SBJ/Jan. 31-Feb. 6, 2011/Opinion

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  • Cartoon: The hard truth


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  • Lack of trust is largest obstacle for NFL, union

    Abe Madkour
    When we sat down to map out our Super Bowl issue months ago, one theme quickly emerged: Sunday will be the last NFL game until either a new collective-bargaining agreement is struck or new work rules imposed. If there is a delay at all in a 2011 regular season, what would it mean for the businesses around professional football?

    We’ve looked at it from the angles — from a league and team perspective, how it affects corporate and media partners, as well as filling stadium dates. (If you haven’t yet, please read NFL veteran Jim Steeg’s insightful piece about what teams must focus on during any work stoppage, on Page 17). We also asked a number of business executives for their unvarnished prediction about how next season will unfold. The skinny from them is not encouraging. A majority sees the season starting late, with a shortened schedule and possibly pushing the Super Bowl deeper into February.

    After getting a sense of the pace of talks and reading much of the rhetoric, who can blame them? It’s been difficult to get a read of how these negotiations have — and will — play out, even among the key leaders. For every time someone like Robert Kraft expresses optimism, Jerry Richardson acknowledges that it’s “baffling” no progress is being made.

    One must take into account positioning and posturing as opposed to reality. Two recent remarks stood out, and neither in a positive way. One was when Steelers Chairman Dan Rooney returned from Ireland and acknowledged that there could be actual “dislike” between management and the union leadership. The longtime NFL leader put new cards on the table, and he did so publicly. Then, union leader DeMaurice Smith was quoted in The New York Times as comparing the negotiations to “war,” and added, “Nobody negotiates their way to strength. Nobody talks their way to a good deal.”

    The main impediment to any deal is not revenue sharing or stadium credits, an 18-game schedule or a rookie wage scale. To me, it’s clearly the personalities dropped into a sensitive bargaining process. Roger Goodell (and company) and DeMaurice Smith (and his inner circle) haven’t danced before. There is no rhythm, just awkwardness and uncomfortable posturing that demonstrates a lack of trust. Trust can — and should — take time to develop. But that inability to trust is what Rooney is referring to, and it was surprising to hear it come out in such an overt way.

    Many still talk about Smith’s performance at last year’s union news conference at the Super Bowl, which surprised ownership with its dramatic tone. Smith’s tenor this week in Dallas will be one of the most scrutinized elements in a Super Bowl week clouded by the uncertainty over the game’s future. Ownership wants to “take its league back,” and there are few signs of fissures in their solidarity. There will be no “bad deal” made by them this time. Players seem to sense this and seem willing to spar until they begin missing checks in September. But most importantly, the key negotiators have to move past any personality conflicts, and until we see a change in the dynamic relationship between the sides — and until we see both sides willing to negotiate and find a deal — it’s hard to have any optimism that a deal gets done any time before Labor Day.

    Even then, too much time will have been wasted and too much lost.

    Abraham D. Madkour can be reached at amadkour@sportsbusinessjournal.com.

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  • And now for your halftime entertainment …

    America’s preoccupation with sports helps define us, enriching our language and imagery and connecting us with our countrymen in a tradition that crosses all barriers of generation, class and creed. It has given us rest and recreation, myths and memories, heroes and history, magic and miracles.

    The same can be said of our unique musical history. The two are deeply woven into the fabric of our society. It’s been said that it’s easier to understand a nation by listening to its music than by learning its language.

    The relationship between sports and music has never been stronger. At every type of sporting event we celebrate the perfect pitch between the two. Think about the unique power sports and music hold in our everyday lives:

    • There are musical athletes and athletic musicians. Every entertainer wants to be an athlete and every athlete wants to entertain. For example, New York Yankee Bernie Williams, former Cincinnati Bengal Mike Reid and the late NBAer Wayman Tisdale have all had musical success after their playing careers.

    • There are songs associated with a sport or team. “Sweet Georgia Brown” and the Harlem Globetrotters. The national anthem, “God Bless America,” “Take Me Out to the Ballgame” and baseball. Hank Williams Jr.’s “Are you ready for some football?” and “Monday Night Football.”

    • Then there’s the music that inspires us to cheer, sing, move and chant: The theme from “Rocky,” “Who Let the Dogs Out?” “Celebration,” “We Are Family,” “Thunderstruck,” “We Will Rock You/We Are the Champions,” “Let’s Get It Started,” and many more.

    Nowhere is the synthesis of sports and music more evident than halftime shows at the Super Bowl. Super Bowl halftimes are a lyrical roadmap of how we have changed as a country. The event has morphed into a massive national holiday, TV ratings bonanza, monetary marvel and gluttonous celebration.

    In 1967, at Super Bowl I, those of us who are old enough watched Grambling and the University of Arizona marching bands, Jazz trumpeter Al Hirt and the Anaheim High School Drill Team.

    Not to go all Simon Cowell on you, but having been around since day one for the ultimate football music mashup, I do have some opinions.

    The good
    • By the time Super Bowl XLI rocked and rolled around, halftime shows had been living in the shadow of the Great Costume Malfunction of 2004. The NFL and its broadcast partners went conservative, scheduling entertainers who were AARP all-stars, along with five-second delays. But Prince and his “Purple Rain” let us all “Go Crazy” with a high-energy, slightly edgy show highlighted by “All Along the Watchtower” and “Best of You.” He brought back high octane.

    The bad
    • Can you imagine Up With People, who appeared four times at Super Bowls, in 1976, ’80, ’82 and ’86, showing up on stage with the Rolling Stones? Up With People was the group of pastel-costumed, smiling singers and dancers who offered a bubble-gum-sweet pop serenade while dancing to routines choreographed by your grandmother.

    The ugly
    • Since musical taste is so personal, use your imagination in this category. But Elvis Presto in 1989? Really?

    The NFL listened to public opinion, and that’s why it decided to get younger with the Black Eyed Peas this year in Dallas. I’m predicting that Fergie will be wearing a suit of armor over her long underwear and Justin Timberlake won’t be allowed to deplane off his private jet. The Peas will be performing their show on the largest HD video board in the galaxy. In a few years we will be watching the shows in 3-D.

    There is no better American Bandstand than the unique combination of sports and music. Millions of American sports fans will continue to rock out in stadiums and arenas from sea to shining sea, season after season, generation after generation, no matter how gray their hair may be.

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  • NFL too profitable to risk losing such success to lockout

    If a new labor agreement is not reached between the NFL players and owners by March 4, there is widespread expectation that there will be a lockout.

    Why has the country’s most popular sports league traveled to this perilous precipice?

    Forbes estimates that all but two of the NFL’s franchises made money last year and that the average NFL team had a profit of $33 million (before debt service). ESPN reportedly has reached a new TV deal with the league that will pay an average $1.8 billion a year through 2022, 40 percent higher than the current fee, for a package that does not include the Super Bowl. Given this prosperity, new NFL Players Association Executive Director DeMaurice Smith understandably wants to know why the players are being asked to accept having 18 percent shaved off the revenue that’s used to calculate the salary cap.

    Smith asked the owners to show the union their financial books. The owners weren’t interested. With the average NFL franchise worth roughly a billion dollars, the estimated $33 million profit represents only a 3.3 percent return on capital. If that were the full return to ownership, the owners indeed would have cause for concern.

    It seems, however, that the owners might be driven by another force: their inability to see eye to eye with each other on the league’s revenue-sharing system. Approximately 70 percent of all NFL revenue is shared equally among its 32 teams. In contrast, MLB, the NBA and the NHL all share less than 30 percent. In addition to extensive revenue sharing, the NFL employs a hard salary cap, a reverse-order draft, a jiggered schedule and free agency signing rules, among other things, to promote parity across the teams.

    The league’s parity policy works. Over the last 10 years, 10 different teams represented the NFC in the Super Bowl. No other professional sports league in the world comes close.

    The question is whether the NFL’s “socialism” goes overboard in its parity promoting policies. Do these policies undermine individual team incentives to develop and promote its product?

    The 2006 collective-bargaining agreement for the first time included all stadium revenue in the base that is used to compute the team payroll cap. Both a cap and a floor (approximately 87 percent of the cap) are set at the same level for all teams. Yet, since small city owners have fewer large corporations to buy sponsorships, signage and premium seating at their stadiums, they believe that the 2006 agreement works prejudicially against them. They insisted upon and got a major increase in the NFL’s supplementary revenue-sharing system that has increased transfers by an additional $200 million in recent years.

    Big city owners believe the system has gone too far. The Cincinnati Bengals are Exhibit A. The Bengals play in Paul Brown Stadium, which was built in 2000 with $423 million of public money (and no money from the team.) The team pays no debt service, no rent, no property taxes, no maintenance or capital improvement expenditures and gets to keep all stadium-related revenue. The Bengals’ payroll has generally stayed close to the mandated floor. The result is that the Bengals have been one of the NFL’s most profitable teams, despite having an underperforming team on the field, yet the Bengals are one of the NFL’s largest recipients in its supplementary revenue-sharing system.

    More ironic still, owner Mike Brown refuses to sell naming rights on the stadium that is named after his father. With several major corporations headquartered in Cincinnati (Procter & Gamble, Kroger, Macy’s, Fifth Third Bancorp, Ashland) Brown could probably garner between $5 million and $10 million annually from selling these rights. Needless to say, many teams that pay millions of dollars into the NFL supplementary revenue-sharing system — teams that have privately funded their new stadiums and experienced ballooning financing costs when the auction rate bond market collapsed — feel a bit cheated. Nonetheless, Brown and other smaller city owners want more transfers.

    When sports team owners can’t agree on dealing with one another, it is not uncommon for them to seek concessions from the players. This is what the NFL owners have done in calling for an 18 percent reduction in the revenue base upon which the salary cap is calculated.

    As proposed by the owners, the 18 percent salary shave is to come principally in the form of greater player contributions to the owners’ increasing stadium costs. In 1999, the NFL owners took the progressive step through their G-3 program of committing league funds to help finance new stadiums. The league, in essence, would grant up to $150 million a team to fund new construction. The union, in turn, agreed to accept a similar deduction in the league’s revenue base (amortized over 10 years), which would result in up a reduction of up to $8.9 million in the annual gross salary bill paid to all players.

    The rationale for the union contribution is that players get 59.5 percent of all revenue, and new stadiums can boost team revenues tens of millions of dollars annually, lifting player salaries proportionately. Thus, the new Cowboys Stadium may increase the Dallas Cowboys’ revenue by $100 million and, therefore, player salaries by $59.5 million. If the players collectively contribute $8.9 million to the stadium, they are getting more than a sixfold
    BUD FORCE

    return.
    MIKE STOBE / GETTY IMAGES
    Cowboys Stadium (top), site of Super Bowl XLV, and the Giants and Jets' New Meadowlands Stadium are examples of how new stadiums can boost NFL revenue.

    In 2011, stadiums no longer cost $400 million to build. The new Cowboys’ facility cost $1.2 billion, and the Giants and Jets’ new stadium even more still. The NFL believes that both the league and union contributions need to rise along with the sharply increased cost of stadium construction. The league also wants the union to kick in a bit more to help defray increased stadium operating costs, which can run up to $20 million a year.

    Now, the fact that owners initially asked for an 18 percent reduction in the salary base does not mean that they expect 18 percent. And the fact that the union’s new leader has employed aggressive rhetoric to denounce the owners’ stance does not mean that the union won’t accept a smaller sum. In many ways, the verbal volleys are nothing more than a typical sports league collective-bargaining dance.

    The good news is that there appears to be a clear path to compromise. In 2009, the owners contracted $1.2 billion to 256 drafted rookies with $585 million guaranteed to players who had not played a single game in the NFL. Although the 2006 labor agreement has a rookie salary cap, the system has gaping loopholes. The owners want to close those loopholes and lower the commitment to unproven college players.

    If the union agrees to close some of these loopholes (and why wouldn’t it, since they affect non-union members?), it can probably avoid any cuts to the salary pool of current union members. Then, toss in an 18-game schedule and increased medical coverage for players, along with a few other touches, and there’s a deal waiting to be signed.
    With $8 billion-plus in annual revenue, virtually all teams operating in the black, new revenue streams popping up with various new technology ventures, ongoing corporate enthrallment, and a massive, captive and growing fan base, the NFL is just too profitable and successful to risk shutting down operations. While the owners may whisper “lockout” to reporters and the union may prepare for decertification, smart money says there will be football next fall.

    Andrew Zimbalist (azimbali@smith.edu) recently released his latest book, “Circling the Bases: Essays on the Challenges and Prospects of the Sports Industry.”

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  • Communication is paramount in weathering a work stoppage

    As the four major sports tumble toward potential labor strife, it is imperative to concentrate on the connection with their constituents — coaches, staff, media, sponsors and, most importantly, fans.

    I began my NFL career during the labor problems of the 1970s. Initially, I was faced with the residue of players’ action that forced the cancellation of the 1974 Chicago Charities College All-Star game. Later, there were the player strikes of 1982 (57 days) and 1987 (24 days). Both occurred after the NFL seasons had begun, but were uniquely different with a true work stoppage vs. use of replacement players.

    Among the most important lessons I learned was that myopic focus on saving money could potentially damage the recovery process. Fans and sponsors became disengaged. The focus often was the battle and not the recovery. It took foresight and planning to hasten recovery. The key component: Honest, consistent communication from all parties.
    GETTY IMAGES
    Commissioner Pete Rozelle unequivocally told me his expectations. I needed to look at the means to show [Super Bowl] attendees we were the gold standard of sports.

    In 1982, my mission was to maintain commitments with and continue planning for Super Bowl XVII in Pasadena, Calif. I was engaged, in person and on the phone, with everyone from politicians to vendors to hotel management, etc. Commissioner Pete Rozelle unequivocally told me his expectations. I needed to look at the means to show the attendees (including all our league sponsors) we were the gold standard of sports. Upon resuming play, we were singularly driven by the need for success, but planning had to be done during the strike to accomplish this.

    We installed portable JumboTrons — it was the first time in history the NFL showed highlights during a game. We revamped the sound system to push it into rest rooms, concession stands, elevators, etc. The corporate hospitality concept was heavily promoted for the first time. Looking back, it was the best-run Super Bowl I oversaw, and we innovated more than at any other previous Super Bowl.

    Communication is key

    The commissioner ensured that the staffs were kept as well-informed as possible during these times. In the pre-Internet era, we constantly received newspaper articles, were given access to trial testimony, attended multiple question-and-answer sessions, and were given guidance about what to communicate. This is much easier now.
    Events and activities must be planned to involve fans. If there is a work stoppage, other entertainment activities will attempt to fill the void, trying to convert fan spending habits temporarily, and then attempting to make a permanent change. It is possible other sports will jump into the void created, adjusting their seasons or events.

    Everyone must cultivate their relationships. Among the things that should be planned before or during a work stoppage are:

    • Ensure draft events are better than ever. The league plans for the draft even if the collective-bargaining agreement expires, and this may be among the last, best contacts with fans.

    • Use training facilities for special events, corporate outings/meetings, charitable meetings, youth clinics, high school coach seminars, similar events to NFL 101 seminars, sit-downs with coaches, etc.

    • Use stadiums for special events, including concerts, movie nights using the video boards and blanket seating on the field (even entertain studio premieres), fun runs and marathons ending at the stadium, social media events (such as last fall’s Panthers Purrsuit in Charlotte) or special college, high school or international games. Provide preferential seating or pricing to season-ticket holders. Some NFL teams already are taking action with their scheduling of Kenny Chesney’s 2011 “Going Coastal” tour.

    • Revamp sponsorship packages to include community-driven programs, out-of-stadium retail promotions, etc. Teams want to avoid sponsors allocating their money elsewhere for a season, then realizing they don’t really need sports promotions and never returning or wanting back in at a dramatically reduced price.

    • Community relations departments must continue reaching out to the public. Teams need to stockpile autographed items now to ensure items can be provided to charitable fundraisers in more depth than the past. Make sure everyone knows the importance of the franchise to the community.

    • Use the relationships with alumni players and current coaches to enhance community outreach via charitable activities, golf tournaments, autograph and information sessions with season-ticket holders, etc. Develop tenure recognition programs for season-ticket holders. Hold fan forums and town meetings with season-ticket holders. If you have won championships, get the trophies out in the public forums.

    • Move up the timetable on selection processes, including cheerleader tryouts. There is a need to be out in the community at an earlier time frame.

    • Use Twitter, Facebook and texting (using an IM app like Kik) to constantly communicate, posting recollections of team achievements, fan memories, etc. Teams should start preparing these now. Updates on current issues can be woven in. Use video clips and podcasts as attachments. Get information to bloggers firsthand. Use all assets like newsletters, e-mail blasts, Web chats, telephone conference calls, phone blasts, etc.

    • Have top management or head coaches meet for regular luncheons with sponsors to keep them informed of
    Teams should be prepared to use social media sites such as Facebook to communicate with fans and post team achievements, video clips and podcasts.
    developments, especially ahead of news cycles, maintaining their engagement. Sponsors should be among the first to know of the return to play.

    • For those staff affected the most — the game-day workers who need to respond favorably to fans at the first game back — involve them and their families in events and keep them informed via newsletters and e-mail. These people may likely have been significantly affected financially, but their fan engagement will hasten the transition upon the return to play.

    • Team radio and TV shows need to be directed to reinforcing great memories and anticipating times to come, especially if there is an anniversary to recognize.

    • Group sales staffs need to cultivate leads, develop databases, take commitments and deposits on season tickets. Ticket sales should remain a primary focus.

    Recovery efforts

    After the labor unrest is resolved and play resumes, the first communication from the team should not be an invoice with an immediate due date. The packaging of the communication needs to be planned to re-engage the season-ticket holder and overcome their potential frustration. Most importantly team personnel need to come out of the labor strife in an aggressive mode.

    The stadium experience needs to be fresh; it cannot appear as if everything was just taken out of storage. The time to do capital improvements is now.

    Be prepared for in-stadium giveaways at the first game. Practice sessions upon the return need to re-energize the fans. Plan special events at preseason training times.

    If there is a time for innovation, it is now: Roll it out. Show it off. Prove to all that the event, and the fan experience, is better than they remember.

    Bottom line, leadership needs to be displayed to keep staff thinking and engaged to ensure all constituents feel connected to the team. The teams and leagues must demonstrate that they are still the best entertainment option for their communities. 

    Jim Steeg (jim.steeg@gmail.com) is former executive vice president/chief operating officer of the San Diego Chargers and senior vice president of special events at the NFL.

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