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NBA Commissioner Adam Silver has formed a second media committee to engage in the process of the league’s coming media rights talks, marking the latest sign of momentum in the negotiations that are expected to begin in the near term.
Bill Koenig, president of global media distribution for the NBA, said league officials wanted to include team operators in the negotiations along with getting input from the seven members of the recently formed owners panel (SportsBusiness Journal, Feb. 3-9). With no overlap in team representation between the two groups, 13 of the league’s 30 clubs are represented via the two committees for the talks.
The NBA’s current TV partners, ESPN/ABC and Turner Sports, have more than two years remaining on their eight-year, $7.5 billion deal, which expires after the 2015-16 season. An exclusive negotiating window for the two companies does not open for another year, but talks are expected to begin during the second half of the season. “The incumbents are anxious to start,” Koenig said.
The creation of the new committee further reflects what’s being seen as an inclusive management style by Silver as commissioner. Silver, along with NBA Deputy Commissioner Mark Tatum and Koenig, will lead the negotiations.
“This is an indication of how Adam intends to operate as commissioner,” Orlando’s Martins said. “He immediately has shown how he intends to be transparent.”
Martins added that the new committee can bring several perspectives to the talks. “My hope is that we bring insights from the teams as to how we can grow our fan base through the distribution of our content, not just from our games, but from digital media,” he said. “The hope also is to bring some expertise and experience from negotiating recent local agreements as well as the impact from the recent agreements on team operations.”
It’s not for a lack of popularity. The event drew almost 88,000 people to the Morial Convention Center in New Orleans this year during its four-day run and has long been a fixture at All-Star Weekend. But in a situation similar to what happened to the NFL with this year’s Super Bowl, the NBA was unable to secure the Javits Convention Center in mid-February 2015 to host the event, and there is no suitable alternative site in Manhattan.
NBA officials are contemplating grassroots basketball tie-ins across all five New York boroughs in place of Jam Session, but for now, those plans are still being formed.
Many league partners in New Orleans were unaware that Javits and the Jam Session would not be part of next year’s All-Star festivities. Silver rejected the idea of an outdoor fan festival along the lines of what the NFL offered with Super Bowl Boulevard, where the league staged events and activities across 13 blocks in midtown Manhattan.
At the Jam Session at the Morial Convention Center, sponsors and licensees got face time with almost 88,000 fans.
Photos by:TERRY LEFTON / STAFF
So with more and more sponsors activating digitally around All-Star Weekend and no Jam Session next year, expect to see a plethora of tech-based activations from NBA sponsors for New York in 2015. Also look for the league to tweak All-Star Saturday Night, which will be held at the Barclays Center in Brooklyn (site
“Adam is taking a look at everything across the league,” said Brett Yormark, chief executive officer of the Brooklyn Nets. “He wants to bring a fresh perspective, and certainly we would like to be part of something that has a freshness to it and is worthy of New York. These are all things we’ll be discussing with the league shortly.”
“Obviously it’s early,” Yormark said, “but one of the things we want to do is bring a global audience to Brooklyn. Our goal will be to make Brooklyn a destination all week long, leading up the [All-Star Game] on Sunday. Obviously, we have Friday and Saturday night, so the question is, What can we do with the league to make it a weeklong celebration in Brooklyn for fans?”
It’s also worth watching to see whether next year’s All-Star Game location will provide the impetus for the league to open a new NBA Store in Manhattan. NBA officials have been calling the current Fifth Avenue location of the NBA Store “temporary” since it opened in 2012.
“It will take 18 months to two years to build [a new NBA Store] out the right way,” said Sal LaRocca, president of global operations and merchandising for the NBA. “New York City has multiple locations for additional temporary retail, so we’re looking at that for All-Star.”
■ A NEW REALITY: Anheuser-Busch marketers used the backdrop of this year’s All-Star Weekend to shoot the second version of the brand’s “Up For Whatever” campaign, which made its debut during the Super Bowl. It’s a reality TV play in which an unsuspecting subject is handed a Bud Light and asked whether he or she is ready for anything that follows. A version that includes All-Star events and some hoops legends should be on air within a week to 10 days, said Blaise D’Sylva, A-B’s vice president of media, sports and entertainment marketing.
Since the first ad included a table tennis match with Arnold Schwarzenegger and an elevator ride with a llama, it will be interesting to see what treatment the NBA All-Star Weekend gets. The ad is from new Bud Light agency of record BBDO.
A-B switched the brand supporting its NBA sponsorship from Budweiser to Bud Light before the start of this season.
“The NBA is young and multicultural, which is right in Bud Light’s wheelhouse,” D’Sylva said. “It’s too early to fully track the results of the switch, but I can tell you that the response from our [distribution] system … has been great.”
While A-B did not anchor a 1,000-foot cruise liner in New Orleans as it did to support the recent New York Super Bowl, its presence outside the newly named Smoothie King Center was by no means understated. Working with the NBA, A-B built a 40,000-square-foot Bud Light District for parties and concerts, a space that served as a site for parties by NBA business partners TNT and Sprint, as well.
Commissioner Adam Silver has his eyes on technology.
Photo by:TERRY LEFTON / STAFF
“They have the strongest [digital/social] metrics in comparison to any league,” said A-B’s D’Sylva, “so I’m looking for them to build on that and accelerate their reach into places where their fans and our customers are living.”
That sentiment was echoed by Sharon Byers, senior vice president, sports and entertainment marketing partnerships at Coca-Cola, an NBA corporate sponsor since 1986. “We love their innovation,” Byers said. “They are consistently on top of social [and] digital trends. The whole mission of our department is combining the power of sports and music to reach consumers more effectively, and they are right with us there.”
The related ramifications of Big Data, analytics and an increasing imperative to know more about NBA customers before, during and after games were much discussed at the league’s annual Tech Summit and throughout All-Star Weekend.
“Anyone can have big data; it’s more about good data,” said Rich Lehrfeld, vice president of global sponsorship at NBA corporate sponsor American Express. “We want to get to real-time offers, based on customers’ needs and profiles. The dream is that when you show up at a venue, there are five offers waiting for you, but that doesn’t exist yet.”
Sponsorships within the playing surface are yielding the most dollars, and as the tech category becomes more finely dissected, the incursion of technology within the lines will become more and more intriguing.
“Unlike every other league, the NBA is interested in allowing technology to infiltrate the game,” said Jonathan Becher, CMO of NBA business partner SAP, while demonstrating Stats LLC’s SportVU player-tracking technology, which digitizes the video collected by ceiling cameras and turns it into a database system, through which game action can be exhaustively analyzed.
The question is, How soon will technology like that be courtside?
“When will we get to a point where this will be on a tablet on the sideline?” Becher said. “The question becomes whether ‘in-game’ means the locker room or on the sideline.’’
SAP is also involved in the program that will see NBA D-League players wearing monitors that track cardiovascular exertion and musculoskeletal intensity and measure the players’ running and jumping.
Former NBA Properties President Gary Stevenson, now cutting a TV deal for MLS, said technology and mainstream media are starting to merge. “Sports properties are looking for content that makes watching the game more intimate,” said Stevenson, now president of MLS Business Ventures. “Miking up players will take a lot longer than people think. It should be something that illustrates impact, fatigue and exertion. Think about something that would have measured the impact the Seattle Seahawks’ defense had on the Denver Broncos in the Super Bowl. That should be measurable, and it would be valuable information to the broadcaster and fans.” So it was that Silver set as one goal for the league, “taking the courtside experience and giving it global reach.” Silver said 900 million people watched some part of the last NBA Finals.
“The NBA has clearly defined itself as the world’s game,” said Wasserman Media Group chief Casey Wasserman. “Now they have to show how to make money with all that reach.”
The NFL will always set the price for sports content in the U.S., but the way in which the NBA continues to develop offshore distribution might end up being just as influential. While there was considerable buzz in New Orleans about how well the league might fare in its next TV deal, more than one NBA watcher reminded about that offshore distribution.
“You have to look at the mobile strategy and how it will impact content distribution,” said former NBA marketer Peter Farnsworth, who now heads consultancy Foxrock Partners. “If you look at Man U as an example, they have around 15 mobile phone carriers as partners.”
■ CORE FOUR: While never wanting to call any sponsorship renewal automatic, looking at the pending re-ups for the NBA, the term “slam dunk” does come to mind immediately. Incumbents on that list include longtime rights holder Nike along with Kia, BBVA Compass and Cisco. For any of those four, the real news would be if they did not renew.
“We’re having good discussions with all of them,” said Emilio Collins, NBA senior vice president of global marketing partnerships.
A new NBA TV deal is likely to affect pricing for both incumbent and potential new corporate sponsors, so stay tuned on that front. As for new business, the league continues to assiduously pursue the airlines, men’s personal care, pharmaceuticals, and health care categories.
■ MOUSE TRACKS: Amy Brooks has been running the NBA’s team marketing and business operations department since July, and near the top of her agenda has been an effort to improve the league’s in-arena operations. With that in mind, Brooks, an NBA senior vice president, has been pushing teams to engage the Disney Institute to help train their in-arena staff.
NBA executives Mark Tatum and Emilio Collins huddle in New Orleans.
Photo by:TERRY LEFTON / STAFF
“There are all these disparate groups — food and beverage providers, security, ushers — and we are seeing great integration with a focus on service standards,” Brooks said. “It’s not just the front lines of the arena, but management.”
The goal is to get fans to return to the arenas, and frequently. The league is expecting the teams’ collective season-ticket renewal rate for next season to eclipse 85 percent, comparable to this season. Giving the league encouragement for reaching that goal is having built up a record season-ticket base this season.
“Our teams are extremely focused on retention,” Brooks said. “Almost a third of the league is already out [with renewals].”
Among the top teams in new full sales this season are the Golden State Warriors, New Orleans Hornets, Charlotte Bobcats and Sacramento Kings.
Teams this year began hitting the season-ticket renewal market early, with some clubs going out as soon as late December. The trend of teams selling season-ticket “memberships” also is growing, with at least half of the NBA’s 30 teams now offering yearlong season-ticket-benefit programs.
Additionally, Brooks has added one new account executive to her staff. Jordan Solomon joined the NBA earlier this month as a vice president in the team marketing and business operations department. He previously worked for McKinsey & Co.
Brooks said she now has one open spot in her 40 staff-member department.
■ HIVE TALKING: The Charlotte Bobcats may be have a sub-.500 record on the court — albeit good enough to be a playoff contender in the East — but the franchise is winning notice leaguewide for its yearlong rebranding campaign built around changing the club’s name back to the Hornets.
The team will begin the next phase of its $4 million relaunch the second its season ends — as that’s the moment when the franchise can officially relaunch the Hornets name that Charlotte’s NBA club had between 1988 and 2002. “Everything in the arena will then change,” Bobcats President and COO Fred Whitfield said.
The team this summer will build special events around the unveiling of Charlotte’s new jersey and a new playing floor at Time Warner Cable Arena. The return of former mascot Hugo the Hornet will be carefully orchestrated, as well. “It will be refreshed but will not look foreign,” said Seth Bennett, senior vice president of marketing for the Bobcats.
The team can only hope its new look will add traction to its television product. Through the All-Star break, the team was averaging just 9,000 homes per game on Fox Sports Carolinas, second to last in the NBA.
The NFL aggressively added to its staff in the 12-month period ended March 31, 2013, with the league’s employment level jumping by 20 percent, to 1,858 employees, according to a review of the NFL’s two most recent tax returns.
That employment figure includes staff for the league office, some game-day operations, NFL Films and NFL Network, but not staffing at the league’s 32 teams. The clubs do, however, have a tie to the additional 312 employees that were hired in that the teams were called upon in part to help pay for the new head count. Teams paid $10.2 million each to fund the league in the 12-month period ending in 2013, a sharp 28 percent jump from the year-earlier period and the highest level for teams to date.
“[The NFL] added more sideline personnel on game day to run the injury surveillance systems, add[ed] more people to work at league meetings, added more people for production of Thursday night games,” NFL spokesman Brian McCarthy wrote in an email explaining the employee number. “Most of the people work just on game day or a short assignment.”
The Thursday night games have been on NFL Network but now will be split between NFL Network and CBS Sports for the coming season. Notably, though, CBS will assume the production costs for the full slate.
McCarthy also cited the staffing needs of the four-hour morning show on NFL Network, “NFL AM,” for causing the staffing jump. The show debuted in summer 2012.
The overall cost of running the league has risen sharply for the teams in recent years, with a near doubling over the five years ended March 31, 2013, according to an analysis of the NFL’s tax returns. The 32 clubs paid $327 million in the 12 months ended March 31, 2013. Five years prior, for the year ended March 31, 2008, the sum was about $166 million, or $5.2 million per club.
“As a general principle, it is still an efficient use of money because about 75 to 80 percent of team revenues are generated at the league level,” said Marc Ganis, a sports consultant with strong ties to the NFL. Also, he said, the rise in overall revenue is generally proportional to the percentage rise in club dues. The league’s annual revenue has increased from $6.5 billion five years ago to $10 billion now.
What else is the owners’ money paying for?
The biggest expense item for the NFL is interest cost from leaguewide financings, like the stadium financing bonds that reside on the league’s balance sheet. The NFL’s total cost in the year ended March 31, 2013, was $123 million, an amount that’s down from $135 million the year earlier.
The second-biggest cost — but arguably the most discussed publicly — is compensation. That sum was $102.3 million in the 12 months ended March 31, 2013, and that total included the $44.2 million paid to Commissioner Roger Goodell.
Not only did Goodell’s compensation increase over the past year, but the amount that his pay represents of full league pay increased as well. In the year ended March 31, 2012, Goodell’s $29.5 million compensation represented 27 percent of the league office’s total payroll cost. That share jumped to 43 percent in the most recent period, with the $44.2 million compensation.
Legal fees surged to $19.8 million from $10.3 million, underscoring the steep costs of the ongoing concussion litigation for the league. The NFL paid Paul, Weiss, Rifkind, Wharton & Garrison, the lead outside counsel on the consolidated case, $9 million in the 12 months ended March 31, 2013, according to the return. Covington & Burling, the league’s longtime outside counsel, received $7 million. A year earlier, no law firm resided in the NFL’s top-five paid outside contractors.
The second-highest paid outside contractor in the year ended March 31, 2013, was Gubser & Schnakenberg of Lincoln, Neb., with $8.99 million. The company makes the upgraded digital helmet devices that were introduced in 2012 that allow coaches to speak to players on the field more clearly than the prior analog system that was in place.
Event production costs also nearly doubled, to $15.3 million from $7.8 million.
It didn’t take long for NFL Now, the league’s nascent digital network, to get dragged into a lawsuit.
Players suing NFL Films over their use in that group’s footage last week cited NFL Now as a prime example of how they are being exploited.
“This new frontier for the commercial exploitation and monetization of Class Members’ images, for overtly commercial purposes, will be a prime source of new discovery in the present action,” the plaintiffs’ attorneys wrote in a motion filed last week in the case, Culp v. NFL Films.
Hall of famer Curley Culp is the lead plaintiff. The case, filed in New Jersey federal court, seeks payment for the use of retiree images in NFL Films.
Culp and more than 2,100 other retirees have opted out of the pending settlement of a similar case in Minnesota, Dryer v. NFL. They contend the proposed $50 million settlement in the Dryer case does not compensate the retirees appropriately.
The NFL is seeking to have the Culp case moved to Minnesota federal court (as it is with a similar case filed in Pennsylvania federal court). Culp’s lawyers filed a motion opposing the move last week, and it was in those papers that they raised the NFL Now issue.
The NFL announced its NFL Now product during Super Bowl week and plans to launch the offering this summer. The network will provide team-by-team customized content via computers, tablets, mobile devices and game consoles, as well as a link on Yahoo.
While the NFL will lean heavily on teams to supply content for NFL Now, NFL Films is also a key component of the plan.