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Volume 20 No. 42

Leagues and Governing Bodies

NASCAR is close to reaching an agreement to buy its digital rights back from Turner Sports, a move that could see the sanctioning body manage its own digital business as soon as 2013.

Specific terms of the pending agreement were not available, and sources said the deal is not expected to be official until next year. It’s not clear how much NASCAR will pay to reclaim its rights, but sources said it would be in the mid-eight figures.

NASCAR and Turner Sports declined to comment.

NASCAR is the latest of Turner’s digital partners to change its business arrangement with the Atlanta-based company. Sports Illustrated last month announced that it would reclaim oversight of its SI Digital business from Turner, bringing an end to a two-year relationship. Recent talk in industry circles has centered on whether these moves represent a setback to Turner’s digital ambitions.

The move puts NASCAR in a stronger position to sell its media rights, which are expected to go on the market next year. NASCAR’s current eight-year, $4.48 billion media deal with Fox, ESPN and Turner ends in 2014. The company is preparing to put those rights up for sale, and its executives know that any network that bids on TV rights will also want digital rights to stream races online.

Though NASCAR is moving now to reclaim its rights, Turner will continue to run for at least a year. That will give NASCAR time to build up an infrastructure that can support and manage its digital assets independently. The group will hire staff to oversee the site and likely base the group in Charlotte. The sport’s production arm, NASCAR Media Group, has four floors of studio and production space in a $43 million facility completed as part of its new building in 2010.

Turner plans to be involved with NASCAR even after selling back the digital rights. The deal now being discussed would see Turner continue to handle some business operations, including ad sales, for NASCAR’s digital properties beyond 2014, which is when Turner’s original deal is scheduled to end. The new deal would have a similar structure to Turner’s deal with Yahoo! Sports that was signed in 2008 and allows Turner to sell ads around Yahoo!’s NBA, golf and NASCAR pages.

NASCAR has been looking to reclaim its digital rights for some time. The sanctioning body sold its interactive rights to Turner in 2000. In 2008, it extended that partnership through 2014. But in recent years, NASCAR officials began to regret taking a big paycheck from Turner rather than controlling the sport’s digital future.

Turner manages digital operations for the NBA, the PGA Tour and the NCAA men’s basketball tournament, but NASCAR officials felt they ceded more control to Turner than those properties. That created frustration in recent years, when NASCAR officials realized that the deal — signed years before social media became popular — gave NASCAR no control over Facebook, Twitter or YouTube.

During the last few years, senior NASCAR officials, who declined to speak on the record, complained that the deal was so restrictive that even simple digital initiatives were difficult to undertake. For example, if NASCAR wanted a Facebook page or Twitter handle, it had to get Turner to create or approve them. The sport and its tracks also couldn’t create mobile applications without Turner’s approval.

NASCAR gave up rights that were so all encompassing that Turner had exclusive rights to any video shot at a track during race weekends. When magazines, cable channels and newspapers shot non-race footage at a racetrack, sources said, Turner would seek licensing fees from the outlets before letting them post the videos on their websites.

Even a rights holder like ESPN ran into issues because of the Turner-NASCAR digital deal. ESPN had to negotiate with a competitor, Turner, to get the right to simulcast live races on its WatchESPN application and site rather than negotiate and secure those rights from the actual rights holder, NASCAR. This fall ESPN and Turner fashioned an agreement that allowed ESPN to simulcast Sprint Cup races and Turner to show in-car footage on during the same broadcasts.

Until that deal was struck, NASCAR officials thought its lack of live online races — standard with some other properties — helped contribute to its drop-off in young, male fans. They also blamed the Turner deal for NASCAR’s social media shortcomings. On Facebook, it has 2.4 million fans while a sports league like the NBA has 10.8 million.

By bringing the digital rights in-house, NASCAR believes that it can better market the sport. NASCAR last summer reorganized its operations to put its digital media division under its marketing department and tabbed Marc Jenkins to lead the company’s digital initiatives. Doing so paved the way to a deal with Turner by making the sport’s digital assets a marketing expense rather than a purely revenue-generating media asset.

With just 30 days to finalize plans after the end of the lockout, sponsorship activation around the league’s Christmas Day tip-off mostly will be limited to digital and broadcast media buys.

At least 10 of the league’s 18 sponsors will advertise NBA-themed spots around the start of the season, but it is not yet known just how many will be ready for the five Christmas Day games to be broadcast on TNT, ESPN and ABC. Ad sales figures for the opening day games were not available.

Among the league partners planning to run NBA-themed spots is Anheuser-Busch InBev’s Budweiser, the first time the brand has a NBA-themed spot to run at the start of the season.

“A lot of the activation largely will be media-based given the tight timeline, but more than half will be activating around the first few weeks of the NBA season,” said Emilio Collins, senior vice president of global marketing partnerships for the NBA. “We are in discussions with partners around other plans.”

In addition to the media buy around the league’s national games broadcast on Christmas Day, Kia will be the title sponsor of the NBA Tip-Off, which runs through Jan. 6. It is the automaker’s second consecutive season as title sponsor of the early-season promotion.

The league’s newest sponsor, Sprint, will be the presenting partner of digital promotions for the league’s Christmas Day games. will be the presenting partner of the NBA Tip-Off show on TNT that begins on Christmas Day. American Express is running an NBA merchandise discount for its card members around the holidays.

NBA video game partner 2K Sports will launch full-length video simulations in advance of all five Christmas Day games.

The NBA is preparing an aggressive rollout of social media initiatives to help herald the start of its abbreviated 2011-12 season.

Among the social media-focused marketing and outreach programs scheduled for this week: an extensive series of ticket and merchandise giveaways through the league’s @NBA Twitter feed under the moniker “Big NBA Xmas,” and a live online Town Hall session on Facebook for fans featuring several active players. “Big NBA Xmas” is a play on the league’s current marketing tag line, “Big Things Are Coming.”

On the content side, NBA Digital, the league’s joint venture with Turner Sports, is expanding the Twitter and Facebook integration within and individual team pages, and prominently featuring on-air the individual Twitter usernames of NBA TV talent. NBA Digital is also reviving its popular Fan Night program in which fans, in part through social media, select games shown nationally Tuesday nights on NBA TV.

Facebook and Twitter factor heavily into the plans.
“The social conversation is obviously going to be ramped up, and is a very important part of both the launch of the season, and the ensuing weeks,” said Christina Miller, NBA Digital senior vice president and general manager.

NBA Digital also has significantly reworked its out-of-market game package, League Pass. Primarily marketed in years past as separate products between TV, online and mobile, marketing in earnest began last week for a single $169 subscription that provides access to live game video on all three platforms. Discussion on the combined offering, as much as $70 less than the total price of each version of League Pass last year if purchased individually, began before the end of last season. But plans then accelerated during this summer’s lockout in part as a means to thank fans for their patience during the sport’s labor dispute.

“It was sort of both situations,” Miller said. “Certainly, we’re seeing the continued growth of mobile and the desire among our fans to have access to the game any time, anywhere. But this was also a situation where we wanted to provide a lot of value to fans.”

The NBA will begin the lockout-shortened 2011-12 season with its number of returning full-season-ticket customers on par with last year, a robust figure considering the labor battle that left teams in a marketing lurch.

As of last week, the league’s full-season-ticket renewal rate was running in the 80-plus percent range, about the same pace as at the start of last season, league officials said. The league was still compiling new season-ticket sales data, but the labor turmoil is expected to affect new full-season-tickets sales, and teams will be challenged to match last year’s sales of partial-season-ticket plans and group plans during its compressed 66-game season.

The NBA set a record last year by selling 50,000 new full-season-ticket plans for a whopping 40 percent increase going into the season. That record won’t be threatened this year following the labor strife that cost teams the first 16 games of their regular season.

“Last year is a difficult comparison because we sold more new full-season tickets [than ever before], but I would say that the sale of new full-season tickets will be in line with most normal years,” said Chris Granger, executive vice president of team marketing and business operations for the NBA.

Granger would not disclose the league’s current new full-season-ticket sales rate.

“The lockout is going to impact advance and walk-up sales, which will be slow,” said Bill Sutton, principal of Sutton & Associates, which counts NBA teams as clients. “Teams will also be doing more discounting. But historically, the toughest games to sell in the NBA are from right after opening the season through Christmas, and those games are already gone.”

During the lockout, NBA teams were challenged to stay relevant given that league rules prohibited the use of current players in any team marketing and promotional efforts. To date, though, the NBA has 10 of its 30 teams with 10,000 or more full-season ticket plans, the same number as last year.

While league officials would not disclose that list of teams, among the clubs reaching the 10,000 benchmark are Miami, Boston, Chicago, New York, New Orleans, and both the Los Angeles Clippers and Lakers.

To help drive post-lockout sales, the league recently sent to its teams a list of marketing guidelines, including a required open scrimmage, as teams ramped up outreach efforts following the ratification of the league’s new collective-bargaining agreement.

“Teams have been extremely aggressive in their outreach,” Granger said. “We’re happy with the pace of sales given the compressed time frame.”

For example, the Washington Wizards, who at the end of last season announced a major rebranding effort only to market it against the lockout, offered season-ticket holders this year a three-year freeze on the price of season tickets bought before the start of the season. In addition, the Wizards will pay all convenience fees charged by Ticketmaster for individual tickets purchased during the first week of individual game sales. Waiving the convenience fees, which range from $5 to $35 per ticket, is a first for the franchise.

The Philadelphia 76ers adopted a similar offer by slashing online ticketing fees while the Atlanta Hawks eliminated all fees for every ticket sold this season at Philips Arena.

The NFL last week approved two significant limited-partner transactions, each totaling in the low nine figures, according to sources familiar with the deals.

The Brown family, owners of the Cincinnati Bengals, bought back from the Knowlton estate its remaining shares in the team, sources said, while the San Francisco 49ers are selling a stake in the club to a Silicon Valley individual to help fund the team’s planned new stadium in Santa Clara.

Combined with the approval of Shahid Khan’s reported $760 million purchase of the Jacksonville Jaguars, the developments underscore how the NFL is more than ever a desirable investment.

NFL owners welcomed Shahid Khan (right, with Roger Goodell) to their ranks.
Photo by: AP IMAGES
“With a new CBA [and] with new TV money, it makes limited partnerships a lot more attractive,” said Randy Vataha, president of Game Plan, which advises in team sales. “There are no big bumps out there.”

The identity of the Silicon Valley investor was not available, and 49ers owner Jed York declined to comment. A spokesman for the Bengals also declined to comment.

The Bengals battled the Knowlton estate for much of the 2000s. Austin “Dutch” Knowlton, a Bengals founder who also was an owner of the Cincinnati Reds, died in 2003, sparking an estate battle over the value of his stake in the football team. The buy-back of the remaining Knowlton stake is the last chapter in that story.

Sources said the Brown family did not have to borrow to finance the transaction because the team has been profitable the last decade; it had the reserves to finance the buy-back. While the Bengals have been long cast as a low-revenue team, accurately so, the club also has very little, if any, debt and a stadium lease described widely as a sweetheart deal for the club.

Meanwhile, the 49ers are borrowing $850 million to fund their planned stadium in Santa Clara, leading observers to question how the club could afford so much debt. Paring down the debt with the proceeds from an equity sale appears to be one answer. The stadium is slated for a 2015 opening.

Potential NFL stadiums across the league got a boost last week when owners, meeting in Dallas, passed a 25-year stadium-financing program, replacing a program that expired in 2006. Teams will be able to get up to $200 million, more than the $150 million available under the old program, paid for through diverted revenue streams, owner loans and assessments against other clubs. The new program can assess each team up to $1 million annually for the quarter century of the program.

A key distinction in the new program, said Neil Glat, NFL senior vice president, is that unlike the old program that gave more money to teams in bigger markets, this system will base payouts on how much teams are putting in. Also, like the old system, renovations are still eligible for funding, but now the first $50 million is not covered.

NFL owners at their meeting also approved two smaller limited-partner transactions. The Philadelphia Eagles had some internal ownership transfers that were minor, the team said, and the Atlanta Falcons executed a share sale. A Falcons spokesman did not immediately reply for comment.

In addition, the owners approved creating the first league-run venture capital fund. Each team will make available up to $1 million for the fund.

“The aim of it is to invest in various technologies and companies that we think are doing great things that will make our world better but also the experience in the NFL better,” Commissioner Roger Goodell told reporters last week. “They may or may not be NFL partners. They may be people who provide technology in our stadiums, on our fields, as part of media. We will look at those different technologies. We’ll have a committee that will be making those decisions, and we’re very excited about it.”