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Volume 20 No. 41

Leagues and Governing Bodies

MLB Commissioner Bud Selig is projecting a strong rebound in attendance in 2014, despite this season’s 1 percent decline, emboldened by the sport’s second-half surge this year at the gates.

Big September crowds like this one at Yankee Stadium helped MLB recover from a rainout-marred early season.
The league ended the regular season with attendance of 74.03 million, down 1 percent from 2012 (see chart), and the sport’s first decline at the gates since 2010. But it was the story further inside the numbers that has the commissioner particularly encouraged as he approaches his final season in office.

In late June, MLB was 4.5 percent off its 2012 attendance pace as it battled 34 first-half rainouts, 62 percent above the 21 postponements all of last season. But following the All-Star break, baseball had only three more rainouts and closed the attendance gap considerably.

“We were just getting killed in the first half, even in places where we don’t get killed. I must admit I worried a lot about this early in the year,” Selig said. “But by the last week of the season, we were packing them in, and how this sport rallied is just tremendous. It gives us a lot of momentum going into next year.

“There’s no doubt in my mind we’ll be back up [in 2014], if we get any sort of cooperation in the weather. I have every reason to believe we’ll do much better next year.”

The sport’s strong September attendance kick mirrors a late surge seen in 2011, and defies typical bell-curve patterns, in which ticket sales normally trail off after peak summer months. But MLB’s expanded playoff format featuring two wild-card teams in each league, now in its second year, was designed in part to boost September attendance, and the AL wild-card race last month featured six teams battling for the two spots.

The Los Angeles Dodgers, which had their own dramatic second-half push on the field toward an NL West division crown, led the sport with 3.74 million in attendance. The Tampa Bay Rays, despite six straight winning seasons and four playoff berths in that span, including 2013, ranked last with 1.5 million.

Everyday interleague play, forced along with the realignment of the Houston Astros to the American League, did not provide the type of meaningful attendance lift expected by MLB executives. This year’s interleague attendance average was 31,046, compared with 30,439 for intraleague play. That 2 percent boost pales compared with the low-double-digit percentage lift from interleague play usually seen in the previous schedule format, when those games were optimized for late spring, early summer and holiday weekend consumption.

MLB attendance is a vital indicator in the health of the league, and the sports industry at large. Ticket sales traditionally have represented baseball’s largest individual revenue source, and the sport has more ticket inventory to sell than any other league.

The league’s new national television contracts go into effect next year, essentially doubling MLB’s annual revenue from national TV to more than $1.5 billion a year. That lessens the singular effect of attendance on overall industry revenue, but Selig, who scours attendance figures daily, said ticket sales remain highly important.

“It’s still a critical factor,” Selig said. “Yes, media revenues are up, which is wonderful, but that doesn’t diminish the importance of attendance. I watch it as closely as I ever have.”

The New York Yankees and Los Angeles Angels of Anaheim, which each broke away from MLB Advanced Media’s renewal with StubHub to form their own secondary ticketing exchanges with Ticketmaster, branded their initial year with their own resale platforms a success.

Neither club nor Ticketmaster disclosed secondary ticket sales or revenue figures. The Angels, however, said they saw a 15 percent lift in single-game ticket sales at their primary market, despite the club’s attendance falling 1.4 percent. The average selling price of Angels tickets on all secondary markets, according to internal club research, rose from $30 in 2012 to $38 this year.

The Yankees, meanwhile, said they saw significant boosts in walkup and group ticket sales business, even as their total home attendance fell 7 percent this season. Perhaps more important to them, the creation of Yankees Ticket Exchange curbed speculative resale listings by sellers without possession of the tickets that the club viewed as corrosive to the overall value of Yankees tickets.

“We think this did a lot to help stabilize the secondary market and reduce illegitimate sales,” Yankees President Randy Levine said. “I think it worked great. It did take a little while to take hold and work out some of the kinks. But fans have grown to it, and we think this only gets better.”

Then-Ticketmaster Chief Executive Nathan Hubbard said in February that he expected the ventures with the Yankees and Angels to be profitable, based in part on the typically sizable profit margins of secondary ticketing. Jared Smith, now president of Ticketmaster North America, declined to specifically address Hubbard’s comments, but said the two baseball partnerships in 2013 “exceeded our expectations.”

“We’re very pleased with the outcomes thus far,” Smith said. “Year one, you never really know what to expect. But given the goals each club had, particularly with regard to having more control over their resale markets, and the goals we had, everybody involved would say it’s a success.”

Robert Alvarado, Angels vice president of marketing and ticket sales, said the club’s initial revenue from Angels Ticket Exchange did not match what the club likely would have received this season by staying in the MLBAM-StubHub partnership. But beyond immediate-term dollars and profit considerations, the Angels also wanted the opportunity to have additional direct involvement in the local resale market. The club used some price floors and other controls on some games, akin to individual manipulations seen in dynamic ticketing structures.

“We did better than expected, and I’d have to think in our market that StubHub did not grow their business,” Alvarado said.

StubHub, now operating without electronic ticket integration from the Yankees and Angels, did confirm its business from both clubs declined this season. But the company pegged the fall more to both teams’ failure to make the playoffs.

“Revenue was down, but with them it was sort of down across the board if you look at what was on the field, overall attendance, the Yankees’ TV ratings and so forth,” StubHub spokeswoman Alison Salcedo said. “Team performance is typically a big indicator in terms of ticket demand. But fans continued to buy and sell tickets to the Yankees and Angels on our site.”

The Yankees and Angels had varied involvement with StubHub this season near their respective ballparks. The Yankees sued to prevent StubHub from opening a pickup location near Yankee Stadium, and obtained a settlement that saw StubHub instead open a storefront much farther from the ballpark. In Anaheim, however, StubHub maintains a last-minute service center just beyond the left-field parking lot of Angel Stadium.

MLS has started negotiations to extend its media deals with ESPN and NBC Sports Group.

The league is in an exclusive negotiating window with ESPN that expires at the end of this month. It also is in an exclusive negotiating period with NBC Sports Group, and while it’s unclear when that window closes, it’s expected to be before ESPN’s window.

“It is early in the process, but discussions with our current partners have started, and we are pleased with the progress of those initial meetings,” said Gary Stevenson, president and managing director of MLS Business Ventures, who is overseeing the negotiations.

NBC Sports Group is in the middle of a three-year, $30 million deal to carry MLS games.
MLS hired Stevenson, the former head of Pac-12 Networks, in June.

Evolution Media Capital is advising the league on its media rights talks.

ESPN and NBC currently pay around a combined $18 million annually for rights to MLS games and U.S. men’s and women’s national team games through deals that expire next year. ESPN is nearing the end of an eight-year, $64 million deal; NBC is in the middle of a three-year, $30 million deal.

Sources said MLS is looking to more than double that figure, bringing in $40 million to $50 million per year.
Univision’s eight-year, $79.4 million deal also ends next year, and MLS has begun talks there.

These negotiations are unique in that they involve two properties — MLS and U.S. Soccer — being sold as one package. Both properties are managed by Soccer United Marketing, MLS’s marketing arm. By tying them together, the popular U.S. men’s national team matches can bring a much higher rights fee than MLS games could on their own.

ESPN’s coverage of the men’s national team has seen a substantial increase this year. Compared with four years ago — the last time the team played World Cup qualifiers — viewership is up 72 percent. Eight games in 2012-13 averaged 1.305 million viewers; 11 games in 2008-09 averaged 758,000 viewers.

MLS, though, has seen viewership drop dramatically so far this year on both ESPN and NBCSN compared with 2012. MLS viewership on ESPN/ESPN2 is down 31 percent this year, averaging 220,000 viewers per game through 17 games. Last year, ESPN/ESPN2’s MLS games averaged 317,000 viewers through 18 games. NBCSN’s MLS numbers are down 13 percent, averaging 111,000 viewers through 32 games. Last year, NBCSN averaged 128,000 through the same period (33 games).

MLS is expecting to benefit from a marketplace for live sports rights that’s as hot as it’s ever been. A source with direct knowledge of the negotiations expects the league to take its rights to the open market, where Fox Sports is expected to make a bid. Fox Sports also holds rights to the FIFA World Cup in 2018 and 2022 and is believed to want rights to the men’s national team games before those events.

But NBC Sports is expected to make a big push to keep MLS. At an industry conference last week, NBC Sports Group Chairman Mark Lazarus spoke about how NBC’s MLS and English Premier League schedules complement each other. NBC is in the first year of a three-year deal to carry EPL programming. “We think we can do more overlap,” he said. “Since EPL has started, our numbers have grown.”

Since the start of the EPL season on Aug. 17, NBCSN’s MLS viewership has averaged 137,000 viewers across a nine-game span, up 52 percent from the same period last year.

ESPN also remains interested in a deal despite its recent loss of rights to both the World Cup and EPL. Though the network has been disappointed with the ratings performance of MLS, ESPN is interested in the men’s and women’s national team games.

In an interview during the league’s All-Star festivities in Kansas City in late July, MLS Commissioner Don Garber was complimentary of the league’s current TV partners, saying, “ESPN has really increased its coverage of MLS and all of soccer, and NBC has been doubling and tripling down in our sport.”

NFL owners are scheduled to vote Tuesday to allocate league funds to help pay for stadium renovations for the Washington Redskins and Cleveland Browns, sources said, the latest teams with venues built in the 1990s seeking to upgrade.

The moves emerge as the NFL has indicated that several teams in cold-weather cities are considering bids for the 2019 Super Bowl. The first outdoor cold-weather Super Bowl occurs in New York in February, and the success or failure of that event could open the floodgates to similar bids — or stifle any future efforts.

The Super Bowl aside, many teams with venues built in the 1990s or shortly thereafter have found their buildings now in need of upgrades to keep up with more modern venues, which feature larger scoreboards and greater Wi-Fi capabilities. The Baltimore Ravens, Pittsburgh Steelers and Philadelphia Eagles, for example, have upgraded their stadiums or are in the process of doing so.

The Browns’ and Redskins’ renovation plans are on the agenda for this week’s NFL owners meetings in Washington, D.C.

The Browns are seeking $62 million from the league’s stadium fund for renovations of FirstEnergy Stadium. That means the project will cost around $124 million under NFL stadium-funding formulas that allow teams to seek league-based financing for about half of a renovation cost.

The project will unfold in two stages, a key source said, with the first occurring between January and August of next year and the second following the 2014 season. Plans call for installing new video boards, upgrading Wi-Fi, and potentially increasing lower-level capacity while decreasing upper-level capacity

The team declined to comment. Last month, the Browns issued a joint statement with the city of Cleveland, which owns the stadium, saying, “We have established a positive relationship, we are working together, and we have had open dialogue regarding the necessary stadium repairs. In its 15th season, the stadium is in obvious need of significant maintenance, similar to any sports venue of comparative age. We are working through our next steps.”

Redskins officials also declined to comment. The scope of the team’s plans for FedEx Field, which opened 16 years ago, could not be determined.

The Minnesota Vikings’ new stadium is also on the agenda for the owners, who in March approved $200 million of funding for that team’s project. Since then, the state of Minnesota has launched an investigation into whether the team’s owners, the Wilfs, can afford to pay their share in the wake of a negative court ruling in New Jersey against the family. The state concluded they could.

Additionally, owners will get an update on Sunday Ticket talks. The league is in renewal discussions with DirecTV regarding the out-of-market games package. The current contract runs through the 2014 season.

Owners also will get updates on the NFL’s London regular-season games, the New York Super Bowl, player health and safety issues, and other league business and competition matters.