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Volume 20 No. 42


It was June 2009 when we held a panel on “The State of the New York Sports Market” during our Sports Facilities & Franchises conference in Manhattan. There were executives from a number of the major metropolitan sports teams and venues on the stage — Dave Howard from the Mets, Mark Lamping from the New Meadowlands Stadium, Scott O’Neil from Madison Square Garden and Brett Yormark from the Nets.

In looking back at the session, the topics discussed that morning were filled with the heavy talk of a financial recession. The executives stressed that they were open for business and working it hard. Howard: “The deals are different; now you definitely have to be more proactive and integrate the sponsors’ business with yours and give them real justification for the deal, help them drive their business and their revenue.” Lamping said, “The way to get out of this, in many respects, is through sales, because sales cures all ails.” And Yormark said, “As dismal as people might make it out, there is so much money in New York, and people still have it, and they made lots of it over the years, and if you can create that value proposition, they will spend.”

Much of the discussion that morning also focused on the changing landscape of the New York venues, with the development of the New Meadowlands Stadium, Citi Field and Yankee Stadium and the renovation of MSG. At this time, the Barclays Center project in Brooklyn was mired by delays, lawsuits and local opposition, and many felt prospects for the arena were dim. The question was asked of the audience, “How many people in the room feel the Barclays Center will be built?” In the room of more than 350, fewer than 20 hands went up.

There was a mix of groans and snickers, but Yormark was adamant, telling the audience, “I will say to you, there are no options. We’re going to Brooklyn. We’ll be there. Two or three years from now, I’ll host this event at the Barclays Center. How about that?”

Now it’s Yormark who has the last laugh and is sitting atop one of the most talked-about stories in sports business. With the opening of the arena this month, I circled back with him late last week to discuss his long, strange trip. When recalling that moment at the conference, he said that he wasn’t playing to the crowd and spinning, but that he never doubted the project.

“To me, it was always a question of ‘when’ versus ‘if.’ It was a story too good to not be told,” he said. “When I sat there on opening night of the Jay-Z show, I was thinking, ‘I can’t believe anyone ever opposed this.’ It was just amazing to see how happy and engaged our fans were and how our staff was. The borough has waited so long for this, and the pride for the community is unmatched.”

If you know Yormark, you know he’s fast forward all the time and not prone for reflection or pause. But even with a project of this magnitude, can’t one take a step back to appreciate? “I don’t look back much,” he admitted. “But I think in life you dream of legacy moments. You look for them, and sometimes you don’t find them, but if you find one, you know it can be a game changer. And I look at this as a legacy moment.”

He added, “I was told by friends in the business, who said, ‘Brett, just think that you can walk down the streets of Brooklyn with your kids one day and know you had a hand in this.’ And that’s a legacy moment, when you can change a community and the face of an industry. So, when I do reflect, I am glad that I had a role in this because it’s going to impact a lot of people positively going forward. So yes, it’s special.”

And yes, Yormark, the Nets and the Barclays Center will serve as host of our 2013 Sports Facilities & Franchises conference in June. He delivered on that promise, too.

> BROTHERS UP IN ARMS: What makes the Van Gundy brothers-ESPN-NBA soap opera so enticing is not the allegations that the NBA pressured ESPN to keep a specific commentator away from league broadcasts. Those conversations occur more frequently than people realize. For me, it’s that the Van Gundys are talking about it at all, providing all of us a window into conversations that typically are kept private.

I was not surprised to see Jeff Van Gundy support his brother Stan. But I am surprised at the language Jeff Van Gundy used and his decision to go public. It’s one thing to stick up for your brother. It’s another thing to question the integrity of your employer in a national newspaper. Van Gundy told USA Today that the NBA/ESPN relationship “raises interesting questions about what a (league-network) partnership means. You have to realize, as a fan, you’re not getting the whole truth.” He adds, “It seems like there are certain people in each sport that (TV broadcasters) can’t criticize, or you can’t criticize the league itself.”

Those remarks feel like a flagrant defensive flop by Van Gundy. For years, his commentary on ESPN has been fair and at times critical of the league, its players, coaches, referees and style of game. He’s been balanced and opinionated. If he feels he can’t criticize the league, or feels the league has come down on him, you’d never know it by what he’s said on air.

Has he been prevented from telling the “truth” to viewers? It certainly doesn’t seem that he’s been asked to ease up on any criticism. The idea that John Skipper would bow to any type of critical commentary on the NBA rings hollow. Does Van Gundy really believe someone like new ESPN NBA TV analyst Bill Simmons will play soft when discussing the league? I don’t. Simmons’ career is defined by being an independent, opinionated voice in sports.

The Van Gundys’ beef fits into the natural push/pull balance between on-air commentary and league partnerships. These disputes happen all the time. But we welcomed the transparency early this year when NFL broadcasters were brutally honest about the failure of the NFL with the replacement referees. That level of openness changed public perception of the issue.

I have no doubt that the NBA and the Van Gundys have a strained relationship (I am sure David Stern was seething at their comments). I’m sure the NBA voiced its opinion to ESPN about Stan Van Gundy, and ESPN listened. But just because ESPN didn’t hire him doesn’t mean the network’s NBA coverage this season will pull any punches.

Abraham D. Madkour can be reached at

A planned initial public offering that aimed to raise $24 million for ownership shares in portfolios of racehorses was put out to pasture this past summer.

The investment vehicle, headed by racing industry veteran Frank Stronach, was to launch six public companies, each of which would back 20 horses. As the filings with the Securities and Exchange Commission explain, the new ventures would have offered “a broad range of investors the opportunity to participate in the enjoyment and excitement of an equity investment in thoroughbred racehorses at a minimum level of investment [$100] commitment that is significantly lower than ordinarily accompanies such opportunity.” However, the IPO was scratched due to the complexity of the SEC rules and the state regulations governing the offering of shares and horse racing in general.

Instead, the venture will go forward as a series of private partnerships, which is common in the world of horse racing. For example, the winner of the 2011 Kentucky Derby, Animal Kingdom, is owned by a partnership of 20 people. The 2003 standout gelding Funny Cide is owned by a group of high school friends who pooled their money to start a breeding operation.

There are many different vehicles for getting off and running in the world of horse racing, but owning an individual horse is considered one of the most risk-laden. Horses are typically purchased a few years before they are set to race. During this time, a horse can become lame, frenzied, diseased or simply fail to turn into a winner. Horses can produce ancillary income after retirement by entering the breeding market, but most are simply a losing investment.

2003 Kentucky Derby champ Funny Cide is owned by a group of friends who pooled their money to start a breeding operation.
In a survey of the four most-expensive horses sold at auction, three of them have resulted in massive write-offs — each in the tens of millions of dollars. As the SEC filings from Stronach’s IPO acknowledge: “[I]nvesting in thoroughbred racehorses is a speculative activity and the most frequent financial outcome from ownership of a thoroughbred racehorse or an equity interest in a thoroughbred racehorse is the partial or total loss of invested capital.” Even among sophisticated investors with decades of experience in horse racing, such investments are essentially about the excitement and the pride of owning a champion, as opposed to the potentially massive but risky financial upsides. Given the volatility of racehorse fortunes, many investors have seen the wisdom of investing in a stable of horses. Much like investing in a slate of films or a mutual fund, the hope is that the winnings of some breakout animals will offset the losses incurred by the others.

The regulation of horse racing and other forms of gambling has traditionally been left to the states. This approach and the multitude of differing state laws makes any IPO for shares in a horse racing endeavor infinitely more complicated. As Stronach’s prospectuses highlighted, “[m]any of these regulations are subject to differing interpretations that may, in certain cases, result in unintended consequences that could materially and adversely impact the effective operation of our business.”

Regulatory uncertainty aside, the value of available race winnings, or purses, has remained stable over the past decade. The purses available for winning horses in the U.S. and Canada all together total more than $1.2 billion. While the cost of maintaining a champion thoroughbred can be substantial, an animal that finishes in the money at all three events in the Triple Crown can be valued at up to $50 million. With so much money at stake, there are many industry experts who make a living picking and grooming winning horses. Relying on such an expert buyer can help increase the chances of investing in a winning horse and mitigate some of the risks. Ownership is found at all income levels, with the largest group making less than $50,000 per year.

The allure, or mania, of investing in racehorses has attracted governments as well as starry-eyed investors. For example, the Irish parliament spent $700,000 in 1953, or the equivalent of $5.6 million today, on a racehorse from the Agha Khan in an effort to jump-start the Irish horse breeding industry. The move, decried by critics as lunacy at the time, has paid off in the long run. Ireland is now the third largest producer of foals behind the U.S. and Australia, and the industry is worth around $1.5 billion to Ireland annually. Similarly, the economic impact of horse racing in the U.S. is not to be ignored. According to a study commissioned by The Jockey Club, the sport contributes billions annually to the U.S. economy and provides jobs to nearly 1 million people.

For the bold, investing in racehorses has all the excitement, romance and drama of investing in a film, fine wine or any other exotic commodity. Even for those with financial acumen, the steep learning curve and substantial role that luck plays in the sport will give any investor a run for the money. With horse racing, it is surely the love of the sport that keeps investors climbing back into the saddle.

Robert Darwell ( is the chair of Sheppard Mullin’s Entertainment, Media and Technology Practice Group and splits his time among Los Angeles, New York, Nashville and Buenos Aires. Sean Faussett ( is a third-year student at Loyola Law School and served as an intern at Sheppard Mullin.

The U.S. Anti-Doping Agency recently asserted that legendary cycling champion Lance Armstrong not only had engaged in illegal doping, but also was at the very center of a team doping operation that was the most extensive in the history of professional sports. Last week, the International Cycling Union stripped Armstrong of all seven of his Tour de France titles and demanded that he return all prize money for those victories.

Oakley joined the list of corporate sponsors to abandon its affiliation with Armstrong, a list that already included Nike, Trek Bicycle, 24 Hour Fitness, Anheuser-Busch and Honey Stinger. The scandal has compelled him to step down as chairman of his highly visible cancer charity, The Lance Armstrong Foundation, also known as Livestrong. Further sanctions and legal actions seem likely.

Has the once illustrious Lance Armstrong brand become so tarnished that it can never recover? Is Armstrong, the man synonymous with world-class cycling, destined to be a public pariah? Conventional wisdom and the current avalanche of condemnation coming from all quarters say yes. But I say, never underestimate the power of the public’s love for a story of redemption.

Armstrong speaks to a friendly crowd at a Livestrong event in Austin, Texas, on Oct. 21.
Armstrong can conceivably come back from this public relations catastrophe, but it will take an iron will — something he has always embodied — and a commitment to redefining himself in a real and profound way. Most importantly, he must become the reverse embodiment of his current public image as the disgraced hero.

The best way to divert public outrage is to openly confess your personal failure. Face up to it. People are imperfect, even the most acclaimed heroes of our culture. Most of us understand this. In our hearts, we don’t really want to hate Armstrong, simply because we have accepted his hero status for so long. I know this from personal experience, since I’m a pretty serious cycling enthusiast and triathlete. We want to forgive him, but only if he openly and fully apologizes.
He must express genuine regret … and right away. The sooner he steps into the blizzard of public condemnation, the sooner he can begin his road to redemption. Delaying this essential step will only continue to allow the piling-on of his attackers and resurrect the controversy all over again.

But repentance is only the beginning of his path to restoring his reputation and that of his personal brand.

He must then begin the long and challenging task of redefining his public character. The best way to do this is to position himself as a watchdog against doping and other performance-enhancing drugs common in sports.

I’m reminded of the case of David Millar, the British cyclist who was banned from the sport for two years between 2004 and 2006 after admitting to taking the performance-enhancing drug EPO. He was even arrested in France and completely humiliated by French authorities. Millar not only went on to resurrect his cycling career to a high level, but he also dedicated himself to drawing attention to the negative impact of performance-enhancing drugs on sports. He is now on the World Anti-Doping Agency’s athletes’ commission.

In my opinion, this is the model that Armstrong could pursue to great effect. The USADA report casts him not just as someone who used performance-enhancing drugs, but as the man at the center of designing various means and procedures by which to distribute these substances to his teammates while keeping the whole conspiracy hidden from suspicious authorities, and successfully maintaining this operation for many years. That would make him pre-eminently qualified to cast himself as the world’s leading authority on how to detect and prevent the very same misconduct.

This is probably the most viable path available to him … working to clean up the sport he has both glorified and disgraced. The world of both amateur and professional sports is rife with abuse of performance-enhancing drugs. Over time, and with the consistent discipline for which he is known, Lance Armstrong could eventually become a major force for ridding drugs from athletic competition.

It may be an easy exercise for me to design a program for Armstrong’s comeback, but make no mistake, it’s a huge undertaking — as huge as winning the Tour de France seven times. Even if his dedication to such a path were complete and unequivocal, there’s no assurance he could overcome his current status of disgrace and defeat in the public eye. But it could give him a commendable goal for his own recovery as a man. And perhaps most importantly, it’s a chance for him to protect the reputation and the very survival of Livestrong, his greatest achievement.

Jeff Lotman is the founder and CEO of Los Angeles-based brand-licensing agency Global Icons.