SBJ/January 24 - 30, 2005/This Weeks IssuePrint All
The Arena Football League opens its 2005 season on Friday with two new international broadcast deals to complement the leagues already beefed-up domestic programming package.
The AFL has signed a one-year deal with Canadas Score Television Network to broadcast 20 regular-season games, and a two-year deal with the North American Sports Network that will broadcast up to 60 games throughout Europe.
League officials declined to disclose financial terms of the deals but said rights fees were part of the new agreements. The new partners will carry games using the feed of either NBC or Fox Sports Net, the leagues U.S. TV partners.
To create this relationship with the Arena Football League is mutually beneficial for both of us, David Errington, senior vice president of the Score Television Network, said in a statement.
The league also has renewed a deal with Japans Express TV that began in 2004, AFL officials said last week.
The domestic [television market] is still the most important, but growing the game internationally is something we are looking to do, said Marc Lowitz, president of the AFL Network, the broadcast division of the leagues office. Weve concentrated on the domestic deals for the past year, but we feel were in good shape.
The AFL recently announced a deal with Fox Sports Net to increase regional cable broadcasts to 120 games this season, compared with 39 non-NBC games last year. The AFL-FSN partnership last year was handled by individual teams with their local-market RSNs. This year, it is a league-level relationship with the national FSN organization.
The AFL is starting its 19th season this year two weeks earlier than last year in hopes of taking advantage of heightened football interest surrounding the NFLs Super Bowl. The league is marking the third season of its broadcast relationship with NBC by airing a game on Super Bowl Sunday at 1 p.m. ET, a first for the league.
If baseball purists ran the sport, the only way Bruce Springsteen, Jimmy Buffett or anyone on a dirt bike would see the inside of places like Fenway Park or Wrigley Field is with a ticket on game day.
But purists rarely consider Major League Baseball’s modern economic principles, like the one that shows how 365 days a year minus 81 home games equals 284 golden revenue-generating opportunities.Baker Botts LLP held a Client Appreciation event on the field at Minute Maid Park.
MLB clubs increasingly are treading on tradition, opening their ballparks to everything from concerts and motocross events to fraternity formals and business outings. Because the revenue-sharing component of MLB’s collective-bargaining agreement touches only receipts from team operations, the added events generate millions of dollars of extra revenue the clubs won’t have to share with the league’s other teams.
The newer MLB venues best equipped to entertain corporate clients are making the most money from non-baseball operations, but their success is changing the way all teams see their venues.
“We never really said this was going to be an empty baseball cathedral when we weren’t playing baseball here,” said Pat Gallagher, president of Giants Enterprises, the subsidiary launched by the San Francisco team’s owners in 1999 largely to look for other ways to utilize SBC Park.
Also out West, the Seattle Mariners started hosting non-baseball events for profit shortly after Safeco Field opened in July 1999. The team now books about 300 events a year, according to Jennifer Mojo, the team’s director of ballpark sales and marketing. In addition to private parties and corporate functions, Safeco has hosted larger, public events such as WrestleMania and the Seattle Bowl.
Mojo declined to provide revenue figures for the Mariners, but she and several other team officials said most of the clubs that use their parks aggressively for non-baseball events typically generate between $1 million and $5 million annually in revenue from the events. For context, the Mariners in 2003 generated an estimated $170 million in total revenue and paid out $31 million in revenue sharing.Safeco Field offers fans a "Centerfield of Dreams" package.
“When you look at the dollars [compared with baseball revenues], we’re the stepchild in the grander scheme of things,” Mojo said. “It’s a nice business unit to basically augment and support the overall objectives of the club.”
The Giants have set the economic standard in the ballpark-event business, due in part to an ownership group that designed the privately financed SBC Park with such ventures in mind. Bolstered by good weather, a ballpark considered one of the league’s best and a city with a heavy corporate presence, the Giants have a steady flow of clients willing to pay SBC Park’s use rates: $7,500 to rent the clubhouse for four hours in the evening or on the weekend, $100,000 for the field for the same times, or $150,000 for the entire venue for the day, among other options.
Gallagher said SBC Park is booked on about 120 non-game days per year and that Giants Enterprises generates anywhere from $7 million to $12 million annually for the club, or as much as two-thirds of Barry Bonds’ $18 million salary in 2004.
The prospect of making money they didn’t have to share was a driving force behind the late-2003 formation of Fenway Enterprises by the lucrative but highly taxed Boston Red Sox. Boston last season generated an estimated $220 million in total revenue, second-best in the league, but it also had the league’s second-highest payroll, subjecting it to an estimated $3 million in luxury tax on top of $42 million in revenue sharing distributed through the other MLB clubs.
Fenway Enterprises, which was modeled after the Giants’ venture, now hosts about 150 events a year, most of them corporate lunches or dinners in the Fenway Park’s 406 Club.Click here for larger image
“We always viewed the Giants as the trailblazers,” said Red Sox COO Mike Dee.
Dee said Fenway Enterprises currently generates in the low seven figures in annual revenue for the Red Sox.
Some clubs are using non-baseball events to test their parks’ durability and versatility. Tim Schuldt, CMO and vice president of sales and marketing for the Pittsburgh Pirates, said the fact that PNC Park emerged from an August 2003 Springsteen concert relatively unscathed “emboldened” the franchise to pursue more music and entertainment events.
Springsteen’s 2003 tour also included Fenway Park, Chicago’s U.S. Cellular Field and Milwaukee’s Miller Park, which since opening in 2001 also has hosted George Strait and ’N Sync. And in what could be the biggest sign of a new baseball era, Chicago Cubs officials are working to have Jimmy Buffett perform a pair of concerts at hallowed Wrigley Field over Labor Day weekend.
But concerts, while valuable for the exposure they bring to a venue, are both costly and logistically difficult because of the extra equipment required. A performance by The Cure at SBC Park last summer was the only money-losing event in Giants Enterprises’ brief history, Gallagher said.
The largest economic opportunities are in corporate functions, which means the newer ballparks in popular convention locales — like San Diego, San Francisco, Seattle and Houston — are best equipped to boost clubs’ bottom lines. The Astros had this in mind when they included a 16-room conference center in Minute Maid Park.
The San Diego Padres, by virtue of the local weather and the proximity of their Petco Park home to the city’s convention center, are the envy of many clubs. But as part of the agreement to build Petco Park, the Padres and the city agreed to split all ballpark revenue, with the Padres keeping 70 percent from events held during the season and the city keeping 70 percent from events held during the offseason.
Padres vice president of ballpark development Erik Judson said Petco, which opened in the spring of 2004, will host about two dozen events in its first offseason. Judson said when the Padres host their target of between 75 and 100 non-baseball events per year, they expect to begin generating in the low to mid-seven figures for the club.
The Padres are unique among clubs with new ballparks in their economic obligations to the city. Clubs with older ballparks tend to have more logistical, political and philosophical obstacles to such events.
Besides lacking the facilities for corporate events, teams like the New York Yankees are tenants of the city and have limited commercial access to their ballparks, beyond tours, during the offseason. Concerts are not in Yankee Stadium’s future.
Meantime, at the newer venues, where tradition is a thing of the past, the prospects are promising.
Gallagher noted that most conventions and major corporate events are planned years in advance, and it takes several years for a venue to build enough of a reputation to attract these events. As that happens, non-baseball revenue could begin to rival baseball revenue in small markets with modern facilities.
Officials from Meeting Professionals International, a 1,900-member association for meeting planning professionals that over the weekend hosted its annual conference in San Diego, said they did not have data illustrating the growing popularity of ballparks for corporate events. But in a clear nod to the promise of MLB venues, MPI officials the last two summers have chosen two ballparks — SBC Park and Colorado’s Coors Field — to plan their annual conference.
Said Gallagher, “We can charge significantly more for these private events than it would cost to go to a hotel ballroom or convention center, because what people are paying for is the pizzazz of doing it in a ballpark.”
DirecTV has reached a new 10-year carriage agreement with ESPN, part of a much broader agreement encompassing all Walt Disney Co.-owned television networks.
The deal calls for DirecTV to pay the same annual rate increases for ESPN as does Cox Communications, which reached a precedent-setting accord with ESPN last year that cut annual increases from 20 percent down to 13 percent, and then to 9 percent in later years.
“I think the assumption that it’s similar to the ESPN deals that went before us is largely correct, although given the overall size of the deal there are differences here and there,” said Michael Thornton, DirecTV’s senior vice president of programming acquisition.
He would not comment on any details of the agreement, which was reached after a marathon final negotiating session that stretched past 9 p.m. ET on New Year’s Eve.
Thornton said DirecTV reached a similar agreement with Fox Entertainment, including the Fox Broadcast Network, Fox Sports Net and all Fox-owned cable channels.
Central to both agreements were broadcast “retransmission rights,” allowing DirecTV to continue retransmitting signals from local broadcast affiliates, and also start offering the ABC and Fox networks in high definition.
“The thing of most value is probably the retransmission consent,” Thornton said.
Licensing fees for cable networks like ESPN and Fox Sports Net generally followed industry precedent under the new agreements, and were a secondary concern in the negotiations.
DirecTV also agreed to carry the soon-to-launch ESPNU channel, which it will likely launch when ESPNU debuts on March 4, as well as ESPN2 HD.
Earlier in the negotiations, DirecTV had voiced an objection to the terms ESPN proposed for a “most-favored-nation” clause, which exempted Comcast Corp. The most-favored-nation clause says that if any other cable or satellite operator negotiates better terms for ESPN, then DirecTV would be entitled to those same terms. But by exempting Comcast, the nation’s largest cable operator, ESPN would be able to offer better terms to Comcast without doing the same for DirecTV.
“That was definitely an issue with us early on,” Thornton said. “Suffice it to say we got comfortable with it based on market forces and other things we were able to get, and the overall value of the deal.”
DirecTV’s agreements with Disney expired Sept. 30 and the new agreement is retroactive to that date.
There was never a deadline to negotiate a new agreement, as all the networks continued to provide their signals to DirecTV.
However, DirecTV had planned to announce at the giant Consumer Electronics Show that it would offer all four broadcast networks in high definition. The show was held Jan. 5-8 in Las Vegas, and the timing prompted DirecTV to hurry negotiations as the calendar year came to a close.
The last round was via conference call, with Disney executives working out of the company’s Times Square office as hundreds of thousands of New Year’s revelers were gathering outside.
Neither Disney, Fox nor DirecTV have made any official announcements regarding their new agreements, other than to say the broadcast networks would be available in high definition.
In the last year, ESPN has reached deals with several major cable operators that call for the lower annual rate increases. The old deals involved 20 percent annual increases.
Sean Bratches, president, affiliate sales and marketing at Disney and ESPN Networks, would not comment.
Never mind the estimated $850 million ESPN will get from Electronic Arts over the next 15 years to use the ESPN brand name and content in EA’s sports video games. The deal between the parties announced last week marked a spectacular save for the network, which had watched EA completely recapture control of what is arguably the most important licensing category for the most valuable sports league.
“You cannot underestimate the dominance of NFL football games in the sports video game category,” said Michael Jerchower, former director of sports marketing at former EA competitor Acclaim Entertainment. “I think ESPN recognized the importance of having their brand on the NFL football title.”
Teaming with EA was the only chance ESPN had to be an NFL partner in the category, thanks to the five-year deal EA signed with Players Inc. last month to be the exclusive publisher of NFL video games.
ESPN and Sega Corp. have partnered in recent years for their own licensed NFL title, a critically lauded game that nonetheless has not sold well. But last year’s decision by ESPN-Sega distributor Take-Two Interactive to slash the price of the ESPN NFL 2K5 game from $50 to $20 helped spur sales, also undercutting EA’s Madden 2005 franchise and ultimately forcing EA to slash the price of its game by $20.
ESPN has one year remaining on its partnership with Sega and Take-Two, but the EA/NFL deal meant ESPN would have to leave Take-Two after 2005 if it wanted to remain competitive in the market for licensed sports games.Skipper
John Skipper, executive vice president at ESPN, said last week that while this deal came together in the last couple of weeks, EA’s deal with the NFL “really did not come into play” in the decision to leave Take-Two after that deal expires at the end of 2005. “We would have done the deal whether [EA] got the NFL deal or not,” Skipper said. “This just makes us feel a little smarter.”
It also removes a huge obstacle to ESPN’s evolving transformation from a sports broadcasting company to a sports media company that reaches young fans through every medium, Skipper said.
EA controls more than 70 percent of the market for sports video games, which accounted for 20 percent, or $1.2 billion, of the $5.8 billion video game market last year, according to the NPD Group.
Steve Lauletta, Miller Brewing’s longtime sports marketing chief, will join The Radiate Group as president of The Radiate Sports Group, effective Feb. 14.Lauletta
Groth said the sports group is actively pursuing more acquisitions and partnerships, and Lauletta’s job will involve identifying appropriate companies and adding cohesiveness to the whole group.
“[Lauletta] has 11 years on the brand side, and we were looking for someone with that kind of experience, who has dealt with leagues and properties and has a complete understanding of integrated sports solutions,” Groth said. “Plus, he has a great knowledge of other agencies, for competition or growth opportunities.”
The Radiate Group is under the Omnicom corporate umbrella, and includes GMR Marketing, Miller’s longtime sports agency of record. Other owned or allied companies are SportsMark (sports events and hospitality), Peter Jacobsen Productions (golf), Thompson Marketing and Access Marketing and Communications.
Lauletta came to Miller as manager of sports marketing from the agency Wunderman Cato Johnson. His replacement has not been named.
The Radiate Group is headquartered in Boca Raton, Fla., but Lauletta will relocate to Radiate’s office in Charlotte from his Milwaukee home. He said he chose Charlotte for the growth potential in Radiate’s NASCAR business, to increase its East Coast presence, and for personal reasons.
Longtime sports marketer Tom George is returning to his roots at Octagon and will rejoin the agency in mid-February as a senior executive in athlete marketing under Phil De Picciotto, Octagon Worldwide president of athletes and personalities. No specific job title has been determined.George
George rejoins the agency he worked for from 1983 to 2001, when it was known as Advantage International (it later changed its name to Octagon) and where he orchestrated marketing campaigns for athletes including Grant Hill, David Robinson, Anna Kournikova and Michael Chang.
George left Octagon in late 2001 for a 20-month stint as athletic director at American University in Washington. In October 2003, he joined OnSport in Raleigh as the sponsorship consultancy experimented with athlete marketing before it decided to stick with its core business.
This has the right feel, said George. Ill be empowered by the properties Ill be representing [which will include Jeanette Black Widow Lee, Bill Cowher and Steve Yzerman] and obviously its a place and a space Im comfortable with.
The World Poker Tour has signed Michelob AmberBock beer as its first season-long sponsor. The deal encompasses the 16-week season, which starts March 2 and is re-aired numerous times during the year. Including the sponsorship, ad spots, in-show promotion and Anheuser-Busch’s planned execution, the deal is worth several million dollars, according to Audrey Kania, WPT’s executive vice president.AmberBock will get numerous ad spots in each telecast, in-show graphics for the “poker corner”
The WPT is in its third season and is the Travel Channel’s highest-rated program. It averaged 1.2 million unique viewers per episode, and 2 million during the average minute of prime-time play, according to the Travel Channel.
Michelob AmberBock was an advertiser in a World Poker Tour special. The current deal is being supported by a grassroots “Go All In Texas Hold ’em” tournament, begun in December, that will involve several thousand events at bars around the country and will produce two participants in the WPT Invitational, April 18-24 at the Bellagio in Las Vegas. In about half the states, progressive tournaments — where winners progress to the next round — are not legal, so the brand will conduct stand-alone themed poker nights there instead, according to Paul Simmons, AmberBock brand manager.
“Go All In,” a poker term, is the brand’s tag line for this sponsorship.
Simmons said the World Poker Tour is a strong vehicle for getting out a certain message about AmberBock, that it’s not your average brew, but it’s not a specialty premium beer either. “It fits with an in-bar activity. You’re in a pub, sitting at bar, having some beers. [Poker] is very intellectual, but you’re having fun, too,” he said.
He added, “Probably, what’s more exciting is that this association with poker gets us involved with consumers. Poker’s not just white or black, female or male, young or old — it’s such a mix of people we’re reaching it’s phenomenal.”
NBC has extended a rights agreement with the U.S. Golf Association through 2014, guaranteeing the U.S. Open golf tournament a 20-year run on the Peacock Network.
“I think this deal probably goes out further than any other deal in television right now,” said Ken Schanzer, president of NBC Sports.
Terms of the deal were not disclosed.
The USGA’s annual report says it generated $92 million in 2002, the most recent year for which it reports financial data, from tournaments and championships, including broadcast rights fees.
NBC broadcast 35 hours of USGA event coverage last year and will maintain a similar schedule in future years, Schanzer said. That includes the U.S. Opens for men, women, seniors, amateurs and, in alternating years, boys and girls juniors.
The network first picked up USGA rights in 1995 with a deal that ran through 2001. It then extended that agreement through 2008, before deciding to seek an early renewal.
“We had a couple years to run but decided we were both very comfortable with the relationship,” Schanzer said. “Each side felt the relationship had been rewarding and wanted to go forward as long as we could.”NBC's coverage of the U.S. Open entered its 10th year at Shinnecock Hills in 2004.
The golf advertising market has struggled in recent years, and all of the networks covering the sport are widely reported to be losing money on their golf programming. Schanzer would not comment on the financial performance of the USGA properties, other than to say “this is a unique premium property that has held its value very well.”
Now that NBC and the USA Network share a common parent company, NBC Sports has ties with five major golf organizing bodies — the USGA, PGA Tour, PGA of America, LPGA and Augusta National. A common sales staff represents all NBC and USA sports programming.
Adidas signs with FIFA
Adidas has signed a $351 million deal to remain FIFA’s official sports equipment supplier from 2007 to 2014, with $215 million coming in cash and $136 million of value-in-kind service. The deal gives Adidas core sponsorship rights to all FIFA events, including the World Cup in 2010 and 2014. Adidas also supplies all sports equipment for every FIFA event, including match balls and uniforms for referees and delegations.
MLBAM secures deal
MLBAM and the MLBPA signed a five-year, $50 million-plus deal that gives MLBAM exclusive rights to use and sublicense MLB player group rights for online and wireless applications, including fantasy and interactive games. MLB.com will also host the MLBPA’s official Web site, which will be rebranded MLBPlayers.com, as well as the official Web pages of all MLBPA players.
NCAA forms task force
NCAA President Myles Brand announced the creation of the Task Force on the Future of Intercollegiate Athletics, which will be chaired by University of Arizona President Peter Likins. Brand said the committee’s mission is to ensure that college athletic programs stay focused on their universities’ academic mission, even if revenue does not continue to climb.
MLB goes west
Major League Baseball will open a Western officePrieb
NFL hires Supovitz
The NFL named Frank Supovitz senior vice president of events, replacing Jim Steeg, who will join the Chargers following the Pro Bowl. Supovitz will oversee all events operated by the league office, including the Super Bowl. Supovitz most recently was NHL group vice president of events and entertainment and previously worked for Radio City Music Hall.
For these stories and more, visit sister publication The Sports Business Daily at sportsbusinessdaily.com.
The National Thoroughbred Racing Association has lost Nextel as a sponsor of its annual championship, the Breeders’ Cup, but picked up vodka brand Grey Goose.
Nextel announced in June 2003 that it would sponsor the Breeders’ Cup Distaff, a race for the world’s best fillies and mares, in a deal reportedly valued at about $1 million a year. The original deal was for 2½ years, but on Jan. 1 Nextel exercised a clause in the contract allowing it out of the deal, said a source who asked not to be identified.
A spokesman for Reston, Va.-based Nextel, which in December announced a deal to merge with Sprint, did not give a specific reason for dropping the sponsorship.
“Really, it’s Nextel continuing to evolve and grow its overall commitment to sports sponsorship,” said spokesman Rich Pesce. “It was just a business decision that we would end our relationship with the NTRA.”
Chip Campbell, NTRA senior vice president of media and sponsorship, said: “We all know that sponsorships are dynamic; they come and they go. Nextel was a good partner and they are not continuing and our industry is disappointed.”
But, Campbell said, “We are extremely pleased to welcome Grey Goose as an official NTRA sponsor.” Campbell would not reveal the terms of that agreement but said it involves both the NTRA and “a good number” of major racetracks.
Grey Goose will receive advertising units, along with signage, hospitality and brand exclusivity at some of the major thoroughbred racing events, including the Breeders’ Cup, which will be held at Belmont Park in New York on Oct. 29.
The ripple effect of the gargantuan exclusive rights deal — a reported $300 million — that Electronic Arts signed with the NFL in December was very much on the minds of senior licensing executives gathered at Super Show in Orlando last week.
The NBA, MLB and the Collegiate Licensing Co. are looking for their own video bonanza, with their licenses expiring after the current season.
Word around Super Show was that the MLB and its Players Association were close to a video game deal that would approach the NFL’s in size and scope — no small accomplishment considering the NFL’s market dominance. Howard Smith, MLB senior vice president of licensing, was mum on specifics but indicated that MLB is not going the single-licensee route.
“We knew whatever the NFL did would change the model, and it did,” said Smith. “But we’ll never do a single license because it is crazy to lock out the guys who make the hardware. They are the foundation, so we’ll always have at least one of both.”
The NBA’s exclusives with Reebok for on-court apparel and with Spalding/Huffy for basketballs and backboards netted big dollars, but in the video game realm there are some product concerns.
The lead times for video games — about a year — are the longest among the NBA’s licenses, said Sal LaRocca, the league’s licensing chief, “so we’re trying to determine if having one licensee would stifle creativity. We want to maximize revenues, but we also want better games every time around, and competition is one way to help ensure that.”
The league hopes to have some direction on that category, if not specific licenses completed, by the time of its All-Star Game next month, he said.
Within the next few weeks, Collegiate Licensing Co. President Pat Battle expects to pare down to a single licensee with one video game around a specific sport and a co-exclusive with another around a different sport.
“For us, it’s not about maximizing revenue as much as it is maximizing the brand,” Battle said. “Video games have become a real crucial revenue producer, but the fact they reach so many young consumers makes them just as important to any property in terms of a brand touchpoint.”
PENNSYLVANIA PASSION: By the time you read this, you’ll know who the Super Bowl contestants are. Last week in Orlando, NFL licensees were rooting for the Keystone State Bowl — a battle between the Pittsburgh Steelers and the Philadelphia Eagles.
There’s no real rivalry between the teams at opposite ends of the state, but each has the kind of pent-up demand that drove championship merchandise from the Boston Red Sox to record levels following their World Series win last year.
Mark Holtzman, NFL senior vice president of consumer products, said “if-win” orders for a possible Pittsburgh Super Bowl appearance rival or exceed Green Bay’s Super Bowl championship run in 1997, the league’s all-time hot market.
RETRO PASSE? As the most fashion-driven sports property, the NBA’s apparel business has taken a hit with the decline of retro as a style trend.
As for the NFL?
“We had a record year in 2004 [in apparel], and we’re on track for the same in 2005,” Holtzman said. “So the predictions on the decline of licensed [products] haven’t been true for us.”
Ideally, the league would like to lessen its dependency on jersey and headwear sales. The NFL also hopes to challenge Under Armour performance wear more directly with Reebok’s NFL Equipment line, possibly by rebranding to a name that’s less institutional and thus more appealing to younger consumers.
LANCE PART DEUX: The success of Nike’s “Livestrong” wristbands (sales in excess of 31 million units) has led to the distribution of the product as purely a piece of licensed merchandise. We’ll soon see if they will be as popular without the cause-related tie that helped make them a fashion staple.Forever Collectibles will sell MLB wristbands for $2 or three for $5.
Also new from the Lewis idea machine are hot-market licensed car magnets. He plans to manufacture an equal six-figure quantity of Super Bowl XXXIX Champion car magnets for each of the Super Bowl contestants overseas and says he’ll be able to deliver most of them to the winning market the day after the game for $7.95 each, with more to follow. Half of the inventory (the losing team’s) then gets destroyed.
“I’m used to chasing hot markets from China,” said Lewis. “It doesn’t really matter to me what the product is.”
IN THE CARDS: While we might argue about whether card-playing and associated equipment should be counted as “sporting goods,” the increasing popularity of poker among sports’ core male audience was very much in evidence, with boatloads of licensed cards and chips.
New from NBA licensee All Pro Deal are playing cards with player caricatures that carry a hefty retail price of $10 and a poker chip set with the league’s venerable Jerry West-inspired “logo man” that will retail for $129.NBA licensee All Pro Deal wants a hand in the poker craze with player playing cards.
The World Poker Tour had a booth showcasing products from its licensees, which included former New York Giants Carl Banks’ G III Apparel’s jackets, jerseys and T-shirts.
Whether or not card-playing is a sport, show officials were impressed enough that they are planning a dedicated poker section for the 2006 Super Show. Can video games as a show staple be far behind?
NEW TRICKS FOR AN OLD DOG: Spalding, one of the oldest brands in sporting goods, continues to chart new directions. The Russell Athletic unit plans to cut its roster of 80 licensees by almost a third over the next year as part of a general brand refocus. Also on tap is a brand repositioning, a new secondary trademark, tag line and brand campaign.
On the product side, we’ve noticed fellow NBA licensee Reebok eyeing Spalding’s markets with a new effort at basketballs and other inflatables, and with a recent license with Lifetime Products to market RBK-branded backboards.
However, we’re wondering if the shoe could end up on the other foot, with Spalding using its recent purchase of running shoe brand Brooks to help bring a Spalding-branded performance basketball shoe to market. Currently that’s one of the product categories Spalding licenses out.
LICENSING LINES: After many years of paying lip service, servicing the women’s licensed sports apparel market has now become a staple. Accordingly, it was tough to find an apparel booth without splashes of pink.Every Wisconsin kitchen needs a Green Bay Packers scoreboard clock, right?
“Home furnishing used to mean stuff for the bedroom, like sheets and towels,” said the NBA’s LaRocca, “but now it’s evolved to where it included items in the den and living room, where a lot of sports fans spent their time — near the TV.”
Other than the scoreboard clock, new products at the show supporting his contentionLee Seed Co. has switched its focus from popcorn to the containers that hold it.
ChampionsWorld, the New Jersey-based company that for the last two summers has organized, run and promoted the American tour featuring soccer giant Manchester United, has filed for Chapter 11 bankruptcy protection.Stillitano
“The debt became pretty significant, and we are not going to have games until this summer,” he said.
Plans include a tour of national teams in May and June, with the ChampionsWorld Series set to take place for the third year starting in July.
Stillitano said the 2004 tour itself broke even but investments in ancillary programs, such as camps and clinics, didn’t pay off. That is not to say that the tour was flawless in year two, he added.
“Maybe we were a little bit overconfident in some of the ticket sales potential in some of these markets,” he said.
The average turnout for the tour dropped from 52,821 over eight games in 2003 to 39,811 over 11 games.
Looking ahead, Stillitano said the company will make changes to the tour and the company itself when it emerges from bankruptcy protection. In addition to going to a tournament-style format for the tour, Champions-World will look to add investors and expand the sponsorship base that last year was limited to MasterCard and Budweiser.
The two teams heading to Jacksonville for the Super Bowl in 13 days carry with them a dirty little secret of the NFL: For all the plaudits and attention and fame, clubs reaching the ultimate football game will almost surely lose money in doing so.
Unlike the other major sports leagues, where making the playoffs can be the difference between red and black ink, the NFL’s system of sharing is actually accelerated during the playoffs. While almost all NFL teams earn a nice profit because of the league’s massive TV deals and sponsorship, a long playoff run can actually chip away at the bottom line.
Like a bureaucratic commissar, the NFL collects all the ticket revenue from playoff games and then doles out to each team an expense stipend to cover costs.Revenue sharing often keeps teams from breaking even on playoff costs.
The checks are $600,000 per club for the wild-card round, $800,000 for the next round, with higher amounts for the last two, a source said. A home team also subtracts stadium operations costs from the ticket revenue it hands over to the league.
But if a team’s expenses are larger than its NFL check, say because of a large entourage, extra pricey championship rings or an extravagant postgame party, then the club eats the extra costs.
“The ancillary benefits of being in the playoffs far outweigh the expenses,” said John Jones, the Green Bay Packers’ chief operating officer. The following season, a team can charge more for sponsorships, ads, tickets and concessions, he said. In addition, there are benefits in national branding opportunities.
John Mara, executive vice president of the New York Giants, agreed, noting, “If you are winning, people want to be associated with you. … If you are losing, it’s a different ballgame.”
Mara’s Giants eked out a small profit during their Super Bowl run four years ago. But many other executives at teams said losing as much as a few hundred thousand dollars during a playoff run is not uncommon.
With most teams earning millions of dollars annually, the loss is a small price for the glory and future financial benefits that accrue.
During the regular season, teams keep most of their ticket revenue, with some club-seat money diverted either into a leaguewide stadium fund or shared with other clubs and players.
In the playoffs, the teams can keep only categories like concessions, parking and game-day publications.
The system dates back to before the first national media deal, which was struck in 1963. Prior to that year, NFL clubs had their own individual TV deals, so some clubs were at a disadvantage. As a result, the league needed a uniform way to pay player playoff bonuses, said Marc Ganis, a sports consultant.
So, playoff gate became the league’s first national shared revenue stream, he said. When the first national media deal was signed, the league just kept the playoff system. Any profit the league comes away with is distributed evenly among all 32 NFL clubs.
Keeping the regular-season revenue-sharing formula, in which teams retain most of their gate, would deprive the league of the funds to pay playoff bonuses, Ganis said.
The U.S. Tennis Association has acquired a 25 percent stake in the JPMorgan Chase Open and has an option to buy majority control of the Anschutz Entertainment Group-owned women’s event in Los Angeles.
The USTA declined to disclose terms, but WTA tournaments of this size commonly sell for a few million dollars.
The move gives the USTA a firmer foothold on the West Coast and signals the group is willing to spend its sizable treasury on endeavors other than just pumping money into community tennis programs and into developing pros. It also means that three of the nine U.S. Open Series events, the branded circuit of tournaments leading up to the Open, will be owned in some fashion by the USTA.Kantarian
The USTA, which owns and operates the U.S. Open, also controls the Mercedes-Benz Cup men’s event in Los Angeles. AEG tried to persuade the Cup to move from UCLA to Anschutz’s new athletic complex in Carson, but was rebuffed.
Despite now having a stake in both Los Angeles tournaments, Kantarian said the USTA will not put pressure on its Southern California section, which directly owns the Cup, to move. There are other options, he said, including rotating the events between the two Los Angeles sites, or simply staging them the same week and having a combined event for TV purposes.
Both tournaments are part of the year-old U.S. Open Series, the branded circuit of summer hardcourt tennis events that lead up to the U.S. Open. The U.S. Open Series was crafted last summer by the USTA.USTA-owned tournaments
Event Type Location U.S. Open Grand Slam New York Pilot Pen Tennis WTA** New Haven, Conn. U.S. Clay Court Championships ATP Houston Mercedes-Benz Cup ATP** Los Angeles JPMorgan Chase* WTA** Los Angeles * Owns 25 percent, with an option for majority ownership ** U.S. Open Series events Source: SportsBusiness Journal research
Kantarian said the USTA did not buy full control because he wanted to allow the current operator to continue to manage the event. The remainder of the option expires after the 2007 event.
Kantarian also noted that JPMorgan Chase is one of the top sponsors of the U.S. Open.
AEG could not be reached for comment. The company bought the tournament from IMG three years ago and moved it from Manhattan Beach to the new Home Depot Center in Carson, which includes tennis facilities as well as Olympic sport venues.
Two years ago, in the event’s first season there, the commercial results were poor, but last year, the tournament drew more than 50,000 people. The Lindsay Davenport-Serena Williams final is the top-rated non-Grand Slam match ever shown on ESPN2.
While the USTA will not necessarily be looking to buy more tournaments, it is seeking to spend its hefty profits from the U.S. Open to acquire what Kantarian described as tennis-related assets. In 2003 the USTA earned $27 million, and Kantarian has argued internally at the organization that the group should be spending the money in new and innovative ways.
Editor's note: This story is revised from the print edition.
Wanna buy a T-shirt and look cosmopolitan?
It’s a 52-weeks-a-year proposition for the Australian Open now. You don’t have to show up during the 14-day tennis extravaganza at Melbourne Park. Just pretend you were on hand by outfitting yourself, skull to soles, in the easily identifiable garb of the initial major of 2005. Easy. All sorts of tournament merchandise other than clothing is available online (australianopenshop.com).
“We’ve developed an iconic brand, opening a year-round shop,” says the boss, Paul McNamee, pleased that the tourney’s 50-week disappearing act is no more. He wants the Aussie Open on your mind all the time as “The Grand Slam of Asia/Pacific.”
One of the hooks is the centenary celebration. Back in 1905, a future World War I aviator, Rod Heath, and 16 other chaps gathered on the turf of the Warehousemen’s Grounds, not far from the present location, for the tourney’s debut as the Australasian Championships, a joint effort of the tennis associations of Australia and New Zealand. Heath won, women weren’t welcomed until 1922, and in 1925 the Aussies and Kiwis parted company. The rest of the world didn’t give a duck-billed platypus’ damn.
That’s changed. Decidedly. Today the Aussies tell you about Mr. McNamee’s neighborhood, stretching across the Orient. Considerably larger than “Mr. Rogers’ Neighborhood” used to be, but the idea in part is to appeal to kids. Evangelizing in the belief that the Aussie Open belongs to everybody from Melbourne to Beijing, Tokyo, Jakarta and Seoul, the proprietors operate an Asian Junior Championship for 14-year-olds. They also dispatch coaching teams led by ex-Davis Cupper Peter McNamara throughout the region, and this year have flown in ball boys and girls from Thailand, India, Korea and China to work the Open.
Wild-card entries to the Open have been awarded to promising Asian players, one of whom, Sania Mirza, an 18-year-old Indian out of Hyderabad ranked No. 166, won her first two matches in the current tourney.
The hope is that the youngsters will act as grassroots PR agents, spreading the commercial and athletic reach of an event that not so long ago was isolated, even backward.
McNamee feels justifiably good as well about the ever-increasing numbers of ticket buyers thronging the gorgeously landscaped complex. A banner first Tuesday drew 57,045 customers (41,431 for the matinee), at the time the second highest single-day attendance for tennis anywhere. McNamee hopes to break the local record, 543,843, set by the 2001 Open.Garnier took over for departed partner sponsor Heineken.
Particularly enticing are the ticket prices and availability, more within the grasp of everyman fan than the other three majors: French, Wimbledon and U.S. Open. Grounds passes are $25 and $20 ($40 to $46 at Flushing Meadows). Family grounds admissions (two adults plus two children, or one adult plus three children) are $57.
A brief, painful blip was Heineken’s departure as a partner sponsor. Rob Dassie, the new general manager of commercial affairs, deftly filled the hole with Garnier (skin and hair-care products) and added Aviva (investment services), Optus (telecommunications) and the state government of Victoria. Principal angel Kia Motors is signed up through 2008.
TV coverage continues to expand as ESPN Star, a Pan-Asian network with a huge range, and Fox Australia have come aboard. “We have the possibility of a half-billion homes,” says Dassie. “At one time TV was the dominant underwriter, but it’s spread out now among TV, corporate and merchandising.”
Altogether TV and sponsorship revenue will amount to close to $100 million. Profits should run between $15 million and $20 million. The prize money, $14,250,000, is a distant cry from the first Open Championship in 1969: $ 25,000.
Rod Laver, launching his second Grand Slam, and collecting $5,000 for that title, is glad that his homeland has upgraded spectacularly. “But,” he says, “that seemed like a million then.”
Bud Collins writes occasionally for SportsBusiness Journal.