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Volume 21 No. 1

Leagues and Governing Bodies

Mike Davis, executive director of the U.S. Golf Association, spent last week in Aberdeen, Scotland, site of the Walker Cup matches. But before he departed the States, he finalized two hires that will significantly affect the future of the USGA. Davis brought on Sarah Hirshland from Wasserman Media Group to run business affairs and Joe Goode from Bank of America to handle communications. They represent the final pieces in Davis’ front-office restructuring, a project he began shortly after taking over as executive director in March. Just hours after delivering his “pregame” Walker Cup speech to the U.S. squad last week, he spoke by phone from Scotland with SportsBusiness Journal’s Michael Smith about these moves and the USGA’s future.

Mike Davis’ team of experts at the USGA includes Joe Goode and Sarah Hirshland.
So, what did you say to the team?

DAVIS: We just talked about representing your country and how you conduct yourself. Of course, we went over some rules. But mostly, just enjoy this time. It’s something you’ll never forget.

Sarah Hirshland will be the fourth senior managing director and the final member of your senior staff. Now that you’ve restructured your front office, what have you accomplished?

DAVIS: Before, we might have had 12 or 14 different people who reported directly to the executive director. That required the executive director to be involved in a lot of decisions day-to-day. What we’re trying to do is get to the point where we have fewer people reporting directly to the executive director. We’re putting senior people in place and expecting them to make decisions, and they’ll be accountable for those decisions. They are the experts in their area. It also will allow me to spend a little more time outside of Far Hills [N.J., where the USGA is headquartered] dealing with our most important allies and partners.

Most everyone in golf knows your background in the sport, its rules and the U.S. Open championships. How are you approaching the commercial side of the association?

DAVIS: That’s true, I have been involved in the golf part of it for 22 years, but people forget the majority of my career was on the operations and logistical side of the business with the national championships. I ultimately was the person who dealt with the Open budget, the vendors, legal, finance, HR, IT. I know enough about the business side to know what I don’t know. So I went into this job … knowing that I want to surround myself with experts in those areas of the association’s business. That’s one of the reasons we created this position [Hirshland’s job as senior managing director of business affairs]. She’ll have a lot on her plate. She’ll oversee many facets of the business, including the on-site marketing at the Open, our corporate partner program and the USGA brand itself. She has great experience in those areas.

You started the corporate partner program in 2006, and now you’ve got American Express, IBM, Lexus, RBS and Rolex on board. Do you envision the USGA standing pat or do you see growing the number of partners in the future?

DAVIS: It’s fair to say that we’re very happy with that number. When we started the program, the idea was to get a few, and it really wasn’t about the financials. We do it so that certain partners can help us on our mission. You never say never, but I feel very confident in saying that we’re not going to see the USGA with title sponsors, presenting sponsors, advertising on the grandstands. We like the fact that we’re low key in that regard. … We’re a nonprofit, $135 million to $150 million business annually, and about $120 million of that goes directly back into the game. For example, we spend close to $5 million a year regulating equipment, testing clubs and balls. If we weren’t doing that, who would? The revenues from our corporate partners help us do that, but we’re not going to overly commercialize what we’re doing. Yes, we leave some money on the table, but we purposely do so. We have limited commercials on the U.S. Open. We want people to enjoy the broadcast.

Major League Soccer is negotiating to sell an equity stake in its media and marketing business, Soccer United Marketing, to Providence Equity Partners, according to several sources.

The talks have been going on for several weeks and those close to the discussions say that Providence is interested in obtaining up to a 25 percent stake in SUM for $125 million to $150 million. Such a deal would value SUM at between $500 million and $600 million.

Neither MLS nor Providence Equity would comment for this story.

MLS could use the influx of cash in a couple of ways.

The league is likely to distribute at least some of the proceeds among its shareholder-owners, who, as a group, have experienced hundreds of millions of dollars in losses since MLS’s inception in 1996, sources said. The league also could use some of the money to create a fund to help attract better players. Inside MLS team circles, there’s been a constant call to improve the state of play, which ideally would lead to greater interest in the league from soccer aficionados, who still view MLS play as being of lower quality than other international leagues.

SUM has considered using this cash infusion to subsidize MLS clubs as they try to convince known soccer stars to come to the league as designated players. While such a move has been discussed, it runs contrary to the league’s move in recent years toward team independence on business and competition matters.

MLS created SUM in 2001 soon after acquiring the broadcast rights for the 2002 World Cup. The agency, fully owned and operated by MLS, quickly became a successful and profitable part of the league, acquiring rights to various soccer events and serving as the marketing, media and promotional arm for most of professional soccer in the U.S.

For Providence Equity, a private equity firm that most notably has investments in YES Network and Univision Communications, the deal allows it to get further into sports content, which has been bringing in record levels of rights fees in the last two years. Providence is making its move for SUM at a time when sports properties’ media rights are doubling and tripling.

Just last month, NBC signed a three-year, $30 million deal for an MLS package that had been with Fox Soccer Channel, up from the $3 million a season from the channel’s previous multiyear contract.

Providence several years ago examined investing in the nascent Philadelphia MLS franchise, but instead turned its focus to the league level.

“Providence understands the MLS structure and finds that structure to be an attractive one from an investment standpoint,” said Bob Caporale, chairman of GamePlan, which advised Providence on the Philadelphia team, but has not been involved with the SUM talks. “They see an opportunity for the continued growth of that business.”

Private equity investment in sports, while not rare, is uncommon because most team and league economics do not generate the types of returns sought in private equity. Several firms looked at buying the Arena Football League before bowing out, and Bain Capital once looked at buying the entire NHL.

However, media companies that revolve around sports have attracted private equity; witness Providence’s one-third stake in YES Network. It also has an investment in the World Triathalon Corp.

The WNBA finishes its 2011 regular season with some of its strongest numbers in memory, with the league posting increases in television viewership and sponsorship revenue, but team profitability remains a challenge.

The gains could also translate at the gate. Through Sept. 6, heading into the last week of the regular season, the WNBA was averaging 7,804 fans a game. That was up 1.7 percent from the average through the same number of games played in 2010.

Last year’s season-ending average was 7,834 fans a game.

Laurel Richie, in her first year as WNBA president, speaks to members of the Washington Mystics.
“All of our key metrics are pointing in the right direction, with league sponsorship revenue up 20 percent and team sponsorships expected to be up double digits,” said WNBA President Laurel Richie, who began her job in May. “I can only speak for this year, but there has been an incredible focus to drive the metrics.”

The NBA’s team marketing and business operations department this season upped its training support for WNBA teams, adding a four-part sponsorship seminar series held in Chicago, Phoenix, New York and San Antonio for team executives designed to help drive local revenue.

Richie would not disclose details on league finances but said that at least one WNBA team will make money this year.

“We are working to make [team profitability] a plural rather than a singular,” she said.

Through Sept. 6, the Washington Mystics led the WNBA in attendance with a per-game average of 10,449 fans. The Tulsa Shock was last with an average of 4,758. The Chicago Sky had seen the biggest increase at the gate heading into the season’s final games, up 29 percent to an average of 5,536. Still, the Sky had the second-lowest gate in the league.

“It’s a great increase, but one day I hope we can’t increase that much because of the number of people in our building,” said Sky President Adam Fox. “We still need general awareness.”

The New York Liberty, who this year played the first of three seasons scheduled at the Prudential Center in Newark while Madison Square Garden is renovated, saw the biggest decline at the gate, down 30 percent to 7,683 fans a game.

“There is no doubt that the change in venue has been a challenge,” Richie said. “The Liberty is working hard to cultivate a fan base in the Newark area.”

On ESPN2, the WNBA’s 12-game national TV schedule had a 5 percent increase in viewership, with an average of 270,000 viewers a game compared to an average of 258,000 over 18 games last season. The league’s 0.2 average cable rating this year was even with its mark on ESPN2 in 2010.

The league’s sponsorship portfolio was bolstered this year by the recent multiyear, eight-figure deal with Boost Mobile that puts the company’s logo on 10 of the WNBA’s 12 team jerseys. It is the biggest sponsorship agreement in the WNBA’s 15-year history and saw Boost Mobile join American Express and InterContinental Hotels Group as new leaguewide partners this year. American Express is also an NBA partner.

The league has 15 corporate marketing partners, two more than last year. “From a sponsorship standpoint, the Boost Mobile deal is a game-changer, and we have only just begun to activate it,” Richie said.

At the team level, jersey sponsorship deals are a key revenue driver, and five of 12 teams now have marquee-level jersey deals featured along with Boost’s presence. The Mystics became the latest this year, adding Inova Health System.

“This is our 15th season and it establishes us as the most continuous women’s professional sports league in the country,” Richie said. “Literally and figuratively, people have embraced it.”