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Volume 21 No. 1

Leagues and Governing Bodies

In the mid-1980s, when lawsuits from Oakland Raiders owner Al Davis against the NFL dominated league headlines, then-NFL executive Jim Steeg remembers being worried that football’s popularity could suffer as a result. Longtime league operations guru Bill Granholm counseled him, Steeg recounted last week: “As long as we line up 11 on offense and 11 on defense,” Granholm would say, “everything will be fine.”

Photo illustration by: WES SCHUENEMAN / STAFF. Photo credits: GETTY IMAGES (main, lower center); AP IMAGES (lower left)
Those remarks seem prophetic even today.

Despite the public outcry over replacement referees, open calls for Commissioner Roger Goodell’s resignation and predictions of a tarnished NFL brand, none of those issues hurt the league’s economics ahead of the regular officials reaching a deal to return to the field late last week.

“Even the best referees blow calls,” said Tom Spock, a former NFL executive vice president who led negotiations with the referees union in the 1990s. “How are TV ratings? How is attendance?”

As Spock well knows, the league’s popularity by almost any measure — TV ratings, Internet traffic, fantasy football participation or social media mentions — remains strong. In fact, by some measures, the controversy of the replacement referees served to stoke interest in the game: An East Coast midnight showing of “SportsCenter” after the disputed touchdown in last week’s now-infamous “Monday Night Football” game drew a 5.2 rating and the most viewers ever for the show. And the disputed game quickly seeped through the mainstream media. Even the president chimed in.

But is all news good news?

“It’s like negative branding: The more we see it happening, it reflects poorly on the league itself,” said Mike Paul, a crisis PR expert. “This is about branding, and the more we have a negative brand, meaning that people are thinking negatively about the sport and the game, that is bad for everybody.”

But even Paul, president of MGP & Associates, said it likely would have taken a full season of replacement referees, and no early deal in the subsequent offseason, to get sponsors and advertisers questioning investing with the league for 2013.

Big names torched the league on Twitter, especially after the Packers-Seahawks game.

Still, conversations with industry executives across business lines last week revealed league partners and longtime supporters shocked to see the NFL, the gold standard in sports, mired in such an ugly issue. Many were asking the same questions tumbling around sports talk radio and across Twitter and Facebook: How could the referee situation have been allowed to go so far, and did the league cave a bit in its negotiations with the referees union, showing some rare vulnerability after the tumult that followed the questionable touchdown in the Monday night game?

Sources close to the negotiations said the Tuesday and Wednesday talks that broke the logjam had already been scheduled before the disputed touchdown call was made, but even Atlanta Falcons owner Arthur Blank told NFL Network last week that the call provided some impetus.

Few expect long-term effect to the NFL image, as the league moved quickly to get the regular refs back on the field. But there could be at least one casualty beside the Green Bay Packers. The reputation of Goodell, who had a long public honeymoon period early in his tenure when he described his role as being the commissioner of football, not just the leader of the owners, could pay a price.

“I don’t think anyone thinks of the commissioner as the custodian of the game,” said one former player who requested anonymity because he now does business in sports. Suggesting further that Goodell failed to stand up to those who hired him to prevent the spectacle that was the replacement refs, the former player added, “This has been the owners’ hunt.”

Few industry veterans are willing to publicly criticize, or even question, Goodell. For all the negative headlines he has endured in recent weeks and months, Goodell presides over the unquestioned powerhouse league of U.S. sports. But there’s no doubt that Goodell’s standing among NFL fans clearly took a hit last week, continuing a rough patch for the commissioner now in his seventh season at the helm.

One former league executive said the ongoing bounty scandal involving the New Orleans Saints, in which the league’s professed evidence seems to have emerged perhaps not as iron clad as initially claimed, combined now with the referee controversy, has damaged Goodell. “He wants to be the commissioner of the NFL,” this executive said. “He is the commissioner of the owners.”

In remarks to reporters last week, Goodell confirmed that extracting pension concessions out of the referees was a big demand by the owners and that, in the short term, the league had taken an image hit. “Obviously, this has gotten a lot of attention,” he said of the matter with the referees. “It has not been positive, and it is something you have to fight through and get to the long term — and that is something we have been able to do with an eight-year agreement.”

When Pete Rozelle ran the NFL, Rozelle would not engage in labor talks with the players because he wanted to elevate himself above the internecine struggle, though he would get involved as mediator. That changed under Paul Tagliabue, but Tagliabue’s tight relationship with late union executive director Gene Upshaw mitigated public perceptions that the commissioner only performed the owners’ bidding. With Goodell having been seen in some quarters as placing the integrity of the game at risk while waging a battle for the owners with referees, it could mark another transition in how the league’s commissioner is viewed.

Goodell frequently was the face of the league last year during the bitter lockout of the players, often being the one to take the hits instead of the owners. At the 2011 draft, which fell on a night the league was in court trying to reverse a judge’s order that lifted the lockout, fans loudly booed Goodell’s appearance on stage, leading him to respond that he, too, wanted to see football.

While some of that enmity dissipated when the 2011 season was saved, the league’s constant friction with the NFL Players Association along with the bounty and referee stories appear to have cost Goodell some of that good will. Players now are routinely critical of him on Twitter and through other media, once unheard-of shows of disrespect for the league and its leader. Goodell’s predecessors, of course, never had to deal with the elements of today’s social media age, underscoring that any figure likely would have trouble staying above the fray and enjoying an impartial reputation. Still, there is no telling how quickly Goodell will be able to regain that lost good will given his intense, personal effort in solving the referee crisis.

There is no question that Goodell continues to have strong support among both owners and other industry insiders, and those who know him continue to defend him, contending he will always do what he feels is in the best interests of the sport. John Tatum, who runs sports marketing firm Genesco Sports Enterprises, said the concepts of “commissioner of the owners” and “commissioner of football” are essentially interchangeable titles.

“You can’t really separate the two,” Tatum said, stating that what’s in the best interests of the owners is most commonly also in the best interests of football. “Roger has shown if he has got to do something for the greater good of the sport, he will.”

The board of Hulman & Co., owners of the IndyCar Series, is weighing an acquisition proposal for the open-wheel-racing operation, according to people familiar with the matter.

Former IndyCar Series CEO Tony George has put together an investor group that includes some of the sport’s top team owners — Chip Ganassi, Roger Penske, Michael Andretti and Kevin Kalkhoven — as well as motorsports marketer Zak Brown that recently proposed the board sell them the IndyCar Series. The group has hired the Midwest-based law firm Faegre Baker Daniels and begun a financial due diligence evaluation of the series.

It’s unclear what the George-led group offered the board, but sources said that the group would take over management of IndyCar, which operated at a loss this year, and assume any debt on its books.


Hulman & Co. would retain its majority ownership of Indianapolis Motor Speedway and continue to run IndyCar’s Indy 500 and NASCAR’s Brickyard 400 races. It also could opt to take a minority stake in the IndyCar Series during the negotiations.

George declined to confirm or deny that he had engaged Faegre Baker Daniels or put together a group of investors. He described the “premise” as “inaccurate.”

Ganassi, Penske, Andretti, Kalkhoven and Brown did not return calls seeking

comment. Hulman & Co. CEO Jeff Belskus was out of the country last week and could not be reached for comment. An IMS spokesman said the board has a policy of not commenting on board meetings.

It is the second time in less than four years that George, who ran the IndyCar Series when it was called Indy Racing League and is a member of the Hulman & Co. board, has put together a group to take over the series. The first time reportedly was in 2010.

The board was told that Brown, who founded the Indianapolis-based

motorsports agency Just Marketing International, would lead the series’ management team if George’s group is successful. It’s unclear how that would work. Brown is still the CEO of JMI, which has built an international operation around Formula One in recent years and continues to work domestically with sponsors of NASCAR and IndyCar. The agency’s investors include Spire Capital and WPP.

If Brown didn’t take the job, sources said the Hulman board discussed the possibility that the group could hire John Lopes, Andretti Autosport’s executive vice president and chief operating officer. Another logical candidate would be

Joie Chitwood III, Daytona International Speedway’s president who was the chief operating officer at Indianapolis Motor Speedway for seven years at a time when George was the speedway’s CEO.

Sources familiar with the Hulman & Co. board said the final decision on selling the IndyCar Series will be made by Mari Hulman George, 77, the board’s chairwoman. She controls the majority of the voting interest in the company. The 11-member board also includes her four children — Nancy L. George, M. Josephine George, Katherine M. George-Conforti and Tony George — and six local businessmen, who serve in an advisory role.

In the proposal, Hulman & Co. would keep its majority stake in Indianapolis Motor Speedway.
The takeover proposal comes four years after the Indy Racing League and Champ Car merged, ending 12 years of a split among the two American open-wheel racing series. George brokered that deal in 2008 and paid $40 million to create a unified IndyCar Series. He resigned a year later after the series fell under financial pressure in the wake of the recession. Randy Bernard, the former head of Professional Bull Riders, replaced him in 2010.

IndyCar is coming off a difficult season. The series experienced double-digit decreases in TV viewership, had a race in China canceled and began searching for a presenting sponsor that potentially could replace its title sponsor, Izod, before the apparel brand’s deal ends after the 2015 season. That came on the heels of popular driver Dan Wheldon being killed in the 2011 season finale and Danica Patrick moving full time to NASCAR this year.

Bernard met with the Hulman & Co. board on the same day that the George-led group’s takeover proposal was presented. He was scheduled to announce the series’ 2013 schedule Sunday and is trying to expand its number of races from 15 to 19 next season.

MLB is venturing into what it calls “uncharted territory” for its new wild card playoff round, as the single-game knockout contests set for Friday creates a dizzying array of logistical challenges.

League and team officials, broadcaster Turner Sports and other business partners last week were all on high alert, trying to prepare for many scenarios for the reformatted beginning to baseball’s postseason. Nine clubs were within six games of a wild card slot at press time last week and the host cities for the two games remained unsettled, magnifying the complexity of business planning.

Baseball regular Budweiser is presenting sponsor of the wild card games.
“All the different scenarios still out there have definitely ramped up what we need to do from a planning standpoint, certainly compared to the prior playoff format,” said Derek Schiller, Atlanta Braves executive vice president of sales and marketing. The Braves, standing last week as the likely host of the National League wild-card game, began selling tickets nearly three weeks ago. But Schiller said the sales process has required the team to educate fans on the new format, and a potential wild-card game at Turner Field as of last week had not yet sold out.

“We’ve had to build out a business plan for literally about six different scenarios. And all those different outcomes have a different effect with regard to start times, broadcast schedules, your concessionaire, ticketing and so forth,” Schiller said. “There’s no doubt this change has … generated a lot of excitement. But because it’s the first year, we’re all having to learn through the new concept together.”

MLB and the MLB Players Association created the single-game wild-card round in last year’s collective-bargaining agreement, expanding the postseason to include a fifth team each in the American and National leagues. After originally planning to begin the new format with the 2013 season, the league and union agreed in March to shoehorn the additional postseason round into an already established 2012 schedule.

Turner Sports began its postseason marketing about two weeks earlier than normal because of the new format. Because it doesn’t yet know where the wild-card games will be played, the network plans to place several TV production trucks around the country near potential host markets.

“We have to be in a lot of different locations,” said Christina Miller, Turner Sports senior vice president of strategy, marketing and programming. “It will take more resources to account for these games. We have to cover our bases.”

MLB Network will air a two-hour wild-card preview show on Thursday, and plans to have talent on site in both wild-card host markets. But like everybody else, the league’s TV outlet remains in wait-and-see mode.

“The big thing for us is that our talent will be talking about something very new,” said MLB Network Chief Executive Tony Petitti. “Even the former players among our talent have never been in something like this.”

The same frantic story can also be told with regard to licensing. With a single knockout game that will end the season for two clubs, hot market merchandising has been compromised, even by normal baseball playoff standards. Longtime on-field cap rights holder New Era for the first time will affix playoff patches to the sides of caps for the entire postseason. The additional decoration had been reserved for the World Series.

“We’re in uncharted territory,” said Howard Smith, MLB senior vice president of licensing. “If I have my business cap on, we’d love to have four or five days before to prime any market. Putting my fan hat on, we have 15 teams with a chance at the postseason with a week left, so I’d love to see a last night similar to last year, where nothing’s decided until the last out of the last game.”

Even with the compressed time frame, MLB and Turner have signed several sponsorships specifically around the single wild-card games. Budweiser is the presenting sponsor of the two contests, an element contained in the brewer’s recent sponsorship extension with the league. Turner signed Captain Morgan, Bank of America and Dodge to various elements of its wild-card game broadcasts, in addition to Budweiser’s activation on TV.

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

After canceling its international preseason tour last year because of the lockout, the NBA heads back overseas this week with a more aggressive marketing approach around its scheduled games in Europe, Mexico and China.

The Mavericks will join the Celtics in playing preseason games in Europe.
The biggest change is that BBVA replaces EA Sports as presenting sponsor of NBA Europe Live, which features four games (see chart). Subsidiary group BBVA Bancomer, of Mexico, will sponsor the preseason game Sunday in Mexico City between Orlando and New Orleans.

In each of the international preseason markets, the NBA aims to have more league-related events around the games than in years past. In each city of the Europe Live tour, the league plans to hold expanded free interactive fan zones, with BBVA sponsoring the areas in Barcelona and Istanbul. In China, the NBA for the first time will hold a Fan Appreciation Day event with free, open practices of both teams for fans in Shanghai.

“We are focusing on getting the game experience to fans as much as possible,” said Emilio Collins, senior vice president of global marketing partnerships for the NBA. “After not having the games last year, our partners have been gearing up, and we are seeing record activation across all three regions. BBVA is making a major brand play.”

Other partners are using the preseason games to roll out new or expanded promotions, as well. Longtime NBA partner Sprite is using the international tour to promote its “Uncontainable Game” sweepstakes, which will select fans to play at this season’s All-Star Game on teams led by Kobe Bryant and LeBron James. Germany-based SAP, which signed on with the NBA as a marketing partner this summer, will begin its activation with hospitality and in-arena branding around the Berlin game and the games in China, while 2K Sports is using the games to launch “NBA 2K13.”

Anheuser-Busch is using the China Games series to launch promotions around its Harbin Beer brand as part of its expanded partnership with the NBA in China.

“There is activation across the board from retail to digital to consumer,” Collins said. “For our partners, the annual slate of games is a unique, once-a-year experience to get to key customers.”

With the NFL’s Breast Cancer Awareness campaign now entering its fourth year, one question that can be asked about the effort is, What’s left on the field to turn pink for the month of October?

NFL players during the first three years of the campaign have worn pink gloves, cleats, shoelaces, chin straps, armbands and wristbands on the field in October. Many of those items subsequently were auctioned off to benefit the American Cancer Society. Games began with a flip of a pink coin, were played with footballs decorated with the BCA pink ribbon logo, and were played on fields bearing the same icon.

Money generated from licensed products like Panini cards has steadily increased.
So what’s left? Well, for starters, kicking tees, which will likely be autographed by a kicker and later auctioned.

But it isn’t just about adding a different hue to NFL fields. The message behind “Awareness” is that early screening, especially for women over the age of 40, is a “Crucial Catch.’’

“Sure, the pinkout is memorable, it pops on TV, and we’re at the point where our fans expect it now,” said Peter O’Reilly, the NFL’s vice president of fan strategy and marketing. “Now it’s about making sure those dollars raised work hard and to make that message of screening and our American Cancer Society partnership resonate.”

Money generated by auctions and proceeds from NFL/BCA licensed products (including pink water bottles, jerseys and even pink Terrible Towels) has increased over the three years from $400,000 in 2009 to $1.1 million in 2010 to $1.5 million last year.

“Our research shows that more than 65 percent of NFL fans can identify that getting screened is the key message of our campaign,” said Anna Isaacson, NFL director of community affairs. “So we think the point is getting across.”

Every NFL club will host at least one “Crucial Catch” game this month, starting with this week’s “Monday Night Football” game in Dallas. Some teams will host two games. The last week in October will see the most games dedicated to the BCA effort, which started as a team initiative and grew to a leaguewide marketing platform.

Among the local market highlights will be in Buffalo, which has previously lit Niagara Falls pink as a tribute. This year, the Maid of the Mist tourist boat at the falls will be in on the act, as well.

All league-controlled media will again support the BCA initiative, and while O’Reilly said the NFL RedZone won’t be changing its colors, it was considered. However, some pink FieldTurf will be installed in those network studios for October.

The PGA Tour is conducting in-depth financial reviews of its tournaments for the first time, with the primary goal being to help each of them increase revenue.

The reviews are voluntary, though not a single tournament declined. Twenty-six tournaments are undergoing a review this year, and the remaining 18 are expected to go through the process next year.

Andy Pazder, the tour’s executive vice president and chief of operations, said the tour has never done such a deep dive into the financials of each tournament.

“We’re basically asking the tournaments to open their books to us and see if we can help,” Pazder said. “It’s been one of the biggest successes of the year and something we hope will pay dividends two to three years down the road, and longer.”

Pazder said PGA Tour events are, for the most part, much healthier than they were a few years ago. Gross revenue still isn’t where it was before the recession, but net revenue is moving closer to where it used to be. Based on tax filings, gross revenue from tournaments ranges from $7 million on the low end to more than $20 million for the best-performing events in the biggest markets, such as the Waste Management Phoenix Open or the HP Byron Nelson Championship in Dallas.

“We had some rough years around 2008, 2009, 2010,” Pazder said. “We began to see a little lift in attendance in 2010, a little more in 2011 and a big pickup this year. … With things moving in a good direction, we’re working with tournaments to take a hard look at what’s being sold, pricing and whether any of that needs to be refined. Are we undercharging, overcharging? How can we make our profits stronger?”

With most of the tour’s title sponsors signed to long-term deals and a TV contract that now stretches out to 2021, the tour decided that now is the right time to dig into the financials of each tournament to see what growth potential exists. In the past, the tournament business affairs division — the liaison between the tournaments and the tour — had done some information sharing, including a website that highlighted best practices at events, but nothing to this extent.

Each sit-down the tour has with tournaments lasts at least two days and goes over every revenue and expense line. Peter Kent, vice president of championship management, typically heads up a team of three sales executives from the tour who meet with a tournament director and sales staff.

“The reality is that our tournaments have small staffs compared to an NBA team or an MLB team in the same market,” said Kent, a former Nike executive who has been with the tour for four years. “We’ve got to be as effective and efficient as possible to compete and make sure that we’re leveraging every asset we have.”

The tour’s focus has been to improve each event’s profit margin, increase prize money, expand charitable giving and build reserve funds. PGA Tour events are part of nonprofit entities, so their profit margins are essentially the money left over each year that events give to charity. Some give as much as $6 million, while others give close to $1 million.

The Travelers was the first event the tour reached out to last year.
Tournaments try to keep enough money in reserve to make it at least two years without a title sponsor — or about $8 million to $10 million, depending on the event. Some currently have it, some don’t.

“The tour has been very aggressive in creating resources for the tournaments on the revenue side,” said Nathan Grube, executive director of the Travelers Championship.

The Travelers was the first tournament the PGA Tour reached out to last year. The tour used Travelers as a test run to see what could be gained by such a review. Both sides saw benefits and the tour privately announced the program to tournament directors last December. Pazder thought a handful might express interest, so he was surprised when more than 20 signed up for a review by the end of that day.

“The big thing was the tone,” said Clair Peterson, a 10-year veteran of running the John Deere Classic and chairman of the Tournament Advisory Council, a group of tournament directors. “It’s completely an opt-in for the tournaments. We’re not being forced to do anything. … In 10 years, I’ve been through a few iterations of how they provide help and this is one of the best things they’ve done. It’s not a cookie-cutter approach. It’s a very individualized look at your market, your price points, your products, and how we promote ourselves, relative to the economic environment in the market.”

Added Kent: “We’re not trying to homogenize the tournaments. We’re looking for the nuances in each market so that we can work with tournaments to customize their plan. In the end, they create the plan, so it feels right to them and it’s easier for them to execute.”

The tour’s tournament business affairs has a representative working with each event and they follow up every few weeks to see how the events are doing with their plan. The process is being handled entirely in-house.

Part of the plan at the Honda Classic, tournament director Ed McEnroe said, has been to re-examine its sales approach. The sales team at the Honda had a renewal rate of 90 percent for primary and secondary sponsors, but the problem was that 60 percent of those were finalized within two months of the event, leaving brands and the tournament without the kind of planning necessary to get the most out of the deal.

As the Honda goes forward, the sales team will seek multiyear deals, even if it requires a slight price reduction, to secure greater stability and better planning.

Peterson said the John Deere is looking into a new shared hospitality product that the tournament has never offered before. The tent structure would have a sports-bar feel to it and would require a separate ticket for access. Food and beverages would be sold inside the tent and it would be an alternative to the giant double-decker tents that line the 18th fairway.

The tour made that suggestion, Peterson said, because it has worked at other tournaments.

Some events have discovered that their hospitality pricing is out of line with tournaments in similar-sized markets, and often the tournaments that are out of line are underpriced rather than overpriced.

Greg McLaughlin, president and CEO of the Tiger Woods Foundation, runs the AT&T National. His review isn’t until later this month and he’s curious to see what types of sales tactics the tour will bring.

“The big challenge is how to creatively grow your revenue,” McLaughlin said. “Growth is not coming from adding another bank of skyboxes or tents. That market is already heavily mined and pretty saturated at most events. So, how do you create something innovative that attracts a nontraditional golf sponsor? How do you offer either an existing or new sponsor something that is appealing over and above what they traditionally do? Sponsorship in golf is a finite market. It’s all about finding ways to expand that.”