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  • Bulls latest in NBA offering partnering to season-ticket holders

    The Chicago Bulls have become the fourth NBA franchise to offer season-ticket partnering services, the latest trend among the league’s 30 teams battling to retain season-ticket holders during the recession.

    Once frowned upon, the practice of playing matchmaker for fans looking to share full season-ticket packages is now attracting interest from NBA clubs.

    The Bulls’ season-ticket sharing program is called Ticket Partners. Accessed through Bulls.com, it allows full-season-ticket holders the opportunity to find partners looking to buy into those season packages.

    A drop-down menu allows users to select from a minimum of five games up to 42 and from one seat to 20 seats. There is no charge for fans using the service, and the team expects that season-ticket holders will have anywhere from one to three partners.

    SplitSeasonTickets runs the Bulls’ service.

    “In the long run this will help us with retention and is a great service for our season-ticket holders,” said Steve Schanwald, executive vice president of business operations for the Bulls, in an e-mail exchange. “It makes season-ticket ownership more affordable, which is especially important in lean economic times.”

    The new product differs from the menu of mini-plans sold by teams because it allows teams to retain their full-season-ticket base yet at the same time offer a way for full-season-ticket holders to cut costs by partnering with fans who want to buy a handful of games.

    “Teams are looking for ways to reduce the economic pressures on their fans,” said Chris Granger, NBA senior vice president of team marketing and business operations. “One way to do this is by facilitating the practice of share partnering.”

    Another benefit for the teams is the ability to gather data from all shared partners in order to upsell to more potential customers.

    “Teams have never known much about who was sharing in ticket plans,” said Dan Bartlett, founder of SplitSeasonTickets, who is running the partnering service. “Now, they know who the partners are, what games they wanted, and what preferences they had. They benefit by getting a whole rich set of data.”

    Last year, the NBA posted an 80 percent season-ticket renewal rate. League officials won’t disclose the current ticket renewal rate, but the league will be hard-pressed to hit the same rate for the 2009-10 season, given the economy.

    “Teams used to look at it as selling against themselves, but now, given the economy, it is a way to keep customers,” said Bill Sutton, a sports marketing consultant who counts NBA teams as clients. “It helps teams keep their market share and maybe when things improve, it will mean more buyers.”

    The Bulls join the Los Angeles Clippers, Charlotte Bobcats and New York Knicks in offering partnering services for the coming season. All have deals with Costa Mesa, Calif.-based SplitSeasonTickets.

     The company, which charges teams an undisclosed flat fee to run the service, also has deals with the San Francisco Giants and St. Louis Cardinals in Major League Baseball and with four NHL teams.

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  • Buying into Boots

    The words still perplex Craig Leipold. “I lied to you.” A simple phrase that is as confusing to Leipold today as it was more than a year ago when William “Boots” Del Biaggio uttered it to him moments before Leipold boarded a plane to France for a family vacation.

    “I’ve got to tell you,” said Del Biaggio, who’d bought the Nashville Predators from Leipold in late 2007, “I lied to you.”

    “What are you talking about?” Leipold asked.

    Weeks later, after he returned from France, Leipold learned exactly what Del Biaggio meant, and just how far those four words had taken him.

    The young, relatively unknown venture capitalist from San Jose had made one of his first confessions of guilt in what would be one of the most embarrassing recent chapters in NHL history. Those four words defined Del Biaggio’s bizarre rise from virtual obscurity into hockey’s upper echelons and explained a stunning fall from grace that culminated with him pleading guilty to securities fraud in February.

    Ultimately, the rise and fall of Boots Del Biaggio was built on nothing more than the flimsy foundation of deceit — and that call to Leipold was one of a series of confessions revealing one of the most brazen frauds in the last decade of sports ownership.

         

    In May of last year, NHL Commissioner Gary Bettman arrived at the league offices on New York’s Avenue of the Americas optimistic about the state, and future, of his league. The playoffs were in full swing, the league was on track to generate a record $2.56 billion in revenue that year, and the NHL was basking in the afterglow of one of its best regular seasons to date.

    Seated at the desk in the corner of his expansive office, Bettman set out taking care of the day’s business, but his daily routine was interrupted, as it often is, by a call from an owner. Boots Del Biaggio was on the line calling to tell Bettman he was in trouble. He needed to sell his share of the Predators, and he needed to sell it fast.

    “If you don’t get me out quickly, it’s going to be embarrassing for the league,” Del Biaggio said.

    “Does David [Freeman, Del Biaggio’s co-owner in the Predators] know what’s going on?” Bettman asked.

    About this story:
    This story is based on extensive research conducted over the last six months. SportsBusiness Journal staff writer Tripp Mickle reviewed more than half a dozen court cases, researched newspaper articles dating to 1994 and spoke with more than 50 people familiar with William J. “Boots” Del Biaggio III, most of whom did not want to be identified on the record. Del Biaggio  declined to be interviewed for the story on two occasions, and his attorney, Elliot Peters of Keker & Van Nest, did not return multiple calls for comment.

    “No,” Del Biaggio said.

    “I would suggest you call him immediately,” Bettman said.

    Freeman’s sense of civic responsibility a year earlier had inspired him to invest in the Predators in order to keep the team in Nashville, and Del Biaggio had contributed critical capital to the deal. The two were less than six months into this partnership of convenience when Del Biaggio reached Freeman in Nashville. Del Biaggio sounded awkward, guarded and secretive as he spoke on the phone. He said he had problems that were going to be embarrassing. Mostly, he just wanted to apologize in advance for any trouble those problems might create.

    Freeman didn’t ask what the problems were, but he could tell by the tone of Del Biaggio’s voice that he should prepare for the worst.

    “How long before the problem becomes public?” Freeman asked.

    “You probably have a few weeks,” Del Biaggio said.

    After he hung up, Freeman wondered what Del Biaggio might have done. All of his guesses turned out wrong. It would be less than a week before Freeman knew why and began to piece together how his partner had led him and so many others astray.

         

    William J. “Boots” Del Biaggio III, 42, was born in San Jose to a family that had settled in the area when it was little more than farmland. He took his nickname from his grandfather, William Del Biaggio, who grew up milking cows on a dairy farm in Patterson, Calif. Classmates called him “Boots” because he wore his farm boots to school. The name stuck and was passed on to his grandson.

    After attending Santa Clara University, Boots’ grandfather took a job selling beer in Merced, Calif., for the John Wieland Brewery and eventually founded his own beer distributorship in San Jose. Boots started working at the distributorship at a young age, sweeping floors, washing trucks and helping drivers with deliveries

    Boots’ first foray into hockey came with a small
    stake in his hometown San Jose Sharks.

    “Boots picked up a lot from [his grandfather],” said Jim Del Biaggio, Boots’ uncle. “[His grandfather] was very friendly, very hardworking, had no airs about him and took care of a lot of people. He wasn’t always the smartest guy in the room, but he had a lot of common sense and worked hard. Boots was hardworking, friendly and always outgoing.”

    As the distributorship grew, Boots’ grandfather and father earned reputations as established local businessmen who gave generously to everything from the Boy Scouts to the local Jesuit school, Bellarmine College Preparatory, which Boots attended. A private, all-boys school, Bellarmine is known for producing tight bonds and accomplished alumni like San Jose Mayor and partial NHL Sharks owner Tom McEnery and former Oakland A’s owner Steve Schott.

    When Boots attended in the 1980s, the parking lot outside the school was emblematic of the students who came from both moneyed and blue-collar families — new BMWs sat alongside beat-up Chevy station wagons. Boots was considered an average student by his peers and a mere role player on the football team, but what he did in school mattered less than simply graduating from Bellarmine. And when he returned to the area after college, he leveraged his Bellarmine ties to launch his first business.

    In 1992, Boots and his father, Bill Del Biaggio, assembled a group of 15 to 20 local businesspeople in a conference room at San Jose’s elegant Hotel De Anza for a presentation on a new business opportunity. After everyone settled into their seats, Boots, in his mid-20s at the time, strode before the group and began to talk about his experience as a local Xerox salesman. Time and time again, he said, businessmen he called on complained about banking troubles. Comerica Bank had recently acquired one of the area’s last local lenders, Plaza Bank, and business executives no longer received the same personal service. Boots proposed starting a new bank, indicating that a successful one might deliver as much as 23 times return on investment.

    It was a high-risk investment made riskier by the inexperience of its pitchman. After all, could a 20-something Xerox salesman with absolutely no banking experience really know how to launch a bank? But Boots, who was polished and aggressive, won the businessmen over with his vision, his originality and the credibility of his family’s name.

    Boots’ Rise and Fall
    1994 — Launches Heritage Bank of Commerce in San Jose
    1996 — Leaves Heritage Bank and launches a venture capital career with Sand Hill Capital
    2002 — Becomes a minor investor in the San Jose Sharks
    2004 — Buys the River City Lancers (now called the Omaha Lancers), a U.S. Hockey League team, along with Mario Lemieux, Luc Robitaille, Mike Eruzione, Ben Robert and John Donovan
    2005 — Fails to close on a $120 million offer to buy the Pittsburgh Penguins
    2007 — Becomes a minority investor in the Nashville Predators through Forecheck Holdings
    2008 — Charged with securities fraud by the U.S. Department of Justice and accused of defrauding investors out of millions by the Securities and Exchange Commission
    2009 — Pleads guilty to securities fraud in conjunction with a series of loans he received to buy the Predators; faces a prison term of up to 25 years when he is expected to be sentenced on Sept. 8

    “All of us, at the time, were more interested in the opportunity than his age,” said Kirk Rossman, who invested six figures into the bank. “We felt there was a need.”

    The group, more than half of whom were Bellarmine alumni, collectively contributed $4 million to the new bank. With that, Heritage Bank of Commerce opened in June 1994 at a fortuitous time. It was the back end of a real estate recession and the front end of Silicon Valley’s tech explosion. Just two years after opening, the bank’s assets soared to more than $132 million, and Boots was named to The Business Journal of San Jose’s “30 Under 30” list in 1995.

    It was around that time that he began applying his experience that he gained raising money for Heritage to branch out on his own and raise money for area startup companies. Venture capitalism suited him. “He could talk money out of anybody, and he had no hesitation about going to anyone and talking to them about money,” said an executive who was at Heritage at the time.

    When soliciting money for startups, Boots handed potential investors his bank business card and met with several in the bank’s conference room. His personal bank account swelled as he deposited the money he raised directly into it. The Glass-Steagall Act (which was repealed in 1999) at the time required that money for investment banking be completely separated from money deposited in a commercial bank. When bank officials became aware of his fundraising and the way he was handling his accounts, they brought the conflict before a bank audit committee and Boots quietly resigned from Heritage in 1996.

    Few on the outside knew why he left. Most assumed it was to do exactly what he did next, which was launch a new venture capital company called Sand Hill Capital. Boots, not yet 30, once again showed impeccable timing by opening the firm just after Yahoo! was founded in 1994 and before the dot-com boom of the late ’90s.

    Essentially, Sand Hill Capital was a cross between a bank and a venture capital firm. Boots raised $8 million and leveraged it to $16 million with bank credit, according to The Business Journal of San Jose. He then loaned money to startups in $1 million to $3 million increments and charged the companies 10 to 18 percent interest on the loans. Sand Hill also received 1 to 3 percent equity in the startup companies. That equity paid off big time when companies like LookSmart went public in the late 1990s. A successful initial public offering helped Boots claim to deliver investors a ninefold return on their initial investment.

    Once again, Boots had crushed it, and investors were ecstatic. “It was a high-risk opportunity,” Rossman said, “but he made money for all of us.”

    Much of Silicon Valley buzzed about Sand Hill’s success, and new investors clamored to get into the firm’s second fund in 1999. It was the height of the dot-com boom, and everyone wanted a piece of the next big IPO. Interest was so high that, instead of raising $20 million to $25 million as planned for the second fund, Boots raised $60 million.

    The firm’s size mushroomed from four employees to 26 and from one office in Silicon Valley to offices in Boston, Los Angeles and Seattle. But when the dot-com bubble burst in 2000 and the Nasdaq shed 45 percent of its value, Sand Hill investors grew nervous. Boots had stopped meeting regularly with the firm’s board of directors and didn’t provide quarterly reports. Both of those issues were questioned in 2001 during an investor meeting at a Los Gatos, Calif., restaurant when two investors confronted Boots about the lack of transparency. Boots told them they could get their money out.

    Between 2003 and 2008, Del Biaggio defrauded various investors and lenders out of approximately $65 million, using the proceeds to purchase an interest in a professional hockey team and to finance a luxurious lifestyle.
    — the SEC v. “Boots” Del Biaggio

    “If you want your money, you can have it,” Boots said, “but I’m not going to change my ways.”

    Other investors pointed to the exchange as an example of Boots’ honesty, saying they’d never witnessed a manager of a high-risk investment opportunity offer investors their money back. But another investor said that while Boots was never a crook, the whole episode underscored how “he was always a step or two removed from dishonesty.”

    The second fund eventually fell flat. Instead of pulling back during the dot-com meltdown, Boots increased the size of the loans that Sand Hill made, from between $1 million and $3 million to between $5 million and $20 million. Boots later conceded to The Business Journal of San Jose that it was a mistake to increase the amount the firm loaned to companies. He added, “I started a bank at a very young age and was very successful … and the first Sand Hill Capital people made nine times their money. OK, then I’m the first to admit, I got over my skis. From 24 to 33 years old, I had an unbelievable run and this is the first downturn I’ve been in — and you know, I have learned a lot. This has been very hard on me, but I have done the right thing.”

         

    Despite the failure of Sand Hill’s second fund, Boots’ reputation remained intact. He was still a dealmaker from a well-known and highly regarded family, and when San Jose Sharks CEO and President Greg Jamison learned in 2001 that team owner George Gund wanted to sell the Sharks, Boots was one of the first people he approached about investing. Jamison, who joined the club in 1993 after stints with the Dallas Mavericks and Indiana Pacers, was committed to keeping the team in San Jose despite the fact that it was losing millions. He knew about Boots’ business success with Heritage Bank and Sand Hill Capital and also about his passion for hockey. Most importantly, though, Jamison knew his father and his family’s reputation. “His family was very well-established,” Jamison says.

    Boots eventually came on board as a minority investor with a 1 to 2 percent stake in the franchise. His percentage was so small that he would never be tapped for capital calls and wouldn’t be part of the franchise’s board of directors. Despite that, he was the only owner to speak to the San Francisco Chronicle in 2002 about the investor group, saying, “The goal [of the investors] was to make sure [the Sharks] stayed here in the community, with local venture capitalists and technology CEOs. … This is a great group. It represents the fan base that we have.”

    Boots was part of an ownership group that
    bought the minor league River City Lancers
    in 2004, and included hockey legends Mario
    Lemieux, Luc Robitaille and Mike Eruzione.

    The Sharks ownership added another veneer of achievement to Boots’ résumé. Around the same time he invested in the team, he traveled to South Lake Tahoe to attend the American Century Championship, a celebrity golf tournament featuring some of the biggest names in sports. An avid golfer, Boots enjoyed being in South Lake Tahoe that week when stars like Michael Jordan, Charles Barkley, John Elway and others were in town. While attending the event in the early 2000s, Ben Robert, a business acquaintance, introduced him to hockey great Mario Lemieux. Lemieux, who owned the Pittsburgh Penguins, was on the lookout for potential investors in his team. Boots seemed like a possibility and the two became fast friends.

    During a round of golf in Lake Tahoe in 2004 with Lemieux and 1980 “Miracle on Ice” star Mike Eruzione, Boots raised the idea of investing in a minor league hockey team in Omaha, Neb. The River City Lancers were in receivership after their previous owner, Pat Forciea, committed bank and wire fraud to obtain $2.56 million to buy the franchise. Lemieux and Boots were working with their friend Robert to put together an investment group to buy the team. Eruzione thought it sounded fun and asked to join the group.

    A month later, they bought the Lancers. Robert’s boss and inCode Telecom CEO John Donovan became the majority owner in a star-studded group that included Lemieux, Eruzione and Luc Robitaille. (Both Robert and Robitaille declined to comment for this story.) Boots rounded out the group by buying an 18.5 percent share of the team for $35,000 and paying to outfit the team’s locker room with maple-colored wood lockers, new carpet and an area for players to play video games.

    The investment in the team and locker room cemented Boots’ membership in an elite crew of hockey figures. To the former players like Eruzione and Robitaille, Boots seemed like any other businessman they’d come across. He was bright, articulate, well-mannered and successful. He occasionally picked up tabs at dinner, but never so often that he seemed like he was buying their friendship. He was nice to everyone and would be as respectful of the valet at a restaurant as he was of other pro hockey players. He was also generous. He donated $1,000 to Eruzione’s charity annually, contributed $36,000 to Lemieux’s foundation and gave $5,000 to Robitaille’s charity Echoes of Hope. As Eruzione said, “That’s how he lived. He wasn’t flashy. He was very generous.”

         

    But as Boots got deeper and deeper into the world of hockey, he seemed to want more and more. And what he wanted most of all was to be majority owner of an NHL team. He always said he wasn’t rich enough to own one by himself, but he believed he could pull together an investor group like the one for the Sharks.

    With the NHL buried in contentious labor negotiations and the 2004-05 season suspended, Boots approached executives and asked them to introduce him to NHL Commissioner Gary Bettman. The league was in the middle of its lockout, but Bettman was on the lookout for potential owners when a sports finance executive called and asked the commissioner if he would be willing to meet Boots. The two met in Bettman’s corner office and discussed the future of the NHL. It wasn’t an extensive conversation, but it put Boots into a special group of potential owners whom Bettman kept in mind when teams came up for sale. It was a tough list to join, and the access it provided was invaluable. As one person familiar with NHL business said, “There’s this little club — the overall potential ownership club — and once your name’s known in the circle, you get to know all 30 owners.” Boots was officially part of that club, and he made his first run at an NHL team soon after meeting Bettman.

    In 2005, Lemieux and co-owner Ron Burkle were looking to sell the Penguins and Boots emerged as a logical buyer — not only was he a friend, business partner and golf partner of Lemieux’s, but he was already on Bettman’s short list. He signed a letter-of-intent to buy the team for $120 million in June and immediately set out to find investors. One of the potential investors he approached was Bill Dallas, who had invested in Heritage Bank in the 1990s. He told Dallas that the Penguins were a cheap, undervalued asset that could be sold for a profit with the right management team. Dallas remembers, “He was dropping [the name] Lemieux like it was his job. He liked running with the big dogs.” But Dallas passed because he saw the investment as more of a long-term play than he was looking for at the time.

    Boots (second from left) and his wife were
    guests of AEG at the 2007 MLS All-Star Game.

    Because of the pending Penguins deal, Boots received an invitation to be a guest at the annual Bad Boys Invitational hockey tournament in Las Vegas. Started by Hollywood producer Jerry Bruckheimer, the multiday hockey tournament was held every summer for as many as 200 celebrities and former NHL players. It was a highly organized and very exclusive event. The invitation lifted Boots into yet another echelon of the hockey world.

    After the event, Boots continued to pitch potential investors on the Penguins opportunity, but Dallas wasn’t the only one to pass. He ultimately failed to raise the capital to buy the team, and the deal fell apart. (The Penguins and Lemieux declined to comment for this story.) Boots and Lemieux remained close, but the failed deal damaged Boots’ credibility. He was never invited to the Bad Boys Invitational again. As one person familiar with the event explained, if a deal goes wrong in the entertainment business, they look at the person’s track record to see if they are a “BS guy or not,” and after the Penguins deal failed, Boots appeared to be more talk than follow-through.

    After that year, Boots still went out to Las Vegas the week of the Bad Boys Invitational, but he spent most of his time gambling. From 2004 to 2008, he spent more than $4.6 million gambling at everywhere from the Venetian to MGM. But being on the outside of the Bad Boys event looking in was not where Boots wanted to be and his desire to buy an NHL team only deepened.

    “When the Pittsburgh deal went south, he had it in his head at that point that he had to get a team,” said a person familiar with Boots at the time. “He threw everything out the window to get a team and save face.”

         

    As he pursued his first sports franchise and weaved his way deeper inside the world of hockey, Boots’ tastes had evolved, as well. He favored private jets and custom-tailored suits, and amassed four properties — one each in Santa Monica and Squaw Valley, and two in San Jose. He had all the accessories of a millionaire, and he continued to present himself as an accomplished venture capitalist. He raised millions for a series of funds between 2003 and 2008.

    In April 2006, he opened a fund called BDB II and raised $11.4 million to invest in Onco Petroleum, an Ontario-based company that claimed to be sitting on a natural gas reserve. Robitaille also invested in Onco Petroleum, and both joined the company’s board. Around the same time, the friends took out a $2 million loan and planned to buy property together. The business partnerships were a natural extension of their friendship.

    “He could talk money out of anybody, and he had no hesitation about going to anyone and talking to them about money.”
    — An executive who was at Heritage Bank in the 1990s

    Robitaille was named an executive at AEG, the global sports and entertainment giant, in November 2006 and charged with finding a tenant for the Sprint Center in Kansas City. Boots, who was still interested in buying an NHL team, once again seemed like a good partner, so Robitaille made sure Boots knew his boss, AEG Chief Executive Tim Leiweke. Boots signed a contract that fall with AEG to own and operate an NHL team based in Kansas City, and his quest for a franchise continued.

    In 2007, he learned that Nashville Predators owner Craig Leipold was looking for someone to buy the franchise. Leipold had owned the team since 1997 and had tired of losing more than $20 million a year. Boots, who was one of the first potential buyers to take a look, struck Leipold as an ideal buyer. He was a current NHL owner who loved hockey, appeared to have significant net worth and was charismatic. Leipold met with Boots and his fellow investor, Warren Woo, at a friend’s office in Chicago before a Predators-Blackhawks game. He had sent Boots some financial information on the team and expected Boots to ask questions about the team’s business. Instead, Boots asked about players, draft picks and hockey operations, while Woo — an investment banker who once headed UBS’s leveraged finance and private equity group — asked the business questions. Leipold left the two-hour meeting concerned that a sale might not work because Woo was too focused on the team’s financials, and he signed a $220 million deal with Research In Motion co-CEO Jim Balsillie instead of Boots.

    David Freeman partnered
    with Boots in late 2007 to
    buy the Predators and keep
    the team in Nashville.

    But Boots and Leipold reconnected when Balsillie’s bid fell apart. A group of local Nashville business leaders had approached Leipold to buy the team but didn’t have enough cash to buy it outright. The group, led by David Freeman, was about $30 million short. Leipold turned to Boots to fill the gap. He arranged an introductory dinner for Freeman and Boots at the Palm in Nashville. The two connected immediately: Freeman appreciated Boots’ willingness to invest and take a quiet, minority position in the franchise, and Boots didn’t mind if Freeman controlled the team, so long as he could be an NHL governor.

    The negotiations catapulted Boots back into the sports industry’s upper echelon. In July 2007, Boots and his wife joined Leiweke, Alexi Lalas and others on billionaire Phil Anschutz’s private jet for a trip to the MLS All-Star Game — the event that was David Beckham’s coming-out party in the U.S. It was the peak of Beckham mania in the U.S., and Boots and his wife had a front-row seat on Anschutz’s private jet alongside the soccer star.

    But in August, Boots and Freeman failed to close their $193 million purchase of the Predators. Leipold was optimistic that the deal would close by October but got a call that fall from Boots that put the closing in jeopardy. Boots said he had cash-flow and personal issues he was dealing with that might prevent him from closing the deal. He added, according to Leipold, “That’s unless you can loan me some money until January or February. I can just pay you back in February.”

    “I think that could work,” Leipold said.

    Boots got in touch with Leipold’s attorney and had his brokerage firm provide the attorney with financial statements detailing his assets. The attorney reviewed them and determined that Boots held three times collateral for the loan in stock. On Oct. 23, 2007, Leipold signed the paperwork and extended Boots a $10 million loan. It was only one in a series of loans Boots collected that fall. A few days later, AEG agreed to loan Boots an additional $7 million. The company was also furnished with documents from Boots’ brokerage company showing that he had collateral for the loans. Modern Bank, a private bank in New York founded by Bippy Siegel, agreed to a third loan of $10 million on Nov. 16, and DGB Investments, VeriFone CEO Doug Bergeron’s company, agreed to a fourth loan of $3 million on Nov. 28. In total, Boots collected $30 million to cover an estimated $25 million in equity that he needed to buy a minority stake in the Predators.

    “He was dropping [the name] Lemieux like it was his job. He liked running with the big dogs.”
    — Bill Dallas,
    whom Boots pitched as an investor when he tried to buy the Pittsburgh Penguins in 2005

    The deal for the team closed on Dec. 7, 2007. Although he wouldn’t be the majority owner, Boots got everything he wanted. In exchange for $30 million in equity and a guarantee against $40 million of the team’s $70 million loan from CIT Group, his company, Forecheck Holdings, became the preferred shareholder in the team and didn’t have to cover any capital call. But most importantly, he would be an alternate governor for the NHL.

    In January 2008, against his business partners’ knowledge, Boots began trying to find investors to help pay back the loans he’d taken out to buy the Predators. He distributed discussion materials to “a limited number of sophisticated prospective investors” who might consider investing in the Predators. The discussion materials, first obtained by The Tennessean, highlighted the strength of his preferred share of the Predators, which allowed him to move the team to another city if the team lost $20 million during the 2009-10 season.

    Boots attended the NHL All-Star Game in Atlanta later that month. Walking through the lobby of Atlanta’s Ritz-Carlton with partner David Freeman, he beamed a wide smile when asked about his first board of governors meeting. He’d been on the outside of the NHL looking in for a long time, and clearly he felt like he had arrived. He attended monthly board meetings in Nashville in February, March and April. And he took out $11 million in additional loans from three different banks.

         

    That spring, only weeks after that first governors meeting, an SEC examiner visited Boots’ brokerage company, Merriman Curhan Ford & Co., for an examination. The visit wasn’t related to Boots, but the examiner came across something that didn’t seem right and began digging further.

    When he was done, the examiner would discover that the brokerage statements Boots was using as collateral for many of his loans weren’t his brokerage statements at all. Since that fall, Boots appeared to be receiving e-mails from a broker at Merriman with other customers’ statements. He then falsified those statements by placing his name and address on them and sent them to Leipold’s attorney, AEG and others.

    Former Predators owner
    Leipold gave Boots a $10
    million loan to help him
    buy the team.

    Boots eventually learned he was under investigation, which is when he placed that series of calls to Bettman, Leipold, Freeman and others in May of 2008. His message was simple: He was in trouble and the news was going to break soon.

    Or as he conceded to Leipold, “I lied to you.”

    On May 29, 2008, the San Jose Mercury News broke the story that federal authorities were investigating Boots. A day later, Bergeron’s DGB Investments filed a lawsuit alleging Boots committed “complete fraud.” Others followed. Security Pacific Bank, the Private Bank of the Peninsula, Modern Bank, Heritage Bank and AEG Facilities all filed lawsuits. In October, Robitaille filed a complaint that Boots exercised the $2 million loan they took out together without his knowledge and provided the bank with an e-mail address that Robitaille no longer used. The value of their shares of Onco Petroleum had dropped from $5 a share to 15 cents a share.

    In December, the SEC filed a civil lawsuit against Boots, and the U.S. Department of Justice charged him with using false brokerage account statements to obtain loans. He settled the case with the SEC and pleaded guilty in February to charges brought by the Department of Justice. He is out on bail and awaiting sentencing Sept. 8, when he faces up to 25 years in prison.

    At a meeting with a friend this summer, Boots still seemed to be in denial about his actions. He told the friend that he had simply overleveraged himself. But it was a bit more complicated than that.

    “When the Pittsburgh deal went south, he had it in his head at that point that he had to get a team. He threw everything out the window to get a team and save face.”
    — According to a person familiar with Boots at the time

    While Boots hasn’t been charged with running a Ponzi scheme, the SEC has alleged that he used the four funds he launched between 2003 and 2008 as his own personal checkbook to cover gambling debts, pay home mortgages and cover credit card bills. The most striking example of what he did emerged in bankruptcy court filings, after Boots declared bankruptcy in June 2008, and involved an investor named Robert Peters.

    After Boots set up a fund called BDB III in January 2007 to invest in Pacific Premier Bancorp, Peters transferred $1 million to Boots’ personal bank account for the fund. At the time, the account was negative $434,000 because of overdrafts for two checks Boots had cut to Peters totaling $450,000 to repay an existing loan from Peters. In other words, Peters was paying himself $450,000 and Boots $550,000.

    Looking back, a lot of his peers in the San Jose community who knew Del Biaggio growing up said the wealth he showed — the private jet service for which he paid $68,000, the custom-made clothing from San Francisco’s stylish Zuckerman & Associates, the Mercedes-Benz CL500 — never added up. This, after all, was not the smartest guy at Bellarmine, just a charismatic guy from a good family.

    From September 2007 through April 2008, Del Biaggio falsified the account statements and provided them by email and the U.S. mail to at least seven banks and private lenders located throughout the United States. Del Biaggio obtained roughly $45 million in loans based upon his oral and written representations that the accounts belonged to him.
    — the SEC v. “Boots” Del Biaggio

    To them, the shame is not what he did to himself but what he did to his family. The Del Biaggios were pillars of the San Jose community. Now, their name carries an asterisk. When 500 people turned out for a History San Jose fundraiser honoring the family, the first line about the event in the San Jose Mercury News read, “The Del Biaggio name still means something good in Silicon Valley.”

    Boots’ share of the Predators remains tied up in bankruptcy proceedings, and the trustee says he doesn’t expect it to be sold any time soon. After the scandal broke, the NHL adopted a new policy that requires owners to disclose any and all business and financial relationships between one another, such as the loans Boots received from Leipold and AEG. While the policy was designed to eliminate conflicts of interest among owners, many say if it had been in place before Boots bought the team, he would have been ruled out as a buyer long before he dragged Leipold, AEG and the NHL down with him.

    For the NHL, Boots joins a string of team owners who have found themselves serving time, dating to Los Angeles Kings owner Bruce McNall in the mid-1990s and New York Islanders owner John Spano in 1997. But it’s not just Boots’ crimes that stand out, it’s the timing of them.

    His rise and fall parallels the boom and bust of the recent financial meltdown. He opened talks to buy the Predators around the market’s peak in 2007 and was convinced he could flip his shares in the team. But the tidal wave of the economic meltdown swept him away before he had a chance, making him nothing more than another victim in the sea of his own deceit.

    From his point of view, Leipold, who now owns the Minnesota Wild, remains perplexed by the entire ordeal.

    “He knew in two months he would owe people a lot of money, and I guess what he expected to do was to borrow more money to pay us off,” Leipold said recently. “That’s a Ponzi scheme.

    “There’s a little of this era of greed. … It’s hard to understand that kind of mind-set.”

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  • Chevrolet drives off, but Colts sign new sponsorships to fill gap

    The Indianapolis Colts have made a few changes to their sponsorship inventory at Lucas Oil Stadium after General Motors-owned Chevrolet dropped out as a founding partner because of GM’s bankruptcy protection filing.

    James Allen Insurance Brokers, a new Colts sponsor, signed a three-year contract to replace Chevrolet as one of the team’s 14 founding partners. Those firms activate their deals with branded destinations and showrooms on the main concourse inside the 63,000-seat stadium.

    The insurance broker will brand its space with signs and wall graphics but there will be no kiosks or other interactive elements, said Tom Zupancic, the team’s senior vice president of sales and marketing.

    The Colts also signed Toyota to a five-year deal as their official vehicle to replace Chevrolet, a Colts sponsor since the team started playing in Indianapolis in 1984, Zupancic said.

    Chevrolet sponsored the facility’s southwest corner with a kiosk and a Colts-branded truck, but exercised an option to get out of its contract after the first season in the new building, Zupancic said.

    Toyota’s deal includes vehicle displays outside the stadium and brand exposure in the seating bowl and on the scoreboard.

    In addition, the Hoosier Lottery has expanded its presence at the stadium after the Colts signed a deal to create a scratch-off game. The lottery was already a Colts sponsor and had a small booth in a transitional area between the southwest corner and the west gate, Zupancic said.

    Colts officials declined to reveal the value of the new and expanded deals, but Zupancic has said that the founding partnerships’ combined value adds up to between $10 million and $12 million annually. Most terms are five to eight years.

    The Colts did not provide the insurance broker with cash credits to develop its space, as it did for the other founding partners, because of the limited scope of its activation, Zupancic said.

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  • Corning event considers return as pro-am

    The organizers of the Corning Classic, the 31-year-old LPGA event not returning next season because of reduced sponsor support and rising costs, may revive the tournament in 2010 as a pro-am event unaffiliated with the women’s tour.

    Jack Benjamin, president of the Corning Classic, said a decision likely would be made by the end of the year.

    The Corning Classic is leaving the LPGA,
    but may still play on under a new format.

    While a handful of pro-am events now operate without the sanctioning of the LPGA, golf insiders believe the Corning Classic would be the first tournament to walk away from the LPGA and immediately start its own pro-am.

    Benjamin said the decision to end the LPGA event was due to waning sponsorship dollars along with the increased cost of running an LPGA tournament, and the corresponding effect on the amount of charitable donations from tournament coffers.

    In the last few years, Corning Classic organizers spent more than $3 million annually on purses, LPGA fees and event operations, and donated about $300,000 in profits to charity. Benjamin estimates the pro-am would cost less than $500,000 and generate up to $100,000 for charity.

    “We would like to stay involved [in women’s golf] at some level, but the business model just doesn’t work for us anymore,” Benjamin said. “And it obviously doesn’t work for some other tournaments, too.”

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  • Dolphins to add more star power

    Miami Dolphins owner Stephen Ross plans to add up to three more celebrity investors to his team, a well-placed source said, adding to a group to which entertainers Marc Anthony and Gloria and Emilio Estefan recently have been announced.

    More than most sports team owners, Ross is moving aggressively to glamorize the Dolphins, a team that until recent years had lacked any distinctive buzz in its south Florida market.

    “The idea of the convergence of sports and entertainment is a natural, if you will,” Ross said. “If you had been to a game recently up until last year, there was a lot of apathy.”

    Ross, who bought the team last year for $1.1 billion, has proved he is willing to try different things. He sold naming rights to the team’s stadium for just one year to obscure beer brand Land Shark Lager in part to affiliate with the label’s owner, musician Jimmy Buffett. He became the first sports team owner to spend money to buy handheld TV devices that this season will be given to club-seat holders at the stadium. In the past, the device makers either rented them to fans at sports venues or found a sponsor.

    Celebs Marc Anthony and wife Jennifer Lopez
    show off their Dolphins jerseys as Anthony
    is introduced as an investor.

    Last week, Ross introduced Anthony as his latest celebrity investor in a loud news conference in the mall area of New York’s Time Warner Center. Ross’ real estate company owns the building. Pictures of the Grammy Award winner and his wife, Jennifer Lopez, holding up Dolphins jerseys were the prize of the day for Ross. The event was covered overwhelmingly by the entertainment press and not the sports media.

    For his part, Anthony declared he is not being brought on to be the “entertainment guru,” though he is willing to offer his expertise and advice. Terms of his investment were not disclosed, but the amount is thought to be small, perhaps around a 1 percent stake.

    Anthony also will boost the NFL’s Hispanic Heritage Month efforts by singing the national anthem before the Oct. 12 Dolphins-New York Jets “Monday Night Football” game at Land Shark Stadium.

    Anthony said he has bought into Ross’ vision of a combination of football and entertainment. Speaking of being won over by the owner’s pitch, Anthony said, “If it was a candy store and he presented it that way, I am like, ‘I am in.’”

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  • Fielding offers: Vikings look to sell naming rights to the ground they play on

    The Minnesota Vikings are selling naming rights to their field, becoming the latest NFL team to try to move a major piece of sponsorship inventory during the ongoing recession.

    While the Dallas Cowboys and New York’s Jets and Giants remain unsuccessful in their efforts to sell naming rights to their new stadiums, the Vikings for the first time are looking to sell field rights at their stadium (so, Company X Field at the Hubert H. Humphrey Metrodome) as well as three gate sponsorships at the venue.

    “Like all major investments with a sports team, this is a challenge,” said Steve LaCroix, the team’s chief marketing officer. “[But] we feel the field naming rights is really unique.”

    The team expects a low-seven-figure annual sum for the field rights and less for the gate sponsorships. The team is handling the sales efforts internally.

    Prospective brand locations (top)
    include the center of the roof.

    In marketing materials, the team describes the field-rights opportunity as a naming-rights deal and shows renderings that would have the company name on top of the Metrodome along with other exterior placements.

    “These opportunities include the unique rights for a local, regional or national company to gain ‘naming rights’ to the facility while still honoring Hubert H. Humphrey’s legacy in association with the Metrodome,” the materials state.

    There is at least one other NFL facility where a sponsorship is linked in the venue’s name to the field: The Denver Broncos’ home is known as Invesco Field at Mile High. Invesco, however, latched onto that stadium when it first opened, making Denver’s deal different from the Vikings’ situation, said E.J. Narcise, a principal in naming-rights consultancy Team Services, a subsidiary of Learfield Sports.

    “There are a handful of [NFL] clubs trying desperately to level the playing field from a revenue standpoint, so it is no surprise that the Vikings would come up with a program like this,” Narcise said.

    The problem for a company looking at the Metrodome, Narcise added, beyond the distressed economy, is the uncertainty of the Vikings’ stadium situation. The team wants a new venue; its lease in the Metrodome expires at the end of 2011. Narcise said he would advise any company to demand a right of first negotiation for naming rights at any new stadium.

    The Metrodome opened in 1982 as home to the Vikings, MLB Twins and University of Minnesota football. The Gophers this fall are moving into a new on-campus facility, TCF Bank Stadium, while the Twins next year depart for their new ballpark, Target Field. With the Vikings thus on the verge of being the facility’s lone tenant, the city of Minneapolis in February gave the team the right to sell these new sponsorship areas.

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  • Joie Chitwood adds to IMS turnover, leaves company to join International Speedway

    The only constant at Indianapolis Motor Speedway the past month has been change, and that continued last week when President and COO Joie Chitwood III left IMS to join International Speedway Corp. as vice president of business operations.

    The 40-year-old Chitwood, who has been at IMS since 2002 and formerly ran Chicagoland Speedway, will start at ISC on Aug. 10 and report to Roger VanDerSnick, the company’s COO.

    Chitwood is credited with bringing MotoGP motorcycle racing to the speedway and planning IMS’s centennial celebration, a three-year effort that will culminate in 2011 with the track’s official 100-year anniversary.

    Chitwood

    Chitwood said his decision was based on moving back to Florida, where he attended the University of Florida as an undergraduate and earned a master’s at South Florida. The recent turmoil at IMS, which involved the removal of Tony George as the track’s CEO, did not play a role in the decision.

    “It was not a factor,” Chitwood said. “I had already started thinking what’s next for me.”

    Jeff Belskus, who was named the speedway’s president and CEO last week, said Chitwood’s position would not be filled immediately.

    Plans for IMS’s centennial will be handed off to Chris Schwartz, the speedway’s vice president of marketing, and Mel Harder, senior vice president of operations.

    The speedway, under Chitwood’s guidance, has been in the midst of a three-year run-up plan that includes the Concours d’Elegance, a vintage car show, and other events in 2010.

    “We’ve got a great plan in place,” Chitwood said. “Chris and Mel have been working on this throughout the process, and I expect things to continue smoothly.”

    A recipient of SportsBusiness Journal/Daily’s Forty Under 40 award, Chitwood is taking over the role previously held by Grant Lynch, who will become chairman of Talladega Superspeedway and vice president of ISC’s strategic projects.

    — Michael Smith

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  • LPGA: No plans to hand off any of operations

    The PGA Tour, IMG and Octagon are interested in a role with the LPGA, but for now it looks like the 59-year-old women’s tour is set to remain on its own. 

    While the LPGA has not been formally approached about such a relationship, it is vowing to remain a member-owned charitable organization with, at least in the short term, full control of its own operations.

    The LPGA is owned by its playing members, managed by a board of directors and run by an internal staff. As a nonprofit with 501(c)(3) status, the tour cannot be bought, but its operations could be assumed by another organization.

    The LPGA said it has no interest in such an arrangement at this time.

    “We are happy with our structure as a player association and have no plans to change it,” said David Higdon, chief communications officer for the LPGA.

    In the past year, golf industry executives have discussed the possibility of an agency or the PGA Tour becoming involved to assist the LPGA’s operations, and further speculation was fueled by the recent resignation of Carolyn Bivens as commissioner.

    The PGA Tour said it would be open to discussing the potential of owning or operating the LPGA, but the men’s tour has not approached the LPGA, nor has the LPGA inquired about such an arrangement.

    “We certainly would sit down with them,” said Ed Moorhouse, co-COO of the PGA Tour. “There’s obviously numerous complications and issues, but if they asked us to take a look at something like that, we would probably take a look at it. Where we would end up on it? I have no idea. But, honestly, they have not done that.”

    Golf insiders have said the PGA Tour’s tournament business affairs, marketing and sponsorship sales groups could also offer assistance to a tour trying to shore up tournament expenses and sign sponsors.

    “We’re willing to assist them however we can,” Moorhouse said.

    There has been speculation that IMG or Octagon — which both run LPGA events and represent players — would be open to assuming ownership of the LPGA, but neither agency is interested in such a scenario, said high-ranking executives with IMG and Octagon.

    IMG and Octagon, not surprisingly, would be open to a formal consulting relationship or a role managing all or part of the tour’s operations, said senior executives with each agency. The most pressing need is sponsorship sales, as 15 of the 28 events on the 2009 LPGA schedule are undecided about 2010 extensions. The LPGA now works with tournament owners to negotiate title sponsorships for most events on tour.

    “Certainly they could use help in some areas, particularly strategy and sponsorship sales,” said Chris Higgs, co-managing director of Octagon Golf and former COO of the LPGA.

    Higdon played down the likelihood of the LPGA hiring an outside consultant until it names a new commissioner, which is expected this fall. “We’re open-minded to any proposal that might come, but right now we’re focused on working with our existing team to conclude the 2010 schedule,” he said. While the LPGA has no outside agency help for its corporate sales, the tour does work with agencies on its media deals. IMG Media handles the tour’s international television rights. Wasserman Media Group and OMD worked on domestic TV deals last year.

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  • NBA teams can drop printed media guides

    The NBA is cutting out printed team media guides for the first time, dropping its requirement for teams to publish the glossy guides, a six-figure cost savings for some franchises.

    Instead of the mandated print copies, the NBA will convert all of its 30 team guides onto a flash drive to be distributed to media members and season-ticket holders. The guides will also be available electronically on the NBA’s media-only Web site.

    “At one time, we were printing as many as 12,000 guides and that cost us up to $100,000 including time and costs,” said Joel Glass, vice president of communications for the Orlando Magic. “We started using memory sticks last year, but this is the first time the league is not requiring us to print copies.”

    It is expected the teams this year will still produce some type of printed guide in limited quantities for promotional purposes. The Magic this year have around 500 copies to be given to select season-ticket holders.

    “We will print some for any dinosaurs who still want them,” Glass said.

    NBA officials said that they decided to rescind the printed media guide requirement not only for budget purposes but also to be more environmentally friendly.

    “Teams this year are not required to have printed guides, but many teams may still print a guide, though they may be smaller than in years past,” said Brian McIntyre, senior vice president of basketball communications for the NBA. “Teams are still making decisions on whether or not they will be printing a guide of some sort, but all teams will have a full guide online.”

    The New Orleans Hornets will spend $10,000 to print 500 copies of their media guide instead of the $60,000 they spent last year to print 8,000.

    “It’s a legitimate savings and the electronic media guide is really more practical,” said Harold Kaufman, senior director of public relations for the Hornets. “A printed media guide gets outdated after the first few days of training camp.”

    This move continues an industrywide trend. Various NFL teams have moved away from producing printed guides and the NHL has lifted its requirement for printed ones, while MLB teams have been producing digital guides. The PGA Tour and LPGA also have eliminated printed guides.

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  • New sponsor SpongeTech soaks up signage

    With signage featured on nine MLB outfield walls, and sponsorships of varying size and scope at all but two of the league’s 30 teams, most baseball fans are now familiar with the SpongeTech brand.

    However, many still don’t know precisely what SpongeTech sells.

    “Since we’re on a lot of walls, we’ve gotten calls from some people asking if we’re the company that makes the padding,” laughs Jack Schwartzberg, marketing director for SpongeTech, a New York City company that has been around for 10 years but which only recently began to invest in sports marketing.

    There are others calling because of SpongeTech’s “America’s Cleaning Company” tag line, as they want to know when the firm can come clean up some industrial spill. That’s changing now, as the tag has been altered, and many stadium signs will soon now have the new slogan, “The Smarter Sponge.”

    SpongeTech is on nine outfield walls and
    has deals with all but two MLB clubs.

    Sports fans will be getting even more familiar with the SpongeTech name as the company is in the midst of cutting multiple NFL team deals that will see it in at least half the league’s stadiums this season. With some of SpongeTech’s stadium signs appearing where banks and auto brands used to be, Schwartzberg acknowledges readily that his company is benefiting from the economic downturn that has produced an oversupply of signage at various sports venues. Accordingly, some club marketers have termed the company “bottom feeders.”

    But, naturally, SpongeTech has a different view.

    “We are negotiating deals that would have been unheard of in another year,” Schwartzberg said. “We’re spending approximately $20 million on marketing in 2009, and getting maybe four to five times that much in value.”

    Terms of the club deals vary depending on market and inventory, as the most extensive deals include TV, radio, outfield and home plate signage, while the other less-extensive don’t feature such elements.

    No one is confusing SpongeTech’s budget with the amount of dollars that used to be an annuity from the auto and banking categories. However, it is new money at a time when every sports property is seeking just that. Company officials say their campaign within MLB is working, even if it appears counterintuitive.

    SpongeTech says sports effectively
    reaches the company’s target market
    of women 25-54.

    “Our target market is women 25-54, so sports may seem like a strange way to reach them,” Schwartzberg said, “but it is working, because there are lots of women watching sports, too.”

    He said the company had revenue of $55,000 three years ago but is projecting $55 million in sales this year.

    As the name suggests, SpongeTech markets sponges, but they are not the commodity product found under the kitchen sink. Their sponges are more comparable to bottles of cleaner, so the company refers to them as “delivery systems.” So, for $7.95 to $19.95, you can buy a sponge filled with enough wash and wax to clean and shine a car six to eight times, or with sufficient shampoo for six months worth of pet washing.

    Other sponge-specific products include one for tub and tile, and one for bathing children, which will soon be marketed with a “SpongeBob” license. The company has been built as a direct response retailer, but the recent additional exposure is helping it increase distribution to brick and mortar retailers, including Costco, Rite Aid and CVS. SpongeTech says aided awareness from its marketing activities has helped it increase North American retail locations from 1,700 locations to 40,000 today, with a goal of 100,000 locations by year’s end.

    SpongeTech has been using a variety of agencies for its team deals: CAA Sports, ANC and Van Wagner.

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  • No prank: Reebok readies training camp ads

    NFL training camps open this week and lead on-field licensee Reebok was finishing a new NFL apparel campaign last week that celebrates an ancient training camp ritual — pulling pranks on rookies.

    Looking to cement its NFL ties and push sales of its Speedwick shirts with NFL logos, Reebok is prepping a “Lighter Side of Training Camp” ad campaign, which will have six to eight spots.

    Knowshon Moreno is among the NFL
    players appearing in the campaign.

    In them, rookies will be involved in training-camp pranks, from the tradition of having to stand and sing their school’s fight song to being forced to look for a veteran’s lost contact lens, which actually doesn’t exist. Another ad has a rookie’s cell phone incessantly ringing from people making inquiries about buying his car — of course, the rookie was unaware his car was for sale.

    “NFL training camp is a time of year we want to own, and we thought taking a light look at it was the right way to make it mean more to more people,” said Kenny Gamble, vice president and general manager of Reebok’s sports licensed division. “We also think showing realistic training camp scenes like these ties back well to the authenticity we’re trying to show with our brand.”

    Denver Broncos rookie running back Knowshon Moreno is doing his first ad for Reebok in the campaign, which should break next month. Other NFL athletes in the spots are New York Giants Eli Manning, Kenny Phillips and Domenik Hixon, and New York Jets Leon Washington, Nick Mangold, Dustin Keller, Thomas Jones and Jerricho Cotchery.

    The $28 Speedwick shirts combine the wicking abilities of Reebok’s PlayDry fabric with an antimicrobial technology. For the first time, this year the T-shirts are available in a retro gray look.

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  • Ricketts’ bankers set syndication meeting

    Bankers for Chicago Cubs bidder Tom Ricketts are scheduled to have a loan syndication meeting Tuesday in Chicago before inviting the lenders to a game at Wrigley Field.

    Ricketts has been the front-runner to acquire the club since January, when Cubs owner Tribune Co. entered an exclusive negotiating period with him. While that window closed in May and Tribune has begun speaking with private equity investor Marc Utay about a deal, Ricketts is much further along in terms of financing.

    Ricketts’ three banks — Bank of America, JPMorgan Chase and Citigroup — have agreed to underwrite the $450 million loan necessary to complete his acquisition of the team. The meeting Tuesday is with other lenders who would buy pieces of the loan, a process called syndication.

    Ricketts’ bid for the team was $900 million. Any deal with Tribune must be submitted to the court that’s overseeing the publishing company’s bankruptcy filing.

    — Daniel Kaplan

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  • Saratoga expects to keep fields, seats filled

    New York Racing Association CEO Charles Hayward thinks Saratoga, a bastion of horse racing tradition that’s also America’s richest meet, will avoid the 10 percent decline in betting that the industry has suffered in 2009.

    The total amount of money wagered on horse races in the U.S. — called handle — was $6.503 billion in the first six months of 2009, a decrease of 10.5 percent from the same period in 2008, according to Equibase, an industry database. In June, handle was $993 million, a decrease of 16.9 percent.

    “I think our handle will be down, but it will only be down by about 5 percent,” Hayward said last week of Saratoga’s 36-day race meet, which opens Wednesday.

    America’s oldest sporting venue, Saratoga Race Course, which opened in 1863, holds more Grade I races and has the highest purse money of any track in the country. The meet historically has drawn horse owners, breeders and jockeys from around the country to Saratoga Springs, N.Y., and its sprawling grounds and picnic areas draw thousands more fans than there are reserved seats.

    Racing fans flock to 146-year-old Saratoga
    every August for top-level races and horses.

    “I think we can seat somewhere around 9,000 or 10,000 people, and our average [daily] attendance is about 25,000,” Hayward said.

    As of earlier this month, sales for reserved seating in the grandstand, clubhouse and box seats were actually up from the same time last year, by about 5 percent, Hayward said. At the same time, group sales and luxury suite sales are about 5 percent softer, Hayward said, adding that was not surprising as corporations are cutting back.

    Saratoga has a new sponsor this year, thoroughbred auction firm Fasig-Tipton, which will sponsor a weekend of racing Aug. 8-9 to promote the company’s annual sale of thoroughbred yearlings Aug. 10-11. Fasig-Tipton will have signs on the track and naming rights to a race.

    Three sponsors, private jet company NetJets and thoroughbred breeding farms Shadwell and Three Chimneys, are returning to sponsor Saratoga’s most prestigious races, the NetJets King Bishop, the Shadwell Travers Stakes and the Three Chimneys Hopeful Stakes.

    Sponsorship revenue at NYRA — which operates two other racetracks, Aqueduct and Belmont Park, along with Saratoga — is down from about $3.75 million last year to $3 million this year, Hayward said, but that is mainly due to the lack of a potential Triple Crown winner at the Belmont Stakes in June. Among the sponsors that did not return after last year, when Big Brown was contending for a Triple Crown, are UPS, Prudential and Dairy Queen, Hayward said.

    But as Saratoga opens this week, it will not have the same horse shortage problem that other tracks across the country have encountered this year.

    Several tracks, including Del Mar, the premier California summer meet, are suffering from a shortage of horses and are cutting back race days. Del Mar is running five days a week, instead of six. But Saratoga is running its usual six-day Wednesday-through-Monday schedule, ending Labor Day.

    Every year, Saratoga’s 1,800 horse stalls cannot accommodate the demand from horse owners who want to race there, Hayward said. But this year, there was a record number of applications for stalls, about 3,400, up from about 3,000 last year.

    “I think Saratoga is a little bit more recession-proof because it is a great destination,” Hayward said. “I just think the racing is so good.”

    Joe Dalton, president of the Saratoga County Chamber of Commerce, said that Kentucky Derby winner Mine That Bird was already on the grounds at Saratoga, and that there was talk Preakness winner Rachel Alexandra would run at the meet.

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  • SEC calls big digital play with XOS

    In an effort to make it the most widely distributed college conference in the country, the Southeastern Conference is teaming with XOS Technologies to form the SEC Digital Network, a broad online platform of content representing an attractive new revenue stream for the conference and its member schools.

    The new network, the first of its kind in the college space to aggregate all sports content and distribute it in a centralized model, is expected to launch Aug. 27, just before the start of the college football season. The SEC’s launch will coincide with a redesigned SECsports.com, the league’s official Web site, which will offer more than 10,000 hours of original and exclusive video, including games and interviews. The archive is expected to grow beyond 20,000 hours.

    The goal is to eventually provide an iTunes-like environment for past and future games, highlights, news, interviews, press conferences, recruiting updates and behind-the-scenes footage. All of that content won’t be available right away, but the network will evolve over time, both parties said.

    “To be able to distribute SEC content across multiple platforms, it’s going to totally add value to the consumer experience,” said Randy Eccker, CEO and co-founder of XOS. “You can watch it at home on your 60-inch big screen or in an airport on your laptop or your iPhone on an SEC application. No longer is the consumer going to be limited by the technology. You’ll truly have access to content 24/7.

    The goal is to provide an iTunes-like environment
    for SEC games, highlights, news and more.

    “This is an industry-changing agreement and concept.”

    SEC Commissioner Mike Slive said, “Our goal is to be the most widely distributed conference in the country, and this network adds greatly to that goal.”

    The two partners are still working on what the SEC Digital Network will look like when it debuts next month. Its branding will be prominent on the SEC’s site, which will be the lone portal to the network, while links to SECsports.com are available on the official athletic sites of the 12 member schools.

    XOS technology will enable visitors to search and sort content, so whether they want clips of Peyton Manning’s longest touchdown passes or Tim Tebow’s touchdown runs, all highlights will be tagged and easily accessed.

    The long-term rights agreement, which will be announced this week, represents a new revenue stream for the conference that previously didn’t exist. That new money, like most of the SEC’s revenue, will be shared among the 12 member schools.

    XOS and the SEC are still working on the revenue model, but a mix of subscription and advertising will be incorporated. A subscription will likely be required for fans to have all access to the content.

    Member schools retain the right to stream live events on their Web sites, as long as those events are not already being broadcast. The SEC Digital Network’s live streaming will be limited to select championships of Olympic sports at first, but could grow to include more live coverage as the network evolves.

    The deal gives XOS rights to collect and manage SEC video content while distributing it to consumers and other businesses that have a use for the footage.

    “The challenge was to structure a deal that takes everything into account in a new world,” said Robert Fuller, a partner in the law firm Robinson, Bradshaw and Hinson, which represents the SEC. “There are almost infinite possibilities when you talk about digital platforms, but you’re still talking about the SEC licensing its intellectual property rights and XOS figuring out how to make programming available to whoever wants to see it. So in some ways it’s still analogous to a broadcast agreement.”

    The sales team at XOS Digital, a newly named unit within XOS Technologies, will handle advertising and syndication, while also working with other Web sites to distribute SEC content. So if AOL or Yahoo! needs highlights of last week’s SEC game, those sites will license it from XOS, which acquired Collegiate Images last year to obtain CI’s video vault and rights with an eye on a digital network.

    “Sites are looking for compelling, rich media content to attract eyeballs,” Eccker said. “As the industry is evolving, digital advertising is blowing through the roof. It’s a highly formidable avenue for advertisers and sponsors to get into college athletics. You can reach more specific demos and you can track it.”

    For the SEC to sell digital rights to XOS, it had to first negotiate the copyright to the games away from the broadcast partners, which previously has retained the copyright to the games they showed. News organizations previously obtained video from CI or the broadcasters.

    The Big Ten was the first conference to take control of the copyright on broadcast games when it launched the Big Ten Network in 2007. The league has used that copyright to air classic games as part of its “Greatest Games” series. The Big Ten’s licensing partner, Denver-based Thought Equity, distributes its digital content.

    When the SEC went into its TV negotiations more than a year ago, it had planned all along to retain its copyright to past and future games, with the bigger plan to use those games on its digital network.

    “In order to own our own digital space, we had to gain the copyright and we were successful in doing that,” Slive said. “We knew that we wanted a state-of-the-art Web site so we thought about all of the resources that it would take to make that happen.”

    Neither XOS nor the SEC would reveal the financial terms or the length of the rights deal, except to say it’s not as long as the conference’s 15-year TV deals with ESPN and CBS.

    XOS Digital will run the site out of its Orlando headquarters. John Christie, formerly CI’s executive vice president, will serve as the digital network’s general manager and run the 20-person staff, while another 25 interns will work game days.

    From the SEC’s Birmingham, Ala., office, Mark Whitworth, associate commissioner for external affairs, will be the network’s primary contact. He was part of a team of SEC associate commissioners, including executive associate Mark Womack, and TV consultant Chuck Gerber, who began as far back as two years ago formulating a digital strategy. Talks between the SEC and XOS on the full breadth of the digital offering began about 18 months ago.

    “This is the culmination of a vision we had before the initial broadcast negotiations to make the SEC available to as many fans worldwide as possible,” Gerber said. “You look at CBS and ESPN, you look at our syndicated package that’s now in 54 percent of the U.S. households, and now this digital network. Any way a fan wants to see the SEC, they can see it.”

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  • Sports would feel hit if lender CIT pulled out

    Embattled lender CIT Group backed away from a commitment to lead a more than $225 million (U.S.) loan to the Molson family, which is buying the Montreal Canadiens, finance sources said last week.

    While the deal is not endangered because the Molsons apparently have been able to find replacement financing, three hockey and finance sources said, the development underscores the big hit that sports finance, and the NHL in particular, may take if CIT is forced into bankruptcy protection or has to sell a wide array of assets.

    “It will be a big negative for the sports lending market if CIT withdrew, mainly due to [the fact] that there has been a contraction in the number of lenders in the last year [that focus on sports],” said Rob Tilliss, the former head of sports at JPMorgan Chase who now runs his own advisory, Inner Circle Sports. “If CIT were to withdraw, that would be removing more capacity from the system.”

    A spokesman for CIT did not return queries for comment, nor did Gordon Saint-Denis, the CIT banker who handles sports lending.

    CIT, a lender to small and midsized businesses, failed to win more government funding earlier this month but was saved from imminent bankruptcy by $3 billion of loans from its creditors. That injection, however, has not solved its problems in full.

    For sports, the news of a CIT demise would not be welcome. The number of lenders to the sector already has shrunk significantly in the last 18 months. Société Générale got out of the business even before the economic implosion last September, and the tightened credit markets have certainly not spared sports.

    CIT, however, was open for business and had made a name as a go-to lender in the NHL, extending credit to teams like the Canadiens, New Jersey Devils and Ottawa Senators. The NHL declined to comment. CIT also was a top lender to Legends Hospitality Management, the concessions venture formed last year by the Dallas Cowboys and New York Yankees. One finance source estimated its sports loan portfolio at $500 million.

    Multiple sources said that replacement financing was at hand for the Molson family, with two sources naming Bank of Montreal, while another source said a deal had not yet been struck. Bank of Montreal referred questions to a Molson family spokesman, who declined to comment.

    The loan is for about $250 million (Canadian), the sources said. The Molsons agreed to buy the team in June from current owner George Gillett. While there looks to be a positive ending in Montreal, the Canadiens are a high-profile team in Canada where native lenders were sure to be on the ready. Other teams needing financing may not be as fortunate.

    Staff writer Tripp Mickle contributed to this report.

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  • Taking the wheel at ISC

    When Lesa France Kennedy entered the drivers meeting at last April’s NASCAR race in Phoenix, it marked a personal reunion with the sport. Wishes of “Congratulations” and “Welcome back” came from team owners Richard Childress and Jack Roush. Handshakes and hugs came from drivers Carl Edwards and Jeff Gordon.

    The week before, Kennedy had been promoted to CEO at the France family-run International Speedway Corp., the world’s largest and most influential racetrack operator. But what the promotion really signified was Kennedy’s re-engagement with the sport that her father and grandfather created and shaped for the last 61 years.

    There was a sense throughout the garage at Phoenix that “She’s back,” and ready for a more public role as one of NASCAR’s most powerful figures.

    It was two years ago that the deaths of her father, Bill France Jr., and her husband, Dr. Bruce Kennedy, both within a month’s time, sent Lesa into seclusion from the sport. She called it a type of shock that took her months to shake and she admitted that the grieving process took longer than she expected.

    “It’s not something you put a timetable on,” she said. “You can’t just set a date that you’re going to be back.”

    Bryan Sperber, the track president at Phoenix, was with Kennedy that April day, escorting her to some of the speedway’s new features, the Bud Roll Bar and the Speed Cantina. The inquisitive and focused Kennedy, 48, asked lots of questions, as she always does.

    “There was a real excitement that she was re-entering the sport in a more active way,” Sperber said. “The loss of her father and husband were very public tragedies and there’s got to be a healing period from that. With Lesa back as CEO now, I think it helps turn the page.”

    ‘She has a tenacity’

    It was 2005 when SportsBusiness Journal named Kennedy the most influential woman executive in sports. As president of ISC at the time, her fingerprints were all over a number of significant projects, including the acquisition of Chicagoland Speedway and the construction of Kansas Speedway.

    In the mid-1990s, Kennedy took the lead on building Daytona USA, the showplace next to the speedway that has since become the Daytona 500 Experience.

    “Lesa can be a bulldog,” said Cliff Pennell, the former R.J. Reynolds marketing chief during the Winston title sponsorship in the 1990s and an ISC consultant for eight years. “She decides that ‘We’re going to do this and it’s not going to fail.’ She has a tenacity that is very much like her father.”

    Even though her appointment as ISC’s CEO took effect June 1 — when she replaced her retiring uncle Jim France — many in the motorsports industry say she was effectively the company’s CEO going back six, seven, even 10 years ago.

    While engineering some of ISC’s most important expansion in the past decade, she also stuck around for the follow-up. When ISC acquired five tracks from racing icon Roger Penske in the late 1990s, including the Homestead, California and Michigan speedways, Kennedy took the lead on integrating them into the ISC family.

    “Those tracks had very different operating styles, very different cultures,” Pennell said. “Bringing them all together — from a private group into a public company — was quite a task, but Lesa is so organized and so determined that she made it work. She has a way of getting everyone to put their differences aside and get behind a common purpose.”

    On a larger scale, “simply to say that Lesa was behind this project or that project doesn’t do her justice,” said George Pyne, president of IMG Sports & Entertainment and formerly an 11-year veteran at NASCAR. “As it relates to ISC and largely to NASCAR, she’s played a role in every major decision the last 15 years, maybe more.”

    NASCAR President Mike Helton with Kennedy,
    who now heads the biggest racetrack
    company in the world

    She’s also out front on ISC’s two current projects: the construction of Daytona Live!, a $430 million retail, dining and entertainment development that will house the headquarters for NASCAR and ISC, and a joint effort with Cordish Co. to build a Hard Rock hotel and casino at Kansas Speedway.

    But some of the company’s more recent struggles face Kennedy as she officially steps into the CEO job. The Daytona Beach, Fla.-based company reported second-quarter losses of $31.7 million, citing drops in admissions, sponsorship and hospitality revenue. The company still expects a profit for the year thanks, in part, to major reductions in expenses, according to John Saunders, who was promoted to Kennedy’s former position as ISC’s president.

    The company also has failed with 50-50 partner Speedway Motorsports to steer troubled merchandise giant Motorsports Authentics in the right direction. MA is expected to post losses for a third time in four years. Created from the $245 million acquisition of Action Performance and Team Caliber, MA now carries a market value of about $38 million.

    Also, recent expansion efforts in Staten Island, Seattle and Denver stalled, leaving analysts wondering from where ISC’s revenue growth will come. A Wells Fargo Securities report called track ownership an already mature, slow-growth industry, and ISC’s stock price of just under $25 last week was well down from the 52-week high of $42.58.

    How Kennedy will react to these setbacks remains a question. The sister of NASCAR CEO Brian France, Kennedy is described as smart but quiet by the financial analysts who cover the publicly traded ISC.

    “She’s not very visible,” said Dennis McAlpine, a veteran analyst who has covered the sport for 20-plus years. “She’s very hard to read because you don’t see much of her.”

    “She’s going to need to be more visible because of the negative forces affecting the business,” said Barry Lucas, a senior vice president and analyst for Gabelli & Co. “She doesn’t necessarily need to be Brian France or even Bruton Smith, but she does represent a significant portion of the sport.”

    Getting more out front

    As the point person for ISC, Kennedy said she’s ready for a more visible role and understands that it comes with not only her leadership position with the tracks, but also as the vice chair of NASCAR, and her maiden name as well.

    “I would like to be more out front,” she said. “I think that comes with leadership and it’s something I’m going to focus on moving forward. It’s one of the ways we can make everyone aware of the opportunities at ISC.

    “The more we further the sport, the more we do to move our tracks forward.”

    Lesa France Kennedy
    Title: CEO
    Company: International Speedway Corp.
    Age: 48
    Residence: Daytona Beach, Fla.
    Family: Son, Ben, 17
    Education: B.A., economics and psychology, Duke University, 1983

    It was within the past few months that Kennedy said she was ready to resume her once-prominent role in the sport. It was July 10, 2007, when the Cessna 310 carrying Dr. Bruce Kennedy crashed in a Sanford, Fla., neighborhood, killing him and four others.

    In the months after the crash, Kennedy receded from her role at NASCAR and ISC, taking days and weeks at a time from work to be with her son, Ben, now 17 and a short-track racer himself. Those weekend excursions to watch Ben race at nearby short tracks in Orlando or New Smryna proved to be part of the healing process.

    “In the time after the accident, the first six months, my focus was totally on the home front,” said Kennedy, who lives in Daytona with her son. “In those six months, I was really in a state of shock. I had a lot to deal with personally, but I also knew that my dad and my husband would want me to keep going and to move on.

    “We’ve got a lot of exciting things going on here at work, there are a lot of exciting things happening with Ben. We’re doing very well now, but it takes time.”

    Putting a timetable on her return to a fuller work schedule wasn’t something she could do at first. Those who work with her say she remained engaged in the company, weighing in on important decisions even though she might not have had a regular presence in the office during the first year after her husband’s death.

    In NASCAR, the commitment of the third generation of leadership, Brian and Lesa, is often gauged by how many races they attend. Their grandfather, Bill France Sr., founded the sport in 1948 and their father, Bill Jr., is credited with shepherding the sport from a regional phenomenon into a national hit during the 1980s and ’90s. They attended most every race and that’s where the bar is set.

    But what most media and fans don’t see, co-workers say, is how often Kennedy has traveled in recent years to lead the new casino project at Kansas Speedway or the attempted expansion at Staten Island.

    “I would tell people they’re wrong if they think she was not engaged in the business before,” said Roger VanDerSnick, ISC’s newly promoted executive vice president and COO.

    But even as Kennedy talks about work the last few months, she describes it as “diving back in.”

    “It’s just a difficult process and some days are better than others,” she said. “The advice I give to friends is not to put a timetable on it. You can’t.”

    In the months since she was named CEO, Kennedy has been more visible, attending races, walking through the garage, engaging fans and stakeholders for their feedback. On a recent conference call with ISC’s business unit leaders, Kennedy opened with comments and chimed in several times over the course of the hourlong call.

    “It was great to hear her because it had been a while since we’d had that kind of insight from her,” said Gillian Zucker, president at ISC’s Auto Club Speedway and an 11-year France family friend. “When she says something, it’s meaningful. She has the power to change the whole focus of a discussion.

    “She’s never been a very public figure, she’s never wanted to be in the spotlight, all she wants to do is drive the business forward. That’s just her personality.”

    Leading in crisis

    Now that she’s fully re-engaged at ISC, the industry awaits her input on the NASCAR side of the business, where it battles dropping attendance, TV ratings and sponsorship.

    When asked about NASCAR’s direction, Kennedy sticks to many of the same predictable talking points that Brian leans on.

    TV ratings, while down, remain strong compared to most other sports. Crowds of better than 100,000 still fill many of NASCAR’s tracks. The new car is making the sport safer and more economical for the drivers and owners.

    One of Kennedy’s successes
    with ISC has been the
    Daytona 500 Experience.

    “The foundation of the sport is very strong,” Kennedy said. “If you look at the business, we’ve been fortunate that we’ve fared very well through the (economic) storm and we’re well-positioned for the future.”

    That’s not a position shared by everyone, many of whom see the declines as evidence that NASCAR is on the wrong side of the plateau after several years of growth.

    “Can she lead the most important public racing company in the world at a time when the industry is in crisis?” asked Humpy Wheeler, the former president of Lowe’s Motor Speedway, which is owned by ISC’s rival, Speedway Motorsports. “It’s going to take a lot of hard work to turn this thing around. We’re talking 60- and 80-hour workweeks.

    “Lesa is a product of inherited leadership and there’s nothing wrong with that. We’ve had many great leaders who came to power that way. But this sport is in a serious situation leadership-wise. Lesa is very smart and she’s certainly capable of giving the industry what it needs, which is strong, passionate leadership.”

    While she’s not exactly effusive when describing her relationship with her brother, Brian, the two are said to be closer after the deaths of their father and Kennedy’s husband.

    “If he needs my support, he asks for it and he knows that I’m there for him,” Kennedy said. “We might talk once a week or several times a day, depending on what’s happening.”

    There are many in the industry who want to see Kennedy wield even more of her influence on both sides of the France family businesses. Brian has said he won’t be a lifer in his role as NASCAR’s CEO, but his sister wouldn’t speculate on whether she might be next.

    “My interest is solely on ISC,” she said.

    Whether her interests expand in the future will be of particular concern for an industry fighting the throes of the recession.

    “What you have to know about Lesa is that she’s not a politician,” said Zak Brown, CEO of Indianapolis-based motorsports agency Just Marketing International. “She calls it as she sees it, she’s passionate about the sport and she’s a very good leader.

    “It will be interesting to see how big her NASCAR influence becomes. Her business card says ISC, but it feels like there’s more to the plan.”

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  • X Games faces key decision on future sites

    X Games is in discussions to renew a five-year contract with AEG and return to the Staples and Home Depot centers next year, but the property is also considering a move to Los Angeles Memorial Coliseum or possibly another city like New Orleans.

    X Games events now at Home Depot Center could
    end up at Los Angeles Memorial Coliseum.
    X Games Booty
    ESPN is giving athletes gift bags valued at $700 this year to commemorate the past 15 years of X Games. X Games sponsor New Balance created a customized backpack with an X Games logo that will be filled with:
    Aspen Skiing Co. “Save Snow” energy light bulb
    Brushfire Records A vinyl record
    Chronicle Books “Stalefish” skateboarding book
    Greenopia Eco-guide to Los Angeles
    Klipsch Image X5 headphones
    Mattel X Games fingerboards
    Mizu Life Eco-friendly stainless steel water bottles
    Sara Happ Lip scrub
    Saxx Performance underwear
    Solar Style Solar charger
    Wet Cement Handmade T-shirts
    Source: ESPN

    “There’s no question Los Angeles and AEG have been the absolute right fit, but it’s incumbent upon us to look at our various options,” said Rick Alessandri, ESPN senior vice president.

    As the X Games have grown, they have become a gathering place for many in the action sports industry. For example, DC Shoes and other companies this week will take over Los Angeles’ Standard Hotel. Such event-related revenue flowing into the Los Angeles area makes ESPN executives believe the X Games should generate more revenue from community and venue partners.

    The AEG contract with the X Games, which expires this week, provided the property a mix of cash and value-in-kind services. The property is in talks with AEG about extending that deal under new terms. Should it fail to reach an agreement, Alessandri said, it would consider other options.

    One of those options would be relocating outdoor events from the Home Depot Center to the Los Angeles Memorial Coliseum. The X Games has done events at the coliseum in the past and is familiar with the facility. Moving to the coliseum would inject newness into an event that has spent the last five years in the same location. It also would reduce the drive X Games attendees currently make between the Home Depot Center, which hosts daytime events like motocross and skateboarding in Carson, Calif., and the Staples Center, which hosts nighttime events like moto step-up in downtown Los Angeles.

    Alessandri

    “The grandness of that building, the history of that building, the proximity of that venue to downtown — it could be pretty exciting,” Alessandri said of the Coliseum.

    Another option might be to open the X Games up for bid and let cities put forward offers to bring it to their markets. Several cities, including New Orleans, have expressed interest. Alessandri declined to disclose other cities, but Dallas, Phoenix and Miami have expressed interest in hosting the X Games in the past.

    The New Orleans Sports Foundation will be visiting the X Games this week to learn more about the event but has no immediate plans to lure the X Games to Louisiana. “If the opportunity to bid on hosting X Games were to present itself, we would certainly be excited to demonstrate how New Orleans could provide an irresistible backdrop for the event,” Greater New Orleans Sports Foundation spokesman Sam Joffray said in an e-mail.

    The X Games may develop a bid process. It is learning more about several bid processes, including how the International Olympic Committee selects the host city for the Olympic Games. Alessandri said the X Games may emulate the IOC selection process or others in the future.

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