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Volume 20 No. 42

Leagues and Governing Bodies

The IndyCar Series ended last season in turmoil. In the span of a few months, its board fended off a hostile takeover, ousted its CEO Randy Bernard and elevated former ATP executive Mark Miles to CEO of its parent company, Hulman & Co.

But as the series prepares to open a new season this Sunday in St. Petersburg, Fla., the tumult of last year has faded. Miles has introduced himself and listened to everyone from owners to drivers to promoters over the last three months, Boston Consulting Group has completed an assessment of its business operations, and the search for a new CEO is expected to be completed by this spring.

Mark Miles’ immediate focus is on completing a strategy and hiring a new CEO to carry it out.
“It is calmer,” Miles said. “Life goes on and people want to pull together and grow this sport. We have a chance to do that in the way people are embracing us and the way we’re diving into discussions about where we want to go.”

Miles’ immediate focus is on finalizing a strategy for the next three to five years and hiring a new CEO to implement it. The organization, which is handling the executive search independently, has narrowed its list of candidates to six people. The ideal candidate will have a mix of motorsports experience and a track record of business success.

Rather than becoming the CEO of the IndyCar Series, the new CEO likely will become the head of a new entity called Hulman Racing. The company would oversee both the IndyCar Series and Indianapolis Motor Speedway, and it would report to Miles and the Hulman & Co. board.

The idea of creating a single company to run both operations has been discussed in the past, but Miles said Hulman & Co. is considering it again as a way to cut costs and improve operations.

“Over time, IndyCar and IMS have built similar organizations,” Miles said. “Each have heads of sales, marketing and communications. They have a different focus, but if you can create a superb marketing and sales organization, it’s going to be hard to find two of those people to lead two organizations, and I think it’s repetitive and costly, so we’re looking at the possibility of largely combining those organizations.”

Miles added that the new CEO and combined company will concentrate on improving IndyCar in three areas: improving fan engagement, strengthening staff and operations, and creating “shared economic interest among teams and track and the league.” He wants the series to create revenue pools and share those with tracks, so that if attendance grows for races, the series and tracks both share in the upside. He also raised the idea of pulling sponsorship signage, selling it across the series and sharing that money among all the tracks.

“Tracks might read that as we want their money,” Miles said. “We don’t want that. There has to be growth [of revenue], not redistributing existing money. It’s hard to do, but there ought to be a way to share these revenues, and that ought to get us better aligned with everyone executing on the same objectives.”

It’s an idea that promoters are open to but cautious about.

“It just needs to make sense,” said Terry Angstadt, president of Green Savoree Racing Promotions, which promotes the St. Petersburg and Toronto IndyCar races. “There’s a formula that has to be followed to make individual events more sustainable. If that gets bigger, then let’s open and share. It has to be good for everyone.”

Jim Michaelian, president of the Long Beach Grand Prix Association, who hasn’t spoken to Miles about revenue sharing, said that other sanctioning bodies have found ways to share revenue by developing a formula around ticket sales, hospitality and program advertising. He suggested that IndyCar look at that model because events like his, which is a full weekend and includes seven races and two concerts, make it difficult to determine how much a ticket buyer is paying for the IndyCar race.

“Those are much more clearly defined and do represent what the sanctioning body brings to the event,” Michaelian said. “That might be a more accurate formula to begin to develop some type of a financial relationship as opposed to taking it off the gross of the weekend or Sunday’s activities.”

In addition to revenue sharing, Miles wants the series to begin to develop a marketing platform that all of the tracks can use, so that there would be consistency in how drivers and the sport are promoted from market to market. Currently, promotions are handled by each promoter and vary from race to race.

Posters and banners have been provided to promoters in the past, but support for media and TV spots and other materials haven’t, said Angstadt, former president of IndyCar’s commercial division.

“Give us the materials,” Angstadt said. “Even better, buy the media. We have significant spends in marketing these events, so if there is an interest, bring it on.”

Miles and Jeff Belskus, IndyCar’s interim CEO, shared some of the ideas from the Boston Consulting Group study with drivers and team owners last week. The meeting followed a report by The Associated Press that the consultancy recommended Hulman condense the 15-race IndyCar schedule into 19 weeks and create a new marketing strategy promoting IndyCar’s “daredevil drivers.”

They emphasized that the AP story was based on an early version of the Boston Consulting Group’s work, and Miles said that they are using the consultancy’s report as a guide as they talk to constituent groups and finalize a long-term strategy. There was time at the end of the discussions with drivers and teams for questions.

Miles said the questions ranged from what IndyCar would do to boost TV ratings to what role the schedule and dates of races have in attracting fans.

“BCG did a great job and presented us with their thinking about the best answers to all of those,” Miles said.

NBC Sports Network will increase the amount of coverage it offers of IndyCar to 13 races, up from nine races in 2012. The increase in the number of races follows the 2012 season when IndyCar pulled its lowest viewership to date on NBC Sports Network. The series, which moved from ESPN to NBC Sports Network (then Versus) in 2009, averaged 292,000 viewers over nine races in 2012, down 27 percent from 402,000 in 2011 and 62 percent from the 778,000 viewers it averaged during its last year on ESPN in 2008.

Bernard publicly criticized NBC for not promoting the races more last year, and the relationship between the series and broadcaster was strained. But Robby Greene, who was named president and chief operating officer of IndyCar early this year, has worked to improve the relationship. He met with NBC last week and was involved in the network’s identification of new talent for this season. NBC Sports Network’s races will be called by Leigh Diffey, in his first year covering the sport; analyst Wally Dallenbach Jr.; and IndyCar driver Townsend Bell, a newcomer.

“As you’ve seen, there have been appointment changes on the commentary team, and those sorts of things are signs of progress,” Miles said.

Miles declined to comment on the future of IndyCar’s title sponsor Izod. The series last year began looking for a presenting sponsor to replace Izod, which has a deal that runs through at least 2015. But he did say that IndyCar and IMS have “a lot” of inventory to sell, including a presenting sponsorship or naming-rights deal for IMS. He added that the series is more focused on new inventory it can create than on what categories it can sell.

IndyCar constituents are pleased with what they’ve seen from Miles so far and are encouraged about the start of the season and the future of the sport.

“If nothing else, the series is focused on getting more concentrated on what it’s going to take to get the series running as opposed to the personality who is running the series,” Michaelian said. “With Mark and Jeff, we’re seeing two people who are focused on trying to respond to the challenges that IndyCar faces, and that’s what we’re all excited about and waiting to hear from them.”

MLB and the MLB Players Association are feverishly trying to create a joint framework for the first international draft before a June 1 deadline.

An eight-person working committee made up of team, league and union executives are planning to meet regularly during the next 10 weeks to try to create a global amateur draft, or at least a second, international draft supplementing the current one each June that includes players from the U.S., Canada and Puerto Rico.

Such a global draft has been coveted for years by baseball management, notably MLB Commissioner Bud Selig, and holds the potential to radically alter how teams acquire and develop talent. But support among players historically has not been as universal, and the details to carry out such a draft are highly complex.

If a worldwide draft deal cannot be struck by June 1, tight restrictions would go into effect governing spending by teams on international amateur players. In the collective-bargaining agreement the league and union signed 16 months ago, teams were subjected to new international amateur signing pools. No deal by June to create a worldwide draft beginning in 2014 would significantly amplify the penalties for teams paying signing bonuses beyond their assigned pools.

The labor deal also created the draft working group, dubbed the International Talent Committee. Now that panel, after a period of more sporadic work, is racing the clock.

“There are plans to sit down and get serious about the negotiations this spring,” said David Prouty, MLBPA general counsel. “We are up against a deadline. If we don’t come up to an agreement, there will be more serious restrictions.”

Rob Manfred, MLB executive vice president for economics and league affairs and a co-director of the International Talent Committee, said there is a chance a draft deal could be struck before June 1. He declined to handicap the odds of it happening.

If there is an agreement, Manfred said, “the most likely outcomes [are] that you have a single, unitary draft, a worldwide draft, or you have the draft as it currently is and a second draft that would cover the rest of the world.”

“While players may not love the idea of an expanded draft, they may not love the expanded penalties, either,” he said. “It’s kind of a poison pill. I think we are going to have very serious talks leading up to this deadline.”

The new rules would impose signing limits sooner and for longer periods of time, and tax at a higher rate.

Without a draft deal, teams next year overspending their international signing caps by 15 percent or more will be subject to a 100 percent tax and a two-year restriction from signing any foreign amateur player to a bonus of more than $300,000. Even a 5 percent overspending by a club would limit an individual signing bonus to $500,000. Current international signing regulations assess only a 75 percent tax for less than a 5 percent overspend, building to a one-year prohibition on bonuses above $250,000 for overspending the pool by at least 15 percent.

The issues surrounding a worldwide draft are many and varied. Many clubs want a worldwide draft to help further level the competitive playing field within the league, give struggling teams the best chance to acquire top international talent, and create even more cost certainty with regard to those players. But the union, generally, has resisted measures that restrict or limit the ability of players to be paid at market value.

Furthermore, amateur baseball is vastly different from country to country around the world, ranging from highly organized leagues and programs in countries such as Japan to far more informal structures in countries like the Dominican Republic. Part of the draft negotiations center on giving all foreign players sufficient opportunities to showcase their talent. Also on the table is continuing efforts to eliminate recurring problems in some foreign countries with falsified player birth records.

The players “have expressed concerns about perceived abuses in the registration process for international players,” said Rick Shapiro, MLBPA senior adviser and a member of the International Talent Committee.

Manfred in an email said the player registration process is “completely legal and respectful of player rights.”

Joining Shapiro and Manfred on the panel: MLBPA Executive Director Michael Weiner, union staff members Stan Javier and Tony Clark, New York Mets general manager Sandy Alderson, Tampa Bay Rays general manager Andrew Friedman, and Kim Ng, MLB senior vice president of baseball operations.

Marketing for 2013 NFL games in the U.K. will center on London.
The NFL will play at least two regular-season games in London in 2014 on top of its two planned games there this year, and even more contests could be added, said John York, San Francisco 49ers owner and a member of the league’s international committee.

The league is scheduled to brief owners at this week’s annual meeting on developments for this year, the first in which two regular-season games will be played in London, and York said an additional two for London in 2014 are set.

“Two games this year, and as far as I know two games for next year,” he said. When asked whether there could be more than two games in 2014, York replied, “Sure; that is a possibility.”

A league executive hedged on York’s comments, saying that with both London games sold out for this season, there is a “good chance” of two games in 2014.

“What I wouldn’t say is we have locked that in 100 percent … though we have great momentum,” said Chris Parsons, NFL senior vice president, international.

Owners to address VC fund

    NFL owners are slated to vote at their annual meeting this week to change the structure of the league’s investment fund from a venture capital structure to a private equity one, a source said.
The league has decided the original intent of the fund, which has yet to invest, of investing in early stage startups that align with NFL interests did not meet the skill set of its staff. The thinking is that the league officials who are charged with making the investment assessments can better judge more established businesses that align with the NFL than they can analyze startups.
    The league will not take control stakes in companies. It hopes to make its first investment by the end of the year.
    Each team has committed up to $1 million apiece for the fund. The fund was created in late 2011.
    Owners will have a raft of competition committee proposals to wade through at the meeting. The quality of field maintenance is also on the agenda, with calls for the league to get more involved after several high-profile incidents in recent years of poor field conditions. Owners additionally will hear the usual updates from league executives on the key sectors of media, finance, labor, sponsorship, football operations and the league calendar.
    The meeting, at the Biltmore in Phoenix, is scheduled to run through Wednesday.

— Daniel Kaplan
For this year’s games, the league is shifting its marketing focus to London and southeastern England rather than taking a full United Kingdom approach as it has in the past, Parsons said. Since the NFL began playing a single annual regular-season game in London in 2007, the city and its environs have enjoyed the attention of somewhat more than 50 percent of the marketing outlay, Parsons estimated. This year, that figure will jump to 80 percent, he said.

While Parsons declined to say how much the NFL is budgeted to spend marketing the games, he said the figure is increasing significantly this year.

One designated home team for a 2014 game has already been set: the Jacksonville Jaguars. The Jags last year agreed to play home games in London in 2013, 2014, 2015 and 2016. The team also recently hired its first U.K.-based executive, Laura Oakes.

In addition to the Jaguars having a “home” game in London this year (Oct. 27, vs. San Francisco), the Minnesota Vikings will host a game in the city this fall (Sept. 29, vs. Pittsburgh). The Vikings could repeat as a home club in 2014, as well: The team after this season will play at the University of Minnesota’s TCF Bank Stadium for two seasons while its new stadium is under construction.

The NFL is pleased with the demand for tickets for its two games this season; 40 percent of all tickets sold are accounted for by “season tickets,” which are passes to both games. To the league, Parsons said, this indicates there is a growing NFL fan base in London.

“The more games we play,” he said, “the more local we feel.”

He added, “As we sit here, I don’t know on three games in 2014. It is definitely one of the things we are discussing: when, and if, we play more games.”