SBJ/April 16-22, 2012/Opinion

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  • Stadiums losing their community feel

    In a New York Times article last year, Harvard professor and author Michael J. Sandel was asked what he would do if he were president of the United States. His answer:

    “I would lead a campaign against the skyboxification of American life. Not long ago, the ballpark was a place where C.E.O.’s and mailroom clerks sat side by side, and everyone got wet when it rained. Today, most stadiums have skyboxes, which cosset the privileged in air-conditioned suites far removed from the crowd below. Something similar has happened throughout our society. The affluent retreat from public schools, the military and other public institutions, leaving fewer and fewer class-mixing places. Rich and poor increasingly live separate lives.”

    Sandel’s viewpoint is a bit simplistic in today’s hyper-revenue-generating world of sports. However, the financial stratification of venue seating areas is changing the dynamic of how fans consume the on-field exploits of their sports heroes. The creation of differentiated layers of fans’ experiential involvement underscores that the days of one-size-fits-all sports venues are over.

    Once upon a time, a kid could wander down on the court or near the dugout and talk to the players. Now, in many venues, especially in the NFL, fans have to pay a hefty license just to buy a season ticket. Fans need the skills of SEAL Team Six to access the varied economic neighborhoods in many stadiums. Up close and personal is reserved for Twitter, Facebook, YouTube and other forms of instant social media. Dynamic pricing and secondary ticket marketing has changed the micro neighborhoods that had existed in many stadiums. Families, friends and perfect strangers grew up going to games and treating each other with respect. Every section was a family section, not one mandated for security reasons.

    When I attended the first NFL preseason game at Cowboys Stadium in 2009, I was amazed at how my eyes were hypnotically drawn to the Texas-sized high-definition video board no matter where I was positioned. It was a potent preview of how games will be consumed in live settings in the future.

    Up until 2005, the San Francisco 49ers had one price — $65 — for all seats at Candlestick Park. As part of the new 49ers stadium that will be built in Santa Clara, all fans will have to purchase stadium builder licenses. Nine thousand or so seats between the 25-yard lines will carry a license fee between $20,000 and $30,000 per seat with an average ticket price of $300. Club seats will sell for $80,000 each. If you want to purchase one of the 165 suites, you’ll have to write a check of between $200,000 and $500,000 a season.

    Ticket revenue will remain a critical component of team revenue, even in the expanding worlds of traditional, new and social media. The automotive industry has done an excellent job of displaying all of its products — from the starter car to the “look-at-me machine” that advertises how well you have done. Consumers become loyal to an automobile brand and are upsold by being able to see, feel and test drive on the way up. Translated to sports, without diminishing the existing value of premium seating areas, teams could become more creative in test driving all seating areas during every home game for their fans.

    Sports are one of the last examples of our town squares. Stadiums and ballparks serve as rallying points for increasingly diverse and financially fragmented communities. These massive meeting places are the front porch of days gone by. But as the skyboxification of our favorite stadiums and arenas falls into the hands of the sports-revenue metricists, we are losing the glue of unity that binds us together as fans. n

    Andy Dolich (andy.dolich@gmail.com) has more than four decades of experience in professional sports, including executive positions in the NFL, MLB, NBA and NHL.

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  • How the Dodgers’ $2 billion price tag could be a bargain

    Did the sale of the Los Angeles Dodgers for the reported price of $2.15 billion surprise you? It shouldn’t have, even with some experts believing the Guggenheim Baseball Group significantly overpaid for the assets.

    Forbes’ recent valuation pegged the Dodgers’ value at $1.4 billion. Is that more accurate? The answer lies in what the new owners do with this iconic team, its majestic stadium and the attractive, 250-acre Chavez Ravine real estate. I would argue that under the right business model, it’s good deal.

    The demise in Dodgers brand equity over the past two years has been startling. The blame has been placed on the nasty public divorce of current owner Frank McCourt, resulting in illiquidity that precluded general manager Ned Colletti from making major player acquisitions. It also led to customer service and security staff reductions that allegedly factored in a brutal beating of a visiting Giants fan. The broad-based fan (and media) disenchantment led to plummeting revenue and attendance. (Dodgers revenue declined from $280 million in 2009 to the low $200 million range in 2011 — a staggering $80 million, or 29 percent, drop; attendance declined by 800,000 fans, an 18 percent drop. This occurred while on-field performance declined from 95 wins in 2009 to barely above .500 thereafter).

    Despite a decline in baseball and business-side performance metrics in the past two years, when the sale is complete, the Dodgers’ asset value will have increased fivefold in eight years.
    Photo by: GETTY IMAGES
    Despite being out of contention since earning back-to-back division titles in 2008 and 2009, the storied franchise still represents a rare jewel that drew more than 10 serious bidders. Competition and limited supply, even with a tarnished asset, means good news for the seller. According to recent Los Angeles Times reports, McCourt will walk away with close to $1 billion net, while his ex-wife and former Dodgers CEO, Jamie McCourt, gets $131 million.

    The size and nature of this transaction reveal both the good and bad sides of sports business. The good is that despite the prolonged economic downturn, major league sports franchises continue to retain broad-based appeal, command high purchase prices and produce well-above-average asset value growth. Major league team valuations are invariably pegged at five times revenue, but brands such as the Yankees, Dodgers, Cowboys, Lakers, Manchester United and Barcelona are sold around seven or eight times multiples because of their prestige and winning history.

    So how is the Dodgers’ sale at more than 10 times revenue justified as a sound investment? Let’s start with the reasons why wealthy people buy professional teams:

    • Increase in asset value: Major league teams typically appreciate well above regular businesses and the stock market. The McCourts purchased the Dodgers from Fox for a reported $430 million in 2004, the majority of which was financed. So the Dodgers’ value grew several times over during the last eight years. For the highly leveraged McCourts, the return is much higher.

    • Operating profit/tax shelter: Most professional teams, with the exception of the NFL and large-market marquee teams, do not make an operating profit. But by depreciating the value of player assets, a significant “book loss” can be created and used to offset tax liability in other businesses. Additionally, the new Dodgers owners are likely to procure a new local broadcast rights agreement projected to be worth $4 billion over the next 20 years. That’s at least double the current rights fee and adds an estimated $100 million in incremental revenue annually. In 2009-10, using Aspire’s Fan Relationship Management Center principles, the Dodgers’ new outbound ticket-sales revenue grew by 280 percent year-on-year. (Overall MLB ticket revenue declined due to the economic downturn.) In the nine seasons I have worked in MLB, we discovered that a key to growing ticket sales was increasing average attendance frequency. In down years, baseball fans typically attend 2.5 games per season on average. When team performance improves, or when fans expect improvement, they generally attend one more game on average. With more than 1.25 million unique fans attending Dodgers games each season, the new owners’ honeymoon should generate an additional $37.5 million annually in incremental ticket revenue per season, without expanding the fan base.

    • Passion for the team/sport: How can a value be placed on owning the team you love, in a sport you are passionate about? The Dodgers are the ultimate “reality-fantasy team” (oxymoron intended) for the mostly Southern Californian ownership group, who said it wants to keep the team for generations.

    • Value to other businesses: The new owners will have the ability to leverage their other business income and value. How can you put a price on bringing your customers into the clubhouse to meet Andre Ethier, or visit with the likes of Alex Rodriguez and Derek Jeter before batting practice?

    • Related business value: There is much speculation on the value of real estate development in the Chavez Ravine location, but the value pales in comparison to creating a year-round destination business run by the Dodgers. A “Dodger Baseball World,” which would include educational, entertainment and culturally diverse programming celebrating the Dodgers’ heritage, could engage the entire Southern California community, with the capital costs covered by sponsorships.

    The good side for sports business is that the new Dodgers owners could double revenue within the next few years and prove the more than $2 billion price tag to be a bargain.

    The bad side is that successful team performance on the field and on the business side is once again proved to be unnecessary in raising sports asset value in America. All of the Dodgers’ baseball and business-side performance metrics took a nosedive in the last two years, but when the sale is approved by MLB, the team’s asset value will have increased fivefold in eight years despite the brand being tarnished.

    Who says sports teams are a bad investment — particularly when other people’s money is used to buy the team?

    Bernie Mullin (bernie.mullin@theaspiregroupinc.com) is chairman and CEO of The Aspire Group and was a revenue enhancement consultant for the Los Angeles Dodgers during the 2009 and 2010 seasons. He has also served in senior executive positions with NBA, NHL and MLB teams and at the NBA league office.

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  • Cartoon: The Fenway Effect

  • On Shaheen’s future, Nike’s play, AD’s stand

    The future of longtime NCAA executive Greg Shaheen was unclear as of press time, but it is a story people continue to talk about. The surprise wasn’t so much that a move was made early last week to replace him with longtime sports exec Mark Lewis; the handwriting was on the wall for months, and the timing suggests that Shaheen never really had a chance to stay in the job.

    This takes nothing away from Lewis, who is an accomplished and respected executive. But people in the business are shocked that the NCAA would remove Shaheen.

    I’ve known Shaheen for years; we probably talked as much about our Lebanese heritage as we have the nuts and bolts of the sports business or the NCAA. He is a member of our Forty Under 40 Hall of Fame and is credited not only with the NCAA’s groundbreaking deal with CBS and Turner, but also in bringing a more progressive mind-set to corporate sponsorship under the tenure of former President Myles Brand. I’ve rarely seen someone as dedicated and devoted to an organization; and the rare public outcry over the NCAA’s move showed the support Shaheen has built over the years.

    Among the responses: Duke’s Mike Krzyzewski told CBS Sports, “Greg furthered the cause of men’s college basketball as much as anyone in the last decade.” On Twitter, SI.com’s Stewart Mandel (@slmandel) wrote, “Absolutely dumbfounded the NCAA ran off Greg Shaheen”; Sporting News’ Mike DeCourcy (@tsnmike) wrote, “Replacing G Shaheen is ludicrous. Brilliant guy.”

    I fully expect — and hope — Greg stays in sports business, and wouldn’t be surprised if he lands at the NBA, where he has developed close relationships and is recognized as a talented executive/operator.

    ■ ■ ■

    Nike pairs its tag line with NFL team names on its new shirts.
    I was struck by the reaction of a friend as we looked at one version of Nike’s new NFL apparel line. A shirt featured the traditional swoosh on the sleeve, but had the team name and logo with Nike’s brash “Just Do It” tag in big type. My friend was livid; he couldn’t stand the fact the team logo that he is loyal to was shared equally with Nike’s well-known but polarizing tag and he didn’t want that phrase connected to his team.

    Many would argue a connection with Nike would enhance a brand, but it made me wonder whether owners and league execs liked the “Just Do It” tag getting equal play with their logos, or does it detract at all from the brands they work hard on and invest in? NFL owners went for a lucrative deal, and they knew what they were getting. It’s only ONE shirt, but it made me wonder: Will other apparel lines from the new deal be about showcasing the NFL and its teams’ brands … or Nike’s?

    ■ ■ ■

    Good for University of Arkansas Athletic Director Jeff Long, who made a bold move and terminated football coach Bobby Petrino, citing “a pattern of misleading and manipulative behavior,” while also adding, “Our expectations of character and integrity in our employees can be no less than what we expect from our students.”
     
    It was refreshing to see a university and an athletic department leader not tolerate being lied to. Some would have succumbed to the pressure to win. Even though our nomination decisions were made months ago, I’m proud that he’s one of our nominees for Athletic Director of the Year for the Sports Business Awards in May.

    Abraham D. Madkour can be reached at amadkour@sportsbusinessjournal.com.

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  • Build your brand and keep your job … in 140 characters or less

    In two areas of life, the term “user” universally applies: drugs and computers.

    The addictive qualities of social media, particularly Twitter, have many of us in its clutches, albeit in a predominantly productive fashion. With more than 100 million registered users in the U.S., sending 175 million tweets a day — thousands every second — Twitter can be a very powerful communications and promotional tool, but only if used carefully and strategically.

    Twitter is a medium of contradictions: direct and intimate, while also global in reach. (Just ask former Aflac spokesman Gilbert Gottfried). With the Twitter playbook still evolving, based on ham-fisted trial and red-faced error, here are sundry observations for sports professionals on Twitter seeking to extend their brand … and their employment:

    Our special obligation: Many of us tweet from a company-owned device, possibly using a brand handle. This brings fortuitous opportunity (built-in branding that bestows credibility and helps attract followers) as well as definite obligations. Mainly, you’re expected to properly represent your company, making each cyber burp a mini-ad brilliantly spreading your message … or packed with potential to explode in your face.

    You’re not Chris Rock … or Tony Kornheiser: Another Twitter contradiction: The quickest way for non-celebrities to gain followers is to be quick-witted and provocative. Subjective musings, however, are a fast track to offending someone, somewhere with a sticky retweet finger. Walk the tightrope, and you’re sure to fall off. Shun the perennial minefields of racial, religious, political and sexually explicit jokes.

    But there’s more to keeping legal at bay and your family fed than going easy on the stand-up act. Sharp opinions may be the magnetic currency of sports talk, but on social media, sniping at people, brands and events inevitably causes problems. No one expects tweets exclusively from @Stepford. Yet, declaring a game boring, a coach inept, or a sponsor clueless elevates no one. Fly Me Airways may have dimwittedly lost your bag, but your sales team is likely pitching them a sponsorship. Get some air before becoming “the angry guy on Twitter.”

    I, Me, Mine: Be authentic, be yourself, and call attention to that. If you are posting individually without a corporate affiliation, add to your profile language specifying these tweets are your personal thoughts, not representing your company. If this is the only advice you follow from this column, it has been worth reading it.

    Review before retweeting: Retweets can imply endorsement. Be careful with “pass along” links that can be perceived as your company’s content or opinion. It’s impossible to fact check everything. At the minimum, read the entire article before retweeting. Let’s learn from the unfortunate chaos surrounding Joe Paterno’s prematurely announced passing due to mass pass-along of an inaccurate source story.

    Check your facts and spelling: This is obvious but sometimes lost in rushing out content from a handheld. (See @IMGCollege misspelling “Purdue” as “Perdue.” Coast-to-coast cackling followed, with tough-man/tender-chicken references used to attain cyber forgiveness.)

    In a sharing culture, nothing is personal: I had emailed a hilarious off-color video to a reporter that was promptly tweeted “from @IMGCollege.” Once I came to and dragged myself off the floor to reach the phone, she instantly empathized with career-flashing-before-the-eyes desperation and deleted the post. #TeachableMoment: When direct messaging or using email, stipulate whether content shared is meant to go public.

    Don’t steal: You may covet thy follower’s pithy insight, but don’t pilfer it without attribution. Sports are an intellectual property business. Respect our unwritten constitution, and always credit the thoughts of others. If for no other reason, you’ll sooner or later be exposed as a thief.

    Make use of your position: As an executive in sports, you’re uniquely positioned to deliver content attractive to current and potential followers, whether they’re media, fans, potential employees, or possible business partners. You can offer:

    Brad Keselowski took advantage of his position at the Daytona 500 to tweet live images. You can offer your own perspective through your position in sports business.
    • Fresh reporting: What we hear from players, coaches, officials, owners, pundits or sponsors (so long as they’re comfortable with widely sharing).

    • A different perspective: You don’t have to be @BradKeselowski photo-tweeting a fireball from his race car during a NASCAR red flag to offer your own interesting insights and environmental observations. For example, IMG Audio’s @GamecockRadio provides tweets from our play-by-play announcer as he’s calling the game.

    • Owned IP: Links to audio or video clips, behind-the-velvet-rope photos, exclusive interviews, or game-winning buzzer beaters. Use Twitter to share new research and brand information as well as to break bona fide news.

    • Organizational peepholes: Counterintuitive stats and fun anecdotes about your job. Most of us don’t attend SI’s swimsuit shoot, but we can share dispatches from other walled-off VIP locations that ordinarily are taken for granted.

    • Interactivity: Contests, questions and calls for suggestions can encourage valuable interplay with your audience.

    Be strategic: Some tweet because everybody’s doing it. Fair enough, but why not take Twitter to another level to drive your business and communications goals? Ask yourself: Why am I on Twitter? What can my organization accomplish? How can we serve our constituencies? Which messages can we share? Then, match social-mediated content to fit your objectives.

    In an ever-changing “brave new world,” if our 140-character proclamations align with communications goals, and we’re keeping it clean and virtuous, the smart money says sports execs will all be successful on Twitter.

    Now we just have to figure out Pinterest.

    Andrew Giangola is vice president of strategic communications for IMG College. Follow him on Twitter @IMGCollege.


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