SBJ/Jan. 10-16, 2011/Leagues and Governing Bodies

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  • MLL plots relocation, expansion

    Major League Lacrosse is moving its Toronto franchise to nearby Hamilton and soon will vote to add two new markets — Columbus, Ohio, and the Carolinas, most likely Charlotte.

    The two new teams would begin play in 2012 if they’re approved at the league’s next board of managers meeting on Jan. 21. A 75 percent majority is required for the 13-member board to approve expansion. In addition to expansion, the league’s board will vote on whether to increase the schedule from 12 to 14 games beginning in 2012.

    The league, which plays its games outdoors from May through August, has outlined a plan to grow from its current six teams to 16 by the end of this decade.

    Toronto Nationals
    Major League Lacrosse’s Toronto franchise is on the move to Hamilton after facing scheduling difficulties at its home stadium.
    David Gross, the league’s commissioner, said the league would like to add two teams a year in 2012, 2013, 2015, 2017 and 2019. The league has been asking for an expansion fee of $1.5 million.

    “But more important than what they pay is how they operate,” Gross said. “What we’re looking for is the right operator to run a franchise.”

    The Toronto Nationals’ move to Hamilton was driven by scheduling difficulties at the previous venue, Lamport Stadium. The team will play in Ron Joyce Stadium in Hamilton, which is about 40 miles from Toronto.

    If expansion is approved, the Columbus franchise will play in Crew Stadium, home of the MLS Columbus Crew.

    The Charlotte ownership group still is working on its venue agreement. It expects to come to terms with the city on a lease at 20,000-seat Memorial Stadium, said Jim McPhilliamy, a former Charlotte Bobcats and sports marketing agency executive who assembled the local ownership group and will head the franchise. If those talks stall, the team could play in Cary, N.C., where the MLL held a regular-season game in 2008.
    McPhilliamy began assembling owners last year in the hope of raising at least $3 million and landing a place in the single-entity league this season. When he fell well short of that goal, raising a bit more than $1 million, league owners agreed to consider the group for an expansion franchise in 2012. The league’s largest stakeholder, New Balance Chairman Jim Davis, will maintain a stake in the franchise to get it up and running, McPhilliamy said.

    “We didn’t raise as much as I hoped to run the program profitably, but Jim Davis backstopped it a little,” McPhilliamy said. “Working with us a little, they got us to where we can do a good job and run a really good team.”

    The Charlotte group points to strong growth potential, with 60 local high school and middle school boys and girls teams and 11 men’s and women’s college teams, and an estimated 1,900 participants.

    “Right now the [lacrosse fan base in Charlotte] is a little small,” McPhilliamy said. “But we’ll have one of the more desirable demographics in the marketplace for sure. I think that’s saleable.”

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  • UFC goes another round in effort for N.Y. sanction

    The owners of the UFC and their often blustery CEO, Dana White, will join the president of Madison Square Garden Sports and others in New York on Thursday at a press conference to discuss the economic windfall that a mixed martial arts event would deliver to the cash-strapped state — were it not one of only four that still prohibit the sport by law.

    They will commit to bring future events to the Garden and other venues in New York if legislators pass a law that allows the state athletic commission to sanction it.

    On that same day, tickets will go on sale for UFC 128, an event scheduled for March 19 at the Prudential Center in Newark, N.J. When the UFC visited Newark last March, the promoter announced attendance of more than 17,000 and a live gate of $4 million. UFC executives said about one-third of those tickets were purchased by residents of New York.

    So begins the latest installment in a push that began late in 2007, when UFC parent company Zuffa paid a well-connected upstate New York firm a $10,000 retainer to lobby on its behalf. Since then it has spent more than $1.5 million on lobbying and public relations campaigns in the state. It also has contributed $165,000 to election campaigns.

    The result: steady coverage of the quest in newspapers and on television, a percolating cauldron of grassroots chatter on the Web, a broadly acknowledged shift in attitude toward the sport by many legislators and, perhaps most importantly, a steady stream of bills — all of which died on the vine.

    And so, even as the once clandestine sport of mixed martial arts has surged toward mainstream acceptance, gaining state-regulated sanctioning in holdouts such as Illinois, Pennsylvania, Indiana, Massachusetts, Wisconsin and Alabama, it remains illegal in the most-watched market in sports.

    “Why in all these states, but not New York? That’s the $64,000 question,” said Marc Ratner, the prominent former Nevada fight regulator whom the UFC hired to forward its legislative cause in May 2006. “I can’t get a straight answer. It’s maddening. But, we’re going to keep trying.

    “Our mantra has been that we run to regulation, not away from it, and we will continue that. I’m very bullish on New York and I think this will be the year.”
    When Ratner headed the Nevada Athletic Commission from 1992 to 2006, he testified in front of Congress about the perils of mixed martial arts, an emerging enterprise that at the time he found to be barbaric and lacking in sport. He made those very points again alongside Sen. John McCain during a 1995 appearance on “Larry King Live,” where he predicted that the 36 states that refused to sanction mixed martial arts events at that time would prevail over the long haul, regulating it “out of existence” across the U.S.

    That was 15 years ago. Today, Ratner works to turn his own prediction on its ear. For the last five years, he has crisscrossed the country, convincing state legislators and athletic commissions that today’s MMA is safe for fighters, with rules that did not exist when he fought staunchly to ban it. Since the recession took hold, the argument of MMA as a driver of tax revenue and economic impact also has resonated with many.

    Commissions in 23 states sanctioned and regulated MMA events when Ratner joined the UFC. Five years and several million dollars in lobbying expenses later, MMA events are sanctioned in 44 states, or all but four of the 48 that have boxing commissions: Connecticut, West Virginia, Vermont and New York.
    The last of those towers above the rest as the remaining priority.

    “It’s important because it’s the biggest sports market in the world,” said Ken Hershman, head of Showtime Sports, which airs MMA events promoted by UFC’s competitors, Strikeforce and M-1. “It’s a natural fit for the continuing expansion of mixed martial arts that it have a home in New York.”

    UFC action
    UFC can’t get into New York City but it can get close, as it did for UFC 111 on March 27 at the Prudential Center in Newark.
    The UFC’s legislative strategy is similar to that of other sports properties. It lobbies in support of legislation that favors its business interest. The difference is that, while most properties operate on the national landscape and monitor legislation on a range of issues, the UFC works in individual states with a singular goal: To pass state laws that allow for and regulate mixed martial arts.

    The billionaire casino owners who bought the UFC 10 years ago, brothers Frank and Lorenzo Fertitta, recognized that was crucial to the venture’s survival from the beginning, said Lawrence Epstein, executive vice president and general counsel of UFC and its Las Vegas-based parent company, Zuffa. Hiring Ratner, who then brought along legal adviser Michael Marsh, formalized that commitment.

    In populous states with vast agendas and complex bureaucratic webs, the quest can be expensive.
    The tab for lobbying in New York last year eclipsed $500,000, based on public filings and interviews with UFC executives. Zuffa also contributed $130,000 to political campaigns, including $36,800 to incoming Gov. Andrew Cuomo, $34,000 to Democratic campaign committees, $10,000 to Republican campaign committees and $1,000 to $3,800 to a dozen different influential state senators and assembly members. Zuffa spent $530,000 lobbying in New York in 2009 and $595,000 there in 2008.

    In less populous states, the cost is far lower but the tactics are the same.
    UFC spent about $75,000 lobbying in Indiana in the 18 months leading up to the passage of legislation there in 2009, according to filings in that state. It spent $216,736 in Wisconsin, where lobbyists logged 366 hours with government officials on its behalf leading up to the law’s passage last year. To get a bill passed in South Carolina in 2009, UFC spent $46,550 on lobbyists and contributed $4,250 to campaigns, giving $1,000 each to the chair of the committee where the bill originated, the chair of the subcommittee that reported favorably on it, the senate president and the senate majority leader.

    “With some of the campaigns we’ve run, it’s not a cheap number,” Epstein said. “It’s not just about hiring a lobbyist to help you navigate the political landscape and showing up at the state capitol. You have to hire a PR firm. You have to do grassroots. Internet. A grass-top strategy. You have to interest decision-makers. And then on top of that there’s lobbying. In a lot of states, a much more in-depth program has to be put in place.”

    In New York, where UFC has spent the most and worked the longest, it still has not broken through, even with the public support of MSG and the chair of the state athletic commission. A 2007 bill passed the Assembly but stalled in the Senate. In 2008, it got stuck in the Assembly’s tourism committee, where it originated. In 2009, it died in Ways and Means.

    Last year, the UFC was optimistic that it had found a strategic advantage. Then-Gov. David Paterson included about $7 million in funding from the projected tax revenue from sanctioning MMA in his budget, giving potential cover to legislators who had opposed the sport because they found it too violent. Opponents could hold their noses and accept the arrival of MMA, explaining that larger budget issues prevailed.

    But that didn’t work, either. The speaker of the house opposed tying the issue to the budget. The Senate passed a free-standing bill on a close vote, but it stalled in the Assembly when opponents in the state’s powerful Democratic caucus carried the day over supporters.

    UFC plans the same tactic again this year, lobbying legislators to support a free-standing bill and also working to get Cuomo to include funding from an MMA tax in his proposed budget.

    “Right now it’s very close,” said Steve Englebright, an assemblyman from Long Island who introduced the bill last year and planned to do so again last week when the new legislative session began. “I think it would be fair to say we have a divided conference, with some very strongly held opinions in both directions. And it doesn’t break down to an analysis based on the type of neighborhood that you’re from. We have members from both urban and suburban who are on both sides of the issue.”

    The UFC’s lobbyists say they’re urging legislators who have embraced MMA sanctioning for economic reasons to become more vocal in their support.
    “Two or three people in the [Democratic] conference will speak up against it, and the speaker is sensitive to that and he doesn’t move it,” said Ron Rock, a lobbyist with Brown & Weinraub, the firm representing UFC. “We’re getting out our supporters. They’re starting to be more proactive. We need for the speaker to hear from them.”

    Lobbying is the top-down piece of the UFC’s legislative equation. There’s also a piece that works from the bottom up. Since 2008, Zuffa has employed Global Strategy Group to design and manage a campaign to mobilize MMA fans to push for legislation. Zuffa paid Global $35,000 a month in 2008 and the first half of 2009, and $22,500 a month since then to build a grassroots campaign and drum up conversation online and in the media. The website it created and manages is packed with information that argues for sanctioning. It also offers easy ways for fans to e-mail legislators and craft letters to their local newspapers.

    “A lot of it at the beginning was educating fans to the fact that we can’t have events here,” said Justin Lapatine, senior vice president of public affairs for Global Strategy Group. “UFC fans are rabid. They are energetic. They love this sport. They believe deeply in it. It’s really about getting them energized and helping them understand how they can play a role.”

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  • NBA meeting to focus on lockout

    The NBA will hold its annual marketing meeting this week in New York with top team and league marketing officials poised to discuss the impact of a potential lockout on next year’s business.

    Typically, the annual marketing meeting focuses on business plans for the upcoming season, with the league also recognizing teams boasting top total season-ticket sales, new full-season-ticket sales, local sponsorships sales and other business-related metrics from the current year.

    But this year’s meeting, to be held at the New York Marriott at the Brooklyn Bridge, will also begin to address questions regarding how the league will deal with season-ticket holders and sponsors given the possibility of a lockout.

    Some NBA teams begin their season-ticket renewal efforts as early as late January and the league soon must contend with how to renew and attract season-ticket buyers with no sign of a new collective-bargaining agreement in sight. This season, the NBA set a record for new full-season-ticket sales revenue of more than $100 million with more than 50,000 new full-season tickets sold. The league also has a season-ticket renewal rate of more than 80 percent.

    “Any time we get our team executives together, we discuss the relevant issues impacting our business as well as share best practices on working more efficiently and creating the best possible fan experience,” said Chris Granger, executive vice president of team marketing and business operations for the NBA.

    It is expected that shortly after the marketing meeting, NBA teams will begin to communicate with season-ticket holders on next year’s season-ticket policies.
    During the NBA’s lockout in 1998-99 that resulted in a 50-game regular season, teams gave season-ticket holders refunds plus interest. It is likely that the teams would follow a similar strategy should there be a lockout when the current CBA expires on June 30. NBA Commissioner David Stern said in late October that the league will begin to feel the financial impact over the labor uncertainty around the league’s All-Star break in mid-February.

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  • NFL sets three owners meetings ahead of CBA expiration

    The NFL has scheduled at least three owners meetings between next week and March 3, the expiration date for the league’s collective-bargaining agreement with players.

    The final meeting is scheduled for March 1-3 in Fort Lauderdale, Fla., setting up that locale as the place where the owners could officially decide to lock out the players. Sources say that if no new deal is reached and the CBA expires on March 3, Commissioner Roger Goodell would have monthly meetings of owners thereafter.

    “I think things will really heat up post-Super Bowl,” said Andrew Brandt, a former Green Bay Packers executive and football business commentator who runs the National Football Post.

    The three meetings should serve as focal points for the public and media as the clock winds down on the CBA, which was struck in 1993 and has been renewed five times since. The sides are far apart, with the owners wanting the players to give back some of their gains from the extension that was signed in 2006.

    The first meeting is next week, Jan. 18, in Atlanta. The owners are then scheduled to meet again on Feb. 15 in Philadelphia.

    Roger Goodell
    NFL Commissioner Roger Goodell has been holding committee meetings in early March.
    Goodell, since he assumed the commissioner’s post in 2006, has been holding committee meetings in early March as a precursor to the league’s annual meeting later that month. This year, those committee meetings will likely merge into a full owners meeting as the CBA expiration date approaches.

    Brandt noted that if there has been progress in CBA talks with the union, the two sides could agree to extend the deadline, but the prevailing thought at this point is that the CBA will expire.

    The severity of the deal expiring is unknown. The league has said a deal gets a lot harder to get done after March 3. Sports consultant Marc Ganis said there seem to be two schools of thought on the issue: One, that the deadline is midnight on March 3; and two, that the real deadline is maybe in the late summer, when a deal would have to be struck to avoid a work stoppage.

    A lockout on March 4 would have little meaning for fans, because players are well into the middle of the offseason anyway, but any voluntary workouts would be off-limits at that point. The real effect for players would begin to be felt in June, when teams conduct formal workouts. Those would not occur during a lockout.

    From a business perspective, no CBA after March 3 would end federal oversight of labor relations between the two sides, and it would mean teams, the league and league sponsors would no longer have the rights to use players in ads.

    The NFL Players Association could also decertify before March 3, preventing a lockout but leaving the players without union protection. Under that scenario, the owners would impose work rules, and the players could then sue the owners under antitrust laws.

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  • Cuts in salaries, ad budget help NHRA withstand revenue drop of more than 10 percent

    A series of belt-tightening measures taken by the NHRA prior to the 2009 season helped the series weather a 10.6 percent decrease in revenue, according to the association’s most recent tax filing.

    The filing shows that the NHRA trimmed expenses by 10.2 percent to $108.3 million during the 2009 season when the recession derailed economic growth. The association cut employee compensation by 10.2 percent to $17.7 million and reduced its advertising budget by 8.3 percent to $22 million.

    The expense reductions helped limit the NHRA’s losses in 2009. The organization had a net loss that year of $643,924. That compared to a net profit in 2008 of $1.9 million.

    NHRA President Tom Compton said the organization’s 2009 spending cuts were made in the midst of the 2008 credit crisis. As the crisis began, he said the NHRA reduced 401(k) matches for employees, renegotiated vendor agreements, switched from Ticketmaster to ExtremeTix, cut back on travel and laid off some staff.

    Executive compensation and salaries also were reduced from $2.3 million in 2008 to $2.1 million in 2009. Compton saw his total compensation decrease 9.1 percent to $701,257, and executive vice president and general manager Peter Clifford’s fell 10.4 percent to $382,983.

    Tom Compton
    NHRA President Tom Compton said 2009 spending cuts were made amid the 2008 credit crisis.

    “We knew we would feel the effects [of the recession in 2009], so we wanted to stay in front of it,” Compton said. “We’re glad we were proactive.”

    The NHRA generated $107.7 million in total revenue in 2009, down from $122.9 million in 2008. The biggest revenue decreases were in the area of sponsorship and ticket sales, which fell by 15.8 percent and 9.7 percent, respectively.

    In 2009, sponsorship and advertising revenue totaled $41.1 million and ticket revenue totaled $43.9 million. Those decreases were driven by the loss of several key partners that year, including Budweiser and General Motors, and cuts in general admission ticket prices that were designed to offer fans relief.

    Compton said the NHRA bounced back in 2010 and is optimistic about 2011. The association has restored employee and management salaries and increased its 401(k) match by 1 percent. Advance ticket sales are improving and sponsorship conversations have increased.

    “We feel really good now about how we weathered the storm for two reasons,” Compton said. “The interest level is strong and there are a lot more companies we’re talking to today, and we had quite a few races see attendance increases. All of that’s encouraging.”

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