SBJ/June 26 - July 2, 2000/Opinion

Coming distractions: Sports litigation takes to the field

Sports industry participants spend a fair amount of time trying to identify upcoming trends and important developments. In broad strokes, the decade of the 1970s brought an understanding of sports economics. This was followed in the '80s by the emergence of sports marketing. And in the last decade, the role of the public sector and taxpayers in subsidizing sports seemed to take center stage.

While many believe that future trends in sports business will stem from the Internet and exporting America's sports on a global basis, such developments will likely bring with them an additional and unfortunate development: increased litigation.

A regrettable but undeniable outgrowth of the sports industry's recent advances and innovations, sports business litigation will surely evolve into its own industry niche, much like those created in the areas of sports economics, marketing and public policy.

Signifying this, I have been called as an expert witness in numerous sports marketing lawsuits over the last couple of years. The amount of time I am allocating to litigation support — ranging from establishing athlete endorsement values and putting a price tag on sponsors' sports marketing activities to assisting municipalities in their disputes with professional sports franchises — is rapidly increasing, signaling to me an industry trend warranting considerable attention.

And, as money continues to flow into sports from all directions, legal disputes will follow as predictably as night follows day. Significantly, this trend in sports business litigation will not subside when the economy cools. In fact, a strong case can be made that an economic downturn will bring with it a flood of additional lawsuits. Further, as sports continues its global expansion and rapid growth via the Internet, sports business lawsuits emanating from industry expansion are sure to increase in number and in magnitude.

The following examples illustrate merely the tip of the iceberg.

n Recently, Washington Mutual — the banking and financial services firm that acquired Great Western Bank — was involved in a lawsuit with the Los Angeles Lakers regarding the team's relocation. Believing that the value of the company's naming rights to the Great Western Forum had been significantly diminished by the NBA team's move to the Staples Center, Washington Mutual was seeking relief due to the venue's reduced role. Marketing experts were retained to determine and mitigate the value, or marketing damages, associated with the reduction in the Forum's reputation and national standing.

n Emerging sports marketing trends, including the marketing and merchandising of athletes over the Internet, provide another vivid example of how sports and the law continue to collide. The NFL Players Association is now embroiled in a dispute with Broadband Sports, the parent company of AthletesDirect, and gridiron.com for creating Web sites that contain NFL players' images without permission. In this matter, the NFLPA contends that any company desiring to use six or more NFL player images to promote its products or services must obtain consent. The NFLPA essentially views the Web site as a competitor, one that is leveraging its passive and tacit associations with star players to authenticate its own site and sell merchandise. Once again, the need for experts to sift through the numerous sports marketing implications of this dispute is evident.

Internet skirmishes such as this may eventually pale in comparison to those arising from upcoming collective-bargaining agreements between players and owners. Future labor impasses will likely include the issue of Internet revenue streams, including those generated directly or indirectly by athletes. Currently, labor and management have difficulty determining how best to share known revenue streams — let alone emerging and less quantifiable streams such as those created by the Internet.

The two aforementioned examples deal with capturing incremental sports marketing dollars and increasing return on investment during times of unprecedented economic expansion. However, when the economy suffers a downturn, lawsuits will ensue just as quickly, as industry players will seek to protect their positions, renegotiate or downsize sports marketing alliances, or attempt to abandon existing relationships altogether.

So, not only is the role of sports business litigation rapidly increasing, it is doing so with no end in sight. Whether disputes stem from the unraveling of traditional marketing alliances such as sponsorships and naming rights, or more recent developments such as the convergence of athletes and the Internet or the emergence of international sports marketing opportunities, one thing is certain: Litigation will be lurking in the shadows.

David M. Carter (david.carter@marshall.usc.edu) is a principal in The Sports Business Group, a Los Angeles consulting firm.

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Los Angeles Lakers, NBA, NFL, Opinion, Staples

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