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Volume 20 No. 42

Leagues and Governing Bodies

MLB Advanced Media is readying a significant push into gaming for the 2013 season, seeking to broaden both its audience and digital traffic patterns.

"Ballpark Empire" is a baseball-centric take on "Farmville"-style participation games.
Several new online and mobile games either have recently debuted or are due for release in the coming weeks as the start of the season approaches. Among the new titles are “Ballpark Empire,” sort of a baseball-themed take on the hugely popular Facebook game “Farmville”; two home run hitting games, “Home Run Derby” and “Slam City”; as well as an expansion of an effort with predictive mobile gaming outfit PrePlay that was tested at the end of last season.

The new games join “Beat the Streak,” a stalwart daily fantasy game for MLBAM since 2001 that has yet to see anyone select an MLB player to get a hit for 57 consecutive days and beat Joe DiMaggio’s real-world record hitting streak. “Beat the Streak” prizes have grown as large as $5.6 million, yet still have gone unclaimed.

MLBAM executives said the increased emphasis on gaming arrives after encouraging early returns for efforts such as last year’s test with PrePlay. Additionally, the suite of baseball-themed casual games, less complex than detailed simulation games, will likely encourage site traffic during dayparts when MLB games aren’t happening, and represents yet another tool to seek out new fans.

Games like "Home Run Derby" are designed to encourage site traffic when MLB teams aren't playing.
“We’ve obviously seen, like everybody else, how much gaming has grown in importance, particularly in the mobile and social realms, and what we’re doing now is our biggest effort to date in this area,” said Bob Bowman, MLBAM president and chief executive. “We think there are some interesting places where we can take the league marks and engage with fans in different ways.”

The new games will carry a variety of revenue models, ranging from completely ad-supported to others based on microtransactions, in which users pay nominal fees for upgraded elements in the games. Some will have presenting sponsors, such as the relationship between “Beat the Streak” and league partner Scotts.

The new gaming initiatives add to’s existing efforts in fantasy baseball, such as its partnership with for commissioner-style games.

The NFL took in $9.7 billion of revenue in 2012, a 2 percent increase from earlier internal estimates, sources said. As a result, the 2013 salary cap, which is expected to be set by Saturday, when teams can begin negotiating with free agents, may be slightly higher than previously projected.

The league had informed owners in December that the salary cap for 2013 would be $120.9 million, a few hundred thousand dollars more than 2012’s cap. It might now rise to as much as $123 million, though the precise figure remains a moving target.

While the increase might seem small, a flattening cap is strapping many of the league’s teams, so even a minor upward adjustment is welcome.

The new collective-bargaining agreement, put into place in 2011, has done two notable things related to the cap. It has corralled the rising salary caps that characterized the previous CBA, and it has shifted more of the players’ take into benefits such as pensions, health care plans and workers’ compensation, dollars that aren’t accounted for under the cap.

It’s unclear what caused the NFL to revise upward the 2012 revenue figure. A league source in January pegged the figure at $9.5 billion and several weeks later revised it to the higher amount.

The league’s revenue has now risen from $8.5 billion in 2009 to the $9.7 billion mark for 2012.

The NFL declined to comment.

One team source said the change could be due to any number of factors, including late incoming merchandise orders or revenue from sponsors and advertisers tied to TV ratings that might have come in higher than any target noted in an agreed-to contract.

The NFL knows what is coming in this year from national deals such as TV contracts, but the cap also has to reflect local revenue that’s not fully materialized, such as ticket sales. That means the league uses the previous year as a gauge in setting the cap for the coming season. If some of the extra revenue that caused the bump to $9.7 billion came from these local sources, it would affect how much local revenue the league estimates for 2013 in determining the cap.

Also, if more revenue materialized in 2012 than was expected in setting that year’s cap, the difference would have to be paid to players in future years.

The cap each year is set in part based on formulas detailed in the CBA — complex formulas that also changed with the new CBA — and also through negotiations between the NFL’s labor group and the NFL Players Association.

Eight core members of the PGA Tour’s digital team gathered in an office for the big moment. At midnight on Dec. 21, the tour would transfer its entire digital operation from Turner’s control over to the tour’s own server.

The move represented the culmination of more than a year’s worth of work. An unopened bottle of 18-year-old scotch sat on a desk nearby, ready for the celebration.

The process was supposed to be simple — just a line of code and the switch would be flipped. They waited until midnight, when traffic on would be low, then Scott Gutterman, the tour’s senior director of digital operations, entered a code and hit the key. will undergo a significant redesign this year.
Nothing. He tried again. Nothing.

Two hours and 600 lines of code later, they found the problem: an out-of-place semi-colon. Damn semi-colons.

Finally, around 2 a.m., the switch was made and the tour’s digital operations were fully in their own hands. And it was time to open the bottle of scotch.

“The digital transfer was the biggest moment in my 12 years at the tour,” said Paul Johnson, senior vice president of PGA Tour new media. “It’s a milestone for the tour. This represents taking control of a very important strategic part of our business.”

The night of Dec. 21 represented the culmination of almost 18 months of deliberation, modeling, late-night meetings, missed birthdays, holidays cut short and a Valentine’s Day evening spent at the office.

But it also was just the start. Working with Omnigon, a systems integration firm in New York, the tour officially took control of its digital rights on Jan. 1. Now, two months later, the tour has launched three new digital products, including the highly anticipated simulcast of its TV broadcasts.

“It would have been nice if we could have just flipped the switch and then gone home,” said Luis Goicouria, the tour’s vice president of digital operations and business development. “Our work was just beginning. … The decision to bring the rights in-house was the hardest. It was the path of most resistance. But we all felt very strongly that digital was too strategic and too important for us not to own it.”

The tour has always outsourced its digital rights. First, CBS managed them and then, six years ago, Turner won the tour’s digital rights through 2012.

But by bringing those rights in-house, the tour will “control its own destiny,” Johnson said. Instead of simply collecting a check from Turner each year for a rights fee and a share of online sales, the PGA Tour now will determine its own digital — and financial — fate.

With that control comes the flexibility to create more products and sell across all

of its platforms, generating potentially more revenue while also extending the tour’s brand by making its products available on any digital platform.

Johnson and Lee Bushkell, vice president of media sales, have added sales staff in New York, Chicago and Los Angeles to take advantage of the new structure. In all, 15 new positions have been created across operations and sales. The tour can now sell across, its inventory of mobile apps, advertising and sponsorship on network simulcasts, ad space on PGA Tour network on Sirius XM, and the tour’s weekly TV “Inside the PGA Tour” show on Golf Channel.


“We’ve got a whole array of cross-platform opportunities now that are all tied nicely together,” Johnson said. “It’s better for our clients. We can tie in media, TV, digital, sponsorship, hospitality, all of the assets of the PGA Tour, and offer a customized package to sponsors.”

Bushkell said the tour previously drove those ad buyers to Turner, or a network partner like NBC/Golf Channel or CBS. Now the tour can put together robust and versatile sales packages like one it recently sold to 5-Hour Energy and

Florida-based attraction Discovery Cove, which are not title sponsors or official marketing partners, so they represent all new money.

The energy shot drink has a sponsorship and ad units in several video elements on to go with its TV advertising, while Discovery Cove will have geographically targeted ads that will run as the tour makes its Florida swing this month.

“The big change is that this opens up a whole new range of clients that we weren’t talking to before,” Bushkell said. “Advertisers in the past have always gone to one of our media partners before, but now we can offer several different ways to activate with the PGA Tour. People want to be able to talk to the league.”

Other deals that range from $250,000 to $500,000 a year combine video with radio, online and commercial production work by PGA Tour Entertainment.

“There is a significant amount of digital, but clients are finding value in the other offline assets we can bring to bear, such as radio or TV,” Bushkell said. “We also feature end-to-end production capabilities, which is valuable in many of our deals.”

Developing popular products like Shot Tracker is a priority for the team.
In addition to the sales potential, the tour is beginning a rollout of products in 2013 that will elevate both and its mobile apps. The tour’s digital products include Shot Tracker, stats center, scoring, fantasy games, video archives and more to be determined. Those are the free products. The tour also is considering a premium line of products that could include different camera angles, featured holes or featured players.

In the last 30 days, the tour’s had three major product launches: a relaunch of portions of; the simulcasts; and an on-site mobile app for its tournaments.

“There’s going to be a lot more,” Goicouria said. “This is going to be a big year for product development.”

At some point, possibly later this year, the tour also will go through a full redesign of with Omnigon’s help.

By 2014, the tour’s entire digital offering will have, in some cases, an enhanced look, and in other cases a completely different look.

“We work with a lot of leagues and I wouldn’t say that technology has been an afterthought, but it hasn’t been a primary focus,” said Igor Ulis, co-founder and CEO of Omnigon, which worked with NASCAR on a similar process a year earlier, and counts Major League Baseball and the U.S. Tennis Association among its league clients.

“What you’re seeing now is that technology is playing a much more important role in the day-to-day operations of these leagues,” Ulis said. “The linear broadcast used to be the focus. Nowadays, leagues are looking to engage fans across every possible touch point. They understand that you have to sustain a level of engagement to remain relevant. That’s driving leagues to take control of their content across all forms of media.”

What that means financially remains to be seen, but Johnson is optimistic because the digital landscape is such a high-growth space. Without going into too much detail, Johnson said he expects a profitable first year for the digital division.

“The audience for digital has doubled in the last three years and revenue is close to three times what it was seven years ago,” he said. “We feel very good about” the business model.

The PGA Tour’s live course maps show viewers where golfers are on the course.
The new in-house model involves paying a host of vendors, but it allows the tour to keep all of its revenue from sales and eventually a roster of premium products.

“With all of the consumption online and mobile, it has the potential to be a very lucrative business,” Ulis said. “Year over year, traffic levels are growing, so the eyeballs are there.”

The chronology of the tour’s digital move actually began in the summer of 2011 during its TV negotiations with CBS and NBC. That’s when the tour secured the rights to simulcast the network broadcasts on and other mobile outlets.

By February 2012, the tour’s digital team — led by Johnson and including Goicouria, Gutterman, Bushkell and systems analyst Andrew Chapman — were meeting every day to establish models for every possible scenario.

In the outsource model, they looked at staying with Turner or moving to CBS or NBC. For the in-house model, they looked at building their own data center and hiring as many as 55 people to run it, or hiring vendors and using their infrastructure. They eventually chose the vendor model.

On the night of Feb. 14, 2012, Valentine’s Day, the digital team worked late into the evening to prepare for one of their most pivotal presentations the next day. Their audience would be the PGA Tour’s leadership of Commissioner Tim Finchem, executive vice presidents Ty Votaw, Ed Moorhouse and Rick Anderson, and CMO Tom Wade.

“All the wives had to be very understanding of the process,” Goicouria said with a laugh.

All of the modeling and analysis was leading the tour to bring its rights in-house. Johnson talked often with NASCAR’s Marc Jenkins, who had a similar experience a year prior when NASCAR took its digital operation in-house, and Brian Rolapp, COO of NFL Media.

The final determination was made in the spring of 2012. Once the decision was made to bring the rights in-house, the tour selected Omnigon to be its systems integrator. Omnigon won the tour’s business over another systems integrator with a strong sports presence, Digitaria.

Essentially, Omnigon led the tour through the process over the next several months, the start of what will be a multiyear relationship. That included hiring about 20 vendors — companies that would assist the tour with everything from video players to ad operations and delivery, hosting, content delivery, fantasy games and mobile platforms, among others. Omnigon typically offered two to three candidates for a job, but left final decisions to the tour, Ulis said.

With all of that in place on the night of Dec. 21, the tour flipped the switch, took over its own digital operation and popped the top on the bottle of scotch.

In many ways, their work was just beginning on a new digital frontier, but there was a collective sigh of relief that at least one major stage had been crossed.

“Looking back, it was something that took years off my life, years off everyone’s life,” Johnson said with a laugh. “Once the transition was made and everything was OK, you could sense the tension level easing. But now it’s like, ‘OK, what’s next?’ There’s no going back now.”

Four U.S. Tennis Association executives earned more than $1 million for their work in 2011, according to the most recently filed tax returns for the group and two related entities, and executive pay rose 13 percent overall.

The USTA and the National Tennis Center reported combined revenue of $272 million for the year, according to the returns, most of which is attributable to the U.S. Open, which the USTA and its related entity, the NTC, own and stage.

The compensation figures emerge as the nonprofit group is in a pitched battle with players over how much prize money the Open should pay.

“Well you see it is good to be running the USTA,” said ATP Player Council member Sergiy Stakhovsky, in a direct message sent in response to questions about the compensation. “I think it’s quite hard to get rid [of] all the profit [the] U.S. Open generates … so they flush it to the execs.”

The USTA, which makes its tax return available as required by law, said in a statement: “Over the past several years the USTA has significantly reduced executive compensation. However that being said we also recognize you need to invest in professional staff to ensure that they can continue setting a record pace for revenue at the U.S. Open and throughout the entire organization.”

The topic of USTA executive pay is hardly a new subject. Four years ago, outgoing head of professional tennis Arlen Kantarian earned $9 million, putting him ahead of the NFL commissioner that year. And 2011 does not even signal the high point for the number of million-dollar compensation packages at the USTA. There were five the year before.

Nevertheless, the numbers come in the context of the battle that erupted early last year over how much prize money the Grand Slam events pay. The Slams, including the Open, have been paying a low double-digit percentage of revenue combined to the men and women competitors, about half the level of the ATP and WTA Tour events, and far below the more than 40 percent levels of American team sports.

The Australian Open has agreed to the ATP’s demands for a dramatic increase in prize money, and its executives won a standing ovation at the tournament’s players meeting before this year’s event. The U.S. Open has been less willing to meet the ATP’s demands, continuing with similar, lower levels of prize money increase (on a percentage basis) from previous years.

The USTA has argued that its primary mission is to spur grassroots tennis in the United States and that paying more to players would detract from that mission.

How the compensation levels at the USTA will be widely received among players is unclear. Stakhovsky, the world’s No. 106-ranked player last week, is just one voice.

The USTA reported total compensation, including items like payroll taxes and benefits, of $39 million for 2011. The NTC reported $7.9 million, and USTA Player Development Inc., which is the USTA arm that is designed to groom the next generation of professional players, reported $8.2 million. That unit, like the USTA and NTC, files its own tax return.

It’s unclear if there is any overlap in the compensation figures for the three groups.