NBA talks lockout in boom times

NBAE / GETTY IMAGES

In any collective-bargaining scenario, management is reluctant to put a rosy face on its business performance for fear of labor using that information to its advantage. Nonetheless, at a time when NBA corporate sponsorship revenue and activation are at all-time highs and during an All-Star Weekend that included the resuscitation of a slam-dunk contest that had become tired and TV ratings that were the best in years, senior NBA executives were quietly affirming that the league’s business is booming.

NBAE / GETTY IMAGES At the Jam Session opening ceremony Feb. 17 , from left: Lawrence Norman, VP of global basketball for sponsor Adidas; Los Angeles Mayor Antonio Villaraigosa; AEG President Tim Leiweke; and NBA Commissioner David Stern.

“The game is in great shape; it’s never been better,” said Commissioner David Stern, at his annual state of the NBA press conference in the bowels of the Staples Center.

There were separate agendas being negotiated when the NBA and its players association met on Feb. 18 at the Beverly Hills Hilton. One was the CBA itself; the other was what kind of face to put on the talks, which are aimed to avoid a lockout when the current agreement ends June 30. Stern avowed optimism, noting the National Basketball Players Association was now open to discussing some issues previously classified by the union as deal breakers. Union head Billy Hunter chose optimistic

DAVIDE DEPAS NBPA Executive Director Billy Hunter (left) and NBPA Vice President Maurice Evans at the All-Star Gala on Feb.19.

terms like “constructive” to describe the bargaining. Still, in what was perhaps the most telling portion of Stern’s annual address the day before the All-Star Game, he acknowledged that the sides are no closer to an agreement now than at the same point in 1998, a stalemate that canceled 32 games that season. “We had a huge gap back then and we have a huge gap now,” Stern said. “Of course, we are smarter now than we were then. We’ve already had a lockout. We know what it feels like.”


As for the yin and yang of ordering a work stoppage when many, if not all, of the league

MICHAEL BUCKNER / GETTY IMAGES The T-Mobile crowd hits the magenta carpet, from left: Meredith Starkey, Suzanne Lowry, Derek Chang, Peter Deluca, actress Ellen Pompeo and Mike Belcher.

revenues are at unprecedented levels? “NBA merchandise is reaching new highs, our ESPN and TNT ratings are at historic numbers, local TV is strong, look at the Lakers’ new TV deal as an indicator there,” said Deputy Commissioner Adam Silver. “So on the revenue side, it’s been terrific, but we still manage to lose a lot of money. We’re healthier than we were two years ago, but collectively we’re still losing hundreds of millions each year. So there’s a flaw in the system we hope to correct.”

NBA owners claim the league is losing between $350 million to $400 million annually.

■ ALL SYSTEMS GO: Season tickets are a portion of the NBA economy that has been unaffected by the threat of a work stoppage. League executives said in October they feared some financial pain of a potential lockout around All-Star Weekend, but the prospect of a labor stoppage has not yet altered season-ticket spending.

“Our early renewals are at a high percentage rate and there has been no impact so far,” Silver said.

The NBA established a new full-season-ticket sales record this past offseason and ended up with a full-season renewal rate of around 81 percent. Though it is still early in the NBA’s renewal campaign, the league is expecting a strong renewal rate this year. “Teams have gotten out earlier than ever,” said Chris Granger, executive vice president of team marketing and business operations for the NBA.

Team sponsorship revenue this season is also up by 6 percent over last season, Granger added.

Next year’s ticketing trends also will reflect the increasing use of variable and dynamic pricing strategies. One team that could leverage its success and star power in Kevin Durant is the Oklahoma City Thunder, but so far owner Clay Bennett has refused to use dynamic pricing to drive ticket revenue as he continues to build the fan base, despite the team playing to near 100 percent capacity in its arena this season.

“We want to build up our brand equity,” said Brian Byrnes, senior vice president of sales and marketing for the Thunder.

NBAE / GETTY IMAGES (2) The Jam Session, which used variable ticket pricing this year, got a warm welcome in L.A.

■ TICKET TAKERS: For the first time, the NBA used variable ticket pricing for its Jam Session fan fest, which was held at the Los Angeles Convention Center. Variable ticket pricing is widely used by the NBA and other pro sports teams, but it had never before been used for any of the league’s annual fan festivals, such as the NBA’s Jam Session, MLB’s All-Star FanFest or the NFL Experience at the Super Bowl.

In Los Angeles, the NBA priced Thursday and Friday Jam Session tickets at $20, but spiked prices to $30 for Saturday and Sunday, days that draw more people. In prior years, the league charged $20 for each day of the Jam Session. “In much the way our teams vary pricing according to demand, we decided to price Jam Session similarly this year, with the best pricing on our lowest demand days,” Granger said.

This year’s Jam Session drew 102,729 people from Feb. 17-21, one of the strongest gates in history. Last year’s Jam Session in Dallas drew 93,611 for the same number of days, though attendance was diminished by a snowstorm. The all-time attendance record for the fan event was set in 2007 in Las Vegas, with 136,311 fans. But that event ran for six days instead of this year’s five-day event schedule.

■ LICENSE TO SELL: Sal LaRocca, NBA executive vice president of global merchandising, went into the season forecasting high single-digit growth for the NBA’s consumer products. With the expected success of the Miami Heat, a renaissance in New York and Chicago, and the spotlight on players such as Derrick Rose, Blake Griffin and Durant, he’s now predicting sales growth well into the double digits. Unlike past fashion-based growth spurts, this one is based on the health of the game and spread across disparate product areas. 2K Sports’ “NBA 2K11” is well on its way to becoming the league’s most successful video game ever, having sold more than 4 million units worldwide since its October release. For anyone thinking that Michael Jordan is past his prime as a commercial catalyst, recall that MJ is on the cover of the game, certainly the first time a team owner has achieved that status.

Even licensed products as banal as NBA-logoed backboards and basketballs are selling well enough that LaRocca says that Spalding’s sales of NBA-licensed goods will jump 12 percent in one of the league’s most mature product categories.

After more than 12 years on Fifth Avenue in Manhattan, the NBA Store shut its doors on Feb. 13 after being unwilling to pay what league officials considered an unreasonable rent increase. Two nearby sites have been selected and offers are out. The hope is for a new NBA Store to open in time for holiday shopping, but with an eight-month build-out anticipated once a lease is signed, that’s not guaranteed. LaRocca is hoping for a similar-sized store with more of a technological bent, along the lines of the retail emporiums from Nike and Apple. “We have a global footprint now and we’ll look for a way to capture that in a retail environment,” he said.

In case you’re thinking a work stoppage would slow down this process, remember that the original NBA Store opened during the 1998 lockout.

NBA licensee ProPatch takes titanium into the non-bracelet category.

■ TITANIUM, TAKE TWO: The titanium bracelet and necklace craze that has propelled companies like Power Balance into the news is still burning brightly, especially in NBA circles. Power Balance is a licensee with NBA endorsees including Shaquille O’Neal, Lamar Odom and Rose. The Sacramento Kings’ home arena has been rechristened to Power Balance Pavilion. Industry analyst SportsOneSource estimated that the titanium bracelet/necklace market grew to $100 million last year, an astounding increase of 70 percent from 2010. Now a company is convinced enough of titanium’s appeal to consumers that it is becoming an NBA licensee for titanium product that doesn’t include a bracelet. ProPatch is an adhesive patch containing titanium that applies like a band-aid and will be available in NBA team colors within a month. It will be retail priced at around $20 for a box of 10 at retailers including Dick’s Sporting Goods. A patch version with licensed images is scheduled for next year.

An NBA license means players can wear the product during games, and it will be available in locker rooms for players to sample. New York’s Amar’e Stoudemire is an early endorser for the company, whose investors include Alphabet City Sports Records and Marquis Jet co-founder Jesse Itzler. However, it’s the delivery system, not necessarily the much-debated merits of titanium, that are intriguing. Itzler said the company hopes to market similar patches that can deliver topical pain relief, energy, analgesics and even vitamins. “The home run would be a kids vitamin delivered by patch,” Itzler said. “In any case, it’s a great combination of fashion and function.”

■ HELP WANTED: The search for a new chief executive officer of NBA China is drawing to a close. “We are narrowing it down to a very short list of candidates” Silver said. The league has been looking for a new executive to replace former NBA China CEO Tim Chen, who resigned in October. Steve Richard, chief financial officer of NBA China, has been serving as interim CEO based out of the NBA China Beijing office.

Meanwhile, the league continues to seek a new president of the WNBA to replace Donna Orender, who resigned effective Dec. 31, 2010, after five years. Granger has been assuming Orender’s duties on an interim basis, but the thinking is that the WNBA wants its own president to lead the league. The WNBA season tips off June 3.

■ THE RIGHT BANK: A familiar face is administering sponsorship activation for BBVA, one of the NBA’s newest sponsors. It’s the man who signed the NBA’s first banking sponsorship deal last year, Peter Farnsworth. The former league executive resigned in December after a decade at the NBA, last serving as senior vice president of business development. His new Foxrock Partners counts BBVA among its initial clients.

For its first activation of All-Star Weekend, Madrid-based BBVA entertained around 250 clients and executives in Los Angeles and sponsored the celebrity All-Star Game, in which MVP Justin Beiber gave slam-dunk winner Griffin competition as far as who would emerge as the weekend’s “it guy.” A spokeswoman said BBVA was pleased since ratings for the celeb game were up 6 percent for an all-time high and it was among the top-trending topics on Twitter.

BBVA also helped sponsor the NBA’s annual Day of Service community initiative. Similar to the other offshore brands with NBA marketing rights, such as Haier and Lenovo, BBVA, which has achieved U.S. growth largely by acquisition, is using its league sponsorship as a platform for a stateside branding play. Long term, BBVA will support its NBA rights with a handful of team sponsorships in the Western U.S. The company also is presenting sponsor of Spain’s top-tier La Liga soccer league.

As for Foxrock, Farnsworth said the company will have three lines of business: corporate consulting, like BBVA; property representation; and nonprofit client’s cause-related efforts. The latter group will include the two-year-old Topspin ping-pong tournament, which draws mainly from the sports, media and marketing crowd, and will expand from New York to three cities this year, likely adding Chicago and Los Angeles.

■ CARD TRICK: Outside of a bodega or the like, when was the last time you were at any retailer, or even a restaurant, that didn’t have point-of-sale ads for a payment card in abundance, especially near the cash register? So it was puzzling to find nary an American Express logo in the NBA Store at Jam Session.

AmEx returned as a league sponsor late last year after a five-year absence and its logo did find its way on hotel key cards used during the weekend and on thousands of stickers on issues of USA Today delivered within those hotels.

On the other hand, being the presenting sponsor of the launch of an All-Star entertainment series, which included inside access events such as meet and greets with celebrities, was a smart way to leverage its restored NBA affiliation while adding a weekend of proprietary events for cardholders.

NBAE / GETTY IMAGES Jumping over the Kia was the easy part.

■ NO SLAM DUNK: The dunk that won the NBA’s Sprite Slam Dunk Contest took only a few seconds to complete, but the process that united Griffin with Kia, the league’s official car, was around five weeks in the making. New York-based Excel Sports Management handles Griffin, and the company’s vice president of marketing, Jaymee Messler, said the idea came from Griffin in January. Kia sponsors both the NBA and Griffin’s Clippers. “We knew if it was going to be a car, it would have to be a Kia,” Messler said.

While Kia has been reluctant to use athletes in their stateside marketing outside of golfer Michelle Wie, a quick call to the automaker’s U.S. headquarters confirmed their enthusiasm. However, there was the not-inconsiderable matter of convincing Sprite, title sponsor of the event since 2003 and one of the league’s largest corporate patrons, that Kia was not carjacking the event. With the help of NBA officials, the Kia Optima was used. It was not a billboard for the automaker and also included Sprite logos as a nod to Coca-Cola.

“We had to be very respectful of Coke’s rights, and fortunately they saw the value it had for the overall event,” said Tim McGhee, senior vice president for IMG Consulting, Kia’s sports and sponsorship agency. Kia paid what McGhee called “a reasonable” incremental fee to stage the automotive aerial. A TV ad around the dunk is still in the works. “We haven’t started to calculate the media value of this yet, but you just know it is something that will endure,” McGhee said.

NBA ENTERTAINMENT Author Malcolm Gladwell (left) and ESPN columnist Bill Simmons at the All-Star Technology Summit.

■ AT THE SUMMIT: The NBA held its annual tech summit at the Beverly Wilshire Hotel Feb. 18 and the event again featured some of the top names in marketing and media. This year’s summit was called “Digital Disruption,” and the event’s final session of a four-segment morning featured ESPN columnist Bill Simmons and author Malcolm Gladwell offering their unique takes on “Sports, Technology and The Fan.” Both provided common-fan viewpoints about improvements that could be made to sports — from both the competition and the fan experience. Their out-of-the box proposed solutions had industry veterans buzzing — both good and bad — as they left the event. Other notable panel members at the session were famed director James Cameron speaking about the future of sports on television, NBA owners Dan Gilbert, Mark Cuban and James Dolan, and Arne Duncan, U.S. education secretary, who also showed that he knows his way around the hardwood in Friday’s celebrity game.