SBJ/Jan. 17-23, 2011/Leagues and Governing BodiesPrint All
Fast forward to the present. A far more ebullient Selig stood before reporters in virtually the same spot last week and issued perhaps his strongest declaration to date that the league has survived the downturn relatively intact and is now poised to grow strongly along with the rebounding economy.
“I’m definitely optimistic,” Selig said. “Ticket sales are trending very well, and as you know, the last six years have been the best six years we’ve ever had. This will fall right into that [trend] and maybe move up a bit.”
Signs of continued recovery are apparent in a range of places. More than $1 billion in future salary commitments have been extended this past offseason. Even more tellingly, it’s not the New York Yankees and Mets, Chicago Cubs, or Los Angeles Dodgers making the biggest deals of late. It’s representatives of the sport’s middle class, such as Colorado, Washington and the Chicago White Sox.
MLB Commissioner Bud Selig was upbeat at the owners meetings, a stark difference from two years ago.
The league posted record revenue of nearly $7 billion last year, with further increases projected for 2011 due in part to MLB and many teams moving into the back end of media contracts with rights-fee escalators. Many league business units, such as MLB Advanced Media and the MLB Network, posted their own annual revenue records last year. Most of the 30 teams are budgeting for 2011 attendance to be either flat or slightly ahead, as well.
During discussions here, political columnist George Will, a longtime friend and frequent committee member for Selig, outlined to the owners for the third straight year his views on the global economy.
“It was fascinating to hear, and he certainly had the rapt attention of the room,” said Derek Schiller, Atlanta Braves executive vice president of sales and marketing. The Braves are conservatively budgeting to match 2010’s attendance of 2.5 million but in reality will likely exceed that after making a playoff appearance last year. “We’re seeing a lot of positive [economic] trends, and through [the downturn] we learned how well-positioned baseball was and is because of its price point and family orientation.”
• MOBILE SHIFT: It’s no secret in the mobile world that BlackBerry’s relevance is trending down while Apple’s trendline, with the iPhone, continues to shoot up. But Bob Bowman, MLBAM chief executive, outlined the marked shift in baseball terms during his presentation to the owners.
Two years ago, BlackBerry maker Research In Motion Inc. represented half of MLB.com’s mobile traffic; Apple had 14 percent with the iPhone. Now, those marks are 61 percent for the iPhone and 20 percent for BlackBerry devices.
MLBAM holds a particularly strong relationship with Apple. MLB’s digital arm has been featured in several national TV ads for Apple, and live game streaming with the MLB.com At Bat mobile application began with the iPhone. Still, such a seismic shift traditionally takes many years rather than only a few to manifest itself.
MLB.com mobile traffic, which has quadrupled over the last two years, is projected to grow further in 2011 to become more than 40 percent of MLB.com’s overall traffic.
“Our sport is particularly well-suited to mobile, getting that quick update, quick news item, quick check into a game,” Bowman said. “It’s certainly not surprising to see this growing so quickly.”
The NBA last month added $136 million to its league loan pool, boosting the total amount available to teams to $2.3 billion.
The league also restructured the credit facility to insulate it from the type of financial turmoil that afflicted sports leagues’ lending instruments in the wake of the 2008 credit crisis. As a result, instead of having to refinance in May, the NBA does not need to do so until 2014.
The added money in the loan pool allowed the Atlanta Hawks to borrow $125 million. The Golden State Warriors also have used the pool, adding to their existing debt. Teams can use the money from the loan pool however they choose.
Both Atlanta and Golden State had ownership deals close late last year. In the case of the Hawks, team ownership agreed in December to a buyout of former owner Steve Belkin, who owned a 30 percent stake in Atlanta Spirit, which owns the Hawks along with the NHL Thrashers and operates their Philips Arena home. For Golden State, a group led by Joe Lacob and Peter Guber paid a record $450 million to acquire the franchise in a deal approved by the league in November.
NBA officials would not disclose the specific amounts loaned to the teams in the credit facility, but with the addition of the Hawks as a new borrower, 19 of the NBA’s 30 teams now participate in the loan pool, with most securing the maximum $125 million allowed by the league.
Leagues create loan pools by using collateral like national media contracts to secure credit at better terms than most teams could obtain on their own. Until 2008, the annual renewal features were common for the leagues’ loan pools, but they caused significant headaches for the NFL and Major League Baseball that year and only missed the NBA because of the fortuitous timing of its renewal, which missed the crest of the financial troubles.
“Like all of these credit facilities, it was subject to annual renewals, and there was always a concern economic circumstances could change,” said Harvey Benjamin, NBA executive counsel for business and finance.
That is what happened to MLB and the NFL, which could not renew their deals when banks became skittish in late 2008. The leagues had to convert the facilities into term loans.
MLB has taken a different tack from the NBA, deciding to pay down a lot of its debt, with the total size of its facility under $1 billion. By contrast, the NBA facility, since its inception in 2003, has grown by nearly 2 1/2 times.
“This is great for the teams and [is] a vote of confidence that the banking community has given to the NBA,” Benjamin said. “We have had a bang-up year in every statistical category.”
JPMorgan Chase is the NBA’s banker.
The NFL, like the NBA, chose to drop the annual feature of its credit facility and lock in longer-term debt.
The Hawks were able to join the NBA credit facility after the Spirit ownership group refinanced $125 million in municipal related bonds for Philips Arena. Under terms of the old municipal debt, the team could not borrow from the facility, but the refinancing in late 2010 cleared the way for the group to tap into the league’s credit facility.
Hawks officials did not return calls for comment. The Warriors declined comment.
Marking the clearest signal to date that NBA teams are bracing for a lockout next season, the league is calling for all 30 clubs to offer a specific interest rate as part of their season-ticket refund policies for any games lost due to a work stoppage.
NBA teams are about to begin their season-ticket renewal efforts, with some teams hitting the market later this month. During the NBA’s 1998-99 lockout, NBA teams offered season-ticket holders full ticket refunds plus 6 percent interest.
The planned refund approach is a noted departure from other league lockout ticket policies, which typically have not carried leaguewide specific interest rates as part of the ticket refund. The NFL recently announced its refund policy to fans for any games lost to a lockout next season, and leaves the decision with the individual teams as to whether to offer interest to general season-ticket holders as part of the refund. The NHL did not have a uniform interest rate as part of its refund policy during the lockout that canceled the 2004-05 season.
The new NBA policy would work like this. If a fan buys a season-ticket package and games are lost because of a lockout, the team would pay a full refund plus interest on a monthly basis. The NBA will determine the interest rate to be paid along with the ticket refunds closer to a work stoppage, but it will reflect prevailing market rates, which currently range between 1 percent and 2 percent.
“What the league doesn’t want is the wild west, where teams offer a wide range of interest rates,” said one team ticket sales executive.
In addition to the league’s interest-payment policy, teams will be able to offer incentives to renewing season-ticket holders to counter any possibility of missed games. Like the NFL, NBA teams will be allowed to craft their own policies on premium inventory, such as luxury and club seats. The NFL’s refund policy to general season-ticket holders also allows the ticket buyer to exchange tickets of a canceled game for another game.
The strategy is to add financial incentives to season-ticket holders to keep their money with the teams in the event of a lockout. Teams want to maintain their season-ticket bases despite the labor uncertainty.
Last year, the NBA boasted an 80 percent season-ticket renewal rate, but the NBA and the union remain far apart on any new collective-bargaining agreement as teams head into their renewal sales efforts for next season.
“It is still cheaper to pay interest rates and keep the season-ticket holders than it is to find new customers,” said one source.
Some team-level incentives under consideration by clubs include offering season-ticket holders free tickets to other events in the market or discounts to future NBA games if season-ticket holders decline the refund option and leave their money with the team.
“You want to keep season-ticket holders on account and provide them with some options that mirror what you do,” said the team sales executive. “Whether it is for a concert or other sporting events, you want to maintain brand affinity, and everyone is searching for that answer.”
The NFL has made three staffing moves in its senior executive ranks, including naming Brian Rolapp chief operating officer of NFL Media, as the league seeks to further streamline its media and sponsorship businesses.
ALEX GORT SR. / GORT PRODUCTIONS
“Many of our sponsorship deals ... are becoming more infused with content elements, so having this more streamlined structure made a lot of sense,” says NFL Media COO Brian Rolapp
Hans Schroeder, with the league since 2001 in a variety of roles, has been promoted to senior vice president of media business development. In addition, Jeff Berman, a former MySpace executive and Washington, D.C.-based lawyer, has been hired as the new general manager of NFL.com.
Berman will be based in Los Angeles and replaces Laura Goldberg, who left late last year and is now the vice president of product for ticketing startup ScoreBig. He will report to Rolapp, as will Schroeder and Keith Turner, senior vice president of media sales and sponsorship.
The shifts arrive as the league’s traditional and digital media and sponsorship sales efforts continue to blur, as exemplified by the $720 million deal signed with Verizon last year. The pact includes both designation for the company as the league’s official wireless partner and rights to stream a variety of content, including NBC’s “Sunday Night Football” and the NFL RedZone channel, to mobile devices.
“Before, what our sponsors’ needs were and our media partners’ needs were completely different,” said Rolapp, a member of SportsBusiness Journal/Daily’s Forty Under 40 Hall of Fame. “Now, they’re growing more and more alike all the time. Many of our sponsorship deals, such as a Verizon, are becoming more infused with content elements, so having this more streamlined structure made a lot of sense.”
Steve Bornstein, NFL executive vice president of media, wrote in a memo to league staff that “the media industry has undergone many changes in the last several years, and in order to remain successful, the NFL Media group has evolved along with it.”
Rolapp will remain based in the league’s New York headquarters, reporting to Bornstein. Also reporting to Bornstein will be Kim Williams, NFL Network chief operating officer; Mark Quenzel, recently hired as senior vice president of programming and production; and Howard Katz, senior vice president of broadcasting and media operations and NFL Films chief operating officer.
“It’s getting harder than ever for leagues to manage the interplay among all the various assets, and for the NFL in particular, these are some of the most valuable assets in all of sports,” said Doug Perlman, founder of Sports Media Advisors, a Connecticut-based consultancy that has worked extensively with the NFL. “But these are really smart, really talented guys, and they’ve done a very good job setting themselves up to succeed and navigate that complex landscape.”