Group Created with Sketch.
Volume 20 No. 42

Leagues and Governing Bodies

Cup branding at Riviera earlier this year.
After more than a year of negotiations, PGA Tour and FedEx executives convened last week at Nona Blue, a chic restaurant near the tour’s Ponte Vedra Beach, Fla., headquarters to celebrate the new 10-year extension of the tour’s most lucrative sponsorship deal.

Some 10 executives attended the dinner, where toasts were offered by the longtime partners who worked on the pivotal deal that provides a stable sponsorship future for the FedEx Cup. But the ease over cocktails countered the challenge of negotiating a deal that extends far into the future and had dealmakers forecasting the unknown — how the FedEx Cup will look in 2027 given potential changes in the tour’s schedule, media landscape and digital strategy. The uncertainty was the biggest challenge to sealing the sponsorship, which was announced on May 9.

“There are a lot of unknowns,” said Patrick Fitzgerald, senior vice president of integrated marketing and communications for FedEx.

As the tour contemplates its TV future, it adds to that uncertainty. Next year it has the option to reopen and renegotiate terms of its CBS and NBC agreements, which run through 2021.

“What is golf going to look like on TV makes it tricky,” said David Grant, president of MKTG Sports and Entertainment, which represented FedEx on the deal. “The big challenge was wrapping our arms around the unknown. We have full acknowledgement that the assets will change and that is OK. Together we will figure out the new world order.”

While many of the core aspects of the new deal are the same, including the continuation of the four-event FedEx Cup playoffs, the new agreement will carry a more global and digital focus as well as increased flexibility for both sides to make adjustments over the length of the deal.

“The need to ensure flexibility is where we spent a fair amount of time,” Grant said.

Leaving room for that white space of unknown isn’t typical in deals as long and as complex as the FedEx Cup sponsorship, but the high degree of familiarity of trust between the tour and FedEx executives paved the way for the flexibility. The tour and FedEx have a relationship dating back nearly 30 years to when the company took over as title of the FedEx St. Jude Classic tour stop.

“This is not common in a typical deal,” Grant said. “Lawyers look for certainty and certainty is hard in these situations. Nothing is stuck in cement. The only way you do that is being together for so long.”

Talks started in earnest more than a year ago and each side had objectives — FedEx eyed an increased digital marketing strategy and the tour looked for a long-term deal for stability. Over the year, they got to a point where both were satisfied with the enhancements. Now it means constantly observing the landscape and constant check-ins on the deal.

Tour Commissioner Jay Monahan and FedEx’s Don Colleran and Patrick Fitzgerald announce the extension May 9.
Increased branding through tour-controlled digital and social channels is a critical component of the new deal, if only anyone can predict what that landscape will look like a decade down the road.

“We have a commitment on both sides to meet on a very regular basis to talk about the new digital opportunities that are there, mobile opportunities, and virtual reality and all of these things that are there,” Fitzgerald said. “I remember at one of the meetings, one of the really scary smart technical guys from the tour brought in some new technology and ways to consume it, things that were just absolutely astounding, and it’s important for us to make sure that our brand and the FedEx Cup are represented in the most appropriate ways possible with all of this new media landscape that we’re in now.”

Consider that since the original FedEx Cup began in 2007, there was no PGA Tour Live OTT, no live streaming on Twitter, or even the use of virtual reality coverage that was offered for the first time at last week’s Players Championship.

“We don’t go back and say, ‘You know what, you didn’t pay for this in the original agreement, we need to have a conversation about the value you’re getting here,’” said PGA Commissioner Jay Monahan. “We will continue to invest in the right technologies, the right way to present our sport, and as we do that, we’ll do it in close consultation with FedEx and we’ll do it in a way that’s going to build the Cup and be something that they’re comfortable and satisfied with.”

While the deal still carries with it the traditional elements in media buys, hospitality and branding at PGA Tour events throughout the 11-month season, FedEx is expected to take a more aggressive approach in creating and using digital content. It is not getting additional digital rights in the deal, but will leverage its ability on content creation and distribution.

“We are never going to own their footage but the ability to borrow it and use it is something that we will have the opportunity to do,” Grant said. “With more outlets to use content, we will rely on that lever more.”

As renewal talks intensified over the past few months, a more global structure of the sponsorship also emerged as FedEx looks to leverage golf’s international appeal as a marketing tool to help rebrand and promote European shipping company TNT Express, which FedEx acquired last year.

“We need to make sure we are supporting their investment as they evolve from working with our international media partners and building predetermined programs that help support them,” said Brian Oliver, senior vice president of corporate partnerships for the tour, who along with chief commercial officer Tom Wade led the tour’s negotiations.

FedEx and PGA Tour executives would not disclose the value of the deal. FedEx would not disclose specific data on how the FedEx Cup has affected its business, but the sponsorship includes broad activation throughout the year through hospitality, pro-ams, on-course signage, and broadcast and digital exposure as the shipping giant uses the deal to market with a heavy business-to-business focus and to build consumer awareness.

“It is across the board and business shipping is an enormous part of the business,” Grant said. “There is plenty of hospitality at the tour events and there are consumer promotions on and off line.”

FedEx’s negotiating team was led by Fitzgerald, along with Monica Skipper, FedEx vice president of brand experience.

The renewal comes during a period of soft television ratings for the property. Through May 8, the tour had seen a decline on Sunday coverage for 13 straight events. But some golf insiders dismissed the impact of current TV ratings on the renewal.

“It says that FedEx has a lot of confidence ratings will improve via a schedule change, a new TV deal or both,” said Jason Langwell, senior vice president of sponsorships and events at Intersport, which represents the tour business for Ace Hardware and Quicken Loans.

Scott Seymour, senior vice president and managing director of golf at Octagon, said he was not a surprised by the 10-year deal as the tour looked to make a statement that its biggest partner is willing to commit to the tour for another decade.

“This one was the most important to have the greatest stability for the tour,” he said.

PGA Tour executives can cross off FedEx from their sponsorship to-do list after last week’s announcement of a 10-year renewal with the shipping giant. But Brian Oliver, the tour’s senior vice president of corporate partnerships, still has a busy agenda.

For starters, the tour continues to work to replace Shell as title sponsor of its Houston stop. Shell leaves the tour this year after a 26-year run as title sponsor.

“We have really good conversations going,” Oliver said as he sat in a conference room at the tour’s office just hours after the FedEx deal was announced. “Nothing is imminent.”

Other tournament title deals set to end in 2017 include the Shriners Hospitals for Children Open in Las Vegas and the Quicken Loans National tournament near Washington D.C.

PGA Tour official marketing partnerships up this year are MD Anderson Cancer Center and Ace Hardware. Oliver also is looking to renew a Presidents Cup deal with Citi, which along with Rolex is a global partner of the event.

THE NEW GUY: Jared Rice this year was named executive director of the Players Championship, replacing Matt Rapp, who was promoted to senior vice president of championship management for the tour.

Rice took over during a year of big changes at the tour’s marquee event. A major renovation to TPC Sawgrass saw a redesigned 12th hole to make it a drivable par 4 and add shot-making drama to the tournament. A new practice range was installed and the route leading to the massive clubhouse was changed. The tour partnered with Nickelodeon for a 5,000-square-foot kids zone that was put on site for the first time.

As in past years, the tournament hosted a concert, with Sam Hunt playing at the course on May 9 as part of the event’s Military Appreciation Day.

“There is a lot new going on,” Rice said. “The centerpiece is the renovation of the course. It is to further the tournament’s vision of having the best fan experience in golf.”

New F1 owner Liberty Media hopes to add races in the U.S. beyond Circuit of the Americas.
As Formula One tries to expand its U.S. fan base, a top executive at Circuit of the Americas is calling for the sport’s new owners to commit more to marketing F1 before adding a second race stateside.

Katja Heim, a former longtime Europe-based motorsports marketer, became chief operating officer of COTA last year. In an interview this month, Heim said she has met briefly with the new owners of F1, Liberty Media, which appointed American media executives Chase Carey and Sean Bratches to run the sport alongside German managing director of motorsports Ross Brawn.

COTA has hosted the U.S. Grand Prix — F1’s only U.S. event — since 2012. But Liberty Media has stated an intention to grow the sport in America, in part through additional races. Heim said that while COTA welcomes the increased attention F1 is putting on the States, she believes the series should first focus on establishing better brand awareness in America.

“Formula One itself kind of totally left it to the promoters in the different countries [to market the sport previously], and in a geographical field like the U.S., this is a huge undertaking,” Heim said, adding that driver Lewis Hamilton is perhaps the only recognizable person in F1 to many Americans. “The most important thing actually is to build the brand, to create more awareness about it and make it more aspirational, because if you don’t do that, a second race … will kind of fall down.”

F1 industry executives noted that under the leadership of Bernie Ecclestone, who ran the series from the late-1970s until this year, F1 did little marketing or sponsorship hunting on its own. This was backed up by a recent comment from Carey, who told The Press Association, “In today’s world you need to market a sport. We were not marketing the sport [previously].” And a source familiar with F1’s prior plans to bring a race to New Jersey, which F1 is trying to revive, confirmed that F1 had not been planning to help market that race, either.

Pressed on whether a second F1 race would hurt COTA, Heim said the track is “all for building the fan base before you have the second race.” She added that COTA, whose biggest markets for F1 fans are California and the East Coast, is currently profitable.

“Bobby Epstein, who is the owner of COTA and is a very clever and smart man, always says, ‘Yes, it surely hurts us; no doubt it will hurt us,’ because the fan base at the moment is actually too small to have two races,” Heim said. “We have quite a good fan base that comes to COTA because of what COTA offers, and how cool Austin is, but you certainly would lose people here.”

The current F1 promoter model sees the promoter pay a fee — typically around $30 million annually — to host a race, while keeping revenue from ticket sales and concessions. Sponsorship, media and Paddock Club hospitality revenue goes to the sanctioning body.

One thing that could help COTA mitigate the effects of a second race would be a reduction of its promoter fee, which has an annual escalator that will see it reach close to $60 million by 2021, according to Forbes. F1’s new ownership has expressed an openness to examining ways to improve the pricey promoter’s model, and Heim made clear that a fee reduction would be huge.

“I know they’re very, very concerned to find a way to support promoters; how it works is another question because each promoter has a different challenge and is differently set up,” Heim said. “It would obviously be superb if they would cut the promoter’s fee; that would be amazingly embraced.”

The NHL Centennial Fan Arena, the league’s in-market activation around its 100th season, has proved to be an effective fan engagement tool for both the league and teams, leading to the hope of doing something nationally on a smaller scale in future years.

Launched Jan. 1 in Toronto at the Centennial Classic, the traveling tour has stopped in 16 team cities thus far, logging more than 33,000 miles. More than 200,000 fans have attended, according to the NHL. It will visit the remaining teams by the end of this year, as well as the league’s tentpole events, including the draft and outdoor games.

A ball hockey rink is one of the elements of the NHL Centennial Fan Arena.
Photo by: NHL
“Our goal was to figure out how we were going to reach out and touch fans during the centennial year, and we’ve seen how each of these cities have embraced it,” said Steve Mayer, NHL executive vice president and chief content officer. “We knew we were producing a lot of good content during the centennial, and wanted to make it as far-reaching as possible, even to the point where it was in your backyard.”

The fan arena, which consists of two 53-foot trucks and was created alongside MKTG and Palmer Audio, includes several elements for fans such as a ball hockey rink, a virtual reality Zamboni experience and a 1,000-square-foot museum display of memorabilia, photos and interactive displays.

Designed to provide fans with a historical look at the sport along with interactive games, the tour has built upon what many teams have begun doing across the league.

For example, the Arizona Coyotes launched their own mobile tour event in December 2015 that included an interactive slap shot game and player features. It travels to festivals, schools and other events around its metro area.

When the league’s truck tour was scheduled to come to the city for two days in early January, it secured a spot at a popular outdoor shopping center where it also held a viewing party for an away game. More than 14,000 people attended in Tempe, with the Coyotes able to sell “numerous” flex packs, mini-packs and single-game tickets, said Rich Nairn, executive vice president of communications and broadcasting.

While the Nashville Predators have an outdoor activation in a plaza outside their stadium for most home games, the chance to bring elements of hockey history to the city as part of the NHL tour was key for a city that has been in the league for fewer than 20 years.

“For many fans in markets like Nashville, they may never get to the Hockey Hall of Fame [in Toronto],” said Gerry Helper, Predators senior vice president and senior adviser. “To be able to bring even a small version of something that features the game’s traditions, its changes and history really helps to grow the appreciation of the sport, the league and our team here.”

The NHL has nine of its sponsors — including Bridgestone, Dunkin’ Donuts and SAP — supporting the tour, and has encouraged teams to have their own sponsors activate alongside the events. In Nashville, Dunkin’ is also a local sponsor and handed out free coffee and doughnuts, and the Tennessee Lottery also activated alongside the two-day event. Mayer said the league is working with all the teams along the tour to optimize the stop as best as they can, both for sponsors and fans.

Mayer said based off the feedback he has received during the planning of the truck tour, he expects all the league’s teams to plan their own in-market tours. He said the league is also aiming to be involved as well, even if it’s just ensuring the most popular element of the current tour is there — the Stanley Cup.

“We’re still trying to figure out how we’re going to do that, but it’s really opened up our eyes in a great way,” Mayer said. One of the factors will be on how much money the league allocates to those efforts.

The NHL declined to comment on the cost of the truck tour. The tour is free to all fans.

The professional scene around Activision Blizzard’s hit video game Overwatch is shrinking, a troubling sign for the company’s ambitious plans to launch a well-capitalized league around the game.

Since May 1, five multi-game esports franchises have disbanded their Overwatch teams, citing a lack of moneymaking opportunities while hype drives up player salaries and details about the still-developing league remain sparse. This comes three weeks after one of North America’s most prominent Overwatch players, Brandon “Seagull” Larned, stepped down from NRG Esports’ active roster to focus on a more lucrative business of streaming his practice to fans.

“It was our third-most-expensive team to operate, yet it was one of our lowest drivers of revenue, and I’m sure that’s true for many of the teams,” said Marty Strenczewilk, CEO and president of Splyce, the Rochester, N.Y.-based franchise that disbanded its Overwatch squad May 9.

CompLexity Gaming and Denial Esports did the same, and European team Red Reserve also bailed, citing the lack of fan interest in Europe. Team SoloMid had been building a team to enter the space but abandoned its efforts May 5.

The situation illustrates the risk Blizzard is taking by putting so much stock in the centrally run, big-money Overwatch League so early in the life of the game. Other publishers that have successfully built spectator-oriented esports titles, such as Riot Games and Valve Software, encouraged fan bases, competitive player pools and teams to develop organically over a period of years by allowing a variety of tournaments and leagues to flourish.

Blizzard took a starkly different path with Overwatch. It announced plans for the Overwatch League in November, just six months after the game launched. Since then, it’s limited the number of one-off Overwatch events that might help build an audience while also trying to sell spots in the eventual centralized league for $20 million, according to multiple sources (see related story). The only established Overwatch leagues are in China and Korea.

Esports experts said the loss of interest in fielding competitive teams, if even temporary, is only making it harder for the Overwatch League to succeed once it does launch.

“The community determines if an esport will be successful, not publishers,”said Tobias Sherman, global head of esports for WME-IMG. “And you can throw all the money at it you want, but if there’s not a critical mass of esports fans invested in this game organically then it’s tough to see a return. You need fans to sell out stadiums.”

In a statement, Blizzard said it’s taking the interests of the existing Overwatch teams into consideration as it carefully builds the league, and will release more information when it makes sense to do so.

“Anyone who knows Blizzard understands how deeply we care about the communities around our games,” the statement reads. “The league is built upon the best elements of endemic esports programs and traditional sports, and we’re in active discussions with many teams and owners from both worlds because it will take a village to stand up a league with such an unprecedented structure. Those conversations have been going well and there’s a lot of excitement around our ambitious plans.”

For the endemic teams, the problem isn’t merely that they cannot afford the franchise spots. They’ve known for months they would have to find a partner with deeper pockets, or be acquired by one, to play in the OWL.

But the burn rate has grown untenable as they wait for more detail, with skepticism growing that the OWL will launch any time soon. Blizzard has not released any details about the form, structure or schedule of competition. Most franchises employ at least six players, a coach and manager, and often house them together as well.

“Six-player squads are expensive to maintain, and there are very few places to actually play and compete right now,” said Jason Lake, founder of CompLexity Gaming. “I hope to eventually return to the game when OWL kicks off, assuming we can find a financially intelligent way to be a part of the league.”

Activision Blizzard has had lengthy conversations with numerous pro sports organizations about buying into the Overwatch League, but no deals have been finalized.

Multiple sources confirm that Kraft Sports Group has agreed in principle to join the league, at a price of $20 million. However, one source said that deal includes a most-favored-nation clause that would lower the price to match what the next buyer pays.

Miami Dolphins owner Stephen Ross’ RSE Ventures has also seriously considered the opportunity but has not made any decisions.

Bobby Kotick, Activision Blizzard president and CEO, has been leading the sales effort.

The $20 million figure, if consummated, would be by far the highest-valued spot in an esports league to date. A spot in Riot Games’ League of Legends top-tier League Championship Series sold for $1.8 million last year.

“We aren’t making any owner-specific announcements just yet, but we are in active discussions with teams and owners from endemic esports as well as traditional sports,” said a corporate statement from Blizzard. “Our ultimate goal is to partner with leaders from both realms to create a league that’s exciting and accessible to a wide audience, sustainable, and rewarding for everyone involved. We’re continuing to work aggressively toward that goal and will have news to share as we move forward.”

Blizzard has so far not backed away from its proposed launch window of the third quarter.

— Ben Fischer

NFL owners are scheduled to vote next Tuesday on a lease for the Raiders’ new Las Vegas stadium … without the team having such an agreement.

The Las Vegas Stadium Authority, the government body negotiating with the Raiders, has said through officials and in meeting minutes that a lease should be secured by the fall.

Nevertheless, the agenda for the NFL owners meeting in downtown Chicago next week includes a vote on the Raiders’ lease.

“In cases such as this, approval is dependent on satisfactory resolution of any open items,” an NFL official said.

But why vote on a lease that is not ready, especially given it has stoked considerable controversy in Las Vegas? The NFL official pointed out that the next owners meeting is in October and that the lease could emerge before then.

A lease for the Raiders’ Vegas stadium hasn’t been secured, but owners will vote on it anyway.

One football official said it appears the league wants to approve a list of terms that it wants in the lease, perhaps giving the Raiders leverage in their talks. In this view, the scheduling of the vote next week is a power move by the NFL, sending a message to the Vegas authorities.

A representative for the Las Vegas Stadium Authority directed calls to the state’s economic development agency. That agency did not reply for comment.

The initial lease that the team filed in late January, with bargain rent and a ban on UNLV from having any branding in the stadium, blew up when benefactor Sheldon Adelson backed away from the proposed stadium.

The Raiders recovered, securing a bank financing pledge and an owners’ vote in March approving their relocation by 2020 to Las Vegas from Oakland. That approval came without a lease, a developer or even the land acquired (the team has since bought the stadium land, though the Stadium Authority needs to approve its use).

There are no indications the team, which did not reply for comment, won’t secure a lease. However, there are some outstanding issues, including the capital improvements budget in future years.

Team owners were told at the March meeting that in addition to the widely publicized $750 million of public financing for the stadium construction, the public is also responsible for $200 million for future stadium improvements.

But Nevada officials have since disagreed that the public tab will rise over $750 million. Nevertheless, NFL officials are working on the basis that there is up to $950 million of public funds.

The fact that the NFL would schedule a vote on a lease far from finished is only the latest example of an expedited process. Owners approved the relocation on March 27 with almost no debate or questions, despite a late stadium push by Oakland. They spent around an hour on the subject.

“I have seen them debate for two hours the height of the uprights,” said one puzzled team official who was in the room when owners voted.

That vote occurred without the lease, and at the time NFL officials suggested the agreement would be ready in April and the document could be approved in May. That approval schedule remains, just without a lease.

The Raiders also still must determine where they will play in 2019. The team plans to play in Oakland through 2018, but its lease there expires at that time.