SBJ/September 10-16, 2012/Opinion

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  • Cartoon: Bigger in Texas

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  • Public financing of minor league stadium a risky investment

    After negotiating for several months to finance and build a $55 million ballpark in Charlotte, baseball’s Class AAA Charlotte Knights will receive $7.25 million from the city, $750,000 from Charlotte Center City Partners (an economic and cultural development group), and a donation of public land valued at $20 million to $24 million from Mecklenburg County. In addition to $38 million from the Knights to pay, in part, construction costs, the county will also spend $8 million to improve infrastructure in the Third Ward, the ballpark’s future location in downtown Charlotte. The team is expected to move from its site in Fort Mill, S.C., after completing the 2013 season.

    In an independent study of sports activity within the Charlotte metropolitan area during 2011, University of North Carolina at Charlotte economist John E. Connaughton estimated that a group of three teams at local colleges and four in professional sports — including the Knights — were responsible for, respectively, direct and total revenue of $402.3 million and $800.6 million, and direct and indirect employment of 6,246 and 9,827 jobs. Because he applied, in part, a relatively large output multiplier of 2.04 and employment multiplier of 24.9 in his study, these seven teams had a significant impact on direct and total on-site and off-site revenue and employment from sports activities. (According to the output multiplier, for each dollar of direct expenditure on sporting events, the total impact on economic output in the region is $2.04. According to the employment multiplier, each million dollars in direct spending creates 24.9 jobs.) Hired by the Charlotte Regional Sports Commission, Connaughton simply made it easier for city and county officials to approve public money and/or assets to build a new baseball venue.

    Despite these results, there are reasons why subsidizing the construction of a ballpark with public money misallocates resources and may waste taxpayer money. For example, what are the implications if Knights teams fail to entertain local sports fans and do not experience an increase in total attendance at their home games from 279,107 — ranked last in the International League in 2011 — to approximately 600,000 or more in future
    Architect renderings show the exterior and footprint of BB&T Ballpark in downtown Charlotte’s Third Ward.
    Photo by: ODELL
    years? Although a much larger fan base exists in Mecklenburg County than in the club’s current York County (S.C.) home, higher ticket prices and parking fees, more crime and traffic congestion, and lack of support for minor league baseball are potential problems with playing day and night games in a ballpark in downtown Charlotte.

    If a recession, higher unemployment or sluggish growth in economic activity occurs in the local or regional economy, will people in Charlotte decide to reduce their expenditures on professional sports and therefore not attend Knights games at their subsidized ballpark? Besides influencing the team’s gate receipts and concession sales at its home games, this would negatively affect the city’s economic development and perhaps reduce revenues and profits of any businesses adjacent to or near the ballpark.

    Some critics suggest that too many professional sports franchises exist in a relatively small market. These include the popular Carolina Panthers, the less-popular Charlotte Bobcats, the MLL Charlotte Hounds and the AHL Charlotte Checkers. That is, most local fans prefer to attend pro football and basketball games rather than those in baseball, while others in the group enjoy contests of ice hockey, lacrosse and soccer teams. If so, then the Knights will likely struggle to perform well enough to succeed in their new ballpark.

    If there is less consumer demand than forecast for the Knights home games during and after 2014, BB&T Corp. may terminate its naming rights contract when it expires in 2031 or, alternatively, negotiate to reduce the (undisclosed) amount paid for these rights. As a result, the baseball franchise’s revenues will decline and limit opportunities to advertise and promote its brand, products and services in the media and to customers and commercial organizations. Consequently, it is risky and perhaps an unprofitable investment for government and the Center City Partners to subsidize construction of the team’s ballpark in Charlotte.

    To pay its share of the facility, the city of Charlotte will divert $7.25 million from a hotel/motel occupancy tax. Apparently, a majority of City Council members think this is the most efficient use of that money rather than spending it on something else associated with tourism. However, if locating the Knights in Charlotte results in more jobs and socioeconomic benefits for residents of the Charlotte metropolitan area, then the Council made a smart decision.

    In contrast to my views, Tommy John, former major leaguer and Knights community relations director and color commentator for home radio broadcasts, shared with me these comments about the ballpark: “It should have happened years ago. [On] 72 [days and] nights [of Knights home games], there will be 5-8,000 fans in downtown Charlotte. Attendance will increase with [a] new stadium downtown. Then it’s up to [the] Knights to ‘bring in’ the fans. It’s all about marketing.”

    I hope John’s prediction becomes true, although ideologically I discourage the redistribution of taxpayer money and/or resources for privately owned sports facilities and franchise operations that benefit only a fraction of the population.

    Frank P. Jozsa Jr. (Frank.Jozsa@fsmail.pfeiffer.edu) is a former professor of economics and business administration at Pfeiffer University in North Carolina. He is the author of 10 books on professional team sports, including three on organized baseball. Bill Focht contributed to this column.


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  • Impact stories in Buffalo, Los Angeles, at the movies

    Here are three end-of-summer stories that caught my eye:

    I continue to watch what Terry Pegula is doing in Buffalo around the Sabres. He has a very understated style but also a true passion to deliver a winner on and off the ice to a hockey-crazed market. Recent news reaffirmed his dedication to the market, as he is offering a new vision for Buffalo’s downtown that represents another example of a sports franchise fueling real estate development. A plan approved in late August by the city granted development rights to a group backed by Pegula and the Sabres that proposed a hockey-themed plan for nearly two acres by the city’s waterfront. The blueprint consists of two ice rinks, a hotel, a possible New Era Cap flagship store and a Tim Hortons restaurant, all of which would connect to the team’s home arena, the First Niagara Center. The project is led by Pegula, and his wife, Kim, with an estimated cost of $123 million. The two envision it being a year-round destination for local and tournament skaters.



    You’re going to see more on this story, but the battle in Los Angeles is turning into one of the best sports business stories of the foreseeable future. Just look at some of the story lines: The Angels land Albert Pujols and a massive deal with Fox Sports West; the Lakers bring on Steve Nash and Dwight Howard to go with Kobe Bryant as they prepare to launch on Time Warner Cable SportsNet and Deportes; and the new owners of the Dodgers make one of the most aggressive moves in memory to win now and are awaiting media riches with a new deal of their own. This is even before we mention AEG, the Clippers and a revived USC, and we haven’t even begun to talk about ticket sales, corporate sponsorship sales, relevancy, mind-share and, oh, where the NFL fits into this picture. Can’t watch this story closely enough.



    Ticket sales across other forms of entertainment help draw a comparison to sports. Last week, it was reported that ticket sales at North American cinemas dropped an estimated 3 percent for the summer compared with the period a year earlier. The last time studios experienced a decline for the summer was seven years ago, according to Hollywood.com. Attendance for the period was the lowest since at least 1993. There were many reasons cited for the drop, but some indicated the strength of sports. First, “higher than normal interest in the Olympics” kept people home, while a report from research firm Ipsos MediaCT showed that one out of every 10 moviegoers replaced at least one trip to the movies with televised sports.



    Our most-read stories from July 1 through Sept. 1:

    SportsBusiness Journal
    College football’s playmakers (Aug. 20)
    ESPN will pay $80M a year for Rose Bowl (July 16)

    SportsBusiness Daily
    ESPN Secures MLB Rights In Eight-Year Deal (Aug. 28)
    Big Ten Network Does Not Air Press Conference On Penn State Findings (July 12)
    TV Ratings: MLS On Pace For Best Season On ESPN; Strong First Year On NBCSN (July 20)

    SportsBusiness Daily Global
    Sky Sports New TV Deal With Scottish Premier League (Aug. 1)
    Rangers Group Says It Would Sell Club For $77M (July 10)
    Spain’s Olympic Uniform Has Become The ‘Butt Of Jokes’ On Social Media Networks (July 20)

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

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  • Inclusion holds power for connecting with Hispanic consumers

    Since perceptive marketers first recognized that money could be made selling specifically to Hispanics, there have been lessons for marketing to Hispanic people. Rightfully, conversations covered preferred languages, generational segmentation, acculturation, diversity within a diverse audience, appropriate designations and more. All are essential considerations.

    Yet ironically, an extraordinary number of those desiring to harness Hispanic spending power either overlook or ignore a simple, powerful truth of human nature: People are more comfortable and prefer doing business with people who resemble themselves. People naturally seek to see themselves included.

    Inclusivity is both a barometer of and a solution to the challenge of capturing Hispanic buying power. To begin, inclusivity considers demographic changes and proportionality. The U.S. Hispanic population of 50.5 million (considered by many to be an undercount) has annual purchasing power approaching $1 trillion. Professors Donna Maria Blancero and Robert G. DelCampo note in their article “Hispanics in the Workplace,” (Employment Relations Today, Summer 2005) that “Hispanics make up 10.3 percent of the workforce [and] although Hispanics are growing in number and in representation in the workforce, they remain underrepresented in the higher ranks. Approximately 4.5 percent of managers and 3.8 percent of professionals are Hispanic. Hispanics fill less than 1.7 percent of corporate board seats and less than 1 percent of executive positions.” And Hispanic women, who frequently make the decisions on expenditures for their families (which are generally larger than white families), held less than 10 percent of corporate seats. Puny percentages all.

    Achieving inclusivity is synonymous with methodical organizational change, and that is especially the case for sports properties that historically have been slow to formally adopt social change. With the ultra-high public profiles of sports properties and layers of personnel within the athletic, administrative and business functions, effecting change is complicated. Regardless, the team, league or event — from top to bottom — needs to reflect the faces of the communities it serves.

    The most important, fundamental aspect of multicultural outreach is marketing within culture. For proof, one need look no further than the NBA in the 1990s to see how the game’s cultural transformation from white-bread jump shots to in-your-face urban jams propelled a league to stratospheric success. Hispanic employees and fans bring invigorating new culture to an organization. Communication and invitations to participate within these new cultural norms give an organization qualities that are attractive and comforting to potential new guests.

    Teams seeking Hispanic fans can take action by reflecting the community they wish to serve.
    Photo by: JORDAN MEGENHARDT / ARIZONA DIAMONDBACKS
    Principles of inclusion


    We humans can be illogical creatures. Though innovation can be a powerful force for good, we have tendencies to avoid change. Fortunately, resistance to change can be vanquished by something of greater power: C-level determination. Thus comes the first principle of an inclusive organization:

    Inclusivity must be driven from the top until it becomes the marrow of the organization’s bones.

    Managers and supervisors can, and must, share in the work, but the directive must come from above. Savvy C-level executives recognize this and tether inclusive business practices to promotions and pay.

    Practice inclusion.

    An organization can require inclusion from its partners. A property or a league office going it alone, without the support of the other, breeds confusion and even ill will. More positively, it need not start from scratch; it can build off of what has already been accomplished. And it can buy inclusively. An organization must know whether it is purchasing from Hispanic or minority-owned businesses. It should consider starting a second-tier supplier program.

    Communicate this inclusion to the world of would-be Hispanic consumers.

    Start with the media. An organization must be inclusive in its relationships with media. Does it use Spanish-language media? Does it speak to its Hispanic media contacts as often as other media? Access does not have to be special. Hispanic media should be included in an organization’s planning and media events even when Hispanics are not the target; invite Hispanic media to all media events. An organization must learn how its efforts are perceived.

    Practice self-assessment.

    Does the organization demonstrate C-level commitment? Existing relationships with partners and the community can be used, and improved, to better learn how efforts at inclusion are viewed. Sponsors can be another resource. They are sophisticated in analyzing and approaching Hispanic customers and can offer advice about how to better target Hispanic customers in a manner that was mutually beneficial.

    Seek counsel.

    Practicing inclusion means being dedicated to learning as an organization. An organization should identify and speak to business and community resources regularly about organizational culture, business practices and inclusivity. Demonstrate accessibility to local Hispanic leaders. Make sure interested parties have day-to-day and C-level contacts in the organization.

    From the perspectives of bottom-line performance, long-term viability and business ethics, inclusion holds great power. Companies that carefully track results testify that market size, sales, profitability and organizational competency all rise. An inclusive organization can honestly and earnestly communicate its story to Hispanics, making the organization’s messages inherently more potent and effective and its product more appealing and appreciated.

    Tom Córdova (tacordova@earthlink.net), a former board member of The Institute for the Study of Social Change at the University of California, Berkeley, now heads Córdova Marketing Group, a marketing consultancy specializing in multicultural and general market strategies, organizational development, and sports sales. Michael Minkus (michael@covacova.com) is counsel and vice president of operations at Córdova Marketing Group.


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  • A losing venture for UFC and its fans

    When UFC President Dana White announced that UFC 151 was canceled due to future hall of famer Dan Henderson’s torn MCL and Jon “Bones” Jones’ refusal to fight Chael Sonnen (Henderson’s proposed replacement), fans and fighters alike expressed their resentment to Jones and the organization via the social media outlets. Understandably, White and the UFC brass recognized that the undercard wasn’t strong enough to entice fans to spend $50 or $60 (HD) on a pay-per-view main event featuring the likes of Jake Ellenberger and Jay Hieron.

    As a result of the league’s first cancellation of an entire PPV card, millions of dollars of PPV and gate revenue were lost, sponsorship agreements were potentially strained and the league’s tenuous relationship with their core fans may have worsened. After anticipating a matchup between one of the sport’s pound-for-pound best (Jones) versus an all-time legend (Henderson), fans were inevitably left with nothing. Event ticket holders were able to return their tickets to the place of purchase for a full refund, but those unfortunate few who had already purchased the PPV will have to seek refunds via their cable or satellite provider.

    Still, issues with fans don’t even begin to scratch the surface of what the fighters on the undercard have experienced. After training for the past several months for payouts that pale in comparison to those of UFC PPV headliners (some as low as $5,000), they’re now forced to continue training until given the opportunity to fight again on another event card. To date, the only fight to be officially rescheduled was the matchup of Ellenberger vs. Hieron on FX 5. For the other displaced combatants, even White stated he wasn’t sure of the repercussions for those who were scheduled to fight at UFC 151.

    So this poses the question, outside of potential scheduling constraints, could the league have offered UFC 151 as a free event on Fox or sister network FX? The UFC’s 2011 deal with Fox was agreed upon in part to propel the sport forward. If the league would have moved the card to Fox or FX, not only would the league not have lost its site fee (Mandalay Bay Events Center) and all of its gate revenue, but it could have continued with its numbered events (e.g., 151), given the fans what they wanted, and continued to pay the fighters on the undercard.

    When dealing with an individual combat sport such as MMA, injuries occur. Unlike in the past where injured headlining fighters were substituted with suitable replacements, the league stands to lose future PPV and gate revenues when fighters are now increasingly given options relative to whether they elect to fight a given opponent. Similarly, the league also stands to lose fringe fans if they feel as if the best fighters aren’t fighting each other — a factor that is supposed to be a distinguishing element between the UFC and professional boxing — and the undercards are not worthy of purchasing. And if recent reported UFC PPVs purchased are any indication of the league’s future PPV sales (150: 190,000 buys; 149: 235,000; 147: 140,000, lowest since 2005), then its primary revenue stream could be on a downward slope.

    With the PPV model in place and the uncertainties surrounding an individual fighter’s health and decision-making abilities, the lesser-known fighters of UFC PPV event undercards will lose their respective purses when this happens again, the UFC will lose both PPV and gate revenue (if future events are canceled) and, perhaps more debilitating, fans will lose interest.

    For now, UFC light heavyweight champion Jones is slated to defend his title against former champion Vitor Belfort at UFC 152 on Sept. 22 at the Air Canada Centre in Toronto. This matchup was agreed upon after reportedly the two best contenders for the title after Henderson (Mauricio “Shogun” Rua and Lyoto Machida) both said no to the fight. With so much uncertainty seemingly surrounding each UFC PPV event, fans will have to strongly consider if they’ll actually get to pay to view a fight.

    Lamar Reams
    Norfolk, Va.

    Reams is an assistant professor in the sport management program at Old Dominion University.


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