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Volume 21 No. 1

Leagues and Governing Bodies

“So how much over slot did you pay?”

That was a frequently overheard question among owners and team executives at these August meetings, which have turned in part into an annual scolding from MLB Commissioner Bud Selig on draft pick compensation.

The commissioner, as he has for the past several August meetings, used part of the gathering to chastise clubs for paying selections well over recommendations supplied by the league office.

The 30 clubs spent a total of $236.1 million on draft pick bonuses and other guarantees, according to Baseball America, easily a league record. Just eight teams — Detroit, Colorado, Oakland, both Los Angeles teams, Atlanta, Texas and the Chicago White Sox — spent less than the MLB slot recommendation on their picks from the 2011 draft’s first 10 rounds.

At the top of the list, Pittsburgh spent more than $17 million in bonuses, including records for No. 1 overall pick Gerrit Cole ($8 million) and second-round selection Josh Bell ($5 million). The Pirates also outspent the other 29 clubs on bonuses last year.

“Yeah, we got our wrists slapped again,” said one team executive speaking on the condition of anonymity. “It’s the same thing every year now.”

Selig acknowledged he is worried about the continued escalation of draft pick compensation. He continues to stump for a hard-slotting system similar to basketball in which picks would have preset compensation based on their draft position.

“The spending is a concern to me,” Selig said, though he has little other recourse to punish slot offenders.

The draft pick compensation issue is among the most prominent subjects in labor talks between MLB and the MLB Players Association. The union, however, historically has held a dim view of hard slotting. Union chief Michael Weiner last month said, “It is not this union’s job to take away individual bargaining rights.”

But the continued blatant disregard for the slot recommendations indicates many clubs are in a different place ideologically.

Long-struggling teams such as Pittsburgh, Kansas City and Washington — the three most flagrant offenders this year relative to slot recommendations on a percentage basis — strongly believe the draft is still the most cost-effective and far-reaching opportunity to rebuild, even amid the rising spending. That means going all out in search of top-flight talent.

“What we did this year is simply a continuation of the plan we put in place in 2007,” said Pirates owner Bob Nutting, referring to the year he took control of the club. “We’ve maintained a very consistent approach. And at the major league level, you’re now starting to see the results of our significant emphasis on player development and the draft. We did what was the right thing for Pittsburgh.”

Nutting said there was no particular discord between the Pirates and MLB headquarters as a result of this month’s outlays by the club. If a hard-slotting system does arrive, he said, the Pirates would comply and quickly seek to maximize efforts within that structure.

“I feel very comfortable with where we ended up this year,” he said.

n SPOTLIGHT ON THE HALL: The Cooperstown setting for the owners meeting, the first time MLB has held such a gathering here since 1999, provided the rare opportunity for the nearby Baseball Hall of Fame to showcase its facility and mission to visiting executives. The hall dedicated a new archives and research center devoted to MLB commissioners and named after Selig, and the team owners and executives spent an evening touring the museum and several exhibits that have opened in the past year.

“This is really important for the owners to see what we’ve built here,” said Jeff Idelson, Hall of Fame president. “Many of them haven’t been here ever, or in quite some time, and this is their history, their legacy. It gives them a chance to see that history and legacy they’re helping caretake come to life.”

In particular, Arizona Diamondbacks owner Ken Kendrick spent part of the session proudly showcasing to his colleagues a collection of rare and valuable baseball cards he lent to the museum. Within the collection is one of three known Mickey Mantle 1952 Topps rookie cards in absolute mint condition (Kendrick also owns a second), and a Honus Wagner T206 card from 1909 that has sold for as much as $2.8 million and is the most coveted card in the industry. Only eight of the Wagner cards exist.

“What would I do if they were just sitting around my house?” Kendrick said. “This is a lot more fun, and I’m proud to share them.”

The MLS All-Star Game and World Football Challenge boosted Major League Soccer’s online and mobile numbers to new heights.

In July, recorded just over 3 million unique visitors, its highest total ever.
For the month of July, which is traditionally the busiest month for, the website recorded just over 3 million unique visitors, its highest total ever and a 30 percent jump from July 2010.

Also, the league saw an acceleration in downloads of its MatchDay Live free mobile application, which has been downloaded by 1 million users since its debut in March.

Chris Schlosser, MLS Digital general manager, said his growth strategy has been to increase Web content surrounding marquee events and rivalry games.

“We’ve found the way to drive traffic with the core MLS fan is by blowing out content around big events, like the U.S. soccer team’s run through the Gold Cup, or the World Football Challenge and All-Star,” Schlosser said. “We did an absolute wall of All-Star content.” The day of the All-Star Game ended up being the site’s highest-trafficked day ever. staff posted close to 700 original stories in July, a 33 percent increase from July 2010. Much of the content came from the World Football Challenge, which had its own micro site built into the league site. also increased its video production by 33 percent, posting 100 original-content videos (not including highlights). According to Schlosser, visitors played 1 million videos during July, which doubled numbers from 2010.

The MLS All-Stars played Manchester United at Red Bull Arena on July 27. The World Football Challenge ran July 13 to Aug. 6.

The traffic numbers represent a year of steady growth for the website, which launched to poor reviews in March 2010. MLS decided to bring its website in-house in October 2009, ending a six-year digital partnership with MLB Advanced Media. Critics, however, lambasted the site for its lack of statistics, inconsistent design and operational bugs. But MLS moved on, working with NeuLion in October 2010 to create a new video player. In March, it signed a deal with European data firm Opta to revamp its updates on player and team statistics.

The website employs 35 full-time and 30 part-time employees, which is five fewer than in 2010, when more personnel were dedicated to developing the site.

Blogger Matt Rolf, who wrote some of the harsher criticism of the website after its launch, said has become a useful resource for incoming MLS fans looking to join the soccer community.

“With Seattle coming in two years ago and Portland and Vancouver coming in this year, you have a lot of new fans coming in who are hungry for news and content, and they will go to the official source,” Rolf said. “And [] has Facebook tied in, so if you’re on Facebook, you’re more likely to engage with their system."

The NFL and NFL Players Association have agreed to a new 10-year sponsorship and licensing agreement that will pay hundreds of millions of dollars to the union over the next decade while for the first time giving team sponsors, in addition to league sponsors, group players rights.

In another new aspect of the deal, the NFLPA for the first time will be required to editorially contribute to the NFL’s digital outlets, meaning player blogs could soon be a staple of

“This structure is a highly desirable one,” said Gary Gertzog, the NFL’s senior vice president of business affairs. “It will facilitate sponsorship activation, more players will be used in advertising and promotion, and it will be done in a more authentic way by combining the assets of the clubs and the league.”

Keith Gordon, president of NFL Players, the union’s licensing and merchandise arm, did not return messages seeking comment.

The league and NFLPA jointly contacted sponsors last week to notify them of the new arrangement.

“We appreciate your continued support of the National Football League and of NFL PLAYERS,” read an email to sponsors from Gordon and Keith Turner, the NFL’s senior vice president, sponsorship and media sales. “We also appreciate your patience as we worked to get our new agreement in place. We believe, and we are confident you will agree, that the benefits to NFL sponsors resulting from our new agreement structure will more than make up for that. We look forward to taking you through these changes in detail as soon as possible.”

The developments follow the completion Aug. 4 of a new 10-year collective-bargaining agreement, which ended nearly five months of labor strife.

The league has paid the union for group licensing rights, defined as using six or more players in advertising or promotions, since 2000, but that arrangement expired with the expiration of the old labor pact in March. Like the old contract, the new one ensures the NFLPA does not sign sponsors that rival league sponsors, meaning the NFL can guarantee its corporate partners exclusive group licensing. That right will now extend to team sponsors for the first time, which could allow clubs to charge more for sponsorships. A Chicago Bears sponsor, for example, could use six or more Bears players in ads.

“It’s a great change that will enable teams to deliver more value to their local sponsors, while taking the quality of creative to another level,” said Matt Higgins, the New York Jets executive vice president of business operations. “And it will lead to more exposure for players because it makes incorporating them less complicated.”

Gertzog said he fully expected the teams to be able to charge more for sponsorships with the new rights.

Another new feature is that league and team sponsors will be able to go directly to players with whom they want to reach deals. Under the old deal, sponsors had to go through the union to facilitate those deals. Many sponsors have sports marketing departments and would prefer not to use an intermediary, Gertzog said.

Since 2007, the NFL has paid more than $30 million annually for sponsorship and Internet rights with players (see chart), according to the union’s annual reports filed with the Department of Labor. Those figures will rise under the deal, sources said, though specific numbers could not be obtained.

Before the signing of the new CBA, the NFLPA had contacted non-league sponsors about signing deals with the NFLPA. The then-decertified union did sign one sponsor that competed directly with the NFL: Zico Pure Premium Coconut Water, which Gertzog described as a Gatorade competitor.

The water deal, announced in June, has since been dropped, Gertzog said, referring further questions to the NFLPA.

Mark Rampolla, the CEO and founder of Zico, said in a statement emailed by a spokeswoman, “Although the formal sponsorship was discontinued when the lockout ended, ZICO still supports NFL players and will maintain our relationship with these players for years to come. We have received product requests from over 500 players that were introduced to ZICO during the lockout and we continue to receive requests.”

The new sponsorship and licensing agreement covers corporate sponsorships but not what the league defines as consumer deals. For example, the NFLPA has its own deal with Electronic Arts through which the video maker gains player rights. The new deal also does not cover retired players.

The extent of the new requirements for players to contribute editorially to the NFL’s digital outlets was not available. However, the NFL rights now cover all of the league’s digital businesses, not just the Internet, as was covered by the old agreement.

Heading into an unsettled 2010 season, when corporate spending was tight and Tiger Woods was absent, the PGA Tour faced the unenviable task of filling more than one-quarter of its title sponsorships. Prospects, it’s safe to say, were grim.

Now, a little more than 18 months later, the tour has emerged from those turbulent conditions nearly sold out of its title sponsor inventory, putting it in prime shape to negotiate its next TV contracts with CBS and NBC.

“For the tour to have the success they’ve had after the financial meltdown, it’s just remarkable,” said sports marketing veteran Gary Stevenson, who at one time worked for the PGA Tour, OnSport and Wasserman Media Group.

Cadillac is among the new sponsors that have come aboard since early in 2010.
In the past 18 months, the tour has closed 17 title sponsorship deals, eight of which represented new money and nine that were renewals. Close to three-quarters of the tour’s tournaments have title sponsors locked in beyond 2013.

“Think about it: There isn’t a traditional FedEx Cup event that’s for sale right now,” said Billy McGriff, president of Florida-based MG Sports Marketing, which brought in Zurich Financial Services and Farmers Insurance as title sponsors.

The only event whose title deal is not locked in for 2012 is the Viking Classic, an opposite-field event in July the same week as the British Open. The tour is in talks with Viking Range Corp., an appliance maker, to extend, but the tournament is not in jeopardy, the tour’s chief marketer, Tom Wade, said.

Title sponsorships for events on CBS or NBC range from $6 million to $8 million annually on most tournaments, with roughly half of the money going to a media buy with the network and the other half going to the tournament to cover purses and other expenses.

“We’re in great shape, sponsor-wise,” Wade said. “We have several deals in place long-term, and those deals have significant escalators in pricing. That’s a huge contrast to 2009, when all the predictions were doom and gloom for the PGA Tour. Not that we weren’t concerned — everybody was concerned — but now we’re in a great place.”

Such a solid base of title sponsors ensures that the tour can maintain its base of 43 tournaments and rich purses. It also enables the tour to deliver a robust stable of advertisers to its network partners.

Tour partners, most of them title sponsors, account for 65 percent to 70 percent of the advertising on PGA Tour broadcasts. Being able to instantly deliver that level of advertising to its TV partners makes the tour that much more attractive as it negotiates the next deals.

The PGA Tour’s current TV contracts with CBS and NBC expire after the 2012 season. Renewal talks began this summer.

“TV negotiations are still a difficult task, but many of these title sponsors have long-term deals, which provides a level of security for the tour and its TV partners,” said Malcolm Turner, principal of WMG’s consulting group, which advises title sponsors Northern Trust and Nationwide, among others. “Having your title sponsors in place checks a very important box for the tour. The renewals and extensions are an important referendum on its value proposition as a property, despite all the economic headwinds.”

As the tour enters its FedEx Cup playoffs this week at The Barclays, the only inventory it has to sell is the Nationwide umbrella sponsorship for the developmental tour, a “proud partner” position with The Players Championship and perhaps title sponsorship of the proposed tour in Latin America, although marketers say the tour hasn’t hit the streets full-force with that yet. Nationwide vacates the developmental tour after 2012.

The tour’s largest deal, the umbrella sponsorship with FedEx, runs through 2012 with options to continue longer. Wade said he anticipates renewal talks with FedEx formalizing after the TV negotiations are complete.

The sales success has led to increased revenue from sponsorships this year. Wade said that revenue from his group would be up 5 percent to 10 percent.

“The worst period was 2009, when we had some sponsors that went through bankruptcies and we took a hit,” Wade said. “But we’re clearly back on track now, and we’ll see some nice increases in the future.”

With companies still guarding their wallets closely, many properties have struggled to bring new money to their sports. The PGA Tour has not encountered the same resistance despite the pressure on the financial and automotive sectors, the two categories golf relies on the most.

Among the new sponsors that have signed on since early 2010 are auto brands Cadillac and Hyundai, while financial firm RSM McGladrey and Farmers also brought in new money.

Other companies, like Nationwide, were already in the sport before increasing their spending with an event title deal. RBC, already the title sponsor at the Canadian Open, added a deal for the Heritage, while Humana, an official marketing partner, added title sponsorship of the former Bob Hope Classic. The future of both of those tournaments was in doubt past this year without their new title sponsors.

These deals have helped the tour keep its schedule intact for 2012 and gives it a healthy head start on negotiating extensions with the 11 title sponsors whose contracts expire in 2012.

“The word is that there’s another company out there that’s just looking for a date,” McGriff said. “If someone blinks, there’s someone on the sidelines. It’s almost like there’s a waiting list.”

The tour has done little to alter its sales approach throughout the past year and a half, said Wade, who pointed to the tour’s increased international exposure, better cooperation from players at hospitality events and improvements to as significant aids in the sales process.

But for most sponsors, it still comes down to the tour’s core values: media, business-building through hospitality and charity.

RSM McGladrey’s president, C.E. Andrews, cited the ability to increase awareness and build better client relationships last year when his company signed on to sponsor a Fall Series event at Sea Island, Ga.

“There’s no question that this is a testament to the tour’s model and that it works,” Turner said. “It’s all been validated by their success. In private, I’m sure they would concede that their success is a bit of an upset given all of the economic turmoil. But they’ve had all hands on deck, and you can’t confuse effort with results. The tour has results.”