SBJ/June 16-22, 2014/Leagues and Governing Bodies

Silver shifts attention to TV meetings

The Donald Sterling saga and the proposed $2 billion sale of the Los Angeles Clippers to former Microsoft CEO Steve Ballmer has dominated the talk surrounding the NBA Finals, but league Commissioner Adam Silver is shifting his sights to another piece of league business likely to bring another jaw-dropping price: a new television deal.

While Silver and his cadre of lawyers are working to clear the Clippers sale in light of lawsuits filed by Sterling, the pursuit of a new TV rights deal sits at the top of the league’s business agenda.

“It’s our highest priority right now,” Silver said an hour before the tipoff of Game 1 of the NBA Finals in San Antonio.

The league and executives from Turner Sports met last week in Miami before Game 3 as the series moved to South Beach after the first two games in Texas. Turner Sports President David Levy and executive vice president Lenny Daniels met with Silver in Miami while ESPN President John Skipper was in Brazil for ESPN’s coverage of the World Cup. ESPN officials met with the NBA on June 11.

NBA Commissioner Adam Silver has said he hopes the league can extend its TV deal with Turner and ESPN.
Photo by: GETTY IMAGES
League, Turner and ESPN executives have had previous conversations related to a new television deal, but the sit-down in Miami comes after a series of meetings and conference calls from both of the NBA’s media committees, one made up of owners, the other composed of top team executives.

Bill Koenig, NBA president of global media distribution, is leading the negotiations with ESPN and Turner.

The talks in Miami come well in advance of the exclusive negotiating window for the incumbent rights holders that begins next spring. The new agreement will replace the league’s eight-year, $7.5 billion deal that expires after the 2015-16 season.

Silver has said publicly that he hopes the NBA will extend its deal with Turner and ESPN before going out to market for a deal that is expected to double in value from the current fee.

The discussions in Miami begin the process of sorting out myriad issues as the incumbent networks prepare to dig deep into their pocketbooks to try to keep the NBA.

THE PRICE OF SUCCESS: Eric Woolworth, Miami Heat president of business operations, will discover the future value of the Heat’s television rights as he begins his own set of TV negotiations with Fox-owned Sun Sports.

Sun Sports’ current deal with the Heat is set to expire after the 2017-18 season, and Woolworth said negotiations for an extension are near.

“We will start soon,” he said.

The Heat’s LeBron James, Dwyane Wade and Chris Bosh can opt out of their contracts this summer.
Photo by: NBAE / GETTY IMAGES
Woolworth will be well-schooled when he sits down with Fox Sports President Randy Freer to discuss a new RSN deal. Woolworth is a member of the league’s media committee, giving him added insight when it comes to mastering the nuances of cable negotiations.

“Sitting on the media committee has been really interesting,” Woolworth said. “I tease Randy Freer that he does a couple of these deals every year and we do them once every eight years.”

A TV deal presents an interesting set of negotiations for the Heat and Sun Sports.

Market size helps determine rights fees, and the Miami market ranks as the 16th largest in the country, but having LeBron James as the league’s star attraction adds leverage, so it’s no wonder Woolworth wants to get a jump on discussions after the Heat’s four consecutive Finals appearances. Also, the Heat’s Big Three of James, Dwyane Wade and Chris Bosh all have a year left on their contracts and can opt out this summer.

This season, the Heat earned a 6.85 average rating on Sun Sports, third highest in the NBA behind the Spurs and the Oklahoma City Thunder.

Under Woolworth, the Heat have been aggressive in leveraging the team’s success behind James. The team this year again will have a 98 percent season-ticket renewal rate and will set a franchise record for sponsorship revenue, although Woolworth wouldn’t reveal specific figures.

The Heat also recently signed a new lease at AmericanAirlines Arena.

“We will reinvest in the arena and it will create some new inventory,” Woolworth said.

Despite the crush of demand for season tickets, the Heat again will hold some ticket inventory back.

“We are sticking with the plan,” Woolworth said.

A NEW MARKETING APPROACH: Since his Feb. 1 promotion to NBA deputy commissioner, Mark Tatum’s main focus has been on overhauling the league’s marketing strategy.

“We are revamping our approach to marketing, and I am going through the data and research,” Tatum said. “We are laying the foundation, and over the next three to six months, we will start activating in an aggressive way.”

Some new marketing initiatives around the Finals give a glimpse of what’s to come.

For the first time, the league created its “Facebook Live” feature that gave fans the opportunity to ask players questions during practice media availability. The 30-minute digital programs featured both Heat and Spurs players, including James.

The NBA also took a bigger and deeper media buy surrounding the Finals and for the first time cross-promoted the postseason across Turner and ESPN.

“We are set up to take a completely different approach to marketing and we are getting there,” Tatum said. “We are still in the early stages. It’s about the stories and insights to the players.”

Tatum said he is spending more than half of his time on the marketing overhaul. Along with those duties, he will travel to South Africa and China this summer. He recently attended the league general managers meeting, and he will continue to visit NBA teams as he looks to grow more familiar with the team basketball operations staff.

“It’s about getting them to know me,” he said. “I haven’t been on that side of the business before.”

MORE FLOOR ADVERTISING: Expect to see at least 10 of the NBA’s 30 teams to have floor apron signage deals by the start of the 2014-15 season, according to Amy Brooks, executive vice president of the NBA’s team marketing and business operations division.

Last June, the NBA approved a plan allowing teams to sell ads on the floor aprons in front of team benches. Just six teams signed apron deals last season, but Brooks said that the number will grow to the double digits during the offseason.

“Teams want to do the right types of deals,” Brooks said, adding that the apron signage is the second most valuable piece of team sponsorship inventory behind arena naming-rights deals. “It’s not just an asset, it’s the cornerstone of large partnerships. It’s jewel inventory.”

The NBA’s Amy Brooks expects at least 10 teams to have floor apron signage deals by the start of the next season.
Photo: COURTESY OF INDIANA PACERS
The value of the apron deals ranges between $750,000 and $1.2 million annually, according to one source familiar with the inventory.

In addition to the increased number of floor deals, Brooks said that full-season-ticket sales and renewals were pacing ahead of last year.

“Pricing is flat to up slightly, but we are seeing more tickets sold,” she said.

Among the new full-season-ticket sales leaders are the Washington Wizards, Charlotte Hornets, Philadelphia 76ers and Toronto Raptors, a franchise that is surging under the direction of Maple Leaf Sports & Entertainment CEO Tim Leiweke.

“The Toronto story is a re-energization of the fan base up there,” Brooks said. “They are up significantly in new fulls, and their renewals are among the highest in the league.”

PARTNERSHIPS IN PLAY: Emilio Collins, the NBA’s executive vice president of global marketing partnerships, was a busy man at a reception inside the AT&T Center with league sponsors in attendance.

It’s the start of an active summer for Collins as he looks to renew league partnership deals with BBVA, Kia, Cisco, Nike and Autotrader that end this year. While Collins works to keep those partners, he said he also will begin talks with executives from some of the NBA’s longest-running and biggest-spending partners — Sprint, Anheuser-Busch and Coca-Cola — to renew deals that expire at the end of next season.

“We start those a year out,” Collins said.

Look for the NBA to land a headphones deal this summer, while talks also heat up in the health care/wellness category.

“The whole health care and wellness category is really ripe,” Collins said. “There are five or six conversations we are having in that space.”

The NBA also is close to rolling out new partners for USA Basketball.

“We have a number of partnerships that we will be announcing this summer,” Collins said. “We will bundle them together and will see them around July.”

Another new sponsorship activation for the NBA this year comes in mid-July when Samsung puts its name on the growing Las Vegas NBA summer league, which runs from July 11 through July 21 at the Cox Pavilion and Thomas and Mack Center. It’s the first title sponsorship for the summer league, which this year includes 24 teams.

The once-sleepy Vegas summer league has been seen as one of the most undermarketed league assets. But it is becoming a major week on the league calendar. Along with board of governors and team president meetings, the NBA will hold other departmental meetings in Las Vegas during the week.

MERCHANDISE MATTERS: Total NBA merchandise sales this year are up between 15 percent and 20 percent compared with last season, said Sal LaRocca, president of global operations and merchandising for the NBA.

“It is the biggest percentage gain in the last few years,” he said.

Driving the gain is a record sales year in the video game category, while the league’s international merchandise sales continue to grow. Another noteworthy trend this year has been an increase in trading card sales, which according to LaRocca has been the strongest in years.

This year, James had the top-selling NBA jersey, and a Heat “Three-Peat” championship would only add to the league’s merchandise sales increase.

“It’s the same two teams as last year, but each team has a different story,” LaRocca said. “Miami has wide appeal outside the market, and certainly with LeBron there is global appeal, and that helps.”

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