September 5 - 11, 2011 Vol. 14 — No. 19

Top Stories

  • Southern California rivalry

    With labor peace freshly assured in the NFL for the next decade, could the league finally return to Los Angeles, bereft of a team since 1994?

    Periodically rising to the front of the NFL’s to-do list, Los Angeles in recent years has resided on the league’s back burner, a distant concern to the labor talks. That’s left two potential stadium sites, each pushed by a billionaire, to duke it out over which would be the best home for a team in America’s second-largest market.

    In the absence of firm league guidance, however, and perhaps because the NFL believes competition results in the best deal, the tone and politics in Los Angeles have turned downright nasty.

    “These guys throw things on the wall and see if they stick,” said Tim Leiweke, president and CEO of AEG, which is proposing a stadium in downtown Los Angeles.

    “These guys” is developer Majestic Realty, which since 2008 has proposed a venue in City of Industry, a corporate haven a couple of dozen miles from the city center. Referring to John Semcken, Majestic’s vice president, Leiweke said, “this man has essentially gone out there and spun the truth and been wrong every time, and he knows nothing about our stadium.

    “I don’t believe a word he says,” Leiweke added.

    GETTY IMAGES
    AEG’s Tim Leiweke (top) has accused Majestic’s John Semcken (right) of lobbying state legislators against the Farmers Field project.
    AP IMAGES
    Leiweke accused Semcken of falsely taking credit for building Staples Center, which AEG owns and operates, and of never having developed a stadium or arena, an AEG specialty.

    In an interview before Leiweke’s remarks, Semcken declined to comment on AEG’s competing project, although in the past he has criticized it publicly. And a Majestic spokesman, speaking for Semcken, said, “Majestic Realty is one of the most successful real estate firms in the country, and with John did all the negotiations with the city for Staples Center.”

    Part of the acrimony stems from the Southern California rivalry between Majestic owner Ed Roski and AEG’s Phil Anschutz. The two developed Staples Center together before Roski declined to respond to capital calls and his share was diluted. And it also stems from, sources said, very different outlooks on the football question by the two men.

    Majestic, said one source close to the situation, believes it has the solution to finally return football to Los Angeles, and the source said that had AEG not suddenly pitched its own plan last year, the NFL would have already chosen City of Industry. Meanwhile AEG believes, this source said, that City of Industry has had since 2008 to convince the NFL and lure a team, but has failed.

    With few public funds available for new stadiums in California, the sites have bickered over which side would provide the biggest return, and which could truly get off the ground.

    In the earlier interview, Semcken contended that because Roski controls the 600 acres in City of Industry outright, and as part of the stadium would be built against a hill, reducing steel costs, the project is more efficient. City of Industry’s billed price tag is $800 million, while Farmers Field, the AEG proposal, tops $1.3 billion, though it has a roof and a $700 million naming-rights agreement announced in February.

    Leiweke points to the Farmers deal as evidence of his project’s viability and mocks Roski for not finding a title partner in City of Industry. Semcken’s spokesman responded that Majestic has not looked for naming rights, and believes it’s better to do so with a team in hand.

    How much money a stadium can deliver is crucial. A team owner would likely need to pay a relocation fee to the league, and the developers could be constrained in what they offer a new team if stadium financing costs exceed projections. They are betting the lucrative Southern California market would solve this math.

    “When no one in the market owns a team and there is clearly no substantial subsidy, you have an economic riddle which needs to be resolved before a team can come back to the market,” said Casey Wasserman, founder of Wasserman Media Group and a key Farmers Field supporter. “The riddle is twofold: How do you generate enough revenue to compel an NFL owner to relocate, while having enough economic activity left after a deal has been made with the team to finance a privately paid for stadium?”

    For Wasserman the answer is simple: downtown Los Angeles and Anschutz’s enormous wealth. Leiweke brushed off suggestions that the Farmers Field project does not have as good a return by saying essentially it’s Anschutz’s money and so it doesn’t really matter.

    However, that does leave a team banking on one man. And a football source said profit margins are not incidental.

    “Yes, margin matters a lot,” this source said. “Generically, the margin available to the club/league is crucial. That is what pays the players.”

    The Majestic spokesman, who asked that his name not be used, said, “In our building [the team’s take] will not be a fixed number, which makes it extremely attractive to potential owners. “It would place any team in the top five in the league [in revenue and profit], if not higher,” the spokesman predicted.

    Whether that’s true is impossible to say, but what is true is that no NFL team seeking greener pastures has bitten on Roski’s long-standing offer: a minimum guarantee of revenue, control of the stadium operating company, but in return for a quarter of the team. Roski expects to make his money developing the land near the stadium, and from his stake in the club.

    AEG is offering a more traditional model of a team as tenant guaranteed a certain amount of revenue, a model employed successfully at Staples Center.

    The trend in the NFL, however, is for teams to control their own stadiums, so whether tenancy flies in the sport is unclear. Farmers Field would be housed next to a convention center and near L.A. Live and the Staples Center, forming another major part of the downtown entertainment district.

    Meanwhile, emotions are raw over AEG’s recent state capital lobbying efforts seeking to win protection from environmental challenges to its project. In response, Semcken has personally met with legislators in Sacramento, the California capital.

    “We won’t go forward if City of Industry is trying to stop us,” Leiweke said of the political equation. “They will do anything they can, including spinning the facts and making false statements.”

    Roski in 2009 won from the state legislature such environmental cover for his project, and now AEG wishes for a similar arrangement. AEG officials believe Semcken is personally lobbying against them, and is upset he would do so when Majestic has the same deal.

    The Majestic spokesman responded that politicians in Sacramento invited Semcken, and pointed out that when Roski won his victory in 2009, he had settled numerous environmental objections to his project. Farmers Field, by contrast, is not far enough along, the spokesman said, to even warrant objections.

    Both sides are actively wooing teams that might want to relocate. With the regular season starting Thursday, however, there is little chance of movement on the issue because the NFL will not want word leaking that one of its teams is about to move.

    “Nobody is going to make any commitment during the season,” Semcken said.

    NFL Commissioner Roger Goodell told CBS Sports executives last month that the league would take its time carefully reviewing the two sites, said Sean McManus, CBS Sports chairman.

    And that could mean unless the league is willing to put its weight behind one site soon, for some time, football in Los Angeles may remain out of bounds.

    City of Industry
    Where: 600-acre site 20 miles outside of Los Angeles
    Size: 75,000-seat stadium
    Cost: $800 million
    Developer: Majestic Realty
    Financing: Traditional capital structure similar to how Staples Center was financed (Majestic expects need for only $350 million of debt).
    Public funding: City of Industry has agreed to use a ticket tax to pay for a new interchange.
    Environmental report: Completed, and site has won immunity from further environmental challenges.
    Team role: Majestic owner Ed Roski would buy between 20 and 30 percent of the club; the club would then own the stadium and be responsible for the debt. Majestic expects a $150 million grant from the NFL and about $300 million of club-seat fees to defray the cost, and cash from naming rights would cover a team's debt expense; team would then capture the remaining revenue.
    Naming rights: None signed yet.
    When can construction begin: Majestic says it is shovel ready, though AEG contends that Majestic has only schematics and not construction plans, which would take longer to complete.
    Completion target: 2014
    Pros: Stadium could be built by 2014; little risk of legal challenges impeding construction; more control of the stadium for the team.
    Cons: City of Industry is considered in the middle of nowhere by Angelenos, although it's only 20 miles from downtown Los Angeles; Majestic seeks a 20 to 30 percent interest in the relocated team, which appears to be a major stumbling block.

    Farmers Field
    Where: Downtown Los Angeles, next to convention center, L.A. Live and Staples Center
    Size: 72,000-seat roofed stadium, expandable to 76,250 seats for special events such as the Super Bowl or NCAA Final Four.
    Cost: $1.3 billion
    Developer: AEG
    Financing: Plan relies on AEG founder Phil Anschutz's wealth and big-ticket revenue streams, including a $700 million naming-rights deal.
    Public funding: None for the stadium, but some public bonding for AEG work on the convention center
    Environmental report: Scheduled to be finished by January
    Team role: The team would be a tenant in the stadium with a guaranteed revenue stream, similar to how Staples Center is run. Anschutz would want a stake in the team, but the deal would not be contingent on that happening.
    Naming rights: Farmers Insurance
    When can construction begin: Non-binding Memorandum of Understanding completed with the city of Los Angeles underscores political support for the project, but numerous hurdles remain.
    Completion target: 2015
    Pros: Glamorous downtown Los Angeles location next to other major entertainment venues; roof would allow for many different events; AEG is a major developer of sports projects.
    Cons: Some believe the cost will be far higher; the trend in the NFL is for teams to control their stadium, not be a tenant as envisioned by AEG; without legislative protection from environmental lawsuits, the project could be halted; potential traffic congestion downtown.

  • Networks not lobbying for an NFL return to L.A.

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

    Now that the NFL has a fresh labor deal in hand, the league is focused on investing in and growing the game. For many, that means finally returning the league to Los Angeles, which has not had an NFL team since 1994, when the Rams and Raiders played their last games there and left the market.

    But don’t count the league’s TV partners as anxiously pushing to be in the country’s second biggest market. TV networks aren’t fighting the NFL’s desire to put a team in Los Angeles, but they certainly aren’t clamoring for it, either. After two consecutive seasons of record high TV ratings, network executives say they are happy with their rights packages as they currently stand.

    “Our package is fine the way it is right now,” said Sean McManus, chairman of CBS Sports. “We’re not lobbying to add another market. If it happens, we’re more than happy to take advantage of the opportunity if it’s an AFC team. If it doesn’t happen, we’ll adjust.”

    Last year, CBS, ESPN, Fox, NBC and NFL Network set viewership records during the regular season.

    So why is the NFL making such a big push for the Los Angeles market?

    While owners talk about returning to such a major market, with a young generation of fans and serving as a gateway to the Pacific Rim, most media analysts believe the push for Los Angeles has as much to do with increasing media rights fees as anything else.

    The NFL’s network TV deals expire after the 2013 season, and having a team in the country’s second biggest TV market could boost the fees the league is expecting, analysts say.

    Currently, Fox pays $720 million a year, and CBS pays $620 million a year for their Sunday afternoon packages. Sources expect those fees to eclipse $1 billion a year in their next contract, which starts with the 2014 season and is expected to be negotiated at the end of this year.

    IDA MAE ASTUTE / ESPN
    Sources say ESPN is close to an extension for “Monday Night Football” worth $1.8 billion a year. The NFL is shopping a separate eight-game package that could be worth $700 million a year.
    Sources say ESPN is close to a “Monday Night Football” extension that’s worth $1.8 billion a year; and the NFL is shopping an early season eight-game package that could be worth as much as $700 million a year.

    The question is how much higher would those rights fees go if a market the size of Los Angeles had a team.

    “The concern networks have is that the NFL will use a move to Los Angeles as a way to leverage higher rights fees in the next negotiation,” said Neal Pilson, who ran CBS’s sports department in the 1990s.

    But will a return to Los Angeles mean more eyeballs? Even the most optimistic predictions show little TV ratings growth for the league nationally. Pilson predicted that an NFL team in Los Angeles would have a minimal effect on the league’s national ratings, adding perhaps a “few tenths of a ratings point,” he said.

    A competitive team in the market could lift national ratings marginally. But a subpar team could create problems — as a poor team that struggles to sell out games would see games blacked out in the market.

    “The team has to be good so they get sellouts,” said Bill Wanger, executive vice president of programming and
    research for Fox Sports. “What you don’t want is a team moving here and not selling out.”

    During the Rams’ and Raiders’ last season in Los Angeles, in 1994, the teams had trouble selling out and blackouts were a problem.

    “That’s the history of the L.A. market,” Pilson said.

    Wanger said the lack of a team in the country’s second biggest market has allowed other NFL teams to make inroads there. In the years since Los Angeles lost the NFL, Wanger said national clubs like the Dallas Cowboys and Pittsburgh Steelers have become popular, since their games were often part of nationally broadcast games that were available in Los Angeles. That would change if a team returns to Los Angeles.

    “What will happen is that you’ll get fewer games in the city, but you’ll get higher ratings,” Wanger said.

    In 1994, the last season Los Angeles had an NFL team, the market ranked 17th in market ratings, with a 13.4 rating for its Fox games. Last year, Los Angeles ranked 50th, with an average rating of 8.6 for its Fox games. Last season, for example, the Cowboys game against Brett Favre and the Minnesota Vikings was the highest rated game in the market, with a 14.3 rating. Wanger would expect a local team to occasionally pull ratings in the 20s.

    “For the league to prosper without a team in a market the size of Los Angeles is an indication of the strength of the NFL as a TV property,” said Ed Desser, president of Desser Sports Media. “I don’t see Los Angeles being transformed by the addition of an NFL team like a lot of other markets would.”

    Last month, NFL Commissioner Roger Goodell addressed CBS’s NFL producers and talent, telling them that the league needs to make sure that any team is successful from a fan standpoint, competitive standpoint and commercial standpoint.

    “We don’t have a vote. We don’t have a say,” McManus said. “We’ve expressed our interest that if there’s a team, we would like it to be an AFC team.”

    John Bogusz, executive vice president of sales and marketing for CBS Sports, said that a team in the Los Angeles market would marginally help networks’ ad sales pitch, even if it didn’t directly help sales, which are more than 80 percent sold so far this year.

    “It would just be a positive story that you have a home team in that market,” Bogusz said. “It would be nice.”

    For the many transplants in Los Angeles, the city is an NFL fan’s dream, with the maximum number of games broadcast into the market each season. Last season, Fox and CBS broadcast 52 games in Los Angeles.

    Chicago, for example, which sold out every game last season, had 50 Sunday afternoon games. Tampa, which had all eight of its home games blacked out last season, had only 42.

    “That difference in games is significant,” Wanger said. “You’ll get more games and more of those national appeal teams without a team. However, if you get a good team — and hopefully it’s an NFC team — the benefits are great. That’s the bottom line.”

  • NBA and Sprint connect for deal

    With the NBA now in the third month of a lockout that threatens the start of the season in November, league marketers have quietly signed Sprint Nextel to a new four-year sponsorship deal.

    Sources close to the deal, signed in early summer, said that the $45 million rights fee paid by Sprint was one of largest ever collected by the league and that total value of the agreement approached $250 million, including media commitments and other contractual requirements.

    Sources said that while the NBA was in talks with AT&T as late as during the NBA Finals in June, it was fervent interest by upstart cell brand MetroPCS and the subsequent leveraging of Metro against Sprint that allowed the NBA to sign Sprint to what one well-placed source said was 15 percent to 20 percent more than what incumbent NBA wireless sponsor T-Mobile had been paying.

    A look back at 1998-99 lockout provides prospective cancellation timeline for NBA.
    Sprint and NBA officials refused to comment.

    As far as activating its new rights, Sprint will have a tough act to follow. T-Mobile was one of the league’s most active sponsors over the past six seasons, including a series of ads with basketball hall of famer and current TNT NBA commentator Charles Barkley and Miami Heat guard Dwyane Wade. T-Mobile also was title sponsor of the Rookie Challenge game during All-Star Weekend.

    With the start of the 2011-12 season in jeopardy, activation plans are scant, but sources close to the deal said that Sprint’s newfound NBA rights have much more to do with content, similar to competitor Verizon’s NFL rights deal. Sprint reportedly will also begin selling Apple’s wildly popular iPhone in October, so the NBA season, scheduled to tip off Nov. 1, would seem a natural launch platform — if the season starts as scheduled.

    Assuming it purchased broad category rights, Sprint could also use the NBA to market Clear, its 4G wireless Internet service, which has attributes of speed, power and reliability that would match well with any sports platform.

    Sprint did not have any NBA team sponsorships at the end of 2010, so it will likely add those. Sprint’s Boost Mobile prepaid cell brand was a New York Knicks sponsor for the 2010-11 season, but that category is now open at MSG.

    The deal elicits questions about Sprint’s sponsorship strategy. The nation’s third-largest wireless carrier has been without a top-level sponsorship of a stick and ball sport since it lost NFL rights after the 2009 season. Its naming rights to NASCAR’s top race circuit run through the 2013 season, and CEO Dan Hesse has been quoted saying the company intends to continue the deal.

    Whether it can derive any more value from a sponsorship that put Nextel on the map is open to debate.

    Boost Mobile announced last month, with some fanfare, an eight-figure WNBA deal, in which the league sold advertising space on 10 of its 12 team jerseys, along with title sponsorship of the WNBA All-Star Game and presenting sponsorship for the league’s playoffs. Even though the size of that deal was impressive for any women’s sports property, clearly that deal was the tail wagging the dog.

    “The last thing [the NBA] wants to talk about during CBA negotiations are new revenues,” said a marketer close to the deal.

    Staff writer John Lombardo contributed to this report.

  • Phelps by a Head (& Shoulders)

    Procter & Gamble has signed Olympian Michael Phelps to a seven-figure endorsement deal for its billion-dollar Head & Shoulders shampoo brand.

    Phelps is signed through next year’s Summer Games in London and will be featured in a commercial, which was shot in Baltimore last month, according to sources.

    Officials at P&G and Octagon, which represents Phelps, declined to comment.

    The signing is the first major endorsement that a P&G brand has closed since the company signed a 10-year, multimillion-dollar deal in 2010 to become a worldwide Olympic sponsor. Both P&G and Head & Shoulders have added sports to their marketing after years of eschewing sponsorship spending in favor of large media buys. In recent years, the company also has added sponsorships with the NFL and MLB and paired them with its Gillette and Head & Shoulders brands.

    Phelps’ global recognition should help P&G as it tries to leverage the Olympics to achieve its goal of increasing its customer base from 4 billion to 5 billion consumers in the next five years. He joins a roster of athlete endorsers for Head & Shoulders that includes Pittsburgh Steelers safety Troy Polamalu and Minnesota Twins catcher Joe Mauer.

    Subway is among Phelps’ other endorsement deals.
    Head & Shoulders joins a Phelps sponsor list that includes Speedo, Under Armor, Hilton, 505 Games, Hewlett-Packard, Subway, Omega, Pure Sport, Visa and, most recently, Master Spas, which makes spas for swim training. His deals start at a minimum of $1 million.

    In the run-up to the London Games, Octagon is focused on signing Phelps to deals with global companies that are committed to using him in international markets. The London Olympics could be his last, and raising his profile internationally would go a long way to increasing his earnings potential after he finishes competing in the pool.

    The signing with Head & Shoulders should help Phelps with that goal. The brand is distributed in markets stretching from Europe to China.

    Phelps and Usain Bolt, the Jamaican sprinter, were the biggest stars to emerge during the Beijing Games. The Baltimore-born swimmer signed a series of endorsement deals following his eight-gold-medal performance at the Beijing Games. After those Olympics, Kellogg’s, Mazda and Subway signed him and began promoting him at retail and on TV.

    His endorsement future appeared bright, but his reputation and brand image took a hit when a photo surfaced six months after the 2008 Olympics that showed him smoking marijuana. After that revelation, sponsors like Kellogg’s and Subway were asked repeatedly by media if they would drop Phelps as an endorser. Mazda asked him to record a video apology for the incident, and Kellogg’s did not renew its deal with the swimmer.

    Phelps bounced back in 2010 by signing deals with Under Armour and Master Spas. 505 Games in February also released “Push the Limit,” a swimming video game that features Phelps.

    P&G first signed on as a partner of the U.S. Olympic Committee in 2009, and it saw 18 brands incorporate the Olympics into their marketing efforts during the 2010 Winter Games in Vancouver. The centerpiece of the company’s marketing efforts was a “Thanks Mom” campaign that saw P&G help defray the costs that mothers of Team USA members paid to travel to the Games.

    Head & Shoulders was one of nearly 32 P&G brands that didn’t incorporate the Olympics into its marketing that winter. Its signing of Phelps suggests that more P&G brands will use the Olympics in marketing next summer than did so in 2010.

    GMR handles sports marketing for P&G, while Platinum Rye handles athlete negotiations for the consumer products giant.

  • IMG’s reach creates big college platform for UPS

    UPS loves logistics, but there was a time that doing a national sponsorship deal in the college space was a logistical nightmare. Ron Rogowski, UPS’s sponsorship chief, admits that if he had to go school to school to aggregate 68 college sponsorships one at a time, the way sponsors had to in the past, he never would have done it. Talk about daunting: 68 negotiations, 68 contracts, 68 approvals from legal.

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