Monday, July 16, 2007

Trumpets Please – The Arrival of David Beckham

Trumpets Please – The Arrival of David Beckham

15 years ago the national media wrote off NASCAR as a sport whose sole demographic was “Southern Hicks”. Today the media are just as quick to dismiss Mixed Marshall Arts as a ‘sport’ rarely if ever worthy of their attention. Twenty-five years ago, fifteen years ago, ten years ago, five years ago and today the media is so quick to dismiss soccer as a sport where the arrival of David Beckham is a mere footnote to some of the most respected sports writers in North America. Those whoever who decide they’ll take the time to investigate if indeed soccer is on the verge of becoming a major sport in the United States (and in Canada) can’t be surprised most growth and economic indicators clearly suggest soccer has surpassed the National Hockey League in the American consciousness and has become the second most popular sport in Canada.

Friday David Beckham and his wife Posh Spice, Hollywood’s latest glitter twins arrived in Lotus Land to a welcome that was somewhat bizarre, somewhat entertaining but served to further enhance why the Los Angeles Galaxy and Major League Soccer came together on one of the biggest contracts ever offered a professional athlete. David Beckman is money in the bank for soccer – he has the potential to be the straw that will stir the drink that is professional soccer in North America and in doing so appears destined to serve as the catalyst soccer needed to push the sport forward.

“I've always looked for challenges in my career and something exciting in my life,” Beckham said. “My family has now moved to Los Angeles. It's something we're looking forward to, something we're very proud of and in our life everything's perfect.”

An estimated crowd of 5,000 supporters -- mostly season-ticket holders -- greeted Beckham with cheers and chants as dignitaries such as Los Angeles Mayor Antonio Villaraigosa, MLS Commissioner Don Garber and AEG President Tim Leiweke each took turns welcoming Beckham to Los Angeles.

Villaraigosa even donned a white Galaxy Beckham jersey and presented the new L.A. superstar with a plaque.

"This is an important day not just for the Galaxy, not just soccer at the professional level but a great day for the future of soccer," Villaraigosa said. "It should be here in the city of Los Angeles, the city of America's hope and promise, where we come from every corner of the Earth."

Beckham was preceded in the presentation by wife Victoria, who took time to pose for the dozens of assembled photographers and waved to the cheering onlookers. The couple arrived in Los Angeles late Thursday with sons Brooklyn, Romeo and Cruz; the Beckhams will take the weekend to settle in to their new Beverly Hills mansion before Beckham reports to work on Monday.

For Beckham, his family and soccer are priorities one and two in his life.

"For me the most important thing in my life is my family. The second thing is the foo... is the soccer," Beckham corrected himself. "I'll get used to that."

Despite the ever-present media glare, Beckham said he was just a normal guy and would relish the chance to live in Southern California with his family for years to come.

"Believe it or not, without all the hype and all the circus that does surround me, I'm a pretty normal person," Beckham said. "I try to live my life as normal as possible. I especially try to make my children's lives as normal as possible. Once I've done this in front of all these thousands of people and once I've done this in front of all the world's press, I'll go back home and jump in the pool with my kids."

The New England Revolution who play their home games at Gillette Field (the home of the New England Patriots) packaged the opportunity to buy premier seating for the Galaxy’s August 12 game with three other games, they sold more than 200 four game packages on Friday – that’s the benefit of Beckham’s arrival to other MLS franchises.

"There has been a lot written about [Beckham] saving soccer," Garber said. "But it doesn't need to be saved. He will make us more credible. "Soccer is growing continuously, it is an emerging sport, and it is only going to continue to grow."

And here’s a dollar statistic no one can argue with – according to MLS officials more than 250,000 Galaxy shirts with Beckham's name and No. 23 have been ordered at $80 each, a good start on gaining a return on the league's investment.

How important is the 'second coming' to the future of Major League Soccer? According to a report in The Washington Post when the deal was announced in January that the MLS will pay Beckham $400,000 per year, with the Anschutz Entertainment Group (who own three MLS franchises and the Los Angeles soccer specific stadium) paying the balance of the record $250 million contract. Put in simpler terms each of Galaxy’s MLS opponents are all contributing to Beckham playing for the Galaxy.

One of the key's to how the MLS has managed their business affairs, each franchise has to manage their team working with a $2.2 million salary cap. So how could the Galaxy’s management team circumvent the cap? Last year the MLS Board of Governors agreed to a Designated Player Rule, but that rule has been known from its inception in MLS circles as the Beckham Rule, the ability to exceed the salary cap with the signing of one designated player, hence nicknamed the Beckham Rule.

"This is the story of a star at the top of his form coming to Major League Soccer,” league Commissioner Don Garber, who helped the Los Angeles Galaxy officials unveil England's David Beckham, this nation's newest sports icon and marketing powerhouse told the USA Today. "David will raise the credibility of our league."

"Beckham is more a celebrity than a soccer player," author and NPR sports commentator Frank Deford says. "He's also smart like a fox. He knows exactly who he is and what he's capable of. It's a brilliant move by the Galaxy."

In what might seem strange on the surface but is more a ‘sign of the times’ the Galaxy will unveil new uniforms Saturday when Beckham makes his MLS debut on ESPN.

"We wanted a classic and clean look that would stand the test of time, something that generations of players and fans would wear with pride on and off the field," said LA Galaxy President and General Manager Alexi Lalas. "We strived to create a jersey with an eye to the future and a nod to the past. With adidas and SME we were able to achieve all of this and more."

The new adidas uniform features the LA Galaxy "Quasar" crest as a woven badge on the jersey with two embroidered stars representing their two MLS Cup championships, accompanied by the adidas three stripes down the sleeves. The uniform also highlights the new LA Galaxy team colors, collegiate navy, gold and white.

"A Quasar is the heart of a galaxy and generates incredible light and energy," added Lalas. "Our crest shows a Quasar shining brightly in a deep blue California sky. It illuminates the initials "LA", used globally to refer to our City of Angels. The color gold honors the Galaxy's proud history and tradition in the Golden State."

AEG President and CEO Timothy J. Leiweke, MLS Commissioner Don Garber, LA Galaxy Head Coach Frank Yallop and Lalas will present David Beckham with his personalized LA Galaxy uniform at 10am PT on Friday, July 13th during the official presentation at The Home Depot Center.

"We're thrilled to be partners with LA Galaxy, MLS and David Beckham at such an exciting time in U.S. soccer," said Antonio Zea, Head of Soccer for adidas America. "The worldwide demand for the new Galaxy jersey is a strong indicator of the relevance that MLS, it's teams and athletes are building on a global scale."

And from a business perspective the Galaxy’s decision makes perfect sense. Beckham represents a once-in-a-lifetime branding and marketing opportunity for the Galaxy. As unconventional as it may seem on the surface to change the look of a sports franchise in the middle of a season if a sports franchise and a sports league was ever going to try to rebrand their product David Beckham is the athlete and this is the time.

"Since the announcement that David was coming here, many brands from Europe started expressing an interest in taking advantage of U.S. soccer as a way of selling their products here," said Jeff L'Hote, who is based in New York for the London soccer consultancy FMM International in a USA Today report

L'Hote says Beckham's signing is a gift and an opportunity, one perhaps with a limited window.

"Signing Beckham was a no-brainer from a league perspective because you get a top player and his celebrity wife in one package, which just gets soccer into the mainstream media," he told the USA Today.

"But my question is, what now?"

That is the easiest question to answer – follow through on the business plan you’ve built your sports league on and maximize every opportunity you can with Beckham’s arrival. And make sure you don’t make the same mistakes the North American Soccer League did 30 years ago when the NASL shone for a few brief years, the late 1970’s, when Pele the greatest soccer player ever played his last three years for the New York Cosmos.

That said the arrival of Pele ultimately led to the death of the North American Soccer League. If any lesson was learnt from the arrival of Pele – short-term short planning can kill the golden goose quicker than you can imagine.

The biggest club in the league and the organization's bellwether was the New York Cosmos, who drew upwards of 40,000 fans per game at their height while aging Brazilian superstar Pelé (considered to be the greatest player of all time) played for them. Giants Stadium sold out (73,000+) their 1978 championship win. However, the overall average attendance of the entire league never reached 15,000, with some clubs averaging fewer than 5,000.

The NASL faced challenges in regard to selling the sport of soccer to Americans, which was then completely foreign to the majority of them. The league "Americanized" the rules in the attempt to make the game more exciting, and comprehensible, to the average American sports fan. These changes included a clock that counted time down to zero as was typical of other timed American sports, rather than upwards to 45 minutes as was traditional, a 35 yard line for offsides rather than the traditional half way line, and a shootout to decide matches that ended in a draw. The foreign image of soccer was not helped, however, by a league that brought in many older, high profile foreign players, and frequently left Americans on the bench. This effort was often doubly futile, as while many of the foreign players were perhaps "big names" in their home countries, almost none of them qualified as such in North America, and they quickly absorbed most of the available payroll, such as it was, which could have otherwise been used to pay North American players better.

Overexpansion was a huge factor in the death of the league. Once the league started growing, new franchises were awarded quickly, and it doubled in size in a few years, peaking at 24 teams. Many have suggested that cash-starved existing owners longed for their share of the expansion fee charged of new owners, even though Forbes Magazine reported this amount as being only $100,000. This resulted in the available talent being spread too thinly, among other problems. Additionally, many of these new owners were not "soccer people", and once the perceived popularity started to decline, they got out as quickly as they got in. They also spent millions on aging stars to try to match the success of the Cosmos, and lost significant amounts of money in doing so.

Also, FIFA's decision to award the hosting of the 1986 FIFA World Cup to Mexico after Colombia withdrew, rather than the U.S., is considered a factor in the NASL's demise.

MLS was formed on December 17, 1993, in fulfillment of Alan Rothenberg and U.S. Soccer's promise to FIFA to establish a "Division One" professional football (soccer) league in exchange for the staging of the FIFA World Cup USA 1994 in the United States. The league began play in 1996 with ten teams and enjoyed promising attendance numbers in its first season. Numbers declined slightly after the first year, but have stabilized in subsequent years. The original 10 teams were divided into two conferences: the Eastern Conference (Columbus Crew, D.C. United, New England Revolution, NY/NJ MetroStars, and Tampa Bay Mutiny), and Western Conference (Colorado Rapids, Dallas Burn, Kansas City Wiz, Los Angeles Galaxy and San Jose Clash).

The question that needs to be asked after the Los Angeles Galaxy signed one of the most recognizable names in the world today, a name that goes far beyond sports, will professional soccer’s second “opportunity of a lifetime” be managed better than the three years Pele played soccer in North America? Have those involved learnt the lessons paid by those who first attempted to bring the world’s most popular sport to America not going to make the same mistakes made by others? In a resounding word – YES!

When the league was started, most teams played in stadiums built specifically for NFL or NCAA (college) American football. This was based on the record attendances achieved at the 1994 FIFA World Cup. However this turned out to be a considerable expense to the league because of modest attendance and poor lease deals. To provide better facilities as well as to control revenue for the stadium, a major goal of MLS management is to build its own stadiums, which are often called soccer-specific stadiums (though they are capable of accommodating high school football, lacrosse, and concerts).

In 1999, Lamar Hunt personally financed the construction of Columbus Crew Stadium, the first major stadium ever built from the ground up specifically for soccer in the United States. The Crew formerly played at Ohio Stadium on the campus of The Ohio State University, but was forced to find a new home when the university began renovations on the stadium.

The Los Angeles Galaxy got a new home beginning with the 2003 season, The Home Depot Center (HDC) located in Carson, California. The Galaxy previously played at the Rose Bowl in Pasadena, California. In 2005, expansion club C.D. Chivas USA joined the Galaxy as tenants at the HDC. Chivas USA does play a few games per season at the Los Angeles Coliseum, usually in tandem with its Mexican parent club.

The move to soccer-specific stadiums has been seen by many as essential to building up attendance and fan support for MLS. So far, every team that has built its own stadium has not only seen its game attendance rise, but also has helped MLS to come closer to the ultimate goal of profitability. Thanks to their new stadium, the Los Angeles Galaxy became the first team to make a profit, and is projected to be followed in 2006 by FC Dallas (final financial numbers for Dallas’ 2006 season are not available yet). With the league's new TV rights for the 2007 season, several more teams are projected to be profitable.

Major League Soccer lost more than $350 million in its first decade, according to a report by Business Week in 2004. However, several signs in media, a landmark TV rights deal, and trends in the league itself suggest a brighter future in the next decade. First, soccer is gaining coverage on American television, with the Fox Soccer Channel and the ABC/ESPN family of channels now airing games in MLS, various Latin American leagues, major European leagues, as well as the World Cup. The exposure helps to erase the image of MLS as being a league of a 'niche' sport.

Last year, MLS and ESPN announced that the network would be paying the league its first ever rights fees to air its games and would produce the games instead of MLS, and also promote the sport on its networks with more time on SportsCenter and a primetime slot on Thursday’s on ESPN2 right after SportsCenter. The deal is said to be worth between $7-8 million a year, and will extend from the 2007 season through to 2014.

This deal is said to be a landmark event for professional soccer in the United States. Combined with other broadcasting rights deals with Fox Soccer Channel and Fox Sports en Español (combined rights deal), HDNet, and Univision, the league in 2007 will take in around 20 million dollars in TV rights for the first time. ESPN, Fox Soccer Channel, HDNet, and Univision are at an estimated $15 million a year as of 2007 before the Univision deal.

And before anyone suggests there isn’t a growing interest in soccer as it relates to television numbers, Multichannel News reported that the recent Gold Cup soccer tournament had better overall ratings in the United States than did the Stanley Cup playoffs. The Gold Cup was televised on ESPN and Univision and the Stanley Cup finals on Versus and NBC.

“We have been experiencing a tremendous growth in ratings for Univision sports events over the past eight years. By the same token, almost every major sport in the sort of typical English-language portfolio of sports on the major networks has been declining. By and large, for everything from [Major League Baseball’s] World Series to the [National Basketball Association] finals to the [National Hockey League’s] Stanley Cup finals, [ratings] have been declining over time. It was sort of inevitable that we would come to a point that we would overtake a major sports championship in raw delivery.

“What made it most likely to happen this year is that we now are measured in the NTI [Nielsen Television Index] for our events, so it is an apples-to-apples comparison. It used to be if we had a very high delivery in NHTI [Nielsen Hispanic Television Index] someone could say, 'Oh yeah, that’s the Spanish sample. It is kind of rigged to deliver high numbers for those guys.’ But now literally the same service that is measuring the NHL finals on NBC is measuring our Gold Cup matches on Univision. There is just no two ways about it. We outperformed them.” Univision Sports president David Downs told Multichannel News.

Soccer specific stadiums has been a key to the growth of professional soccer in North America – but the arrival of a marquee athlete with the marketing and brand power of David Beckham is an essential piece of the puzzle.

As much as it made business perfect sense for the Seattle Mariners to sign Ichiro Suzuki Friday to a five-year $90 million contract, like the Mariners have done with Ichiro the Galaxy have generated tens of millions of dollars since they announced Beckham would be traveling Stateside in January.

USA Today reported: Beckham already has added $20 million in ticket and merchandise sales to team coffers. The team also has secured an unusually large — for MLS — jersey sponsorship deal with Herbalife, worth a little more than $20 million over five years.

Other small fortunes are forthcoming. In November, the Galaxy will play in Sydney's 80,000-seat Telstra Stadium. Without Beckham, the idea of an MLS team going halfway around the world to play an exhibition in such a venue wouldn't have been conceivable.
As part of his deal, Beckham is sharing in almost all of the revenue he's helping to generate. Much was made of Beckham's contract in January, and while the potential $250 million seems astronomical — the annual average is twice that paid to New York Yankees star Alex Rodriguez, or A-Rod — it's also real.

"That's more a potential figure that he could meet or exceed," says Simon Oliveira, Beckham's spokesman at 19 Entertainment. "He will simply share in the success he brings to the Galaxy's table."

Each year, Beckham will make $5.5 million in salary, plus a $1 million marketing and promotional bonus. Factor in sponsorship deals and a cut of everything from TV rights to merchandise (the team this week unveiled a new uniform and logo) to the team's new jersey deal, and $50 million a year doesn't seem that far-fetched.

Let the fun and games begin – and of yes, watch the MLS grow and for the Beckham deal to pay for itself in the long run. Soccer is here to stay in North America – and Beckham’s arrival couldn’t come at a more perfect time --- soccer is here to stay in a big way.

For SportsBusinessNews this is Howard Bloom. Sources cited and used in this Insider Report: Multichannel News, USA Today

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