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Volume 21 No. 10

Leagues and Governing Bodies

Photo: Getty Images

Mark Shapiro smiled and gave a hearty laugh.

Sitting in a warm, hip hospitality lounge on a cold Minneapolis day, the co-president of WME and IMG was asked whether the NFL’s popularity had peaked. It was a question that dominated conversations during Super Bowl Week, coming after a season where the league couldn’t seem to get out of its own way. From anthem protests and concussions to its frustrating rule book and public dispute between Cowboys owner Jerry Jones and NFL Commissioner Roger Goodell, stories that held the NFL in a bad light dominated news cycles throughout 2017.

Super Bowl week always has been about celebrating the league and the sport. This year, however, the NFL spent the week on the defensive, culminating in a Wall Street Journal headline just two days before the Super Bowl that declared that the “NFL is losing its core audience.”

 

The mere thought that the league’s best days are behind it — that, maybe, some other sport was lying in wait to take the mantle as the biggest sports brand in American culture — felt so farfetched to Shapiro, that he sat back in his chair and laughed.

   

“It’s cyclical,” he said. “I have no doubt that the NFL will create stars and bounce back.”

 

To Shapiro’s eye, the NFL has lost a lot of star power over the past two years. Some of the league’s most bankable stars, like Peyton Manning, retired. Other bona fide stars spent much of the season on injured reserve, like Aaron Rodgers, J.J. Watt and Odell Beckham Jr.

 

Plus, some new, appealing faces being groomed as the next generation were hurt and spent more time in the trainers’ room than on the field, like Carson Wentz and Deshaun Watson.

 

The funny thing about all the angst surrounding the NFL right now is that none of it is coming from anybody that does business with the league. Sure, the NFL’s TV ratings are down, but so is everything else on television. And NFL games still make up the most popular programming on television — by far.

 

It’s the same for sponsors. The 2017 season may have been a little rough. But, they say, nothing produces like an association with the NFL (see related story).

 

Business is good enough for Fox to buy “Thursday Night Football” rights. The NFL also was able to close new business (Amazon Web Services and Sleep Number) and renew business (Microsoft, which now includes laptop rights, along with tablets and sideline branding), Verizon, and Procter & Gamble.

 

“While we obviously assess traditional measures such as ratings, we are focused on whether the NFL is a platform that allows our clients to drive brand and business results — and the answer to that is a resounding ‘absolutely,’” said CAA Consulting head Greg Luckman, whose NFL clients include Bose, New Era and EA Sports.

 

Perhaps some of the negative storylines, like fan boycotts, have cut into some sponsor profits and brand equity. But sponsorship executives insist that the NFL is the surest bet in sports.

 

Fanatics founder and Executive Chairman Michael Rubin had a similar reaction as Shapiro when asked if the league was past its prime. The NFL, which is an investor in Fanatics, remains the biggest draw for the company.

 

League sponsors including Verizon throw shade on talk that the NFL has peaked.
Photo: on location experiences / sim canetty-clarke

 

“I’m sure the NFL hasn’t peaked,” he said. “There’s no secret the NFL had a challenging year, and a lot of things contributed to that. We know that the anthem stuff was a challenge. We know that the [perennially top-selling] Dallas Cowboys went from having an extraordinary year to a challenging one. And apparel in general has some challenges now. All that said, we grew our NFL business in 2017 mid-single digits compared to our business in 2016.”

 

League sponsors in developing categories were even more bullish on the question of whether the NFL has peaked.

 

“Far from it,” said Verizon Executive Director Chris Paul, who said his company had invested enough to improve network coverage by more than 500 percent in and around Minneapolis. “As fans want to access the NFL in new and different ways, we will enable that. The script hasn’t even been written yet for that, but we’re moving it far beyond traditional sponsorship.”

 

Even the league’s television ratings, which have been the source of much negativity, look much better when they are put into context, said David Schwab, an executive vice president at Octagon.

 

“When people talk about the NFL’s problems, the first thing they refer to are TV ratings,” Schwab said. “Outside of the NBA, all sports are seeing ratings challenges.”

 

Schwab pointed to NBC’s “Sunday Night Football,” which ended 2017 as television’s most-watched prime-time series for the seventh consecutive season — even in a down year. “Interest is huge,” Schwab said. “The gap between the NFL and everybody else is staggering.”

 

That’s the same message the NFL delivers to sponsors who bring up falling TV numbers, NFL sponsorship chief Renie Anderson said.

 

“I tell them that the NFL is still the best content on television,” she said. “Ratings drops are not an NFL thing, they are a television thing. Remember, we don’t sell ratings, we sell the ability to leverage our rights. TV is an important place for that, but so is retail. It’s not like the sky is falling. Even with all the off-the-field stuff this season our [sponsorship] business is strong.”

 

Anderson’s message seems to be getting through, at least to some sponsors.

 

“You can see the NFL’s headwinds in its viewership numbers, but they are still gigantic, compared to everything else in U.S. sports,” said Dean Evans, CMO of NFL sponsor Hyundai, who cited declining youth participation numbers and a shrinking TV audience among the desirable 18-34 male demo as concerns. “It still wins the night. We’ll see over the next five to 10 years where it’s heading. When we can get past the kneeling thing and get back to football, I think the game will seek and find its natural level again.”

 

Getting past “the kneeling thing” may not be as easy as it seems, some sponsors say. The hope is that player protests, and the backlash to them, aren’t damaging the NFL’s shield long term.

 

“I don’t think it’s as simple as, ‘Trump is upset, so I’m not buying a jersey,’” said a senior executive at a large NFL licensee. “But all the negativity leads to a less robust fan base. It’s the same thing with TV. Most fans didn’t stop watching NFL games; they’re just watching less. Both licensing and TV will rebound because nothing’s even close. For all the negatives, it’s still an unbelievable property, with no rival, as far as American sports.”

 

The NFL’s Anderson recalled leaving a Sunday church service to deal with the Trump issue as it was blowing up one weekend.

 

“Clearly, it is a very difficult subject, one that’s very personal,” she said. “We don’t want to talk about politics. We want to talk about football. We bring people together around a TV or a tailgate. Moving forward, you’ll see us talking more about the game and the fan and positioning the NFL as a unifying agent.”

 

Nick Kelly, who heads U.S. sports marketing for Anheuser-Busch InBev, said that executives at his company liken the NFL’s market position to that of Bud Light. It is still the world’s top-selling beer and available at every retailer that sells beer. However, its market share has been declining for a decade.

 

“We ask that question internally all the time, and while some NFL measures, including ratings, are down, no other sports property is close,” said Kelly, whose company hosted around 400 wholesaler and retail guests during Super Bowl Week. “It’s still the biggest game in town.”

Despite lagging sales for some licensees and injuries to marquee players like Odell Beckham Jr. and Aaron Rodgers, 2017 still will prove to be a record year for NFL Consumer Products, according to division chief Chris Halpin.

 

The reasons: Electronic Arts and Panini posted record years; Fanatics dominated online retail; and the Philadelphia Eagles provided a vibrant market for championship products, easily exceeding even the most optimistic projections.

Other than demand — pent up since 1960 — why did Gang Green generate so much, er, green?

“This Eagles team has an authentic connection to their hometown and fan base,” Halpin said on Super Bowl Saturday at the NFL’s annual Consumer Products Brunch. “A win there would be a seminal moment.”

The Eagles sent product sales soaring.

Two days before the Super Bowl, Fanatics founder and Executive Chairman Michael Rubin was equally as bullish on the NFL market, saying that his company’s January NFL sales were up almost 30 percent compared with last year, and not including last year’s Majestic acquisition.

Rubin described a hot Philly market as his company’s best. As it was tracking last week, it was both the league’s and Fanatics’ best NFL championship market ever, with sales up more than 60 percent over 2017, and trailing only the Chicago Cubs World Series title for Fanatics hot-market sales. Moreover, in 2017, during which NFL sales lagged for many apparel licensees, Rubin said Fanatics grew NFL sales by mid-single digits.

“Traditional broadcast ratings are down, traditional brick and mortar retail is screwed, and the entire apparel category is challenged,” Rubin said. “Add up all the NFL content being consumed on TV, digital, and social. Fandom for sports is stronger than ever. But if you’re looking to monetize that, you just can’t do it in the same old ways.”

As for those licensees feeling some pain:

“Demand for our products isn’t decreasing, but the traditional retail landscape is,” Halpin said. “We’re encouraging licensees to develop their direct-to-consumer business, because [selling through] traditional wholesaling is going to be increasingly challenging. The ones that built their own direct-to-consumer businesses are capturing that shifting demand.’”

Other licensees, however, continue to point to lagging “futures” orders as a daunting omen. That could spell challenges ahead for the 2018 season.

“The hot market will make a big difference for us, but the bigger concern is next season,” said a longtime NFL apparel licensee. “Will there be excess inventory and will they buy less then, because of this season’s trend?”

• • • •

NEW JERSEY? Nike’s gargantuan deal for on-field NFL rights expires after two more seasons, and renewal discussions already have started. Nike has the preponderance of NFL players under contract, and is expected to renew simply for the association, reach and exposure having its swoosh on NFL fields affords.

“I would take the over, with Nike continuing,” said one licensee executive.

Could Adidas make a play that big, in search of additional U.S. credibility? Maybe Fanatics, in which the NFL is an investor, would be interested, possibly teaming up with Under Armour (or even Adidas?), similar to its deal with MLB? Keep in mind that Under Armour’s financial health is considerably worse now than it was in 2016, when it signed the deal that will put its brand on MLB jerseys, starting in 2019.

The anger and confusion surrounding a rapidly deteriorating relationship between Major League Baseball and the MLB Players Association could be summed up in a few profane words from an unnamed team executive from a smaller market.

 

“Who the f--- are they to say I don’t want to win?,” said the executive, speaking on the condition of anonymity due to not being authorized to discuss labor matters publicly. “I get up every single day trying to win, and to say otherwise is just straight-up [BS].”

 

That bitter and private exhortation, and plenty of others like it on both the management and player sides, are evident of an escalating public war of words that is already casting a shadow on the upcoming season. The deepening divide between owners and players has already complicated efforts to reach an agreement on pace-of-play modifications and threatens to hinder efforts in other parts of the game.

 

As spring training starts this week, the last two weeks have seen increasingly strident statements from the league and union offices, players and agents about a historically slow offseason free-agent market that as of last week still had more than 80 unsigned players.

 

Among the more pointed comments: powerful CAA agent Brodie Van Wagenen claiming the slow free-agent market is the result of behavior by team owners and general managers that “feels coordinated,” suggesting collusion. MLBPA executive director Tony Clark claiming that “a significant number of teams are engaged in a race to the bottom … and threaten the very integrity of our game.” MLB firing back that “to lay responsibility on the clubs for the failure of some agents to accurately assess the market is unfair, unwarranted and inflammatory.”

 

Talk of collusion, which owners were guilty of in the 1980s and paid a $280 million settlement for, continues to resurface. But there remains a long way between mere talk and an actual union grievance.

 

“Collusion is very hard to prove,’ said Bill Gould, former chairman of the National Labor Relations Board. But he adds he hasn’t seen a free-agent market even close to this since those collusion-affected ones of the mid-1980s, calling it “unprecedented.”

 

The ill winds are a marked departure from most of the past two decades, even compared to prior management-labor battles around drug testing policy and player service time. The last three basic agreements came without the public rancor and work stoppages that defined baseball’s troubled labor relations for nearly 40 years.

 

As industry revenue surges past $10 billion per year, players and agents are finding it increasingly difficult to reconcile that growth with the lack of free-agent activity. As of last week, the largest free-agent deal signed was by outfielder Lorenzo Cain with Milwaukee for $80 million — a  fraction of the many nine-figure deals of recent offseasons, and the Brewers play in MLB’s smallest media market.

 

Management counters that multiyear rebuilding efforts, ones that don’t call for signing an expensive veteran free agent, are common, particularly following analytics- and youth-driven reconstructions by the Chicago Cubs and Houston Astros, the last two World Series champions. As a result, the league said they find the union hostility misplaced. Still, industry sources said more than an hour of a roughly three-hour general session at recent owners meetings in California was devoted to labor matters.

 

“Every [player] market is different,” said MLB Commissioner Rob Manfred. “Just like there’s some markets where the lid got blown off in terms of player salary growth, economics would suggest that occasionally you’re going to have some that are not quite as robust.”

 

Many other management-side executives also argue privately that some clubs are simply saving resources for this July’s non-waiver trade deadline, and more specifically for next offseason’s free-agent class, led by superstars Bryce Harper and Manny Machado, that is widely deemed to be far superior than this year’s class.

 

But the ongoing furor over the lack of player signings has already damaged the ability for the league and union to strike a deal on new pace-of-play rules. That makes it more likely that Manfred will be forced in the coming days to impose new rules unilaterally, further widening the player-management divide. The current labor agreement doesn’t expire until after the 2021 season, but many industry observers expect a very bumpy ride on many other day-to-day issues between the two sides.

 

“Yes, there will definitely be spillover from this into other matters,” said Marc Ganis, a Chicago-based sports consultant who works with several MLB teams.

Bayern Munich and FC Dallas have signed a comprehensive player development partnership, the first unaffiliated European and MLS clubs to do so.

 

The partnership, which will be formally unveiled this week, will see the two clubs come together to exchange talent, allowing young players to work with coaches and scouts from both organizations in either country. The goal for FC Dallas is clear — to improve its talent base.

 

In December, three players from FC Dallas traveled to Munich to take part in a 10-day training camp alongside Bayern Munich academy players. Coaches will also look to exchange expertise, as well as organize matches between youth players from each club in the two countries.

 

FC Dallas sees relationship with Bayern Munich as a way to improve its player talent.
Photo: Getty Images

While City Football Group and Red Bull have built similar pipelines between their ownership of European and international clubs and their stakes in their respective MLS clubs — New York City FC and the New York Red Bulls — no other MLS club has an expansive player development partnership with a European club.

 

There is no financial component of the deal, according to both sides, and while there is no specific commercial initiative attached to it either, FC Dallas President Dan Hunt said there is room for the partnership to evolve.

 

Hunt said the deal is set for a defined number of years with options to extend it, but he declined to comment on the details.

 

“The agreement wasn’t based on ‘just give us your partner list,’” Hunt said. “Our focus here is on developing young players, and I think this is going to produce better soccer players not only for FC Dallas but our youth national team as well.”

 

Discussions around a potential partnership date back several years to 2014, when Bayern Munich first opened its office in New York, becoming the first European club to do so. Talks intensified last year at the Super Bowl in Houston, where Bayern Munich President of the Americas Rudolf Vidal and Clark and Dan Hunt discussed the idea. Both of the Hunts traveled to Munich last week to visit the club and its offices, including the Bayern Campus, a 74-acre academy that opened in August 2017, as well as attend the Bayern-Schalke 04 match at Allianz Arena.

 

Dan Hunt said that while Hunt Sports Group has looked at international soccer club ownership opportunities in the past, it has passed them up as it would be unable to operate them locally. However, it was interested in forging a partnership with someone at a global level who could aid Hunt Sports Group in developing players at FC Dallas, which has become the club’s calling card in MLS. To date, 20 academy players have signed to play for FC Dallas, the highest number in MLS.

 

Bayern Munich has placed an emphasis on supporting youth soccer since its arrival in the U.S., including a partnership with Global Premier Soccer, which it extended in 2017. The club shares its coaching philosophy and curriculum through the organization, which to date is used at more than 101 soccer clubs in over 22 states, reaching more than 90,000 youth players.

 

“It is important for us to help the sport continue to grow and help develop players and do things at the grassroots level,” Vidal said. “Now we’re going to the next step and working at this elite level and will be able to help these young players on the pathway to professional football.”

Content on RidePass will include companion coverage for all PBR premier series events.
Photo: PBR

The Professional Bull Riders’ over-the-top streaming venture debuts this week, as the Endeavor-owned property seeks to take western sports to the next level digitally.

 

RidePass will cost about $7 per month for users who get a full-year subscription. Content will include companion coverage for all PBR premier series events that air on CBS Sports Group’s channels; on-demand replays of those events the next day; and live airings of premier series events not carried by CBS. It also will have original content series; access to PBR’s international tours not carried by CBS; and live rodeo events that are put on by other organizations.

 

The venture is funded and developed by Endeavor, which bought the PBR in April 2015 for a reported $100 million, and is part of the Hollywood agency’s broader OTT strategy that includes UFC’s Fight Pass and the Made to Measure fashion channel. 

 

The PBR aims to have subscriber numbers in the six figures or more within 18 months of its launch.

 

“It’s been a 10-year vision, but for the last three or four years we’ve been putting all the pieces together strategically with the intention of getting to this,” Sean Gleason, PBR CEO, said last week, noting that PBR brought its production in-house several years ago to lay the groundwork for the venture. “Bringing TV production in-house wasn’t just for our TV capabilities; it was for all of these things.”

 

PBR is handling the venture in-house and has grown its production group fourfold in order to operate RidePass. The first live event to be streamed on the network will be PBR’s St. Louis Invitational this weekend.

 

PBR has been producing live streams of non-televised premier series events for about five years. Gleason said PBR was “not monetizing that purposefully besides selling a little bit of ads because we were building a base and perfecting our abilities — and now the base is willing to pay for it because they understand the quality of the content we’re delivering.”

 

PBR will have its own broadcast team that is separate from CBS on-site at events for its premier series, now titled the 25th PBR: Unleash the Beast tour, to produce companion coverage. That will include interviews, insights and behind-the-scenes access.

 

Original content produced for the service will include “Keepin’ it 90” featuring PBR star J.B. Mauney and western personality Dale Brisby, plus “In Color,” which will have interviews with past and current PBR riders.

 

The PBR is working with local rodeo shows throughout the country and the National High School Rodeo Association to air non-PBR events on the network. It’s also working with the World Champions Rodeo Alliance to create rodeo events and manage the media rights to them.

 

The app to access the network will be available on Apple and Android devices, and will become available later this year on other OTT services including Amazon Prime, Apple TV and Roku. The platform will feature some sponsored content, though none during the initial rollout this week. There are no current plans to have traditional advertising on the platform, but Gleason said the PBR is open to the idea. At least to start, the PBR will use subscription numbers to judge the success of the platform.

 

The series will market the effort with some paid advertising and by putting the product in front of western sports fans.

 

“The vision for the company is much broader than just RidePass, but we’re fortunate that a Hollywood agency bought a bull riding organization,” Gleason said. “It’s largely because they saw the opportunity around content.”