August 15 - 21, 2011 Vol. 14 — No. 16

Top Stories

  • Exceptions for big-ticket projects shave NFL players' annual share

    The NFL can shave hundreds of millions of dollars from the annual revenue it shares with players under terms of the new collective-bargaining agreement, according to an analysis of the document. The players agreed to the reductions because the money is tied to high-cost but big-reward projects, such as stadium construction and other league or team businesses.

    The new CBA, finalized on Aug. 4, also makes it more difficult for the NFL Players Association to challenge the league’s business judgment, something the union did successfully earlier this year when a judge ruled the NFL violated the old labor deal by requiring broadcasters to pay their fees even in a lockout.

    BUD FORCE
    The Dallas Cowboys’ merchandise company is one item in the agreement that thins the money pool from which players get their cut.
    The new labor pact does not have $1 billion taken off the top of revenue for expenses — like the expired one did. It also, however, is not as clean a division of revenue as has been widely believed. The old deal took the $1 billion off the top and then gave the players the remaining 60 percent of revenue. This deal has been billed as giving the players an average of 47 percent of all revenue over the next decade, with no expense adjustments.

    But starting with the average of 47 percent of revenue, the league gets a credit of up to 1.5 percent for stadium expenses, which reduces the overall percentage take of the players. The pool of money the players get their cut from is also thinned for a range of items, including NFL Ventures business, the Dallas Cowboys’ merchandise company, the New York Jets’ and Giants’ personal seat license sales, and potentially a new stadium in Los Angeles (see chart).

    “Each one is expected to have a return for the players many times over,” said Marc Ganis, a sports consultant with close ties to the NFL.

    League officials declined to comment. The NFLPA did not respond for comment.

    While it’s unclear exactly how much each of these measures will reduce the actual percentage share the players will get, league sources insist this is not a case of a fast one being pulled on the NFLPA because the idea is for these deductions and credits to fuel revenue growth.
    INSIDE THE CBA:
    CREDITS AND DEDUCTIONS


    It’s been widely noted that as part of the new CBA, NFL players will get an average of 47 percent of the NFL’s more than $9.5 billion in rapidly growing annual revenue. But there are a host of credits and deductions — designed to increase revenue for both sides — that will serve to lower that percentage. The following are many of those points that are included in the new CBA but were not in the old deal.

    DESCRIPTION / EXPLANATION

       Stadium credit / The league can take 1.5 percent in stadium credits annually for expenses to build new stadiums, lowering the total percentage share by this much.
       Further stadium credits / The league can deduct naming-rights and premium-seat revenue if that money contributes to building a stadium. If this revenue pushes the overall percentage decrease for a given year beyond 1.5 percent, the league will have to prove that the incremental credits will more than double the return to the players.
       Dallas Cowboys merchandising / The Cowboys are the only team in the league to distribute their own merchandise. Under the new CBA, the team’s wholesale merchandise revenue, projected to be $80 million this year, is excluded from the revenue pool shared with the players. However, royalties paid on Cowboys merchandise do continue to be shared with the players.
       N.Y. Jets/N.Y. Giants PSL sales / The NFLPA several years ago had already agreed to deductions from league revenue for several team PSLs that contributed to building stadiums. Because the Jets and Giants are still selling PSLs, this needed to be factored into the new agreement. According to the CBA, PSL sales from the two teams this year are expected to total $43 million.
       Increase in complimentary ticket exclusion / Under the old deal, the league could exclude a certain number of comp tickets for use by sponsors and others, with those tickets not counting toward general revenue. Either 1,700 tickets per preseason and regular-season game could be excluded, or it could be 1,250 tickets for regular-season games and 3,500 tickets for preseason games. Now, those thresholds rise to 2,215 for each regular-season game and 5,000 for preseason games.
       Surrounding stadium real estate / Revenue derived from real estate development opportunities in conjunction with or related to any stadium lease or land-purchase agreement is excluded from sharing. An example might be revenue from Patriot Place, the commercial real estate development adjacent to Gillette Stadium, which has not been shared with the players, though questions were raised from the players side periodically regarding whether it should be.
       NFL Ventures / The league can take up to $60 million of deductions in 2012, with NFLPA approval, for new business startup costs. The league also can go to the NFLPA with three new businesses annually and receive deductions for revenue from those three businesses. The idea is that the NFLPA only signs on if convinced the business will deliver substantial revenue to the players.
       TV revenue for stadiums / This provision allows the NFL, with NFLPA approval, to divert national TV money for stadium projects. While this could be used for any new stadium, its most notable use could be in helping to bring the NFL back to Los Angeles.

    — Compiled from the NFL collective-bargaining agreement and SportsBusiness Journal sources

    “The stadium credits are a 1.5 [percent] … deduction from the … [47 percent] player share,” one league source said. “The other items are indeed off the top, excluded from AR (all revenue), making the pot from which the player share is computed smaller.”

    Part of the league’s concern with the old deal was it did not create incentives for the NFL to invest. If, for example, a new venture in its first year generated $10 million of revenue, that revenue had to be shared with the players irrespective of the costs. Now, the league can identify three NFL Ventures projects annually as being eligible for deductions. NFL Ventures pertains to NFL Network and licensing and merchandise business.

    In 2012, according to the CBA, up to $60 million of deductions for the three selected projects can be taken from annual revenue shared with the players. A league source said the way this will work is the NFLPA would sign off on projects only if convinced the projects can be profitable for both sides.

    No specific amounts are provided for after 2012.

    Similarly, the league can propose further stadium credits beyond the 1.5 percent already factored in, this source said. However, the league will have to prove to the NFLPA that these extra credits will bring well north of a 100 percent return for the players.

    The CBA also has a provision that the league can exclude investments in a new Los Angeles stadium from the stadium credit limit, though the NFLPA has to sign off on this extra allocation, too. A separate provision in the CBA allows the league, with union approval, to divert national TV revenue for stadium projects — a move that, a source said, would aid a new L.A. stadium.

    Meanwhile, the league won language in the CBA that would likely prevent a repeat of the lockout insurance case that played out this year. A federal judge ruled March 1 that the league had violated the CBA by requiring broadcasters to pay their fees even in a lockout, rejecting arguments that the NFL had used its best business judgment.

    “It made it a risk for every business decision a club might make,” a source said. The case was dropped as part of the new CBA agreement.

    In his decision, the judge rejected the NFL’s argument that it had met the legal test of using “sound business judgment” in crafting the TV contracts with the lockout language. The new CBA inserts the replacement term “reasonable business judgment,” appearing to lower the threshold.

    Now the CBA reads, “The parties … shall consider and give substantial weight to the reasonable business judgment of the NFL or the NFL Team but no deference will be applied where the NFL is alleged to have deferred or forgone revenues of $1 billion or more for the purpose of securing leverage in collective bargaining, in which case any finding of non-compliance shall require proof by a clear preponderance of the evidence.”

    In the media fees case, the NFLPA alleged the league gave up about $700 million in TV money to win the guarantee of payments during a lockout. Under the new provision, that would not have been enough to send it to a system arbitrator.

    The new CBA also eliminates the so-called “sham” language. The old contract said that if the union decertified after the expiration of the deal, the league could not declare it a sham, and then the players would have to wait six months to file an antitrust lawsuit. In the new deal, each side reserves its own legal rights.

  • Pennsylvania powerhouse keeps the top spot

    Editor's note: This story is revised from the print edition.

    It would be easy to label Hershey-Harrisburg’s repeat No. 1 ranking in our biennial study of the nation’s top minor league markets as a gimme.

    The Pennsylvania market has a passionate fan base, tenured clubs and a stable economy — everything our study values highly. And now, as the first market to hold the title of Top Minor League Market twice, the assumption could be made that as long as the AHL Bears and Class AA Senators keep playing, fans will keep coming, and more No. 1 rankings will follow.

    NEWSCOM
    The Bears’ winning percentage dipped, but their attendance numbers did not.
    Not so, in this market, warns Senators President Kevin Kulp.

    “This is the most passionate fan base I have ever seen, so we feel that we have a responsibility that comes with that,” said Kulp, whose 16-year minor league baseball career began as an intern with the Charleston (S.C.) RiverDogs and who has helped launch minor league baseball clubs in Delmarva, Md., and Lexington, Ky. “These fans do hold you accountable for making sure you do the right things, and they will definitely let you know if they’re not happy.”

    That sense of accountability may come from the fact that before Kulp and his group came along, it was the fans themselves who owned the club.

    In 1995, the city of Harrisburg purchased the Senators for $6.7 million from an ownership group that was planning on moving the franchise to a new, taxpayer-financed ballpark in Springfield, Mass. The city sold the club in 2007 to Chicago-based International Facilities Group. It was not an easy transition. Many fans had become used to referring to the club as “our Senators.” But the new ownership soon embarked on a three-year stadium upgrade priced at more than $40 million. That effort was mostly finished in time for this season and fueled a change in the team’s marketing strategy.

    “Over the last couple years we’ve changed the way we’ve marketed ourselves and made an effort to be more family friendly,” Kulp said. “The new ballpark is more receptive to that type of marketing because it has more destination areas for families to visit during the game.” Kulp points to an increase in children’s entertainment spaces and in concessions areas, as well as new sight lines from a concourse that wraps around three quarters of the playing field.

    The Senators set an attendance record last season, and Kulp said revenue from corporate partnerships has increased about 25 percent in the last two to three years largely because the improved ballpark includes a scoreboard and two LED ribbon boards that are incorporated into every sales call.

    WILL BENTZEL / HARRISBURG SENATORS
    Stephen Strasburg’s stint in Harrisburg last season was a boost for the Senators.
    Also helping the Senators, a Washington Nationals affiliate: having Stephen Strasburg in the club’s lineup for several games last year while he worked his way up to the parent club. This summer, fellow former MLB No. 1 draft pick Bryce Harper is wearing a Senators uniform.

    Meanwhile, a few miles east, the Hershey Bears also set an attendance record for their most-recent season, doing so for the eighth straight year. That happened despite the team having its lowest on-ice winning percentage since 2007-08.

    The Bears have played continuously on the site of their Giant Center home — albeit in different structures — since the franchise was created by chocolate magnate Milton Hershey in 1932, but the team continues to grow its fan base beyond the boundaries of what might be considered a traditional distance for a minor league hockey team.

    “The Bears are an iconic brand throughout the state and certainly draw fans from further away than most teams,” said AHL Commissioner Dave Andrews.

    NEWSCOM
    The Harrisburg Senators welcomed another phenom this season, Bryce Harper.
    Andrews said Hershey Entertainment and Resorts Co. (HERCO), the Hershey Co. subsidiary that oversees, among other business divisions, the Bears and the Giant Center, has made a strong effort to strengthen its ties to the Washington Capitals, the Bears’ NHL parent club. That helps extend the area of influence for both clubs, he said. It is not uncommon now to see fans wearing Bears apparel at Capitals games.

    “The supporting cast the team has on the business side from [Hershey Co.] is very strong, very progressive and very committed to the sports product,” Andrews said. “They invest in the hockey team and they invest in the relationship with the Washington Capitals.”

    This is the fourth time SportsBusiness Journal has ranked the nation’s minor league markets. Among the other observations made through this year’s survey:

    TACKLED FOR A LOSS: Hershey-Harrisburg seems to have everything going for it — it’s the only market of the nearly 300 we have measured over the survey’s history that has finished among the top 10 every time — but a look at the standings of previous high-rated markets shows there is no room for complacency at the top. Rochester, N.Y., and Fort Wayne, Ind., for example, are previous No. 1 markets, in 2005 and 2007, respectively. Each had finished in the top 10 in our previous reports, but each fell out this year after failing to keep an indoor football team in its market. The loss of an indoor football team has also negatively affected past top-10 markets Boise, Idaho, and Stockton, Calif.

    WATER ON THE FIRE: Dayton, Ohio, has received a great deal of publicity this year, as the Class A Dragons broke the nation’s record for most consecutive team sellouts, a streak that was up to 830 games earlier this month. Back in 2005, Dayton ranked No. 8 in our study. This year, it ranks No. 150. While the Dragons have been going strong, the CHL Gems have filled only one-third of their seats over the past 5 seasons, and the team plays in an arena that is showing every bit of its half-century age. Dayton also has seen challenges with indoor football.

    IF YOU BUILD IT … : Eleven years of frenzied ballpark construction has helped lead to franchise stability, especially in the world of Minor League Baseball. From 2001-05, 35 markets lost a baseball club, either to it folding or in the 18 cases involving Minor League Baseball clubs, relocating to another market. In the five-year period examined for this year’s ranking, baseball teams in 20 markets were found to have disappeared, only six of which were due to a Minor League Baseball club relocation.

    FORWARD AND BACK
    : South Texas has seen plenty of activity among its minor league teams in recent years. Hidalgo, for example, is the only market in the survey that is home to five teams. Beaumont opened a new arena in 2003 but has since lost both a hockey team and a football team. Corpus Christi also built a new arena and stadium in the last decade, but it has lost three teams in the last five years. And Laredo has lost a baseball team and indoor football club, but it broke ground this summer on a new $18 million ballpark for the planned American Association expansion Laredo Lemurs.

  • U.S. sports executives who run Arsenal see slow gains, intense scrutiny

    When veteran sports executives Ivan Gazidis and Tom Fox left for the U.K. two years ago to run the business side of Arsenal, one of the most prominent and profitable franchises in the world, the presumption by many in the U.S. was that their American-style management would immediately boost the business to an even higher level.

    The results so far are mixed.

    Gazidis, the former deputy commissioner of MLS, has won praise as Arsenal’s CEO for helping the club navigate the Great Recession and emerge debt free. But he’s also collected criticism as the team raised ticket prices and struggled to sign new players.

    Fox, the former head of sports marketing at Gatorade, earned recognition as Arsenal’s commercial director for remodeling the club’s suites and building out its commercial department. But he’s also been questioned as
    STUART MACFARLANE / ARSENAL FOOTBALL CLUB (2)
    Ivan Gazidis (top) and Tom Fox have spent the last two years taking steps to position Arsenal to increase commercial income.
    the club failed to sign new sponsors and generate new revenue.

    “We knew it would be a great challenge and a real learning experience,” Fox said. “For eight years, the club was focused on transforming itself through concrete and pouring a new stadium. We’re focused on transforming it through people, and none of us thought that would be easy or fast. The changing of a culture takes time. ”

    U.K. sports executives and Arsenal supporters remain undecided about the duo’s performance.

    “The perception is that they’re doing pretty well,” said Rick Parry, the former CEO of Liverpool. “The big issue and the big challenge for Arsenal is to start winning something. That’s what fills your stadium and sells your replica shirt. It’s that perennial challenge of being run wisely and sensibly, which they clearly are, and spending to have a competitive team.”

    Tim Payton, a spokesman for the club’s fan organization, the Arsenal Supporters Trust, said, “There’s definite concern among Arsenal fans about performance of the club both on the field and off the field.”

    Gazidis and Fox, who opened their third season with the club on Saturday, are acutely aware of that. They face perhaps more pressure than any other club to generate enough revenue to support their team.

    Arsenal is the only team in the top seven of Deloitte’s Football Money League, which ranks soccer clubs based on total revenue, to be operating a self-sustaining model that pays for players exclusively from the revenue the team generates annually. It does so even as competitors like Manchester United and Real Madrid fund player acquisitions through debt, and rivals like Chelsea and Manchester City fund acquisitions out of their wealthy owners’ pockets.

    Click here for a roundup of key issues facing each EPL franchise

    “The ability to stand on our own two feet and not depend on anyone for our success gives us the ability to plan for the future with confidence,” Gazidis said. “It can be challenging because we’re in a market not constrained by salary caps, but the reason we believe in it is not just because creating something rather than buying it drives pride, but also because it gives you the capability to say, ‘Arsenal will be competing at the top of world football now, five years from now, 10 years from now.’”

    Gazidis takes pride in leading one of the few clubs that can say that. The key going forward will be making sure he can continue to say that.

    GETTY IMAGES
    Arsenal’s jersey sponsorship is reportedly worth less than half of Manchester United’s deal with insurer Aon.
    Right now, the club depends on Emirates Stadium, which opened in 2006, for more than a third of its annual revenue, according to Deloitte. The $152.5 million it generates annually from the new venue is the third highest matchday revenue total worldwide. But the club lags far behind its peers on the sponsorship sales front.

    Manchester United and FC Barcelona brought in $133 million and $166 million, respectively, in sponsorship revenue in 2011, while Arsenal brought in just $71 million. Arsenal has just eight sponsors, and its jersey sponsorship reportedly is worth less than half of Manchester United’s deal with the insurer Aon.

    The state of the club’s commercial operations is both Gazidis’ and Fox’s greatest challenge and their greatest opportunity. The duo knows their commercial operations are underdeveloped compared to their peers, and they’ve spent the last two years taking the steps to position Arsenal to sustain its matchday revenue and increase commercial income. They have built a sponsorship sales and servicing division, revamped premium seating, enhanced membership packages and taken the club on an international tour for the first time in 12 years. They expect all of those efforts to begin paying off this season with increased revenue.

    “We’ve created a five-year business plan that we’re ahead of target to achieve,” Fox said. “The real proof will be in the next two or three years as the plan we put in place begins to gel.”



    Ivan Gazidis had been approached before by Premier League clubs interested in hiring him as CEO, but none of the opportunities interested him until Arsenal came calling in 2008. The club, one of the league’s elite, was steeped in tradition and history. It had won 13 first division titles, 10 English Football Association Cups and held the record for the longest unbeaten streak in the EPL.

    “Opportunities like that come along less than once in a lifetime,” Gazidis said.

    He joined the club at an opportune time. Arsenal was three years into a new stadium, it had a manager in Arsène Wenger with a track record of success, and it had a brand that was recognized worldwide. Those pieces gave him a foundation to build on, and he thought they would give him a cushion as he adjusted to his first job as a top team executive.

    But when Gazidis arrived in London in January 2009, he discovered Arsenal wasn’t in quite as good a shape as it appeared. The team was facing serious financial pressures as a result of the recession.

    Arsenal had taken on $500 million in debt to finance its move from Highbury Park to nearby Emirates, and it had planned to pay off those loans by converting the old stadium into an apartment complex called Highbury Square. When the financial and housing markets tanked, Arsenal simultaneously faced pressure from lenders to repay loans and struggled to sell the apartments to generate the money to cover its debts.

    Gazidis worked with the banks to reschedule the loans, which bought the club a year to get its fiscal house in order. It went on to sell 362 private apartments at Highbury Square and generate $300 million. The money allowed Arsenal to repay half of its debt by the end of 2010. It finished repaying the loans this year, and profits from the remaining nine apartments now go straight to the club’s bottom line.

    “That wasn’t a strategic issue or an issue of setting a new direction for the club, but it was one of the most pressing,” Gazidis said.

    Paying down the debt freed Gazidis to develop a strategy for Arsenal’s growth. He believed that the next phase would be driven by people, and he wanted to overhaul the staff to position it for the future.

    The club that he took over had about 200 employees, but it was so focused on developing its new stadium that it lacked many of the fundamental pieces of an American front office. It didn’t have a general counsel, a director of communications, a human resources department or a head of IT, and Gazidis set about filling all of those positions.

    One of his most important hires was Fox, who joined the club in August 2009 as commercial director. Gazidis had known Fox by reputation in the U.S. but never worked with him. He wound up selecting Fox from a pool of dozens of candidates because Fox shared his belief that the best way to develop Arsenal’s commercial potential was to raise the profile of the brand and then drive revenue through strategic sponsorships with companies that share the club’s values.

    “We think that’s where the value of the brand lies,” Gazidis said. “Not in real estate, not in selling impressions, but in real partnerships.”



    Fox was given nearly 10 months to make sense of the English Premier League and evaluate Arsenal’s commercial operation. The learning curve was steep.

    Like Gazidis, he had no team experience. The bulk of his career in sports was built on the brand side with marketing stints at Nike, Pepsi and Gatorade. He not only needed to learn the team business, he needed to understand the team business in a different country.

    He quickly was overwhelmed by the differences between the EPL and U.S. sports leagues. For example, the EPL plays 380 games a year, with 138 broadcast live and 142 games not shown at all. He could not wrap his mind around the fact that Arsenal games on Saturdays at 3 p.m. weren’t televised. Similarly, he saw that the team had a season-ticket waiting list of 40,000 fans and thought the club was leaving money on the table by not maximizing demand.

    “You look at those two things as a U.S. sports executive and you think two things: one, you’re not charging enough for tickets, and two, you’re leaving money on the table by not showing games on TV,” Fox said. “I spent a lot of time trying to understand that.”

    It took Fox time to appreciate that Arsenal had one of the highest season-ticket prices in the EPL, practically double what its London rival Chelsea charged, and to understand that the broadcast restraints were designed because, in a small country like the U.K., it was nearly impossible to develop the type of local territory rights that allowed the Boston Red Sox to launch their own TV network.

    Once he developed a sense of the market, Fox began to develop a business plan. He recognized that the commercial department’s most immediate need was new personnel. The club had just one sponsorship-sales executive and one sponsorship-servicing executive. Fox added five people in each department, including a new head of partnership, Vinai Venkatesham, who came from the 2012 London Olympic Organizing Committee.

    The club’s partners immediately began to notice a difference.

    “With the success of Arsenal and the excellent Emirates Stadium which they built, it was always going to be difficult for new joiners, like Ivan and Tom, to make a big difference, but for us, as soon as Ivan was appointed, we noticed a modern marketing mentality that would lead the club to the next level, then later with Tom I can say we enjoyed one of our best relationship we have with any of our football clubs, a model all football organizations and clubs must adapt if they want to move on towards better future,” said Boutros Boutros, Emirates’ divisional senior vice president corporate communications.

    The club also began overhauling its premium seating area. Fox recognized that Arsenal’s club section had a high amount of season-ticket churn. It was clear to him that the relatively barren look and feel of the clubs had become stale and offered fans little more than a warm place to spend time during halftime of a winter game. He looked to remodel the club level so it would appeal to a wider spectrum of fans.

    For the most affluent club member, Arsenal created two high-end restaurants that offer five-course meals before every match at a price of $7,500 a season.

    For the club member interested in a bite and a beer before the match, Arsenal converted a barren club room into a traditional sports bar, featuring portraits of past players commissioned from graphic artist Tavis Coburn and rows row of flat-screen TVs. Per caps are up 16 percent in the area since the remodel.

    “Arsenal, now with Tom there, are probably the best hosts in London,” said Fred Popp, the former CEO of SME and the founder of Teamup, a European sports marketing agency. “The amenities that are available are so much more consumer appropriate for the fan segments they serve.”

    Boutros agreed, adding, “We like what they have done in the new commercial hospitality areas, and the product offering at Emirates Stadium is second to none.”

    The other incremental change Fox made after coming on board was to restructure Arsenal’s multimedia operations. Before his arrival, the media operations were divided into two businesses: a print publication business and a broadband venture. Under his direction, Arsenal created a single content group and signed an agreement with MP & Silva. The international sports media company pays Arsenal an upfront, multimedia rights fee, and they co-produce and distribute digital content. The deal has helped Arsenal expand its content, which Fox and Gazidis believe will drive the type of Web traffic that will keep fans connected to the club and allow them to increase revenue.

    “What you’re seeing us do is … using modern technologies to find ways to engage with our global audience personally,” Gazidis said. “These are ways we can create communities, Arsenal communities, and we’re finding those communities can connect fans with the clubs very personally.”

    This season, Arsenal eliminated the company’s broadband subscription offering, which had 30,000 subscribers paying approximately $70 a year, and added broadband service to the club’s membership service by increasing the price $8 on average to approximately $60. The hope is that the additional content will reduce churn among members, who buy in order to have the opportunity to buy individual match tickets, and expand the 190,000 membership base to include international fans.

    “Suddenly, membership’s become about more than getting access to the stadium,” Fox said. “Now, they have another reason to be a member.”



    For all of Gazidis’ and Fox’s recent efforts, Arsenal’s soccer business saw its revenue decrease from $364 million to $360 million between 2009 and 2010, and the pressure to improve revenue significantly has increased.

    Fan criticism has soared since last season, when Arsenal won only one league game in March and April. Fans are unhappy with the team’s delay in selling player Cesc Fabregas, who wants to join FC Barcelona, and its struggle to sign new players to fill holes in the defense and midfield. The club’s manager, Arsène Wenger, has come under fire, as well.

    Fans know Gazidis doesn’t control the on-the-field product, which is managed exclusively by Wenger, but he still is held accountable for the team’s performance because the more money the front office generates, the more the club will have to buy players.

    Gazidis has said sponsorship revenue is the most important growth area for Arsenal, but the club has been slow to increase its list of sponsors in the last two years. It signed its first new partner in two years when it closed a multimillion-dollar deal with home appliance manufacturer Indesit last spring.

    The Indesit deal gives Arsenal a total of eight partners. By comparison, Manchester United, which generates the most commercial revenue of any Premier League club, according to Deloitte, has 21 partners, including separate telecom partners in India, South Africa, Malaysia and other markets.

    Arsenal’s opportunity for sponsorship growth is limited by both external and internal restraints. Externally, the club is locked into its two biggest deals with Emirates, its jersey sponsor, and Nike, its uniform supplier, through 2014. Internally, Gazidis and Fox have advocated taking a slow approach in which they have a limited number of blue chip corporate partners.

    “We want to find the companies that fit with us, our values and approach, and there’s the other side of that, which is we believe we’ll do the best jobs for those companies if our values are aligned,” Fox said. “We’re not trying to sell inventory as much as we’re trying to identify what their businesses need to be successful and how we can help get them there.”

    The combination of the long-term agreements and the executives’ business strategy has put Arsenal in a difficult position and made the fan base restless.

    “Liverpool has moved past us (in commercial sales),” Payton said. “(Tottenham Hotspur) have new deals. It will get worse and worse for us until 2014.”

    It’s also led observers to advocate waiting a few more years to evaluate the performance of Gazidis and Fox.

    “I would judge them on what foundation is being created to be successful long term,” said Jeff Plush, the president of the Colorado Rapids and a member of Arsenal’s multimedia board. “There’s no question that’s happening.”

    As they work to grow Arsenal’s commercial revenue, Gazidis and Fox will benefit from the club’s new ownership stability. Stan Kroenke, who owns the St. Louis Rams, Denver Nuggets, Colorado Avalanche and Colorado Rapids, this year put an end to a protracted struggle for majority ownership by accumulating a 62 percent stake in the team.

    Kroenke supports the Arsenal executives’ vision for the club as Gazidis and Fox try to catch up with Liverpool, Tottenham and Manchester United by taking the Arsenal brand into new markets. They convinced Wenger this summer to take the club on its first international tour in 12 years.

    “That’s real progress that they managed to get the team on an Asian tour,” said Bruce Bundrant, Liverpool Football Club’s head of commercial partnerships. “It strengthens your relationship with fans in core markets around the world and helps grow fan base.”

    The tour helped the club collect data from 260,000 fans across Asia. Fox’s department is marketing to those people in hopes of convincing them to become club members. The department also is selling the passion of that Asian fan base to international companies.

    Fox said the trip changed several sponsorship discussions because it underscored the value of the Arsenal brand overseas. He credited the trip with helping them close a deal with two new partners. It last week announced a new deal with Carlsburg, its first global beer partner, and expects to announce another partnership this week. It also closed a renewal, Fox said.

    “It was a very successful overseas tour,” Payton said, but he added, there’s still “huge pressure” on Gazidis and Fox.

    After two years, the two imports from the U.S. are fully aware of the pressure, but it’s not something that they spend time worrying about.

    “We’ve put together a five-year business plan for a reason,” Fox said. “We knew we had to upgrade the infrastructure and change the culture. We think we’re headed in the right direction and at the right pace. We’re incredibly confident we’ll get there and reach our goals.”

  • ESPN plans recruiting sites tied to schools

    ESPN plans to launch up to a dozen college-specific websites by the end of the year that will focus on high-school recruiting.

    The first two sites will target BCS powerhouses the University of Southern California and the University of Texas. ESPN hopes to add four more sites by early fall, and plans to end the year with as many as 12.

    The sites mainly will focus on basketball and football recruiting news at the schools, niche content often outside the scope of mainstream sports outlets.

    The move appears to be a direct competitive challenge to Yahoo!-owned Rivals and 24/7 Sports, both market leaders

    in the area. Like those established sites, much of ESPN’s recruiting offerings will be behind a pay wall available to its premium Insider subscribers as the content targets highly avid fans and will be primarily monetized through a subscriber-based model.

    ESPN, though, plans to make some bigger stories available for free on its various sites, from its local pages to ESPN.com.

    ESPN executives played down competition with sites like Rivals and 24/7 Sports, saying its plans represent an extension of its local online strategy, which in the past two-plus years has seen the company launch market-specific local sites in Boston, Chicago, Dallas, Los Angeles and New York. The first site launches will occur in areas where ESPN already has launched local sites: USC (ESPN Los Angeles) and Texas (ESPN Dallas).

    ESPN’s local strategy also led to the “Heat Index,” when the media company embedded a team of reporters last season to cover the Miami Heat. Two “Heat Index” columnists, Michael Wallace and Brian Windhorst, were the two most-read columnists on ESPN.com’s NBA section for the year. ESPN executives believe those stats show that even the most local stories can become popular nationally.

    The college website launches also represent an extension of ESPN’s recruiting business, which started in 2006 with the acquisition of Scouts Inc.

    “The tipping point was the ‘Heat Index’ that we launched last year,” said Patrick Stiegman, ESPN.com’s vice president and editor-in-chief. “We’re in this for the long haul. We’re not going zero to 60. This will evolve over the course of the next two or three years.”

    Shannon Terry, founder and president of 24/7 Sports and a key executive leading Rivals.com to its $98 million sale to Yahoo! in 2007, said ESPN’s brand power will undoubtedly attract an audience. But he added the company will face a stiff challenge within the recruiting space.

    “They’ve been planning for this for at least a couple of years,” said Terry. “And leveraging off the local sites, which have been really successful for them, is a smart play. But I don’t know what they can offer that’s different from what’s already being done. … It can be more difficult for big companies to build highly specialized products like this and be as laser-focused.”

    In most cases, ESPN plans to hire local writers and editors to staff the new sites. It is planning to move an ESPN.com editor from its Bristol, Conn., headquarters to Texas and has made offers to up to three Texas-based reporters. ESPN would not identify the reporters, since the deals haven’t been finalized.

    But at USC, ESPN is partnering with the local site WeAreSC.com, which already has a staff in place. The WeAreSC.com website already describes itself as “an ESPN affiliate.”
    Stiegman said ESPN will hire editors and reporters to staff new sites, rather than partnering or acquiring existing sites.

    In deciding where to launch college sites, ESPN also will look into alumni population, interest level and available talent, Stiegman said.

    The sites will be independent of the schools; ESPN will not need to obtain rights to launch these sites. But Stiegman said it’s important for ESPN to maintain good relationships with the schools it covers.

    Stiegman said the sites will feature news, video and message boards. He doesn’t foresee any problems of the sort that have affected Longhorn Network, which has been criticized for plans to show high-school games.

    “The high school coverage and video coverage we will include will be entirely independent of what happens with Longhorn Network,” he said. “We will be an independent voice covering the team.”

  • This amateur has the golf world watching

    When Peter Uihlein tees off to defend his title as U.S. Amateur champion next week, there will be the usual speculation on future marketability and potential PGA Tour success that comes with most promising young players.

    GETTY IMAGES
    Peter Uihlein has compiled a long résumé of successes in amateur and collegiate golf.
    But Uihlein is no regular young golfer, and interest in him is far more than the norm. He’s also the son of one of the most powerful men in the sport: Wally Uihlein, chairman and CEO of Acushnet Co., which owns the Titleist, Footjoy and other leading golf brands.

    “One of the biggest questions amongst agents is the question of who will represent Peter Uihlein,” said veteran golf agent Rocky Hambric, “not only because Peter is one of the top two amateurs in the world, but because he and his family are the most informed consumers of management services in the history of the game.”

    Peter Uihlein, who will turn 22 at the end of this month, has won every major amateur award and title and has topped every national and international amateur ranking for the last few years. He intends to compete in the U.S. Amateur as well as represent the United States in the Walker Cup for the second time early next month before starting his senior year, planning to complete his degree at Oklahoma State University.

    Meanwhile, Wally Uihlein, in his role overseeing one of the world’s largest golf companies, has known — and negotiated with — all the major agents in golf for decades. Acushnet posted more than $1.2 billion in sales last year.

    IMG Vice Chairman Alastair Johnston, who oversees IMG’s golf division, said the golf world is watching and waiting to see what Peter Uihlein does.

    “I think he is the most anticipated in that he has a name-brand recognition in the golf industry and everybody wants to see how Wally’s kid plays,” Johnston said. “For anyone who came into the golf industry in the last 25 years, the first person they wanted to know was Wally Uihlein. But Peter has earned that reputation and has earned that respect.”

    Wally Uihlein reluctantly consented to be interviewed for this story, first by email and then by phone, because, in part, he is aware of the growing speculation about his son’s future plans and he wanted to point out that such talk is premature.

    In response to an emailed question of how many agents had expressed an interest in representing his son, Uihlein wrote back, “Peter is an NCAA student athlete.” He was even more emphatic in the subsequent phone interview. “We don’t even know if he is turning pro,” Uihlein said.

    GETTY IMAGES
    Wally Uihlein, Peter’s father, is chairman and CEO of golf giant Acushnet Co.
    As to rumors that Peter Uihlein already has a business plan for when he turns pro, including hiring a particular agent, Wally Uihlein said, “Many people have insinuated there is a plan. There isn’t a plan.”

    But the talk continues. Among the hottest rumors is that Peter Uihlein will hire a representative with a well-known name from long ago: Hughes Norton, the former IMG agent who was Tiger Woods’ first agent. Attempts to reach Norton, who has virtually disappeared from the golf industry in recent years, were unsuccessful.

    Wally Uihlein laughed when asked about that talk. “That rumor, for the most part, is prompted by me,” he said, adding that it is “a ruse.” He said he brings up Norton’s name — and points out that he counts Norton as one of his oldest friends — when someone in the industry brings up the subject of who Peter might sign with.

    “It’s as much a disarming comment,” Uihlein said, “intended to say, ‘Hey, this subject matter is out of bounds.’”

    Uihlein has been CEO of Acushnet since 2000 and has worked in golf since 1976. When asked if it is a forgone conclusion that Peter, who has played Titleist equipment his entire life, would sign with Titleist when and if he turns pro, Wally Uihlein wrote back, “I suspect Titleist will have an interest in an association with Peter, but that is for the company to decide, not me.”

    In the follow-up phone interview, Uihlein said he would recuse himself from any decision by the company on whether Titleist would sign Peter.

    That kind of separation wouldn’t be new. By all accounts, Wally Uihlein has not been the stereotypical, pushy parent of a gifted young athlete through Peter’s growth.

    “You would never hear from him,” said David Whelan, Peter’s coach at IMG Academies from the time Peter was 13 until he entered Oklahoma State. “The only time Wally and I would communicate is Wally saying, ‘Peter would like to see you.’ Wally, if anything, really created the environment for Peter to do whatever he wanted to do.”

    Oklahoma State officials declined to make Peter Uihlein available for an interview, in deference to NCAA amateurism rules because the story pertains to a potential pro career. OSU officials are increasingly protective of Uihlein’s time, with a growing number of interview requests being made. Peter has already been featured in numerous stories in industry trades, including Golf Magazine and Golf Digest, and he was dubbed “Golf’s Little Prince” in a Wall Street Journal article earlier this year.

    “We have just tried to stop Peter from getting run over,” said Oklahoma State golf coach Mike McGraw. “Ultimately, what is more important: that he talks to another reporter or that he plays well?”

    When asked how good Peter Uihlein is and how he compares to other young golfers, McGraw said he thinks maybe one or two amateur golfers have accomplished in the last 30 years what Peter Uihlein has done. “It’s pretty rare,” he said, “to be the No. 1 ranked junior player in the country twice and then to be ranked the No. 1 college player and then the No. 1 ranked amateur in the world and to be the U.S. Amateur champ.”

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