SBJ/Feb. 14-20, 2011/Leagues and Governing Bodies

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  • Jewkes accepts NASCAR job he helped create

    Nearly six months after completing a review of NASCAR’s communications strategy and recommending the property hire a chief communications officer, Brett Jewkes last week accepted the position that he helped create.

    The longtime Taylor executive will oversee the roughly 35-person NASCAR integrated marketing and communications division that he helped design last August. He will join the organization’s senior management team, working closely with NASCAR Chief Executive Brian France, President Mike Helton and Chief Marketing Officer Steve Phelps to develop a long-term communications strategy designed to make the organization more proactive and collaborative in its communications.

    In Jewkes, NASCAR found a leader with not only corporate and sports communications experience but also NASCAR experience. He has managed NASCAR-related marketing and PR efforts for Alltel, Ask.com, Diageo and others. Taylor, under his leadership, also conducted an annual survey of NASCAR fans that identified consumption habits and brand and driver affinity.

    “Brett’s marketing and communications expertise and broad experience working with top brands at a premier agency, coupled with his very unique understanding of NASCAR and our industry, will be a tremendous asset to our company,” France said in a statement.

    Taylor CEO and managing partner Tony Signore said in a statement: “Brett’s passion and knowledge of NASCAR, and his ability to serve as a senior counselor to the industry’s leaders, has been inspiring. We welcome the prospect of working closely with him as a client partner.”

    Jewkes will be based in NASCAR’s Charlotte office. He and his family will relocate there from Chicago this summer.

    “The challenge of what NASCAR’s embarking on is super-attractive,” Jewkes said of the new communications strategy. “It’s a spectacular professional challenge in an arena that I’m passionate about.”

    NASCAR received more than 200 résumés in response to its search for a CCO. The organization, with the support of executive recruiting firm Korn/Ferry, narrowed the list and interviewed 10 candidates before settling on three finalists for the job last December.

    Jewkes initially wasn’t among the finalists. Phelps said that he was added to the group later because NASCAR leaders thought he would be a good fit for the position. The late addition of Jewkes to the group of finalists delayed the planned announcement of a new CCO from January to last week, Phelps said.

    Phelps declined to name the other three finalists.

    “We went through the process, and Brett wasn’t even a passing thought until the end,” Phelps said. “It became clear as I looked at what we needed to accomplish, the combination of Brett’s expertise and his vision for our IMC division made him the person we should go after.”

    Though Jewkes won’t start full time until April 13, he already met with most NASCAR team executives in January during a series of meetings that Phelps conducted about the communications review and other studies Taylor has undertaken on NASCAR’s behalf.

    “This is not just an operational change, it’s a mind-set change,” Jewkes said. “In one year, I’d like people to say that competition is better than it’s always been, which is strong, and that we’ve added some really good strategic thinkers.”

    NASCAR plans to add seven to 10 people to its communications staff.

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  • NBA owners wrestle with revenue sharing

    As NBA owners figure out how much revenue they are willing to split with today’s players, a difficult and sometimes fractious set of internal negotiations must be completed as ownership tackles a major new business strategy: how to split more revenue among themselves.

    For months, the NBA’s 10-member planning committee, led by Boston Celtics owner Wyc Grousbeck, has been addressing ways to align a new revenue-sharing system with a new collective-bargaining agreement.

    Yet, as the clock ticks toward the June 30 conclusion of the current CBA, owners continue to wrestle over a new revenue-sharing structure that NBA Commissioner David Stern has said is on a dual — but separate — track with a labor deal. Stern believes that the league must have a more equally distributed business model aligned with how funds are shared with players. The goal is to move more money through revenue sharing to help make all teams profitable. It’s a seismic shift given the NBA’s current revenue-sharing system, which unlike other leagues, doesn’t share a dime of local revenue among the 30 owners.

    Further challenging the league is that at least half of its teams lose money, while there is a widening revenue gulf between large- and small-market teams. Consider the disparity in team revenue, where large-market teams like the New York Knicks and Los Angeles Lakers generate annual revenue of around $250 million compared with small-market franchises like the Memphis Grizzlies and New Orleans Hornets that generate around $100 million.

    Combine that revenue disparity with individual owners unaccustomed to sharing earned dollars, and it makes for a complicated, protracted set of negotiations.

    No formal plan on changes to the current model have been presented to the league’s board of governors and there likely won’t be any specific plan presented to the league or union during this week’s All-Star break in Los Angeles. The hope is that owners will settle on a revenue-sharing model this spring.

    Until then, Grousbeck, who declined to comment, and the planning committee are running model after model with permutation on top of permutation, trying to create a system that will win support of all the owners.

    NBAE / GETTY IMAGES
    “Because of the wide revenue disparity among teams, which is mainly a function of market size, you will always have some teams that will struggle to make a profit if they want to be competitive.”
    Joel Litvin
    NBA President of League Operations
    “There is a broad consensus that the current revenue-sharing structure ought to be changed,” said Joel Litvin, NBA president of league operations and a key executive involved in the revenue-sharing issue.

    But the mechanics of change present huge obstacles to ownership, as teams confront an age-old question: how to redistribute wealth among those who aren’t predisposed to increased sharing.

    While it helps to have big-market teams like the Lakers and Knicks endorse the effort, the reinvention of how owners do business is contentious.

    “The large markets have bought in, but this is a league run by a bunch of entrepreneurs who have never shared with their competitors,” said one source familiar with league finances. “There has been zero revenue sharing on tickets and none on the local media level, so this represents a sea change in how the league is run.”

    Part of the NBA’s current revenue-sharing structure mirrors other leagues in that it calls for its 30 teams to equally share national television revenue. Estimates this year have that total at $900 million, which this season will bring each franchise around $30 million. But unlike other leagues, the NBA has a local performance metric tied to another smaller component of revenue sharing. The amount of revenue to be shared from that pool is calculated by the amount of luxury tax assessed to teams that spent over the salary cap. But the pool from those sources became underfunded as fewer teams exceeded the salary cap, which this year stands at $58 million per team.

    For the 2008-09 season, the league recognized the dwindling revenue-sharing pool and boosted the pool to $49 million up from $30 million. Seventeen of the NBA’s 30 teams received a portion of that revenue-sharing pool, with some franchises receiving a very small amount, and just five receiving a maximum payout of $6 million.
    While the league is still computing payouts for the 2009-10 season, the pool is expected to be around $60 million, with 10-15 teams receiving the shared revenue.

    The amount of the payouts to teams from this fund are determined by a formula created by business consultants at McKinsey & Co. It calls for teams to meet certain business performance benchmarks, including specific amounts of local advertising and sponsorship revenue based on market size. This was set up to safeguard teams from not fully maximizing local revenue opportunities while still receiving revenue.

    So in the current system, teams receive a base of $30 million in national television revenue along with potentially another $6 million or so from the McKinsey formula.

    But many teams, particularly small-market franchises, feel that’s not enough and oppose the structure because its limited payout doesn’t close the gap between higher-revenue teams. Their belief is there is not enough revenue distributed no matter how efficient they operate in their respective markets and they want a greater upside provided for smaller-market teams.

    “It is extremely complicated and most of the owners are looking to change,” Litvin said.

    “Because of the wide revenue disparity among teams, which is mainly a function of market size, you will always have some teams that will struggle to make a profit if they want to be competitive,” Litvin said.

    Now, the league is studying new revenue-sharing systems, particularly the pooling of local revenue that assists low-revenue teams and creating a more financially competitive approach in how its teams do business. Possibilities include taking a portion of each team’s gate and local broadcasting revenue and redistributing it to the neediest teams.

    “The universal challenge is how do you fill the growing gap between the very top and the very bottom,” said Andy Dolich, former president of business operations for the Memphis Grizzlies. “In markets where there is a lack of eyeballs and available wallets, the question is how to equalize it. It has to be in an increased revenue share.”

    The union has not been involved in the league’s work to restructure revenue sharing and does not know of the owners’ plan, said Jeffrey Kessler, outside labor counsel for the union. “They just told us they are studying it and they are working on it, and that is all we know,” Kessler said.

    The NBPA has proposed that more local revenue, specifically, be shared among teams, as opposed to national revenue, Kessler said, because “in the NBA, unlike the NFL, the profitability is driven by the individual local revenues.”

    Kessler added that the players have asked that in any revenue-sharing plan the NBA adopts “that there be clear rules” that the teams that receive the revenue either spend it on player compensation or on ventures that actually increase revenue.

    “The players would be willing to sit down and negotiate the exact parameters” of revenue sharing with the owners, Kessler added.

    While Stern and the NBA’s labor committee, chaired by San Antonio Spurs owner Peter Holt, will increase the frequency of talks with the union for a new CBA, the league isn’t yet sharing specific details of its revenue-sharing approach as it considers a new structure.

    “There are so many ways to go at it,” said a source. “The [planning committee] is as down in the weeds as it can be.”

    Staff writer Liz Mullen contributed to this report.

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  • NFL gives EA a break

    The NFL has restructured its lucrative licensing and sponsorship contract with Electronic Arts to account for the sport’s uncertain future, significantly reducing the video game maker’s contractual obligations next season but adding a year to the deal, according to several well-placed sources. The contract now runs through 2013.

    The league is believed to have so far rebuffed pleas for fee reductions from other licensees and sponsors, many of which, like EA, find it difficult planning for the next season under the threat of a work stoppage. The league’s collective-bargaining agreement with the players expires March 4, and the two sides are far apart on reaching a deal.

    EA, however, is a special case, with its iconic “Madden” video game title. The licensing deal it agreed to with the league in early 2008 is believed to be worth well into nine figures in guarantees and royalties over its original five-year term. That stands as one of the most, if not the most lucrative non-TV contract the NFL enjoys.
    The NFL Players Association, which signed a companion EA deal for rights to the players, reaps regularly between $30 million and $40 million annually, according to the union’s annual filings with the Labor Department.
     
    The league deal allows EA to use team colors, names and logos.

    “For one of our core partners in a difficult environment, we say let’s look at this, and maybe it makes some sense to extend something out longer and give our partner some relief in the short term but gain something on the back end,” said Jacksonville Jaguars owner Wayne Weaver, chairman of the NFL’s business ventures committee.

    EA’s games allow for continuous updating during a season to account for weekly player performance, so lost games in an NFL season could impair the video game’s attraction.

    Weaver, like the sources, declined to say how much relief EA is gaining. The Wall Street Journal in October reported that the game maker requested a $30 million reduction in its scheduled payments because of the labor uncertainty. Weaver also declined to detail the contract restructuring.

    The league and EA, which declined to comment, reached their accord recently, several months after the California-based company sought the financial relief. But on a conference call with analysts earlier this month, EA’s chief financial officer, Eric Brown, said, “In terms of the NFL, I can tell you that our base assumption going into the plan is a very conservative one ... we’ve baked in, at least in our thinking, the most conservative assumption, meaning no season. We’re optimistic it can be better than that and generate further upside.”

    The union did not respond for comment on the status of its own EA contract. The NFLPA since last summer has been notifying league sponsors that beginning March 4, absent a CBA deal, the rights to players through NFL deals will no longer exist (SportsBusiness Journal, Aug. 16-22, 2010).

    EA is not in that boat because it already has the separate NFLPA deal for players’ rights though 2012. But the same problem would exist for EA with the players that it has with the league: If there are lost NFL games in 2011, the market could shrink substantially and devalue the licensing contracts.

    If the season is uncertain, asked Wedbush Securities analyst Michael Pachter, “Why would EA do TV pre-buys [and] advertise the hell out of the ‘Madden’ game, which presumably they have to commit to before the launch of the game, which is around Aug. 10? They have to put the game out in the market, and that is why they are getting relief.”

    EA programmers are actively preparing for the August release of “Madden NFL 12.” “Madden NFL 11” last year was EA Sports’ second-biggest selling title on a global basis, with more than 5 million units shipped, trailing only its soccer title, “FIFA 11.”

    Another year of an exclusive NFL license is significant for EA. The company’s first deal in 2005 gave the publisher sole rights to league and player marks and intellectual property, eliminating vibrant competition from 2K Sports’ “NFL 2K” series. That ushered in a wave of full- and semi-exclusive deals in sports video game licensing.

    Staff writer Eric Fisher contributed to this report.

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  • Movie, unique distribution raise U.S. Figure Skating's profile in a non-Olympic year

    When U.S. Figure Skating Association Executive Director David Raith first considered developing a documentary honoring the 1961 figure skating team that died in a plane crash, he wanted to do more than the traditional made-for-TV special he’d seen other sports organizations develop. The movie lover wanted a film worthy of the big screen and a major cinematic release.

    Thursday, Raith will see that desire become reality when the movie “Rise,” which was developed for $1 million, premieres at more than 500 theaters nationwide during a special, one-night-only screening. In addition to the movie, theatergoers will see a live broadcast from New York’s Best Buy Theater in Times Square that features NBC’s Matt Lauer interviewing Olympic figure skaters.

    "Rise" documents U.S. skating's return after a plane crash killed the national team in 1961.
    The event is the result of a partnership U.S. Figure Skating struck with NCM Fathom, the company that has brought the Metropolitan Opera and FIFA World Cup to theaters nationwide. Raith hopes it both raises the profile of figure skating and raises money for the U.S. Figure Skating Memorial Fund, which honors the 1961 skaters who lost their lives.

    Fathom and U.S. Figure Skating signed a revenue-sharing agreement for the film and will share ticket revenue after costs, with proceeds going toward the Memorial Fund.

    A DVD and Blu-ray production is in development and is expected to be released later this year in conjunction with a television broadcast of the film, which tells the history of figure skating in the United States by talking about the 1961 team and the generations of skaters that followed them.

    “I’ve been asked, ‘When it’s over, what do you want to happen?’” Raith said. “Besides writing a check to the Memorial Fund, I want people to go out and skate.”

    National governing bodies often struggle in non-Olympic years to keep their sports on the national radar. The development and unique distribution of “Rise” have helped U.S. Figure Skating overcome that a year after the Vancouver Games when awareness of the sport would usually be at its nadir, Raith said.

    Fathom’s partnership with AMC, Cinemark and Regal cinemas meant trailers promoting “Rise” were shown on more than 17,000 movie screens nationwide. Raith estimated the value of that exposure was worth more than $1 million.

    “We don’t have the money to do that ourselves, but that’s part of our arrangement with Fathom,” Raith said.
    Fathom Vice President Dan Diamond expects the film to attract an audience and perform well at the box office.
    “If there wasn’t a profit opportunity in all of these programs, we wouldn’t be doing it,” Diamond said. “The key is finding passionate fans and offering them a chance to bond and connect in an affordable way they couldn’t otherwise.”

    The film is being released at an important time for U.S. Figure Skating. The organization’s $12 million-a-year marketing and broadcast deal with ABC ended in 2007, forcing the organization to control its expenses, find a new broadcast partner and sell its own sponsorships the last three years.

    Through partnerships with NBC for broadcasts and Van Wagner Sports for marketing and sponsorship sales, the national governing body has rebuilt its business, now operating on a $10 million annual budget, Raith said.

    The organization is in the process of a long-term strategic review. It hopes to increase membership from the 176,000 members it had last year to more than 200,000 members in the future. It also hopes to continue to expand its portfolio of partners, which currently includes Alka-Seltzer, AT&T, State Farm and Smucker’s.

    Raith sees the release of “Rise” as a critical step in U.S. Figure Skating’s effort to achieve those goals. He doesn’t know if U.S. Figure Skating will ever return to the zenith of the Nancy Kerrigan days of the 1990s, but he’s confident that the sport is well-positioned for the future.

    “Every sport is cyclical,” Raith said. “We’re moving in the right direction and doing the right things. Our future’s now.”

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