SBJ/Dec. 2-8, 2013/Marketing and Sponsorship

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  • Lawyer Mark MacDougall runs IMG sale with steady hand

    The trial lawyer hasn’t sat in a single IMG management meeting. He hasn’t met officially with any of the potential IMG buyers. He wasn’t even in the country the week KKR dropped its bid for the company.

    But when it comes to the sale of IMG, Washington, D.C.-based attorney Mark MacDougall has the most powerful voice in the room.

    MARK MACDOUGALL
    Photo: COURTESY OF AKIN GUMP STRAUSS HAUER & FELD
    IMG Chairman Ted Forstmann granted MacDougall power of attorney before his death, giving him complete responsibility for Forstmann Little’s 85 percent stake in IMG, and he’s led the sales process ever since.

    MacDougall worked with Forstmann Little’s two trustees to determine when the company went on the market. He sat through more than 20 pitches from banks that wanted to handle the sale.

    He spurned Goldman Sachs and JPMorgan Chase, banks with whom Forstmann had a close relationship, and instead selected Evercore and Morgan Stanley as the lead banks. And then he backed away, allowing the bankers to deal directly with the buyers and report back to him on the sale’s progress.

    People around the process describe it as regimented and tight. One person on the buy side, lamenting the lack of access to a document room for due diligence, called it annoying.

    But it’s the perfect reflection of MacDougall, who colleagues and competitors describe as a smart, principled and intense attorney with a reputation for being an aggressive and zealous representative for his clients.

    “He’s a no-nonsense, fair, good guy to have in your foxhole — I don’t care what kind of fight you’re in,” said Bill Nettles, the U.S. attorney for South Carolina, who worked with MacDougall on several criminal defense cases.

    Everything MacDougall’s done around IMG has been driven by one mission — to get the highest possible price for the shareholders, which includes everyone from institutional investors like GE and Boeing to former Forstmann Little partners to IMG employees.

    “He’s doing the right things,” said Julian Robertson, the hedge fund pioneer and a member of IMG’s board who was named chairman of Forstmann Little after Forstmann’s death. “I think the world of Mark MacDougall and I very much respect what Ted Forstmann decided to do [in granting him power of attorney].”

    Former ESPN exec Mark Shapiro (top) is working on the William Morris Endeavor/Silver Lake Partners bid. NFL Network CEO Steve Bornstein (below) is with the CVC Capital/Peter Chernin bid.
    Photo by: TONY FLOREZ PHOTOGRAPHY
    MacDougall’s role in the sale of IMG caught many at the company by surprise because he is a relative newcomer to the world of Forstmann Little and Forstmann’s inner circle.

    For nearly three decades, Forstmann relied on Steve Fraidin for most of his legal needs. The two did countless deals together, including the acquisition and sale of Gulfstream. But they had a falling out in 2010 around the same time that Forstmann was dealing with a lawsuit that alleged he had gambled on college and pro sports.

    Forstmann had met MacDougall more than a decade ago through Bob Strauss, a founding partner of Akin Gump Strauss Hauer & Feld, and had used MacDougall on several minor issues. He hired MacDougall to be his primary lawyer in 2010, and Akin Gump began working on a lawsuit in 2011 filed by the same man who accused Forstmann of betting on sports. (The case is pending.)

    Photo by: GETTY IMAGES
    The job fit MacDougall perfectly. He is a pioneer in an area of law he calls reputational recovery, a field that involves working with clients who have been the target of false accusations by the media, government officials and companies. He has worked with clients who have been wrongfully accused of having links to Al-Qaeda and committing murder in Eastern Europe. He works with private investigators to prove the allegations are false and then secures a retraction in publications.

    It’s a specialty that can pay upward of $1 million a case, and a profile in “The American Lawyer” on his work in the area earned him the nickname “The Cleaner.”

    “Our job is to kill the false story. Not the bad story, which is what a PR guy does,” MacDougall told the publication.
    MacDougall was not available for comment for this story.

    The reputational recovery work is only a small portion of what MacDougall does. He spends most of his time doing corporate litigation. He recently led a lawsuit by Bahrain’s state-controlled aluminum company against Alcoa that alleged the U.S. corporation committed fraud and racketeering. It was considered the first claim of alleged bribery by a foreign company in the U.S., and Bahrain’s aluminum company secured a settlement valued at $450 million.

    “It takes a lot to dig in and find a basis to make the allegations he did,” said Richard Beizer, who represented another party in the case. “He’s smart. Tenacious.”

    MacDougall also does pro bono criminal defense work, primarily in South Carolina, where he’s represented several defendants facing the death penalty. Most recently he worked on the capital trial of Earnest Daise in Beaufort, S.C., which in October resulted in the first unanimous life verdict in a South Carolina death penalty case in more than a decade.

    “He can see ways that you can’t think of that [a case] could play out,” Nettles said. “It’s not paranoid, but you need to have thought through all the permutations. If ‘A’ happens, we have a plan. If ‘B’ happens, we have a plan. He’s got the ability to see around corners.”

    IN THE RUNNING FOR IMG

    William Morris Endeavor and
    Silver Lake Partners

    There’s no doubt that WME co-CEO Ari Emanuel wants to push into sports, and sources say he believes IMG is the perfect vehicle to do it. The question is: What does Silver Lake Partners think? The private equity firm has a minority stake in WME and would be the one putting up most of the money for IMG. Former ESPN executive Mark Shapiro is working on their bid.

    The Carlyle Group
    The private equity fund said last week that it had raised $13 billion for its newest fund, giving it more than enough cash to acquire IMG. It is working with ICM Partners, the movie, TV and literary talent agency. It’s unclear what their commitment or vision is for IMG, and some financial sources question their interest, but they stayed in the bid process even after KKR, another finalist, recently dropped out.

    CVC Capital and Peter Chernin
    The London-based private equity firm, which owns Formula One, was one of the first potential buyers to begin researching IMG. Its interest in the company has been strong, and they have the financial support of Mumtalakat, a Bahrain-based fund, and sports and entertainment expertise of former News Corp. President Peter Chernin. NFL Network CEO and former ESPN Chairman Steve Bornstein also is working on their bid.

    Colleen Coyle, who worked with MacDougall at Akin Gump for two decades, said: “If any one of my children were ever in trouble, Mark is the first person I would turn to. As a trial lawyer, he’s very aggressive. He really, really defends his clients to the max. He’s very bright and has very high principles and expectations of the people he works with.”

    MacDougall grew up outside of Boston. His mother was a nurse and his father was a union carpenter. After graduating from Notre Dame, he earned an MBA at Boston University and worked in corporate lending at a bank before going to law school at nights at George Washington University.

    IMG will be the first multibillion-dollar sale he’s overseen. The company, which was put on the market in August, has three final bid groups: William Morris Endeavor and Silver Lake, The Carlyle Group, and CVC Capital and Peter Chernin (see box).

    It is the second asset Forstmann Little has taken to market since Forstmann’s death two years ago. It put the fitness chain 24 Hour Fitness up for sale earlier this year. In that process, sources familiar with the process said MacDougall took a hands-off role, allowing Goldman Sachs to lead the sale. Forstmann Little ultimately pulled 24 Hour Fitness off the market when it didn’t fetch a sufficient offer.

    MacDougall has been more involved in the IMG sale, sources familiar with the process said. He has a distrust of IMG management, according to sources, and challenged IMG Chief Executive Officer Mike Dolan earlier this year after learning of Dolan’s unauthorized meetings with potential buyers before the sales process officially began. He’s also kept the high-profile advisory board out of the process, a move that many see as a response to former board member Michael Ovitz’s alleged attempt to take over IMG in 2011.

    “He doesn’t dictate the process with the exception of a deep distrust of management,” said a source familiar with MacDougall’s approach.

    But another source said, “He is 100 percent making the decision.”

    There are parallels between MacDougall’s role in making the final decision about the future of IMG and the role Jones Day attorney Michael Horvitz played in the 2004 sale of IMG to Forstmann Little. Horvitz was chairman of the McCormack Family Trust. He let management make presentations and then he negotiated the deal with Forstmann Little after it submitted a winning, $750 million bid.

    Nearly a decade later, MacDougall will play the same role. The only difference is he has a much bigger number to hit. This time IMG is expected to go for $2.5 billion or more.


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  • ATP adding Michelob Ultra to U.S. nets

    Michelob’s branding of the nets at the ATP’s 10 U.S. tourneys is seen on a mock-up from the Miami event.
    Photo illustration: ATP
    Editor’s note: This story is revised from the print edition.

    Michelob Ultra will replace Corona as the ATP’s lead sponsor in the United States next year, putting the low-carb beer brand on the nets at the circuit’s 10 U.S. tournaments through 2015.

    The deal marks Michelob’s first major move into the sport of tennis, expanding on its road racing and golf sponsorships.

    Corona remains the ATP’s top sponsor outside of the U.S. at the tour’s other 51 events. The switch in brands became necessary after the Department of Justice earlier this year required Anheuser-Busch InBev, as part of its purchase of Grupo Modelo, to cede U.S. marketing rights for Corona. Grupo owned Corona.

    “This was an opportunity for the ATP to show the flexibility … of our global sponsor program in 31 markets, 30 different countries,” said Laurent Delanney, the ATP’s CEO of Europe and commercial director.

    He added it “is the first time we did it” in splitting the lead sponsor. The ATP first signed Corona as its top global sponsor in 2010, replacing Mercedes-Benz.

    FedEx close to new ATP deal

         The ATP is close to renewing its sponsorship with FedEx Corp., said Laurent Delanny, CEO of ATP Europe and commercial director.
        FedEx first signed with the ATP in 2010, paying in the seven figures annually to align with the men’s tennis circuit.
        The FedEx deal is one notch below lead sponsor, which now will be shared between Corona and Michelob Ultra.
                                                                      — Daniel Kaplan

    There is no change in the financial structure because Anheuser-Busch InBev inherited the Corona sponsorship when it acquired Grupo Modelo. It chose the switch to Michelob Ultra, though the ATP had a say in which of A-B’s brands the beer giant tapped, Delanney said.

    “In the U.S., we are pleased to bring Michelob Ultra fans unique access to world-class tennis via the ATP World Tour, and we’re looking forward to unveiling our plans soon,” Lori Shambro, vice president, Michelob Ultra, said in a statement contained in a release due out today.

    In addition to net signage, Michelob gets on-site activation and point-of-sale branding opportunities at the 10 U.S. events.

    Michelob Ultra has a smaller presence in the U.S. than Corona, but could be a better fit for tennis. Michelob Ultra controlled 1.8 percent of the U.S. beer market in 2012, compared with 3.4 percent for Corona, according to Beer Marketer’s Insights, a trade publication.

    That said, Michelob is seen as more upscale than Corona and, combined with Ultra’s focus on low-calorie beer, is a better match with the tennis crowd, said Bob Basche, founder and principal of Connect Sports and Entertainment.

    “This is a big upgrade for them, quite frankly,” he said. “Michelob is an upscale beer in the A-B portfolio. It complements the other sponsorships that Ultra has. It is definitely not an NFL brand. It will work well with tennis.”

    Michelob currently sponsors the PGA and LPGA tours, and has supported players including Grace Park and Natalie Gulbis. The ATP’s Delanney said he did not expect Michelob to sign tennis players to endorsements because the new ATP pact is event focused.

    Michelob is also a sponsor of road races, including several marathons. Last month, the beer company announced a deal with U.S. Road Sports & Entertainment to title sponsor what is now called the Michelob Ultra 13.1 Marathon Series.

    More than a decade ago, Michelob Ultra sponsored the Pilot Pen women’s tennis tournament in New Haven, Conn. That is believed to be Michelob Ultra’s only previous sponsorship of professional tennis.

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  • Cross-licensing, niches take spotlight for MLB

    After a fiscal year in which licensed sales were flat, MLB is looking to niche areas for growth.

    MLB consumer products chief Howard Smith said sales of Red Sox championship gear were comparable to the team’s last championship in 2007, getting the fiscal year off to a nice start.

    MLB hair bows from USA Licensed Bows
    Photo by: MLB
    However, Smith said that the untold licensing story of the playoffs was the resurgence of the Pittsburgh Pirates, who produced a spike in sales after qualifying for the playoffs for the first time in 21 years.

    Having a retailer as large as Dick’s Sporting Goods based near Pittsburgh doesn’t hurt, but now Smith is wondering if the Pirates are ready to make a jump to more of a national brand. “On-field success after so long and stars like Andrew McCutchen really made a difference,” he said.

    At the licensing show during the recent MLB Industry Meetings, MLB was showing a number of cross-licenses, where more than one license is used on a product. A Hello Kitty line of apparel and hard goods, which was tested last season with some West Coast MLB teams, is being expanded to a full MLB license. “If there is something in pop culture that allows me to offer fans a different way to connect with baseball, we’re going do it,” Smith said.

    A cross-license with the “Peanuts” comic-strip characters also is being developed as a tie-in to the 2014 MLB All-Star Game, which will be played in Minneapolis, where “Peanuts” creator Charles Schultz was born. The city of St. Paul has held “Peanuts on Parade” tributes since 2000 and a similar one is being planned for 2014 to celebrate the All-Star Game with co-branded “Peanuts” character statues and other products.

    Under Armour has not shown great passion for the licensed sports business, but MLB has found a way to capitalize on the brand’s still surging popularity through a deal to combine marks with longtime apparel baseball licensee Gear For Sport. Smith said the deal was not complete; however, industry sources said the products to be sold online and at MLB venues will include T-shirts, fleece, hoodies and golf shirts, items already manufactured by MLB partners.

    Other new products displayed at the meetings included high-end, MLB-logoed boots from Eastland, and a variety of women’s jewelry and accessories, among them licensed MLB hair bows from USA Licensed Bows.

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  • Execs still looking to media rights as engine for growth

    Terry Lefton
    At Harvard Law School, a venue accustomed to deliberation, some of the leading practitioners in the business of sports recently gathered to debate some of the industry’s most critical issues. Chief among those were escalating media rights fees, which have been the catalyst driving the growth of sports for decades. If anyone in attendance had the
    answer to the perpetual question of when media rights fees will slow their exponential growth, it wasn’t offered.

    “None of us know when this bubble will burst,” said Rich Gotham, president of the Boston Celtics, who in 2011 completed a 20-year rights deal with Comcast that included an equity stake in the Comcast SportsNet New England RSN.

    Industry confidence on continued rights-fee inflation is so institutionalized that it has created a scenario wherein the tail of rights fee escalation is wagging the dog of pro team ownership.

    “You’ve got groups buying pro teams now because they like what they see as the future of their media rights,” said Andrew Kline, founder and managing partner of sports investment banking practice Park Lane.

    “Our growth’s going to continue to come from media,” said Torrey Galida, COO of Richard Childress Racing. “NASCAR’s first network TV deal back in 2001 was responsible for a huge amount of growth within the sport. … As Fox and NBC really focus on NASCAR as a premier property for their cable sports channels, that will help us grow and reach a broader fan base.”

    Fox Sports’ Larry Jones: “Now the challenge is to turn those rights into profits.”
    Photo by: TERRY LEFTON / STAFF
    Even some of those who wrote the largest rights-fee checks expressed anxiety over a market scenario in which those fees continually escalate.

    “What keeps me up at night,” said Larry Jones, Fox Sports Media Group executive vice president, “is how we are going to monetize all these huge rights fees and deals we’ve done over the last five years. Now the challenge is to turn those rights into profit.”

    Others said the outlook for the overall cable industry was of more concern to them than whether the sports rights fees gravy train will ever slow.

    “As long as the [overall] cable industry remains viable and healthy, the sports industry will do increasingly better,” said YES Network President and CEO Tracy Dolgin. “We are the engine driving industry growth. The health of the cable industry worries me more than the sports part of the cable industry.”

    Threats of cord-cutting and, to an even greater extent, a la carte pricing were cast as industry villains by cable execs already anxious about affordability.

    “It’s not whether or not people think it [cable TV] is a valuable asset,” said David Preschlack, executive vice president of affiliate sales and marketing for Disney and ESPN Networks Group. “It’s whether or not people can afford it. The lowest quintile of [annual income earners] in this country makes less than $10,000 a year. When they are faced with a $60 or $70 monthly cable bill, it’s not that they don’t want to buy, it’s just not feasible. … Within that lowest quintile are some of the best consumers of our products. That’s a scary thought as the income divide grows.”

    > PEACETIME EFFORTS: With long-term collective-bargaining agreements at top sports properties ensuring no lockouts or strikes for the foreseeable future, the top execs representing athletes and management were asked what issues were paramount during this period of “unprecedented peace.” (The current MLB CBA expires after the 2016 season, the NFL’s ends in 2020, the NBA’s new CBA expires after the 2021 season and the NHL’s expires after the 2021-22 season).

    “The perception of peace” is dangerous for unions, the NFLPA’s George Atallah said.
    Photo by: TERRY LEFTON / STAFF
    NHLPA special counsel Steve Fehr said that for his organization and the other pro athlete unions, one of the most taxing tasks is accounting for revenue. “We’re basically obligated to look under every rock to see if there’s any money they are hiding or not counting,” he said.

    George Atallah, NFLPA executive director of external affairs, said “the perception of peace for any labor union is actually pretty dangerous.” Atallah said the NFLPA’s most pressing issues are health and safety concerns, including new protocols for injured players returning to play and testing for HGH. He said that while there is an agreement in principle with the NFL on testing for HGH and the disciplinary process around that, commissioner discipline in those cases remains a sticky issue. “If a player without a positive test is disciplined by the commissioner, players believe that should go to a neutral arbitrator,” he said. “The NFL believes that should go back to the commissioner.”

    Until that issue is resolved, HGH testing in the NFL is unlikely.

    Joel Litvin, NBA president of league operations, forecast no changes in the league’s labor-management dynamic when Adam Silver becomes commissioner next year, since Silver was chief negotiator during the last CBA “and he’s been glued to [Commissioner David Stern’s] hip for many, many years.” On the other hand, “It has been difficult to do business with the union because of their vacancy at the executive director level, but they are in the process of a search.” Billy Hunter was ousted as the NBPA’s executive director in February.

    Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.

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