More money, tech in preview centers Champions 2015: Tom Jernstedt New commish, expansion greet AFL season Youth lacrosse tourney inspired by LLWS Comcast stakes claim at SunTrust Park Will Cowherd be the new Maher? The NHL and the Canadian dollar IMG College deepens ties with NCAA Toyota, iHeartRadio play Rock ‘n’ Roll Univision to produce weekly NBA shows
SBJ/Aug. 4-10, 2014/FranchisesPrint All
You’d think if someone said, ‘I’m the owner of a minor league team,’ they’d have a pretty good idea of how to run it so it made money,” Michael Savit was saying. “That wasn’t the case.”
Not so long ago, minor league baseball teams in most regions of the country were available for a song, often less than $1 million. In some cases, they were acquired for nothing more than the willingness to pull the prior owner out of a hole. “It was a common theme back then,” said Pat O’Conner, a 31-year veteran of Minor League Baseball who has served as its president since 2007. “You needed eight teams to have a league. ‘Take the eighth for assumption of debts.’”
In June, the Frisco RoughRiders sold for $32 million, a minor league record price that was topped less than a month later.
Photo by:FRISCO ROUGHRIDERS
“My only regret was that I didn’t get involved earlier,” said Savit, a former IMG executive who bought his first franchise in 1997. “In those days, if you wanted a franchise, they’d pretty much just say, ‘Go ahead.’”
The Dayton Dragons emerged from one of those situations. From 1988 through 1999, they suited up as the Rockford Expos, the Rockford Royals, the Rockford Cubbies and the Rockford Reds, drawing around 1,000 fans a game. In 2000, Mandalay Sports Entertainment, the investment fund founded by movie producer Peter Guber, bought the team and took it from Illinois to a new stadium in Dayton, Ohio, within commuting distance of the parent-club Cincinnati Reds.
The Dragons haven’t played before an unsold seat since.
Last month, Savit’s HWS Group paid $40 million to Mandalay for the Midwest League’s Dragons. The purchase price was a record for a minor league affiliate — and it only bought Savit a Class A franchise — but the transaction didn’t happen in a vacuum.
For more than a decade, smart shoppers have been buying up teams, often clubs with negative balance sheets. “Either it’s a market issue, or stadium, or operations,” said Stuart Katzoff, whose Manhattan Capital Sports Acquisition fund owns teams in Reno, Nev., and Bowling Green, Ky., and is hunting for more. These operators increase their teams’ cash flow — and their value — with better operations, enhanced facilities, and professional marketing and sponsorship. They’re perfectly willing to move them to a distant state if they can get someone there to build a new ballpark.
The resulting rise in valuations has been dizzying.
The Class AAA Tucson team that Katzoff purchased in 2006 for $15 million was playing in a city where “it’s 116 degrees in the summer and rains at 4 every afternoon, and there are 30 days of spring training right before the season,” he said. He relocated the team to a gleaming new facility in Reno. “Reno was the redefinition of the AAA market,” O’Conner said. If sold today, the Aces would probably fetch $30 million.
Dubious? Just months before Savit’s group bought Dayton, Mandalay sold its Class AA Frisco (Texas) team to former Texas Rangers CEO Chuck Greenberg for $32 million. Earlier this year, a group led by multiple franchise owner Ken Young bought the Class AA Huntsville (Ala.) Stars for $16 million.
The Stars, who play in a 30-year-old stadium, are heading for Biloxi, Miss., and a $36 million facility that is being built by the city and state on land provided by a local casino.
“By the time we put this team in a new ballpark, the value of the franchise should have accrued 30 to 35 percent,” Young said.
“People call about San Antonio,” said Dave Elmore, who owns the Class AA franchise there, as well as six other Minor League Baseball teams. “The first thing they say is, ‘Look, I know it’s going to be at least $25 million.’”
Art Silber, who spent about $500,000 in 1990 to buy the Class A team in Prince William County, Va., that is now the Potomac Nationals, said he gets offers regularly. “A guy will call who already owns another ballclub or two,” Silber said. “He’ll tell me, ‘Without even looking at your books I’ll offer you $15 million.’ I was a highly trained financial analyst, but in my wildest dreams, I could never have imagined that this business would have evolved to what it is now, and that this ballclub would be worth this much.”
Asked if he finds the offers enticing, Silber shook his head. In 2017, he’ll move the team to a self-financed ballpark in what he calls a “perfect location,” alongside I-95 in Woodbridge, Va.
“Right now, we have the worst ballpark in the league and one that probably ranks in the bottom 10 of organized baseball’s 160,” he said. “At the new ballpark, the visibility will be extraordinary. Naming rights alone will pay for a lot of the stadium.”
He can only imagine what the team will be worth.
Taken together, Minor League Baseball’s numbers are startling. Some 40 million Americans (and a few Canadians) went to a game last year. That’s more in total attendance than what the NBA, NHL or NFL can tout.
The games themselves are ostensibly the same as MLB’s, merely a few notches below. But as a business, this is a vastly different enterprise, as removed from the majors as college basketball is from the NBA.
“What keeps fans coming back,” said Bradley Reynolds, general manager of the Southern League’s Mobile (Ala.) BayBears, “isn’t baseball. If they want a better baseball game, they can see it on ESPN. This is about affordability, family fun, wholesome entertainment. That’s what makes this business unique and what makes it work.”
The Dayton Dragons, which sold for $40 million in July, boast a sellout streak that began in 2000 when the team moved into its new stadium.
Photo by:DAYTON DRAGONS
But there are common factors driving the valuation surge. The old generation of mom-and-pop ownership is dying off, or selling. That has created opportunity. “A lot of minor league baseball was owned by groups of local investors who were having fun and not really paying much attention,” Katzoff said.
Katzoff’s fund, which he runs with his father, Jerry, isn’t much different from Mandalay, which has owned or run eight different franchises since 2000 and is currently divesting. (Note to potential investors: Erie and Oklahoma City still remain.) “Peter Guber was ahead of his time,” Katzoff said. “He accumulated a bunch of teams … and sold out to Seaport Capital. They had a fund life, and the fund ended. But it had its run.”
Katzoff’s group has no time horizon. It plans to distribute returns as it goes. “So after five or seven years, you get all your money back and you’re sitting on an asset,” he said. “And this happens to be a very good business if you purchase the team right and operate it right. These are profitable teams, not hobbies.”
The opportunity for profit comes because costs are low. Parent clubs supply the players, whom they can promote, trade or release with impunity. That makes marketing personalities, or even competitive success, almost impossible, but it also means that player salaries aren’t an expense. And with many of the ballparks built to lure teams from other cities, rents are low or even nonexistent.
That’s the expense side. Revenue consists of ticket sales, suites and club seats for the increasing number of teams that have them, and finding local and national companies to put their names on as many different aspects of the game and parts of the stadium as possible. Those ceremonial first-pitches, fan-participation contests, between-innings promotions, and sing-alongs that are so much a part of the minor league experience exist primarily as sponsorship inventory.
These days, too, branded items — from game-worn jerseys to beer mugs, sold at the stadium and online — are an increasingly relevant profit center. If your nickname is unique and proprietary, like Flying Squirrels, Isotopes, Lake Monsters, Sea Dogs, Sand Gnats or Biscuits, so much the better.
“There was a day — and you’ve heard it a million times — that the way to make a small fortune in baseball was to start with a big one,” O’Conner said. “That’s not the case anymore. These teams are not only gaining in valuation, but most are holding their own.”
Some minor league teams have cash flow into the seven figures, O’Conner notes. Only a third of teams are losing money, and in most cases, the losses are negligible. “If your day job is to work the market, you can do better than in baseball,” he said. “But if you want a real safe place to park your money, that’s where we come in as a very attractive alternative.”
It isn’t just potential profits driving these sales. “They’re not based on the normal economic model of how you value a business,” Savit said. “For whatever reason — and I’m very happy about this — people don’t value these teams like they would any other business in their community.”
Sports teams are a perk of wealth in American culture, a bauble for successful businessmen. With the cost of a major league team into nine figures (or more), the minors have become the way for mini-moguls to get the kick of owning controlling interest.
“Part of the reason that valuations are high is vanity,” Elmore said. “People are willing to accept 3 percent to 5 percent return on their money if they can say they own a team.”
Until MLB expands, something not on the horizon, the number of affiliates across the 17 leagues will remain static. The market consists of what’s there now, and nothing more — unless you count the independent leagues, which operate without fail-safes against franchises taking on excess debt or playing in substandard facilities. Independents also pay their own player salaries.
To O’Conner, a signal event in the growth of Minor League Baseball — following the 1988 movie “Bull Durham,” which put the sport in the American consciousness for a new generation — was the dot-com boom and subsequent bust. “All of a sudden, there was a lot of money sitting on the side, looking for somewhere to go,” he said. The same happened in 2008, when capital was pulled out of the stock market. Wealthy businessmen with more than enough savings to live on were suddenly out of that game — and looking for a new one.
Gary Green (above) paid more than $15 million for the Omaha (Neb.) Storm Chasers. The team will draw roughly a half million fans this season.
Photos by:OMAHA STORM CHASERS (2)
One Saturday evening recently, Green’s Storm Chasers were playing the El Paso Chihuahuas. In many places around Werner Park, you’d never have known it. The kids in the 7,500-square-foot Centris Family Fun Zone in left field, or riding the Universal Studios carousel, might have been at an amusement park. The 20-somethings in a foosball game at the Budweiser Downdraught Bar, or sipping the team’s proprietary Ale Storm beer (available in stores starting this summer), could have been whiling away time at a pub.
Big league games are so expensive you’d better spend your time watching baseball. But in the minors, a $6 ticket can be perceived as the cover charge to a bar, or the cost of entry to access an entertainment arcade. “We need to always be doing something different, giving people new reasons to come to the ballpark,” Green said.
The Storm Chasers will turn a profit this year, as they have annually since 2007, and draw roughly half a million fans. “That’s one-sixth of what the Dodgers will draw, but we’re not worth one-sixth of what the Dodgers are worth,” Green notes. “The difference in value is in the broadcast contract. That’s where the next shift will come from. There’s a great demand to see these young prospects who have almost mythical qualities. Better broadcast quality will help us fill that demand, and profit from it.”
That has started to happen. In 2008, the minor leagues’ governing body created the Baseball Internet Rights Co. as a way to standardize Internet content across all the affiliated teams. Beyond free websites for teams, that includes live streaming of minor league games. If you’re a fantasy baseball owner who wants to scout prospects, or you’re just a hard-core fan of a big league team who’s eager to see the young players in the pipeline, you have far more access than ever before.
“BIRCO is going to be a leader for us in virtually every aspect of our business: e-commerce, exposure, everything else,” O’Conner said. “Right now, we’re limited to 160 communities. With BIRCO, we’re only limited by AC/DC power and an Internet connection. It opens up our universe.”
Once an owner learns how to run his team at a profit, keeping expenditures low and finding incremental new income, it becomes clear that the formula will work elsewhere. There’s no direct economy of scale in owning more than one team, no additional purchasing power or reduced labor costs. But there’s an intellectual economy of scale at play.
“The names change and communities change,” said Reynolds, who runs Mobile for Savit. “But once you have the confidence in the model, it’s fairly easy to replicate it from city to city.”
“Most cities, Tuesday nights are dead,” said Elmore. He was edging his way through a crowd of 8,500 in Colorado Springs on a Tuesday in May: a sellout despite a downpour that delayed play for half an hour. By combining group sales, Tuesday night season tickets and discounts, he said, the Sky Sox “get to 8,000 week after week.”
Elmore bought his first team, the old Hawaii Islanders, in 1981, for $1 million. He moved it to Colorado Springs in 1988. The market is the second-smallest in Class AAA, but the franchise has rolled along, making money while accruing value. “You can put up with low earnings if you don’t have to service debt,” Elmore said.
In a ramshackle facility that poorly serves its suburban Washington, D.C., market, one of the most affluent in baseball, Art Silber has been doing just that for years. Silber was CEO of Baltimore’s Sterling Bank & Trust in 1988 when he helped friends finance the purchase of a team in Frederick, Md. After helping fund “maybe a dozen” franchises for friends, Silber landed one of his own. Silber invested $300,000 and borrowed a bit more. “People convinced me it was something I should do, and it didn’t take a lot of convincing,” he said.
Today, he’s sitting on an asset worth … $20 million? $25 million? His proposed $70 million stadium, which will be built on land donated by the municipality, will change that. “We’re counting on 200,000 to 300,000 in annual attendance,” he said. “But we actually think we can hit 400,000.” It’s a figure that would have annually exceeded that of several big league teams when Silber was growing up in Brooklyn, but it wouldn’t rank his club in the minors’ top 10 today.
Silber has retired to Florida. His daughter, an MBA with a banking background, runs the team with little regard for what happens on the field. “I’m not a sports person,” Lani Weiss admitted. “I’m a woman running a family business that happens to be a baseball team.” She’s in the office every day, making executive decisions and poring over the finances. But she often doesn’t stay for the game.
Many of today’s owners can’t visit their teams every week, or even every month. They hire general managers to run them and pass through when they can.
On a recent evening, one such absentee owner stepped on a plane in San Diego, headed for a Class A game in Visalia, Calif. Over the past decade, Tom Seidler has resurrected a once-thriving baseball market that had fallen on hard times. He’s no dot-com millionaire or construction magnate but a baseball lifer born into the sport. His grandfather, Walter O’Malley, owned the Dodgers.
Growing up, Seidler parked cars at Dodger Stadium. He served an internship for Great Falls, Mont., in the Pioneer League, and later returned to run that team. When the O’Malleys sold the Dodgers to News Corp. in 1998, he and Peter O’Malley’s son, Kevin, looked to keep the family in the sport on a smaller scale.
“Baseball had been in Visalia since the 1940s,” Seidler said, sitting in an air-conditioned lounge at Rawhide Ballpark, home of the team now known as the Visalia Rawhide but known for many years as the Visalia Oaks. “Yet when we got here, we never saw Oaks T-shirts or hats, or posters in windows. It was like the team didn’t exist.”
The Visalia (Calif.) Rawhide found renewed community support following a change in ownership.
Photo by:AP IMAGES
Visalia is in California’s Central Valley, but it has a Midwestern tenor. It’s less than an hour from the San Francisco Giants’ top farm club in Fresno, but you get the sense that few Rawhide fans have made the trip. The team is rooted in the community.
The contrast could hardly be more striking with the other team that Seidler’s family owns. In 2012, Peter O’Malley headed a group that purchased the Padres. Seidler moved to San Diego to help run his uncle’s franchise. Now he shuttles between major and minor league baseball like a marginal prospect, watching Albert Pujols and Yasiel Puig pass through Petco Park one night and greeting old friends in the stands during a Rawhide-High Desert Mavericks game the next.
Visalia isn’t even a Padres affiliate; it’s a Class A outpost of the Arizona Diamondbacks. There’s no grand scheme, no plan to dovetail the investments under the same player-development umbrella. Nevertheless, Seidler perseveres. Outsiders can’t quite understand why. “Someone covering a major league team for a newspaper doesn’t keep stringing for a paper in a minor league city,” O’Conner said with a laugh.
Then he explained it. “This is an entirely different model than the majors,” he said. “At any minor league game, half the people leave without even knowing which team won or lost. But what they do know, what surveys show that 98 percent know, is that they’ve had a hell of a good time — and that they’re coming back. We sell the sizzle. It’s a whole different business.”
Bruce Schoenfeld is a writer in Colorado and a frequent contributor to SportsBusiness Journal.
Like their affiliated counterparts, minor league baseball’s independent leagues are experiencing a historic rise in franchise values. But the financial landscape is much more specific to individual clubs and markets.
The most lucrative sale of an independent minor league team is believed to be the Atlantic League’s Long Island Ducks, when former Deutsche Bank Chief Executive Seth Waugh acquired a controlling interest in the club in 2011 in a deal valuing the franchise at $24 million.
Several other independent team sales have reached eight figures, and executives from the nonaffiliated leagues said thriving franchises such as the Sugar Land Skeeters in suburban Houston, also of the Atlantic League, would fetch a price very similar to the recent $40 million Dayton Dragons sale if they were for sale.
Without the baseline of a defined MLB team affiliation and market territory, though, independent league teams are more closely scrutinized on their own actual, year-to-year financial performance.
“The value of independent clubs, I believe, is much more realistic and tied to the bottom line,” said Miles Wolff, commissioner of both the Can-Am League and the American Association. “If you wanted one of the top independent franchises — a St. Paul, a Sugar Land, something like that — you would definitely pay a lot. Others, at the other end of the spectrum, you still might get for less than $1 million. But independent baseball is not limited by scarcity, a defined number of franchises, so it’s a different situation.”
Indeed, the growth of independent leagues such as the Atlantic League and American Association over the past decade has been a rather targeted progression in which markets, facilities and ownership groups were carefully chosen to promote individual financial success since there is no assistance from an MLB parent club. As a result, owners who have experience in both affiliated and independent clubs say it is the independents that more routinely turn a profit.
“The independents really succeed or fail based on their own talent and the connections they make with their particular market,” said Peter Kirk, chairman of Opening Day Partners. The firm owns several Atlantic League teams, including the Skeeters, and previously was involved in several affiliated clubs. “That’s different from a situation like, say, Harrisburg. That franchise sold for more than $13 million [in 2007], which was a league record at the time, and it had never made a penny.”
As major league team valuations continue to soar, and in turn price out many high net-worth individuals and shift them toward the minor leagues, Kirk said he expects to soon see independent league values move into the $30 million to $50 million range. The Atlantic League is aiming to soon expand from its current eight teams to 12 and in the coming months will set the expansion fees for those additional franchises.
Those fees present a bit of a dilemma for the Atlantic League, though. The league’s expansion fee, historically $3 million and termed a “membership fee,” is no longer reflective of current market conditions. A higher fee would help set a new floor in valuations for the existing team owners but also could hamper the financial viability for the startup teams that in most instances must also take on a multimillion-dollar commitment for a ballpark.
Kirk said he expects the league to take a conservative tack in setting the new fee.
While independent teams have enjoyed greater latitude to operate as they see fit, they also must pay their own players and coaches and supply their own equipment — unlike affiliated teams, where those costs are covered by the major league parent club. And the independent leagues do not enjoy the revenue enhancement of Minor League Baseball collective ventures such as the BIRCO online initiative or the Project Brand sponsorship effort. Because of that, some prominent sports bankers have not elected to get involved in independent league team sales.
“We’ve sort of made a judgment that it’s been better for us to stay on the affiliated side,” said Bob Caporale, chairman of Game Plan and the banker for the recent Dayton Dragons sale by Mandalay Baseball Properties. “With the affiliated clubs, the baseball side is basically covered by the parent club, so the operators can really just focus on the business. It’s easy to get distracted in this business by the team operations, which we see a lot in the major leagues, so the affiliated minors have an enviable situation where they’re not responsible for the labor costs.”
Editor’s note: This story is revised from the print edition.
Almost one quarter of Minor League Baseball’s 160 clubs are owned by 10 groups that have three or more teams in their portfolio. That number increases to roughly 38 percent if you add in the 11 groups that own two clubs. These groups typically include executives who have deep business backgrounds both inside and outside of sports.
OWNERS WITH 3+ CLUBS
7th Inning Stretch
■ Key executives: Tom Volpe, chairman, CEO; Pat Filippone, president and general manager
■ Teams (when acquired): A-Adv. Stockton Ports (2002)*, A Delmarva Shorebirds (2006), A-Short Everett AquaSox (2008)
■ Notables: Volpe was an investment banking and risk capital executive leading up to his purchase of the Ports.
Beaver Sports Properties
■ Key executives: Don Beaver, president; Peter Fisch, director of operations
■ Teams (when acquired): A Hickory Crawdads (1993), AAA Charlotte Knights (1997), AAA New Orleans Zephyrs (2000)
■ Notables: Beaver also is a minority owner of the Pittsburgh Pirates.
Brett Sports & Entertainment
■ Key executives: Bobby Brett, principal owner; Brent Miles, president; George Brett, partner
■ Teams (when acquired): A-Short Spokane Indians (1985), A-Short Tri-City Dust Devils (2004), A-Adv. Rancho Cucamonga Quakes (2009)
■ Notables: Also owns the Western Hockey League’s Spokane Chiefs and produces radio broadcasts for Gonzaga University.
Elmore Sports Group
■ Key executives: David Elmore, owner, chairman; Donna Tuttle, co-owner; Douglas Elmore, managing director
■ Teams (when acquired): AAA Colorado Springs Sky Sox (1981)*, A-Short Eugene Emeralds (1983), Rookie Idaho Falls Chukars (1986), AA San Antonio Missions (1987)*, A-Adv. Inland Empire 66ers (1993)*, Rookie Helena Brewers (1999), A-Adv. Bakersfield Blaze (2006)
■ Notables: Elmore was a partner with McBride, Baker, Wienke and Schlosser in Chicago from 1958-68 before founding Elmore Sports Group in 1969. The group also owns the ECHL Utah Grizzlies.
Greenberg Sports Group
■ Key executive: Chuck Greenberg, chairman
■ Teams (when acquired): A-Short State College Spikes (2006), A-Adv. Myrtle Beach Pelicans (2006), AA Frisco RoughRiders (2014, pending)*
■ Notables: Greenberg is a former managing partner and CEO of the Texas Rangers.
■ Key executive: Mike Savit, managing partner
■ Teams (when acquired): AA Mobile BayBears (2003), A-Adv. Modesto Nuts (2005), A-Short Mahoning Valley Scrappers (2008), A Dayton Dragons (2014, pending)*
■ Notables: Savit worked for IMG from 1981-97, specializing in event management. He also owns Coastal Plain League Columbia (S.C.) Blowfish.
■ Key executives: Robert Rich Jr., chairman, Rich Products Corp./vice president, Rich Entertainment Group; Melinda Rich, president, Rich Entertainment Group; Jonathan Dandes, president, Rich Baseball Operations
■ Teams (when acquired): AAA Buffalo Bisons (1983), AA Northwest Arkansas Naturals (1987), A-Short Jamestown Jammers (1994)
■ Notables: Also owns the Palm Beach (Fla.) National Golf and Country Club.
■ Teams (when acquired): AAA Norfolk Tides (1993), AA Bowie Baysox (1996), AAA Albuquerque Isotopes (2002), A-Adv. Frederick Keys (2006), AA Huntsville Stars (2014)
■ Notables: Also owns the AHL Norfolk Admirals.
OWNERS WITH 2 CLUBS
■ Key executives: Gary Green, CEO; Larry Botel, co-founder; Eric Foss, managing partner; Brian Callaghan, managing partner
■ Teams (when acquired): AA Richmond Flying Squirrels (2009), AAA Omaha Storm Chasers (2012)
Mandalay Entertainment Group
■ Key executives: Art Matin, director and CEO of Mandalay Baseball; Larry Freedman, president of Mandalay Baseball; Robert Murphy, COO of Mandalay Baseball
■ Teams (when acquired): AA Erie SeaWolves (2003), AAA Oklahoma City RedHawks (2010)^
Manhattan Capital Sports Acquisition fund
■ Key executives: Stuart Katzoff, principal; Jerry Katzoff, principal; Brett Beecham, director of operations and general counsel. The group also includes Herb Simon, owner of the Indiana Pacers and Indiana Fever.
■ Teams (when acquired): AAA Reno Aces (2006)*, A Bowling Green Hot Rods (2013)
■ The Goldklang Group: A Charleston Riverdogs*, A-Short Hudson Valley Renegades*
■ Ripken Baseball: A-Adv. Charlotte Stone Crabs, A-Short Aberdeen IronBirds
■ Ryan Sanders Baseball: AAA Round Rock Express; AA Corpus Christi Hooks
■ Miles Prentice: AA Midland RockHounds; A-Short Connecticut Tigers; investor in AA Biloxi 2015 team relocating from Huntsville
■ Hardball Capital: A Fort Wayne TinCaps, A Savannah Sand Gnats
■ Peter and Rita Carfagna: A-Adv. Lancaster JetHawks, A Lake County Captains
■ Tom Dickson and Sherrie Myers: AA Montgomery Biscuits, A Lansing Lugnuts
■ Joe Finley and Craig Stein: AAA Lehigh Valley IronPigs (2006); A Lakewood BlueClaws (2000). Separately, Finley owns the AA Trenton Thunder, and Stein is an investor in the AA Reading Fightin Phils.
* Includes ownership of the team’s ballpark
^ Also owns a half-interest in the AAA Scranton/Wilkes-Barre RailRiders
Notes: Dates listed represent when the current owner acquired rights to the team. The team may have played in a different market at the time of the acquisition. In addition to these ownership groups, the MLB Atlanta Braves own the AAA Gwinnett Braves, AA Mississippi Braves, A Rome Braves and the Rookie Danville Braves; and the MLB St. Louis Cardinals own the AAA Memphis Redbirds, AA Springfield Cardinals, A-Adv. Palm Beach Cardinals and the Rookie Johnson City Cardinals.
Sources: Ownership groups, MiLB, SportsBusiness Journal archives
Compiled by David Broughton
In a move taken directly from “The Late Show with David Letterman,” the Super Bowl champion Seattle Seahawks are selling their TV ad inventory in the first quarter of each preseason game to one specific sponsor.
The Washington State Lottery bought the exclusive position for this week’s Super Bowl rematch against the Denver Broncos, and Boeing bought the position for the Sea-hawks’ Aug. 22 preseason game against the Chicago Bears.
“We are in deep discussions with other prospects to fill the other two slots,” Sea-hawks President Peter McLoughlin said. “We’re optimistic about that.”
The strategy stems from McLoughlin’s two-decade stint at Anheuser-Busch, where the company bought an exclusive sponsorship to one of Letterman’s shows. McLoughlin considered it a success and thought he could replicate the effort during the first quarter of the Seahawks’ four preseason games.
The Seahawks have valued the exclusive inventory in the low to mid-six figures. The team will make more from selling the first quarter exclusively than if it were to sell the ad spots traditionally.
“I don’t want to overdo the revenue aspect because there’s certainly a revenue stream here,” McLoughlin said. “But the four preseason games is not a significant part of our overall revenue.”
The first-quarter ad inventory will feature five, 75-second breaks that could include everything from prerecorded messages to interviews with the sponsor’s executives. The rest of the telecast will have its normal mix of ads.
The Seahawks control the game rights and most of its ad inventory. The team pays for the game production and hires the announcers, Curt Menefee and Brock Huard.
The team’s local broadcast partner, the Tribune-owned Fox affiliate KCPQ, controls some of the commercial inventory, and the Seahawks were able to convince them to move their first-quarter spots to later in the game.
“We control the majority of the inventory, which gives us the flexibility,” McLoughlin said. “We were able to reallocate the commercial inventory into the second through the fourth quarters to free up the first quarter to create this new opportunity.”
McLoughlin recalled that A-B’s Letterman sponsorship mainly consisted of product placements and gave the talk show host more airtime to tell jokes and conduct interviews.
“It was more of a service to the viewer,” he said. “We’re going to do something similar. We’re going to stick more to the football message, give more opportunity for our talent to talk about the players, the coaches, the strategy, what’s going on in the game. There will be less commercial time.”