SBD/March 21, 2014/Franchises

Owners Peg Int'l Growth As Top Priority; Khan Considers U.S. Market Saturated, Limited

Khan said the Jaguars have benefited from playing games in London
Expansion beyond U.S. borders remains the biggest opportunity for pro sports leagues, a group of four team owners said during a panel session at the '14 IMG World Congress of Sports. Jaguars Owner Shahid Khan said his team has benefited from playing some of its home games in London. “Shockingly enough, we thought a year-and-a-half ago when we were planning this thing that it was going to be ex-pats and people who were in London buying tickets,” Khan said. “But they are less than a third of it. The biggest segment we have is people coming from Europe buying this. A lot of them really don’t know football. They have no idea where Jacksonville is. It’s wonderful. You see people speaking different languages wearing Jacksonville Jaguars T-shirts.” Khan described the U.S. market as saturated with limited growth opportunities for the league. “Our upside is going to come from overseas,” he said. 76ers Managing Partner & Devils Managing Member Josh Harris identified international expansion as a priority for both the NBA and NHL. “Basketball is making enormous strides all over the world, particularly in China,” he said. “Hockey also is growing internationally.”

Quick hits:
* IceArizona partner & Coyotes Owner Daryl Jones, on buying the team: “We bought a bankrupt hockey team in the desert, which to most people is a crazy proposition. We can probably get to break-even in the next couple of years, which is a big route for a franchise that had been losing $30 million plus per year.”

* Padres lead investor Peter Seidler, on buying back into baseball: “The business has changed so much, if you compare it to 1998. At that time, baseball had probably something like 30 years of consecutive battles with the players union, and that was damaging to the game. A season was cancelled. A World Series was cancelled. Since then there’s been labor peace, which is a big driver to the success of baseball, as well as the explosion in national TV contracts and local TV contracts.”

* Khan, on buying a team: “If you set the NFL aside, all of the other sports franchises' value is something of a state of mind. I don’t think you should get into a sport just because the value is going to go up. You have to see the kind of money and some of the benefits you are going to get out of it.”

* Harris, on operating teams as businesses: “These businesses are flipping from being live entertainment businesses like an event to being media businesses. The value of these businesses are going up and the cash flows are going up. Certainly the NFL is the most profitable sport. Both the NBA and NHL are making great strides in terms of improving profitability and getting to significantly positive free cash flow."

* Harris, on revenue sharing: “It’s amazing to see some of the richest people in the world argue over revenue share in the NBA. I won’t name names. There are so many issues that come up that if the league can get the ownership groups to take off their individual city hats and team hats and put on a team hat, it may be a little less good for you than, maybe, for someone else. The league does a very good job in focusing the ownership group on the greater good, whether that be sponsorship deals, media contracts or tricky issues like revenue share, where you can’t have a league five big market teams. You need to work out how the small market teams are going to be able to survive. That’s a tricky issue.”

* Khan, on the difference between the NFL and the EPL: “The NFL is partnership. It’s a centrally controlled institution. The NFL would be bigger than some of the 32 clubs put together. The EPL is like a loose collection of federations, something like Italy in the 1840s. With relegation [and] promotion, you really don’t know who’s going to be in it or not be in it. So you don’t have all the best practice sharing and the camaraderie, the fellowship and the partnership that you have in the NFL.”

* Jones, on hockey’s biggest challenge: “For hockey, especially in our market, it’s really growing the game. Hockey is the fourth sport in the U.S. and the top sport in Canada. The challenge for the league and owners is to broaden, educate and expand the game in the U.S.”
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