April 4 - 10, 2011 Vol. 13 — No. 48

Top Stories

  • Presenting the 2011 Champions: Pioneers and innovators in sports business

    For the second year, SportsBusiness Journal and Daily honor six industry veterans for their distinguished success in shaping the business of sports.

  • NFL changing how it plans Super Bowl

    The NFL is changing the way it assesses risk in developing contingency plans for future Super Bowls in the wake of the ice and snow that wreaked havoc on the game in North Texas in February.

  • ATP tourneys push back over tour chief's proposed contract

    ATP tournaments are battling the tour’s executive chairman, Adam Helfant, over his proposed next contract, multiple tennis sources said, and his future with the sport is possibly at risk.

    Helfant signed a three-year, incentive-laden deal in 2009, and this year he will cash in with compensation topping $3 million, the sources said. That is a record amount for the ATP World Tour and WTA Tour, though not in tennis, where Arlen Kantarian in 2008, his last year at the U.S. Tennis Association, earned $9 million. Still, at the ATP before Helfant, the top executive historically made less than $1 million.

    At the WTA, former CEO Larry Scott earned $1.6 million in 2007 and more than $1 million again in 2008, his last full year at the tour before resigning to accept his current job as Pac-10 Conference commissioner. But Scott’s pay is more of an outlier; WTA chief executive pay typically has been less than $1 million.

    Under Helfant, the ATP has added sponsors Corona and FedEx and renewed a lucrative deal with Ricoh. Given the nature of his contract, with its incentives, Helfant is being handsomely rewarded. Now, the tournaments would like a more conservatively structured contract, and Helfant is balking at that idea, the sources said.

    “Would you want to make less money next year?” one source asked, rhetorically.

    An ATP spokesperson, speaking for Helfant, said, “The ATP doesn’t comment on contract negotiations.”

    Helfant assumed his ATP position after the stormy reign of Etienne de Villiers, who effectively was pushed out by players who were dissatisfied with his calendar changes and outsized profile. Now, it’s the tournaments’ time apparently to voice disapproval. Many events have been squeezed in the last few years by rising prize money mandates at the same time the economy worsened.

    “The tournaments want a deal that is fair to Adam and the members,” said Adam Barrett, the Sony Ericsson Open tournament director. “[Helfant] has done a terrific job.”

    Under Helfant, the ATP has grown overseas, but it has not grown as much in the United States. Unlike his predecessor, Helfant has kept a low profile and rarely speaks to the media.

    One of the sources wondered whether Helfant might only be suggesting he might not re-sign so as to get a better deal. But then, this source added, Helfant left his previous job at Nike in 2007 over similar issues.

    The only public compensation figure for Helfant is from his first year at the tour. According to the ATP’s tax return filed last November, for 2009, Helfant earned $1.4 million that year.

    Sports compensation consultant Cathy Griffin said she had heard about tensions surrounding Helfant’s next contract months ago.

    “Most contracts have incentives; that’s pretty normal at that level,” she said. She added that backlash against his pay “sort of comes with the territory.”

  • Forward into the unknown

    The confidence that comes with weathering a long recession was evident last week among executives at the IMG World Congress of Sports.

    But there was also discomfort caused by uncertainty on several important issues, including labor, the perils of social media and the future of content distribution. The inescapable conclusion: The future of the sports industry is being reshaped by forces beyond many executives’ control.

    SportsBusiness Journal’s Abraham Madkour (left) leads the Rapid-Fire Roundtable, discussing the headlines of the day with ESPN’s Mike Tirico, Gatorade’s Sarah Robb O’Hagan, EA’s Peter Moore, Turner Broadcasting’s David Levy, the NHLPA’s Donald Fehr, the USOC’s Scott Blackmun and the WTA’s Stacey Allaster.
    “We’re out of the recessionary tunnel,” said NHL Deputy Commissioner Bill Daly. “As there are in any cycle, there are always new issues to deal with, [and] those are the constant challenges that we all have to address as we move forward.”

    Even during the recession, the sports industry enjoyed the type of stability most businesses would envy. TV rights rose steadily, sponsorship values increased incrementally and new additions to premium seating continually boosted the bottom line.

    But there was an awareness throughout the conference that the easy, organic growth of years past was over, and the key to mapping the future lay in long-term labor security, understanding social media and harnessing the opportunities of mobile and digital distribution.

    “These are all significant issues leagues and properties will tackle,” said Rob Temple, vice president of sports management at ESPN. “The leagues, sponsors and media companies that are listening to fans are going to come through it stronger. The ones not staffed well or willing to listen will struggle. ”

    Labor Unrest

    A panel on team ownership, moderated by SBJ staff writer Tripp Mickle, featured Stephen Ross (second from left) of the Miami Dolphins, Rocky Wirtz of the Chicago Blackhawks, and Merritt Paulson of the Portland Timbers.
    Like most people, AEG President and CEO Tim Leiweke long thought there was no chance the NFL would miss any games next season. Too much money was at stake. But he’s slowly begun to change his mind over the last couple of weeks.

    “Now it’s personal,” Leiweke said, alluding to the escalating vitriol that has emerged as one of the biggest threats to a deal between the NFL and NFLPA.

    While Leiweke said he thought the league might miss games, others at last week’s conference expressed confidence that the sides would reach a resolution and start the season on time. But the lack of consensus underscored just how much uncertainty there is around sports’ biggest property.

    “It’s not good, and the longer we don’t get a deal, the worse it will get,” said Brian Rolapp, NFL Media’s chief operating officer. “We’re confident and hopeful we’ll get to the table and get something done.”

    NHL Chief Operating Officer John Collins agreed, adding, “Labor is the one big hiccup holding everything back. You have to see where the NFL goes and the NBA goes. Baseball’s right after that.”

    Sports marketers already are spending twice as much time developing activation plans for the 2011 season as in previous years because they need to prepare a contingency plan in case the lockout continues, and they said the repercussions of that could extend beyond this year.

    Procter & Gamble has developed both NFL and non-NFL-related point-of-sale displays and retailers will make a decision which one to feature this May. The activation is for a major retailer, and Greg Via, Gillette/P&G global sports marketing director, said if the retailer doesn’t take it this year, it would make it less likely the retailer would opt for an NFL display in 2012. “It’s going to have a long-term effect,” Via said.

    At the same time that marketers are making tough decisions about how they activate their sponsorships, they’re also deciding how they will advertise.

    “We’re looking at our upfront marketplace on the entertainment side and saying, ‘Where are all these [gross ratings points] going to go?” Turner Sports President David Levy said. “Sports is really the only thing that seems to be growing from a [gross ratings point] standpoint, so if advertisers have to lay their money down in the fourth quarter and there is no football and there is no NBA, that’s going to cause a shortage in supply, high demand and high pricing.”

    Social Media

    Five years ago, Peter Moore said EA Sports developed campaigns that shaped what consumers thought of the brand and its products. Now he tracks what consumers say about the brand and tries to influence their commentary in social media.

    “You can’t control it, you have to manage that,” Moore said. “We have lost control of the conversation to the consumer.”

    The Florida Panthers’ Michael Yormark (left) listens as the Miami Heat’s Eric Woolworth talks about the fan experience.
    The shift reflects a change marketers are grappling with as consumers use platforms such as Twitter and Facebook to become marketers.

    “It’s a social revolution that’s in play for the marketplace, and the sports world has to embrace it,” said Michael Lynch, Visa’s head of global sponsorship management. “Right now, everyone’s trying to figure it out.”

    Research has shown that consumers are 12 times more likely to trust a recommendation from a friend for a product than they are a traditional advertisement, and brands are deploying an array of strategies in an effort to influence recommendations.

    Visa provided exclusive content around its Olympic athletes during the Vancouver Games in order to increase its Facebook fan base by 110,000 fans, and Farmers Insurance sponsored an airplane in the Facebook game Farmville that got downloaded 6.5 million times.

    “Can I show you a spreadsheet that shows it translates to sales? No, I can’t,” said Coca-Cola chief marketer Bea Perez. “But we believe this is a space we will continue to learn from and will be important to our business.”

    But as great as the potential rewards are, there are risks with social media, as well. Reliant Energy employs 12 people to monitor customer feedback across social media platforms, so it can respond to complaints before they influence opinions of the brand.

    Gatorade tells its athletes to be wary of Twitter and reminds them that everything they tweet is on the record.

    “If you talk to public relations directors in pro sports, Twitter keeps them up at night,” said ESPN commentator Mike Tirico. “Some of it’s great because we’ve taken down the barrier of athlete to media to fan, but like everything, life’s a laboratory, and we have to proceed with caution.”

    Communicating directly to fans presents both an opportunity and an obligation, said MLS Commissioner Don Garber.

    “It’s all going into a big pot,” Garber said. “We’re stirring it around, trying to get our hands on it.”

    Content Distribution

    SBJ’s Abraham Madkour (left) moderates a panel including Reebok’s Tom Shine, IMG’s George Pyne, AEG’s Tim Leiweke, the Boston Bruins’ and Delaware North’s Jeremy Jacobs, and MLS’s Don Garber.
    Sports leagues spoke with a unified voice last week when they discussed plans to stream programming to tablets: They like it.

    But even with that unanimity, uncertainty remains about whether distributors have the rights to stream channels like Time Warner Cable started doing, allowing its TV and broadband subscribers to view a 32-channel lineup on their iPads.

    Powerful entertainment programmers — including Fox and Viacom — have threatened to sue Time Warner Cable over the service. Last week, Time Warner Cable pulled channels that complained, and threatened legal action itself.

    The question of whether Time Warner Cable legally is allowed to stream a 32-channel lineup to its iPad-using subscribers almost certainly will be settled by a court of law. But the sports industry threw its support behind the service — even though it doesn’t currently include any sports channels. League and ESPN executives described Time Warner Cable’s service as a natural evolution of video.

    Their remarks stand in stark contrast to entertainment programmers, like Fox, Scripps, Viacom and Discovery. Last week, Fox sent Time Warner Cable a cease-and-desist letter, trying to persuade it to pull its channel from the lineup. The networks allege that Time Warner doesn’t have the right to stream their channels to an iPad, and they worry that they’ll start to lose control of where their content can be viewed if they allow such a move.

    But sports executives say Time Warner Cable’s service — as well as one planned by Cablevision — doesn’t necessarily concern them. Because viewing is confined to Time Warner Cable subscribers within range of their router, league executives view the iPad as another television screen in the home.

    “I think we’re going to stop the debate about screens and devices and get to a philosophy about content,” said Tim Brosnan, MLB’s executive vice president of business. “Live games get sold here in this fashion for all these purposes. [A content] library gets sold here in this fashion for those purposes. We’re going to look to extract value on all of it.”

    Tim Brosnan (left), John Collins, Brian Rolapp, Adam Silver and John Skipper share a laugh during the sports media panel.
    Viewers on iPads can’t be counted by Nielsen yet, a problem for league executives like NBA Deputy Commissioner Adam Silver, who speculated that iPad viewers would be the type of younger and tech-savvy fans who leagues and networks sell around.

    “It’s important for all of us that those screens get counted in the home,” Silver said. “When it comes to televising the games in the household, I’m in favor of [Time Warner Cable’s service], with the exception of the Nielsen issue.”

    Unlike programmers like Fox and Scripps, ESPN doesn’t see problems with Time Warner Cable’s service. ESPN signed a carriage deal with Time Warner Cable that allows the cable operator to stream several of its channels to its subscribers. John Skipper, ESPN executive vice president of content, said the iPad app is a natural progression.

    “This is really about video on the best available screen,” Skipper said. “The distinction between these screens is becoming nonexistent. They’re just screens. … You want to watch whatever you want to watch on whatever the best screen available is.”

    NFL Media’s Rolapp agreed that video to a tablet is a natural evolution from 2005, when DirecTV started making “Sunday Ticket” available to Internet users.

    “You could get your ‘Sunday Ticket’ package on your mobile phone or your computer,” he said. “Now you can get it on your tablet. It’s always been there.”

    Staff writers Eric Fisher, Brian Helfrich, Daniel Kaplan and Terry Lefton, and correspondents Jennifer Rodrigues and Joseph Argenziano, contributed to this report.

  • PrestoSports: Official Web partner of Cinderella

    Butler and Virginia Commonwealth wore the slippers to the Final Four, but it was their website partner, little-known PrestoSports, that was the real Cinderella.

    With a modest operation of 22 employees based in Rockville, Md., the small tech firm seldom competes against the giants in the college website industry, CBSSports.com College Network and NeuLion, which own the digital rights to most of the BCS schools. Instead, Presto has been happy to collect the rights to NCAA Division II and III schools, as well as a growing list of midmajors like Butler, VCU, Harvard and Yale, by offering a more cost-efficient option.

    Through its diligence, Presto’s client list has grown to more than 270 schools in the U.S. and Canada, many of which you’ve never heard of.

    It’s the relationships with Butler and VCU, though, that gave Presto a seat at the Final Four table with the big boys.

    “It gives us a chance to show what we can do with a lot more visibility,” said Serge Knystautas, 38, Presto’s CEO and founder. “Hopefully, all the midmajors and the big boys say, ‘Hey, these are great-looking websites and maybe I don’t have to pay that much for it. … It’s a chance for us to show what this rag-tag group can do.”

    Knystautas, a programmer by trade, started PrestoSports in 2005 after doing a series of projects for the Eastern College Athletic Conference. While the big schools had vibrant websites, he saw that the smaller schools didn’t have a similar outlet to publicize their sports.

    Presto found its mark in Division II and III and gradually has moved into Division I with the likes of Kent State, Santa Clara and Furman, which occasionally has put them in competition with the industry leader, CBS. Presto typically comes in at a lower cost, sometimes a half to a third cheaper than CBS, based on some recent bids.

    Presto sets up a content management tool that enables sports information officials at the school to post their own content on the site. With the school officials doing more of the work, it helps keep Presto’s costs down. The Presto sites, however, offer many of the same features found on the bigger schools’ sites, such as ticket sales, online auctions, merchandise sales and fundraising.

    Most of Presto’s clients are looking for a website that will extend their brand — or perhaps establish a brand — while not breaking the budget.

    “We’re more like the affordable provider,” said Ted Bardach, vice president of business development, who joined Presto in 2008 after being with CSTV and CBS College Sports. “We definitely don’t have that corporate feel that you have at CBS. But we can do as much as the bigger providers.”

    Being the affordable option means running a lean operation. Presto’s modest offices sit on the sixth floor of a nondescript building in Rockville, just northwest of Washington, D.C. Only half of its work force is based there because the rest work from home.

    In the coming months, however, Knystautas expects to grow with a national ad sales team that can sell across all of Presto’s Web properties. For now, though, employees come to work in T-shirts, jeans and sweats, giving the office an early Facebook feel. Programmers sit in a “bullpen” ready to help with technical support. A foosball table provides occasional entertainment.

    Presto’s sales are currently outsourced to multiple ad networks, but the company wants to bring those sales in-house so that it has more control and it is better able to avoid conflicts, such as the one on VCU’s site last week. The Rams are a Verizon school, but Presto’s ad network sold a spot to AT&T, which ran briefly on VCU’s site before it was taken down.

    Most of the advertising on the sites now is packaged into corporate sponsorships that are sold by the schools. Additional ad sales could drive more revenue, and Presto thinks it might have the critical mass of schools now to begin selling nationally.

    “The online ad market is complicated,” Knystautas said. “But what we know is that we have a strong demographic to work with, and the ability to go after more revenue per customer will also let us go after more BCS schools.”

    A certain pride emanates from being the smaller company that’s trying to expand its business at the Division I level.

    Dealing with Presto gave VCU a hand in keeping its expenses down.
    VCU, which selected Presto over CBS a year ago to manage vcuathletics.com, was attracted by the functionality of the system and the price ­— mostly the price. Presto asked for a little less than $10,000 to design and manage the VCU site, while CBS was going to charge three times that, said Robby Robinson, VCU’s associate athletic director who spearheaded the selection process.

    “We might have missed out on a few bells and whistles, but honestly, we got most everything we wanted,” Robinson said.

    It actually was the Butler business that helped Presto acquire VCU. The Rams, who received bids from Presto, CBS and a handful of other tech companies, were in the middle of their search as Butler made its run to the 2010 NCAA championship game. Robinson admittedly didn’t know much about Presto, so he monitored butlersports.com during last year’s tournament and was impressed by the look and layout.

    On paper, Presto against CBS was a mismatch the size of VCU against Kansas. CBS has the rights to 48 of the 65 schools from the big six conferences and has a national sales force behind the college network. But lean and mean Presto won it on affordability.

    “I kept reading and re-reading Presto’s bid,” VCU’s Robinson said. “I was thinking, ‘OK, what’s the catch? What am I not seeing?’ I thought it was too good to be true.”

    Schools can spend anywhere from $10,000 a year to $50,000 a year on their websites, whether it’s with Presto, CBS or NeuLion, and the return from them fluctuates wildly. While the Ohio States and Alabamas count their websites as a source of revenue from advertising and video subscriptions, the smaller schools are just hoping not to lose money.

    That VCU can cover its Web expenses through subscriptions to RamTV is a win for the budget.

    The Final Four runs for Butler and VCU also bring the opportunity for incremental revenue from online auctions, donations and subscriptions to the video service. Butler took advantage of its Final Four run last year to set up a new Web feature that allows fans to inquire about season tickets.

    The Final Four runs gave Presto incremental revenue opportunities like auctions and new subscriptions.
    “Presto helped us set that up and it was pretty simple,” said Mike Freeman, associate AD at Butler. “We captured a lot of new names from that and it really helped us get off to a good start with season tickets and individual sales. We also saw our online gifts go way up.”

    For most midmajors like VCU, though, “revenue from the website is gravy,” said Robinson, who added that traffic on vcuathletics.com last week was about 10 times higher than normal. “Branding is what we’re thinking about.

    “Right now, we just want people thinking that it’s cool to be following VCU.”

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