SBJ/June 12 - 18, 2006/This Weeks News

Leagues cut into clubs’ Finals revenue

Miami Heat president of business operations Eric Woolworth is blunt when asked about the financial gains of playing in the NBA Finals.

Playoff revenue for Edmonton and Carolina
takes a hit after the league’s share.
“We make more on a regular-season game than a game in the finals,” he said.

How can a Tuesday night against Atlanta mean a more immediate financial gain than a coveted spot in the NBA Finals? The reason is a combination of forces: The Heat’s surging business the past two seasons means little inventory is available, but the NBA’s rigid postseason regulations also mean shared gates, league control of prime in-arena signage, and the lack of local advertising sales from television broadcasts, all of which affects a team’s bottom line.

A similar formula holds true in the NHL for the Edmonton Oilers and Carolina Hurricanes as they compete for the Stanley Cup. Both league finals being played this month demonstrate how the championship series are league-run and league-operated events, with the participating teams’ best chance for cashing in coming the following season with aggressive ticket, sponsorship and media sales.

Dividing up the inventory
Teams in both league finals keep their normal concession and parking revenue, and sponsorship sales offer an ability to increase revenue. Other inventory is at the mercy of the leagues, though, and it’s the share of the gate that cuts deepest into each team’s revenue stream during a championship series.

During the Stanley Cup Finals, the league takes two of the four available on-ice placements and a chunk of the lucrative dasherboard inventory for league branding use. NHL teams give up to 50 percent of a regular-season sellout gate to the league for each home game during the finals depending on market size, or roughly half of the $1 million that is a typical median market team sellout. In this year’s Finals, the teams will give between 30 percent and 40 percent of a regular-season sellout.

Each NHL Finals team also contributes about $250,000 that goes into the player-award pool and helps pay for officiating and other series expenses.

Meanwhile, the NBA takes away its teams’ highly coveted rotational courtside signage and hands it over to ABC as part of the league’s television deal, costing each team hundreds of thousands of dollars in revenue for the series. In addition, each NBA home team forks over 45 percent of their gate to the league. Teams set their own ticket prices for the Finals, with the gate roughly $2 million.

The NBA and NHL also will take over a few suites for league sponsors and other guests and reimburse the participating teams for the lost revenue.

And that’s not all: Teams in both leagues lose out on local ad dollars, a significant source of revenue, with the finals being a national broadcast sold by ABC for the NBA and by OLN and NBC for the NHL.

New sponsorship upside
An appearance in the NBA or NHL finals can be more than an exercise in socialism, however. Sponsorship sales can result in the biggest financial impact, with teams getting incremental revenue from each of their sponsors for each round of the playoffs.

Teams in the NBA Finals miss out on rotational
signage revenue, which is sold by ABC.
Sponsorship playoff participation and activation are usually negotiated up front as part of an overall, seasonlong deal. The Heat has a playoff presenting sponsorship deal with La Bamba Check Cashing, while the Dallas Mavericks have a presenting playoff sponsorship with Countrywide Home Loans, adding to each team’s Finals revenue base. La Bamba was a Heat season sponsor before signing on as the presenting playoff sponsor for incremental revenue. Countrywide was a new deal for the Mavericks.

“Those deals have a set fee per round, and the longer you go, the more exposure they get and the more revenue the team gets,” said Scott O’Neil, NBA senior vice president of marketing and team operations.

Neither the Hurricanes nor the Oilers has a playoff presenting sponsor, but the Hurricanes have taken a different approach to their Stanley Cup sales strategy. The Oilers locked up playoff components as part of their regular-season deals, but the Hurricanes made playoff participation optional with an eye on driving additional revenue. As a result, the team is able to resell limited sponsorship inventory through the playoffs and around the Stanley Cup.

“Most of our existing sponsors had the option to renew for the playoffs and finals and did so, but some did not, and it gave us some high-profile inventory,” said Michael Hurley, director of corporate sales for the Hurricanes, who refused to disclose the price increase for playoff sponsorship deals. For example, Rex Healthcare opted out of their on-ice placement but kept their dasherboard deals. The team then sold the on-ice Rex spot to Ford.

During the Cup Finals, there are 36 dasherboards available to each team, with the NHL taking four for network use for OLN and up to 12 for NBC games.

The Hurricanes had 12 dasherboards to sell during the finals and sold them in pairs to six new sponsors, none that created any conflicts with existing partners. The six new partners are Misys Healthcare, Nortel, The Raleigh News & Observer, Quintiles Transnational, Time Warner, and SAS Institute.

The on-ice inventory was up for grabs as well, with the NHL taking two spots of the available four on-ice positions, displacing Ford, who signed on for the conference finals but not for the Stanley Cup Finals.

During the regular season, the cost of dasherboard and on-ice advertising runs about $200,000 per season. For the finals, the dasherboards run about $50,000 per pair for the series, according to one NHL team official, which means the Hurricanes could have earned roughly $300,000 in new sponsorship revenue in selling the six pairs.

The Hurricanes’ other local on-ice deals are with Advance Auto and Lenovo, both signed for the regular season.

“It’s been nice from a revenue perspective,” Hurley said, adding that he expects up to a 20 percent increase in overall playoff revenue sales.

For the Oilers, a return trip to the Cup Finals means another layer of revenue from what has already been a financially successful season in the league’s smallest market.

The Oilers had three open dasherboards available for the finals, selling one of the three to Sanjel, a local oil field service company. The team is forsaking additional short-term revenue and using the remaining boards as part of a re-branding campaign called “Oil Country” that the team unveiled at the start of the playoff season.

NBA Finals

  • Home team gives to the league 45 percent of the gate.
  • No local broadcasts; ABC controls courtside rotational signage.
  • The league reimburses the teams for any suites used.

NHL Stanley Cup Finals

  • Home team gives to the league up to 50 percent of a regular-season sellout gate for each home game, depending on market size of teams. This year, the Hurricanes and Oilers will contribute between 30 percent and 40 percent.
  • Each team pays up to $250,000 to the league for expenses and player awards. The league reimburses teams for any suites used.
  • The league takes between four and 12 of the 40 dasherboards and two of the team’s on-ice placements.
  • No local broadcasts, with OLN broadcasting Game 1 and Game 2 and NBC broadcasting the remaining games.

Sources: NBA, NHL

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