SBJ/September 24-30, 2012/Franchises

NBA clubs hire firms to help sell patches

As the NBA wrestles with how to divide up to $100 million in potential revenue from jersey sponsorships deals, some teams have taken the next step toward making those sales, hiring agencies to help them sell the anticipated uniform logo patches.

Officials at Stamford, Conn.-based Repucom said they are working with a handful of NBA teams to determine the potential value of the jersey advertising. While neither the company nor the NBA would disclose which teams have signed deals for valuation work, Orlando Magic officials confirmed that they have hired Repucom to help guide them toward a potential jersey advertising deal.

The patches being considered would mirror the size and positioning of this year’s NBA Finals patches.
Photo by: NBAE / GETTY IMAGES
The team-level activity comes even before NBA owners have formally approved the sale of uniform ads, which would appear on jerseys no earlier than the 2013-14 season. The sentiment across NBA clubs is that the sale of uniform ads will be among their largest deals financially, so they are working to prepare for lengthy negotiations even before it is clear who exactly is controlling that inventory.

“This is the type of sale that isn’t done in a short amount of time,” said Magic CEO Alex Martins. “It takes a lot of discussion with a number of firms, and it’s also about getting into [a company’s] budget cycle for the upcoming year. I would estimate that it is at least a six-month sale process.”

First, however, NBA ownership must reach consensus among teams about who sells the inventory and what impact it will have on revenue sharing. One approach is to have each team sell and keep the revenue from its own deals; another centers on pooling the revenue and adding it to the league’s new revenue-sharing system. Still another scenario — perhaps the least likely, but it remains a possibility — is that the league sells a deal across all 30 teams.

“We are all going through the exercise of trying to determine value for when we get the green light to go to market,” said Boston Celtics President Rich Gotham, adding that his team has spoken to but not yet hired an outside consultant to help with valuation. “Certainly it needs to be a big number to be worth doing, and our research is showing that it should be. How the pie gets divided is not as meaningful right now to us as getting a new asset to sell and finding out what it’s worth.”

With every other U.S. league watching closely, the NBA in July considered a plan that would put a 2.5-inch-by-2.5-inch logo patch on uniforms for the 2013-14 season. At next month’s board of governors meeting in New York, league officials are expected to take the next step, addressing the heart of the matter: What is that uniform advertising worth, and how would the revenue be divided? Along with that comes the question of whether it’s the teams or the league that will sell the advertising.

According to one team executive, the biggest issue is that question of whether the expected revenue windfall from the jersey deals will be shared among large and small markets.

“Does it go into a general fund, or do the [Los Angeles] Lakers and other big market teams get to keep all the revenue from a deal?” the executive said.

Some of the most optimistic early projections had jersey ad patches for larger market teams at more than $5 million annually. At the July meeting, Commissioner David Stern said the league could gain as much as $100 million in annual revenue from uniform advertising, or an average of about $3 million per team.

NBA teams are free to pursue their own deals either with Repucom or other brand analysis agencies.

“We are trying to do our due diligence now, and when the approval comes, we will be ready,” Martins said. “Nothing has been determined, but my sense is that it will be part of the board meeting [next month].”
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