well short of the $4.4 million that the LA Galaxy get from chief sponsor Herbalife on a yearly basis. Many have criticized the club as of late for focusing on signing a lead corporate sponsor instead of focusing on its on-field performance – the team set on finishing last in the 20-team league – but nevertheless, the Fire have successfully inked Valspar.

14. Sponsors rekindling for AP. Sponsors are finally beginning to warm back up to Adrian Peterson after his indictment on child injury charges last September. Peterson said that he has “started to see more marketing opportunities come back for him,” most recently citing his shoe deal with Adidas that was just announced. Former sponsor Nike decided to cut ties with the All-Pro running back on September 17, 2014, and officially terminated the deal once Peterson pleaded no contest to misdemeanor charges in November. Last December, Peterson asked the NFL to consider the $4 million in lost endorsements as part of his punishment – Nike and Castrol cut ties with him in the wake on controversy, and Radisson suspended its team deal. But AP is rejuvenated, focused, and off to a great start this season, saying, “I get a couple texts from my marketing guy, saying different things. But I'll look at it and go on about my day. It's not really a big deal, to be honest with you. I'm with Adidas now, and that's well. But mostly, I'm focusing on football and handling business. Everything else will work out.” Through the Vikings’ Week 5 bye, he was leading the NFL in rushing. With substantial long-term appeal and brand awareness, sponsors are willing to “go the extra mile” to maintain a relationship.

 

15. Panthers public/private partnership. The Florida Panthers have once again made a request for public assistance and funds at their home, the BB&T Center. The team is asking for $86 million in tourism taxes; this topic will be publicly debated by Broward Country commissioners early this week. County leaders said that they have “little choice but to sweeten the deal Broward Country made with the Panthers” in the 1990s. If the team were to leave or file bankruptcy, officials said that the country could be left to pay millions of dollars. While the county has rejected the Panthers’ last two requests for more public funding, this offer is different and the club is hopeful of receiving the tax money. This time around, the Panthers are asking to direct public money into the county-owned arena itself, not the team. South Florida has been schizophrenic with its public contributions – significant dollars for Miami NBA basketball and Miami Major League Baseball.  Some initial contributions for the arena in Sunrise, Steve Ross doing it on his own with the NFL and Super Bowl.  Let’s see what this chapter brings.