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Volume 21 No. 1

Leagues and Governing Bodies

The leaders of Grand-Am Racing and the American Le Mans Series, which last week announced they would merge in 2014, hope they can retain both of their title sponsors.

Rolex is the title sponsor of Grand-Am Racing’s top series, and Patron is the title sponsor of the American Le Mans Series.

The companies will merge in 2014 and will try to retain their title sponsors.
Grand-Am President and CEO Ed Bennett said that series officials would approach both companies with an opportunity to become either lead or presenting sponsor of the new, unnamed sports car series that will debut in 2014. He said that it would work similarly to the way Grand-Am’s top series was named in 2007 when it was known as the Rolex Sports Car Series presented by Crown Royal.

“Both [Rolex and Patron] are interested in being involved, which is great news,” Bennett said. “We’ve had both [a lead and presenting sponsor] before. We’re comfortable with that architecture. We haven’t had these discussions with them yet, but I think there’s an opportunity for both of them. We’ve got some time.”

As for other corporate sponsors, Bennett said the series would try to keep as many as possible. Excluding manufacturers, Grand-Am has 16 sponsors and ALMS has 14.

InterContinental Hotel Group is the only sponsor of both series, but Bennett said there’s little category overlap between the two series and added that all of the sponsors will be given a chance to be part of the unified series.

Both series handle sponsorship sales in-house, and that likely will continue after they unite. Bennett said that any new sponsors the series brings on will be premium brands that align well with current partners like Rolex and Patron.

In addition to finding new sponsors, the unified series will have a chance to pursue a new TV agreement.

Grand-Am’s relationship with Speed goes through the end of 2014. Grand-Am doesn’t receive a rights fee from Speed. The network covers production costs and sells advertising against race broadcasts.

ALMS has a time-buy agreement with ESPN that runs through the end of 2013. It gets 58 hours of programming on ABC, ESPN2 and ESPN3 and receives commercial inventory to sell to existing and new sponsors.

Bennett didn’t know if the united series would be able to get a rights fee from a broadcaster, but he’s optimistic it will get a better TV deal than the one that each respective series currently has.

“With all the brands involved and all the attention, we’re optimistic we can have the best outcome from television,” Bennett said. “We don’t know what that is. We want it to be something [financially] sustainable.”

The other major revenue benefit of a united series could be higher sanction fees for events. Sanction fees make up a sizable portion of Grand-Am’s annual revenue, Bennett said, and without another elite sports car series in the market, the new Grand-Am-ALMS series will have more leverage in negotiations with tracks.

Bennett said that the series would spend the rest of this year and early part of next year developing detailed sponsorship, TV and branding plans. He hopes to have many of those details finalized by the second quarter of 2013.

Editor's note: This story is revised from the print edition.

Major League Soccer will host more than 250 team, league and industry executives Wednesday and Thursday in Columbus for the 2012 MLS Business Summit. The featured speakers will be U.S. men’s soccer coach Jurgen Klinsmann and Claude Ruibal, YouTube global head of sports content.

“It’s an opportunity to share a sense of pride about how far we’ve come in the last few years,” said Brad Pursel, MLS vice president of club services, “but also to take a leaguewide look ahead.”

The event is just the second of its kind in the league’s 16-year history. The first was in Chicago in 2008. MLS traditionally has used its All-Star Game week and its MLS Cup championship game to convene leaguewide meetings, but MLS Commissioner Don Garber wanted to bring back the summit this year.

The event was scheduled for this week so as to follow the U.S. men’s World Cup qualifier against Jamaica at Columbus’ Crew Stadium on Tuesday night. The majority of summit participants are expected to attend the game.

The following morning, to start the summit, Klinsmann will speak and take part in a question-and-answer session. Ruibal will speak later in the day.

Six months ago, MLS Digital and Bedrocket Media Ventures launched Kick TV on YouTube, creating a global video site with news, analysis, instruction and classic-game broadcasts.

Other sessions set for the opening day of the summit include remarks by Garber, MLS President Mark Abbott, Soccer United Marketing President Kathy Carter, MLS Chief Marketing Officer Howard Handler and Todd Durbin, MLS executive vice president of player relations and competition. There will also be a panel with executives from key league partners, including Panasonic, AT&T and Quaker Oats.

The summit’s second day will be for departmental meetings, with sessions planned for corporate partnerships, digital, finance, community relations, legal, marketing, fan development, ticket sales and communications.

The event is closed to the public

Since the league is no longer hosting MLS Cup at a predetermined, neutral site — the finalist with the best regular-season record will host the championship game starting this year, on Dec. 1 — the summit could become a more frequent event.

With the NHL’s collective-bargaining agreement set to expire on Saturday, the prospect of what could be the league’s third lockout since 1994 had both insiders and industry experts making note last week of likely areas of impact.

Formal talks between the NHL and NHL Players’ Association broke off on Aug. 31. No further talks had been held as of Wednesday.

Team training camps were slated to open next week, and the league’s regular season is scheduled to begin Oct. 11.
While the Calgary Flames, as of last week, were the only club to so far publicly acknowledge that they will roll out salary cuts for employees in the event of a lockout, other teams are keeping a close eye on their bottom lines.

“We haven’t had any work-stoppage-related layoffs yet, and I haven’t heard of cuts around the league besides what the Flames announced,” said one senior vice president with an NHL club who requested anonymity. “What we’ve told our employees, and I’m hearing it’s the norm around the league, is to not spend a dime without approval. We want to protect our staffs as long as possible, so being prudent about expenses only makes sense. Who knows what the cost of a lockout will be?”

AJ Maestas, president of Chicago-based Navigate Research, pointed first to the NHL’s casual fans.

“Not only would another lockout become a major challenge to win more fans, I believe the NHL would lose casual fans and not regain them for an extended period of time,” said Maestas, whose firm conducts research, measurement and analysis of sponsorships in sports and entertainment. “Our research after the last lockout [2004-05] showed the passionate fans quickly returned to the arena but a long lag time for casual fans to return to attending games and watching on TV. Given that TV ratings are one of the greatest challenges for the NHL, this is not good.”

Financially, the NHL’s agreement with NBC calls for the league to be paid by its U.S. television broadcast rights holder during a lockout. Any extended time lost — time that could not be made up during a 2012-13 season — would be added to the end of the contract, a 10-year, $2 billion deal signed in 2011. Similar payments were slated for the NFL and NBA from their rights holders during those leagues’ labor battles last year.

Media expert Neal Pilson noted prospective gains for both NBC and the NHL from the arrangement.

“The clause gives the league cash flow during a lockout,” said Pilson, the former president of CBS Sports and currently CEO of his own sports media company, Pilson Communications. “The network pays now, but gets a year at the end of the deal. When you consider the rate of inflation, that’s a significant benefit. In this case, NBC solidifies its relationship with the NHL by backing them financially during a lockout and could get an extra year a decade from now. Let’s face it: Paying the NHL for possibly a year is not going to drastically affect the balance sheet of a company like Comcast, just as it wouldn’t for Disney or Fox in the other sports.”

NBC Sports Group spokesman Chris McCloskey said NBC was “hopeful that the labor situation will be resolved with no disruption to our programming.” If there is an absence of NHL games, NBC will have replacement programming that will include soccer, boxing and college football, as well as minor league, college and international hockey.

NHL Deputy Commissioner Bill Daly said last week there is no standard answer for how league sponsors would be handled in the event of a lockout.

“All of the contracts are different and contemplate different packages of rights, and each will be impacted differently by any work stoppage,” he said. “As a general matter, league sponsors will not have to pay for things … that we are unable to deliver on.”

As for teams, Daly said the league will work with clubs on protocols for season-ticket holders and other customers, but most such actions will be driven by the franchises themselves.

“The league provides general guidance to the clubs on its dealings with season-ticket holders in the event of a work stoppage and the cancellation of games, but each club is generally free to develop its own policy depending on the unique circumstances in each different market,” Daly said.

Elsewhere, the NHL with a lockout could see a drop-off in coverage from newspapers and websites. Lynn Zinser, an editor, reporter and Web producer for The New York Times, said the canceled 2004-05 season exacted a cost.

“The last lockout gave sports editors, who were almost all looking for ways to cut their budgets in an unfriendly newspaper economy, an excuse to cut hockey coverage,” Zinser said. “This lockout would do that again, in an even less-friendly media economy. In that regard, this comes at a terrible time for the NHL. The league will fall like a rock down the list of priorities of things to cover for U.S. media.”

For its part, the American Hockey League is poised to help fill any game-action void for fans. The AHL has a deal in place with Sportsnet in Canada to broadcast an additional slate of games if NHL games are canceled. It also has begun discussions with NBC Sports Network and several RSNs about replacement broadcasts. Still, AHL Commissioner David Andrews said his league hopes the NHL resolves its labor issues soon.

“While there may be a short-term bump for our league,” Andrews said, “there’s no question that the NHL playing is more important to us. It’s the best league in the world, and we are partners in the development of players and in the growth of the sport.”

According to Andrews, the AHL did see attendance gains during the 2004-05 lockout, especially in regions close to NHL markets. “We had a higher quality of competition,” Andrews said, noting that future NHL stars such as Eric Staal, Jason Spezza and Dustin Brown played in the AHL while their rookie NHL seasons were postponed by the lockout. “Marquee names attract media coverage and fans.”

Russia’s KHL also could benefit from an NHL lockout. Many of the country’s star players, including Evgeni Malkin of the Pittsburgh Penguins, have said they would keep their skills sharp during any prolonged lockout by playing in the league.

KHL President Alexander Medvedev last week said that each club could sign up to three NHL players for the duration of the lockout and that those players would not count toward the KHL’s salary cap. In addition, KHL games between Moscow Dynamo and SKA St. Petersburg at the new Barclays Center in Brooklyn on Jan. 19-20 could serve to satisfy the needs of some fans to watch high-quality hockey should there be an NHL work stoppage that extends into 2013.

As for the ultimate cost to the NHL brand, league Commissioner Gary Bettman has cited the loyalty of fans as the primary reason for his lack of concern. In the year after the failure to agree to a collective-bargaining agreement led to the cancellation of the 2004-05 season, 24 of the NHL’s 30 teams averaged at least 15,000 fans for its home games. Only the St. Louis Blues, whose attendance dropped from 18,560 to 14,213, experienced a steep decline, while many clubs saw increases.

Pilson also sounded an optimistic tone.

“I’m encouraged by the way the NBA came back [last year],” Pilson said. “Fans may not like it, but the new media has helped explain why there are work stoppages. I know the NHL is not the NBA, but when you consider the amount of social media coverage hockey gets, I predict a strong recovery for the NHL.”