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Volume 21 No. 2

Leagues and Governing Bodies

MLB this week during owners meetings in Arizona will wrestle with the mechanics of inserting an additional round of playoffs into the 2012 schedule, including how to televise the extra games.

The league and MLB Players Association in November, as part of a new five-year labor deal, agreed to an expanded postseason in which two wild card teams in each league would play a single-elimination game, with the winners advancing for League Division Series play. The new postseason plan will begin no later than 2013, but both sides would like to start the revised format this year, if possible.

A decision on the 2012 postseason schedule must be made by March 1. Given that this week marks the last set of owners meetings before that deadline and that broadcast plans must be made, a decision before that date is likely.

MLB executives, after announcing the plan, said they would begin talks on televising the two new playoff games with their existing television partners: ESPN, Turner Sports and Fox. Turner already holds exclusive rights for the League Division Series games, and it televises the League Championship Series games with Fox on an alternating basis between the American and National leagues.

Turner currently holds rights to tie-breaking games, such as the Tigers-Twins AL Central game in 2009.
Since the announcement, though, the league has been tight-lipped about its progress in squeezing the extra games into a 2012 schedule that already calls for an April 4 Opening Day, an Oct. 3 end to the regular season, and a postseason that would end Nov. 1 in the event of a seven-game World Series.

Under the league’s media contracts, Turner has held the right to carry tie-breaking games at the end of the regular season. Those rights came into play most recently when Minnesota and Detroit played for the AL Central Division crown in 2009.

In accordance with Turner’s contract, media industry sources expect the network to land the rights to the new round of play-in games, but they are waiting to hear definitively that the games are covered by Turner’s current deal.

In any event, the creation of new postseason baseball TV inventory represents a valuable addition for both the league and the network that ends up carrying it.

Also on the MLB meetings agenda is a vote on a shift of the San Diego Padres’ designated control executive from Chairman John Moores to Jeff Moorad, vice chairman and chief executive officer. Moorad, a former agent, and his investor group are in the midst of a multiyear plan to buy the Padres’ equity from Moores.

The San Diego change for its designated control executive — the appointed lead representative for the team with regard to league matters — will be the fourth such change in the league since the beginning of last season, following switches last year in San Francisco, Houston and Texas.

The NHRA continued to battle economic headwinds in 2011 and saw a significant decrease in revenue because weather dampened attendance for several races.

The organization worked to keep its costs under control by letting go of a handful of employees in October, said President Tom Compton, who characterized 2011 as a “tough year.”

NHRA President Tom Compton: 2011 was a tough year.
“We’re going to show a loss that’s material,” Compton said. “What we’re doing to prevent that in 2012 is we’re making additional personnel cuts and scrutinizing costs even more.”

Compton said the NHRA is in the midst of renewing some of its biggest sponsors. He expects the organization to sell all of its race title sponsorships and said he’s bullish on attendance in 2012.

“We’ve got momentum on the sponsorship side, and when the weather was good last year, attendance was up,” Compton said. “We’re going to be fine and we’ve made the adjustments we need to on the cost side to deal with anything that comes our way this year.”

The cost-containing efforts undertaken in 2011 came after the organization trimmed expenses by $4.1 million in 2010, according to the association’s most recent tax filing. Such cuts allowed the NHRA to decrease its losses from $643,924 in 2009 to just $12,855 in 2010.

The tax document, which was filed last November, shows that the organization cut expenses by 3.6 percent to $104.4 million in 2010. The move helped keep its operating budget in line with total revenue, which shrank 3.1 percent to $104.3 million during the same period.

The bulk of the reduction in expenses came from two categories described as “other” in the filing. Compton said that the organization’s biggest cuts came from a readjustment of property taxes for its track in Indianapolis, cutting its spending on consulting services, and minor cuts across areas like information technology and insurance.

“Had we not cut those costs, we wouldn’t have been able to break even,” Compton said. “We managed our cash very closely.”

The organization’s biggest expenses included: $24.6 million on advertising and promotions, $24 million on prizes, $14.5 million on salaries and benefits, and $2 million on officer salaries. The NHRA reduced spending on officer salaries by more than $100,000 in 2010, but most officers saw their base compensation increase in 2010. The NHRA said in the filing that “economic conditions improved” enough by May 2010 that the organization reinstated senior management’s base compensation to pre-2009 levels. In 2009, senior managers’ salaries were cut 10 percent because of the recession.

Compton saw his total compensation increase from $701,257 in 2009 to $712,189 in 2010. Total compensation for Peter Clifford, executive vice president and general manager, increased from $382,983 to $414,397 over the same period, and compensation for Gary Darcy, senior vice president of sales and marketing, increased from $379,153 to $380,527.

Total NHRA revenue fell for the second consecutive year, but the decreases between 2009 and 2010 were not as severe as the previous year. The organization’s ticket revenue decreased 4 percent to $41.9 million, sponsorship revenue decreased 3 percent to $39.6 million and royalties and concessions decreased 10 percent to $5.6 million. The only significant area that increased was the royalty and licensing sector, which rose 1 percent to $12 million.

Two of the complaints most frequently heard at the LPGA are that the tour doesn’t have enough domestic events and that too much of its TV coverage is tape-delayed. Commissioner Mike Whan said last week that the LPGA is addressing both of those critiques in 2012.

All of the tour’s weekend telecasts on Golf Channel, which is entering the third year of a 10-year LPGA contract, will be live this year, a significant increase over the previous two years.

The LPGA also is beefing up its schedule with four new tournaments, plus the return of the Jamie Farr Toledo event. That will give the tour nine events overseas and 18 North American tournaments.

The full schedule will be released this week.

“We want to be three things,” Whan said. “We want to be a tour made up of the best players in the world, and we want to have fans, sponsors and media partners from around the world. Those are happening. The third thing is that the U.S. is our home. We’re a U.S.-based company. Players around the world move here, they buy homes here, and they want more U.S.-based tournaments. We’re working very hard to do that.”

Toledo, a new event in Hawaii and a new tournament outside of Toronto give the tour three additions to what Whan calls the domestic calendar in 2012. Whan considers tournaments in North America as domestic events.

The LPGA is losing one U.S. event, the 36-year-old Springfield, Ill., tournament, which couldn’t renew State Farm as the title sponsor.

“When you consider that we renewed eight of nine title sponsors and 10 of 11 marketing partnerships, that represents a lot of positive trends,” Whan said.

Whan said he sometimes bristles when the LPGA schedule is used as a gauge of the tour’s health. It’s other factors, such as sponsorship, media and overall interest, that truly measure the tour’s growth, he said.

“Sometimes the schedule is like the stock price. Price goes up when the fundamentals are solid,” Whan said. “Our players are going to be playing for more money this year, we’ve got the value proposition right with our partners and we’re getting the TV proposition right. Those are the things that go into building a solid foundation, and that’s what enables us to build on the schedule.”

In addition to the renewals, the LPGA brought on Kia, Frontier Airlines, MedjetAssist and Symetra as new partners for 2012.