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SBJ/Jan. 17-23, 2011/Marketing and SponsorshipPrint All
So how do the principals who spent a billion or more building the new homes of the New York Jets and Giants and the Dallas Cowboys feel about the recent revelation that Farmers Insurance is close to a naming-rights deal for a facility in downtown Los Angeles that hasn't been approved nor begun construction?
While an agreement could still fall apart, those close to talks said a deal was close. Amazingly without even having an NFL tenant to play in AEG's proposed NFL stadium. If you can sell naming rights without site approvals, construction costs or a team, then the Farmers Insurance deal could signal a whole new business: virtual naming rights.
"That's a business I like, as long as the commissions aren't virtual," joked 16W partner Frank Vuono, whose involvement in naming-rights deals includes Edward Jones Financial's naming rights to the St. Louis Rams' home dome. "Remember also that a naming-rights deal attracts other founding partners, and banks definitely look at all of those deals when they are evaluating construction loans."
There is one great unknown here.
"None of us know if Farmers is paying anything now, but if they are, this really could be a new revenue line," said Randy Bernstein, whose Premier Partnerships is selling naming rights for the Oakland stadium that is home to the A's and Raiders. "The pre-build is the key, because that's when the name gets outside the sports pages."
The following naming-rights evaluation
data from 21 Marketing is based on
Monte Carlo modeling within Oracle
Enterprise Performance Management
software. It runs hundreds of thousands
of simulations to formulate an evaluation,
and the following data details annual
exposure value of a naming-rights deal
at these facilities.
JETS/GIANTS Minimum value: $64,231,299 Mean value: $68,131,582 Maximum value: $73,083,209 COWBOYS STADIUM Minimum value: $84,338,119 Mean value: $90,057,151 Maximum value: $98,114,727 FARMERS INSURANCE STADIUM Minimum value: $85,238,401 Mean value: $92,293,579 Maximum value: $100,377,933 Source: 21 Marketing
When asked to recall any parallels, experts cited Barclays' investment in January 2007 in the new Brooklyn arena, which won't open until mid-2012, that will house the NBA Nets. "This is Barclays all over again," said Rob Prazmark of 21 Marketing, Greenwich, Conn.
Both the exceptional nature of the L.A. market and the NFL's absence there for 16 years combined to foment the pending Farmers deal. Could it happen elsewhere? "There's only one NFL and only one L.A.," said Mark Noonan, president of FocalSport, Southport, Conn., which helped engineer Citi's deal of the New York Mets' home field. "This is a great pre-emptive strike by AEG to distinguish the viability of their project."
Bernstein recalled that he did a deal with Cisco for a proposed stadium in Fremont, Calif., for the A's. In that case, there was a team, but no stadium ever materialized. Premier is currently representing a group attempting to build a sports arena in Las Vegas, another locale where "pay-to-play" naming rights might be saleable.
"I'm not saying there isn't a lot of value to it, because Farmers has already built a new level of public consciousness," said Mike Reisman, a principal at Velocity/Team Epic, which assisted on the Prudential Center and Citizens Bank Park deals. "But until the stadium happens, it's the 'Seinfeld' of naming rights: a story about nothing."
Nike's commitment to future endorsement spending surged between May and November last year by nearly half a billion dollars, or 13 percent, suggesting the company paid more to secure NFL rights than has been previously reported. In fact, for just the first four years of the new NFL deal, which begins in 2012, the company's commitment to spend future endorsement and sponsorship dollars has increased 23 percent, according to Nike's securities filings.
The NFL in October announced that Nike had secured the right to outfit its teams in a new five-year deal starting in 2012 reported to be valued at $35 million a year, or $175 million total.While the more than $480 million increase in new endorsement commitments detailed in Nike's quarterly report released earlier this month cannot be fully ascribed to the NFL, there are few other explanations, experts said.
"It's the only Nike deal [in that period] that is close to that size," said John Horan, publisher of Sporting Goods Intelligence.
Nike declined to comment. The NFL has declined to comment on the value of the Nike deal, though a league source at the time the deal was announced said the reported figures were too low.
» INCREASED COMMITMENT The amount of money that Nike has committed annually to
endorsements between 2012 and 2015 is higher now than
it was in the middle of last year. Those years are the first
four years of the company's new NFL deal, which was
announced last fall.
Endorsement Obligations As of
Nov. 30, 2010
May 31, 2010
Change 2012 $704 million $638 million +$66 million 2013 $716 million $568 million +$148 million 2014 $656 million $508 million +$148 million 2015 $540 million $411 million +$129 million Source: Nike securities filings
Nike's endorsement obligations stood at $4.27 billion as of Nov. 30, 2010, according to the quarterly report, up from $3.79 billion as of May 31, 2010, according to the company's annual report.
The FIFA World Cup occurred during the same time period, and Nike sponsored several teams during the competition, but those deals would not be reflected as change because they had been set well before.
The Nike deal replaces Reebok's contract with the NFL. According to Nike's securities filings, endorsement obligations for 2012, the first year of the deal, now stand at $704 million, up from the $638 million reported last summer, prior to the deal being announced. Endorsement obligations jumped $148 million in 2013 and 2014, and $129 million in 2015.
Even if the increases are not justified by additional equipment and jersey sales, Horan said, Nike may see the deal as worth it because it knocked Reebok out of the marketplace.
As the sports economy has improved, so have the fortunes of the industry’s only remaining sports licensing show.
Organizers of the Sports Licensing and Tailgate Show, which opens a three-day run in Las Vegas this week, were optimistically predicting a 40 percent attendance increase this year. They already have seen a 25 percent uptick in the number of booths on the show floor at the Mandalay Bay Convention Center, from 480 to 600.
“We’re pretty much sold out, but if you really want one, we could sell you a booth near the floor,’’ joked Stanley Schwartz, co-director of the show along with Hardy Katz, both of show producers ShowProCo.
Attendance projections are equally strong, as Katz is expecting more than 7,000 attendees, up from last year’s show that drew 5,500. While most big licensors no longer buy the oversized booths that once dotted the floor of the predecessor Super Show, the NHL has returned. Returning licensors with booths include IMG College’s Collegiate Licensing Co., the Collegiate Licensed Properties Association and MLS. Additionally, most every big licensor now feels obligated to send staffers to walk the show floor, at a minimum.
While the show grew out of the remains of the now-defunct sports industry Super Show as a non-apparel “trinkets and trash” exhibition, organizers note that apparel licensees, including G-III, Franco, ’47 Brand, and Mitchell & Ness, will display this year. Noting the synergy between tailgating and sports licensed products, ShowProCo organizers combined the two markets into a show several years back.
The Chicago Cubs and White Sox and BP are planning an increase in marketing activity for the 2011 Crosstown Cup, with the interleague rivalry forming a key piece of the energy brand’s post-disaster promotional plans.
The MLB clubs early last year announced a three-year deal with BP in which the company became title sponsor of the clubs’ annual six-game interleague series, formalizing a long-standing rivalry. The marketing effort for the Crosstown Cup quickly became tempered as BP’s massive oil spill in the Gulf of Mexico became the largest environmental disaster in U.S. history.
Following a series of recent meetings between the two clubs and BP, plans for the second version of the Crosstown Cup include heightened point-of-sale promotion at Chicago-area BP gas stations; additional local media buys, including some outdoor signage; and more charitable and community service projects.
The effort ultimately aims to surpass what was planned for 2010 before those initial plans were scaled back.
“We’re all going to be much more aggressive with this [in 2011],” said Brooks Boyer, White Sox vice president and chief marketing officer. “Last year, we only did, maybe, 60 percent of what we had originally talked about. But there is going to be tons of activation this time. We’re proud to be associated with BP. We see them trying to make a wrong into a right [in the Gulf], and that’s precisely the kind of sponsor we want to have.”
Funding for this year’s Crosstown Cup marketing efforts was not disclosed, but BP executives branded the upward spike for 2011 as “significant.”
“We’re going to be much more focused on local activation and getting into the local communities,” said Linda Bartman, marketing communications manager for BP’s fuels marketing business. “As we move forward [following the spill], the Chicago area is certainly one of the areas in which we’re looking to go much deeper, and the Crosstown Cup is a significant part of that.”
Cubs and White Sox executives said there was never any thought of dropping BP as a sponsor or discontinuing the Cup following the spill.
“BP is a great brand and a great client,” said Wally Hayward, Cubs executive vice president and chief sales and marketing officer. “They are an important part of this community, with their North American headquarters right here in Chicago. We proudly stand by them.”
Mark Dowley is leaving the agency world to join the client side as Under Armour executive vice president, global brand, and president of international.
Dowley starts Feb. 1 and will report directly to company founder, chairman and CEO Kevin Plank.
But Dowley will keep a hand in the agency world. Sources said Dowley is also in the midst of completing a management buyout of Endeavor Marketing, a joint venture of William Morris Entertainment, now owned by Interpublic Group. It is unclear if Endeavor will retain its name.
William Morris has been consulting for Under Armour for around 18 months. The brand lags behind some of its competitors in overseas sales. About 10 percent of Under Armour’s business is overseas.
Dowley has been CEO of William Morris Endeavor Marketing.
While Dowley has consulted with some of the world’s biggest brands and is renowned for his connections and prescience across the marketing landscape, this is his first job directly with a client-side marketer. Like rival Nike, Under Armour has a complex and sometimes insular corporate culture, something that can be challenging for outsiders. In July, David McCreight, formerly a Lands’ End marketer, resigned after two years as Under Armour president. Last February, the company’s senior vice president of apparel, Suzanne Karkus, resigned 27 months after leaving Izod.
McDonald’s has finalized a one-year extension with the NHL to maintain its rights as the league’s American quick-service restaurant through the end of the 2010-11 season. Under the media-heavy deal, McDonald’s becomes title sponsor of NBC’s inaugural “Hockey Day in America” on Feb. 20, which includes four games spread across six hours of hockey programming.
The NHL declined to discuss the value of the partnership. Accompanying advertising will appear on NBC and Versus, as well as on the NHL Network and NHL.com. The NHL’s integrated sales team managed the extension.
A Canadian partner of the NHL from 1993 until last year, McDonald’s started its American partnership with the league at the 2009 Winter Classic in Chicago. McDonald’s also has regional partnerships with six U.S.-based NHL teams. The quick-service restaurant, whose league sponsorship extends through the breakfast and coffee categories, activates heavily around the outdoor game and the NHL All-Star Game.
“We like how [the NHL] has created a must-see event with the Winter Classic, we like to take advantage of the high-profile events,” said John Lewicki, McDonald’s senior director of alliance marketing. “Now NBC has jumped in to create a unique watchable event to get Americans back into hockey. It’s a great matchup for us.”
McDonald's partnership with the NHL includes prominent signage at the Winter Classic.
NBC’s programming block for “Hockey Day in America” kicks off at noon ET on Feb. 20 and includes three staggered regional games between the Washington Capitals and Buffalo Sabres, Philadelphia Flyers and New York Rangers, and Detroit Red Wings and Minnesota Wild. The national coverage continues at 3:30 p.m. with the Game of the Week match between the defending Stanley Cup champion Chicago Blackhawks and Pittsburgh Penguins.
The programming begins with a 30-minute pregame show that includes short vignettes that highlight the “American hockey lifestyle,” such as hockey moms, backyard pond hockey and pee-wee games.
Jon Miller, executive vice president of NBC Sports, said producers have spent six months producing the content. “We want to show how hockey permeates the American lifestyle on multiple levels,” Miller said. “It’s a celebration of hockey.”
Miller said Hockey Day piggybacks off the three-day “Hockey Weekend Across America,” which was started in 2008 by USA Hockey as a celebration for the sport and included regional amateur tournaments. Hockey Weekend was originally in late January, but NBC and the governing body agreed to move the weekend back three weeks to accommodate the programming block. Miller said Hockey Day’s Feb. 20 date “dovetailed very nicely” with the NHL’s Heritage Classic outdoor game between the Calgary Flames and Montreal Canadiens, which will air on Versus that evening.
Keith Wachtel, NHL senior vice president of integrated sales, said the youth hockey element of Hockey Day was especially attractive to McDonald’s, whose “In The Line Up” contest selects children to stand on the ice during the national anthem alongside the players. Wachtel said that McDonald’s will maintain sponsorship of the accuracy competition at the All-Star Game and retain signage behind the benches and penalty box at the All-Star Game and the Winter Classic.
The Danish company that provides the 3-D shot-making technology on the PGA Tour has agreed to a five-year extension with the tour.
TrackMan, co-founded in 2003 by an engineer and a doctor fond of golf, measures the launch angle, ball flight and other characteristics of a golf shot. Many of those measurements are used on the TV broadcast of PGA Tour events.
Terms of the arrangement were not available, but Klaus Eldrup Jorgensen, co-founder and CEO of TrackMan, said the money really isn’t as significant as the exposure TrackMan receives on the broadcasts.
“The brand gets mentioned quite often,” said Jorgensen, who practiced as a physician for five years before returning to school for an MBA and eventually running TrackMan from Vedbaek, Denmark. “That’s primarily what we get out of it.”
TrackMan has found its technology useful in baseball as well, where it has made sales to the St. Louis Cardinals and Boston Red Sox, among MLB teams, but golf remains the core business.
Most of TrackMan’s $8 million a year in annual sales come from the manufacturers that buy TrackMan to improve equipment, while also providing a more accurate fit for the club-buying public.
Jorgensen said practically every club, ball and shaft manufacturer is a buyer, and more than 60 tour pros internationally have bought the TrackMan system for their practice purposes. They include Graeme McDowell, Ian Poulter, Martin Kaymer and Ben Curtis, Jorgensen said.
For the tour, TrackMan provides information to both aid the broadcast and help the tour deliver its product to the consumer. Steve Evans, the tour’s vice president of information systems, said the information enables the tour to provide more than just the scores to the fans. “It helps demonstrate the abilities of PGA Tour pros,” he said.
Among the stats that are kept: club speed, ball speed, shot trajectory, carry, launch angle, launch direction and ball spin rate. The tour collects this information annually, which provides a year-to-year measure in those categories, and also uses it for ShotLink and other elements online at PGATour.com.