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Volume 21 No. 1

Leagues and Governing Bodies

Minor League Baseball is revamping its national marketing efforts, developing a new unified program called “Project Brand” aimed at striking deep corporate partnerships as opposed to simply selling ballpark and media inventory.

Project Brand seeks in part to build upon the collective revenue development efforts of the Baseball Internet Rights Co., the affiliated minors digital rights venture with MLB Advanced Media. The BIRCO deal, renewed earlier this year for the 2013-15 seasons, creates a common digital platform for MiLB and shares revenue generated through online advertising, multimedia content and other similar efforts.

Project Brand in much the same way will seek to create more joint revenue by expanding the presence of national and international brands within Minor League Baseball. Since Pat O’Conner’s arrival to the MiLB presidency in 2007, he has repeatedly pushed individual minor league clubs to set aside provincialism in the name of the greater overall good. Minor league team operators were briefed on Project Brand last week at baseball’s Winter Meetings in Nashville.

As part of the developing effort, MiLB has retained executive search firm Russell Reynolds Associates to hire a chief marketing officer who would run Project Brand day-to-day and report directly to O’Conner. Candidate interviews have begun, and MiLB intends to name the CMO around Feb. 1.

“We’ve been far too reliant historically on marketing our standard inventory in and around our ballparks,” O’Conner said. “Brand marketers tell us they’re looking now for something more dynamic and strategic, programs that can also get into [product] sampling, digital marketing, charitable giving and cause-related efforts, and so forth.”

MiLB executives declined to specify projected revenue targets for Project Brand. Once it is fully operational, MiLB will seek major corporate partnerships, each carrying terms of multiple years with at least mid-seven-figure commitments annually.

A key part of the pitch of Project Brand will be MiLB’s reach. The affiliated minors features 160 U.S.-based clubs, covering nearly every major domestic media market.

MiLB’s existing national marketing efforts, which date to 1993, are relatively modest. O’Conner said last week the program has returned $23.6 million to clubs over the past decade.

The PGA Tour will launch its first branded restaurant in the coming months, once an airport site is selected.

The PGA Tour Grill restaurants will offer a menu that features healthy eating options.
The tour has struck a licensing agreement with Bethesda, Md.-based HMSHost to create the PGA Tour Grill, a branded chain of sit-down restaurants that will be located primarily in airports near tournament sites.

With a theme of “Eat Smarter, Play Harder,” the PGA Tour Grill will feature a menu with healthy eating options such as wasabi salmon and shrimp, a variety of chicken dishes, and crab and artichoke crostini.

Tim Hawes, the tour’s senior vice president of retail licensing, said this is the tour’s first venture into airport food and beverage.

The five-year agreement calls for HMSHost to pay the tour a percentage on all sales in the restaurant.

“This has been on our to-do list and we’re ecstatic that we’re able to get into food and beverage in a way that is so core to our business direction,” Hawes said. “The tour is very focused on the health and wellness platform, and that’s something our athletes are advocating as well. … It was great, once we began meeting with HMSHost, that we were of such like mind with the food concept.”

HMSHost has restaurants in airports all over the world — including the top 20 busiest airports in North America — and some of them are branded with sports themes, such as the Chicago Blackhawks in O’Hare or the Seattle Seahawks in Sea-Tac.

The company is talking to airports to determine the location for the first PGA Tour Grill. Bill Casey, HMSHost’s vice president of the company’s restaurant portfolio, said putting the tour’s grills in cities where there are tour events will help promote the tournaments.

“We like that the demographic that travels is very similar to the affluent demographic that plays golf and follows the tour,” Casey said. “Airports have done the chain restaurants and they’re looking for different ideas. We think this will be very well received by the airports.”

Casey said it’s too early to tell how many PGA Tour Grills will be established over the next five years, but he estimated close to 20. They will range from 1,500 square feet to roughly 2,400 square feet in size, he said.

The current deal allows for the creation of restaurants in domestic airports only, but there is the potential to expand the contract to include international airports as well.

“To be able to get into the food and beverage space in a highly visible way is something we’re enthusiastic about,” Hawes said. “We’re in the licensing business to grow our brand and brand affinity, and the more we can do that in an enormously high-traffic area like an airport, the better. This represents the kind of licensing programs we’re looking for.”

StubHub has signed a five-year contract extension with MLB Advanced Media to remain baseball’s official ticket resale marketplace, extending its controversial relationship with the sport but not without some changes.

The renewal, covering the 2013-17 seasons, completes more than a year of negotiations. The talks were often tense, and two teams have already opted out of the new contract.

Financial terms were not disclosed, but the parties will participate in a revenue-sharing agreement. The original StubHub-MLBAM pact was estimated to be worth nearly $60 million a year, when also including offline MLB team sponsorships, and the new deal will increase beyond that.

StubHub has been under heavy criticism from some teams for aggressively promoting available ticket listings far below primary market prices and sometimes under a dollar. The undercutting complaints from teams were among the key points of discussion during the extended, off-and-on contract negotiations.

StubHub and parent company eBay Inc. have fought stridently against any sort of price floors or artificial restraints. But StubHub will seek to address the undercutting complaints by moving toward an all-in pricing model in which MLB ticket listings beginning next year will show upfront the total cost to purchasers when also factoring in commissions, delivery and other fees. Minimum commissions and electronic delivery fees in the past have added at least $10.45 to every StubHub baseball ticket order.

Under the new structure, the minimum MLB ticket cost on StubHub in full will be $6, due largely to changes in how electronic delivery fees are calculated. But the days of the 50-cent ticket listings on StubHub are now over.

Some other ticketing companies, including Ticketmaster, have also sought to move toward greater transparency in showing all related fees earlier in the purchase process. StubHub has been testing its all-in pricing structure during the past year, and by the end of 2013 it will be universally applied on its site.

“We tried hard from the very beginning of this to address the concerns of the clubs,” said Chris Tsakalakis, StubHub CEO. “What we’ve ended up with is something that has a primary benefit to the buyer and seller and delivers a truly great consumer experience with no surprises, addresses the concerns of the clubs, and preserves an open marketplace.”

The new pact will also feature an “anchor tagging” in which listing pages for each MLB game will begin at $10. Users will then be able to move up and down in price from there as they choose. But unlike before, the cheapest ticket listings will no longer necessarily be the first thing they see. Teams additionally will gain greater latitude on whether they want to have StubHub participate in offline marketing, such as signage, within their ballparks.

“We tried to strike a deal that not only was fair on the economics, but also addressed a number of qualitative issues,” said Bob Bowman, MLB Advanced Media president and chief executive. “I think we were able to strike a good balance there and keep a safe, reliable secondary market with a trusted partner.”

In many ways, the new pact follows ground similar to the original deal signed in 2007. Buyers will see secondary ticketing links directly on and official team pages, and in some markets fans will still be able to pick up StubHub orders at ballpark will-call windows. As before, MLBAM and individual teams will have access to the wealth of purchasing and consumer data generated through StubHub.

The new contract term also heavily contemplates the continued advent of mobile ticketing. Both MLBAM and StubHub have been among the earliest adopters of emerging technology such as Passbook, a feature on Apple’s latest mobile operating system to store tickets, boarding passes and similar materials.

Still, at least two MLB teams — the New York Yankees and Los Angeles Angels of Anaheim — have already opted out of the new contract with StubHub. The Yankees and Angels for years have been among the most strident and vocal critics of StubHub, arguing the official relationship with baseball is training consumers to look there first for tickets as opposed to the clubs’ box offices and is corroding season-ticket sales.

“We are not participating in the StubHub renewal,” said Randy Levine, Yankees president. “We’ll be making our own announcement in that area shortly. Stay tuned.”

Tickets to Yankees and Angels games will still be available on StubHub, even without direct integration from the clubs, and StubHub plans to set up ticket pickup locations near Yankee Stadium and Angel Stadium of Anaheim. The opting-out clubs will still be able to opt back in to the deal at a later date if they choose. The Boston Red Sox did just that in 2010 after initially refusing to participate in the first MLBAM-StubHub agreement.
Several other teams contacted said they were just briefed on the new terms late last week and were not yet ready to comment.

The original StubHub-MLBAM deal in 2007 arrived rather quickly as the secondary ticket market was beginning to explode in popularity and importance. The latest extension, conversely, happened after nearly two years of exhaustive study, most notably by the Commissioner’s Ticket Review Committee formed in 2010 by Bud Selig.