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Volume 22 No. 19

Leagues and Governing Bodies

Atlanta Falcons owner Arthur Blank (left) is the current chair of the compensation committee that gave Roger Goodell a five-year extension last fall.
Photo: Getty Images

NFL owners will vote on a new member of the key compensation committee at their league meetings in New York this week, an unusual internal step that is residue from the nasty battle last fall between Dallas Cowboys owner Jerry Jones and Commissioner Roger Goodell over the latter’s new contract.

 

Owners ultimately sided with Goodell last year, giving him a five-year deal that begins next year and takes him through March 2024. With bonuses, Goodell’s compensation could come to more than $30 million a year.

 

At a meeting earlier this year, however, owners agreed that two members of the compensation committee — Houston Texans owner Bob McNair and Kansas City Chiefs owner Clark Hunt — would come off at this week’s meeting. The compensation committee will also be reduced from six members to five. One new member will be voted on. It was not clear why the two owners would come off or the thinking behind reducing the size of the committee, which has changed multiple times over the years.

 

Typically, the commissioner appoints members of committees. In the case of the compensation committee, member selection has been left to the chairman. Currently that is Atlanta Falcons owner Arthur Blank. But in another shift from the norm, the fifth member of the committee will be selected from the ownership at large and then voted on by full ownership. 

 

It’s unclear how the process will work, whether multiple owners will seek to join the committee or whether the vote will be held publicly within the room or in private. Jones was an informal member of the committee last year until he threatened to sue his fellow owners over the commissioner’s new contract.

 

Once the committee has five members, then a new chairman will be elected by those members, although it’s possible owners could vote to keep Blank in the role. Earlier this year the owners decided that the new compensation committee must then elect a chairman, who will serve a two-year term. The committee members must also elect a vice chairman, who would then succeed the chairman for a new two-year term. That will make the compensation committee the only one of 34 committees with a vice chairman (a handful have co-chairmen).

 

The members of the compensation committee currently, without McNair and Hunt, are Blank, New England Patriots owner Robert Kraft, New York Giants co-owner John Mara and Pittsburgh Steelers owner Art Rooney. These constitute some of the most influential owners in the league.

Stan Kroenke’s planned NFL stadium near Los Angeles is on pace to open in 2020.
Photo: Getty Images

Two years ago, when NFL owners voted to allow St. Louis Rams owner Stan Kroenke to relocate to Los Angeles, the move underscored the changing ways of league ownership. Owners had spurned the proposal of San Diego Chargers owner Dean Spanos, who had followed all the league rules on relocation and worked on important committees, to build a stadium in Carson, Calif., that would host the Chargers and the Raiders, opting instead for Kroenke’s plan in Inglewood.

Newer, richer owners saw Kroenke’s wealth as a deciding factor in allowing the Inglewood project, which came with a $2.66 billion price tag, to move forward.

This week there could be another shift away from the old-world, gentlemanly ways of NFL ownership that will be discussed at the league’s fall meeting in New York. Eliminating the cross-ownership rule would do away with the notion that NFL owners don’t compete with one another in their local markets.

One high-level team source from a small-market team bemoaned the pending move, likening it to the L.A. vote. “That rule was sacrosanct for so long,” he said.

The cross-ownership rule prevents owners of other big four sports teams in NFL markets from buying football teams. The rule also prevents an NFL owner from buying a non-NFL big four team in a league market. The rule is in place to prevent NFL owners from competing with their fellow owners in the local sports marketplace. However, with valuations of teams so high, the pool of prospective buyers has shrunk, leading to a rethinking of the rule, sources said. Only three bidders emerged for the recent sale of the Carolina Panthers, which David Tepper bought for $2.275 billion in a deal that closed in July. Although that amount was a record for an NFL team, it still came in under expectations.

While old-school types within the league may bemoan the demise of the rule, those who work to buy and sell teams view it favorably. Sal Galatioto, a sports investment banker, said that if the NFL does lift the rule, it would be a boon to the sports mergers and acquisitions market. “It would have a very positive effect on the NFL and other sports assets,” he said. “It opens up the market for an NFL team to a large group of very wealthy people.”

The NFL has not always strictly enforced the rule. In 2010, Kroenke exercised an option to buy the Rams despite already owning the NBA’s Denver Nuggets and the NHL’s Colorado Avalanche. After a long grace period, he did not sell the Denver teams but instead moved their ownership to family members.

Several years earlier the league had prevented the Glazer family, which owns the Tampa Bay Buccaneers, from bidding on MLB’s Los Angeles Dodgers. While at the time there was no NFL team in L.A., the league considered it an NFL market.

The NFL invited three investment banks and a law firm to league headquarters in recent months to present ideas of possible changes to ownership rules in the wake of the sale of the Carolina Panthers. The surging prices for NFL and other sports teams has limited the pool of prospective buyers, pressuring the NFL’s conservative restrictions.

Eliminating one major rule — the cross-ownership prohibition that prevents owners of big four sports teams in NFL markets from buying an NFL team outside their city — is scheduled to come to a vote this week at the fall owners meeting in New York. 

But that could be just the first domino to fall. Sharply increasing debt limits, allowing limited partners to finance, and increasing the number of limited partners an ownership group can have are all suggestions the outside advisers brought to the league.

“The finance committee has been reviewing a number of ownership policies that are not specifically related or limited to the Panthers sale,” a league source said. “League staff has been doing research, which included talking to industry experts.”

This source disputed that the current process rose out of dissatisfaction with the Panthers sale. In a deal that closed in July, David Tepper bought the team for an NFL-record price of $2.275 billion, though that was lower than the $3 billion figure that had been bandied about when the team went on the market in January.

There had been two other, higher bids for the Panthers, but they were viewed skeptically because of liquidity concerns with those prospective buyers.

Investment banks that met with the league were PJT Partners, Inner Circle Sports and Allen & Co., the Panthers’ sell adviser. The league also spoke with Proskauer, a top sports law firm.

The NFL has long had restrictive ownership rules, but under former Executive Vice President Eric Grubman, the league laboriously screened prospective buyers long before teams came on the market. That way yellow and red flags were known well before a sale process unfolded.

That research was not used in the Panthers case, sources said, in part because of a falling out between then-Carolina owner Jerry Richardson and Grubman. Grubman handled the Los Angeles relocation process, and Richardson believed the outcome there should have left the Rams in St. Louis. Instead, the Rams won the right to relocate to their former home in 2016, with an option given to the San Diego Chargers, who relocated to L.A. a year later.

With Grubman, a former partner at Goldman Sachs, having departed the league last summer, it’s unclear whether there is a push to have the NFL continue to handle quasi-investment banking chores in-house. Grubman, now chairman of On Location Experiences, declined to comment, as did the NFL.

The cross-ownership rule has been around since the 1960s. Conversely, an MLB, NBA and NHL team owner in an NFL market cannot buy an NFL team outside of that market.

The logic behind the rule was to ensure NFL owners did not compete against each other locally. But that sentiment appears ready to fall as rapidly rising valuations cull the number of potential buyers.

Another step the league can take to make buying a team easier is to allow more borrowing. Currently, teams are capped at $350 million, a very conservative loan-to-value ratio. The league also could relax the limit just for the purpose of team purchases.

After proving that a small operation based west of the Mississippi could be successful and then reaching NASCAR’s pinnacle, Furniture Row Racing owner Barney Visser decided to pull the plug on the team.
Photo: Getty Images

Barney Visser has always been a bit of a maverick.

 

When he launched his NASCAR team in 2005, he shunned the sport’s North Carolina race hub and instead set up shop in Denver, headquarters to his Furniture Row retail empire. No other NASCAR team is based west of the Mississippi.

 

Conventional wisdom said the team could never be successful given its remote location, but Visser eventually formed an alliance with one of the sport’s top teams, which provided his Furniture Row Racing with the cars and technology it needed to be competitive.

 

By the end of the 2017 season, Furniture Row Racing had surprised everyone and won the Monster Energy NASCAR Cup Series championship.

 

It’s a captivating beat-the-odds story, only it doesn’t have a happy ending. Instead, it’s a story of how a perfect storm of factors can wreck the best plans, how alliances can get complicated, and how a sport’s ownership model is getting ever tougher to make work.

 

FRR executives declined to comment, so this account is based on conversations with several people close to the team, plus other key industry executives.

 

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When Visser first came into NASCAR in 2005, he used his Furniture Row retail chain not only as the team’s name but also as its primary sponsor, an arrangement some team owners use until they can land external funding. FRR’s black matte No. 78 paint scheme quickly became recognizable to NASCAR fans.

 

Like most new teams in NASCAR, Furniture Row got off to a slow start, with its first win not coming until 2011 with Regan Smith as the driver at Darlington Raceway.

 

But with its Denver base, FRR began to build a blueprint for how NASCAR could help grow the sport across the U.S. by having teams based outside of the Carolinas. FRR developed what eventually turned into a significant fan following in the Denver and greater Colorado area, with everything from routine social media shoutouts from the Broncos and general manager John Elway, to often having around 100 people waiting for tours on the day the team hosted them each week.

 

In happier times, Martin Truex Jr. and the rest of FRR celebrate the team’s Monster Energy NASCAR Cup Series title last November.
Photo: Getty Images

Visser’s maverick streak reached beyond the team’s location. While he’s respected by the industry, he opted against joining the Race Team Alliance, the coalition of NASCAR teams that each pay a mid-five-figure annual fee in order to be included. The group works with NASCAR to find ways to improve the sport and lower the costs to compete, and only a handful of teams have opted to not be in it. Visser declined to take on the added expense.

 

That’s not to say that Visser and FRR shunned other teams. Realizing the challenge of staying ahead of technology, and the cost of research and development, the team partnered with Joe Gibbs Racing in 2016 to build the team’s chassis and provide other support including pit crews. Such arrangements are commonplace in the sport and the relationship greatly improved FRR’s ability to compete with the sport’s top pedigree: multicar teams owned by Gibbs, Rick Hendrick, Richard Childress, Jack Roush, Roger Penske and Chip Ganassi. Through nearly 15 years racing, heading into last weekend’s race at Talladega, Furniture Row had 18 wins overall, with 16 of them coming in the last three seasons.

 

The pinnacle came in 2017, when the dominant Martin Truex Jr. drove to the Monster Energy Series championship after winning eight races.

 

FRR had firmly planted its flag.

 

■ ■ ■ ■

 

Fresh from the momentum of winning the championship, FRR looked ahead to the 2018 season and the next chapter of its success.

 

Instead, things quickly began to unravel.

 

This past summer, nearly midway into the 10-month 2018 Monster Energy Series season, FRR was in renewal talks with sponsor 5-hour Energy, which split sponsorship on the team’s car this year mainly with Bass Pro Shops and to a lesser extent Auto-Owners Insurance.

 

It shows that even billionaires can get tired of writing checks.
Rob Kauffman
Chairman, Race Team Alliance

 

5-hour had joined in 2017, and after winning the championship the team was optimistic of getting a renewal deal done. But the sponsor pivoted and informed FRR that it would not return after this season. Suddenly, FRR had a massive $10 million annual hole in its coffers it would need to fill if it wanted to run another season. NASCAR teams rely on sponsorship for about 75 to 85 percent of their annual revenue.

 

The precise reasoning of 5-hour’s reversal was never confirmed by the sponsor’s parent company, Living Essentials, other than to say it was a marketing decision.

 

The timing was brutal. Normally, sponsors give teams as much notice as possible, often around a full year, given the long decision-making process brands face in making investments of this level.

As NASCAR President Steve Phelps said, “having a July announcement with a major sponsor leaving made it difficult for sure.”

 

The loss of the key sponsor was amplified by a change in FRR’s relationship with Joe Gibbs Racing. After FRR won a championship last year, Joe Gibbs Racing saw the deal — set to expire after this year — as undervalued and asked for an increase in the range of $10 million to $12 million annually, or around a threefold jump from the $3 million to $4 million FRR had been paying, sources say. Joe Gibbs Racing executives would not comment for this story.

 

The sharp increase raised eyebrows in the garage, particularly with it coming at a time when FRR was struggling to make ends meet. But history in NASCAR has shown that when the smaller team buying parts from a bigger team starts to beat that bigger team, the bigger team will naturally feel that its services have gone up in value. For example, Hendrick Motorsports supplied chassis and engines to Stewart-Haas Racing starting in 2009, but Stewart-Haas eventually started winning championships in Hendrick’s equipment, and the relationship eroded and eventually ended in 2016.

 

What's Next?

Furniture Row Racing owner Barney Visser will have his NASCAR team charter to sell, and sources say it is almost certain to go down as the most valuable one to be sold since the system was enacted in 2016. The charter could fetch a record $6 million to $7 million. NASCAR implemented the charter system in 2016 as a way to build enterprise value and give teams more power in the running of the sport.

FRR unleashed a sponsorship hunt as soon as it found out about the 5-hour move, including pitching local Colorado-based companies such as Molson Coors, but came up empty. Visser also didn’t want to go back to having to use Furniture Row as the main sponsor again and tie up so much of the retailer’s marketing budget on the one venture. Visser told ESPN that while his family initially saw using the company’s logo on the car as a marketing investment, NASCAR’s “TV audience has been falling off a little bit,” making the Furniture Row sponsorship “a little tougher to justify.” Visser’s outspoken comments were unusual in that an owner called out the sport’s ratings challenges.

 

“It shows that even billionaires can get tired of writing checks,” said Rob Kauffman, chairman of the Race Team Alliance and co-owner of Chip Ganassi Racing, who is not close to Visser. “Stock car racing would have a more sustainable model if it was structured like other professional sports.”

 

By mid-August, with no new sponsorship to speak of, Visser looked at a possible deal with NASCAR Xfinity/Truck series team GMS Racing that would have seen Visser sell FRR’s assets to GMS, which would have continued running the No. 78 team in the Monster Energy Series. But that deal was eventually nixed, something sources close to the matter attributed in part to the new terms of FRR’s technical alliance with Joe Gibbs Racing, which GMS decided were just too high.

 

By the end of August, with FRR running out of options to continue, Truex and his management were granted permission by Visser to look elsewhere and began talks with Joe Gibbs Racing that will see him and longtime corporate backer Bass Pro Shops join the storied NASCAR team next year. The move caught some people in the garage by surprise, since it all but assured that Furniture Row would close down. But others noted that this sort of hyper-competitive environment among the teams is just part and parcel of NASCAR.

 

■ ■ ■ ■

 

In September, with it set to lose Bass Pro Shops and Truex for 2019, FRR announced it would shut down after this year’s season. Its official news release cited the lack of sponsorship and the impact of the increased fee for the alliance with Joe Gibbs Racing.

 

Visser later tried to downplay that relationship, telling ESPN that the fee increase wasn’t “ridiculous,” and that the sides had been close to extending the deal before 5-hour pulled out.

 

The loss of primary sponsor 5-hour Energy started the domino effect that will end with FRR leaving the sport.
Photo: Getty Images

NASCAR insiders were already well aware that the sport’s team ownership model was in need of major changes. The sanctioning body and teams have been meeting frequently for years to try to address the most pressing issues, which are rising costs and an over-reliance on sponsorship.

  

Nonetheless, FRR’s announcement — that a Monster Energy champion just a year earlier would be forced to shut down shortly after losing one key sponsor — has brought about an added layer of soul-searching in the sport. And for its part, FRR has taken to the grim duty of starting to shut down its operations. Crew members are looking for jobs that will likely see them get uprooted to North Carolina if they want to stay in the NASCAR industry. The team, which employs 60 to 70 people, even recently announced that it would no longer be offering shop tours as it gets ready to close.

 

“We don’t want to see owners leave or switch like that — particularly when you have someone who is your reigning owner of your champion,” Phelps said. “With that said, there are circumstances that happened as part of [Visser’s] deal from an expense and sponsorship standpoint that he didn’t feel he could make work, family stuff, etc. Do I think it’s systemic [of wider ownership problems in NASCAR]? I don’t.”

One year from perhaps the darkest day in U.S. Soccer’s history, the men’s national team wants to send out a new message: The future is still bright.

It was Oct. 10, 2017, when the U.S. men’s national team lost 2-1 to Trinidad and Tobago, ensuring that the Americans would miss the World Cup for the first time since 1986.

Now, as the federation puts its focus on the USMNT playing in the 2022 event with a slate of high-profile friendlies this fall and next summer’s CONCACAF Gold Cup, it is bringing along with it the message “The Future is US.” The new campaign rolled out last Thursday, one day after the first anniversary of that fateful loss in the Caribbean.

“The Future Is US” is meant to signal a restart for the players, the federation and the fans.
Photo: Courtesy of U.S. Soccer

“As we came out of last fall, it was certainly disappointing for us not only as a team and a federation, but for the fans as well,” said Kay Bradley, U.S. Soccer brand director. “While that experience was absolutely upsetting, we also felt it was an opportunity.”

Over the last 12 months, U.S. Soccer tried to put its finger on the pulse of the men’s team, doing research through its U.S. Soccer Voices fan panel and member council, having discussions with the American Outlaws supporters group and performing outreach at various soccer events — including with U.S. fans who still traveled to Russia despite the team not qualifying.

The takeaway? “They were extremely upset that the team wasn’t going to Russia, but they still had optimism, and there was this belief that there was a bright future ahead,” Bradley said. “A line that we use a lot here is ‘It’s not a matter of if, it’s a matter of when.’ The fans said a similar thing, and that was very encouraging for us.”

That led them to “The Future is US,” the first standalone campaign that U.S. soccer has ever done around the men’s team right after a World Cup. The message and branding was created in conjunction with Portland-based marketing agency Industry.

The campaign will be largely digitally focused, and there also will be a social media content push, all aimed to introduce casual fans to the new names on the team in more of an authentic and stylized manner than perhaps the federation is known for, letting the players’ personalities shine more.

The campaign rolled out last week, ahead of a friendly versus Colombia in Tampa. Bradley said while the federation has plans to use the messaging into next summer’s Gold Cup, it expects the campaign to evolve, a reflection that its World Cup aspirations are not the team’s alone.

“Our goal is to make sure that this feels like the restart of a journey that isn’t just about the players or the federation, but the fans as well,” she said.

The Bundesliga will open a New York City office this week, the latest European soccer entity to reach across the Atlantic. It will be the second international office for Germany’s top league, which previously opened a Singapore office in 2012.

Robert Klein, CEO of Bundesliga International, the league’s subsidiary responsible for international sales and marketing, said the league has been working on opening a U.S.-based office for more than a year, providing closer access to its partners, its U.S. broadcaster Fox Sports and fans.

Bundesliga club Bayern Munich was one of the first European clubs to have a full-time office and staff in the U.S. when it opened its doors in June 2014. While Bayern has grown in the U.S. thanks to its social media reach and presence in events like the International Champions Cup, no other Bundesliga clubs have made the physical leap into the U.S., something Klein wants the office to help facilitate.

“Bayern has done a great job with its event presence and what it has done with digital and social media, but we need to bring more than just Bayern, we need to bring the other clubs,” Klein said. “Those clubs have an understanding that internationalization is important, and we want to serve as a catalyst to that goal.”

The Bundesliga U.S. office, which will be located on Park Avenue in the Union Square neighborhood, is expected to have five or six employees to start, with additional space and desks available to representatives of any of the league’s clubs. Klein said more than 20 clubs will have executives at the office opening this week.

The office will be led by Arne Rees, who previously served as ESPN’s general manager of international digital business, who has been hired as executive vice president of strategy, and Melanie Fitzgerald, who had been director of international media at MLS, and who will be head of Bundesliga Americas. Additional hires will be made following its opening.