March 14 - 20, 2011 Vol. 13 — No. 45

Top Stories

  • Fox and Big 12 near deal worth more than $60 million a year

    On the verge of collapse just months ago, the Big 12 is nearing a cable agreement with Fox that will more than triple the conference’s revenue over its current contract.

    The Big 12 and Fox are close to finalizing a long-term deal that will pay the 10-team league more than $60 million a year, well up from the $20 million it now receives from its cable contract, industry sources say.

    Fox, meanwhile, has been in discussions with eight of the league’s schools about establishing a conference-specific channel for a handful of football games, up to 60 basketball games and Olympic sports. The channel would not include programming from the University of Texas, which has partnered with ESPN on a new Longhorns channel, or the University of Oklahoma, which is planning its own channel, as well.

    Kansas is among the eight Big 12 schools talking to Fox about a college sports channel to carry their events.
    The other eight schools, however, have been engaged with Fox about a college sports channel that would carry their events. Fox’s talks, led by the co-president of Fox Sports, Randy Freer, primarily have gone through Learfield Sports, which is the multimedia rights holder for Kansas State, Iowa State, Missouri, Oklahoma State, Texas A&M and Texas Tech. IMG College owns the rights at Baylor and Kansas.

    Talks have centered on having Fox flip one of its three Fox College Sports national channels, which are carried on cable sports tiers. Whether the channel could be called the Big 12 Network remains to be seen because only eight of the 10 schools in the conference would be participating. The conference office would have to rule on whether the name could be used in such a venture.

    The athletic directors at the schools that would make up such a channel were updated about the negotiations by Learfield executives during last weekend’s Big 12 basketball tournament in Kansas City.

    The two arrangements — Fox’s cable deal with the league and Fox’s potential channel with the eight teams — are separate conversations, sources say. Fox’s cable deal with the Big 12 must be completed first so that the network knows how much content is available for a conference channel. The conference office is not involved in the talks about a channel for the eight schools.

    “The conference continues to work diligently on our future television rights agreement,” said Big 12 spokesman Bob Burda, but he offered no details on the progress of the talks. Fox executives had no comment on the deals because they have not been signed.

    The two developments signify a stark turnaround from last summer, when the Big 12’s future was in doubt as Texas, Oklahoma and others talked about joining an expanded Pac-10.

    At the time, one of the Big 12’s marquee schools, Nebraska, had fled for the Big Ten, and another, Colorado, had defected to the Pac-10. Rumors swirled that the six schools in the Big 12’s south division were headed out west, which would have meant the end of the 15-year-old conference, which was created out of the old Southwest and Big 8 conferences.

    Commissioner Dan Beebe salvaged the league by promising growth in TV revenue and allowing schools to retain a substantial portion of their media rights, which cleared the way for Texas to start its own network. Once the Longhorns committed to staying, everyone else did, too.

    Now the additional revenue from the new Fox cable agreement will be shared by 10 schools, not 12, which would expand each school’s piece of the pie.

    The Big 12’s current cable contract with Fox runs through the 2011-12 academic year and will pay the league $20 million in the final season. Terms of the new deal will drive revenue above $60 million and potentially close to $70 million annually for the league.

    The conference also has a network broadcast contract with ABC/ESPN worth $480 million over eight years that runs through 2015-16. It was first thought that the Big 12 would extend its cable agreement to 2016 to make it concurrent with the ABC/ESPN contract, but now sources say that the Fox extension will go beyond 2016 and could go out as long as 10 years, to 2022.

    The network and cable deals combined will bring an average of close to $130 million a year into the conference to share with the 10 teams, putting the Big 12 only slightly behind the ACC, which recently struck a deal for $155 million a year with ESPN.

    If Fox follows through on its talks to create a conference channel for those eight schools, it would aggregate what’s known as the third-tier rights from those schools. The third-tier rights are the games that are not picked up as part of the network or cable contracts, so they drop to the third tier.

    Most schools turn over their third-tier rights to their rights holder, like Learfield and IMG College, which televises those games locally or regionally via TV or online and uses them to generate ad revenue.

    Under terms of the new cable agreement with Fox, each school will be permitted to retain the rights to at least one home football game and a handful of men’s basketball games. That means a new conference channel would have the rights to a minimum of eight football games total. In men’s basketball, anywhere from six to 13 games per school typically fall into the third tier of rights.

    Kansas is considered to have the most valuable assortment of third-tier rights because of its historically strong basketball program and national following.

    But while a new channel would significantly boost exposure and potentially aid recruiting for the eight schools, it is not expected to provide a financial windfall. Those schools already are being paid for their third-tier rights in their multimedia contracts with Learfield and IMG College.

    By flipping an existing Fox College Sports channel, Fox would save on development and facility startup costs, and would start with a national distribution footprint of between 10 million and 20 million homes. However, the network would either have to pay Learfield and IMG College to obtain programming rights or negotiate a partnership position for them in the channel. The other option would be to create a syndicated network of over-the-air channels within the Big 12 footprint. Bill Byrne, the Texas A&M athletic director, is on the record as supporting the creation of a channel. “I prefer an offering in the form of a Big 12 Network for our fans,” Byrne wrote in his January blog on the school’s athletic website.

    A new channel could send repercussions through the league on several fronts, including scheduling. Most of the third-tier football games are against nonconference foes in September. To provide more balanced programming, those games would need to be scattered throughout the season, which means the conference schedule would have to accommodate nonconference games in October and possibly November.

    The schools also would have to work with the conference on how conference games are distributed. If Texas plays Texas A&M in volleyball, does the home team get the rights to the game? Can it be simulcast on both the conference channel and the Longhorns’ channel?

    And what about the name of a conference channel? Can it be called the Big 12 channel if all 10 of the league’s schools are not involved?

    Those are details that need to be ironed out, but it’s clear now that talks are getting more serious and that the idea of a conference channel for eight schools has significant support.

  • Moody's: NFL media rights to double

    NFL media fees will double to $8 billion annually by the end of the decade, a significant reason why the league has been striving to reduce the share of revenue the players receive, said Neil Begley, a Moody’s Investors Service senior analyst.

    Those conclusions are in a yet-to-be-released, but finished, report that Moody’s plans to publish if the NFL locks out the players, Begley said.

    The NFL and NFL Players Association at press time late last week were engaged in federally mediated negotiations regarding a new collective-bargaining agreement. The most likely outcomes of last week’s talks — the two sides agreeing to a third deadline extension, or the union decertifying and the league locking out the players — had not occurred as of Thursday evening.

    Among the key issue in the talks is the sharing of revenue. Ownership has pushed for a greater share of the pie, which itself is expected to increase from lucrative media fees and other sources. The league’s deals with Fox, CBS, NBC, ESPN and DirecTV fuel about $4 billion in annual revenue currently, with deals running through 2013 and an ESPN extension in the final stages that sources have said would see that network’s fee double.

    “It’s why this CBA needs to be fixed now,” Begley said, “before this big surge [in media fees]. Because otherwise, [the NFL] won’t reap enough to offset costs associated with building stadiums.”

    Analysts say NFL Commissioner Roger Goodell has leverage with the networks.
    Twenty of the NFL’s 32 teams are playing in stadiums that are new or have been substantially renovated dating to 1999.

    “The league felt with the new stadiums there would be a tremendous upswing in pricing, and they would be fine,” Begley said. “What happened was a little different. The elasticity in [ticket and premium-seat] pricing wasn’t as vibrant, the recession occurred, and ultimately the plan was largely a failure. As a result of that, they have been bearing a lot of the credit risk without the profit. The upshot is they would like to get a more reasonable portion of the media revenues to cover the risks they have taken.”

    Moody’s is projecting the huge rights fee increases largely, Begley said, because of the “TV everywhere” concept, in which consumers can view shows not just on TVs but also on computers, handheld devices and tablets. For example, Time Warner Cable recently cut a deal with ESPN to allow its cable customers to view ESPN programming on computers, requiring customers to authenticate who they are with their cable bill number.
    Cable companies will pay a lot more for these rights, Begley said.

    “The leagues are going to have more leverage [in media negotiations] than ever before,” he said.
    Begley covered the NFL for Moody’s until 2007. His area of coverage now includes media companies, stadiums and concessions companies, all of which are affected by the outcome of the CBA talks.

    Every media analyst contacted for this story agreed with the changing dynamic. David Bank, an analyst with RBC Capital Markets, said TV networks have relied on the huge NFL ratings to save their TV seasons. Last year, NBC’s “Sunday Night Football” was TV’s highest-rated broadcast show, and ESPN’s “Monday Night Football” was the highest-rated cable show.

    “This is a really good time for the NFL to negotiate,” Bank said. “The league has to be aware of how reliant the networks are [on] the league’s ratings.”

    Bank said the NFL could indeed see its media fees surpass $8 billion annually in a decade, but he warned that it is misleading to say that the figure would double what’s being paid currently because of escalators that are built into the league’s media contracts.

    “To gauge the increase in real costs from a new contract, one probably shouldn’t compare average price to average price, but rather peak price on the old contract versus trough price on the new contract,” he said.
    Rich Greenfield, a financial analyst for BTIG, also pointed to the league’s TV ratings as evidence that the NFL’s leverage will get stronger in coming years.

    “The NFL clearly has become more important to the TV industry each year,” Greenfield said. “It’s the one thing broadcasters can use to get [retransmission] fees and cable companies can use to fight cord cutters.”
    Under the NFLPA’s proposed 50-50 split of all revenue, players would get $2 billion annually of the increased media fees that Moody’s is projecting. The league’s desired percentage is uncertain, but for each percentage-point drop, the players would lose $80 million annually. Presuming a 3 percentage-point difference, and media terms of five years, that translates into a $1.2 billion difference.

    Mike Trager, a sports TV consultant, agreed with the Moody’s projection, saying that given just the projected rise in the “Monday Night Football” package — which will average close to $2 billion a year — the sport was on its way. But Trager also pointed to retransmission consent fees that distributors are starting to pay broadcasters. Last year, for example, Fox used New York Giants games as leverage during its retransmission dispute with Cablevision in the New York market.

    The rights fees the networks pay to the NFL have not risen a lot in recent years, Trager said, but that should change now that broadcasters are getting retransmission fees.

    Staff writer John Ourand contributed to this report.

    • Related story: Restructuring NFL loans would not be a problem, experts say

  • In K.C., mixing naming rights and doing the right thing

    Every day, the unfinished steel and concrete structure in the western suburbs of Kansas City, Kan., better resembles the rendering of Sporting Kansas City Park, the $200 million, soccer-specific home of Sporting Kansas City. In late September 2010, Sporting Kansas City CEO Robb Heineman sent Lance Armstrong Foundation CEO Doug Ulman a picture of the rendering with the words of his foundation alongside, “Livestrong Park.” It was not a blind pitch, as both organizations did business with the Kansas City-based American Century Investments group.

    From left, Robb Heineman, Doug Ulman, Lance Armstrong and Cliff Illig announce the deal last week.
    “When someone approaches you with an idea you’ve never thought about, it seems crazy,” said Ulman, whose Livestrong organization is most associated with cancer research, Nike and the seven-time Tour de France champion. The picture sat on Ulman’s desk for two weeks, and to his surprise, it routinely caught the attention of his office visitors. “I started to realize there might be something big here, something innovative,” he said.

    That was the first in a series of steps that led to last week’s announcement that Livestrong will become the naming rights partner of Sporting Park, which opens on June 6. The marriage of the cancer foundation and Kansas City’s recently rebranded professional soccer team (formerly the Wizards) is not the most novel part of the deal, which was the talk of sports marketing circles last week. In a unique twist, Livestrong is paying nothing for the rights or activation at the park. The team, instead, will cover all activation costs, and will pay the foundation an undisclosed percentage of all stadium revenue — including a guaranteed minimum of $7.5 million — over the six-year deal.

    Both parties were quick to point to altruism as the force behind the deal. “The core tenet of this relationship is to support the [Livestrong] cause,” Heineman said. “We’d love it if we could give $20 million.”

    Ulman, who played college soccer at Brown, told the team from the outset that Livestrong would not pay a naming-rights fee, and said that Livestrong would only come on board if there was “raised awareness and significant financial impact” from the partnership. A source close to the foundation confirmed that, since 2007, Livestrong has required partners to guarantee minimum contributions — usually $1 million to $1.5 million per year — to use the brand’s name.

    Timing also drove the deal, and Heineman said that the four-year political debate over the stadium’s public financing meant the organization got a late jump in searching for naming-rights partners. Sources said the team simply found no suitors that would come close to the minimum $1 million to $1.2 million annual value the team and the league were seeking. Heineman admitted that the team pursued half a dozen traditional naming-rights opportunities, and that Livestrong was the “outlier.” But he insists that a lukewarm sponsorship market wasn’t the reason for the partnership.

    “Yes, it would have been difficult to say no to a [deal] that would pay you $3 million for 10 years,” Heineman said. “We never got to contract terms with [anybody else]. But this is an opportunity that we could not have done with a traditional sponsor.”

    Naming-rights analysts contend the team most likely found its options limited for traditional naming rights, considering the scarcity of Fortune 500 firms in Kansas City. Randy Bernstein, president and CEO of sports agency Premier Partnerships, which brokered the naming rights for FC Dallas’ Pizza Hut Park, said his firm could not find a sponsor to name the field at Arrowhead Stadium, where the Kansas City Chiefs play. “Kansas City is not one of the stronger corporate headquarters in the U.S., with Sprint a notable exception, and they obviously signed a long-term deal [in 2004] with AEG for the new arena in town,” Bernstein said. “National companies have a limited interest in Kansas City due to its market size and geographical location.”

    Heineman said the stadium and the partnership with Livestrong are the centerpieces of the team’s new membership model, which invites fans into an online community where they engage with products and marketing from team partners. The membership is free, and members receive discounts to partner products and other perks, such as unlimited free tickets to away games and three free tickets to home games. Partners receive marketing data on the members.

    “They are a really special and innovative ownership group,” said MLS Commissioner Don Garber. “They are in a small market but they have big goals and aspirations.”

    Heineman said the team has already seen positive business from the deal — in the 24 hours after the partnership was announced, the club sold 400 season tickets, its greatest single-day haul in the team’s 15-year history. Looking ahead, he foresees the stadium hosting Livestrong concerts and other events and predicts that revenue from those events could equal any traditional naming-rights deal he could have secured.

    Ulman said that plans for holding other Livestrong events at the facility were only in the discussion stage. “This is the first time we’ve had this type of access to a world-class facility,” Ulman said.

    The deal raises questions of how the team will balance its leaguewide partnership with Adidas and an alliance with Livestrong, which has a long-standing relationship, and is closely identified, with Nike. The stadium’s logo does not include a Nike swoosh. But Heineman said that a team store at the stadium would sell Livestrong-branded Nike clothing, and that revenue generated from the sale of Adidas-made team jerseys and clothing would be included in the donation to Livestrong.

    A spokeswoman from Adidas declined to comment. But one marketing executive believes Livestrong’s strong ties to Nike and its major presence on the building is detrimental to one of MLS’s biggest sponsors. “Even if there are no [Nike] logos, it’s well-known that Livestrong and Nike are almost interchangeable — it’s basically Nike Stadium, that’s what you’re saying,” said Lou Imbriano, former vice president and chief marketing officer for the New England Patriots. “If I’m Adidas, I’m not too pleased.”

    Heineman said he does not see the Livestrong deal as risky to the Adidas partnership. “Adidas is a very important partner for us and we’ll do everything we can to make them feel good about the Sporting Kansas City brand,” he said.

    The partnership also raises questions of how the team will deal with the millions in lost revenue — a traditional naming-rights deal could have earned the club $5 million to $10 million for a six-year deal.

    stadium rendering
    The stadium is scheduled to open June 6.
    Heineman said the city of Kansas City, Kan.’s $147 million contribution in sales tax and revenue bond sales has helped ease much of the financial burden. He declined to say how much the team contributed to the stadium project and said that the stadium’s public financing was “irrelevant in our decision” to partner with Livestrong.

    Several outside analysts noted the tax implications of the deal, citing the team’s ability to write off some of the partnership as a charitable donation. Heineman said he did not know how much the team would write off. “It’s not like we did this because of tax planning,” he added.

    FC Dallas President and CEO Doug Quinn, who battled and survived a bout with throat cancer, said the Livestrong deal signals the start of a cause-marketing trend and pointed to FC Barcelona’s jersey deal with Unicef as the beginning of a move by sports enterprises to donate valuable inventory to charitable causes.

    “I expect to see more of it,” Quinn said. “It could be a stadium, it could be a jersey, it could be a car, but I’m confident it will happen again.”

    Staff writers Don Muret and Tripp Mickle contributed to this report.

  • AmEx back for three more years with PGA

    American Express has renewed its patron-level sponsorship with the PGA of America for three more years.

    AmEx came on board with the PGA in 2006 as one of its first partners at the patron level, which is the PGA’s highest level of sponsorship. Mercedes-Benz and RBC Bank are the other two patron sponsors.

    Kevin Carter, the PGA’s senior director of business development, said he is searching for a fourth patron sponsor and hopes to add one this year.

    “If we could add one more, we’d probably hold off after that,” Carter said.

    learning center
    The American Express renewal keeps the credit card company, which is represented by sports marketing agency Wasserman Media Group, on board through 2013. Financial specifics were not available, but these sponsorships range from $3 million to $5 million a year and often require incremental media spending with the PGA’s media partners. CBS has broadcast rights for the PGA Championship.

    Learning center
    The PGA Learning Center presented by American Express takes the sponsorship to event sites.
    The sponsorship includes access to other PGA championships throughout the year, such as the Senior PGA; Ryder Cups on U.S. soil; and access to market AmEx’s credit cards to the 28,000 golf pros represented by the PGA.

    AmEx’s activation has centered on programs designed for its card members, some of which grant them access to PGA professionals. On-site activation has focused on the PGA Learning Center presented by American Express at the PGA Championship and Ryder Cup.

    The Learning Center last year at Whistling Straits entertained more than 50,000 visitors the week of the PGA Championship, about 8,700 more than the previous year. Inside the center, PGA pros offer swing analysis and other tips to the fans.

    “It all goes back to access for our card members,” said David Eisenberg, manager of sponsorship marketing at AmEx. “We’re able to deliver that in a variety of forms, from sports to music and entertainment. The partnership with the PGA very much helps deliver on that strategy, which is one of the main reasons we renewed.”

    The Learning Center “is one of the more unique activations in golf,” Carter said.

    American Express has been a U.S. Golf Association corporate partner since 2006, which gives it a presence at the U.S. Open as well. AmEx in the past has had relationships with the PGA Tour and Tiger Woods before it turned to more consumer-driven deals and activation. It still has some ties to PGA Tour events, such as the American Express Volunteer Pavilion at the Wyndham Championship in Greensboro, N.C.

    “We know our card members are passionate about golf,” Eisenberg said. “Anything we can do to enhance their experience on-site means we’re delivering for the card members.”

    AmEx also got behind a PGA program called “Friend of a Card Member” that allows anyone paying for a golf lesson with an AmEx card to bring a friend and get a lesson for free. Another program called “Championship Tees” enables card members to have access to courses that have previously hosted PGA or USGA championships.

    AmEx also recently announced a three-year deal with the NBA.

  • Sports Business Awards: ESPN, Turner lead pack

    We are pleased to announce the nominations for the fourth annual Sports Business Awards, which will be presented during a live ceremony in New York City on Wednesday, May 18. The 2011 awards recognize outstanding achievements in sports business from March 1, 2010, through Feb. 28, 2011.

    The 73 nominees across 15 categories were selected by committees of the editorial staff from SportsBusiness Journal/Daily, who studied hundreds of nominees over the past two months. Among this year’s highlights is a record 73 nominees, with 37 companies or individuals being nominated for the first time. The top nominees are ESPN and Turner Sports with four each.

    Now that the nominees have been selected, we are following through on the changes in the voting procedure we announced months ago. We are embarking on a significant overhaul that we think will add more transparency to the process and clearly establish the Sports Business Awards as true “industry” recognition.

    The final selection discussions will include a panel of sports industry executives who will study the nominees and serve as category judges. Industry executives and members representing SportsBusiness Journal/Daily will evaluate the nominees and determine the winners of 13 of the 15 categories by a private vote. The list of judges for each category will be announced in the May 16 issue of SportsBusiness Journal/Daily. The categories of Executive of the Year and Athletic Director of the Year will continue to be judged solely by the editorial staff of SportsBusiness Journal/Daily.

    We are including outside judges to add more expertise, more transparency and more points of view to the final selection process. We are not identifying the members of the selection committees until after the votes have been cast to prevent lobbying and outside influence during the deliberations. We have targeted well-respected executives who we feel will add great value to the awards.

    We look forward to announcing the winners during the live ceremony on May 18 in New York City. We hope to see you in what promises to be a fun and special celebration of the best in sports business.

    George Bodenheimer     ESPN/ABC Sports
    Chip Ganassi     Ganassi Racing
    David Levy     Turner Broadcasting System
    Kevin Plank     Under Armour
    Pat Riley     Miami Heat

    Bob Bowlsby     Stanford University
    Tim Curley     Penn State University
    Chris Del Conte     Texas Christian University
    DeLoss Dodds     University of Texas
    Chris Hill     University of Utah

    Major League Soccer
    National Basketball Association
    National Football League
    National Hockey League
    Ultimate Fighting Championship

    Ganassi Racing
    New York Jets
    Orlando Magic
    Pittsburgh Penguins
    San Francisco Giants

    ING New York City Marathon – 2010
    NBA All-Star Game – 2011
    NCAA Final Four – 2010
    Winter X Games – 2011

    Papa John’s
    Phillips-Van Heusen
    T-Mobile USA

    Amway Center
    Arrowhead Stadium
    Consol Energy Center
    New Meadowlands Stadium
    Red Bull Arena
    Target Field

    CBS Sports
    Fox Sports
    National Football League
    Turner Sports

    ESPN Networks
    Fox Sports
    HBO Sports
    NBC Sports
    Turner Sports

    CBS Interactive Media
    ESPN Digital Media
    MLB Advanced Media
    Turner Sports

    MLB Advanced Media

    GMR Marketing
    GroupM ESP
    Team Epic
    Wasserman Media Group

    AEG Global Partnerships
    CAA Sports
    Home  Team Marketing

    Boras Corporation
    CAA Sports
    Wasserman Media Group

    BaAM Productions
    BeCore Promotions
    The Marketing Arm
    Momentum Worldwide

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