The NBA is considering loosening its long-standing restrictions on teams’ local marketing efforts while also restarting talks about how to sell ads on jerseys.
Both actions would carry major implications for teams as they look to drive sponsor value.
Teams currently are prohibited from using any of their brand marks outside a 75-mile radius around their home cities, a policy put in place decades ago to protect teams from encroaching on each other’s markets. According to sources familiar with the discussions, several new options are under consideration. One proposal would allow teams to use their marks throughout their states. Another proposal would allow teams to market within their own states plus another 150 miles beyond their state lines. A third proposal would allow teams to market within their local television footprints.
There was no timetable offered for making a change, but any change would have to be approved by the league’s owners. Changes would be put in place no earlier than the 2016-17 season.
A change to the rule would particularly affect how teams would be able to work with regional and national brands.
“Our brands are not local brands anymore,” said Brad Sims, Cleveland Cavaliers chief revenue officer.
The subject was talked about during last week’s board of governors meeting in Las Vegas. While the topic was not a specific agenda item, the subject of selling ads on jerseys was on the agenda. The team-marketing restrictions were part of general league business discussed by executives.
“There were examples of having to expand the marketing territory when it comes to certain business partners,” said NBA Deputy Commissioner Mark Tatum.
Here’s how a change in policy could affect a team such as Cleveland. Currently, a Cavs sponsor that does business throughout Ohio cannot use team marks to tout that association outside of the immediate Cleveland area. With a change, that company potentially would be able to market its deal in Cleveland, Columbus or other cities. In turn, that deal becomes a more lucrative sponsorship for the team to sell.
The NBA is not the only league with team-marketing restrictions. Similar rules exist in the NFL, MLB and NHL.
While making a change would serve to add value to teams’ deals, there are concerns at the team level, as well — particularly among clubs that play within the same state. Teams want to be able to widen their reach but also protect their respective home markets.
The Charlotte Hornets have seen their business increase since the team rebranded last year, yet the team cannot leverage its new brand presence with its sponsors outside of a 75-mile range of Charlotte even though the next-closest NBA team is 240 miles away, in Atlanta.
“Anything that extends the marketing radius is something our organization is interested in,” said Pete Guelli, executive vice president and chief sales and chief marketing officer for the Hornets.
Sims said ratings for Cavaliers game on Fox Sports Ohio in Columbus, located 140 miles from Cleveland, are more than double those of the NHL Columbus Blue Jackets in their home market.
“Thirty years ago, there wasn’t an Internet or social media, and there were three TV channels,” Sims said. “This would give us more of an opportunity to monetize our deals.”
As for the matter of putting advertising patches on teams’ jerseys, owners last week charged the league’s planning committee (chaired by Philadelphia 76ers owner Josh Harris) with addressing the issue.
“There was a discussion around the patch, and we talked about having the planning committee revisit it,” Tatum said.
The jersey advertising subject has been actively discussed by league officials since 2011, but the process has been derailed over how teams would split any revenue and whether teams or the league would sell the inventory. The league tabled the matter in late 2012, but NBA Commissioner Adam Silver said in 2014 that it is inevitable that ads would appear on NBA uniforms.
The hurdles of revenue-sharing and who would sell the ads remain, but the league wants to resolve the subject as Nike prepares to put its logo on game jerseys as part of its new deal with the NBA. Nike is replacing Adidas as the league’s merchandise partner beginning in the 2017-18 season. Adidas’ logo currently appears on team warm-ups but not jerseys.
“We agree that work needs to be done and we will work through some of the issues,” Tatum said.
