SBJ/October 22-28, 2012/In Depth

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  • NBA season-ticket sales heat up the box office

    The NBA is finding that serenity sells.

    As the league nears its Oct. 30 tipoff with none of the contentious labor drama of last year, it is setting a blistering pace at the box office and expects to set a record for full-season-ticket revenue. The league has sold more than 50,000 new full-season tickets, up 15 percent from last season. Total full-season sales are expected to eclipse the 250,000 mark, with more than $100 million in revenue generated from new full-season-ticket sales.

    Those sales metrics are similar to those set during the blockbuster 2010-11 season, when the NBA captured so much business after a frenzy of free agent activity, highlighted by LeBron James moving to Miami. The league this year has a record full-season-ticket renewal rate of about 88 percent heading into the start of the season.

    Chicago Bulls fans have put their team in the top five among full-season-ticket sales.
    Photo by: NBAE / Getty Images
    It’s the highest renewal rate in NBA history and is the key driver of the league’s full-season-ticket sales that will help push the league’s total gate past the $1 billion mark, of which at least 75 percent comes from the sale of season tickets.
    Other leagues, such as Major League Baseball and the NHL, typically have season-ticket renewal rates in the low to mid-80s.

    “We will have our best year in full-season-ticket sales and will have our highest gate on record,” predicted Chris Granger, executive vice president of the NBA’s team marketing and business operations department. “Our renewal rate is usually in the low 80s, but we have momentum from last year’s playoffs and our product is really strong right now.”

    But the gains at the gate are due to more than continued momentum from last season. Since 2010, for example, teams have grown more sophisticated in using data management tools to help sell tickets. Most NBA teams now employ at least three staff members dedicated to customer relationship management where only two seasons ago, some teams had none.

    In addition, NBA teams have beefed up the number of customer service employees assigned to season-ticket holders and have added a far wider and more flexible array of partial ticket plans, which in turn is helping teams post higher conversion rates of those partial plans into full-season-ticket buyers.

    “For the premium [ticket] market, the NBA has a ratio of one service representative for every 500 accounts, and for the regular full-season-ticket market, the ratio is one customer service representative for about 800 to 1,000 accounts,” said
    Bernie Mullin, a former NBA executive who now runs The Aspire Group, a sports marketing consultancy. “But it’s not just the quantity of customer relations people. The NBA has identified that the No. 1 opportunity area is first-year season-ticket-holders and they are doing all sorts of things to build connections to those buyers. That is what is helping drive the renewal rate.”

    The five teams with the highest full-season-ticket sales totals are the Chicago Bulls, Los Angeles Clippers, Los Angeles Lakers, New York Knicks and Oklahoma City Thunder, though the league won’t disclose specific season-ticket numbers or the specific sales order for those teams.

    “We have a 98 percent renewal rate and have 4,000 people on our waiting list so we backfill [non-renewals] immediately,” said Brian Byrnes, senior vice president of sales and marketing for the Thunder, which has capped its season-ticket sales at 14,100.

    At least 18 of the NBA’s 30 teams are expected to have more than 1,000 new full-season tickets sold, though that number is down from the record high of 21 teams with at least 1,000 new fulls sold during the 2010-11 season.

    Last season, the NBA had 12 teams with more than 10,000 full-season equivalent tickets sold for the original 41-game home schedule. Heading into this season, 15 teams are projected to have sales of at least 10,000 full-season equivalent tickets.

    “Fans came back in droves after the lockout and that has rolled right into renewals,” said Adam Kanner, a former NBA executive who is now CEO of ScoreBig, an online ticket seller that counts NBA teams as clients. “A lot of teams have gotten better at pricing. When you make the value proposition more compelling, while at the same time the product is better, there is a positive impact.”

    This year, almost every NBA team will use more sophisticated variable ticket and dynamic pricing strategies to push ticket revenue. Granger won’t even offer a leaguewide breakdown of ticket price changes from this year to last year because it changes so much on a nightly basis depending on the date, location of the seat, and opponent of each NBA home game.

    The top teams boasting at least 3,000 new full-season-ticket sales are the revived Philadelphia 76ers, the relocated Brooklyn Nets, the up-and-coming Minnesota Timberwolves and the star-studded Los Angeles Clippers.

    Notably, the Nets last season ranked last among the 30 teams in average attendance during their final year in New Jersey, but now have sold more than 11,000 full-season tickets at their new Barclays Center arena.

    Rounding out the top-five teams in new full-season-ticket sales are the Charlotte Bobcats franchise, which surprisingly has sold about 2,000 new full-season tickets coming off last year’s futile 7-59 record.

    “We feel good about sales from a small-market perspective,” said Bobcats President and COO Fred Whitfield. “We maintained our prices flat across the board, and to be able to sell a nice mix [of tickets] says a lot.”

    The Bobcats entered the summer sales season with a projected season-ticket renewal rate of about 50 percent. Instead, the team has a 70 percent season-ticket renewal rate thanks in part to aggressive promotions that included an offer to fans to buy a season ticket for this season and get another season ticket free for next year.

    “The intent was to move tickets and the promotions garnered interest,” said Flavil Hampsten, senior vice president of ticket sales and database marketing for the Bobcats. “When you win seven games, your phone is not ringing.”

    Also helping push the league’s renewal rate are an influx of teams now adding year-round benefits and off-the-court events as part of season-ticket packages. About half of the 30 NBA teams now have year-round membership clubs as part of their season-ticket packages, including the Bobcats’ Cats 365 and the Washington Wizards’ DC 12 Club.

    “We are clearly seeing more teams selling memberships and it’s not just about 41 games anymore,” Granger said. “Teams are taking basketball and connecting with other like-minded people.”

    Those programs are helping the league have at least 19 other teams with season-ticket renewal rates above 87 percent, the most ever at that level for the league.

    “If you renew well, it changes the entire business,” Granger said. “We have some breakout teams in Brooklyn and Philadelphia and those teams help pad the numbers. But it is an exciting market to sell into right now.”

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  • Names in the Game

    The NBA’s top power players are well-known. NBA Commissioner David Stern, National Basketball Players Association Executive Director Billy Hunter, Dallas Mavericks owner Mark Cuban and NBA Deputy Commissioner Adam Silver are among those firmly entrenched as industry leaders. But the NBA also teems with talent below the top rung of its leadership.

    From team and league executives, to media and business partners, these dynamic and innovative executives are making some of the biggest deals and creating new strategies as they make their mark on the industry. In the pages that follow, we’ll introduce you to some of the people you should get to know.

    — Compiled by John Lombardo, John Ourand, Terry Lefton and Don Muret

    Brad Sims

    Photo by: Cleveland Cavaliers

    Senior VP, chief revenue officer
    Cleveland Cavaliers

    Sims came to the Cavaliers in May from the NBA and he’s wasted little time in bringing a leaguewide perspective to the franchise, which has battled plummeting attendance in the post-LeBron James era.

    The chief revenue officer is a new job at the Cavs, marking a shift in front-office strategy as the team puts the entire sales and marketing operation under Sims’ watch.

    One of Sims’ first moves was to create a digital sales department designed to drive social and digital revenue. It’s a structure that the rest of the NBA will watch as teams work to leverage their digital business opportunities.

    Sims doesn’t focus solely on the Cavs. He also leads the sales efforts for the Dan Gilbert-owned D-League Canton Charge, the AHL’s Lake Erie Monsters and the AFL’s Cleveland Gladiators.



    Steve Gaffney
    Sprint

    VP, corporate marketing
    Sprint

    Certainly the NBA was happy last summer when Sprint signed one of its largest corporate sponsorship deals in the midst of a lockout that eventually lopped 16 games off the season. However, even with a shortened season, Gaffney ended the year feeling good about Sprint’s first year as the NBA’s official wireless partner.

    “Despite starting in the headwind of a shortened season, I would call our first season a success,” Gaffney said.

    Sprint had been seeking a large sports property since losing NFL rights to Verizon in 2010. The NBA and Sprint’s NBA Game Time app have helped attract new customers and, just as importantly, reduce churn in a saturated and competitive category. Still, Gaffney said this year “is really our coming-out party.”

    Look for more retail activation, additional club deals, and a new emphasis on social media as part of Sprint’s NBA playbook.

    “The NBA and its players have a huge social media following,” Gaffney said. “We should be able to capitalize on that, because our category lends itself nicely to the mobility that’s at the heart of social media. We see an opportunity to engage with the fan base there and drive our business.”



    Daniel Rube
    Photo by: Jennifer Potteheiser / NBAE

    Senior VP, deputy general counsel
    NBA

    Rube plays a critical behind-the-scenes legal role at the NBA, where his collective-bargaining and negotiation skills were tested and ultimately proved during last year’s lockout.

    Rube has worked for the NBA since 1995. Along with his labor relations work, which includes management of the league’s salary cap, Rube was deeply involved in crafting the league’s new revenue-sharing system. Creating that system was one of the most contentious issues for the league, and Rube this year has oversight of the plan, which is designed to narrow the gulf between large- and small-market NBA teams.

    If that weren’t challenging enough, Rube is also responsible for navigating legal issues related to the NBA’s deal with FIBA. It’s an area that may see big changes as the league ponders an age limit for NBA players participating in the Olympics as well as creating a World Cup-type tournament format.



    Ted Loehrke
    Photo by: Jennifer Pottheiser / NBAE

    Senior VP, team marketing and business operations
    NBA

    Loehrke is one of the most analytically astute members of the NBA’s team marketing and business operations department. Since joining the NBA in 2007, he has earned high marks by managing the league’s immensely valuable and sophisticated customer relationship management system, which uses a vast amount of data to help teams sell tickets. The data has been put to great use as the NBA begins its 2012-13 season with a record season-ticket renewal rate around 88 percent.

    But Loehrke is more than a number cruncher. As the most tenured account manager in the department, he is known as a creative executive who can deftly manage the relationships between teams and league marketers.

    This year, Loehrke played a key role in creating new sponsorship revenue streams for teams as they rolled out digital courtside advertising systems and new LED stanchion signs. He is also deeply involved in the league’s potentially lucrative proposal to sell game jersey sponsorships.



    Alex Diaz
    Photo by: Angela Cranford / MSG Photos

    Senior VP, general manager
    Madison Square Garden

    Diaz has played a key role in developing two NBA arenas in New York: the transformed Madison Square Garden and the newly constructed Barclays Center.

    Diaz is in charge of daily operations at MSG, which is entering the home stretch of a three-year renovation topping out at just short of $1 billion. The project’s third and final phase will be completed in the fall of 2013.

    MSG hired Diaz in the spring of 2011 from across town in Brooklyn. For five years, Diaz was the Nets’ official in charge of developing their facility, New York’s first new arena built in 40 years. Before he came to the Nets, Diaz was general manager of AmericanAirlines Arena in Miami, home of the Heat.



    Roy Hamilton
    Photo by: Fox

    VP, coordinating producer
    Fox Sports Net

    Fox Sports Net holds the local rights to 14 NBA teams, meaning that it produces more than 1,000 NBA telecasts each season. It’s up to Hamilton to make sure that the productions carry a similar look and feel whether they are in Los Angeles (Clippers) or Miami (Heat).

    Hamilton gained fame in the late 1970s as a basketball player for UCLA — he was one of legendary coach John Wooden’s last recruits. Now, he has made his name behind the camera, providing quality control to make sure that FSN’s interests and the NBA’s interests are aligned in terms of TV productions.



    Todd Fischer
    Photo by: Marc Bryan-Brown

    Manager of marketing communications
    State Farm

    Times Square on New Year’s Eve isn’t as noisy as the contentious insurance category, in which marketing spending by the top 10 brands has exploded from $1.7 billion in 2005 to a forecast $3 billion-plus this year.

    How do you fight all that noise? Three years ago, State Farm became an NBA corporate sponsor, a move that Fischer said has helped the insurer achieve relevance and distinction.

    “The NBA has allowed us to expand our brand and make it more contemporary,” he said. “We were looking to attract a demographic that was younger and more multicultural. And as the game continues to grow, there is mass appeal that fits well for a brand of our size.”

    Fischer and State Farm are espousing the mantra of so many contemporary marketers: In an age of fragmented media consumption, multiple consumer touch points are a necessity, not a luxury.

    Accordingly, State Farm now has 23 team sponsorships, adding Minnesota and Utah in the offseason, and continues with significant TV buys.

    “You have to be connected in multiple ways,” Fischer said. “It is crucial to bring it to life across all channels.”



    Doug White
    Photo by: ESPN Images

    Senior director, programming and acquisitions
    ESPN

    ESPN’s day-to-day contact with the league, White was instrumental in cutting the eight-year media rights deal that was signed in 2007. That deal gave ESPN more postseason exclusivity and digital rights than it had before.

    White joined ESPN in 1993 as a graphics operator. He’s been in his current role since 2008, where he also manages ESPN’s relationships with poker, Olympic sports, professional lacrosse, billiards and cycling.



    Jamie Gallo
    Photo by: Nat Butler / NBAE / Getty Images

    Executive VP, marketing
    NBA

    The NBA in the past few years has cycled through several senior-level marketing executive positions. None of the executives, however, came to the job with the professional pedigree of Gallo, who in June was hired to lead the league’s marketing efforts.

    At the time of Gallo’s hire, NBA Commissioner David Stern said the league needed someone who had run “something big.” Gallo certainly fits the bill.

    The former president of TBWA/Chiat/Day’s New York office is taking an increasingly global view of the league’s marketing strategy. Social media and digital marketing are Gallo’s chief focus as he seeks to create a consistent branding effort across all of the league’s assets.

    So far, Gallo is sticking with the NBA’s agency of record in Goodby, Silverstein & Partners and its “Big” leaguewide campaign, but it bears watching how Gallo puts his own stamp on the league’s brand.



    Chip Bowers
    Photo by: Rocky Widner / NBAE / Getty Images

    CMO
    Golden State Warriors

    No NBA team is in the midst of as much change as the Warriors, with their overhauled front office and an ambitious plan to move from Oakland to downtown San Francisco. As the front office ramps up its arena development efforts, it begins the season with some new faces, including the addition of Bowers, who was hired in July.

    CMO is a new position within the Warriors’ front office and Bowers is banking on his past success as senior vice president of corporate partnerships and marketing for the Orlando Magic to drive the Warriors’ business.

    Though the central Florida market is far smaller than the Bay Area, Bowers is used to big deals. He helped secure all of the Magic’s founding partnerships and helped negotiate the naming-rights deal at the Amway Center in Orlando.

    The challenge for Bowers is to help centralize the team’s previously fragmented marketing, corporate sponsorship, ticketing and digital media duties in a large market.



    Tim Kiely
    Photo by: Jeremy Freeman / TBS

    VP, executive producer of production
    Turner Sports

    Ernie Johnson and Charles Barkley have won Emmy awards for their roles in the popular studio show “Inside the NBA.” But the behind-the-scenes executive most responsible for the show’s popularity could be Kiely, who has produced the show since 1995. He has advanced to a role inside Turner Sports that has him overseeing all studio and remote productions, as well as overseeing the production staff.

    Kiely has been with Turner Sports for 17 years. During that time, he has helped produce the company’s coverage of everything from NASCAR to Atlanta Braves baseball and college football to Wimbledon.



    Allen Johnson
    Photo by: Ed Richter / City of Orlando

    Executive director
    Orlando Venues

    Johnson holds a unique position among NBA arena managers. As executive director of Orlando Venues, a group of publicly owned and operated facilities, he operates Amway Center, home of the Magic. In other NBA markets, arenas are run by the team or a third-party management firm. In Orlando, where public money paid for most of the $480 million arena project, Johnson, a city employee, is in charge of operations and booking the building.

    One of the facility management industry’s most respected leaders, Johnson has been in Orlando since September 2004, when he was hired to operate Amway Arena, the Magic’s former home. For the new arena, Johnson worked closely with the Magic to develop a cutting-edge facility that quickly became the benchmark for other NBA teams planning to build new arenas or renovate their existing venues.



    Albert “Scooter” Vertino
    Photo by: Mark Hill / TBS

    VP, executive producer of content
    Turner Sports

    Vertino is the executive Turner chose to oversee the NBA’s digital properties — one of the most important relationships Turner has with the league. Turner has managed the NBA’s digital assets for more than three years, and Vertino has been the executive overseeing the NBA’s digital content since September 2010.

    Vertino has the NBA in his blood. He has covered the league for Turner since he started at the company 17 years ago. He was a producer on TNT’s NBA coverage before taking the digital job, which includes NBA TV, NBA.com and NBA Mobile.

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  • 5 Questions for the NBA

    Will there be a jersey jackpot?

    Photo by: NBAE / Getty Images

    The NBA has spent the past year studying and debating whether to go the way of the English Premier League and allow advertising on team game jerseys. It’s a big, complicated leap, one that would make the NBA the first of the big four sports leagues to sell game-jersey sponsorships. It’s also seen as one of the most lucrative new revenue opportunities for the league.

    But putting logo patches on game uniforms won’t happen at least until the 2013-14 season. Until then, major questions remain, including putting a range of value on the deals and figuring out how the revenue would be divided among large- and small-market teams.

    Teams, no doubt, are antsy for more local revenue, but can the league sort out the issues to satisfy not only its owners, but also its television partners and sponsors?



    Will the Nets find success in Brooklyn?
    Photo by: NBAE / Getty Images

    The renamed and rebranded Brooklyn Nets have moved across the Hudson River into the sparkling new Barclays Center where hopes are sky high in the borough. But will the Nets leverage their new home into success both on and off the court? Will the Nets chip away at rival Madison Square Garden’s market share dominance? Can the franchise owned by Russian billionaire Mikhail Prokhorov build a championship franchise within three years as he expects?

    The Nets have entered Brooklyn with a big splash with their new arena, a new logo and brand designed by celebrity owner Jay-Z, and a commitment from ownership to build a contending team. So far, the Nets are off to a blazing start, but all eyes will be on whether the team can truly flourish with its new home and new identity.



    Can the Hornets build some buzz?
    Photo by: NBAE / Getty Images

    New Orleans Saints owner Tom Benson last season swooped in and bought the Hornets from the NBA for roughly $300 million. Now in his first season of NBA ownership, everyone is watching to see how Benson uses the local power and market dominance of the Saints to help drive the Hornets’ business.

    Already there is strong cross-pollination between the two front-office staffs, with Saints President Dennis Lauscha also taking the same role with the Hornets.

    Leading up to the sale, the Hornets, city leaders, and Louisiana Gov. Bobby Jindal rallied to push season-tickets sales to 10,000. The team also won a key new lease at the New Orleans Arena, along with tax breaks and funding to improve the facility. In addition, the Hornets signed a new, more lucrative local television deal.

    But running an NBA team with 41 home dates is far different than running an NFL franchise with eight regular-season home games. How Lauscha builds on the team’s newfound traction in small-market New Orleans and how he adapts to running the Hornets bears watching. So, too, is watching how the Saints leverage their massive season-ticket base into business on the basketball side.



    Will a new ticket partnership pay off?
    The NBA and Ticketmaster enter a brave new world this season as they partner to create a comprehensive, one-stop shopping online site that lists every available ticket for all 30 teams.

    What’s noteworthy is that the site will also sell
    secondary inventory along with primary tickets as the league looks for more control and profit from the secondary ticket market. Even the six teams that don’t have deals with Ticketmaster will be listed on the site. The league is banking on shopping ease and convenience for fans using the site to drive ticket sales.

    Teams like the new deal because it uses the branding power of the entire league to help sell individual team tickets. They also like the promise of data collection and analytics to be gleaned from the site to help provide a better profile of ticket buyers.

    How effective and how much more ticket inventory will be sold on the site bears watching as the NBA rolls out the new platform this fall.



    Can the Kings find a new home?
    George (left) and Gavin Maloof have been unable to strike an arena deal in Sacramento.
    Photo by: NBAE / Getty Images

    Not so long ago, Kings owners Joe, George and Gavin Maloof were the toast of the NBA with their team playing in front of sellout crowds every night in small-market Sacramento. Now, uncertainty reigns over the beleaguered franchise after the Kings pulled the plug on a new arena deal led by former NBA star and current Sacramento Mayor Kevin Johnson.

    While the Kings and the city point fingers at each other over the inability to land a deal to replace the team’s outdated arena, other cities are licking their chops.

    Seattle, which lost the Sonics franchise in 2008 after owner Clay Bennett moved the team to Oklahoma City, has a new arena deal in place. Anaheim city leaders last year nearly persuaded the Maloofs to move south, while a group in Virginia Beach has set its sights on building an NBA-ready facility.

    How the Maloofs play the relocation card and what type of deal they can muster is one of the biggest issues in the league.

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