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Volume 24 No. 117

World Congress of Sports

The reports of TV sports’ demise may be premature, but programmers with a long view are preparing for even more radical changes to content delivery. Turner President David Levy told the ’17 CAA World Congress of Sports crowd during a featured interview that declining sports ratings are not as dire as some believe. “If you have competitive games, big brands, and good story lines the ratings will be just fine,” he said. Levy also said ratings numbers do not capture the audience like they used to. Levy: “Consumption is happening on different platforms. You have to monetize on all those platforms.” He said some programming tweaks have also helped boost Turner’s numbers. “We’re taking commercial time out of NBA on Mondays and adding sponsored content, relevant content. It’s not a commercial.” The bottom line: “If you have fewer commercials, more content gives you higher ratings.”

ROOM WHERE AMAZON HAPPENED: Levy noted he "wasn’t in the room where Amazon discussed (the NFL Thursday Night streaming deal),” drawing a distinction between Amazon’s streaming business and a TV network. “They have different mechanisms and results they look at and what’s a measure of success for them. The first opportunity for them is, it’s not about ratings and ads. It’s a different business.  Amazon is a large distributor of NFL merchandise. Maybe they’re looking to sell more merchandise.” Levy added that the technological delivery is also different and much more customized for digital consumption. “What they do is very different than what Turner can do,” he said. “(Amazon) can send different ads directly addressable to each of those (NFL game) viewers. Today Turner Broadcasting can’t do that.”

DIRECT DELIVERY: He said Turner is exploring novel ways to generate additional revenue from its properties with more direct-to-consumer options. “We’re having discussions about [letting consumers buy the] last two minutes or five minutes of a game,” Levy said. “I think you will at some point. It doesn’t have to be a million people doing it. If you’re a fan of a certain school or sport and willing to pay 99 cents or $3, it may be worth it."

STILL SWINGING: Levy noted TV remains the biggest “reach vehicle” and that in the next round of rights deals for the NFL and MLB in '21-22, the networks will again be the big bidders, with tech firms such as Facebook, Amazon or Twitter as partners, not competitors. “You have to hope you’ll generate the next generation of fans,” he said. “I think you’ll see situations where we combine with those platforms and they’ll create content around the edges of that programming. I don’t know you’ll see them competing for 'Sunday Night Football,' but I think you’ll see them working with these broadcasters.”

E-GAME ON: E-sports is not a fad, he said, and that the network has gotten “very positive results” with its eLeague. He also said there are untapped opportunities beyond the professional ranks: “People aren’t focusing on the amateur (video game player). I want to see if we can have a relationship with the amateur, set up tournaments, you’ll have IP lined up with you. If you can bundle all the handicap-7 people to play together, you can do Pro-Ams with pros and tournaments. There’s a real opportunity in e-sports right now to be a part of the amateur play.”

Quick Hits:
* "When you go after rights you have to go after them all and platforms that may not exist today. The consumption of content is happening across all different platforms and you have to make sure you have all the media rights.”

* "The definition of a network will change in five years. Bleacher Report could be a network in five years.”

* “A year today is like five years [before]. We are three to five years away from seeing the definition of network changing. It doesn’t mean there won’t be TV, but the opportunity of how you distribute your content will change.”

The RSN business, seemingly imperiled a year ago amid declining cable subscribers and industry disruption, remains a strong business making good profits, said industry executives at the '17 CAA World Congress of Sports. Panelists in particular cited the high standing of pro teams in local market TV ratings. “We all have to admit the world has changed,” said Fox Sports Regional Networks President Jeff Krolik. “Cord-cutting is real. Distributor consolidation is real. But there are 29 domestic MLB teams. Twenty-three of them rank in the top 5 [in their markets] when they play. Nine of those teams rank No. 1. So if you ask what the No. 1 rated television program is, it isn’t 'Empire' or 'This Is Us' in Baltimore, in Cleveland, in San Francisco, and so forth. The answer is the regional sports network. And that’s a pretty powerful thing to be able to say.”

MUST-HAVE STREAMING: In-market live streaming in a mere matter of months has gone from a supplemental piece of programming to vital content, said the panel. NBC Regional Sports Network President David Preschlack called in-market streaming a “must-have.” Preschlack: “You have to be there from a fan standpoint. Period. Full stop. And then you have to figure how to monetize it. But for us, we’re driving a fair amount of traffic [to in-market streaming], and it’s growing. Our NBA traffic is up almost 20% year over year. We’re now up and going with MLB. Hockey we sort of got mid-stream, but it’s growing month over month. It’s a priority for all our regionals, and it represents a unique ad sales opportunity.” Krolik added, “Clearly it’s demand pull, and not supply push. Consumers are demanding it, particularly younger viewers, and it’s gone beyond a question of can we have it to it being a must-have.”

KNIGHTS RIGHTS: A decision on the local media rights for the expansion NHL Vegas Golden Knights is approaching fast, said Evolution Media Capital partner Alan Gold. “Hopefully, we’ll have a decision in the next few weeks,” said Gold, who is formally representing the team in marketing its local media rights. “This is a unique opportunity. It’s a very, very complicated RSN market. You already have nine professional teams who have access to the Las Vegas market. Putting aside hockey, there are six baseball teams who can go in there. It’s unique because we’re trying to balance revenue versus exposure. It’s very important to get off to a fast start and have the broadest reach possible, especially as you’re building a new brand for an expansion franchise, and for hockey in Las Vegas. I think [Bill Foley] is a phenomenal owner who has really zeroed in on what’s important to the franchise, and the good news is we have multiple people [interested in the rights].”

Media fragmentation is a challenge for all marketers, but during a panel at the '17 CAA World Congress of Sports, two prominent sports sponsors said it opens up opportunities for a well-thought out campaign. American Family Insurance has used longer-format digital videos to help build its brand, said CMO Telisa Yancy, and people watch them. The '15 research showing that humans have a shorter attention span than a goldfish -- 9 seconds -- just is not true if you’re using the right sports properties and athletes to tell a story, she said. "I worry about fragmentation, and I also worry about content,” Yancy said. "But if you put the right content in front of the right consumer, they’ll give you not only the seven seconds, but up to 2.5 minutes, and sometimes even more.” Hyundai Motor America CMO Dean Evans went as far as to say that fragmentation is “a competitive advantage,” because he is certain he knows how to cover the sales funnel online for prospective buyers, and then how to use particular sports and TV shows to hit target demographics with a brand message. “And you don’t worry about fragmentation after that,” he said.

Quick Hits:
* Yancy, on political activism from athletes: “We do a really good job up front of vetting whether or not we’re a good fit."

* Evans, on local team deals: "Being part of local teams, like the Minnesota Vikings and the Miami Dolphins … being part of those communities, with dealers and customers, are really how you bring an emotional component to the brand."

* Yancy, on the future of sports marketing: “As long as there are rabid fans somewhere, and some live programming that drives them in, or even streaming, I think the future of the business is solid."

The spirited debate over whether social activism harms or helps athletes was in display during the opening panel of the ’17 CAA World Congress of Sports. Adidas Group North American President Mark King argued it will ultimately harm the ability of many athletes to obtain endorsement deals. He said, "We try to not be in social issues, though we are moving toward that because we have to. But we certainly won’t associate with athletes that are going to cause our brand something we don’t represent and we don’t stand for.” Fanatics Chair Michael Rubin said elite athletes such as Cavaliers F LeBron James can safely be politically active, but such stances are much more dangerous for rank-and-file players. “I don’t think [the activism] is going to increase,” Rubin said. “And the reason I don’t think it’s going to increase is because Colin Kaepernick is not someone people want to hire right now. He’s an OK quarterback, but he’s someone people are saying, they don’t want the aggravation that comes with it. … Tom Brady can do that. Chris Paul can do that. Dwyane Wade can do that. Colin Kaepernick can’t do that. Can the 10 best athletes per sport say whatever they want? Absolutely. But…it can backfire for the majority of athletes.”

OPPOSING VIEW: CAA Sports co-Head Michael Levine offered a vigorous counter argument, saying, “I can’t disagree any more with these two guys.” Levine: “When you talk about the attention and respect given a few days ago to Jackie Robinson and the path he trailblazed, what Billie Jean King did for women, what Muhammad Ali did by taking an unpopular stand -- here we are 50 years later acknowledging he’s one of the most impactful athletes of all time -- I just think that our guys get it and our guys want to have that kind of impact.” Added NBA Deputy Commissioner & COO Mark Tatum, "As a sports league, you have to create an environment where that’s OK and for a player to understand they have a platform, they have a voice, and they can make a difference. That’s what we try to communicate to our players.” 

Proskauer’s Sports Law Group Chair and co-Head Joe Leccese teed off the Inside Golf panel at the '17 CAA World Congress of Sports where else but with the golfer-in-chief, Donald Trump. Since his election, President Trump has been just as controversial on the golf course as he is in the public discourse. Leaders of three major golf organizations told World Congress attendees they are trying to remain apolitical, but that it is increasingly difficult. “My tour is no different than this room or any other organization. I’ve got players who practice at Trump’s facilities and are personal friends with him and voted for him, and others who feel just the opposite,” said LPGA Commissioner Michael Whan, adding that he is bracing for disruption at the U.S. Women’s Open this July at Trump National Golf Club in Bedminster, N.J. “I know people are going to try to make this more than a golf tournament,” he said. “But I won’t let my political views or somebody else’s get in the way. The best female golfers in the world don’t always get the same opportunities as in other sports or that male golfers get. I won’t let some movement or moment get in the way of those opportunities.”

TRYING TO STAY IN THE FAIRWAY: The Senior PGA Championship is teeing it up at Trump National Golf Club in DC next month, and the '22 PGA Championship will also be held at Trump Bedminster. PGA of America CEO Pete Bevacqua said, “The process has been difficult for us. [President Trump] and the (Trump) organization have been huge proponents of the game for several decades. ... We all have personal relationships with Donald Trump the person. I’ve played with him a lot. The last time I played with him was in late December. Whoever the president is, it’s good to have the president as a fan of the game and a proponent. Whether it’s President Trump, Obama, Clinton, or either of the Bushes.” USGA Exec Dir & CEO Mike Davis added, “The USGA is in the business of golf, supporting golf, governing golf, and never wanted to get into politics. That’s easier said than done. ... (President Trump) has been very supportive to date, but we just don’t want to get caught up in it. It’s a no-win situation and I think we have our work cut out for us this summer (at the U.S. Women’s Open).”

OFFICIATING BY EMAIL: Golf has had no shortage of controversy on the course this year, and the three golf officials addressed the Lexi Thompson penalty that was noticed and emailed by a TV viewer to the LPGA that cost her a major title at the ANA Inspiration. Davis said, “Golfers are expected to know and play by the rules. It is disconcerting. We have all been tremendously uncomfortable with the public saying people are calling in and affecting the outcome of golf. But if it didn’t happen in golf, you‘d have champions perhaps winning events when the whole world knows they shouldn’t.” He did allow that change could be coming. “The governing bodies are looking at, when a round is over it’s over,” he said. “It does bother people that it happened on Friday and it affects the results on Sunday.” Whan said the LPGA may get 15 emails a year pointing out infractions. “The rules say if you get info from any source and there’s video to review then you review it,” he said. “Whether you like it or not is kind of like whether or not you like that pass interference is something that can’t be reviewed because it’s judgmental.”

MIXING IT UP: The growing youth movement, especially among girls, is a positive sign for the game. Whan said, “The fastest growing segment in golf is girls under age 18. That’s the first time we’ve ever been able to say that.” Bevacqua gave a shout out to the success of co-ed programs, including Junior Team Golf and the Drive, Chip, and Putt competitions. And co-ed golf may soon hit the pro tours. “You’ll see us playing together in the pretty near future,” Whan said. “We’re working on it right now. Our preference is to start with the Tournament of Champions. That gets you a field size of 60 or 70 golfers versus 240. That is more user-friendly from the beginning.”

Quick Hits:
* Davis: “We first got to know Trump when Bedminster was being built 10 minutes from our headquarters. He built a beautiful facility. It may not be the greatest in the world, which he talks about sometimes, but it’s a great course.”

* Whan: “The future of the game, the face of the game, is changing. It looks completely different than adult golf. Today one-third of junior golfers are women, one-third are non-Caucasian. It looks completely different than adult golf. I don’t know what golf will look like in 2030, but I can promise you it will look different than today.”

Team Shanghai playing the Esports Celtics? It is an idea that seems less far-fetched by the day. NBA Deputy Commissioner & COO Mark Tatum, speaking in the opening session of the ’17 CAA World Congress of Sports, talked about the league’s effort to create a new pro e-sports league in collaboration with video game partner 2K Sports. The league is set to debut next year. “Right now, we have more than half to two-thirds of our NBA teams who have signed up and said they will have teams in the NBA 2K Esports league,” Tatum said. “Long term, we can see a situation where a Team Shanghai is playing the Esports Celtics, or the E-Sixers are playing a team in Paris, and this becomes a truly global e-sports league.” MSG President & CEO David O’Connor said the company, and by extension the Knicks, are big supporters. “We’re going to be heavily invested,” O’Connor said. “We believe in it, and we’re actively in the marketplace now.” But panelists predicted industry consolidation, with intellectual property owners in a particularly strong position. “It’s definitely a goldrush,” said Fanatics Chair Michael Rubin, who also is a 76ers and Devils co-Owner and owner of e-sports entity Team Dignitas. "But anytime you see market euphoria, there’s generally a reason for it. I think there’s going to be an incredibly successful e-sports business, but my guess is that it will be centralized around a very small group of parties. The question is who takes the prize.”

: The first pro team to buy an e-sports franchise was the 76ers, but team co-Owner David Blitzer during a later panel said it is still very unclear what was bought. Blitzer called e-sports the Wild West. “It’s buying a place within this new ecosystem where you don’t know exactly how it will turn out over time,” he said. Blitzer first learned about e-sports by reading an article about a sold-out event at MSG. Asked how he will measure success in three years, Blitzer replied: “Absolutely no idea.” He added that e-sports is about “growing our brand to the point where it is relevant.

Adidas Group North American President Mark King used the opening panel of the ’17 CAA World Congress of Sports to say college athletic programs "once you get past the Big 5 conferences are in trouble." He noted, "There’s no revenue generation. Alumni are starting to not support. It’s tougher and tougher to get funding.” King and Big East Commissioner Val Ackerman predicted a reduction in the number of sports supported by many colleges. “It’s going to require prioritization on what sports you hang on to,” said Ackerman. “What sports you really want to double down on if you want to be nationally competitive, and there may be other sports that would be good to keep, but the resources aren’t there.” ESPN Exec VP/Programming & Scheduling Burke Magnus added that the Power Five are already headed “in a different direction” than other schools, “and that trajectory is only going to continue.”

Stadium operators have lost their way by overcharging their customers on concession prices, said AMB Group CEO Steve Cannon, whose company owns the Falcons. The team made waves last year with news it would charge low prices for concessions at Mercedes-Benz Stadium, which is scheduled to open in August. A family of four will be able to eat for $30, Cannon said. “In the stadium space, we have lost our way a little bit,” he said. “If you charge eight dollars for a hot dog, you have lost your way. ... Even if you are catering to a great demographic that can afford to drop that kind of money, it just leaves a bad taste in their mouth. So, we have broken the business model.” He pointed to The Masters, which is well known for low-priced food, as an example to follow. “Why build an incredible stadium and then create a barrier to entry that is your concession pricing?” he asked. Officials at other NFL clubs have pointed out that it is not fair to compare the Falcons to all clubs. The Falcons are in the midst of selling high-priced PSLs and so perhaps can better afford not to reap a high profit margin on food.

New Era is a throwback. The family-owned company has bucked the trend of fast-growing businesses seeking riches or fresh capital through an IPO, instead remaining in the hands of the founder’s son and current CEO, Chris Koch. “My father was my mentor, and he hated debt and partners,” Koch, only half joking, said yesterday at the '17 CAA World Congress of Sports. “He drilled into me we’re a family company and you can do something amazing if you can stay private and not have public partners.” Koch credits his father for building the business by outfitting MLB clubs in the depression-era, starting with the Indians in '34. That was the company’s first chapter. Koch said the next chapter, growing revenue tenfold through global expansion and broadening the product line, began with a single phone call.  Koch: “When Spike Lee called me out of the blue in 1996 and asked me to make him a red Yankee cap, I said, ‘Why would you want a red Yankee cap?’ He said, ‘I’m going to wear it at the World Series with a red Yankee jacket.’” When Lee wore that red cap, it took the brand in a whole new direction. “Before that, it was fans who bought the product,” said Koch. “After that, small boutiques called and said, ‘Can I get the red cap?’ And then it went to bigger accounts. Champs. Lids. Companies like that.”

THE SAME, BUT DIFFERENT: Koch said another secret to success is the ability to create “mass customization,” where every retail partner looks different even if they stock the same merchandise. Going global has also opened up new markets. “In the early 2000s, MLB had asked us to move into Europe and Asia,” he said. "When we did that, I think our international business was basically Canada and was 2% of our business. Half the business we do outside this country is apparel, backpacks and luggage, things we don’t do in this country. Outside the U.S., it’s a lifestyle fashion play, the fan market isn’t anywhere near as big as it is in US.” Koch said the company is bringing the lifestyle lines to the U.S.

NATURAL FIT: Koch said it is “pretty damn cool to see” New Era’s name on the stadium of the company’s hometown Bills. “Terry (Pegula) said,  ‘I don’t need the money, but I think this deal makes a lot of sense,’ said Koch. “And we came to see that. The way we’ve done the deal …  you see fans taking their pics and doing selfies in front of the stuff we’ve done on the outside of the stadium. It’s not a normal naming-rights deal.”

Quick Hits:
* How would his father feel about today’s New Era? “We did less than $100 million in rev when he died (15 years ago). This year we’re approaching $1 billion in revenue. He’d be proud the way we’ve grown into an international brand."

* What keeps you up at night? “The things that keep me up at night are the crazy events going on around the world. Something could happen that could affect our business in a very negative way. There are so many positive things going on right now that I worry some big disaster could happen, like a terrorist act. It could change the momentum of what’s happening in our industry right now. This is the most exciting time of my life and I’ve been in the industry for 40 years.”