Saturday, December 30, 2006

The NBA – an uneventful 2006 II

In a player centric sports league like the NBA it shouldn’t have come as a surprise so much of the ongoing business of the NBA was on its marquee athletes. That said, the failed introduction of the new Spalding basketball, the failed sale of the Memphis Grizzlies to former Duke basketball players Brian Davis and Christian Laettner, the future of the Sacramento Kings and the Seattle Sonics all simmered in 2006, but could easily boil over early in 2007 for David Stern and the NBA. And then there’s the issue of revenue sharing – all that and a great deal more for Stern and the NBA to look forward to.

Two weeks before Christmas Spalding’s plans to market the new NBA game ball blew up in the faces of a key NBA supplier and sponsor. On December 11, the NBA realized it was time to correct their error in judgment.

“Our players' response to this particular composite ball has been consistently negative and we are acting accordingly," said NBA Commissioner David Stern. “Although testing performed by Spalding and the NBA demonstrated that the new composite basketball was more consistent than leather, and statistically there has been an improvement in shooting, scoring, and ball-related turnovers, the most important statistic is the view of our players.”

"In the meantime, we will work with our players and our partners at Spalding to determine the best possible ball for the NBA."

Spalding who has supplied the NBA with their basketballs since 1983 made the only decision they could from a marketing perspective – seeing the bigger picture.

“Spalding’s main objective is to uphold the integrity of the game of basketball,” stated Spalding Group President and CEO Scott Creelman. “For 130 years, Spalding’s commitment has been and remains providing the best players in the world with the best product for the game. We believe the micro fiber composite ball offers many superior characteristics to leather however we firmly support any decision that improves player satisfaction. We will work closely with the NBA to ensure a smooth transition and to determine the best product going forward.”

A day later, Spalding announced it would offer $115 refunds to consumers who purchased and wanted to return the National Basketball Association's composite ball after the league said it is switching back to a leather ball.

The NBA’s decision followed a decision by the NBA Players Association to launch a lawsuit against the NBA for introducing the new basketball. Evidently the NBA and Spalding failed to check with players (the end-users) how they felt about the new basketball.

"How they could actually even get it that far and not have even run it by the players is just an amazing, amazing exercise in ineptitude," Rob Frankel, a Los Angeles-based branding expert told Bloomberg News. "When you produce a ball that nobody wants to play with, that's pretty damaging for your credibility as a sports authority, wouldn't you say?"

"Not only is it 13 days before Christmas, but they had the entire NBA season they were counting on . . . and also the millions of dollars they put behind the marketing of the basketball," said Robert Tuchman, president of New York-based consultancy TSE Sports & Entertainment in a Bloomberg News report at the time of the announcement.

"It's really a disaster. I wouldn't put it on the same page as the New Coke fiasco, but it really is an unfortunate situation. It's like an endorsement gone wrong."

Three of the biggest names on the basketball court, made it clear they had no interest in the new basketball.

Shaquille O'Neal, Miami Heat: [The new balls are like] cheap balls that you buy at the toy store.

LeBron James, Cleveland Cavaliers: You can change the dress code, you can make our shorts shorter, but when you take our basketball away from us, that's not a transition we handle.

Steve Nash, Phoenix Suns: It's awful. [The friction burns], it's like an irritant. . . . Sometimes, I even have to tape my fingers in practice.

The good news, the NBA realized they had made a mistake and brought back the old basketball. That style of leadership has been a hallmark of Stern’s tenure as NBA commissioner. Stern has served as the NBA’s commissioner since 1984. 2006 may have been a relatively easy year for David Stern, 2007 may be an entirely different story.

Michael Heisley who has never been the NBA owner the league hoped he would be when Heisley purchased the Vancouver Grizzlies from Orca Bay Entertainment in April 2001, believed he had reached an agreement in principal to sell his 70 percent share in the Grizzlies for $252 million, based on a $360 million franchise value to Davis and Laettner had a January 15 deadline to complete their deal – that will not take place. Clearly Heisley wants to end his NBA ownership. The NBA doesn’t need an owner who doesn’t want to be involved with the day-to-day management of one of their franchises. With no short-term solution on the horizon Memphis will require Stern’s attention early in the New Year.

On September 29 a collective group of NBA team owners drafted a letter to David Stern that focused on the economic challenges so-called small market teams are facing. The Seattle Times who obtained a copy of the letter which among other issues raised, challenged the NBA’s front office belief the league collectively had turned a profit of $46 million for the 2005-06 season the first year of the latest collective bargaining agreement.

According to the letter the Minnesota Timberwolves believe they could lose $30 million between the 2005-06 season and this season. Paul Allen surrendered the Rose Garden to Portland in 2004 by declaring it bankrupt and expects $100 million in losses the next three years. Utah claims to have lost $25 million the past two seasons. Eight NBA team owners that signed the letter, made it clear to Stern the NBA needs significant revenue sharing.

The letter states: "We are asking you to embrace this issue because the hard truth is that our current economic system works only for larger-market teams and a few teams that have extraordinary success on the court and for the latter group of teams, only when they experience extraordinary success. The rest of us are looking at significant and unacceptable annual financial losses."The letter to Stern also says: "If appropriately managed teams can't break even, let alone make a profit, we have an economic system that requires correction. The needed correction is serious revenue sharing not just modest revenue assistance and we urge you to address this issue on an urgent basis this year."

Blazers owner Paul Allen, Heisley, Charlotte owner Bob Johnson, Milwaukee owner Herb Kohl (a member of the United States Senate), Utah owner Larry Miller, New Orleans owner George Shinn, Indiana owner Herb Simon and Minnesota owner Glen Taylor each signed the letter.

Joe and Gavin Maloof didn’t sign the letter. Good judgment on their part. Sacramento voters on November 7 overwhelmingly rejected two key measures that would have provided a publicly funded arena for the NBA franchise. Owned by Joe and Gavin Maloof, the arena measures were rejected by a resounding 80 percent. Nine days after staring at the end of the NBA in Sacramento, Joe and Gavin made their first intelligent decision in months – they turned their arena fortunes to NBA Commissioner David Stern.

“The Maloofs have never wavered in their interest in keeping their teams in Sacramento and they have requested that we take a leadership role in helping them achieve that goal,” Stern said.

“We believe that David Stern’s combination of experience and creative thinking will help us find a plan that will work for both the public and the team,” Joe Maloof said. “We will remain an integral part of the process, but the league is going to take the leadership role going forward. Gavin and I and the rest of the management team are going to be spending 100% of our time supporting the Kings and Monarchs and enhancing the experience of our loyal fans and community partners.”

Stern has made his initial visit to Sacramento and has turned the future of the Kings over to John Moag one of the most respected deal-makers in the sports industry. It remains to be seen if the Kings will be playing in Sacramento in the next few years, or in Anaheim or possibly Las Vegas. However, the Kings could be one of two NBA franchises that might be on the move in 2007

The Seattle Sonics play in a facility so terrible it forced Seattle native and Starbucks founder Howard Schultz to sell the franchise to Oklahoma City interests. In late October before the start of the NBA season, the NBA approved the transfer of the teams’ ownership to Clay Bennett. Bennett continues to say all the right things about the team staying in Seattle, but let’s make it clear – Bennett is from Oklahoma City, and if Bennett and the NBA can’t convince Washington taxpayers to support the building of a new arena for the Sonics, Bennett will move his team to the city he lives in.

“Well, actually I have sort of a sense of optimism because although Clay and his ownership group are based in Oklahoma City, almost from the first day that Clay started looking at Seattle as an investment and then as a purchase, he stressed to me the vibrancy of the Seattle market, the revenue streams that could be available there, and its jumping off status to Asia and its business relationships to Asia, which is a subject on which the Board spent some time today, not in terms of Seattle, but in terms of the NBA’s opportunities. So, I went from kind of skeptical in a way, to kind of getting on line with “Ok, I get what you see here.” But, of course, the large investment that they’re making and that they’re continuing and willing to stand behind is dependent upon a new building. And, they actually have committed to resources for experts and consultants and the like, to follow a critical path that seems designed to exhaust every opportunity, including the political route, the governmental route that is necessary to have a new building. I’m delighted to see the effort so focused, and hopefully their intentions here will be reciprocated by the decision makers who have the opportunity to impact it in a positive way, “Stern offered after the BOG’s approved Bennett’s ownership of the franchise.

“David has said it very well. We, first and foremost in our evaluation, made a decision to invest in the NBA and to be a shareholder in what we view as a very important and growing, global business. We also view the Seattle marketplace as a remarkable opportunity – very dynamic, expanding economy, beautiful place to be. The connection to the Pacific Rim, the existing trade that is there, the future trade that will happen, and the league’s potential internationally and really a lot of work that is already being done in that pursuit. So, our interest is in that marketplace and in that economic model. I am encouraged by what has happened so far in terms of the development of a building. I think we’re being well received, and I think we’re making constructive progress toward that end. So, we’ve been working -- although we didn’t receive board (NBA Board of Governors) approval until today – we’ve been working, really since the day we announced (the purchase), on this project. So, we’re excited to really hit the ground and begin some serious work,” Bennett saying what any new owner would say on the eve of his first year as owner of an NBA franchise based in Seattle.

Bennett has made it clear he’ll give it a year (the Hornets “plan” on moving back to New Orleans in one year) and then he’ll look at his options – moving the Sonics from Seattle to Oklahoma City, in time for the 2007-08 season. Whatever Bennett and Stern suggest, Bennett bought an NBA franchise to ensure the city he does business in and lives in (Oklahoma City) has an NBA team. Once Bennett moves the Sonics to Oklahoma City the NBA may expand to Seattle (the Charlotte Bobcats) or move a team to Seattle (the New Orleans Hornets) but take it to the bank Bennett -- will move the Sonics to Oklahoma City, if George Shinn follows through and moves the Hornets back to New Orleans.

For his part as the year came to an end and David Stern had an opportunity to reflect on the current state of business for the National Basketball Association.

“I would say that in a market in all ratings are going down we are holding about steady and we project that come the playoffs and the Finals that our ratings will be up. Both of our network partners, The Walt Disney Company and Time Warner are extraordinarily interested in extending our relationships because sponsor sales are strong and demographics are strong.”

“Attendance, although it is getting very difficult to keep going up, will be up for the fourth year in a row and we will once again have record revenues. We’ll be playing at about 92 percent capacity this season, which is continued growth, but its hard to inch up a percentage or two each year and I think we’re getting close to that.”

“And on a global scale, we continue to have enormous growth in television, in broadband, in sponsorship sales and in merchandising so actually all of the business indications are extraordinary and players as well in terms of a flood of endorsement opportunities and campaigns and the like, we’re seeing it more intensely than we have in years. And so we’re feeling pretty good about it. But it’s far from perfect and Saturday night can tell you why it’s not perfect.” Stern said

David Stern had every right to believe the business affairs of the NBA as they currently stand are in decent shape. That said the challenges David Stern faces in the coming weeks and months will challenge him like few other periods of time have required David Stern’s focus. The good news for the NBA, the best in the business, David Stern is at the helm.

For Sports Business News this is Howard Bloom

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Friday, December 29, 2006

The NBA – an uneventful 2006 I


David Stern continued to deliver solid leadership as the National Basketball Association’s commissioner. In reviewing 2006 the NBA remains a personality driven league. Dwayne Wade led the Miami Heat to their first World Championship. Wade became a marketer’s delight, and was selected as Sports Illustrated’s Sportsman of the Year. The reemergence of Kobe Bryant as a marketing force, the launch of a basketball shoe priced with the consumer in mind and not the almighty dollar were two other important events this year for the NBA.

However despite the good Stephon Marbury managed to accomplish with the launch of an affordable product line, David Stern’s overreaction to an incident at Madison Square Garden and the serious legal problems Indiana Pacers forward Stephen Jackson faced hurt the NBA’s image.

One of the biggest challenges David Stern and the NBA faced was the launch of a new game basketball from Spalding. After the NBA Players Association filed a lawsuit against the NBA in regard to the new basketball, Stern announced effective January 1 the NBA would head back to the future, bringing back the game basketball the league had used for many years.

And while 2006 may have been an uneventful year for the NBA in terms of serious challenges with NBA franchises, a year from now two NBA teams could be in the final stages of relocation, and the future of the Memphis Grizzlies is very much uncertain after the collapse last week of the proposed sale to former Duke basketball players Brian Davis and Christian Laettner. If the challenges David Stern faced in 2006 were limited to serving as a judge, jury and lawyer in dealing with ill-tempered players, 2007 promises to challenge how strong a leader and sports commissioner David Stern is.

Dwayne Wade was the story of the year for the NBA. On Monday, December 4, 2006 , it was announced Wade will be named Sports Illustrated’s Sportsman of the Year, becoming the sixth time an NBA player was selected in the 52-year history of the award, joining Bill Russell (1968), Kareem Abdul-Jabbar (1985), Rory Sparrow (1987), Michael Jordan (1991) and Tim Duncan and David Robinson (2003).

Wade has known about the selection for about a month, but said he was ''shocked'' when he heard the news.

''When you think of Sportsman of the Year, you can go into every sport, there's always Tiger [Woods], who every year can win, and then Roger Federer, the other guy who had an unbelievable year,'' said Wade, who averaged 34.7 points, 7.8 rebounds, 3.8 assists and 2.7 steals in the Heat's six-game Finals triumph. ``I was thrilled. But I kind of know that, to me, it's all dedicated to my teammates and what we did last year with that incredible run to the Finals.''

Heat coach Pat Riley said he couldn't think of anyone more deserving than Wade.

''He deserves it,'' Riley said. ``I can't think of any other singular athlete in any other sport last year who had a better year and a better ending and did something dramatic in his sport. Also he's very good in the community. He's a great choice.''

The Sportsman of the Year issue of SI will be on newsstands Wednesday, and Wade will receive a trophy at a party in his honor Dec. 14 in New York.

''This award has always stood for more than the victory alone. It recognizes the manner of an athlete's striving and the quality of his or her efforts,'' SI Group Editor Terry McDonell said. ''Dwyane embodies that winning spirit by playing for his team, not himself, and by working in the community to ensure young people have the chance to realize their own dreams.''

Wade led the Heat to their first NBA title and enjoyed several key endorsement opportunities. The first overall pick from the 2003 NBA draft, Wade parlayed his NBA Finals MVP award, berths on the Eastern Conference All-Star team, 2004 U.S. Olympic team and 2006 U.S. world championships team into $10 million in endorsement opportunities. Wade was one of People magazine's 50 Most Beautiful People in 2005. GQ named him the NBA's best-dressed player last season.

“Winning certainly helps,” Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon told the USA Today. “But history has shown that doesn't necessarily correlate to marketability. He brings a charisma and a consumer attraction that marketers covet. Someone has it or doesn't have it. Dwyane seems to have it more so than others.”

Wade was the focus of the NBA’s USA ‘Dream Team’s’ August appearance in China. The Americans stopped in China for a pair of games on their way to the World Basketball Championships in Japan. Wade was featured on 20 million Gatorade bottles distributed throughout China in advance of the tour.

The perception many sports industries insiders have of Dwayne Wade is how many saw Kobe Bryant for many years, before time stood still for Bryant on July 4, 2003. For many NBA fans, particularly those who cheered for Kobe, the end of the innocence began a little more then three years ago when Bryant, then 24, was arrested and charged with Felony Sexual Assault in Eagle Creek, Colorado. (The alleged assault took place on June 30, Bryant was charged five days later).

37 months later on August 21, 2006 the NBA and Sony announced that Kobe Bryant would be on the cover of NBA '07 for PlayStation(R) 2 and PlayStation Portable (R). As strange as it may seem, Kobe Bryant then positioned as the next great NBA player, following in the legacy of Bird, Jordan and Magic, only to experience his own personal version of a Greek Tragedy may indeed be the marketing force most believed he would be, until that fateful day when Kobe was accused of raping a woman.

"I think some people were surprised at the speed of Kobe's comeback. But, the way the way the situation was resolved, I don't think anyone doubted that he'd resume being a marketable personality," Doug Drotman, head of the New York-based sports public relations firm Drotman Communications told the Associated Press.

"What you will see is that Kobe will be marketed a little differently. That's inevitable. Because a change in public perception is something that can't be denied or avoided."

Kobe did the rest, capturing everyone’s attention collecting 81 points in a remarkable one man performance against the Toronto Raptors on January 22, 2006. The tour de force marked the second highest single scoring total in one game, second only to Wilt Chamberlain biblical 100 point game, more myth and legend at times then reality. Kobe’s 81 point masterpiece came in the age of instant communications – overnight Kobe Bryant was back.

"We were all on our e-mails during the second half of the game to make sure it would go up on the Internet quickly," said Brenda Spoonemore, the senior vice president for interactive services at NBA Entertainment. At a moment like Kobe 81, she said: "Our fans have the expectation to see it, own it, watch it. It feels like one of those turning points in the sports industry."

"Kobe Bryant has distinguished himself as one of the truly elite players in the NBA and we are thrilled to have him represent NBA '07 as our newest cover athlete," said Sharon Shapiro, senior director, promotions and sports product marketing, Sony Computer Entertainment America. "With his explosive game and storied rise to the top of the NBA's ranks, Bryant is a great ambassador for NBA '07 and its unique gameplay-driven story mode 'The Life: Vol. 2.'"

Stephon Marbury isn’t a marquee NBA player in the rarefied air Bryant and Wade belong to, but what Marbury contributed to the game in 2006 may the true lasting legacy one NBA player left the sports industry.

He has been named to The Sporting News list of “Good Guys in Sports” three times. He was one of the highest donors to the NBA Player Associations Katrina Relief effort, donating $1 million dollars to the effort. He currently has 7 barbers on hire in Coney Island giving free haircuts to neighborhood children. But it’s his Starbury Ones basketball shoes that represent what one day might become Marbury’s lasting legacy to basketball, to tens of thousands of children and their families – affordable shoes and basketball apparel for the community.

Earlier this month Footwear News, an industry magazine, recognized the impact Marbury’s product launch had on the industry by awarding Marbury its “Launch of the Year”. Footwear News’, who also publishes Women’s Wear Daily, award is thought to be the “Oscars of the shoe industry”. Marbury and his partners retailers Steve & Barry's last week also announced they are donating a free pair of Starbury One high performance basketball sneakers to every varsity high school boys basketball player in New York City. The donation of 3,000 pairs of Starbury Ones is part of a new agreement that makes the Starbury brand a partner of the Public Schools Athletic League (PSAL). The PSAL directs all athletic competition among the 193 public high schools in the five boroughs.

Marbury launched his product ‘revolution’ on August 17, and followed that with a 21- city tour promoting the shoes and the accompanying clothing line. The product launch and the subsequent tour was timed to send a message to parents from lower income families as they were conducting their back-to-school shopping, you can afford to have your kids look and feel like an NBA basketball player. The shoes retail for $15 a pair. To date more than 3 million Starbury Ones basketball shoes have been sold.

Stephon Marbury said at the time of the release: "Kids shouldn't have to feel the pressure to spend so much to feel good about the way they look. I'm blessed to be in a position to do something about it, to help change the world. I couldn't find a better partner to create the Starbury Collection with than Steve & Barry's. For 20 years, their entire business has been about selling great quality clothes for much less than people expect they should cost."

Steve & Barry's co-CEO Barry Prevor added: “This is a very exciting moment for Steve & Barry's. When Steve and I founded our company in 1985, it was with a mission to bring people the most unbelievable values on clothes they've ever seen. That's exactly what Steph's vision for the Starbury Collection is all about, so this has been a fantastic partnership from the first day we met. Like Steph, we want to revolutionize how people shop, and this new line will help us continue to make that happen.”

Marbury commented, "It was very important to me that the Starbury Collection have a strong social component for kids and parents, especially in urban areas. Steve & Barry's and I decided to conduct the design contest so kids could give real input into how the Starbury line is created and as a means to give back to youth and the community."

Two weeks ago, on December 16 Carmelo Anthony (the third player selected in the 2003 NBA draft) became embroiled in what could be best labeled a ‘skirmish’ in the last minute of the Denver Nuggets 123-100 blow-out of the New York Knicks. The game played at Madison Square Garden led to Stern suspending Anthony the NBA’s leading scorer for 15 games.

Stern tried to rationalize his decision to suspend Anthony for 20 percent of the NBA season: “The NBA and its players represent a game of extraordinary skill, athleticism and grace, and, for good or bad, set an example for the entire basketball world, on and off the court. On the positive side, there is our players’ passion for the game, engagement with our fans, commitment to their communities and respect for the history and tradition of the game. With respect to the negative, while we have worked diligently to eliminate fighting from our game, there are failures such as Saturday night at Madison Square Garden that demonstrate there is still more to be done.”

“It is our obligation to take the strongest possible steps to avoid such failures in the future and to make a statement to all who follow the game of basketball that we understand our obligations and take them seriously. Accordingly, I am issuing the penalties that Tim (Frank) just listed, and will take the occasion to set forth some of the considerations that have influenced my decision here and will continue to guide us as we seek to demonstrate our determination that the NBA and its players be viewed as standing for the best in sports.”

Stern’s overreaction was in large part based on the zero-tolerance Stern instituted following the “Brawl at the Palace” during November 19, 2004 game between the Indiana Pacers and Detroit Pistons that ended with fans and members of the Pistons fighting each other. One of the Pacers who became involved in the single worst incident involving sports fans and professional athletes was the Pacers Stephen Jackson. On October 11, the Indianapolis Police Department filed a “Probable-cause affidavit” against Jackson relating to an alleged incident that took place between Jackson and patrons at Indianapolis Club Rio, a “gentlemen’s club”.

The Pacers have since traded Ron Artest (the center of “Malice at the Palace”) and Jermaine O'Neal has managed to keep his emphasis on the basketball court. Given Jackson’s terrible choices are coming off-the court there wasn’t very much the NBA or the Pacers could do while the legal system is reviewing what took place at the start of the Pacers training camp. That however, didn’t stop Pacers management from letting Pacers fans know how upset they where with Jackson’s behavior.

Pacers’ President and CEO Donnie Walsh and President of Basketball Operations Larry Bird addressed the media after the charges against Jackson had been filed.

“I'm very disappointed. I think we all spent a lot of time during the summer understanding that we came through two years where we had problems, the Detroit brawl and then the way our team performed last year. We went out and tried to change the team in a very dramatic way, the best way that we could and I think we felt really optimistic that we had a lot of good guys coming in here and the combination of those players and the players we had would change the atmosphere in the locker room.” Walsh told the media.

Larry the Legend is everything to basketball in Indiana. A true Hoosier Legend, when Larry Bird speaks – Indiana basketball fans listen.

"This is a big impact, there's no question about it," Bird told the media Wednesday. "I'm sure season ticket holders are very frustrated with us right now. We have to believe we're going to make the change and do the right thing. We will do it and it's just going to take some time."

Part II of Sports Business News look at the year that was for the National Basketball Association will focus on the ‘back to the future’ decision relating to the ill-conceived decision to introduce a new basketball, and the key franchise decisions Stern and the NBA will face early in 2007.

For Sports Business News this is Howard Bloom.

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Thursday, December 28, 2006

What a year for MLB and Bud Selig



When all the dollars are finally counted from the 2006 season, Major League Baseball revenues will have exceeded $5.2 billion. The year that was, 2006, was an amazing year for Bud Selig and Major League Baseball. Through the last fifteen years Selig has been among the most criticized executives in sports history. In a classic case of what have you done for me lately the past year marked a remarkable tour-de-force for Selig. The World Baseball Classic was a stunning success, Major League Baseball set an attendance record, the league finalized major television agreements, and most importantly a new collective bargaining was successfully negotiated without the threat of a strike or a lockout. The major blemish in what was a near perfect year for Selig – the complete failure of the Selig appointed Senator George Mitchell performance-enhancing drug committee.

Not many baseball media pundits (present company included) gave the World Baseball Classic much of a chance to succeed. The World Baseball Classic was an unqualified success story on every level.

"Anything you do for the first time is not going to be perfect," Commissioner Bud Selig said on Monday March 20 just before the Japanese vanquished the Cubans, 10-6, at PETCO Park to win the first championship. "But by any stretch of the imagination, this tournament exceeded my expectations in a myriad of ways. Absolutely."

Attendance at the seven venues didn't reach the pre-tournament expectations of 800,000, but 737,112 tickets sold was pretty close, considering the fact that the Asian bracket, played in the 55,000-seat Tokyo Dome, didn't reach the 80 percent capacity that was originally projected. Games between China and Chinese Taipei, and Korea against the aforementioned teams did not turn out to be strong draws.

For the record, the final game attendance for Japan vs. Cuba was 42,696, and without the presence of Team USA, which was eliminated from the tournament by Mexico at the end of the second round, all three games in San Diego -- for the semifinals and finals -- sold out, totaling 126,603.

During the next eighteen months, the format, the rules, the officiating, the timing and the logistics of the tournament will be picked apart with a fine-tooth comb. But one thing is certain: It will be back in 2009 and every four years after that, Selig said definitively, echoing sentiments shared by the tournament's supervisors, Paul Archey of Major League Baseball and Gene Orza of the MLB Players Association.

The WBC served as the perfect entrée for the 2006 season. The success nearly every country enjoyed on the field showcased the real global potential for baseball. And with the International Olympic Committee pulling baseball from the 2012 London Games, Major League Baseball sent a decisive message to IOC about how big baseball is in the global village.

MLB.com continued to be the Internet related business that dreams are made of in 2006. Major League Baseball remains the industry leaders when it comes to streaming their games on the Internet. 2006 is the fifth consecutive season MLB has offered live video streaming of their games at MLB.com, a program that began with the 2002 season. Arguably, MLB.com’s biggest success to date was the streaming of the NCAA men’s basketball tournament in March.

At least for Major League Baseball, MLB.com has evolved from an interesting concept, to a loss leader, to a profitable venture. A March Wall Street Journal report on the dollars and cents of the MLB.com said about 15% of the site's total revenue of $195 million last year came from managing Web sites and other partnerships like the one with CBS. An additional $68 million came from subscriptions to watch live video content on MLB.com, including the 2,400 baseball games it streamed during the 2005 season. The rest of its revenue comes from ticket sales and advertising. How good has MLB interactive become at what they do, good enough that they’ve been able to market their services to other sports leagues, properties and events.

Under the leadership of Bob Bowman, MLB’s interactive division has already signed up 25 clients, including CBS, Major League Soccer and the World Championship Sports Network. Entertainers Jimmy Buffett and LL Cool J have hired MLB.com to promote albums and concerts by streaming video of interviews and live performances.

"They are one of the few operating in this space," says Larry Kramer, president of digital media for CBS. "And the important thing was they were in the off-season, so we knew they could also dedicate the time."

It’s easy to understand why Major League Baseball works as well as it does on the Internet. Teams play 162 games; displaced fans want to be able to follow their team on a nightly basis, irregardless of where they are.

"I really needed some way to see Yankees games," says Robert Auld, a transportation analyst with Henry Schein Inc., a New York medical-supply distributor. "I'm on the road a lot and I take my laptop with me just about everywhere I go. And with a hectic schedule, I figured my best option was subscribing to baseball's video service."

On July 12, Major League Baseball finalized its national broadcast agreements. MLB took advantage of the All-Star break to make several important business announcements, headlined by a new seven year television agreement with Fox and Turner worth an estimated $3 billion. Were the new television agreements good or bad for the baseball industry? And it’s well worth remembering where MLB was a little over a decade ago with their network television partners.

The television agreement further shows sports and television are heading to a cable universe. Fox has committed to televising the World Series, one of the two League Championship series and the “opportunity” to increase its Saturday Game of the Week from 18 to 26 games. According to USA Today’s Michael Hiestand, MLB will see an increase of 19 percent in its national television rights fees. In an era of ‘supposed’ physical restraint on the part of network television executives, sports rights fees show no sign of decreasing. Hiestand suggested all told MLB new agreements (Fox, ESPN and TBS) will see MLB enjoy nearly $670 million a year in national television rights fees. With the rights to the remaining LCS yet to be negotiated each MLB franchise stands to receive a little more then $22.3 million annually from the sports national television agreements. When you factor in local television agreements (different in each market particularly in bigger markets Boston and New York, and smaller markets Milwaukee and Kansas City) baseball’s 30 team owners are a happy group today.

There remains a tremendous challenge that baseball continues to face, the battle of the have and the have not’s. Major market franchise (the Yankees, Red Sox, Los Angeles and the Chicago franchises to name a handful) easily generate between $50 and $100 million each in local rights fees. Smaller market teams (Milwaukee, Kansas City, Pittsburgh, both Florida teams to name another handful) likely can expect less then half of what major market teams generate. Selig as commissioner needs to address the tremendous financial disparity. One suggestion might be for Selig to play “Robin Hood” taking from the rich and giving to the poor.

Baseball which currently shares 24 percent of their revenues would be a very different sport if the smaller clubs forced the bigger teams to receive a smaller share of the national television pie. Imagine if Major League Baseball’s national television dollars weren’t divided up in equal shares, but by how much local television revenues teams do or don’t generate? It becomes another method for baseball revenue sharing. It’s an inexact science, but at the end of the day the Yankees get to keep all of the money they generate in the New York market. At the same time by dramatically changing how its national television money is distributed MLB can force the smaller market franchises to use their additional national TV revenues on their payroll by creating a salary floor (a minimum team payroll), the first step towards a salary cap for Major League Baseball.

Major League Baseball established a new single-season overall attendance record for the third consecutive year in 2006, passing last year's record total of 74,926,174. In addition, Major League Baseball will surpass the 75,000,000 mark for the first time in history, as it was announced.

"Major League Baseball is more popular today than it has ever been in its long history," said Baseball Commissioner Allan H. (Bud) Selig. "Setting a new attendance record for a third consecutive year is a remarkable accomplishment. The record signifies the great passion that fans all over the country have for our great game."

Major League Baseball has now set its single-season record in each of the last three years. In 2004, the 30 Clubs drew 73,022,969 fans. In 2005, that mark was eclipsed as 74,926,174 fans attended. The streak of three straight record-breaking years is the longest since the mark was broken five consecutive years from 1985 through 1989 (46,824,379 in 1985; 47,506,203 in 1986; 52,011,506 in 1987; 52,998,904 in 1988; and 55,173,096 in 1989).

On Tuesday, October 25 before Game three of the 2006 World Series, Major League Baseball and the MLB Players Association announced a new five-year collective bargaining agreement. While there wasn’t a strike or a lockout when the 2002 agreement was negotiated, the players where poised to call a strike on August 31.

The ‘guts’ of the five-year agreement is remarkably similar to the four-year accord that was set to expire on December 19, 2006. It would appear, MLB have moved on from what would have been the most contentious issue they would have ever attempted to force on the players – a salary cap. Teams will be free to spend whatever they wish, and teams that exceed certain thresholds will be taxed – call it the Robin Hood Clause, taking from the rich and giving to the poor. The formula remains – the top 13 revenue generating MLB franchises contribute to a fund that benefits the bottom 17 revenue generating franchises.

The CBA ‘primer’ provided by Major League Baseball, hints at some small but important changes with the new CBA. Revenue sharing and a luxury tax make perfect sense, as long as the teams taking are spending. The Florida Marlins received close to $56 million this year, when the Marlins revenues from revenue sharing and baseball’s national television deal are combined. The Marlins remained competitive for most of the 2006 season, on a team payroll of less than $15 million. Under Jeffrey Loria’s ownership the Marlins have consistently traded away their established players for prized minor league players from other teams. In theory that system makes sense if you trade for the right players, and then sign those players to long-term contracts. That was the philopshy the Cleveland Indians won the 1997 American League pennant with, they had seven years of winning baseball, and filled Jacobs Field for a major league record 455 consecutive game sellout streak. The Marlins haven’t showed they’re prepared to follow that mind-set. Loria seems content to build a team, and then dismantle that franchise as soon as some of his better young players become eligible for salary arbitration, certainly once they qualify for free agency after their sixth season. It’s a mindset that flies in the face of the rationale behind the “Robin Hood Affect”.

The Associated Press reported the average salary shot up Major League Baseball salary increased 9 percent this year to $2,699,292, according to final figures released last week by the Major League Baseball Players Association. The increase was the highest since a 12.8 percent rise in 2001 and makes it likely the $3 million mark will be broken next year or in 2008.

"The increase in the average salary is a reflection of the growth in overall industry revenues, and that while the sport still has significant economic challenges, the increased average is a reflection of the level of the talent on the field," said Bob DuPuy, baseball's chief operating officer.

And the 2006 off season has resembled sailors coming ashore with plenty of money on their hands – MLB owners have acted like drunken sailors. From the beginning of the free agent period after the World Series, teams had spent more than $872 million signing players, with the Cubs responsible for nearly $300 million of that total. And that doesn’t include the $110 million the Boston Red Sox have invested in Daisuke Matsuzaka and the tens of millions of dollars the Yankees are spending on Kei Igawa, and the Tampa Bay Devil Rays contract with infielder Akinori Iwamura. When the free agent frenzy spending spree is completed more than $1 billion will have been contractually committed by MLB teams to a handful of players.

Last Thursday, MLB announced the Yankees were sent a $26 million luxury tax by the commissioner's office, raising New York's total to $97.75 million over the last four years.
Boston, which missed the playoffs, was the only other team over the tax threshold and will pay $497,549.

New York hasn't won the World Series since 2000, and was knocked out in the first round of the playoffs for the second straight year. The Yankees paid tax in all four seasons of the just-expired collective-bargaining agreement: $11.8 million in 2003, $26 million in 2004 and $34 million for last year.

The one major blemish for Selig and Major League Baseball was the ill-conceived investigation into the use of performance-enhancing drugs by Major League Baseball players. The rationale for the probe was the fallout from the New York Times bestseller “Game of Shadows” which examined the Bay Area Laboratory Cooperative (BALCO) federal investigation into the use of steroids and other performance-enhancing drugs by Barry Bonds (the primary focus of the book). On March 30, Selig appointed former U.S. Senator George Mitchell to lead the investigation.

On December 1, Mitchell admitted he had failed at the task he was asked to manage by Selig.

"When I began, I was, of course, aware that I do not have the power to compel testimony or the production of documents," Mitchell said in a statement on December 1. "From the outset I believed that the absence of such power would significantly increase the amount of time necessary to complete the investigation, and it has."

While club officials have testified, Mitchell can't order any of the unionized players to cooperate. No player is known to have testified.

"My investigative staff has conducted hundreds of interviews and received thousands of documents; however, much more work will be necessary," Mitchell said. "Cooperation has been good from many of those from whom we have sought testimony and documents, but has been less than good from some others. This will not affect the result of the investigation, but it has increased the length of time it will take me to complete the investigation."

On Tuesday, January 9 the issue of steroids and performance-enhancing drugs dominate the 2007 Baseball Hall of Fame inductees’ announcement. Cal Ripken and Tony Gwynn are certain to be honored the first time they are on the ballot, but the focus in a few short weeks will be on Mark McGwire also on the ballot for the first time. McGwire ended his career with 583 home runs, which was then fifth-most in history (that total since surpassed by both Sammy Sosa and Barry Bonds).

McGwire will finally understand the full affect of his testimony during the March 2005 Congressional Steroid Hearings. McGwire ruined a reputation he took a lifetime to build by not admitting he ever used steroids (as Jose Canseco has suggested McGwire had done in the book he had written). McGwire not only refused to acknowledge (or refute them) the allegations Canseco made about him, he broke down and cried at the hearing. Because McGwire is eligible for induction into the Baseball Hall of Fame in January, this will be one of the most anticipated Hall of Fame voting results in baseball history.

And if that isn’t enough for Selig to deal with, Barry Bonds who already holds the single season home run record with the 73 home runs he hit during the 2001 season will be the center of attention throughout the 2007 MLB season. With 734 home runs, Bonds is 22 home runs away from surpassing Hank Aaron’s 755 career home run record.

The biggest name from MLB’s steroid era is set to become the all-time home run king, the focus of the 2007 Baseball Hall of Fame class will focus on the steroid era and not on the players selected by the Baseball Writers Association of America for induction. Bud Selig earned the spoils from a great 2006 season, 2007 will challenge Selig’s leadership and belief in the game once again.

For Sports Business News this is Howard Bloom

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Wednesday, December 27, 2006

In 2006 -- Titans of Industry -- the National Football League II


Two of the benchmarks of the National Football League have been stability and leadership in the commissioners’ office. Since 1960 three men have been National Football League commissioners. Pete Rozelle arguably the key figure in the growth of the National Football League as a business and as a brand, Paul Tagliabue who replaced Rozelle in 1989 and pushed the league to a stratosphere few believed any sports league could ever achieve as a business, and Roger Goodell who replaced the now retired Tagliabue on September 1, 2006. Goodell’s goal is simple, keeps the NFL moving forward, never backwards. Take a business that under the leadership of Paul Tagliabue annually generated $6 billion a year and do your best to make sure you don’t slip.

Forbes Magazine released their 2006 NFL team financial valuations in early September – the numbers weren’t just staggering, the numbers showed how powerful a business the National Football League had evolved into: this year Forbes believes the average NFL team is worth $898 million, 212% more than when Forbes began calculating team values eight years ago. Look at it this way: Football team values have increased 11 times more than the S&P 500 since 1998. Profitability? In 2005, the average NFL team posted $30.8 million in operating income (earnings before interest, taxes, depreciation and amortization), versus $5.3 million in 1997.

Tagliabue replaced Rozelle on October 26, 1989. Tagliabue’s hiring is an often told tale. It took 11 ballots, three ownership meetings in three different cities, and a New York based executive-search firm before the NFL made the best decision the league ever made. Tagliabue was elected on the eleventh and final ballot. The NFL’s old guard were steadfast in supporting Jim Finks, then the vice president and general manager of the New Orleans Saints. The new guard believed Tagliabue was the man to lead the NFL into the 21st century.

''I've had the luxury and benefit of working with Pete Rozelle for 20 years,'' Tagliabue said at a news conference after arriving that fateful afternoon from Washington. ''He's the goal standard for all founders and leaders to come. I hope to have Jim Finks working with me. He called and told me he would be supporting me 100 percent. I told him I wouldn't let him off so easily.''

Fourteen months into his term as commissioner Tagliabue, as he would be forced to deal with in the terrible aftermath of September 11, 2001, had to consider how the NFL would react to ‘events beyond the scope of football'; Operation Desert Storm. Days after the first President Bush sent Americans into battle, the NFC and AFC championship games where scheduled for Candlestick Park in San Francisco and Rich Stadium in Orchard Park, N.Y. The following Sunday, January 28, 1991, Super Bowl XXXV, was scheduled to be played before 75,000 fans in Tampa Stadium.

As he told The New York Times’ Ira Berkow, there was no doubt whatsoever in his thought process as to what the NFL would do.

"We can't be paralyzed as a nation," Tagliabue said, "and can't act out of fear. We have to maintain appropriate respect for the situation, and keep appropriate proportion. So we've decided to play the games, but we're going to follow events right up until the kickoffs. There could be a change at any moment."

A month after Super Bowl XXXV, Tagliabue started setting the table for the dramatic moves forward the league has made in increasing their television rights fees. The NFL was in the final year of the league's four-year, $3.6 billion contract with five networks: the Big 3 of ABC, CBS and NBC, and the cable networks ESPN and TNT. The vision Tagliabue had was to develop the NFL as a sports property capable of moving beyond the barriers of offering their games on over-the-air carriers in each NFL market.

"We're thinking of something like a season's-ticket concept," said Tagliabue. "Maybe take an attractive game at the end of September, October, November, and December, a four-game package. You get the fans' attention by putting it on a regular basis, just like you do with 'Monday Night Football.' "

Tagliabue’s idea would be the birth of DirecTV’s NFL Sunday Ticket. Major League Baseball, the National Hockey League, the NCAA for both men’s football and basketball each now offer and generate tremendous sources of revenue from a concept first thought of by Paul Tagliabue. The league would wait a few years before moving forward with a ‘season-ticket package’ but it was the NFL who created the opportunity.

The next landmark date during Paul Tagliabue’s tenure took place on January 6, 1993. It took nearly two years, but Tagliabue led the NFL to the finish line with a new collective bargaining agreement with the NFL Players Association. Tagliabue had been beside Rozelle when NFL players went on strike early in the 1987 season leading the owners to use replacement players. Years of litigation followed. Tagliabue was determined to find a solution that didn’t include litigation, a strike, or replacement players.

The key to the NFL’s 1993 CBA, changing the rules of free agency, allowing each team to designate only one player as their franchise player. Every other player could become a free agent once their contract had been completed. The essence of the 1993 CBA remains a key component to the CBA that the NFLPA and the league agreed to in March.

Labor peace allowed Tagliabue’s vision of a bigger National Football League to move forward. The league expanded to Charlotte and Jacksonville in 1995 ($140 million for each franchise). The NFL also expanded into Houston ($700 million in 2002) and Cleveland ($540 million in 1999). The four expansion franchises have generated $1.54 billion in expansion fees for NFL owners.

Six years after being hired as the NFL’s seventh commissioner, the challenges Tagliabue was facing must have seemed like they were everywhere. First the Rams left Los Angeles for St. Louis and then the Raiders returned to Oakland from Los Angeles. Dallas Cowboys owner Jerry Jones was battling the NFL over local sponsorship rights. Jones believed he could circumvent NFL mandated sponsorships if it benefited the Cowboys.

If you really want to appreciate what makes a great leader you need to look no further then look no further then Tagliabue allowing franchises to move. Tagliabue believed that ship had sailed in 1982 when Al Davis successfully sued the NFL for the right to move the Raiders to Los Angeles from Oakland. Bud Adams moved the Oilers to Nashville and Art Modell moved the Browns to Baltimore. In both cases under Tagliabue’s leadership Houston and Cleveland returned to the league with new owners and stadiums.

Jerry Jones filed a $750 million lawsuit against the NFL in 1995 citing his belief that each NFL franchise had the right to negotiate their own sponsorship agreements.

"Jerry's views aggravate the problem and don't help solve the problem because there are two underlying realities about a sports league that you have to recognize to be successful," Tagliabue said. "You have to operate in markets of different sizes. And No. 2, winning and losing is cyclical. And by definition you're always going to have losing teams in a sports league. You have to sustain your stability in individual markets even when you are losing."

"When you say Jerry wants to dismantle Properties, it is a disservice to Jerry," Tagliabue said.

"Jerry wants to build something new, which is what we have been doing here."

The NFL filed a $300 countersuit against the Cowboys. On December 13, 1996, the NFL and Jones agreed to drop their respective lawsuits.

September 11, 2001 a date will remain etched in the consensus of everyone who was alive that terrible day. Two days later, Tagliabue made the only decision he could concerning the NFL games scheduled for Sunday, September 16, 2001, the second Sunday of the regular season – Tagliabue postponed the 15 scheduled games.

''We wanted to be sensitive, certain, and right,'' a tired Tagliabue said in a conference call with the news media, ''and certainly not superficial.''

He added: ''At a certain point playing our games can contribute to the healing process. Just not at this time.''

Five hours after Tagliabue announced he was postponing the NFL’s slate of games; Major League Baseball announced they would follow the NFL’s lead and postpone their games for the entire week. All Division I-A college football conferences -- some of which earlier had said they would play that week -- called off their weekend games. NASCAR called off its Winston Cup race in New Hampshire this weekend. In each and every case, it was leadership by example; the sports industry followed the decision Paul Tagliabue believed was in the best interest of the National Football League.

''This was our commissioner's finest hour,'' said Baltimore Ravens owner Art Modell to the New York Times. ''He did the right thing. I wanted our league to take the initiative, to be the pace-setter by making the correct decision quickly and decisively. Paul did just that.''

When Tagliabue finally retired on September 1, he realized the Saints return to New Orleans following the terrible aftermath of Hurricane Katrina, but he also had to accept Los Angeles, the second biggest market in the United States, would once again not be home to an NFL franchise. A quiet but decisive leader – Tagliabue left those and other challenges to the only man who could possibly succeed him, Roger Goodell.

Sometimes in life the right person is the right person for that job. Roger Goodell was elected as the National Football League’s eighth commissioner Tuesday evening, August 8, 2006 in the fifth and final ballot. Goodell had enough votes after the fourth ballot collecting 23 of the 30 votes (22 was the key), passing Gregg Levy on the decisive ballot. NFL owners made a quick and decisive decision, sending a strong message to the NFL's corporate and media partners -- the NFL's $6 billion business is in great hands with Roger Goodell in charge.

A lifelong football man himself, Goodell's election represented possibly the greatest single example of vision in the history of the sports industry. Roger Goodell’s election sends a clear message to anyone interested in working in the sports industry – live your dream, never lose that dream, and remain clear in the vision and destiny you believe your life holds for you. That is why Roger Goodell today will be entrusted with managing the $6 billion NFL.

In high school, Goodell, remembered sleeping with an NFL “Duke” football when he six years old, decided that his goal was to work for the NFL and perhaps someday become commissioner. Upon graduating from Washington and Jefferson, he began a letter-writing campaign to land a job in the NFL.

He wrote a total of 40 letters, starting with Commissioner Pete Rozelle and including one to every NFL team. In the summer of 1981, Rozelle instructed NFL Executive Director Don Weiss to interview Goodell. After one interview and several more letters from Goodell. He was offered a three-month internship in the NFL office that began in September of 1982 shortly before the start of a nine-week NFL players’ strike.

The following year, Goodell worked for the New York Jets as an intern in public relations and administration. Following that season, he was offered a position on the New York Jets coaching staff, but decided it would be better to return to the NFL office in 1984 as an assistant in the public relations department.

That is the definition of passion, dedication and a never-ending commitment to purpose.

"I spent my life following my passion," said Goodell, who worked his way from an intern in the public relations department to what is the most powerful post in American sports in an ESPN.com report. "The game of football is the most important thing. You can never forget that."
One of the few life lessons most people consider is to follow what they believe is their destiny. Granted most six-year olds don’t dream of growing up one day to become the NFL commissioner, but it is an amazing story that one six-year old had that dream and never let that sway him from what he believed was his and his alone.

"We've had the two greatest sports commissioners in the history of professional sports, Paul Tagliabue and Pete Rozelle, and I was fortunate to work for both of them," Goodell said. "I look forward to the challenge and thank them again for their confidence."

“The league has always tried to find a better way of doing things and be responsive before we need to,” Goodell said. “That has been a hallmark of our leadership under both Commissioner Rozelle and Commissioner Tagliabue.”

He added: “My theme was it wasn’t time for status quo. We need to keep innovating. I don’t think it was a vote for the status quo.”

Four months into what Roger Goodell hopes will be a lengthy tenure managing the biggest brand name in sports, the 2006 season has been largely uneventful for Goodell. Apart from the “Roger Rocks America Tour” Goodell agreed to visit each NFL city during the 2006 football season. The biggest challenge Goodell has faced is the terrible behavior of many NFL players.

To date more than 35 players, including eight members of the Cincinnati Bengals and four San Diego Chargers have been arrested and charged with various crimes. The sense of entitlement among National Football League players is out of control. Chicago Bears Terry "Tank" Johnson, the teams’ starting defensive tackle, had bad week even by NFL standards. Johnson was arrested at his Chicago home and charged with misdemeanor weapons charges. It was the third time Johnson had been arrested in the last 18 months.

Hours after his arrest Bears general manager Jerry Angelo reportedly warned Johnson he was down to his final chance with the Bears. Early on December 15 Johnson’s bodyguard William Posey was murdered in a Chicago nightclub. Johnson was present at the shooting. Johnson did not play in the Bears 34-31 win over the Tampa Bay Buccaneers that Sunday.

What next for the Bears and Johnson? Literally hours after being told he was down to his last chance to remain a Chicago Bear would general manager Jerry Angelo follow through on his threat to cut the teams ties with their starting defensive tackle, a key member of the Bears defense? Would the Bears really consider jeopardizing their chances to win a Super Bowl because a player had behaved badly? Of course not – the Bears suspended Johnson for one game, a meaningless game Christmas Eve. Meanwhile a Chicago Judge placed Johnson under house arrest. Good news for the Bears, he’ll get to play for the Bears during the playoffs.

As the 2006 is coming to an end and we look forward to 2007, the first four months Goodell enjoyed as commissioner will seem like a honeymoon cruise with the challenges Goodell and the National Football League is going to have to deal with in 2007. They include but are far from being limited too:

Create a code of conduct for NFL players

Working with the NFL Players Association to create a code of conduct for NFL players. David Stern may have overreacted in suspending the Denver Nuggets Carmelo Anthony for 15 games for throwing a punch in an NBA game on December 16, but if Stern went too far, imagine what David Stern would have done if he was dishing out the justice if Stern was dealing with the small, but noticeable criminal element playing on Sunday for the National Football League? Or imagine what Stern would have done to Terrell Owens after Owens spat at Falcons cornerback DeAngelo Hall (the NFL fined Owens $35,000). Goodell has to lay down the law and deal with the reprehensible behavior of NFL players who step over the line.

Returning the National Football League to Los Angeles

Has it really been 11 years since Los Angeles was home to an NFL franchise? Al Davis moved the Raiders back to Oakland and Georgia Frontiere moved the Rams to St. Louis. Both franchises left the nation’s second biggest market after the 1994 season. The challenge the NFL faces hasn’t changed since the second biggest television market was left without a football franchise – a stadium without the amenities an NFL franchise needs on the eve of the 2006 season. The Rose Bowl (the home of the UCLA Bruins) and the Los Angeles Memorial Coliseum (home of the USC Trojans) both seat in excess of 90,000 more then enough for an NFL team back lack any suites and club seats – a key component of every NFL teams revenue streams.

In one of his last “missions” as commissioner, Tagliabue led an NFL delegation to Los Angeles in May in hopes of assuring the NFL would return to Los Angeles. The Rose Bowl had shown interest; the NFL is offering the City of Los Angeles $137.2 million to improve the Coliseum and Anaheim remains interested in trying to figure out how they can fit into the NFL plans. The real question that has yet to be answered – will any of the proposed stadiums offer the NFL what it needs, a stadium capable of being home to an NFL franchise? The NFL needs to expand by at least two franchises in the next six years (in order to make the NFL Network work) and one of those two teams must be in Los Angeles. It won’t be easy, but Goodell has to know both Tagliabue and Rozelle would have found a way to get this accomplished.

A very old stadium down San Diego way

The National Football League has made it clear – San Diego’s Qualcomm Stadium can no longer be home to an NFL franchise.

“I'm surprised that we are here this week,” Tagliabue said two days before Super Bowl XXXVII was played at Qualcomm Stadium in 2003. “If it weren't for Alex (Spanos) ... I don't think that San Diego would have been on the top of the list of most owners who were considering Super Bowl sites.”

As is the case with Los Angeles politicians, you’re committing political suicide in California if you attempt to push through a taxpayer supported plan to build a stadium for a National Football League team. Making it that much more difficult for Roger – the not so satisfying legacy Paul Tagliabue left behind.

“My sense is that Roger's style will be dramatically different than Mr. Tagliabue's,” said George Mitrovich, president of the City Club of San Diego. “Roger Goodell has a clear understanding of the importance of good public relations as it relates to people in cities. I can't imagine him saying what Tagliabue said when he was here.”

“Roger is clearly a smart guy, a realist,” Mitrovich said. “Most people give him credit for the (NFL's) television package. So he has the competence and the skill to get a great many things done, but because he's just a different person (than Tagliabue) – an engaging, likable person – it makes things easier. ...

“People remember how (Tagliabue) dissed our city at a very bad time. Those are the kind of things that if you think them, you shouldn't say them. This is a very insecure place. You say something like that and it goes down a lot worse here than it would in other places. In New York or Chicago or San Francisco, who cares? But here, it shakes us down to our toes.”

The good news for Roger, the Chargers who have the right to pay a $6 million penalty to the City of San Diego after the 2008 NFL season and move the franchise. The organization will be allowed to negotiate with cities interested in giving them the keys to a yet-to-be-built stadium as soon as January 1, 2007. The good news, the team announced a few weeks ago they won’t consider moving (just yet anyway). You have to know the future of the San Diego Chargers is to be settled in the next six months.

New media, globalization and performance-enhancing drugs

Clearly the five immediate challenges Goodell is facing are labor peace (revenue sharing), the much needed code of conduct for NFL players, what to do with the Los Angeles market, the San Diego market and the long-term future of the New Orleans Saints (that will be dealt with in a separate insider in the next week). As important as those issues are to Goodell, he can’t ignore a trio of additional issues:

New media: The sports industry leaders in working with the Internet remain Major League Baseball. MLB is making money at streaming their games over the Internet. NFL TV contracts are all national, the blackout rules would make streaming NFL games challenging. But it’s a major opportunity waiting to be taken advantage of and could prove to be a very lucrative new source of revenue for the league.

Globalization: The sports industry leaders working to take their sport and league globally is the National Basketball Association. David Stern has backed away from suggestions he believed a European division was in the NBA’s future. The United States men’s national team preparing for the upcoming World Championships in Japan stopped in China for a series of games. Major League Baseball and the National Hockey League talk about going global but have no real plans in place.

The NFL played a regular season game in Mexico City last year and will in the not too distant future play a regular season game in Toronto. NFL Europe has never proven to be a moneymaker for the league, but sooner rather then later the NFL will play a regular season game in England, but does it really make sense?

Truly Pete Rozelle and Paul Tagliabue are regarded as Titans of Industry. Leaders, men among men. Standard-bearers. Good luck Roger Goodell in living up to the legacy left to you by Rozelle and Tagliabue. The Rozelle era ended in 1989, the Tagliabue tenure in 2006, 2007 and beyond belongs to Roger Goodell.

For Sports Business News this is Howard Bloom

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Tuesday, December 26, 2006

Titans of Industry -- the National Football League I


The facts speak for themselves, if the rights fees paid to sports leagues and properties are added up, the sum total would not top the $3.75 billion in annual fees generated by the National Football League. Four major events in the NFL’s year stood out among what was a busy year for the business of the NFL. A leader retired, a new one was hired, a founder left much more than he likely ever imagined he would contribute to the growth of the sport, and the evolution of the NFL Network was the most discussed sports media event of the year.

The NFL Network was launched November 4, 2003, only eight months after all of the league's 32 team owners voted unanimously to approve its formation. The league invested $100 million to fund the network's operations.

NFL Films, which produces commercials, television programs, feature films, and documentaries on the NFL, is a key supplier of NFL Network's programming, with more than 4,000 hours of footage archived in their library. Thus, much of the network's highlights and recaps feature NFL Films' trademark style of slow motion game action, sounds of the game, and the talk on the sidelines.

Last fall after the NFL secured network television revenues collectively that are greater then the sum total of NASCAR, NBA. MLB, NHL, the NCAA and the last two Olympic Games combined. The NFL understanding that they were dealing from a position of strength looked at a number of different options for the eight late season games the league hadn’t sold the rights for.

The league's decision to build the NFL Network with regular-season games comes nine months after it completed deals with NBC Universal Sports on a six-year, $3.6 billion deal to carry Sunday Night games, and with ESPN on an eight-year, $8.8 billion contract to show ''Monday Night Football.'' In November 2004, CBS and Fox extended their Sunday deals for six years, with CBS paying $622 million annually and Fox paying $712 million. DirecTV extended its contract for $3.5 billion over five years.

''I never thought eight games would be so valuable,'' Jones, the owner of the Dallas Cowboys, said before his team defeated the Eagles, 21-20, in Philadelphia on Monday night last November.

''I get up in the middle of the night to watch international news, and then I turn to the NFL Network,'' Robert K. Kraft, the owner of the New England Patriots told The New York Times. ''I watch it all the time, and many real fans do the same.''

In November there was a great deal of speculation the NFL would either use the eight games as leverage to create a national cable sports network or sell the games to Comcast who would in turn put the games on OLN. OLN, which reaches 65 million homes, secured national cable rights for the National Hockey League.

''We hope our potential programming partner can help us get more exposure, even without putting games on the NFL Network,'' Jones said.

Kraft added, ''If we can have the new multisport platform, and the NFL Network continues to grow, that would be the ideal solution.''

Ten weeks later, on January 27, 2006 the NFL realized they weren’t going to receive what they believed was fair market value for the eight games, and announced the NFL Network would host the games. At least for the short-term (six years) Comcast and Turner weren’t interested in investing hundreds of millions of dollars in helping the NFL move the league’s in-house network forward.

The NFL Network was a ‘fledging’ operation at Super Bowl XL, reaching 33 million homes). Through 15 weeks of offering Monday Night Football, week after week, ESPN’s Monday Night Football has produced ratings that have stunned even the most optimistic sports media observer. Monday Night Football has averaged close to 10 million homes each week, showcasing not only the power of the NFL, but how important ESPN has become to the sports consumer.

ESPN’s 95 million homes offer the NFL the cable partner it needs to deliver ratings that can justify billions of dollars. The NFL Network doesn’t have the reach or the awareness to deliver significant ratings to the NFL when the league decided to make what at best was an ‘interesting’ decision.

''They'll be able to build the NFL Network into something far more significant,'' said Marc Ganis, a sports industry consultant in a New York Times report last January. ''On the 357 days when games are not being carried, N.F.L. programming will be going into people's homes.”

NFL owners for their part, where pleased a broadcast venture they had invested $100 million in start-up funds three years earlier was ready to make a dramatic step forward.

Dan Snyder, the Redskins' owner, who is on the league's broadcast committee, said by telephone, ''The games are ultimately so powerful that we could propel this into a major network.''

Robert K. Kraft, the owner of the Patriots and a third member of the committee, said by telephone, ''In some ways, I had hoped that we would be able to do a deal with Comcast.'' But, he added, ''we're into the development of our sport, and our network is 24 hours a day, 7 days a week, 365 days a year.''

When National Football League teams went to training camp in late July the league announced it was ready to move forward with a $100 million multi-media campaign to generate interest in the NFL Network. When the campaign began the NFL Network was in 40 million homes. The focus of the NFL Network’s efforts was focused on three major cable carriers – Time Warner (the second biggest American cable carrier), Cablevision (the biggest cable provider in the ‘Tri-State area’ New York, New Jersey and Connecticut) and Charter.

NFL Network officials made it clear where they wanted to be when the network aired its first live NFL game on Thanksgiving Day, November 23 – in 65 million homes.

“People will go nuts on Thanksgiving when there's a game on and they can't watch it,” says Seth Palansky of the NFL Network. Forcing its way into another 25 million homes this season will bring the NFL Network two-thirds of the way toward its goal of matching ESPN's distribution of 91 million homes.

“The full weight of the NFL marketing machine will be used,” vows NFL Network spokesman Seth Palansky in an oft repeated line as the campaign began in late July.

Four months later the NFL Network aired their first game to mixed reviews, but in the same 40 million homes the NFL Network was in when their campaign began. The National Football League which rarely if ever fails, fell flat on their collective faces in convincing anyone their product had real value. The NFL should have been paying more attention to ESPN and less to what they believed the consumer wanted.

ESPN’s live event programming includes 17 weeks of Monday Night Football, full schedules of Major League Baseball and National Basketball Association regular and post-season games, thousands of college football and basketball games, Major League Soccer, Arena Football League and many other live sports events. The NFL Network offered eight live NFL games, eight late season games.

ESPN charges cable operators a monthly rate of $3 per subscriber, the NFL Network wants to charge cable operators between 75 and 80 cents per subscriber. In a 500 channel cable universe – compare the value of what ESPN offers and what the NFL Network believed was worth close to a third of what ESPN provides consumers, and it’s a wonder any cable provider believed they were justified in charging their subscribers what the NFL Network demanded. It didn’t make sense in July, it didn’t make sense in November and it makes even less sense today as the 2006 NFL season is coming to an end.

There is however solutions to the challenges the NFL Network is facing, but none of these are short term problem solvers.

Agree to terms and conditions that allow cable carriers to place the NFL Network on a “pay-per-view” sports tier. Football fans will have no issues whatsoever paying between 75 and 80 cents for the NFL Network and the eight games. That is the short-term solution. The NFL didn’t make a mistake in putting live games on the NFL Network, the league just didn’t offer enough games to create the demand they believe existed.

There remains only one real solution to the challenges the NFL Network faces – a full schedule of Thursday and Saturday games, 17 weeks, 34 games. That’s easier said than done, but if Roger Goodell continues to demonstrate the leadership he has shown in his first few months, you can expect Goodell to move forward with the right business plan to move the NFL and the NFL Network forward.

The NFL needs to expand by at least two franchises in the next six years. The current television agreements expire in six years. The National Football League has every expectation the networks will line up in six years and again pay billions of dollars for the rights to NFL games on Sunday.

However for that to take place it will be critical the NFL preserves the integrity of their Sunday schedule. In simplistic terms you can’t take away from the number of games on Sunday in order to create the additional games needed to create a full Thursday and Saturday schedule. If the NFL adds two more teams that will create the extra number of games needed to offer a full slate of Thursday and Saturday games for the NFL Network.

With a full schedule of Thursday and Saturday games the National Football League will have the needed leverage to not be in just 65 million homes, but the power to be in close to 90 million homes. Eight NFL games are an appetizer, 34 NFL games are a full course meal. Charging consumers for a complete dinner and only offering a bowl of soup isn’t what the NFL is about – hopefully under the leadership of Roger Goodell, the NFL will move forward in serving the consumer an extra value meal.

Part II of Sports Business News NFL year ender will focus on the end of the Tagliabue era and the start of the Roger Goodell’s time as NFL commissioner.

For Sports Business News this is Howard Bloom.

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Thursday, December 21, 2006

The Death of the Pittsburgh Penguins


History will record the end of days arrived for the Pittsburgh Penguins at 11:30 AM, Wednesday December 20, 2006. The Penguins died when the Pennsylvania gaming control board awarded Pittsburgh's sole stand-alone casino license to Don Barden's PITG Gaming. The Penguins and the National Hockey League had put all of their cards (pardon the gaming related pun) in the failed Isle of Capri bid. Close to two-years of planning went down the drain, along with plans to build a $290 million arena. The so-called “Plan B” remains an option, but it’s as likely to occur as the return of the Montreal Expos to Montreal’s Olympic Stadium.

NHL Commissioner Gary Bettman released the following statement after the Pennsylvania Gaming Control Board announced its decision regarding the awarding of a slots license in Pittsburgh:

“The decision by the Gaming Commission was terrible news for the Penguins, their fans and the NHL. The future of this franchise in Pittsburgh is uncertain and the Penguins now will have to explore all other options, including possible relocation. The NHL will support the Penguins in their endeavors.”

“We congratulate Don Barden and PITG Gaming on their successful bid. Obviously, we are very disappointed that the Isle of Capri was not awarded the slots license. We want to thank them for their effort over the past year, including an unprecedented offer to fully fund construction of a new arena had they received the license.”

“We also want to thank the dozens of local leaders and thousands of fans and concerned citizens who voiced their support for what they believed was the best plan for our region. Had Isle of Capri been selected, it would have ensured the long-term future of the Penguins in Pittsburgh and would have delivered a $1 billion development opportunity to the Lower Hill and Uptown.”

“At this point, our franchise enters a period of uncertainty, with our lease at Mellon Arena set to expire this summer. We will re-evaluate all of our options before deciding on a course of action and making further comment.” Penguins CEO Ken Sawyer offered.

The so called Plan-B to keep the Penguins in Pittsburgh was first floated in mid September. Plan B includes: The company (one of the two other companies – the successful bidder) to contribute $7.5 million a year for 30 years, the Penguins $8.5 million up front and $4.1 million per year, and the state $7 million a year through a slots-backed fund, all toward the new facility. There also is $26.5 million in state funds for land acquisition and site preparation in Uptown, adjacent to Mellon Arena.

Don Barden made it clear immediately following the announcement he would be moving forward with his casino plans that he would indeed honor the pledge he had made to contribute $225 million towards the building of a new arena. However the rest of the plan is where the real issues lie. Plan B calls for whoever owns the Penguins to contribute $131.5 million for forego any revenues from naming rights to the facility. There is no chance anyone willing to pay Mario Lemieux the $175 million he wants for the Penguins, will be prepared to invest at least $300 million. Then factor in what should be painfully obvious to everyone, the $290 Isle of Capri arena plan was nothing more than smoke and mirrors. The Isle of Capri plan had been proposed close to two years ago, and had been on the books for more than twelve months. In the last six months the costs of sports facilities have increased.

The proposed arena voters in Sacramento overwhelmingly rejected on November 7 would have cost $540 million. The Dallas Cowboys last week announced their plans to build a $1 billion stadium. The New York Yankees and the New York Mets have broken ground on stadiums that will each cost in excess of $550 million.

There is no doubt whatsoever the cost of building a state-of-art arena in Pittsburgh will cost close to $400 million and not the outdated $290 million Isle of Capri failed plan. Given that for better or worse Isle of Capri was prepared to write a check to cover the costs, Plan B requires extensive financing and support from financial institutions. While that may not be an issue, who will cover the increased costs associated with the borrowing (the tens of millions of dollars in interest payments) will further cripple Plan B.

There also has to be a buyer who is prepared to keep the Penguins in Pittsburgh. Dismiss Canadian beer man Frank D'Angelo. His bid to buy a Canadian Football League franchise was dismissed by the CFL before D'Angelo, who appears in his own commercials in embarrassing situations, doesn’t have either enough money or common sense.

Frank D'Angelo is a poor man’s version of Mark Cuban. There are those who believe Cuban, a Pittsburgh native, is going to rescue the Penguins and keep the team in his hometown. Much of that belief is based on an entry in Cuban’s well read blog “Blog Maverick”. An entry Cuban posted on November 3 lamented how “upset” Cuban was that he had been beaten by Jim Balsillie in putting together an ownership group to buy the Penguins. Cuban never met a media opportunity he didn’t crave. His complete silence on Balsillie’s decision to end his pursuit of the Penguins is all one needs to understand Cuban’s real interest in buying the Penguins was a lot of hot air, and nothing more than that.

NHL deputy commissioner Bill Daly appearing on Primetime Sports, a national radio show broadcast in Canada, made it clear the clock is ticking on Plan B. What was clear from Daly’s interview, the NHL didn’t have a clear understanding of Plan B, but if there is to be an alternative concept to keep the Penguins in Pittsburgh, it had better include extensive public (taxpayer) support. As currently presented, Plan B does not include any financial commitments from Pittsburgh taxpayers.

Daly also discussed Jim Balsillie’s decision to withdraw his bid Friday. Wednesday, Canada’s National Post offered a front page expose on what happened to Balsillie’s bid and what went wrong. The report refuted in its entirety by Daly, suggested the rationale behind Balsillie’s decision to end his bid to buy the Penguins was in large part based on what unnamed sources The National Post used for their front page report, a series of new conditions were presented "without any warning or discussion" on Dec. 8 as part of the NHL's consent to his offer. Daly told Primetime Sports there was nothing presented to Balsillie on December 8 the two sides hadn’t discussed previously.

The report asserted Balsillie would be forced to keep the franchise in Pittsburgh until 2013. Daly made it clear with the failure of the Isle of Capri’s arena/casino deal, if the new owner of the Penguins couldn’t reach a similar arena funding plan in the near future, that owner would be free to relocate the team to another city as early as next year. That alone suggests Balsillie and the National Hockey League at the very least are suffering from a total breakdown in communications. The two versions of the truth are so different, it defies logic.

Daly told Globesports.com the NHL did not impose last-minute conditions.

"Obviously, there is a much bigger picture here, including that Mr. Balsillie had verbally and in writing agreed to everything that was in the letter," he said in a e-mail.

He added that Balsillie "was asked by [the league's] executive committee whether he would give the league an option to buy back the team and he said he would. The 'unreasonable' condition is one he participated in creating."

Balsillie hasn’t offered a great deal since Friday’s withdrawal and hasn’t commented on The National Post report or Daly’s comments Wednesday that it was Balsillie and not the NHL who didn’t seem to understand the agreement.

Wednesday, Balsillie told Globesports.com he was prepared to make another bid for the team.

"All it takes is three motivated parties and a five-minute phone call to get this deal back on track," he said in an e-mail referring to himself, the NHL and the Penguins' current owners. "We've fully studied the situation, and are prepared to complete the purchase and immediately commence good faith 'Plan B' negotiations with the government officials to keep the team in Pittsburgh."

Jim Balsillie may be worth a reported $7 billion, he may have purchased the option on a parcel of land in the Kitchener/Waterloo area where he would or wouldn’t build an arena, but it’s a near certainty the National Hockey League has had enough of Jim Balsillie for the near future. The time may come again when Jim Balsillie may be in a position where he can buy a National Hockey League franchise, but given Bill Daly’s version of how Jim Balsillie’s decision to withdraw his bid for the Penguins played itself out, and regardless of how much money Balsillie’s worth, the NHL isn’t going to welcome him back with open arms anytime soon. Its clear Balsillie sees the Penguins for what they represent, the NHL’s team of the future, with the NHL’s next gilt-edged superstar in Sidney Crosby, but the prize won’t be Jim Balsillie’s to have.

Which leaves the future of the Pittsburgh Penguins in the hands of two cities, and two people – Les Alexander and the Houston market, and William “Boots” Del Biaggio and the Kansas City market.

Del Biaggio made a serious bid to buy the Penguins in 2005. Penguins’ owner Mario Lemieux took the team off the market soon after the franchise drafted Crosby. Del Biaggio, a minority-partner in the San Jose Sharks, has signed an agreement with AEG to own and operate an NHL franchise when one becomes available. AEG have built The Sprint Center, a new arena without a major tenant set to open in time for the start of the 2007-08 season.

Brenda Tinnen, general manager of Sprint Center, told The Kansas City Star while expressing disappointment for the fans of the Penguins, who have been a mainstay in Pittsburgh since 1967, expressed the feeling of many in Kansas City.

“Let’s just say it’s beginning to look a lot like Christmas,” Tinnen said in the Star report.

The National Hockey League expanded to Kansas City before the start of the 1974-75 season. Two years later the franchise moved to Denver, where the team became the Colorado Rockies. The Rockies moved to New Jersey before the start of the 1982-83 season. The NHL has failed once in Kansas City, where an NBA franchise also failed. With a new arena and Sid the Kid, and if William “Boots” Del Biaggio is ready to write a check for at least $175 million, the Penguins could be on their way to Kansas City.

Les Alexander the owner of the NBA’s Houston Rockets visited NHL commissioner Gary Bettman 19 months ago (May 2005) with the expressed purpose of making clear to the National Hockey League he was very interested in bringing an NHL franchise to America’s fourth biggest market. Alexander told The Houston Chronicle on November 3, 2005 he was ready to move forward with his plans to bring an NHL franchise to Houston’s Toyota Center.

"I am trying to get a team. I am trying," Alexander said. "I went to see the commissioner. I told him about my interest. I can't disclose teams, but I've been talking to people (in the NHL) and to investment bankers.

"I had conversations a month ago with an investment banking firm. I'm looking to buy a team. So people know my interest. You hear from time to time that teams might be for sale, then it changes or something else happens. But my interest is out there."

The other cities that will be mentioned as potentially new homes for the Penguins include Oklahoma City, Las Vegas, Seattle and Portland. None will play a serious role, and none offer what either Les Alexander or William “Boots” Del Biaggio businessmen with arenas, in cities the NHL wants to be in, likely ready to write Mario Lemieux a check for at least $175 million. The NHL with either Alexander or Del Biaggio will have an opportunity to buy into an NHL with a salary cap and financial restraint. What creates ‘the perfect storm’ for Mario Lemieux and Gary Bettman isn’t the sale of an NHL franchise but with Pittsburgh nothing more than a technicality away from becoming the death of the Quebec Nordiques repeated is the Penguins.

The Quebec Nordiques were the NHL’s best young team in 1993, the team of the future. The owners of the Nordiques sold their team to Denver interests at the end of the 1994-95 season and won their first of two Stanley Cups their first year in Denver.

Forbes Magazine recent subjective financial valuation for NHL franchises determined the average hockey team is now worth $180 million and makes an operating profit (in the sense of earnings before interest, taxes, depreciation and amortization) of $4.2 million. During the 2003-2004 season, the last before the lockout, the average hockey team was worth $163 million and lost $3.2 million. Recent sale prices for NHL teams (the St. Louis Blues) have been around $150 million. It’s reasonable to assume if Alexander and Del Biaggio are serious (and there’s nothing to indicate they are nothing but serious) its possible Mario Lemieux might be able to sell the Penguins for close to $200 million.

Handicapping the race to buy the Pittsburgh Penguins:

Les Alexander (Houston’s Toyota Center). Would serve as a natural rival to the Dallas Stars. Fourth biggest market. If the NHL holds onto their dream of building the sport in non-traditional hockey markets, this has to be the dream scenario come true. Odds even.

William “Boots” Del Biaggio (Kansas City’s Sprint Center). A building in search of a major tenant. AEG owns the Los Angeles Kings, what could be a small but important advantage that shouldn’t be dismissed. Odds even

Jim Balsillie (Southern Ontario). Before Bill Daly’s Wednesday evening revelations that it was Balsillie and not the NHL that had turned the tables, Balsillie might have been the favorite. There will be a price to pay, and that price will not come back and visit us when we’re fed up with one of our other problem franchises, you can’t have this one. Odds (again after Daly spoke) 15-1

Oklahoma City, Las Vegas, Portland and Seattle. Nothing more than cannon fodder, with no real serious ownership groups. The markets may work one day and there may be interested ownership groups one day, but that day isn’t today, and Mario Lemieux and the NHL will want to sell the team now. Odds 100-1

Mark Cuban (Pittsburgh). The sports industries version of a Macy’s Thanksgiving Day parade float (a hot air balloon) would be great for the NHL and even better for Pittsburgh, but Cuban’s heart is in his Dallas Mavericks. Odds 250-1

Frank D’Angelo (Pittsburgh). No chance, no way, no money, no common sense, no business sense. Odds 1 million to one.

For Sports Business News this is Howard Bloom.

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Wednesday, December 20, 2006

The King of all Sports Media – ESPN


Howard Stern believes he is the self-proclaimed King of all Media. What Howard Stern believes remains open to interpretation, there is no doubt whatsoever the King of all Sports Media is ESPN. Created in 1979, ESPN continued their remarkable growth Tuesday announcing they had acquired a minority stake in the Arena Football League. In the last thirty days along with buying into the Arena Football League, ESPN has agreed to work with NASCAR in securing a new lead sponsor to replace Busch for the sport’s Tier II racing series, announced the creation of a sports film festival with the renowned Tribeca Film Festival, moved forward with plans to expand into England and continues to set cable ratings records with Monday Night Football. All of this accomplished since December 1.

Earlier this month investment bank UBS announced at a New York conference they had determined ESPN value to be $28 billion. UBS said ESPN accounted for 40% of Disney's $70.7 billion market capitalization. Disney owns 80% of ESPN, with Hearst holding the remaining 20%.

"I feel pretty good about ESPN being part of the overall family as it is," said Tom Staggs, CFO of ESPN's parent told Media Post.

UBS made it clear their confidence in ESPN’s value is in part based on how strong the ESPN brand is. Tuesday, the Arena Football League not only embraced UBS philosophy in the value of ESPN’s brand recognition, they married the future of their league to ESPN.

ESPN acquired minority ownership in the Arena Football League as part of a five-year agreement announced Tuesday that includes extensive multimedia rights and a minimum of 26 televised games per season, beginning in 2007. The agreement enhances ESPN’s year-round football programming lineup, the most comprehensive in sports television.

Similar to recent major ESPN content acquisitions, the agreement entails a broad range of rights. Fifteen ESPN platforms will benefit from this new agreement, including ESPN, ESPN2, ESPN on ABC, ESPN Classic, ESPN HD and ESPN2 HD; ESPN.com; Spanish-language ESPN Deportes; ESPN360 (the company's growing interactive and customizable broadband service); Mobile ESPN Publishing (the company's wireless content licensing business); ESPN Radio, ESPN The Magazine and other ESPN-branded services (i.e., iPod, video on demand). ESPN also gains the right to both air and syndicate Arena Football League games through ESPN International.

“We are committed to the Arena Football League and its exciting brand of football. We will help grow the league across all of our multimedia platforms. As the league grows, so will our business, and we see a bright future for us both,” said John Skipper, executive vice president, content, ESPN.

“This is the longest and most comprehensive media partnership in AFL history,” said Commissioner David Baker. “ESPN’s brand is ingrained in sports fans, who watch, read and listen to its multiple media properties. Through its equity purchase, ESPN now owns a piece of the AFL and has the ability to provide exciting football content on Monday nights for fans on a year-round basis. There is no better partner to help continue the AFL’s growth as a leading global, multimedia property than ESPN."

On December 6, ESPN Inc. and Tribeca Enterprises, the parent company of the Tribeca Film Festival, launched The Tribeca/ESPN Sports Film Festival, a multi-platform showcase for independent sports films, it was announced today by John Skipper, ESPN executive vice president, content and Jane Rosenthal, Tribeca Film Festival co-founder. In a multi-year arrangement, The Tribeca/ESPN Sports Film Festival will be programmed and operated by the Tribeca Film Festival with on-air support from ESPN, the world’s leading sports media brand. Targeted at both the film industry and sports film fans, the Festival will feature a complete program of film screenings, live events, online interactivity, and media extensions. An advisory board, comprising leaders in sports and film, is currently in formation.

“ESPN’s collaboration with the Tribeca Film Festival demonstrates our continued commitment to serving sports fans by extending the discussion about sports overall,” said Skipper. “Independent film has grown exponentially in the last few years, and sports-themed films have grown with it. The Tribeca Film Festival has captured sports films like no other film festival and has proven to be creative, smart and passionate about nurturing films of all kinds. Together, we hope to inspire filmmakers to make sports-themed films with this new platform in mind and thereby raise the level of the genre.”

"This brings together sports and film in an exciting new way,” said Robert De Niro, Tribeca Film Festival co-founder.

The inaugural Tribeca/ESPN Sports Film Festival will debut at the 2007 Tribeca Film Festival (April 25 – May 5, 2007) and feature premiere screenings of sports-related narrative and documentary features, short films, industry events, and will include user generated online content curated by the festival’s programmers. At the core of the festival will be the premiere screenings of independent feature films that will be seeking commercial distribution. The festival will also feature “Sports Saturday,” where all the independent sports films will screen and special interactive community events will take place with opportunities to meet sports stars, filmmakers and actors.

“Filmmakers have long been captivated by the compelling storytelling inspired by sports,” said Jane Rosenthal, Tribeca Film Festival co-founder. “By combining forces with ESPN, the world’s leading sports media brand, we will not only serve passionate sports fans but build new audiences for sports filmmakers and their films, on a national and international basis, at the festival as well as on a year-round basis.”

A week later on December 11 ESPN announced: ESPN had reached a multimedia agreement for the domestic and international rights for UEFA European Football Championship™ 2008, Sat., June 7 – Sun., June 29, from Austria-Switzerland, it was announced today by Russell Wolff, executive vice president and managing director, ESPN International, and Philippe Le Floc’h, director, marketing and media rights, UEFA. Under the deal, ESPN’s U.S. domestic television networks will provide exclusive coverage of all 31 matches of the quadrennial tournament – featuring the top 16 European national soccer teams – including Spanish-language telecasts on ESPN Deportes.

Like other recent ESPN rights acquisitions, the agreement provides access to extensive content that will fuel ESPN’s multimedia assets and ESPN International networks. These include ESPN.com, ESPNSoccernet.com, ESPNDeportes.com, ESPN360, Mobile ESPN Publishing, and other ESPN distribution platforms. Additionally, in-progress and post-match highlights can be featured across key ESPN outlets. Outside the United States, rights include telecasts in Canada and Latin America—not including Brazil.

The EURO 2008 deal extends ESPN’s long-standing relationship with UEFA – the Union of European Football Associations, the governing body of football on the continent of Europe. In May, ESPN renewed its agreement with the organization through 2009 for the comprehensive rights to the UEFA Champions League™ matches, the world’s premier international club competition. ESPN and ESPN2 combined to present 12 EURO 96 matches from England and ESPN International featured all 31 matches.

“This deal underscores ESPN’s worldwide commitment to soccer and embraces the multimedia future of the sport," said Wolff. "Coming off its best tournament in 2004, the UEFA European Championship™ has become a must-see soccer event in the world. We are proud of ESPN’s multiple platforms and multiple territories–merging domestic and international linear networks with new media platforms to reach fans wherever and however they consume sports. This coverage will take the event to higher levels of exposure and growth.”

Le Floc’h added, “UEFA welcomes ESPN’s continued commitment to European football.
We are delighted with the opportunity to keep cooperating with a long-standing partner and are confident that the excellent platform offered by ESPN in both North and South America will help UEFA EURO 2008 ™ to further enhance the football experience of millions of fans. UEFA is enthusiastic about having accomplished the nationwide distribution in the US of the entire tournament."

Clearly ESPN is buying content, content they can distribute over their 15 different media platforms. In an era where content remains king, ESPN fully understands how important content is to their growth.

Media remains an advertising driven business. The more products you have to sell (assuming you have content that can attract an audience and advertisers) the more revenue you can generate. The single best example of how big a media empire ESPN has evolved into are the ratings for Monday Night Football. A year ago when ESPN agreed to pay the National Football League $1.1 billion a year for the rights to Monday Night Football (and no NFL playoff games or Super Bowls) many media pundits wondered if ESPN had made the biggest investment mistake in cable television history. Wonder no more, Disney, ESPN’s parent company made one of the best decisions in their long history.

Monday night's 34-16 victory by the Indianapolis Colts over the Cincinnati Bengals on ESPN's Monday Night Football earned an 11.2 rating, representing an average of 10,327,000 homes (14,218,000 viewers, P2+). Monday night ESPN was the most-watched network - cable or broadcast - in primetime last night among households, viewers and all key male and adult demo groups. The game was simulcast on local over-the-air channels in Indianapolis (16.6 rating) and Cincinnati (18.0 rating), boosting ESPN's audience to an estimated average of 10,700,000 households. The total also includes those viewing in high definition on ESPN HD.

NFL Season to Date

* MNF on ESPN is averaging a 10.0 rating and 9,224,000 homes (12,402,000 P2+) for 16 games in 15 weeks. These represent increases of 41%, 43% and 42%, respectively, compared to the first 15 weeks of last year's ESPN Sunday Night Football (7.1 rating, 6.444 million homes, and 8.733 million viewers).

* ESPN leads all networks - cable or broadcast - in delivery of all key male demos on Mondays in primetime: men 18+, men 18-34, men 18-49 and men 25-54.

* ESPN leads all cable networks in overall household delivery in primetime (an average of 2,480,000 households throughout the week).

* Last week, for the 16th consecutive week, the network led all cable networks in delivery of adult men on a total day basis (since the week of August 21), as well as men 18-54.

* ESPN's 16 MNF games so far are cable television's largest 16 household audiences of the year.

"Monday Night Surround" on ESPN.com

Online, ESPN.com's NFL and "Monday Night Surround" content viewed on computers and wireless devices generated more than 20 million page views Monday, up 56% over page views last year according to Web measurement tool HitBox. In addition, there were 2.8 million views of pro-football-related videos on ESPN Motion and ESPN360 on Monday (through Tuesday at noon).

Former Disney CEO Michael Eisner was a strong believer in ‘synergy’. In ESPN’s case the last three weeks have been all about Eisner’s synergistic business philosophy, building your business while maximizing the opportunities you’re investing in.

What’s even more interesting last week ESPN made it clear what ‘was’ regarded as their only bad decision of 2006, their failed launch of ESPN Mobile won’t stand in the way of ESPN creating content for mobile phone technology. ESPN launched ESPN Mobile with much fanfare during Super Bowl XL in Detroit. In August, ESPN admitted ESPN Mobile wasn’t working and said they’d end the service on December 31. ESPN Mobile might end on December 31, but that won’t stop ESPN from generating money from the mobile phone industry.

"We simply recognized quickly that we needed to adjust our business model and that's what we're preparing to do," said George Bodenheimer, president of ESPN and ABC Sports and co-chairman of Disney Media Networks. "You'll see an announcement from us relatively shortly on that."

"The Mobile ESPN application is going to be available to fans, just in a different method than how we started out," he told Reuters.

Monday, Anheuser-Busch told NASCAR officials they would end their current title sponsorship Tier II racing series after the 2007 racing season. NASCAR was quick to react, saying not only are they ready to take their number two racing series to the market, but they’ll do with ESPN as their partner.

"We didn't feel like we needed to make a big announcement on it, but we felt it was important to alert NASCAR that we were not going to renew after '07 as a courtesy of our long-term relationship," said Tony Ponturo, vice president of global media and sports marketing for Anheuser-Busch. "We wanted to give them time to consider and look for a new sponsor."

"No one could come up with another example of league and broadcast partner selling a sponsorship," NASCAR's director of business communications, Andrew Giangola announced. "We will be enjoined to find the right series sponsor to support our efforts and elevate the series."

With the growth of the Busch Series in recent years, coupled with the brand loyalty shown by NASCAR fans, NASCAR believes it made perfect sense that NASCAR and its broadcast partner be involved in the title sponsorship process.

"The Busch Series will have more of a presence on ESPN, so we're going to be looking for a national brand that's going to promote the series," he said. "The Busch Series is an extremely strong motorsports property. It's a significant opportunity for a company to gain $100 million in brand exposure. It's a unique situation, because the company is literally branded to the sport."

ESPN (an acronym for the Entertainment and Sports Programming Network) founded by Scott Rasmussen and his father Bill Rasmussen, and launched on September 7, 1979 under the direction of Chet Simmons, who was the network's first President and CEO.

Just before ESPN launched, Getty Oil Company (later purchased by Texaco, now ChevronTexaco) agreed to buy a majority stake in the network. Nabisco and Anheuser-Busch also bought minority stakes.

In 1984, ABC Video Enterprises, a division of the American Broadcasting Company, bought 80% of the network, and the Hearst Corporation bought the other 20%. That basic arrangement has continued, although ABC is now owned by the Walt Disney Company.

In 2006, ESPN took over all of ABC Sports' broadcast operations and programming, now known as "ESPN on ABC."

The first show was a slow-pitch softball game that aired on September 7, 1979. A few hours later came the first SportsCenter, which had no highlights and audio difficulties during an attempted interview with University of Colorado head football coach Chuck Fairbanks.

To help fill 24 hours a day of air time, ESPN aired a wide variety of sports events that broadcast networks did not show on weekends, including Australian Rules Football, Davis Cup tennis, bowling, professional wrestling, boxing, and additional college football and basketball games. The U.S. Olympic Festival, the now-defunct competition that was organized as a training tool by the United States Olympic Committee, was also an ESPN staple during this time.

Even before ESPN began telecasts, it convinced the NCAA to grant it rights to show early round games of the NCAA Men's Division I Basketball Championship. The game broadcasts were extensive and helped college basketball gain a larger audience.

The seminal moment in ESPN history dates back to 1987, when ESPN acquired National Football League rights for the first time. Initially ESPN and TNT shared Sunday Night Football rights. ESPN was a part of Sunday Night Football for 19 years before switching to Monday Night Football this year.

In 1990, ESPN added Major League Baseball to its lineup. MLB games are still on ESPN today and are scheduled to continue through 2011. The National Basketball Association (along with TNT) are the NBA’s national television partners.

In 1993, ESPN2 was founded, with Keith Olbermann and Suzy Kolber launching the network with SportsNite. Three years later, ESPNEWS was born, with Mike Tirico as the first anchor. (Today, Tirico is play-by-play announcer on Monday Night Football.) In 1997, ESPN purchased Classic Sports Network and renamed it ESPN Classic. The latest ESPN network in the U.S., ESPNU, began on March 4, 2005.

More than 90 percent of American homes have access to ESPN and ESPN2 – that’s the essence of brand power. Overwhelmingly ESPN isn’t complacent and refuses to stand still. If you’re a sports league and you haven’t aligned your sports property with ESPN those involved with that sports property have to wonder about the long-term viability of their entity. ESPN doesn’t have a monopoly on sports, but at the end of the day if you’re not a part of ESPN, you’re not going to reach the audience you need to reach if you hope to see your league grow.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: Wikipedia.

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