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Volume 21 No. 10

Franchises

Three years after the Atlanta Hawks hired the NBA’s first chief diversity officer, the Cleveland Cavaliers are looking to add a similar executive role to their front office as diversity efforts grow within the league.

 

The Cavs are searching for a vice president of inclusion and engagement, a new position that team executives said is needed considering their ongoing diversity and inclusive efforts.

The Philadelphia 76ers are also looking to fill such a role, according to an NBA team source. Team executives refused to comment.

The Cavs’ search comes after the Atlanta Hawks hired Nzinga Shaw in December 2014, becoming the first team to hire an executive dedicated exclusively to organizational diversity and inclusion efforts. In 2015, the NBA hired Oris Stuart as the league’s chief diversity and inclusion officer.

The team’s diversity and inclusion executive will work across the company’s holdings that includes the Cavs, the AHL Cleveland Monsters, and G League’s Canton Charge, and the Arena Football League’s Cleveland Gladiators.

The team is not using a search firm to fill the position.

“We’ve had a number of team leaders who have been engaged and will continue to be, but this will be someone who will be 100 percent focused and will build off where we are,” said Len Komoroski, CEO of the Cavs who declined to disclose any timetable on the hire.

The Cavs said the team ranked in the top five in the 30-team league for both percentage of minority full-time staff and women full-time staff in 2016. The 2017 rankings have not yet been released. Of the 2,500 jobs across the entire Cavs organization, 34 percent of the full-time staff were minorities, but it hits 49 percent when combining full and part-time staff.

The expected hire comes as the NBA and the entire sports industry spotlights diversity and inclusion efforts. The NBA last month named the Miami Heat and Toronto Raptors as winners of the NBA’s inaugural inclusion awards.

Komoroski added that the increased spotlight on inclusion is not related to workplace issues or to the #MeToo movement.

“We’ve been talking about this for quite a while,” he said. “It’s been a matter of building off an area of strength.”

The Los Angeles Dodgers have signed a partnership with Houston-based ticket distribution company Eventellect, signaling a new strategy for Major League Baseball’s top attendance draw.

 

The Dodgers, playing in MLB’s largest ballpark with a capacity of 56,000, have long held a liberal stance toward ticket brokers. The club has declined to specify its level of business with brokers, but some industry estimates point to a third of its season-ticket base of more than 35,000 full-season equivalents being previously held by brokers.

But in the new alignment with Eventellect beginning this season, many of those broker accounts will be canceled and the company will assist the Dodgers in overseeing its local ticket resale market. Financial terms of the deal were not disclosed but agreements between MLB teams and ticket distribution companies typically involve profit sharing on ticket resale revenue, exchanges of sales data, pricing analysis, and controls over the amount of secondary inventory entering the market.

“We hope to keep learning and think this will be a better way to manage our relationship with brokers,” said Stan Kasten, Dodgers president and chief executive. “We see this as an important step as we figure out our best path forward.”

The Dodgers-Eventellect deal follows a 2017 World Series that former Ticketmaster Chief Executive Nathan Hubbard called “probably the most lucrative event for ticket brokers ever.” A potent combination of Dodger Stadium’s large capacity and strong fan interest on ticket resale markets generated an estimated $15 million in profit to brokers for each World Series game in Los Angeles, money that didn’t make its way back to the Dodgers. During the World Series, Dodgers executives said they planned to review during the offseason how they engaged with ticket brokers.

Eventellect is one of several prominent ticket wholesalers and distributors in the industry and works with dozens of other pro teams including the Houston Astros and Atlanta Hawks. Industry estimates now point to more than half of MLB teams having a defined ticket distribution and resale strategy, with that number continuing to grow.

“We’re very excited about our relationship with the Dodgers as more teams look to transform their ticketing business,” said Patrick Ryan, Eventellect co-founder.

The Dodgers-Eventellect deal also arrives as MLB this season is beginning a third contract term with ticket resale marketplace StubHub. The new term contemplates a deeper working relationship between StubHub and clubs.

“They’re both foundational pieces of our overall ticketing ecosystem,” said Tucker Kain, Dodgers chief financial officer, managing director of Guggenheim Baseball Management, and another key figure in the Eventellect partnership. “They’re both major partnerships that will help us get tickets to our fans.”

The Tampa Bay Rowdies, the second-tier USL team and one of the 12 groups tabbed by MLS as a potential expansion market, is being put up for sale.

 

Owner Bill Edwards confirmed that the club will be brought to market this week, noting that he’s already beginning to have conversations with potential investors. Edwards said that while he is shopping the entire team, he is open to staying on in some capacity with a new ownership group. Edwards declined to say if other minority stakeholders in the team would also be selling.

 

Industry sources pegged the team’s value at more than $25 million, as expansion fees for the USL now eclipse $5 million — they were less than $1 million five years ago. Other recent team sales are now into the eight figures, sources said.

 

Edwards, who acquired the team in 2013 and moved it to the USL from the NASL in 2017, said the team is profitable and holds no debt. He said he’s invested more than $40 million in the team but declined to put a price tag on his ownership stake, saying that “it’s about finding the right person or right group that will see the future ahead and continue to carry on what we’re doing.”

 

That future could include MLS, as the Rowdies were one of the 12 groups that submitted formal bids to the league last January. While Tampa was not selected as one of the four in the running for the first two spots to be awarded — one was already granted to Nashville — Edwards said that he is optimistic about its chances for one of the final two spots. MLS is expected to select those teams later this year.

 

“There are no guarantees that we will end up in MLS, but of the 11 biggest television markets in the U.S., MLS has the first 10 and this is No. 11 — that’s a big plus, and that will get the attention of MLS,” Edwards said.

 

That may drastically increase the value of the club in any transaction as well, according to industry sources. However, Edwards noted that, “it’s not inexpensive to get into MLS.” The MLS expansion fee is set at $150 million.

 

Last year, local voters in St. Petersburg approved a plan that would extend the team’s lease at the city-owned waterfront stadium if an MLS expansion spot were granted. It also allowed for Edwards’ plan to renovate and expand the stadium from 7,000 to 18,000 seats. The project would cost $80 million and be privately financed.

 

While Edwards had positioned the club for MLS, he said he has kept his focus on growing in the USL. The Rowdies finished with the third-best record in the Eastern Conference last year, and set multiple club records, including averaging more than 5,663 fans per game. Since Edwards acquired the team, it has tripled its revenue, he said.

 

Industry sources said that Park Lane has been hired by Edwards as the financial adviser for the transaction. Both Edwards and Park Lane declined to discuss that.

 

Edwards, 73, a real estate and entertainment investor in the St. Petersburg area, underwent open-heart surgery last year, and has decided to step back from some of his business endeavors as a result.

Carolina Panthers owner Jerry Richardson and his investment bank selling the club have their sights set on a record value for an American sports franchise, and perhaps an unofficial record for speed of the transaction.

 

According to financial and other sources familiar with the sales process, Allen & Co. has indicated it expects the deal to close as early as the late March NFL owners meeting, and if not then by the mid-May owners meeting. The price: around $2.5 billion, the sources said.

 

That would easily top the highest price paid in the NFL, $1.4 billion in 2014 for the Buffalo Bills, and supersede the $2.2 billion American sports franchise record for the Houston Rockets last year.

 

Asked why given declining TV ratings someone might pay that amount, one investment banker said, “Did anyone think Fox would pay as much as they did for ‘Thursday Night [Football]’? It’s still the most exclusive club in the world. I think it’s insanely too rich given everything they are facing.”

 

Fox Sports recently agreed to pay about $600 million annually for “Thursday Night Football” for five years, a package that NBC and CBS privately claim they were losing money on that jointly paid $450 million a year.

 

Richardson is selling the team after a December report accused him of inappropriate behavior with some female employees that led to private legal settlements. The NFL hired former Securities and Exchange Commission Chairman Mary Jo White to investigate the situation, which might explain the ambitious timetable to complete a sale.

 

Allen & Co.’s Steve Greenberg, who is handling the sale, did not reply for comment. Allen & Co. has released financial information to prospective buyers who have signed nondisclosure agreements, the sources said.

 

One wild card in the process is whether Richardson would sell to a buyer who is not committed to keeping the team in Charlotte. The club can relocate without penalty after the next season. However, none of the sources anticipate the team moving given the strength of the Charlotte market.