April 18 - 24, 2011 Vol. 14 — No. 1

Top Stories

  • ESPN, Big East in talks on extension

    With the value of college media rights continuing to swell, ESPN and the Big East Conference are negotiating to extend their media deal, which ends after the 2013 college football season, according to several sources privy to the talks.

    A deal is not imminent and could take months to complete, if at all, partly because the Big East schools aren’t on the same page in terms of strategy, sources said. But initial indications show the current trend of escalating rights fees will continue, as the extension being discussed would more than triple the conference’s current media rights fee.

    ESPN and the Big East are taking an aggressive posture in extending their nearly 32-year relationship by initiating these talks much earlier than normal. Typically, with a deal expiring at the end of 2013, talks wouldn’t have started until next year.

    ESPN currently pays the Big East an average of $36 million annually as part of a six-year contract for all of its sports. While initial numbers being floated may not be as rich as the ESPN/ACC deal that was struck last spring, it would still mark a major boost for the 16-team conference.

    Sources indicate the early numbers range from $110 million to $130 million annually, but conference sources describe those figures as a starting point for any negotiation. The initial offer would fall short of the $155 million annual payout the ACC will receive from ESPN in a deal that kicks in this summer. But the bold push by ESPN shows the network wants to lock down college rights in the face of increasing competition.

    Despite the long history between the conference and the network — they’ve been partners since 1979 — several obstacles have to be cleared before any extension can be finalized.

    ESPN’s offer has created a division among the conference’s schools. Some want to rebuff ESPN’s offer and take the conference’s media rights to the open market. The reason: The amount of potential bidders in the market has helped other leagues increase their media rights more than they initially expected.

    During ESPN’s negotiations for the ACC rights last year, the network’s bid leaped from about $120 million to more than $155 million per year once Fox emerged as a legitimate contender.

    Just last week, the Big 12 verified that Fox intends to be a significant player in the college rights space with its 13-year, $90 million per year deal that more than quadrupled the $20 million the conference was getting in its previous cable arrangement.

    Earlier this year, Fox Sports agreed to pay Conference USA a total of $42 million for its rights over five years.

    And the Pac-10, which is deep into negotiations on the open market with Fox, ESPN, Turner and Comcast/NBC, has talked about signing an all-in media rights deal worth north of $200 million per year.

    Still, ESPN’s initial offer has support among several other Big East schools, who are looking for ways to increase revenue and secure their futures in a league that seems annually to be the target of poachers from other conferences.

    The 16 Big East schools — soon to be 17 when TCU joins — have to share the $36 million the conference gets annually from ESPN. A new ESPN deal would reset that market, making the Big East more competitive with other conferences and potentially convincing schools with bigger football programs — like Syracuse and Pittsburgh — to stay with the conference.

    As the talks unfold, sources say, all eyes will be on Big East Commissioner John Marinatto, who succeeded Mike Tranghese in 2009 and embarks on his first major media negotiation.

    The draw for the Big East traditionally has been its strength in basketball. The league sent 11 teams to the NCAA tournament this past season and its ninth-place squad, UConn, wound up winning the national championship. Football, on the other hand, has been a drag on the conference.

  • What lockout? NFL keeps business rolling at draft

    Don’t look for any signs of disaffection among NFL sponsors activating around the NFL draft next week in New York, even with labor negotiations at the forefront.

    League officials are doing their best to tout business as usual and say they will have a record amount of marketing support for the draft, which averaged nearly 10 million viewers last year in its debut as prime-time programming on ESPN and the NFL Network.

    But be ready for some changes to the traditional programs. To achieve what the league says is a record amount of support from 14 sponsors, a new level of integration was sold — in the form of former players and more fans reading off the picks that teams hope will lead them to future success.

    One of the deepest forms of integration is by new league sponsor Anheuser-Busch: It has presenting sponsorship of the entire second round of the draft, which will take place on day two, April 29.

    Bud Light will get on-air mentions during the second round of the draft.
    During that round, NFL legends will deliver the picks from the podium at Radio City Music Hall, and through ad deals with ESPN and NFL Network, Bud Light will get on-air mentions throughout the round. Those retired NFL players will also make appearances at various A-B on-premises accounts around New York City. Meanwhile, a Facebook-based sweepstakes overlay for what A-B is touting as the “best round ever in prime time” is offering a $10 million first prize for anyone correctly predicting all 32 first-round picks in the proper order, the size of the prize being inversely proportional to the likelihood of any NFL Nostradamus achieving that feat.

    NFL corporate sponsor Verizon has a draft sweepstakes in which three winners will get to announce a team’s pick in the third round, which also takes place on the second day of the draft. Points-of-sale, ads on Verizon’s subscription-based NFL Mobile service, and retired player appearances at retail will support the effort.

    A-B and the National Dairy Council also are participating in marketing efforts in the draft’s later rounds, which will include additional opportunities for fans to announce team picks.

    The NFL has turned the draft into a “prime-time” marketing platform.
    EA Sports will again reveal its cover athlete, selected via fan vote, for its top-selling “Madden NFL 12” video game. The winner will be revealed during the first round, and EA will hold a draft day event in Times Square.

    Other NFL corporate patrons with national marketing support include Castrol, GMC, Mars, Papa John’s, Pepsi and Visa.

    Peter O’Reilly, NFL vice president of fan strategy and marketing, said he did not anticipate any decline in ratings around the draft this year with the current lockout. Over the three days, ESPN is planning a mind-numbing 26 hours of draft programming; NFL Network is planning 36 hours of coverage.

    “This is about fans reconnecting with their favorite teams during an important offseason event that’s a celebration of football,” O’Reilly said.

    With the NFL last week releasing its preseason schedule, the draft activation is another sign that business is moving forward despite the labor standoff. The league is looking to extend the draft to a three-month marketing platform and has branded it as “the path to prime time” and “welcome to prime time” in various league asset media as far back as December.

    “We get calls from sponsors all the time concerned about the ability to leverage their NFL sponsorships this season,” said Bob Dittrich, vice president of Genesco Sports Enterprises, during a National Sports Marketing Network panel in Chicago about the effects of a potential NFL work stoppage. Genesco handles league sponsors Pepsi, Verizon and Motorola. “When you look at the stature of the NFL in the sports landscape, the assumption is that the fans will all be back.”

    The NFL Players Association is hosting its own series of events around the draft for prospects, their families, and current and former NFL players in New York, including a dinner on Thursday night, media interviews on Friday, and a fitness and skills clinic on Saturday in Harlem. A number of top prospects, including Cam Newton, Blaine Gabbert and Nick Fairley are expected to attend some of the events, the NFLPA announced last week.

  • GE-NBC team intact for Games bid

    In a move that underscores the power of the Olympic rings to both NBC and its former parent company General Electric, the two companies will be back at the table together during the upcoming television rights negotiations.

    Peter Foss, GE’s president of Olympic sponsorship and corporate sales, said GE will negotiate its Olympic sponsorship “the same way it did last time” in 2003.

    The move could add more than $100 million in sponsorship fees to NBC’s bid to retain the Olympic TV rights, which are set to be sold this June. It also puts to rest the possibility that GE might look to negotiate independently of NBC, a move that would have allowed GE to exit or maintain its sponsorship regardless of what happens with the TV rights.

    During the last Olympic rights bidding process in 2003, GE, then NBC’s parent company, agreed to spend $200 million to become a worldwide sponsor as a member of The Olympic Partner program (TOP) through 2012. The sponsorship deal was added onto the $2 billion that NBC agreed to pay for the rights to broadcast the 2010 and 2012 Olympics, bringing the total value of the deal to $2.2 billion. The proposal, which sweetened NBC’s rights offering, marked the first time a broadcaster’s parent company had ever offered to become a sponsor during a TV rights negotiation and differentiated NBC’s bid from its competitors.

    In late 2009, GE sold 51 percent of NBC Universal to Comcast in a deal that valued the media company at $30 billion. The deal closed earlier this year.

    The combination of the NBC sale and the fact that GE is already a worldwide Olympic sponsor created the possibility that the company might negotiate its renewal independently of the television rights, but Foss said that won’t be the case.

    “We still own 49 percent of the company,” he said. “They’re our partners. We’re sticking with them.”

    The IOC is expected to hold bidding this June for the U.S. TV rights to the 2014 and 2016 Olympics. In addition to NBC Sports, which has held the rights for almost two decades, ESPN and Fox have expressed interest in bidding. CBS and Turner also have met with the International Olympic Committee.

    GE’s Olympic sponsorship already has benefited the company, which credited its sponsorship of the Beijing Games with generating roughly $700 million in China-related sales. It supplied energy distribution, lighting, water treatment and security equipment and systems to 400 projects around Beijing.

    The 2014 and 2016 Games, to be held in Russia and Brazil, respectively, offer similar opportunities for GE’s infrastructure sales divisions. Both Olympics are expected to require billions of dollars in infrastructure development.

    “We’re already participating there, but they’re high-growth markets,” Foss said.

    IOC leaders hope to name a television partner for the 2014 and 2016 Olympics before the IOC meets in July.

  • Drama sells for NBA

    It began with the frenzy surrounding LeBron James and the onset of the evil empire Miami Heat, continued with midseason drama involving the game’s biggest stars, and ended with the resurgent play of the big market Chicago Bulls and New York Knicks. So compelling was the NBA regular season that it pushed leaguewide revenue to an all-time high of $4.3 billion, delivered a record television audience for its network partners and brought higher than anticipated gate revenue.

    But against the backdrop of the league’s dizzying regular season, the NBA also recently reported to the National Basketball Players Association that it lost about $340 million during the 2009-10 season, following a $380 million loss for 2008-09. While the league does not yet know what the specific loss will be from this season, the most recent $340 million loss figure will be a key talking point as the league heads toward a June 30 expiration of its collective-bargaining agreement.

    Overall, the league drew 21.3 million fans for the season, the fifth-highest attendance in NBA history, as story lines played out all over the league. There was the high-profile trade of Carmelo Anthony to New York, the emergence of superstar rookie Blake Griffin that made the Los Angeles Clippers relevant, and the challenge of the Kobe Bryant-led Los Angeles Lakers in defending their dominance.

    “Top to bottom, the NBA has never been as competitive,” said Gary Stevenson, former NBA executive and sports consultant. “There were so many marquee matchups on any given night. But the big elephant in the room is labor.”

    Average attendance this season grew by nearly 1 percent to 17,323 fans per game, in line with preseason estimates, league officials said. Nineteen out of 30 teams saw an average attendance increase, compared with 13 teams last season.

    League officials would not disclose specific gate revenue or the rate of increase, but ticket sales typically account for about one-third of total league revenue, meaning that the league’s gate is an estimated $1.4 billion.

    Ratings soared across all of the NBA’s network partners (TNT, ABC and ESPN) while about half the league’s 30 teams saw double-digit increases in local cable ratings.

    Leaguewide team sponsorship revenue hit record levels, though league executives would not disclose specific figures. The average number of team deals stands at 100.

    “We have great momentum and our teams are capitalizing on the great halo over our game right now,” said Chris Granger, executive vice president of team marketing and business operations for the NBA. “Revenue generation hasn’t been the problem; it is the cost of generating revenue that has been the issue.”

    For example, Granger said, many teams have added ticket sales and service staff while investing in more sophisticated marketing and digital efforts in an effort to drive revenue.

    The Chicago Bulls led the NBA in attendance this season, drawing an average of 21,792 fans per game, while the Indiana Pacers ranked last, averaging 13,538.

    The largest percentage gain in attendance came in Miami, where the Heat, led by their offseason free agent acquisitions of James and Chris Bosh, saw their attendance jump 11.6 percent to a capacity 19,779 fans per game at AmericanAirlines Arena. The Detroit Pistons posted the biggest drop in attendance, with an 11.2 percent decline to an average of 16,660 fans per game.

    Driving the increase in gate revenue are double-digits hikes in group sales and individual-game ticket sales.

    Teams played to 90.4 percent capacity, the seventh consecutive season the league played to at least a 90 percent capacity mark.

    “We had a good year on all fronts with very strong renewals, record full-season-ticket sales, and record groups and individual tickets sales,” Granger said.

    NBA ratings this season on TNT rose 45 percent to a 1.6 U.S. rating (2,453,000 viewers) over 52 games compared with a 1.1 U.S. rating (1,728,000 viewers) over 53 games last season. By averaging more than 2.4 million viewers per game, Turner recorded its largest viewership for TNT since it began broadcasting the NBA in 1984.

    “Even with our high expectations, this is a record-setting year,” said Christina Miller, senior vice president of strategy, marketing and programming for Turner Sports. “From the biggest free agency period in a very long time to a huge tip-off to now, there have been great story lines.”

    Those story lines played well on the Web, as traffic on NBA.com grew to a record 5.9 million page views, up 35 percent, according to Turner, which runs NBA.com.

    NBA games on ABC generated an average 3.0 U.S. rating (5,110,000 viewers) over 15 games, up 30 percent over a 2.3 rating (3,694,000 viewers) over 15 broadcasts last year.

    The NBA on ESPN generated a 1.3 U.S. rating (2,025,000 viewers) over 71 telecasts, up 30 percent compared with a 1.1 U.S. rating (1,571,000 viewers) over 73 games last season.

    This was the highest-rated and most-viewed season on both networks since ESPN acquired the NBA rights in the 2002-03 season.

    “There have been so many plots and subplots that it is great television,” said Doug White, senior director of programming and acquisitions for ESPN.

    On the corporate sales front, the NBA signed new leaguewide deals with American Express and BBVA Group this season. Up for renewal this summer are Gatorade, T-Mobile and Anheuser-Busch.

  • Billion dollar baby

    The scene two weeks ago at the opening match of the Indian Premier League’s fourth season was an international grab bag of sports fandom.

    The four-year-old Indian Premier League has been valued at $4.13 billion.
    Some fans waved yellow flags and chanted with the same enthusiasm as a Liverpool FC supporters club; others banged ThunderStix with the type of energy Anaheim Angels fans showed during the 2002 World Series; and a handful held up handwritten posters reminiscent of the ones that appear behind Kirk Herbstreit during “College GameDay.”

    It should come as no surprise that fan elements from around the world found their way into a cricket stadium in eastern India. The IPL, after all, is perhaps the youngest and most successful sports league in the world, and a major reason the IPL has achieved that status is because it modeled itself on the professional leagues that preceded it.

    The IPL borrowed the idea of cheerleaders and musical entertainment from the NBA, the stability of a salary cap from leagues like the NFL, and the revenue benefits of jersey sponsorships from the English Premier League. The resulting blend has created an immensely successful league in a short time.

    In just four years, the IPL has sold a franchise for as much as $370 million — to Sahara Group Chairman Subrata Roy in June — completed a $1.69 billion, 10-year television rights deal with Sony, and seen the consultancy Brand Finance value the league at $4.13 billion.

    “It’s the first sports product to capture the country’s attention and the consumer’s attention,” said Jamie Stewart, founder of the Indian-based sports marketing agency Commune. “It’s been unbelievably successful and will continue to be so.”

    The league’s immediate success is surprising in light of the challenges the IPL has faced in its first four years. After its first season, the league had to relocate to South Africa for a year because an Indian election required most of the country’s security forces, making them unavailable for the season. Then the third season was marred by a scandal that resulted in the ouster of the league’s founder and commissioner, Lalit Modi, who has been accused of betting on IPL matches and holding a silent stake in three franchises.

    The league has captured the country’s attention with the play on the field and the other entertainment elements that accompany each event.
    Somehow, the league survived both experiences without major damage. Indian sports experts attribute that to the strength of the league’s structure, the marketing vision of its founders, and the embrace of a nation enjoying heady economic growth and eager for a sports and entertainment outlet of its own.

    “At the end of last season, there was some controversy, but the country has put this behind it,” said Sangeev Kapur, chief marketing officer of Citi India, an IPL sponsor. “This is a juggernaut that is going to keep becoming bigger in size.”

    Commercializing cricket

    The IPL was born from two men’s desire to bring professional sports to India.

    Modi, the son of a wealthy Indian family, attended college in the U.S. and was a longtime admirer of the NBA’s successful blend of sport and entertainment. Andrew Wildblood, an Englishman who ran IMG’s business in India, was intent on replacing state-run cricket teams with privately owned franchises.

    The two met at a London hotel during Wimbledon in 2007 and spent the next nine months crafting the league’s structure and business model. They opted for a fast style of cricket called Twenty20 that could be played in about three hours, making it perfect for television. They proposed an eight-franchise league that would see each team play seven home matches during a 44-day season, allowing them to squeeze in a short season without interfering with the international cricket calendar. The top four teams would advance into a playoff to determine a champion.

    To control player costs, teams would buy their players through a capped auction. No team could spend more than $5 million on their first-year roster.

    Modi and Wildblood developed a prospectus for the league that emphasized strong central revenue. Television revenue would be the No. 1 revenue stream for each of the teams, which would split 80 percent of those monies. They would also share money from league sponsorships, including a presenting sponsorship for the league. The rest of revenue — local sponsorships, hospitality, ticket sales, franchise shirt sponsorship — would be kept by each team.

    Teams would play at existing stadiums, which they would lease from municipalities, and ticket sales would not be expected to be a major revenue stream in a nation where the average Indian makes $675 a year. (Ticket prices this season go for as little as $6 a game.)

    Before they auctioned off franchises, they sold the television rights. Only three bidders turned up at the table. One was excluded from bidding because of a technicality; another quoted a figure below the floor price. The last bidder, Sony, which owns a television network in India, offered $908 million for a 10-year deal. It was a monumental deal for a league that still didn’t exist, and it allowed Modi and Wildblood to bring their vision for an IPL to fruition.

    “That gave us a sum of money that gave the potential franchise owners confidence this was for real,” Wildblood said.

    Only 13 bidders showed up for the franchise auction that followed. Four or five of them were close friends or relatives of Modi, said Alam Srinivas, who authored the book “IPL Cricket and Commerce: An Inside Story.”

    “If they had not been there, there would have been less than eight bidders for the franchises,” Srinivas said. “The IPL could have been a flop before it began. The fact that it didn’t was part luck and part the personal powers of Lalit Modi.”

    Bollywood actor Shah Rukh Khan (left), part-owner of an IPL team, performs at this month’s IPL opening ceremony.
    Franchise buyers, who forked over an average of $90 million for a team, featured some of India’s top businessmen and celebrities. There was Reliance Industries Chairman Mukesh Ambani, who paid $111 million for the Mumbai team, and Bollywood actor Shah Rukh Khan, who paid $75 million for the Kolkata franchise.

    The owners shared in the league’s $90 million annual television rights fee and a half dozen sponsorships that ranged in value from $5 million to $12 million a year. Hero Honda, Citi, Pepsi and Vodafone were among the first to sign up. DLF, a real estate company, signed on as the league’s presenting sponsor.

    Each of the IPL teams earned $12.5 million from central revenue in the first season, and that number rose to $18 million each in season three. Srinivas estimated total league and team revenue eclipsed more than $500 million in 2010.

    “Most of us believed this would not click because there were too many ifs and buts,” Srinivas said. “Once it happened and it took off, the mix of cricket, entertainment and viewership in India took IPL to another level.”

    Facing the future

    There are a number of reasons why the IPL became such an overnight success. Much of it is due to the league’s stable structure and its ability to fill an entertainment void in a country with an emerging middle class.

    Modi managed to marry Indians’ fanaticism for cricket with their fanaticism for Bollywood in a way no one had ever done in India before. In addition to the actor Khan owning a share of the Kolkata franchise, actors Juhi Chawla and Shilpa Shetty co-own the Rajasthan Royals, and Preity Zinta is a co-owner of the Kings XI Punjab.

    Their star power was coupled with well-publicized late-night fashion shows and parties after games that provided plenty of copy and photos for the Indian press. There were also fireworks, cheerleaders and Super Bowl-sized concerts.

    Teams averaged 58,000 spectators a match in 2008, and a poll by the Indian Times after that initial season showed more people attended or watched games on TV to see Khan than to see the cricket.

    Citi, Hero Honda, Pepsi and Vodafone were among the first to buy IPL sponsorships, which range in value from $5 million to $12 million a year.
    “It’s more than cricket, it’s celebrity glamour, as well,” said Charlotte Hollow, who manages Wasserman Media Group’s office in Mumbai. “As much as people love cricket, they love stars, and the combination of the two is what’s made the league a winner.”

    The emphasis on entertainment helped the league attract female viewers to a sport whose fan base historically was dominated by men. Their interest helped boost television viewership.

    The IPL became the first prime-time sports programming in India, and it was immediately embraced. In 2010, an estimated 67 million Indians watched IPL matches on average. Viewers tune in to the games on a nightly basis over the season in much the same way Americans watch the Olympics over its 17-day run.

    “The eyeballs are amazingly high,” Srinivas said. “Every day you have a captive audience. People are glued to the television set.”

    As consumption of the IPL rose, sponsorship interest followed. The Mumbai Indians recently signed a $5 million-a-year jersey sponsorship with Hero Honda. By comparison, the jersey sponsorship with Herbalife sold by Major League Soccer’s Los Angeles Galaxy was valued at $4.5 million after signing David Beckham.

    Mark Ingall, Citi managing director of global strategic media, said that the company has been pleased with the return on its investment as the league’s official bank. The company gets in-venue signage at every game and is the presenting sponsor on TV and at matches of “Citibank Moments of Success,” which recognize significant plays during matches.

    “Being associated with the IPL gives us a chance to look a bit bigger than we probably are,” Ingall said. “That’s perceptual scale.”

    Commune’s Stewart said the IPL’s ability to offer marketers scale was what made it so appealing to sponsors.

    “It’s a nation with something like 30 languages,” Stewart said. “Cricket is a language itself that cuts across language, religion, caste and this large land mass. It’s the one thing that brings it all together.”

    Some in the sports industry wonder if the IPL will miss Lalit Modi’s marketing instinct.
    Despite its early success, the infant league challenges ahead. The first will be how it copes without its founder and commissioner, Modi. The Board of Control for Cricket in India, which governs the sport, named its vice president, Chirayu Amin, interim commissioner last year.

    Srinivas expects that without Modi, who orchestrated much of the overlap between Bollywood and the IPL, the league’s entertainment quotient will decrease. Others anticipate the league will miss Modi’s marketing instinct. But few think the IPL will struggle without him, and that’s primarily because it has established itself as a player in the Indian marketplace so quickly.

    “The IPL is not a flash in the pan,” said Sam Rush, Wasserman Media Group’s international chief operating officer. “It combines the key environments you must have for longevity. You have a huge audience, you have a sport with great appeal, you have the interest of top brands, and you have built a top brand in the IPL.”

    Wildblood, who is still overseeing IMG’s work organizing and running the league, agreed.

    “If the question is can the league survive and flourish irrespective of the controversy, then sure it can,” Wildblood said. “It is something that’s bigger than any individual. This is now the biggest rock ’n’ roll show in India by a mile. It’s huge. It’s absolutely huge.”

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