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SBJ/May 27-June 2, 2013/FranchisesPrint All
The Los Angeles Galaxy this week plans to launch what it is touting as the first second-screen experience of its kind in MLS.
The Galaxy Social Hub Connected by Chevrolet, available via iPhone, Android and other platforms, will aggregate social media conversations about the franchise in one location. It also will feature crowd-sourcing contests called Galaxy Fans Decide in which fans will have the opportunity to make select decisions for the club — starting with the chance to rename the hub. Winners will receive tickets and autographed merchandise.
The Galaxy Social Hub Connected by Chevrolet will aggregate social media conversations and offer crowd-sourcing contests.
“We haven’t seen anything around MLS as extensive as this,” said Scott Carlis, vice president of social media and digital at AEG Global Partnerships, parent company of the Galaxy. “We’re taking all those pieces of social chatter — Twitter, Facebook, YouTube, Pinterest — and putting them into one robust, comprehensive and easily accessible place.”
Last June, the Galaxy created a Facebook application that let the public design the club’s third kit for this season. There were more than 8,000 entries during the two-week contest. The Galaxy plans to unveil the new uniform in late June.
Los Angeles leads MLS clubs in both Twitter followers (137,000) and Facebook fans (600,000).
“The Galaxy are proving once again to be a leader in innovation,” said Chris Schlosser, vice president, MLS Digital. “Given the league has the youngest, most tech-savvy fans, it is important for all of us to create great experiences for our supporters.”
Said Galaxy President Chris Klein: “These programs are indicative of where the market is headed and where the Galaxy is headed.”
The Galaxy declined to disclose the financial terms of Chevrolet’s sponsorship of the hub. The brand, which is in its third season as a sponsor of the club, also serves as the presenting sponsor of the L.A. Galaxy Academy, the team’s youth soccer program that has more than 20,000 registered players. The academy will be integrated into the social media hub, with features such as the academy’s player of the week.
Editor's note: This story has been revised from the print edition.
The Charlotte Bobcats plan to use the Brooklyn Nets as the primary model for rebranding themselves as the Charlotte Hornets.
Bobcats owner Michael Jordan last week officially announced the team would return to its old Hornets name starting with the 2014-15 season. The change must be approved by the NBA Board of Governors before it can take effect. A vote is set for July 18, Bobcats officials said.
Team owner Michael Jordan and CMO Pete Guelli discuss bringing the Hornets name back to Charlotte.
Photo by:AP IMAGES
“What they’ve done is a best practice for the league,” Guelli said.
The Nets’ rebranding process took about two years to complete and was a project tied to their move to Barclays Center, the team’s new arena in Brooklyn, said Fred Mangione, Nets executive vice president and chief marketing officer.
The Nets worked with the NBA’s merchandise division as well as with Adidas, the league’s official retail apparel provider. The Nets made a few trips to Adidas headquarters in Portland as they “dug in hard” to find the right fit, Mangione said.
Entertainer and clothier Jay-Z, who was a Nets minority owner, also had input in developing the new brand. The result was a black-and-white color scheme with a capital B as the primary mark that has become a lifestyle brand in Brooklyn, Mangione said.
“Our goal was to come up with a logo that was simple and classic that would stand the test of time,” he said. “Some people thought it was too simple, but we’re fourth in the league in merchandise sales. We wanted to come up with something cool that all ages would want to wear.”
During their research, the Nets considered a red-white-and-blue mark tied to their old ABA days with Julius Erving. They also looked at black and gold, colors symbolizing the borough of Brooklyn, but the scheme looked too much like the Pittsburgh Steelers, Mangione said. They settled on black as a primary color after finding out a nontraditional black jersey for Chicago Bulls star Derrick Rose outsold a regular home jersey for Miami Heat star LeBron James, he said.
The Nets did not use a fan vote or focus groups to help develop their new brand for fear word would leak out before they were officially ready to disclose the marks, Mangione said.
“We kept it internal,” he said. “The first thing we had to do was go to EA Sports with our brand for their video games. They had our stuff before anybody. We were praying it wouldn’t get out as we shipped it across the country. The league was shocked it wasn’t leaked.”
In addition, the Nets used social media channels to slowly unveil their new brand over time instead of announcing it at a special event. It was a strategic move to reach a wider audience, including their younger fan base, a demographic tuned to their smartphones, Mangione said.
In Charlotte, the Bobcats unveiled a tease of the Hornets’ rebrand at last week’s news conference with a “Back the Buzz” slogan in purple and Carolina blue printed on free T-shirts, a slight departure from the old Hornets’ teal.
Over the next 18 months, the Bobcats must rebrand everything from their website to concourse banners at Time Warner Cable Arena. All told, it’s a $4 million expense, Guelli said.
From a merchandising standpoint, NBA teams want as much runway as possible in rebranding to sell the team’s old-look inventory, league officials said. Remaining items are discounted and sold through closeout channels. Any leftover inventory is typically donated to charity.
“We’ll start a liquidation process once this [name change] happens and then start focusing on the new brand,” Guelli said.
Staff writer John Lombardo contributed to this report.
Shortly after NBA owners voted to keep the Sacramento Kings in California, NBA Commissioner David Stern relayed a quick message to the team’s marketing chief, Jeff David.
“It said ‘sell, sell, sell,’” said David, who as senior vice president of sales and marketing is leading the reboot of the Kings’ business operations with its sale to a group led by Vivek Ranadivé.
The success of Ranadivé (below) means selling can resume in Sacramento.
Photo by:GETTY IMAGES
Revenue projections for next season are still being set, but lofty goals are all but assured, especially given the amount just spent. The Ranadivé group paid $347 million for a controlling, 65 percent stake in the franchise, an agreement that puts the Kings’ purchase value at an NBA record $535 million. The group also has committed to $191 million in
Photo by:MARC BRYAN-BROWN
How does that eye-opening price develop for a small-market franchise in need of a new arena? The answer lies in part on the current owners, the Maloof family, developing a purchase agreement with Chris Hansen in Seattle that included the right to negotiate with a backup bid, which became the Ranadivé offer.
“Here we truly had an auction between different cities, and sellers [the Maloofs] that came with different perspectives,” said Adam Klein, an attorney with Katten Muchin Rosenman, which represented the Ranadivé-led group in buying the team. “It is unique and it allowed us to talk to the seller. It was smart of [the Maloofs] to do that.”
Hansen in January signed an agreement with the Maloofs to buy their interest in the team for roughly $350 million. He later upped his offer by $75 million, only to lose out to the competing Ranadivé group.
Joining Ranadivé in the purchasing group are members of the Jacobs family of communications giant Qualcomm; 24 Hour Fitness founder Mark Mastrov; Sacramento real estate developer Mark Friedman; and former Facebook executive Chris Kelly. About 20 other local business leaders have invested in smaller stakes, for a total of about 30 equity partners.
Klein said the purchase is mostly an equity deal though the team could borrow up to the maximum $175 million as allowed by the NBA.
Formal approval by the NBA’s full board of governors is expected by the end of the month.
The Kings aren’t waiting at this point, though. Team officials have started moving quickly to begin selling again — for the coming season and for future years.
Sacramento finished the 2012-13 season ranked last in the league in attendance.
David would not disclose the size of the Kings’ current season-ticket base, but he said he expects a full-season-ticket renewal rate of close to 100 percent for next season and a goal of between 10,000 and 12,000 full-season equivalents sold. The NBA benchmark is for teams to have at least 10,000 full-season equivalents, with about half of the teams this season hitting the mark.
The Kings won’t increase season-ticket prices for ticket holders, but they are expected to increase prices for new buyers, and they also now are requiring a nonrefundable $200 deposit from fans in order to buy season tickets.
“We will renew flat and take a look at demand from our deposit campaign,” David said. “We do want to do a market correction to keep up with NBA [ticket-pricing] averages. There will be lofty revenue goals. I am confident that in time we can do it.”
The team hasn’t increased season-ticket prices in several years because of the franchise uncertainty, putting the team in the noted market-correction position.
The Kings also now are requiring three-year deals from new and renewing sponsors. Key categories the team wants to fill or renew include the banking, automotive and wireless categories. Additionally, of the team’s 30 suites in Sleep Train Arena, only six are signed for next season; 21 are up for renewal, and three are vacant, without past deals.
Also significant from a revenue-generating standpoint is a possible new television deal. CSN California holds the Kings’ rights in a multiyear deal with an option provision in place. It is possible, David said, the deal could be reopened this year.
David said the team is poised to begin the process of hiring new staff, as well. Thirty employees voluntarily left the franchise over the past year due to its uncertain status. The team now aims to hire 60 new employees: 40 as full-time ticket sellers to work both day and night shifts; the remaining 20 for other sales and marketing jobs across the front office.
The total front-office staff is expected to reach around 140 employees.
The NBA has flown in about 12 league staff members, ranging from sales executives to public relations staff, for temporary assistance in Sacramento as the Kings re-engage.
“We are behind other NBA teams,” David said, “but there has been so much interest that demand is very strong.”
Photo by:PATRICK E. MCCARTHY
In the meantime, Wolff has sought to develop other facets of the organization, including a long-term deal signed this year to redevelop and occupy the Chicago Cubs’ old spring training facility, HoHoKam Park, in Mesa, Ariz.
Wolff, a Los Angeles-based real estate developer, recently spoke in New York with SportsBusiness Journal staff writer Eric Fisher.
■ Despite your revenue challenges, the club won the division last year, and is competitive once again this season. Billy is certainly a celebrated executive. But what do you see as the key factors in your on-field success? Does the success surprise you?
WOLFF: Going back two years ago, before spring training, there was a meeting with Billy and all his guys and he made it clear that he had to make some big moves, some tough moves. Moves like trading [closer Andrew] Bailey and [starting pitcher] Gio Gonzalez. But he sort of set a goal. Last year, he reached the goal faster than any of us imagined. It’s not a surprise to me, though. I think we’re going to be a competitive team for a long time to come. This is all following a plan. There is a discipline within a payroll that is roughly 50 percent of our revenue. The thing that does concern me is that in a couple of years, there are a number of our players that will become free agents.
■ The way the business is trending now, there is a real movement in baseball toward internal development and an increased emphasis on the draft. These are things you’ve been focusing on for years. Do you sense the rest of the industry gravitating toward your thinking?
WOLFF: Yes, I think so. Especially this year. The combination of our success last year, the last couple of years, and the new CBA has given others a push in this direction. I think more people are looking at building a team as opposed to just collecting star power.
■ You look at the rest of the division, and there is a big gulf in TV revenue. Texas and the Angels just signed big deals with Fox. Seattle just did its big deal with DirecTV. Houston is trying to get its new RSN with Comcast established. It seems like you’re the outlier now.
■ But if you look over the next decade, there are certainly going to be more clubs heading toward and exceeding nine figures annually.
Wolff’s GM, Billy Beane (center), continues to make moves that keep Oakland competitive with bigger-payroll clubs.
Photos by:GETTY IMAGES
■ Getting to the facility issue, it’s been so much of what has defined you and the A’s franchise as a whole. It’s hard to discuss you and the team without quickly getting to the stadium issue. Has that been problematic or cast a pall on the rest of the team operations?
WOLFF: We have a fan base that is quite loyal. The field itself [at O.Co Coliseum] is an excellent playing field, at least until the end of the season when the Raiders start up again. I had lunch with [Raiders managing partner] Mark Davis, and he said he was a little worried about his players playing on a baseball field, that his players might get hurt. I said that wasn’t fair, that was my argument the other way. So we laughed about it. But seriously, neither team should have to play like that. Especially in August when they start their preseason. The field goes from an A+ to a C-.
■ Beyond that, what has your relationship been with the Raiders and Warriors, given that you have a somewhat unusual situation sharing your grounds with two other teams?
WOLFF: We’re all fairly compartmentalized. The Warriors have been no problem. In fact our offices are in the building where the [Oracle] Arena is. I snuck in and watched one of their games the other day. The Raiders, they also sort of march to their own drummer. We all do. Every so often, there’s a little bit of a conflict. For example, the Warriors had one of their playoff games the other day the same day as one of our games. But we’ve been able to accommodate all of that. It’s not a major issue.
■ Speaking of relationships, what is yours with Commissioner Selig these days? You obviously have this long history together, but you haven’t had resolution on the facility issue.
WOLFF: I think the relationship is excellent. We have a little different view on timing of decisions. But there are so many other good things that baseball brings to us that I enjoy. I enjoy the committees he’s put me on. Thanks to Billy and his staff, we’re sort of a force. We’ve become a little more interesting to people. Winning helps. And I think Bud enjoys that. He’ll call me and tell me he was watching our game. We’re often the last game of the night anyway. The only statement that I’ve ever made about our situation is that I’ve explored everything to my knowledge I could to stay in Alameda County. And baseball has done the same thing. So we think there’s no plan that we’ve missed to stay where we are at. And we haven’t received any plans from Oakland. And that’s all I’ve really said even though I’ve been constantly vilified by some people. We’re not moving the team to Mars. We’ve never threatened to move outside of the state of California. And we’ve never threatened that if you don’t do ‘X,’ we’re moving to Texas or something. So it’d be nice to get this settled one way or another.
■ Even without making threats, is there a point, perhaps motivated by life planning, that you just decide it’s not worth the wait anymore?
WOLFF: No. I don’t think so. I don’t think there’s anyone that walks upright that wouldn’t agree we need a better venue. So whether I produce it in my era, which is short, or someone else, we have a lot of backup. We are building a soccer stadium in San Jose. People said that wasn’t viable either. There was no public money. But we can deliver if we have the opportunity. And we still don’t feel we’re leaving the area.
“For a lot of us,” Wolff says, “there’s still nothing more fun than a filled-up ballpark.”
Photo by:PATRICK E. MCCARTHY
WOLFF: I do not think so. But if I tire, the immediate backup available to me is strong and deeply committed. We are hopeful of extending our lease in Oakland for five years, thus our commitment to the Bay Area is solid. I am proud that we have never threatened to leave the area as a lever on anyone. We will only consider a move out of the Bay Area if all options are clearly exhausted.
■ Is there a succession plan laid out for the franchise? Does your son, Keith, get more involved?
WOLFF: Keith is building the soccer stadium. He’s in charge of that. He’s capable of doing it. Our succession plan is the fact we have a great existing staff who can implement a lot of aspects of running a stadium, such as selling sponsorships and tickets and so forth. We have that in place. And as far as the development side, Keith can do it. It’s not a succession plan in the sense that if I stop, he’s going to be Lew Wolff. But we just want to do what’s best for the team.
■ How are you getting along with the Giants these days?
WOLFF: There really hasn’t been a lot of communication. Their position, for reasons you have to ask them about, is that they don’t want us to move. They feel if we move further away, it’ll hurt their business. I obviously feel the opposite. But that’s really it. They’re happy to meet and discuss this. But to my knowledge, they’re not looking for a check. They really haven’t expressed any of that.
■ What is your level of confidence this gets resolved in the next year or two?
WOLFF: I prefer not to comment on that. I’m not sure. I haven’t been a great predictor on that.
■ Some of the Bay Area politicians appear to be getting more animated and impatient regarding this issue, and there have even been suggestions of lawsuits being filed. How difficult has that been to navigate?
WOLFF: The city of San Jose has been extremely patient with me. They want to have a baseball team. But in my business life, I have not often seen legal solutions to business problems work very well. And I’ve got to look at baseball in total. I don’t just look at this one issue. Look at all the other good things that have happened and are happening. I really don’t want to be associated in any kind of legal action against my partners.
■ You mention looking at baseball as a whole. How much of this stadium issue has been mitigated by the run of revenue growth the league has experienced?
WOLFF: I try to look at the overall balance sheet as opposed to one issue. And so, yeah, you look at the balance sheet. We’re in baseball. We’re having fun. We’re having success. We’re the beneficiary of things like the new television contracts, the new CBA. We’ve got a lot of accomplishments. The one thing we haven’t been able to do is get a path to a new venue. But that’s just one of many other things related to baseball, and most of the things related to baseball have been very positive.
■ With regard to the TV contracts, it seems like the new money is such that for the first time in the history of baseball, the sport is going to be primarily a media-driven entity as opposed to one that gets its largest share of revenue from attendance-related sources.
WOLFF: Obviously, it’s tilting that way. But the need remains for the fan experience, for it to be fun to go to the ballpark, to really enjoy it. For a lot of us, there’s still nothing more fun than a filled-up ballpark. And we could have that [for the A’s], if we had a new ballpark.
Wolff with Cisco CEO John Chambers in 2006
Photo by:GETTY IMAGES
WOLFF: We’re not sitting with working drawings. But we have one of the most interesting designs I think in baseball. It’s sort of sitting in the closet. And we have to get it out of there. It’s a series of neighborhoods. Wherever you sit, it’s a little bit of a different experience. We’ll have a lot of technology. Lots of digital signage. All the concessions will be digital to the point that when it’s time to stop serving beer, you just press a button and that disappears. The ability to change prices if you’ve got too many hot dogs. A lot of that little stuff. We’ll also have a large series of four-person boxes. Smaller luxury boxes instead of these mega-boxes. And we’re not averse to stealing other good ideas from other ballparks.
■ How do you split your time between baseball and your other activities?
WOLFF: I didn’t realize baseball would take up as much time as it does. But [Beane] and I communicate every day. There’s a lot of day-to-day stuff. Jerry Reinsdorf warned me, and so did Bud, and said, “You’ll be busier than you think.” Something comes up all the time. But most of it’s fun.
■ You’ve had a lot of front office stability, even with the ballpark situation. Dozens of staffers have been with the club for well more than a decade, predating your arrival in ’05. How have you tried to engender that?
WOLFF: We’re fortunate we inherited a very well-run organization. We haven’t had too many changes. I’m sure other teams would say the same, but we have a family feeling that I enjoy a lot. And people actually work harder when they feel comfortable. My theory is that if you’re driving to work and four of five days of the week you look forward to going there, you’re in the right job. And some of our people work seven days a week during the season. But what we’ve got is basically a homespun kind of feeling in what is a very visible activity.
■ Outside of owners’ meetings, how much are you in contact with other team owners?
WOLFF: Not as much as I’d like. I don’t engage in the trades or the agents, and that part of it. Some other owners do, and have a long history of that. But I do enjoy a number of the other owners. Mark Attanasio lives in my area. I like Arte Moreno a lot. The guys who run Boston I have lot of fun with. Every time I go to dinner with them and they pay, I joke that it’s additional revenue sharing. I talk to Jerry Reinsdorf and Bud a lot. There’s a lot of great people in the group now.
The addition of the New York Yankees as a partner in Manchester City FC’s purchase of a New York MLS expansion franchise was kept under wraps for more than six months.
Joe Ravitch, co-founder and partner of global merchant bank The Raine Group, points to November for when the idea of a partnership between the powerhouse franchises started to take hold.
“I thought a partnership would be enormously helpful to get the deal done,” Ravitch said last week, after the announcement that New York City Football Club would begin play in 2015 in an interim stadium while the team seeks to secure a permanent home. EPL club Man City is the majority owner of the franchise. The Yankees, according to a source, are looking to take a stake of between 20 percent and 25 percent, though the deal’s paperwork was still being finalized late last week.
The $100 million expansion fee for the franchise more than doubles the previous high for MLS ($40 million for Montreal in 2012).
The Yankees and Man City had a relationship before the NYCFC deal through Legends Hospitality Management, the Yankees’ stadium concessions business, which in December signed a deal at Man City’s Etihad Stadium. But bringing the Yankees directly into the fold for an MLS expansion club was seen as a way to make the EPL club owners more comfortable dealing with New York politicians and community groups while searching for a stadium development deal.
Ravitch’s involvement dates to last summer, when his group was retained by MLS to advise on the league’s desired 20th franchise. Although The Raine Group has advised on dozens of sports league and franchise transactions — including working with the Yankees on the creation of the YES Network — this was its first deal with MLS.
“It would give the Manchester City guys more confidence in New York by having a strong local partner like the Yankees,” Ravitch said.
Yankee Stadium now has been mentioned as a possibility for the new club’s interim stadium. Since MLS’s efforts to complete a deal for a stadium development in Queens have been unsuccessful to date, NYCFC management will look at other sites in New York for a permanent home.
“We thought we could help Manchester City, and the deal made sense for us,” said Yankees President Randy Levine. “We’re a sports and entertainment company that’s always looking for great opportunities.”
Any revenue generated for the Yankees through such opportunities would not be subject to MLB revenue-sharing provisions.
Man City first expressed its interest in MLS a year ago, when club executives came to New York in June to unveil a rooftop soccer field at Public School 72 that was donated by club owner Sheikh Mansour bin Zayed Al Nahyan. MLS President Mark Abbott stopped by the event to show his support. A very preliminary discussion about Man City’s interest in the New York expansion franchise was held. Formal talks began three months later.
Last Wednesday, Abbott, MLS Commissioner Don Garber and Man City CEO Ferran Soriano were back at PS 72 for a press conference to discuss the deal.
“It was beautiful symmetry, being back at PS 72,” Abbott said. “Our negotiations began the day after Labor Day, and we worked on it just about every day for the next nine months.”
All in-person negotiations were conducted at the New York offices of the law firm Paul Hastings. Martin Edelman, who is of counsel to Paul Hastings, sits on the board of Manchester City FC. MLS was advised by outside counsel Jon Oram and Bradley Shron of Proskauer. Brent Richard, a former soccer player at Vanderbilt and now a vice president at The Raine Group, worked with Ravitch on the deal. Soriano represented Man City in consultation with attorneys from DLA Piper in most discussions, while the Yankees utilized their internal legal staff.
“There were a lot of interesting compromises, a lot of negotiations,” Ravitch said, declining to disclose any such details.
Abbott also declined to provide specifics about the lengthy negotiations. “In the end,” he said, “we can’t imagine having better partners for this team than Manchester City and the New York Yankees.”