Group Created with Sketch.
Volume 20 No. 45

Leagues and Governing Bodies

NFL owners this week are slated to vote to end Ticketmaster’s exclusive rights to provide official secondary ticketing to NFL teams, opening the field to multiple providers. Ticketmaster’s deal runs through the end of next season.

The vote, scheduled for Wednesday, is on the agenda for the owners’ fall meeting in New York, though the issue of whether to compel players to stand for the national anthem might dominate the meeting and potentially delay the vote.

Either way, the league appears ready to move toward a more open ticketing landscape in which authenticated tickets are available through a range of both traditional and nontraditional outlets.

Ticketmaster and NFL officials declined to comment.

The basic framework of the deal, according to multiple industry sources, involves the ticketing giant retaining preferred status as a primary ticket provider to teams. Thirty-one NFL teams use Ticketmaster for primary ticketing; the Detroit Lions are aligned with AXS. Sources said teams will be “incentivized” to use Ticketmaster, though it was not immediately clear what those terms were.

First Look podcast, with NFL ticketing discussion beginning at the 12:55 mark:

If the new deal is OK’d, Ticketmaster would keep preferred status as a primary ticket provider.
Meanwhile, teams would be allowed to designate an official secondary partner of their choosing, breaking down the exclusive secondary rights Ticketmaster has held for the 2013-18 period at a cost of more than $200 million. Those chosen partners would be able to have full integration with the teams’ primary markets, allowing for the easy resale and transfer of tickets. Financial terms of the new deal have not been disclosed.

The deal has been the subject of steady negotiations over the past year, and a special league committee involving several team and league executives has studied the issue in depth. The NFL for months had eyed this week’s fall meeting as a potential slot to ratify a new ticketing deal.

In recent weeks, NFL executives have called some team ticketing executives to inquire about issues such as the incidence of ticket fraud to help prepare for this week’s presentation and vote, and help teams move toward safe secondary ticketing choices.

The deal would keep Ticketmaster as one of the league’s top business partners. But one rival ticketing executive wondered if the new deal would affect Ticketmaster’s ability to grow its own secondary ticketing business. “How does this serve to help grow Ticket Exchange for Ticketmaster?” the executive asked. “This would seem to give away their point of differentiation.”

But open distribution has quickly become a more favored element in sports ticketing. As attendance has plateaued or fallen in many sports, the urgency to find new buyers, particularly where they are already shopping and participating in other online activities, has become more important.

Major League Soccer in particular has a broad-based deal with New York-based SeatGeek to use the company’s box office system, which will make seats available for purchase on a variety of outside platforms. Sporting Kansas City and the Seattle Sounders are the initial MLS clubs to use the system. Other, newer platforms such as Gametime have seen their own growth accelerate in recent years.

The NFL, the target of criticism from President Donald Trump over whether players should stand for the national anthem, is on strong legal ground if owners decide to unilaterally require players to stand, law experts said.

It’s unclear that’s where the league is headed. Owners meet this week, and in a rare move invited NFLPA leadership to the gathering, a sign they may want to avoid any decree from above on the issue. But if compromise fails with the players, the NFL could require standing.

While it is popular among the players’ defenders to talk about First Amendment rights, those rights apply only to government action, not private employer situations, said Cornell University law professor Stewart Schwab.

“The First Amendment really tells government what it can and cannot do,” he said.

Some argue that because many of the stadiums are publicly owned, or because public tax dollars went into the construction, the First Amendment holds sway. Schwab disagreed, saying the critical issue is whether the government is the one compelling standing for the anthem.

It’s unclear whether the league will move to compel players to stand for the national anthem.
There could be some exceptions, however.

“In states like California, the free speech provisions of the [state] constitution have been deemed applicable to private sector employees,” said Bill Gould, a Stanford Law School professor and one-time chairman of the National Labor Relations Board.

Owners might be able to make a legal case, he added, if they can prove that, by kneeling, players are harming the sport’s economic interests. He pointed to the arbitration case of former pitcher John Rocker, whom MLB suspended in 2000 after he made derogatory comments about minorities in an interview. An arbitrator reduced the suspension in part because MLB did not make a case that its economic interests were hurt by the free speech exercised by Rocker, Gould said.

If the NFLPA and NFL are unable to reach consensus and the league does require standing, the union is likely to file a grievance. That grievance would face long odds.

First, unlike the NBA, where players are required to stand, the issue has not been collectively bargained. Leagues have wide discretion over conduct on the field, Gould said.

Schwab added the NFL could make the case that standing for the anthem has been the norm under this and past CBAs. Players began attending and standing for the anthem in 2009.

One unrelated union has already filed a grievance with the NLRB over Dallas Cowboys owner Jerry Jones’ comment that he would bench any player who does not stand. Gould said the NLRB does not have jurisdiction over politics, and unless the players are protesting terms and conditions of their employment, he predicted the agency wouldn’t get involved.

As Vancouver Canucks Chief Operating Officer Jeff Stipec walked around the arena in Beijing before the team’s game against the Los Angeles Kings, a group of traveling Canadian fans stopped him to complain.

“They traveled halfway around the world, and now I’m getting criticized because they don’t serve beer in the arena,” Stipec said. “It was a little bit different than the experience we deliver in Vancouver.”

The NHL, much like Stipec, didn’t know what to expect from its first visit to China. While there were differences from the traditional game experience, from booklets explaining rules left at every seat to the drinks of choice in the venue, the NHL views last month’s effort as a success, said David Proper, the league’s executive vice president of media and international strategy.

Two games between the Kings and Canucks, in Beijing and Shanghai, drew more than 23,000 fans combined. The league, in conjunction with the teams and the NHLPA, held a fan fest in Beijing, and youth clinics in both cities. It also held an event with the U.S. Embassy called “Hockey Night,” a 50-minute program featuring hockey activities and demonstrations that was streamed online in China and had more than 4.6 million video starts. A livestreamed practice for the two teams had 2.6 million video starts.

Those numbers may be modest by Chinese streaming viewership standards, but they were well above what the league expected, Proper said. The league’s Chinese-specific social media platforms saw more than 300 percent follower growth during the week of the games, and an additional 100 percent increase since the games were held, he said.

Two games between the Kings and Canucks attracted more than 23,000 fans combined.
The league’s reach in the country still pales in comparison to the NBA. For example, the NBA’s account on Weibo, China’s Twitter equivalent, has more than 33 million followers. The NHL’s has roughly 172,000. But the first meeting between two NBA teams in China was in 2004 (and Yao Ming starred on one of them), so basketball has a considerable head start.

Proper said the league viewed its first step into the country as just that: the first part of a multiyear strategy that will evolve. The events did not generate revenue for the league, but local promoters and organizers took on all cost risks.

The NHL and NHLPA met last week to discuss the league’s international strategy. On the table are potential games in China in the coming years during the preseason, as well as playing more regular-season games outside of North America. The NHL will hold two games in Sweden in November.

The league aims to host at least 15 clinics in the country in the coming year. To educate fans, plans call for viewing parties in major cities aided by the NHL’s Chinese rights holders, CCTV and Tencent.

The Kings and Canucks will follow suit. Through parent company AEG, the Kings have built a two-person social media team in China that runs the team’s WeChat and Weibo channels and spent the China trip with the Kings capturing content. Clinics in China with partner ORG Packaging will continue.

“Continuity is very important, and we have to have plans to go back and work on clinics and connect with kids,” said Los Angeles Kings President Luc Robitaille. “The league needs to be embedded in the youth hockey community, and if we can do that there is huge upside.”

The Canucks, who have supported youth hockey development in China for the past three years, will continue down that path with additional partnerships. They’ll also host a tournament in February in Vancouver that potentially will include eight teams of 9- and 10-year-olds from China. The Canucks also launched their own WeChat and Weibo channels ahead of the trip to China, as well as a Chinese-specific microsite.

Stipec said that during the trip he was able to talk with Chinese companies about opportunities to not only sponsor the team in Vancouver but also partner on efforts in China.

“When you walk into a sporting goods store in China, basketball and the NBA dominate as a result of what the league has done in that market. I think there’s that opportunity for the NHL as well,” he said.

Editor’s note: This story is revised from the print edition

A funny thing happened this year as investors dove into esports, chasing eight-figure franchises in the Overwatch League and the “League of Legends” League Championship Series: A new game came out of nowhere to win the hearts and minds of fans.

Launched in beta mode by Korean developer Bluehole Studio in March, “PlayerUnknown’s Battlegrounds” is a bona fide juggernaut, and its rapid ascent raises fresh questions about the wisdom of relying heavily on any single game for long-term esports profitability.

Known simply as PUBG, the game immediately attracted players and viewers who liked the simple but engaging concept: 100 players all dumped into the same battle space, Hunger Games-style, with the last player alive winning.

Since it launched, it’s second only to “League of Legends” in Twitch viewership, quickly leaping over “Overwatch” and mainstays like “Dota 2” and “Counter-Strike: Global Offensive.” Esports organizations are quickly developing PUBG teams, and tournament organizer ESL will run a $200,000 purse PUBG tournament in November. The game has sold 15 million copies worldwide.

“If I’m honest, PUBG just decided to show up at the party unannounced, without even knocking at the door — just proper kicked the door with the hinges out, showed up and said, ‘I’m here, and I’m not going to be ignored,’” said Michal Blicharz, vice president of pro gaming for ESL.

All this happened while sports industry investors were busy talking to Overwatch publisher Activision Blizzard about $20 million franchise deals, and League of Legends publisher Riot Games re-organized its top American circuit to better appeal to investors, who must pay at least $13 million for a new spot or $10 million to retain a spot.

Meanwhile, esports teams are creating PUBG teams for a few hundred thousand dollars at most.

To be clear, it remains to be seen whether PUBG can sustain its popularity, or whether it’s even a direct competitor to Overwatch or any other esports titles. There’s an industry feeling of a rising tide lifting all boats as esports finds new fans.

“If this was a zero-sum game, I guess I’d be more threatened,” said Randy Chappel, managing director of Hersh Interactive Group, which recently infused Team Envy with an eight-figure investment to facilitate the fees for Overwatch and possibly League of Legends, along with supporting the other five teams it runs. “But the pie is growing so quickly that the attention and awareness of all these things is exciting.”

But PUBG’s rise is a cautionary note, experts said. Esports properties want investors to believe they’re building an industry that will look a lot like traditional sports, with stable franchises, enduring fan connections and high barriers to entry for competitors. But gaming may be more accurately compared to the music industry, where even the most sophisticated industry giants must always be aware that an obscure talent can strike a chord with fans and quickly become relevant.

“Seventy percent of the esports market is predictable, in terms of what games come up, what to invest into, and 30 percent consistently surprises the industry, regardless of how deeply rooted in the industry you are,” Blicharz said. “I’ve been in esports for 15 years and didn’t see PUBG coming.”

The coming weeks and months will be crucial for the future of PUBG and its place in the esports ecosystem. As a small publisher, Bluehole must scale its operations to foster a vibrant competitive scene and keep making the technical improvements to the game to keep fans engaged (it’s still technically not a completed product).

“There’s a lot of things to love about PUBG, and the question is, will they make the right decisions in order to maintain a large player base and to maintain a large fan base for the esport?” said Bryce Blum, executive vice president of esports at Catalyst Sports & Media, which advises brands, investors and teams on esports strategy.

Meanwhile, Blizzard and the OWL’s 12 charter franchise holders, along with Riot Games and the League of Legends teams, have extensive resources and an extraordinary incentive to make their investment pay off.

Hector Rodriguez, CEO of OpTic Gaming, which has secured a spot in the Overwatch League, believes Overwatch is on the right track despite the low viewership during this lull before play starts in December. “Given the opportunity and the structure it’s being given, I think we’re going to see some interesting stuff happen with it,” he said.

To account for the game unpredictability, esports teams are structured as platforms that can dive into new titles with relative ease. In recent weeks Team Liquid, Team SoloMid, Noble and Team Dignitas have acquired PUBG teams, and Rodriguez said OpTic is looking into it. At this early stage, the investment is much more in effort than dollars, said Team Liquid co-CEO Steve Arhancet, matching the risk with the uncertainty facing PUBG.

But some of the new investors have staked their entrance in esports on a single game, like Comcast Spectacor and the Kraft Group, both single-purpose Overwatch buyers.

“You can never force something to be a spectator esport,” Rodriguez said. “It either has it or it doesn’t, and in esports the audience will always let you know if you’re on the right track.”

The Golden State Warriors are under consideration for a spot in Riot Games’ reconstituted North American League Championship Series in “League of Legends,” a team source confirmed.

The Warriors are a charter member in the NBA 2K league set to launch in 2018 but otherwise have no esports assets.

Riot says it will announce the 10 organizations that will compete in 2018 in November. Newcomers to the game would have to pay Riot $13 million if accepted. Most esports experts believe that only two or three spots in the new LCS will be awarded to applicants that don’t currently compete in the league.

Warriors co-owner Peter Guber and Assistant General Manager Kirk Lacob are part of a large group of investors in aXiomatic, a group that owns a controlling stake in esports team and current LCS participant Team Liquid. Riot prohibits dual ownership of LCS teams, so if both teams are accepted in the league, restructuring or divestment would be necessary.

— Ben Fischer

The U.S. men’s soccer team suffered perhaps the biggest loss in its history when it fell 2-1 to Trinidad and Tobago last week and failed to qualify for the 2018 World Cup in Russia.

That puts the U.S. out of soccer’s biggest event for the first time since 1986, even as soccer enjoys growing success at the major league level here and groups compete to pay a $150 million fee for an MLS expansion franchise, up 36 percent from the fee the Los Angeles Football Club paid to join the league in 2014.

While this is a rough moment — and criticism of U.S. Soccer had begun before the final whistle was blown at Tuesday’s upset loss — it is not a full-fledged disaster for all the stakeholders in the sport. Here’s a look at how each of them stands to be affected by a World Cup without the U.S. men.


For U.S. Soccer, this was the worst possible scenario.

Sunil Gulati, president of U.S. Soccer, will be forced to shoulder the blame for the failure and for perceptions that the sport has not progressed in the country for a variety of reasons, among them a lack of quality coaching, cost concerns around youth soccer and a relatively weak pipeline for talent.

The large crowds in red, white and blue that gathered for U.S. World Cup games in 2014 will not be available to marketers in 2018.
Gulati has been president since being elected in 2006, winning subsequent re-elections in 2010 and 2014. His current term will end in February, when the federation will hold a scheduled election at its annual general meeting. He has not stated that he will seek another term — recently enacted term limits would allow for him to serve only for four more years — but if he does, he is expected to have competition. Lawyer Steve Gans and indoor soccer team owner Paul Lapointe have both announced their candidacies, though neither appears to have the track record to appeal to a wide swath of voters, who range from 291 youth club delegates to a professional council that includes MLS. It is expected other candidates may emerge as the election nears.

Sources with knowledge of U.S. Soccer said that even if Gulati were not the sitting president of U.S. Soccer, he could continue as a member of the FIFA Council — his term runs through 2021 — as well as in his position leading the World Cup bid for 2026 for the U.S., Mexico and Canada. Neither Gulati’s influence in global soccer, which swelled during the 2016 election of FIFA President Gianni Infantino, nor the unified 2026 World Cup bid, will be affected.

That 2026 World Cup decision, which FIFA will vote on June 13, may provide a moment for U.S. Soccer to present a detailed road map on changes it will make to grow the game in the U.S., similar to what it did in 1994 and the push for MLS after that, according to soccer sources.

The federation, which has nearly a $100 million surplus, will not suffer a massive revenue drop. It will not receive prize money from FIFA, for which it received $1.5 million for participation in the 2014 World Cup in Brazil and $9 million more for advancing past the group stage, according to its financial statements. However, offsetting that revenue was the added expense that the federation spent on sending the team to Brazil.

While U.S. Soccer does not individually break out World Cup travel expenses, during its 2015 fiscal year, which included the 2014 World Cup, the men’s national team had $31.1 million in expenses. In the 2016 and 2014 fiscal years, it had $19.9 and $18.7 million, respectively. The federation had begun discussions with lodging and training sites in Russia, including setting up its training home in St. Petersburg. However, those arrangements were not complete.


Fox Sports’ World Cup ad sales revenue is expected to be $30 million to $40 million lower than originally projected as a result of the U.S. team’s failure to qualify, sources said.

But the network is expected to make up much of that figure by cutting costs in some places, adding advertising units elsewhere in World Cup coverage like some of its studio shows, and putting more World Cup games on the broadcast network. Half the games already were scheduled for the broadcast network, and sources said they expect that number to increase to give Fox a chance to sell ads at higher rates.

All told, revenue is expected to come in about $20 million lower than expected, sources said.

While the $20 million hit is disappointing for Fox’s first World Cup, its executives privately said it’s not as significant a downswing as some would believe. For example, Fox Sports would make that much more in revenue if the big-market Yankees were to make the World Series this year, and the Series were to last at least six games. Another example is the 2016 Women’s World Cup, won by the United States. Ad sales outperformed expectations by nearly $20 million on the strength of the U.S. showing, sources said.

ESPN brought in $530 million in ad revenue with its coverage of the 2014 World Cup in Brazil, sources said. Fox has not given any projections for 2018 World Cup revenue.

No decisions have been made on where Fox will cut costs, but most of the cutting would not be noticed by viewers, according to sources both inside and outside of the network. Fox will move forward with building a set in Moscow’s Red Square, where it will produce daytime and late-night studio coverage. Fox channels still will carry 350 hours of World Cup programming.

Sunil Gulati was first elected as U.S. Soccer’s president in 2006.
Fox almost certainly will cut travel and send fewer staffers and employees to Russia, or pare down travel for employees who make the trip. For example, Fox had plans to embed reporter Jenny Taft to follow the U.S. team, said a source who asked not to be identified because Fox Sports was not prepared to announce any changes. That expense can be pared back now, though Taft still is expected to be involved with Fox’s World Cup telecasts.

TV ratings are certain to take a hit without the U.S. team. During the 2014 World Cup in Brazil, the four U.S. matches accounted for 20 percent of ESPN’s total viewers for the World Cup, sources said.

It’s almost impossible for Fox to make up those numbers during this World Cup.

But Fox executives are trying to take a bigger view of the World Cup and not focus on the disappointment of the U.S. defeat.

“Fox made a 15-year strategic investment in international soccer,” said one source. “That investment continues.”

Beyond the fact that its World Cup rights deal lasts through 2026 — a tournament that is expected to be held in North America — Fox executives believe the World Cup has played a big part in growing FS1. Fox signed a deal for the 2018 and 2022 World Cup in 2011, two years before FS1 launched. Fox executives credit big-ticket rights like the World Cup for helping to grow FS1, which is in 85 million homes and gets a license fee of $1.30 per subscriber per month.

“FIFA is responsible for a lot of that,” a source said.


The U.S. team has perhaps been viewed as the one of the easiest bets for a brand wanting to connect with U.S. soccer fans. With the team not playing in the World Cup, it is expected that the interest from casual fans and millennial consumers will drop off significantly, said Michael Neuman, executive vice president and managing partner of Scout Sports and Entertainment. “In a country deeply divided by our politics, the World Cup was to be a beacon of unity, bringing together avid and casual soccer fans,” he said.

However, Gilt Edge Soccer Marketing founder John Guppy said the idea that any brand would shy away from the World Cup just because the U.S. is out is like “throwing the baby out with the bathwater.”

“There’s no question a World Cup without the U.S. is not the same, and we’re not going to see the scenes of 20,000 people clad in red, white and blue at viewing parties in big cities, or Beyoncé on ‘Entertainment Tonight’ in a jersey,” he said. “But none of the strategic reasons on why a brand would invest in soccer has changed. It’s just how tactically they will tap into that opportunity.”

Guppy said he expects to see several different approaches, such as celebrating the multiculturalism of the event or focusing on the stars from around the world.

“The most popular soccer player in America is Lionel Messi. He’s still going to be there,” he said.

Nike may turn to international stars like Cristiano Ronaldo.
The national team’s failure to punch its ticket to Russia will cause Nike, U.S. Soccer’s chief sponsor and licensee, to miss perhaps its biggest chance to monetize the partnership, said Neuman, noting how rampant jerseys were at the 2014 World Cup and around qualifying games. Nike was scheduled to roll out a comprehensive marketing campaign around the U.S. team, which it will now have to shelve.

Guppy said it is likely that Nike will pivot to its global campaign here in the U.S., which will highlight its key players such as Cristiano Ronaldo and Neymar, whose names carry more cachet in the U.S. than any national team player.

U.S. Soccer’s only other direct sponsor agreement is with Soccer United Marketing, which handles the vast majority of the federation’s sponsorship, television, licensing and royalty revenue. Most of the federation’s deals through SUM, which include AT&T, Anheuser-Busch, Coca-Cola and Continental Tire, are in the middle of long-term agreements.

Though Guppy said he expects many of the sponsor agreements the federation signs in the future will include clauses related to qualifying for the World Cup, the value of a sponsorship with the national team has not changed much, especially with the expected arrival of the 2026 World Cup in the U.S.

Perhaps the most affected party on the U.S. side will be 19-year-old Christian Pulisic, who was perhaps the lone American player to impress during the qualifiers. Pulisic, who plays in Germany’s Bundesliga for Borussia Dortmund and was recently profiled on “60 Minutes,” has shown signs of breaking out as a star.

“His ticket to crash the party around soccer’s biggest stage is now on hold,” Neuman said. “Aside from the missed touches against the world’s best, he will also miss out on endearing himself to inflated U.S. audiences and to brand marketers stateside.”

For FIFA global partners such as Coca-Cola and Visa, it is unclear how their marketing strategy around the event may change with the U.S. not participating. Both have run campaigns with an international focus in the past.


No organization ties itself as closely to U.S. Soccer every World Cup as MLS. With the bulk of the U.S. national team also playing in the league, those matches every four years are perhaps MLS’s best chance to make household names out of some of its players. During the 2014 World Cup, MLS launched a specific marketing campaign titled “Here,” which aimed to showcase how that same excitement — and players — from the World Cup could be found in MLS matches when the league returned from its break during the tournament.

MLS was working on a campaign for next year’s World Cup that would have heavily focused on the U.S. team and its players; now that strategy will have to be re-evaluated. The league, which was in talks to contract an agency to start working on that campaign, is looking at how it will reshape that message, still with a focus on the World Cup.

The league is also determining how it will stop play for the World Cup. In iterations past, MLS has taken up to two weeks off during the group stages. Dan Courtemanche, MLS executive vice president of communications, said the league’s product strategy committee — the group of owners that evaluates all aspects of the league’s competition — has not yet determined what length of break the league might take, or if it may consider other options based upon which teams qualify.

In 2014, 21 MLS players played in the World Cup, a league record. While it’s unclear how many will participate in 2018, MLS expects there may be players from up to 12 countries representing the league, up from six in the previous edition.

Much like the NHL, MLS has seen loose correlation between a rise in attendance and television ratings coming out of an international event. While it is likely that the league receives a bump in popularity and interest, MLS annually has an increase in ticket sales in late summer into the fall regardless of whether it’s a World Cup year, Courtemanche said.