Wednesday, January 31, 2007

Countdown to Kickoff --- Super Bowl XLI will be Peyton’s Place


Sunday’s Super Bowl will be all about Peyton Manning. If the Indianapolis Colts win Super Bowl XLI Manning will have finally won the big game, led his team to a championship. If the Colts lose the game the biggest story after the game will be how Peyton Manning can’t win the big game. His series of “failures” in high school, at Tennessee and in his eight previous seasons with the Colts will come full circle. There may be 83 other players suiting up Sunday, but when all is said and done Super Bowl XLI is all about one player and one player along – Peyton Manning.

Manning earned more than $11.5 million in endorsements last year from a half dozen companies that included, Sony, Reebok, Sprint, DirecTV, ESPN, MasterCard and PepsiCo's Gatorade brand. Manning also was the spokesman for Xbox's NFL Fever 2002 and 2003 and 2004, and was featured on the cover of all three games.

He earns more from endorsements than any other football player. Having turned 30 physically Manning is nearing the peak of his athletic career. At $14 million his salary made him one of the highest paid players on the field in 2006. But more than one of the best quarterbacks in a generation, Manning is the prototype athlete of the 22nd century. He’s become the face of the National Football League, at ease in one of his many commercials or on a football field leading the Colts.

"From a marketing standpoint, his upside is a little bit limited," David Carter, the executive director of the University of Southern California's Sports Business Institute, said of Manning in a globesports.com report. "He's already pretty much the gold standard for the NFL endorser. He really can't get much higher."

None of companies Manning currently endorses have plans to be a part of CBS’s Super Bowl XLI coverage Sunday, but you had better believe once the game ends, if the Colts win and especially if Manning is the MVP there will be an avalanche of Manning commercials early next week. Manning seems to love the camera. From his series of MasterCard commercials that parody Manning praising everyday people doing their jobs to Peyton fooling around with his brother Eli (the quarterback of the New York Giants). Peyton Manning is a natural and very much at ease in front of a camera when a commercial is being filmed.

"The fact is the guy's a good actor," said Bob Dorfman, vice president of Pickett Advertising and the creator of the Sports Marketers' Scouting Report, which tracks athletes and their endorsements. "The MasterCard spots are very good. He's persuasive, he's funny and he delivers a line very well. The only question is what categories are left for him to pursue."

Chris Jogis, vice president of U.S. brand marketing for MasterCard, told CNNmoney.com’s Chris Isidore that while Manning’s current advertising campaigns with MasterCard focus on sports programming that could change if Manning and the Colts win Sunday.

"The advertising and marketing to date has been focused on the more avid football fan," said Jogis. Jogis said his appearance in the Super Bowl only adds to his appeal to sponsors, no matter the final score.

"He'll be better known to more people," he said.

Jogis said MasterCard, one of Manning's first national campaigns, isn't worried about his deals with other sponsors.

"His personality and sense of humor really resonates with people," said Jogis. "As with someone like Michael Jordan, people can't get enough of him."

There are those who believe too much Peyton Manning isn’t a good thing (present company not included)

"There is such a thing as too exposed, and he's close," said Matt Delzell, senior client manager for Davie Brown Talent, who negotiates with athletes on behalf of sponsors. "There's a lot of clutter. At the end of the spot, if you can say, 'I don't know which of the seven it was,' that's a problem."

That may be somewhat true but if you look at the athletes who dominate endorsement opportunities they all share in their ability to sell themselves and whatever products are linked to their name. Tiger Woods and LeBron James both generate more money annually than Manning. The three men present themselves well and each excels on their respective playing field. New England Patriots quarterback Tom Brady earns about $9 million annually in endorsements (second in the NFL to Manning).

The NFL has been refereed to as the National Felons League from time to time, a moniker well deserved. During the Chicago Bears media opportunity Tuesday at Dolphins Stadium as part of Super Bowl XLI media day Tank Johnson attracted the most attention. Nine members of the Cincinnati Bengals were arrested during the teams’ recently completed season. Manning and Brady offer a safe secure image that companies seek. The greatest fear companies have in working with NFL players on endorsement contracts is that they’ll have to enforce the morality clause included in their contracts. There isn’t much chance Peyton, son of Archie Manning, is going to embarrass himself, the Indianapolis Colts, the National Football League or any of the seven companies he works with. If Manning is overexposed it’s due at least in part to the players who have done damage and harm to the reputation of the National Football League. Peyton’s Place is a safe place for any company to be, as are Tiger Woods and LeBron James.

"He represents what's good in sports," said Ben Sturner, president of Leverage Sports Agency, which has offices in New York, Phoenix and Charlotte.

"Brands are making a significant investment in guys like Peyton Manning," said Bill Glenn, who helped create the Davie Brown Index and is vice president of Dallas-based The Marketing Arm in a USA Today report. "First and foremost they want people to recognize him without needing help."

According to CNNmoney.com Marketing Evaluations, which surveys consumers to create the Q-score ratings used by advertisers to judge the appeal of celebrities, and Davie Brown Talent, which has a comparable survey, both put Manning's awareness in the general population a bit above 50 percent, well below the 85 to 95 percent recognition for Tiger Woods.

Bob Garfield, a columnist for Advertising Age (the single best source for Super Bowl advertising information) wrote a column in December on Manning suggesting, that Manning is "the greatest sports endorser ever. Not the most successful; Michael Jordan, after all. But his delivery, poise and comic timing make Michael look, comparatively, like an extra on 'CSI.' "

Sony who worked first with Jordan believe in the power of Manning to deliver key and important market demographic, men aged 30 to 40 a key age group for Sony’s high end electronic product line.

"When we first asked Peyton to join our team he was second only to Jordan in consumer recognition of athletes," said Kevin Berman, senior marketing manager for Sony Electronics, which uses Manning to pitch high-definition televisions in a Los Angeles Times report. "That's a nice camp to be in."

"We really don't need to tell him much or brief him. He seems to be ready for everything coming at him," said Todd Krinsky, a vice president for Reebok.

Manning is known to think on his feet during commercial shoots. "If you're asking if he calls audibles during the process, yes he does," Berman told The Los Angeles Times.

"He transcends football," Jogis said. "He has a great sense of humor, he's really down to earth for such a great athlete and people can relate to that."

Two and a half years ago Manning did an interview with Business Week that focused on his relationship with IMG (his agents at the time). One interesting question Manning was asked, was if the business side of his career (the commercial endorsement opportunities) are in anyway a distraction from what his football career?

“Some guys lose their focus. They get caught up in the business deals or the endorsements, and they lose their focus. For me, it's always about football. I've never lost sight of what's making all these other things happen.

“IMG has done a good job of letting me concentrate on what's important. I don't do appearances during the season. On Tuesdays, some guys are jumping on a plane. I'm trying to meet with coaches or lift weights or work on my game. That's what matters. And IMG respects that.” Manning told Business Week in July 2004.

Manning is represented by Tom Condon, who has been named the most powerful agent in football by Sporting News, heads the Football Division of Creative Artists Agency with fellow super-agent Ben Dogra. CAA represents over 120 NFL players, including Peyton Manning, Matt Leinart, Marvin Harrison, LaDainian Tomlinson, Tony Gonzalez, Steve Hutchinson, Eli Manning, Drew Brees, Chad Pennington, Alex Smith, Marc Bulger, Chris Simms and Byron Leftwich.

Manning for his part told the USA Today in November he loves the chance to show everyone that he’s much more than just a football player.

"Some people have this impression of me: 'Boy, he's always so serious on the field. Football. Football. Football,' " Manning said. "I'd like people to understand that I do have some personality. It's a commercial, not an Oliver Stone movie."

And if football fans bump into Manning, they’ll often recite word for word the lines used in the MasterCard spots.

At the end of one popular MasterCard spot, Manning asks a grocery clerk to autograph a loaf of bread for his younger brother, Eli. MasterCard's advertising agency had written another line, but Manning decided to mention his brother. "It was his impromptu idea on the set," said Chris Jogis, MasterCard's vice president for U.S. brand development. "It ended up being one of the best lines in the spot. He definitely has a good sense for what's humorous."

"That one's ingrained in people's minds," Manning said. "And the sequel was, 'Will you sign this loaf of bread? ... Sign this melon for my little brother?' Eli was mad because he didn't get any royalties off that spot."

Peyton Manning is someone people not only seem to like but they also trust. CNBC’s Darren Rovell reported that a polling company called E-Poll said their stats on Brady vs. Manning. 20% saw Manning as a sincere person versus 15% for Brady. Say whatever you want about being recognized, at the end of the day if you’re trusted and respected you can build a long term relationship with a solid group of companies. As big as Peyton Manning is four days before Super Bowl XLI, if Dolphins Stadium becomes Peyton’s Place Sunday his endorsement potential will head into a new stratosphere

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: globesports.com, CNNmoney.com and The Los Angeles Times

Labels: , , , , ,

Tuesday, January 30, 2007

Countdown to Kickoff -- At $2.6 million, there had better be a big bang for your Super Bowl buck


CBS has been selling 30 second commercial spots for Sunday’s Super Bowl XLI for $2.6 million. If CBS managed to sell their complete commercial inventory for the game (47 minutes or 96 spots) CBS would generate $244.4 million.

It’s not quite as easy as it would appear. Firstly CBS commits a fair percentage to promote their network programming (in a typical Super Bowl, one-fourth of all commercial time is a plug by the network for its own programming. The value of that air time in 2006 alone exceeded $52 million), there’s the commitment to local programming and CBS has yet to sell out their available inventory. Nonetheless Super Bowl Sunday remains the biggest single advertising day of the year. And why? In an increasingly cluttered media universe, the Super Bowl remains the highest rated TV program every year and more importantly the offers the highest guarantee in the industry, you’ll reach an audience.

The average cost of a commercial for the 2000 Super Bowl cost between $2.1 and $2.2 million. It may have been seven years ago, but the 2000 Super Bowl represented the beginning of the end for the tech boom (at least the first internet driven economy). Among the dot.com’s that rolled their financial future on a 30 second Super Bowl spot: Monster.com, HotJobs.com, Pets.com, OurBeginning.com, Oxygen Media, Kforce.com and Computer.com. Online brokerage firm E*Trade sponsored the half-time show and purchased numerous spots during the game.

OurBeginning.com's chief executive Michael Budowski (the website and Mr. Budowski are no longer online) told the media seven years ago that he was spending about $4 million of his $15 million 2000 marketing budget on the Super Bowl.

"If we wanted to catapult ourselves to the forefront and shorten the branding curve, the Super Bowl represents the ultimate opportunity," Budowski said. "We researched different media buys, and we realized that the Super Bowl is really the only media buy throughout the year."

Given that OurBeginning.com, Oxygen Media, Kforce.com, Lifeminders.com and Computer.com (and that’s just a few) are no longer operating, the 2000 Super Bowl was an advertising disaster of Titanic proportion. 17 dot.com’s advertised during Super Bowl 2000 a clear understanding of what was wrong with the first dot.com boom – those involved didn’t understand the industry they were a part of.

"People are in a different place with their Internet experience and understanding of the dot com world," said Anne Hollows, senior vice president of global brand strategies at Monster.com seven years ago. Her company saw its traffic spike about 450 percent after the game last year. "I would be surprised if we see that kind of a surge this year--the novelty has worn off," she said.

Monster.com is still around, but no longer a part of Super Bowl Sunday. As of Monday night only one dot.com, careerbuilder.com will be a part of Super Bowl XLI. Careerbulder.com have purchased two thirty-second spots one in the second quarter and the other in the third quarter. Godaddy.com is back once again this time with three spots and salegenie.com will be a first time advertiser at Super Bowl XLI.

The historical numbers linked to Super Bowl advertising is mind-boggling. According to TNS Media Intelligence, advertising during the Super Bowl game has accounted for 682 minutes – over 11 full hours – of commercial time throughout the past 20 years (1987-2006). Those 11 hours represent 221 different advertisers, more than 1,400 commercial announcements and translate into $1.72 billion of network advertising sales.

The top five Super Bowl advertisers of the past 20 years have spent $613.4 million on advertising during the game, accounting for 35 percent of total advertising dollars spent in the game. Anheuser Busch and Pepsico, advertisers in every Super Bowl game since 1987, continue to lead the pack, followed by General Motors and Time Warner.

While last year’s report (covering 1986-2005) listed FedEx Corporation as the fifth top advertiser, the company was replaced in this year’s report (covering 1987-2006) by Walt Disney. This is especially interesting as FedEx Corporation has advertised with the Super Bowl for 19 years, while Walt Disney has only advertised with the Super Bowl for the past seven years.

Each year, about 62 percent of the network TV ad money invested in the game comes from incumbent marketers who ran commercials the previous year. The major exception to that was the 2000 Super Bowl

“While that’s a very high retention rate, it’s actually lower than the comparable rate for two other showcase TV events. Over the past 10 years, the average dollar retention rate has been 78 percent for the Academy Awards and 67 percent for the World Series,” said Jon Swallen, senior vice president of Research at TNS Media Intelligence.

The cost of an advertisement in the Super Bowl has more than quadrupled in the past 20 years, reaching $2.5 million in 2006 for a 30-second unit. For the 2007 game, CBS is reportedly fetching over $2.6 million for each 30-second spot.

The biggest single advertiser for Super Bowl XLI is Anheuser-Busch. The beer company has purchased 5 minutes or 10 spots. If AB didn’t get a discount for buying as many spots as they did, they’ll be writing CBS a check for $26 million.

"It's fragmentation-proof, or least fragmentation-resistant," said Jason Maltby, president of national broadcast for MindShare, a media-buying firm owned by WPP Group. "You are reaching almost 1 out of every 2 Americans. Nothing else in any media even comes close."

In addition, "there is a much higher level of attention and engagement with the commercials," he added in a marketwatch.com report

The real question remains – does it make sense to invest in a Super Bowl spot?

"It's a much, much bigger risk than it is reward pay-out," Julie Roehm, the former communication's chief at Wal-Mart Stores Inc., said at a Reuters Newsmaker event in New York.

To make the multi-million dollar commercials worthwhile, marketers need to look to tie-in advertisements, such as using the same character or theme on an Internet campaign.

"It's not worth it if you just look at the numbers," said Jon Bond, Co-Chairman of advertising agency Kirshenbaum Bond + Partners. "You've got to have something I'll call the 'X factor'."

Joann Ross, president of network sales for CBS (hosting this years ago and knowing they’ll be televising the game in three years time again) needless to say is a big believer in the power of Super Bowl advertising.

"The Super Bowl is the one event where people do pay ... more attention to the commercials," she said. "The recall of the commercials is greater than spots that don't run in the Super Bowl."

Ryan Schinman, CEO of Platinum-Rye Entertainment agreed.

"I look at the Super Bowl as a big, almost, premier," Schinman said. "The Super Bowl, like the Academy Awards, is something special."

The Super Bowl is the one event that transcends sports. Ross is correct in suggesting it’s the one event people take the time to watch the commercials. One interesting feature to this years’ cavalcade of Super Bowl spots – most if not all of the spots will be available at youtube.com immediately following the game Sunday night. Ironically while the biggest disaster in Super Bowl advertising history was the dot.com 2000 Super Bowl debacle, seven years later the internet offers Super Bowl XLI advertisers an opportunity to leverage their $2.6 million 30 second investment.

As well Doritos and the NFL Network are among the advertisers who are actually allowing their customers to create what ad will run. A total of four Super Bowl XLI spots collectively worth $10.4 million will air Sunday.

"User-generated content is the hottest concept in marketing today," said Fran Kelly, president of ad agency Arnold Worldwide. "Trying an idea that people are going to talk about and look forward to seeing during the game is using the Super Bowl the right way."

"You're trying to get people engaged, and it's hard to argue that they're not engaged if they're actively involved in the making of the commercial," said John Condon, chief creative officer of ad agency Leo Burnett USA in a Cnet.com report

Amateur advertising videos have been around for a couple of years. Shoe company Converse was the first to run television ads created by customers. The concept was developed in 2004 by Butler, Shine, Stern & Partners, the Sausalito ad agency. The 24-second Converse videos were exhibited on www.conversegallery.com, in addition to television.

"What marketers are increasingly finding is that they can't control it,'' Stern said.”And, in fact, letting go and ceding absolute control is a major part of this new marketing model.''

And at the end of the day what matters most – regardless of whether or not your ad has been put together as part of Ted Mack’s Amateur Hour (an old TV program) or offers the creativity of some of the legendary Super Bowl spots of yesteryear, the spots better stand and deliver.

"You have to create spots especially for the game and that can double the price. You have to pay $2.6 million or so to get in the game and to produce a spot could easily cost you another million or two," said Fran Kelly, president and chief executive officer of Arnold Worldwide, a leading advertising agency. "It is a challenge for marketers. If you wind up with one of the poorly rated commercials you wonder if it's worth the money."

Anheuser-Busch’s will focus on fun and entertainment this year, moving away from their series of post 9/11 spots that featured ads with a patriotic theme. AB will also be using the internet to help get their message out. With 10 different spots on Sunday’s telecast AB will allow fans to vote for their favorite Anheuser-Busch spot on the companies website and encourage fans to use their cell phones to text message their favorite.

“What you have to recognize is where the consumer’s going,” said Robert Lachky, executive vice president for global industry development and chief creative officer at the Anheuser-Busch division of Anheuser-Busch in a New York Times report.

“Half the people in the United States watch the Super Bowl, but half don’t,” said Steven R. Schreibman, vice president for advertising and brand management at Nationwide Financial. “How do you reach them?”

“The Super Bowl is the only media property where the advertising is as big a story as the content of the show,” he added, “so you want to see how much you can leverage it.”

Garmin, a maker of G.P.S. navigation devices made it clear to The New York Times they couldn’t be more excited about their first chance to be a part of a Super Bowl game. There 30 seconds of fame is set for the second quarter.

“To look at the Super Bowl as ‘30 seconds and gone’ was never a part of the plan,” said Jon Cassat, director for marketing communications at Garmin. “We think a great audience out there responds to traditional media like television,” he added, “and we think there is a great audience out there we will reach through viral means.”

“It’s not right for everyone,” said Tim Calkins, a professor of marketing at the Kellogg School of Management at Northwestern University.

“Some of them, you scratch your head,” he added. “In the hype of the Super Bowl, they get carried away.”

But for “the right marketer, the Super Bowl makes wonderful sense if you think of it as a springboard to other things,” Professor Calkins said, adding: “Put the ads on the Internet. Get all the P.R. you can. Make the most of your media investment.”

Several of the websites who plan on streaming the Super Bowl commercial inventory immediately after the game ends are selling sponsorships for their post game Super Bowl connection.

According to a report in The Wall Street Journal; USA Today's Web site and Viacom Inc.'s IFilm site have both sold pre-roll ads on their Super Bowl poll pages, while Time Warner Inc.'s AOL has sold advertising for its viewer poll. Google Inc.'s YouTube, which is mounting a Super Bowl poll for the first time this year, is offering advertisers in the big game the chance to buy marketing packages aimed at reinforcing the message of their Super Bowl spots on the video-sharing site.

"Super Bowl ads have taken on a life of their own," says Neal Scarbrough, editor and general manager of AOL Sports. "When folks see these big numbers, they go, 'You know, you think we can advertise there.' "

For example, traffic to IFilm increased 157% during the week after the Super Bowl to 2.6 million unique visitors from 1 million the week before, according to Nielsen/NetRatings, a Web monitoring company.

"Ten years ago you looked at Nielsen numbers and then day-after recall," said Kate Sirkin, exec VP-global research director, Starcom Mediavest Group. But now it's about more than just eyeballs. "You can look at online buzz, online traffic, people talking about your brand and searching online."

And that is the bottom line;’ if you’re spending $2.6 million for a 30 second commercial spot not only had that commercial be outstanding but it’s essential that you look to leverage that opportunity in as many different ways as possible. Advertising remains what it has always been, you’re selling an intangible, and you hope you’ll reach an audience but you’re never quite sure.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The New York Times, CNNmoney.com, AdAge and Marketwatch

Labels: , , , , ,

Monday, January 29, 2007

Countdown to Kickoff – the Great Super Bowl Economic misnomer


Super Bowl XLI is six days away, the game between the Indianapolis Colts and the Chicago Bears is set for Sunday evening at Miami’s Dolphins Stadium. HB’s Insider Report along with Sports Business News will focus the shift of our content this week to the Super Bowl. We’ll remain on top of all the latest sports business news, but this week the world will be looking towards South Florida. Just how big an economic impact will Super Bowl XLI have on South Florida businesses? If you have NFL officials they’ll suggest a Super Bowl game generally has a financial impact of $350 million on the local economy. If you ask an economist, they’ll make one issue clear regarding the economic impact – if you ask event organizers they’ll suggest money is falling from heaven.

More than 120,000 visitors are expected to head to South Florida this week and the NFL is sticking to their stance the game will generate more than $350 million to South Florida. True but mostly false. South Florida, the last week of January, first week of February – South Florida is pretty well filled with snowbirds and tourists fleeing northern communities for the warmth of South Florida. In simplistic terms – if South Florida can’t generate close to $350 million in tourist income during the same period each year regardless of whether or not the Super Bowl is in town, there are much bigger issues in South Florida. Most hotel rooms, restaurants and tourism related businesses will be full next year during the same dates when Super Bowl XLII will be held in Phoenix.

"If you move that $400 million estimate and you move the decimal point one place to the left you're much closer to what it is that it actually provides," said Robert Baade, an economics professor at Lake Forest College in Chicago who has looked at the financial impact of Super Bowls, Olympics and World Series in an Associated Press report

"A lot of people who might frequent, let's say, hotel areas where they know Super Bowl fans are going to be staying are going to avoid the chaos, the congestion, the peak utilization of sidewalks and roads," Baade said.

And those who don’t agree with economists like Baade and are working on behalf of various Super Bowl host or organizing committees offer this retort.

"I guarantee you that 99 percent of these economists have never been to a Super Bowl and never collected data on the ground," said Kathleen Davis, executive director of the Sport Management Research Institute, who was hired by the host committee to study Super Bowl XLI's economic impact. "They're not capturing the local spending habits and they focus on whatever factors will justify their arguments."

Thursday, PricewaterhouseCoopers released an economic study that indicated (PwC) estimates that Super Bowl XLI will generate approximately $195 million in direct spending for Miami-Dade, Broward, and Palm Beach counties. This excludes the so-called “multiplier effect,” which past studies have suggested can up to double the direct dollars by accounting for "indirect" impacts, such as a concession company's purchase of goods from local producers and manufacturers, and "induced" impacts which occur when the income levels of residents rise as a result of increased economic activity and a portion of the increased income is re-spent within the local economy.

The Super Bowl continues to act as a significant generator of economic activity for its host communities. Over the past 10 years, the game itself and a variety of additional special events and related activities (including approximately six months of pre-game planning) have generated $1.5 billion in local spending.

"The success of Miami and the entire South Florida region in realizing a greater level of economic impact from the Super Bowl reflects several factors including the attraction of South Florida as a destination, the diversity of venues available for hospitality and special events, and the higher cost of hotel rooms and other goods and services,” said Robert Canton, a director in PricewaterhouseCoopers’ Advisory practice focused on sports, conventions, and tourism. "Although any destination will experience a significant increase in local economic activity associated with hosting a Super Bowl, tourist destinations like Miami, San Diego, Phoenix, and New Orleans provide a unique atmosphere that is conducive to a comparatively higher level of spending and extended lengths of stay."

While some analysts have suggested that a "let-down" following the event can have a negative impact on a region's hotel performance in the week following the game, research conducted by PwC in markets that have hosted the past six Super Bowls indicates this is not typical. According to Mr. Canton: "We evaluated hotel occupancy and rates in the five weeks surrounding the game and found that the two-week period following the Super Bowl performed equally well or better than the two-week period prior to the week of the game."

According to PwC, while tourist destinations such as Miami generate higher impacts than non-tourist destinations, others including Detroit last year also realize significant impacts from the Super Bowl and invest heavily to attract the game.

“While few events measure up to magnitude of the Super Bowl, Indianapolis has a great history of hosting major sporting events, including Final Fours and the annual Indianapolis 500, and with its new Lucas Oil Stadium, expanded Convention Center, and visitor-friendly downtown, it should have a real opportunity to compete for the Super Bowl event in 2011” explains Mr. Canton. “To successfully attract the Super Bowl, a destination must not only be capable of providing the venues, hotel rooms, transportation, and entertainment environment, but must also be willing to invest millions of dollars on items including public health and safety, hosting special events, recruiting and training volunteers, clean-up, and other items. Indianapolis has a history of strong commitment by its leaders to create and sustain a tourism environment based largely on major sporting events and conventions.”

The last three Super Bowls where held in Houston, Jacksonville and Detroit respectively. None are considered warm weather tourism destinations. Miami is the perfect Super Bowl city, but again a destination that is filled with tourists from early December until late April.

Jacksonville, host of Super Bowl XXXIX, organized more than 120 special events over a 10-day period culminating with their Super Bowl on February 6, 2005. NFL officials believed Jacksonville’s Super Bowl would generate over $300 million in economic impact for Florida’s First Coast region. But the rationale for Jacksonville organizers was simple – they believed hosting a Super Bowl would validate Jacksonville as a legitimate major league/mega event city.

The host committee raised more than $12 million in private funds and the city kicked in close to $3 million, as well, with $5 million in additional revenues that came back in sales tax and hotel surcharge revenue alone. Security expenses in Jacksonville topped $6 million, with those costs split between various local, county and state governments.

In 2000, Jacksonville voters approved a $2.2 billion growth management plan that helped change the face of downtown. Among the civic improvements made in the years leading up to Super Bowl XXIX: a 16,000-seat arena and minor league baseball park were built, along with a new three-mile river walking/biking/jogging trail, a library, courthouse, equestrian center, and major improvements at the zoo.

Jacksonville didn’t have enough hotel rooms within the immediate area to accommodate the 100,000 people who traveled to the city two years ago. The Jacksonville Super Bowl organizing committee charted six ocean liners and turned the rooms in the luxury liners into the additional hotel rooms they needed. The organizing committee leveraged the cruise ships by selling dinner and overnight packages on the cruise ships to local residents on Wednesday, the day before the ships were turned over to the NFL. The cost of dinner was $239 per person; overnight is $599 a couple.

Exploiting every possible money-making opportunity, the host committee sold sponsorships to stages at the downtown SuperFest, as well as naming rights to a transportation hub.

The host committee absorbed about $1.5-million to create a downtown entertainment district to make up for the scarcity of Jacksonville’s nightlife. The rationale was easy to understand – if you’re going to spend tens of millions of dollars in hosting a Super Bowl investing an additional $1.5 million in enhancing your cities night life makes perfect sense.

The 2002 Super Bowl played in New Orleans represented a serious of monumental challenges to the organizing committee and the National Football League. The first major global sports event that followed the terrible events of September 11, 2001 forced NFL officials to move the game forward one week ahead from its scheduled date. The NFL made the change after postponing their games the Sunday following Tuesday, September 11, 2001.

The NFL swapped dates with another major convention -- the National Automobile Dealers Association -- paying $7.5 million (plus an additional $500,000 to the auto dealers’ charity) to move the 30,000-person convention and its 16,000 hotel room commitments (a week ahead, the original Super Bowl dates). The league even paid $5,000 each to 11 parade clubs so they could celebrate Mardi Gras a week earlier. The league also paid to move a monster truck show and several minor league hockey games.

Zenophon Abraham of Sports Business Simulations, was in Houston for Super Bowl XXXVIII, said "The Super Bowl changes that. If the viewer comes to Houston, that's an economic impact in addition to the mention of the name in the media, but is caused by that action. It's safe to say that Houston will receive about $25 million in economic impact from this source – media exposure – alone because of the two-week Super Bowl period. Add that estimate to the base estimate of $240 million, and that's a $265 million economic impact. Media marketing is about 10 percent of that total."

Dr. Bruce Seaman of Georgia State University estimated the total impact of the 2000 Super Bowl in Atlanta to be $292 million, which is the combination of the direct and indirect impacts of the spending attributed to the event.

Seaman estimated that the average out-of-town visitor to Atlanta stayed for 3.7 days, arriving on Friday and leaving the Monday after the game.

According to Seaman, each visitor to Atlanta spent an average of $350 per day, or about $375 in 2003 dollars. In Atlanta, corporations spent approximately $11.2 million. The 2004 Houston Super Bowl Host Committee anticipated corporations spent approximately $10 million. Seaman estimated media expenditures of approximately $6.5 million in Atlanta.

If the numbers from Seaman's study are adjusted to reflect differences between Houston and Atlanta and inflation during that four year period, the direct economic impact of the 2004 Super Bowl would have been $156 million. This, combined with the indirect impacts (using Seaman's 1.08 multiplier) implies a total economic impact of $324 million.

This is only 3.5 percent less than the $336 million estimate offered by the 2004 HSHC. Therefore, the HSHC's position may not be terribly overstated.

The estimated impact of the 2004 Super Bowl sounds impressive and, for some, might justify the approximately $450 million public expenditure on Reliant Stadium. However, caution is in order.

The main determinants of the estimated impact of the Super Bowl in Seaman's calculation (aside from the multiplier's value) are the length of the average visit and the per diem of the average tourist. A small change in either can cause a large change in the estimated economic impact of the Super Bowl. And that goes back to the premise made at the start of this Insider Report – South Florida would be filled with tourists this week regardless of whether or not a football game was being played Sunday at Dolphins Stadium.

That isn’t stopping some hotels from taking advantage of the opportunity. According to ESPN.com swank South Beach, the Delano Hotel is getting $1,200 to $1,875 a night for rooms, and the Setai Hotel wants $950 to $9,000 a night for suites. Spokesmen say these are their usual popular prices but acknowledge hefty minimum-stay requirements -- five nights at the Delano and seven nights at the Setai. It's becoming as much a South Florida tradition as Uzis -- the Art Basel crowd also cried "price-gouging" -- and the NFL is not amused.

The league has sued three hotels, alleging they reneged on contracts to provide the league rooms at a certain rate to pursue higher-rate customers. "There are those who see a chance to do a year's worth of business in a weekend and would like to take a shot at stepping away [from their contract]," says Frank Supovitz, who as the NFL's senior vice president for events is the league's Super Bowl honcho.

To Supovitz, it isn't so much that business execs passed up Detroit altogether, but that they passed less time there. "They came, but not necessarily for four days," he says. "A number of corporate clients came in just for the day." (One day as opposed to four dramatically has a negative affect on the economic impact).

Robert Tuchman, whose TSE Sports & Entertainment has sold about 1,000 Super Bowl XLI packages, after only selling 350 packages for Detroit’s Super Bowl XL.

"The blue-chip companies that cut back after 9/11 are starting to do more again," he says. "There's also been a revival on Wall Street, which has driven a lot of our business."

Economists Robert Baade and Victor Matheson told The Miami Herald estimates of the Super Bowl's benefits are almost hopelessly overstated. The men studied Super Bowls from 1970-2001.

Their conclusion: ''Evidence from host cities from 1970-2001 indicates the Super Bowl contributes approximately one-quarter of what the boosters have promised.''

In Miami, it was even lower. Super Bowl XXXIII (or 33) produced one-tenth the anticipated economic gain, they found.

Of course, there are non-monetary benefits. For instance, the host committee notes that much of its projected economic impact comes from ''exposure that leads to increased tourism and business relocation.''

Peter Roby, director of the Center for the Study of Sport in Society in Boston, told the Associated Press he believes the estimates relating to the Super Bowl’s economic impact are probably somewhat inflated "because people are trying to justify why they want to bring that particular event to the city." However, Roby stills calls the event a "major economic catalyst" that could provide benefits for the community and charities.

Organizers want to say, "Not only did we put our full face out to the public to see, but we used some of the revenue from this event to benefit some of those things," Roby said.

Is it worthwhile to host a Super Bowl, that’s a rhetorical question. Of course it’s great to host a Super Bowl event but it’s important to appreciate when a Chamber of Commerce or a local Super Bowl Host Committee extols the financial benefits of hosting a Super Bowl. It’s essential to consider all of the financial variables in determining the true economic impact of events like the Super Bowl.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: ESPN.com, the Associated Press and The Miami Herald

Labels: , , ,

Friday, January 26, 2007

And the 2016 Summer Olympics will be held in (read the story to find out)


Thursday’s HB Insider Report conclusively proved the 2016 Summer Olympic Games will be awarded to the United States of America when the International Olympic Committee meets in October 2009 in Copenhagen, Denmark to select which city will be selected to host the 2016 Games. Los Angeles and Chicago both delivered their domestic bid books to the United States Olympic Committee filled with goodies and a great deal more in hopes of winning the right to represent the United States in Copenhagen in 26 months time.

Chicago’s 2016 Olympic bid is spearheaded by Mayor Richard Daley the son of the late Richard Daley. Daley’s father was the driving force behind national Democratic parties and at the center of the 1968 Democratic Convention which was held in Chicago and many believe led to the protest movement that helped Richard Nixon’s 1968 Presidential election. The current Mayor Daley grew up at the foot of one of America’s craftiest politicians in the 21st century. Daley knows how the game is played and he knows how to play the game to win.

A great example of how the game is played -- Daley was officially welcomed in Beijing by the government of the People's Republic of China during the week of May 15, 2006, when the mayor discussed Chicago's venture; he is the only mayor of an American city vying for the 2016 Summer Olympics to have been welcomed to Beijing on official Olympic business. When Daley visited the host city for the 2008 Games there were five American cities interested in hosting the 2016 Games. The USOC eliminated Houston and Philadelphia from the process and San Francisco withdrew after the collapse of the 49’ers stadium plans, leaving Chicago and Los Angeles.

Chicago's chances for hosting the 2016 Summer Olympics are bolstered by preliminary commitments made by major corporations and wealthy Chicago philanthropists; promised participation in the planning process by community and government leaders (including the Chairman of the Illinois Republican Party, a political party usually opposed to Daley); and the enthusiasm of the citizenry.

Opinion polls conducted by local newspapers in early 2006 suggested that public support for the 2016 Summer Olympics in Chicago could be as high as 80 to 85 percent. Most importantly, the city's existing infrastructure and venue options are considerably more substantial than the offerings available in other interested cities.

Bob Ctvrtlik, part of the initial USOC’s assessment team, said, "It's got all the amenities that would make this a wonderful experience for our athletes." Ueberroth added, "Chicago is going in the right direction, and we are impressed by that."

The Chicago bid committee held a media reception on Tuesday the day after their domestic bid was submitted to the USOC. The highlights of the bid, according to a Chicago Tribune report included:

A temporary stadium at Washington Park, the lynchpin for the Games, has reduced in size, while cost estimates have risen. The plan now calls for 80,000 seats, rather than 95,000, to trim costs. This is estimated to cost $316 million.

After the stadium is dismantled, another $50 million will be spent to construct a lasting amphitheater in Washington Park. The facility, for cultural and sporting events, will seat 5,000, down from the 10,000 originally planned.

The combined cost of the temporary stadium and the amphitheater, $366 million, is up from earlier estimates of $300 million to $320 million. A nationally known contractor has committed to build it for that amount, adjusted for inflation, though ultimately the project will go out for bid.

The stadium design was unveiled, showing a bowl-shape arena, with a partial roof over seating for Olympics officials and the media. An outer skin will display dramatic images of Olympic athletics, and live coverage of the events will be projected on huge screens, at Washington Park and in other city parks, including Grant Park.

The overall plan, which concentrates most venues downtown, by the lakefront or in city parks, becomes even more downtown-centric, with a decision to move the rowing competition from the South Side lakefront to Monroe Harbor. The cost of adapting the harbor is estimated at $50 million.

Six private developers have signed letters of intent to bid on construction of a $1.1 billion Olympic Village, to be erected on a platform above the truck parking lot at McCormick Place. This project, too, will go out for bid. Officials said the city is committed to seeing an Olympic Village complex, even if Chicago does not get the Games. The goal is to transform and create a new community that will be very much like the high-rise communities along North Lake Shore Drive.

"The Prudential Building was built on air rights. North Wacker Drive is built on air rights. Chicago has a great history of creating really important land value out of air rights [and] building over impediments. ... Millennium Park is that," Chicago 2016 Chairman Pat Ryan told the media Tuesday.

"The city is so excited about this development that it will go forward irrespective of whether we win. ... This new lakefront living will be like the North Side. They'll look out onto Burnham Park, a beach and the new harbor at 31st Street. It'll be the same kind of living. ... There will be an access point over the Outer Drive for the Near South Side. That's a major urban legacy we're creating."

Ryan made one issue very clear Tuesday – a point that should be clear to any city interested in seriously bidding for the 2016 Olympic Games.

"If there's uncertainty on the regulatory [or financing] side, we won't win. We know that. We're getting rid of the uncertainty," Ryan said, predicting that a Chicago Olympics would generate a surplus in the "hundreds of millions of dollars."

One of the key concepts behind Chicago’s 2016 plans includes a temporary Olympic Stadium. Atlanta converted their 80,000 1996 Olympic Stadium into Turner Field immediately following their Games. The 2000 Sydney Olympic Stadium located 45 miles from the cities center (along with most of the 2000 Olympic faculties) have been largely used since the Games ended seven years ago. The same holds true for the legacy from the 2004 Athens Olympic Stadium. Used Olympic Stadiums that represent little more than symbolic white elephants and do nothing but damage the IOC’s reputation.

“Chicago now is a truly a global city in character and in commerce. But, many of us have noticed when we go overseas the perception hasn't quite caught up with reality," Daley told The Chicago Sun Times earlier this week. "If we want this city to thrive in a global economy, we have to do everything we can to raise our city's profile before an international audience. The Olympic Games give us that great opportunity."

Los Angeles hosted the Olympic Games in 1932 and 1984. Both have long been recognized as two of the most successful Games ever to be held. After Montreal’s disasters debt ridden 1976 debacle; the only city interested in bidding for the 1984 Olympics was Los Angeles. After a United States led boycott of the 1980 Moscow Olympics nearly ended the modern Olympic movement, Los Angeles agreed to move forward with their 1984 selection only if the Games wouldn’t cost taxpayers a dime.

Los Angeles Olympic organizers turned to Peter Ueberroth, who stood and delivered. The Montreal Olympics had more than 600 sponsors, the 1980 Lake Placid Winter Games more than 350 sponsors. Ueberroth believed fewer sponsors (exclusivity) would bring bigger dollars. It was Peter Ueberroth who conceived the Olympic TOP program, it was Peter Ueberroth’s vision that saved the Olympic Games and turned the debt ridden Games into a money making machine. The 1984 Games, eight years after Montreal lost more than $1 billion generated a profit of $250 million. Ueberroth currently serving as the President of the United States Olympic Committee led the city of Los Angeles in 1984 to the biggest save in Olympic history, securing the future of the Olympic Games.

Can Los Angeles become the first city of host the modern Olympic Games three times (historically the modern Olympic Games date back to the 1896 Athens Games)?

"We offer the United States Olympic Committee a very compelling bid submission for Los Angeles to host the 2016 Olympic Games," said Mayor Antonio Villaraigosa. "Los Angeles is where the whole world comes together, and if chosen, we will bring all that is California to the athletes, to the Olympic Movement, and to the world."

Los Angeles' bid includes the use of historic Olympic venues like the Los Angeles Memorial Coliseum, new state-of-art facilities like the Home Depot Center and the Staples Center arena which did not exist at the time of the 1984 Olympic Games in Los Angeles. The SCCOG plan also includes the combined resources of UCLA, which will serve as the Olympic Village for the athletes, and USC, which will serve as the Media/Family Village.

"Because we can stage the Games with almost no construction of permanent facilities, we can turn our attention to building human spirit, human achievement and joy -- the fundamental Olympic values," said Barry Sanders, chairman of the Southern California Committee for the Olympic Games.

One of the many ways that the Los Angeles bid will break new ground in this area is in creating a state-wide Olympic cultural program, 'Peak Performance.'

"It will be unprecedented in its size and scope making the connection between brilliance in athletic performance and brilliance in every intellectual and artistic pursuit for which this state is known, from scholarly debate to great food and wine," Sanders said.

"Los Angeles provides a higher stage on which the athletes can perform, and we will employ our star power to put a spotlight on their achievements," said Sanders. "We will capture the imagination of the whole world for the Games and the athletes."

"In bidding, we make these commitments: we will use our ample resources, including our outstanding ingenuity, creativity, high technology, energy, climate, facilities, stable finances and personal determination in services to the Olympic movement and the athletes," said Sanders.

Los Angeles bid will certainly offer a great deal of “panache”. Last Friday California Governor Arnold Schwarzenegger joined with Mayor Antonio Villaraigosa, the Southern California Committee for the Olympic Games (SCCOG) and Olympians at the historic Los Angeles Memorial Coliseum to voice his overwhelming support and that of all of California for Los Angeles’ bid to host the 2016 Olympic Games.

Flanked by city and county officials from across the region and children from Vermont Elementary School who participate in the SCCOG’s Ready, Set, Gold! fitness program, Gov. Schwarzenegger said California and Los Angeles will welcome the world if chosen.

"I could not be more proud of the great bid Los Angeles has put together to host the 2016 Games," said Gov. Schwarzenegger. "Los Angeles has all the facilities the Olympic Games need. It also has incredible tradition and a Gold Medal record when it comes to hosting these great summer games. Los Angeles embodies the Olympic spirit. It is a city built on dreams, where anything is possible."

“The Games are not something the Olympic Committee does for a city; they are something a city does for the Olympic Movement and for the athletes of the world,” said Barry Sanders, SCCOG Chairman. “Today, Los Angeles’ great institutions, including USC and UCLA, join with our Governor, our Mayor, our Olympians, our children and the people of California with a commitment to honor that promise.”

“The support we have from our elected officials across the city, region and state matches the high level of enthusiasm from Olympians like me,” said Olympian Peter Vidmar, who earned his two gold medals in gymnastics during the 1984 Olympic Games in Los Angeles. “A total of 1,147 Californians have been U.S. Olympians and Paralympians since 1896, and we will carry their spirit forward, to honor our Olympian tradition by making the 2016 Games all about the athletes.”

The United States Olympic Committee plans on announcing which of the two cities will represent the United States of America in bidding for the 2016 Games on April 14. The two choices represent two very different choices.

Los Angeles is the safer choice. Los Angeles has hosted the Games twice and while the IOC has opted for cities that haven’t hosted the Games, having their opportunity to host an Olympic Games, Los Angeles’ Olympic track record is second to none. And let’s remember Olympic Games were losing hundreds of millions of dollars leading up to the 1984 Games. The 1984 Los Angeles Olympic Organizing Committee guaranteed the 1984 Summer Games wouldn’t lose a dime and they delivered on that all important financial commitment.

Chicago was awarded the 1904 Games, but the Games were moved to St. Louis the host of the 1904 Worlds Fair. Chicago 2016 Chairman Pat Ryan made it clear Tuesday one of the keys would be assuring everyone that there are no financial concerns relating to the Chicago bid will be very important, the key to the entire bid. It makes far more sense for the USOC to choose Chicago, if Chicago can make the needed financial guarantees.
For all the reasons Southern California is a great choice, Chicago is an even better pick because Chicago has never hosted an Olympic Games.

If Chicago can paint the perfect financial picture Los Angeles can guarantee, than the USOC will award the right to represent the United States in bidding for the 2016 Games to Chicago. But if Chicago cannot make that iron-clad pledge the choice will be Los Angeles. At the end of the day, it is Chicago’s bid to lose.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Chicago Tribune, The Chicago Sun Times and Wikipedia, the free encyclopedia

Labels: , , , , , ,

Thursday, January 25, 2007

The 2016 Olympics -- they will be held in either Chicago or Los Angeles


Monday, the United States Olympic Committee received the Domestic Bid Books from the two U.S. Candidate Cities under consideration to be selected as the U.S. Applicant City for the 2016 Olympic Games – Chicago and Los Angeles. The good news, one of the two cites in all likelihood will host the 2016 Summer Olympics. The best news, whichever city isn’t selected by the USOC. The bad news, the city that is selected by the USOC faces a $20 billion bill once they are selected by the International Olympic Committee in October 2009. The IOC vote will be held in Copenhagen, Denmark.

“The submission of the Domestic Bid Books is another important milestone in our process and the cities are to be commended for the outstanding work they have done,” said USOC Vice President, International Bob Ctvrtlik, who is overseeing the bid process for the USOC. “There are three things that are immediately apparent when reviewing the Bid Books. First is the passion and enthusiasm that each city has for the Olympic Games and Olympic Sport. Second is the strong desire of each city to work with the USOC in building long-term, meaningful partnerships with the worldwide Olympic Movement. And third is their recognition of the universal importance of the Olympic Ideals in our world today.

“These are critical factors in the success of any bid, and it is clear our two U.S. Candidate Cities understand this,” added Ctvrtlik.

The 1996 Summer Games were held in Atlanta, the 2000 Games in Sydney, the 2004 Games in Athens, the 2008 will be in Beijing and the 2012 Games are scheduled for London. Geographically that’s North America, Australia, Europe, Asia and back to Europe. That leaves the IOC with little if any choice except for North or South America for the right to host the Summer Olympics in 2016.

As is the usually the case with the IOC’s decision more than two years away there are more that 20 cities that have expressed interest. However, if one follows the geographical location of previous cities where the Olympics have been held, considers historical factors it is almost inevitable the 2016 Summer Games host will be from either North or South America.

The 2014 FIFA World Cup is scheduled to take place in South America, likely in Brazil. Rio de Janeiro expressed an interested in hosting the 2016 Olympics in September. However with Brazil and Columbia vying for the right to host the 2014 World Cup (and rest assured Brazil will be selected) Rio will be eliminated as a host city for the 2016 Olympics. An Olympic Games have never been held in South America. Both Argentina and Chile have indicated their interest in hosting the 2016 Summer Games. However, neither country offers what Rio might have. At the same time both Argentina and Chile have little if any infrastructure capable of hosting an Olympic Games. Those factors make it next to impossible for a South American city to be awarded the 2016 Olympic Games.

That leaves Mexico, Canada and the United States. Mexico City the host of the 1968 Olympics has shown any interest. Interestingly Montreal Mayor Gerald Tremblay announced the city that hosted the debt ridden 1976 Olympics was interested in hosting the 2016 Games. Nice to see Montreal’s interest, never say never but it’s a pretty safe bet the IOC won’t ever be interested in returning to a city whose lasting Olympic legacy was its debt. For all the right or wrong reasons that leaves either Chicago or Los Angeles as the host of the 2016 Games.

There is a belief among many Olympic pundits the International Olympic Committee remains a European centric group with strong anti-American sentiments.

President Jacques Rogge speaking with NBCsports.com’s Alan Abrahamson earlier this week made it clear the IOC was ready to seriously consider a Summer Games bid for the United States.

“I think there is absolutely no negative anti-Americanism. I think that is a wrong perception."

To those who might suggest otherwise, Rogge said, "It may be that you are seeing the situation through too-dark glasses."

Abrahamson raised a number of important issues. The International Olympic Committee's policy-making executive board is made up of 15 IOC members, none from the United States. Abrahamson also suggested the IOC’s decision to eliminate baseball and softball and New York’s dismal fourth place finish (out of the final finalists) in the bidding for the 2012 host city are symptomatic of anti-American feelings on the IOC.

Before anyone gets too excited as to why baseball and softball were not included in London’s 2012 Olympic program consider these financial numbers. According to The London Telegraph, London Olympic organizers stand to save $86.9 million with baseball and softball off their Olympic menu. In a country with no grassroots baseball and softball programs, the building of baseball and softball stadiums in a country where baseball and softball aren’t on the sports landscape, it makes perfect sense to not have a baseball and softball event(s).

As for New York’s fourth place finish, it may have surprised some the 2004 and 2012 Games are both being held in European cities. Yes the IOC’s current 108 members include 56 Europeans. Madrid who nearly stole the 2012 Games from London is expected to bid again for the 2016 Games, but three of four Summer Games being held in European cities – just not going to happen. And suggestions Tokyo will bid for the 2016 Games, there may not be a great many American IOC members but let’s remember the economic engine that drives the Olympic Games – American corporations who have led the way in the Olympic sponsorship program. And then consider the financial commitment American television has made to the IOC.

Consider the rights NBC has paid the IOC for last year’s Torino Games. At the same time, why not factor in the commitments NBC has made to the Olympics through the 2012 London Games. NBC has the rights through the 2012 Games; the Games beyond 2012 have yet to be offered for broadcast tender:

$614 million for the 2006 Torino Winter Games.
$894 million for the 2008 Beijing Summer Games.
$820 million for the 2010 Vancouver, B.C. Winter Games.
$1.181 billion for the 2012 Summer Games.

The IOC generated $833 million in broadcast rights from the Torino Games. The latest IOC Olympic broadcast revenue chart indicates, the IOC is projecting broadcast revenues of $1.706 billion in world wide rights from the Beijing Games. In total the IOC expects broadcast revenues of $2.539 billion from this quadrennial (the four year period that includes both the Torino and Beijing Games), with NBC contributing $1.508 billion, more then 60 percent of the total broadcast revenues the IOC will realize.

According to the IOC, during the four-year Olympiad, that includes the Turin Games and the 2008 Summer Games in Beijing, the IOC believes sponsors and broadcasters will pay more than $4 billion in fees for the quadrennial up from the $3.6 billion in similar revenues the IOC collected for the 2002 Salt Lake City and 2004 Athens games. The IOC keeps 51 percent of the broadcasting and marketing dollars each Olympic Games generate, with the host organizing committee receiving the other 49 percent.

Of the eleven IOC Top sponsors, a designation given to the select group of companies who each invest tens of millions of dollars in the Olympic ‘ideal’, six are companies with their world-wide headquarters based in the United States: Coca-Cola, General Electric, Kodak, Manulife Financial, McDonald’s, and Visa.

Rogge made it clear he has tremendous respect for USOC chairman Peter Ueberroth. After Montreal’s disasters debt ridden 1976 debacle the only city interested in bidding for the 1984 Olympics was Los Angeles. After a United States boycott of the 1980 Moscow Olympics nearly ended the modern Olympic movement, Los Angeles agreed to move forward with their 1984 selection only if the Games wouldn’t cost taxpayers a dime.

Organizers turned to Peter Ueberroth, who stood and delivered. The Montreal Olympics had more than 600 sponsors, the 1980 Lake Placid Winter Games more than 350 sponsors. Ueberroth believed fewer sponsors (exclusivity) would bring bigger dollars. It was Peter Ueberroth who conceived the Olympic TOP program, it was Peter Ueberroth’s vision that saved the Olympic Games and turned the debt ridden Games into a money making machine. The 1984 Games, eight years after Montreal lost more than $1 billion generated a profit of $250 million. That is the man at the helm of the USOC today, the man who save the Olympic Games.

Rogge said of Ueberroth, is a "very, very capable man" who has "brought peace and stability and prestige to the United States Olympic Committee.

"Definitely," Rogge went on. "I think he is also preparing for the future by hiring new people, by empowering new people." Among them: Jim Scherr, the USOC's chief executive; Norm Bellingham, the chief operating officer; Bob Ctvrtlik, the USOC's vice president for international relations, and Robert Fasulo, an American who had for years been based in Lausanne, now the USOC's staff director for international affairs.

"That is very wise from his point of view," Rogge said.

Soon after the 1984 Games (Ueberroth was selected as Times Man of the Year in 1984), then IOC President Juan Antonio Samaranch reportedly wanted to honor Ueberroth by appointing him to the IOC. That never happened, but you can believe Ueberroth who went from running the 1984 Games to becoming Major League Baseball commissioner hasn’t forgotten that he was snubbed by the IOC. Men like Peter Ueberroth have long memories, and while Ueberroth has never suggested he even cared about being appointed to the IOC, a man as proud and successful as Peter Ueberroth has to have thought about the insult sent to him by the IOC more than 20-years ago.

70 percent of the revenues the International Olympic Committee generates are from American based companies. The economic engine that drives the Olympic movement is the United States of America. Another issue that has upset the European centric is the United States being the only country that gets its own cut of Olympic broadcast and marketing revenues. Worldwide there are 203 National Olympic Committees. When one country is generating 70 percent of all the revenues common sense dictates that country will receive the biggest share of the pie.

The 2016 Summer Olympics will be held in the United States of American for both economic and geographical reasons. There is no other rationale choice for the IOC to make, and Peter Ueberroth is the man who will deliver the Games back to an American city.

For Sports Business News this is Howard Bloom. Sources citied in this Insider Report: NBCsports.com

Labels: , , , , , ,

Wednesday, January 24, 2007

Time for the National Hockey League to fire Gary Bettman


The time has arrived, the time is now, there is nothing more important to the future of the National Hockey League – it’s time the Lords of the Rink fire Gary Bettman before Bettman destroys the NHL. His time has long past, his inability to lead the NHL into what might be a bright future, is impossible given that Bettman and his ‘crew’ clearly have no understanding, no concept of where the sports industry is, where the NHL stands and how to move the NHL forward. If Gary Bettman is allowed to continue as NHL commissioner undoubtedly the NHL is headed to a dark deep place, a journey that will see the NHL as we know it implode with the NHL certain to lose at least six franchises in the next decade.

Bettman offered his “State of the League Address” Tuesday from the league’s All-Star festivities in Dallas. As is always the case with Bettman, he refuses to acknowledge there are any real challenges facing the NHL. There’s nothing wrong with any leader being optimistic, there is everything wrong with the person in charge of a sports league not showing a clear and concise understanding of his/her league.

The NHL Board of Governors meeting earlier in the day before Bettman spoke to the media decided not to change the NHL’s schedule format. As a result, the NHL has lost an opportunity. Under the current NHL schedule formula, NHL teams do not play each other every year. While that may seem like a non issue for those who follow the National Football League or Major League Baseball where teams do not play each other every year, one of the few great NHL opportunities went up in smoke Tuesday morning, Hockey Day in Canada. Canada is Hockey and Hockey is Canada. The last seven NHL seasons have featured a Hockey Day in Canada where the six Canadian NHL franchises played each other. Canada’s Canadian Broadcasting Corporation (CBC) made it a national day celebrating hockey in the only country in the world where hockey is a part of the fabric of society.

There will be no Hockey Day in Canada as part of the 2007-08 schedule. The teams in the NHL’s Pacific Division will not be playing the teams in the NHL’s Northeast Division. The Edmonton Oilers, Vancouver Canucks and Calgary Flames are all in the Pacific division, with the Montreal Canadiens, Ottawa Senators and the Toronto Maple Leafs all members of the Northeast Division. In an example of failed leadership, Gary Bettman should have made it clear to the members of the NHL Board of Governors there must be a Hockey Day in Canada, and if it meant changing the NHL’s schedule back to what it was before the NHL’s lockout than so be it, but Bettman had to rise to the occasion and make it happen.

The President of the Calgary Flames Cal Nichols left the NHL’s Board of Governors meeting upset that Bettman hadn’t ‘stepped up to the plate’ and ensure the NHL went back to the schedule format the league followed before the league’s season long lockout.
What Nichols offered the media following the Board of Governors meeting was a total commdenation of Gary Bettman’s leadership. Given that Nichols is the longtime Chairman of the NHL’s Board of Governors the tough talking Nichols remarks clearly indicate one of the more influential Lords of the Rink is losing confidence in Bettman’s ability to lead the National Hockey League.

"Encouraging those to do the right thing for the game," said Nichols. "I don't know about individual conversations with others, but obviously they occur and I guess (Bettman's) decision to just sort of allow it to happen amongst ourselves is another frustrating thing. We voted for change and then we got into all these (different options). That shouldn't matter. We already said we wanted change. We should just pick the best one and go ahead. If there's disagreement, you've got to talk to people and convince them. It doesn't always work, but most of the time it does."

Bettman for his part did what Bettman does best, he sidestepped the issue.

“He didn't share that view with me. The fact is there wasn't enough support from the clubs to make a change, which leads me to conclude, because we're in the middle of a three-year rotation, a number of clubs only thought it fair to conclude it. And sometimes people lose sight of the fact that while some of you think I throw lightning bolts, the fact is I do report to a Board.

“And the Board on certain things has the final say. Actually, ultimately, the Board on anything it wants can have final say. But I'm comfortable that finishing the three-year rotation is the right thing to do.

“And whether or not we need to change after that, we have ample time to consider. What's interesting about the schedule, unlike lots of things that we've done as a League, where everybody can focus and do it on a League-wide basis, the schedule is kind of personal. Market-specific. Rivalry-specific. It gets emotional. And in the absence of what I call a catalyzing event, or a reason to have to do it, it's more difficult.

“So, for example, if Pittsburgh has to move, I guarantee you this issue will get resolved. If they don't have to move, you know, then maybe we'll just sit tight and see.

“So I think that the prudent, safe course was to continue what the Board voted a year and a half ago, and that had a three-year life to it in terms of how it played out.

“That's not an irrational, irresponsible or necessarily unwise decision. And the research we do with our fans is more fans than not like what we have.” Bettman told the media after the BOG meeting.

And when asked if changing the schedule back to a format where every team played each other at least once was something he personally wanted, his true lack of understanding became obvious.

“I think to the extent that there were some concerns by some quarters that they prefer to see every team at least once -- although I think that's being made into perhaps a larger deal, because it affects five teams in any given year -- that's really the difference in this. But I think since everybody went into this with the expectation that we would rotate through the three years, I'm comfortable with seeing that through.” Bettman commented.

Here’s the issue coming to a head. Many Canadians believe Gary Bettman has never appreciated how important hockey is to Canadians and how important Canada is to the NHL. That isn’t true. It was Gary Bettman who managed to save the Ottawa Senators and keep that team in Canada’s capital, but his belief that the current schedule “affects five teams in any given year -- that's really the difference in this”, doesn’t wash if you consider Tuesday’s BOG decision effectively killed one of the few successful NHL promotions. In a league filled with many more dark than light days, Hockey Day in Canada is a success story.

Two weeks ago Nashville Predators owner Craig Leipold made it clear to the Nashville media he was concerned with the teams attendance. Leipold has an out-clause in his contract with the city of Nashville that permits him to move the Predators if their paid attendance does not reach at least 13,200 by the end of the current NHL season. The Predators paid attendance isn’t near that figure right now. Two weeks ago when the Predators (then with the second best record in the NHL) met the Anaheim Ducks (the team with the best record in the NHL), the Predators paid attendance that night was less than 12,000. The two best teams meeting each other and less than 12,000 paying their way into the building – Gary smell the roses something is clearly amiss in Nashville.

“The attendance is up compared to last year, which is a good thing. I'd like to see attendance stronger in Nashville. I know Craig Leipold would like to see attendance stronger.

“I know that's one of the reasons he's made it known that he would like some local ownership to assist him, because I think we've got great fans.

“And interestingly enough, I think as a percentage basis, there were more individual season ticket holders in Nashville than most other clubs.

“I think it's really the corporate community that hasn't stepped up. And I'm hoping that, over time, that changes.” Bettman told the media Tuesday.

Telling it like it is is how and what Bettman should have done. He needed to send a strong, clear and concise message to Nashville’s business community, you had better step up and start buying tickets, and it better be now. He had a tremendous opportunity at the NHL’s All-Star media presser to deliver that message. Instead trying to be the nice guy, Bettman stepped around the issue instead of dealing with the problem.

One issue Bettman wasn’t questioned about during his media gathering Tuesday, but was dealt with in an interview Gary Bettman have to The Dallas Morning News before the NHL’s All-Star festivities this week, was how Gary felt about the NHL’s non-existent American television ratings.

“The answer is we're working very hard with our partners. Both of our partners tell us not to be concerned, that these things take time. We're committed to doing the right things over the long haul and we're confident over time our ratings will grow.

“I think that our fans are well served by all of our television relationships, both locally and nationally. Obviously, the broader the exposure you get over time, the more awareness people have of your broadcasts, the more likely you are to attract casual sports viewers. I also think high definition television will continue to enhance the broadcast quality of our game, which will make it even more attractive on television.” Bettman told the Dallas Morning News

Of all the mistakes, error in judgments Gary Bettman has made during his tenure as NHL commissioner none come close to his misguided belief that Versus is the right American cable TV partner for the NHL.

“They have honored and exceeded their commitments to focus on hockey. If you think back to last year's playoffs, every night there were doubleheaders, hockey-related programming, hockey features, hockey updates during the intermissions and between games, postgame shows instead of going to a sports summary show of all sports. They gave us more of the touch and feel of the game. They have been absolutely terrific in covering and promoting hockey. And we knew that they would. And we gave up some distribution in the short term in order to get this better treatment. And they've grown by more than 7 million homes in the year that we've been on them. And they anticipate continuing to grow.” Bettman made his belief in Versus clear to The Dallas Morning News.

It has been said before in the pages of Sports Business News and it will be said again, if you’re not on ESPN, you’re not a sport in the United States. It doesn’t matter if Versus has done more or less than what was expected of them. What is important is ESPN in the last year has become the machine that is consuming the sports industry. The only decision the NHL needs to make regarding Versus is how to head back to ESPN. And let’s remember this, it was Gary Bettman who set the “pay as you go” rights fee (or lack thereof) for the NHL. The NHL’s agreement with NBC doesn’t guarantee the NHL a dime, all it ensures is the NHL has an over-the-air national carrier in the United States. Its time Gary Bettman was held responsible for leading the NHL’s BOG’s into their terrible Versus cable agreement.

And just how bad are the NHL’s national TV ratings on NBC? They’ve fallen by 20 percent through the first three weekends of coverage. Just how can anyone judge what 20 percent of nothing is a bigger issue than it was last year, but the ultimate believer that little if anything is wrong with the NHL made it clear to The Dallas Morning News that as bad as the ratings are it’s much to do about nothing.

“No, when you look around at the sports ratings landscape, most sports, all sports are in decline, and that's a function of fragmentation, both with respect to other programming and the new technology. So, I think you have to look at it in context. But other than the NFL, I'm not sure anybody has a great ratings story to tell.” Bettman answered when asked if the NHL’s 1 percent national TV ratings was a problem.

"It's a bit like pulling teeth during the season," Calgary defenceman Andrew Ference, one of half-a-dozen player business representatives who are in Dallas to kick around some marketing ideas told globesports.com’s Brian Milner. "We have to convince guys that it's worth doing."

"It's a work in progress," Ference said of efforts to improve NHL marketing. "It's not going to be perfected in one year or two years."

Which brings the biggest issue, the schedule back to the forefront. The NHL’s current schedule as it is currently formatted ensures the NHL’s two biggest and most marketable players, the Pittsburgh Penguins Sidney Crosby and the Washington Capitals Alex Ovechkin, won’t be playing in many NHL arenas every year. For the NHL that remains a major problem given that Crosby and Ovechkin have the potential to do what Larry Bird and Magic Johnson did for the NBA – save a sports league.

"You're hard-pressed in some markets to have a chance to see any of the new stars," said Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center and a die-hard Vancouver Canucks fan since childhood.

Swangard made it clear to the globesports.com’s Brian Milner. "If I have empty seats and I know there are some players who could potentially put butts in seats, I should think like a circus and take my stars on the road."

And a report in Canada’s National Post painted an even scarier picture of what the reality is in some key NHL markets as the league stumbles forward.

"I was in Chicago last Sunday and Tuesday," a scout said over the weekend told The National Post. "There weren't 6,000 people there either night. And I'm seeing a lot of that in the U.S. Los Angeles? For the most part, you won't see 10,000 people there.

"In Philly, they're really, really worried about next year, from a business perspective. They've got plenty of season tickets sold -- this year. But look at the stands. No one is using their tickets. What happens after you paid for season tickets but never used them? You don't renew."

"Detroit? A lot of empty seats there. The tickets are sold, but they're not coming," another scout reported. "I've never, ever seen empty seats in Detroit. I was there for a Dallas game -- empty seats. A Nashville game -- empty seats. Montreal? Empty seats."

The bottom line – Gary Bettman has had his share of success stories as NHL commissioner (notably the current NHL collective bargaining agreement) but if anyone were to objectively access Gary Bettman’s 14 years as commissioner he has failed. Under the direction of Gary Bettman the NHL expanded from 24 to 30 teams but common sense paints a picture of bad decisions.

It was February, 1993, and expansion teams in Anaheim and Florida would begin play next season. Within a few years, Winnipeg and Quebec City had left for Phoenix and Colorado, Atlanta and Nashville were awarded franchises, and expansion to Minnesota and Columbus rounded out the league at an even 30 clubs. Hockey teams moved from traditional (Quebec and Winnipeg) to non traditional markets (Denver and Phoenix). Denver has been a tremendous success story for the NHL (and Bettman) but Phoenix has been a disaster. The NHL’s return to Minneapolis another success, but expansion to Atlanta and Nashville are destined to be failures, and when was the last time the home of the Ohio State Buckeyes was a major league sports city? Columbus is and will always be a college town. Two franchises in Southern California is one franchise too many and in Miami they can’t giveaway Florida Panthers tickets. Eight franchises and two success stories, that’s a 25 percent success and that by any definition is a failure. Its time the National Hockey League Board of Governors showed they really care about their game, show they really care about the future of the NHL and hold Gary Bettman accountable for how his lack of leadership in managing the NHL.

For Sports Business News this is Howard Bloom. Sources cited in this Insider report: The Dallas Morning News, Globesports.com and The National Post

Labels: , , , ,

Tuesday, January 23, 2007

The Sucker’s won’t be betting online during Super Bowl XLI


Super Bowl Sunday is the biggest single gambling participation day of the year drawing in everyone from professionals wagering thousands of dollars on the outcome to social fans tossing a bill into some random-chance office or tavern pool. Regulated sports betting parlors at Nevada casinos handled a record $90.8 million in Super Bowl wagers for Super Bowl XL winning $15.4 million from players. This year’s game featuring the Chicago Bears and the Indianapolis Colts is expected to generate more than $100 million in Las Vegas. Where there won’t be any betting for Super Bowl XL is online. In the last few years, driven by American bettors, the dollars bet on the Internet defied the imagination. Christiansen Capital Advisors estimated online sports operations handled between $450 million and $600 million in Super Bowl bets last year, far above the $90.8 million legally wagered in Nevada.

The end of the beginning for Internet gambling began on Monday, October 2 when the United States Congress did exactly what they said they were going to do for years –banning internet gambling in the United States making it illegal for banks and credit card companies to process payments to offshore Web sites that directly deal with sports related gambling.

The Justice Department has been relentless in their resolve to end Internet gambling by Americans. While Internet sports gambling is legal in most other countries, close to 100 percent of the Internet gambling sites have shut down since President Bush signed the Unlawful Internet Gambling Enforcement Act, making it illegal for Internet sites to handle sports betting.

Just consider how important American bettors are to online gambling sites. Sportingbet told Yahoo News it was "disappointed" by the decision in Congress, adding that it would have "a material impact" on trading. It pointed out that during the year to the end of July, 2006, 62 percent of the company’s gross win was generated from US-based customers. Last month, 888 revealed that 52 percent of its revenues came from the United States.

British based World Gaming was worth $118 million Monday, by Tuesday the company worth had fallen to $18 million – yes one online off-shore gambling related business had lost $100 million in one day. Good luck to anyone who has any ‘betting futures’ with this company.

"It's certainly devastated the public companies on the stock exchange in London," said Simon Noble, chief executive officer of the privately held Pinnacle Sports UK betting company. "It certainly comes as a surprise to a lot of operators."

"This has come as a major shock to the industry, where most observers expected the legislation to fail," said Stephen Ford, an analyst for broker firm Collins Stewart. "It also comes as a major shock to the stock market and unsurprisingly stock prices have fallen significantly across all online gaming stocks exposed to the US."

PartyGaming shed as much as 62 percent of its value on what has been dubbed “Black Monday” by the now dead industry” in deals on the London FTSE 100 index of leading shares, while its smaller peers Sportingbet dived 73 percent and 888 Holdings slid 50 percent on the second tier FTSE 250. Despite heavy losses to the gaming sector, London’s main indices were trading higher by the half-way stage.

Australian based online gaming company Betcorp says new US laws banning gambling in its biggest market are likely to have a material adverse effect on its business.

"While management will take appropriate measures to mitigate its impact the Act is likely to have a material adverse effect on the operation of the company and its profitability," Betcorp said in a statement to the Australian Stock Exchange.

Net gambling "is a scourge on our society," said Rep. Bob Goodlatte, a Virginia Republican who's tried for the better part of a decade to enact legislation that combats Net gambling.

"Gamblers will be able to place bets not just from their home computers, but also from their cell phones as they drive to work and from their BlackBerrys when they wait in line for the movies," said Rep. Jim Leach, an Iowa Republican.

Since Black Monday most Internet gambling sites have vanished. While there wasn’t a great deal of news in November and December, three events that have taken place in the last two weeks that directly relate to Internet based sports betting send a clear message to the Internet gambling industry – you’re no longer welcome in the United States.

Two weeks ago Pinnacle Sports told its U.S. customers that it would no longer accept their wagers on sports, horses or anything else. According to The Washington Post, The Eye on Gambling Web site published a brief interview with an executive identified only as Pinnacle's "main man," who said: "When the U.S. focuses on something and says 'Enough,' and when they go to war, no individual company can possibly win in a fight of this nature."

Before its demise earlier this month, Pinnacle which had been in business since 1996 handled every imaginable wager from Hillary Rodham Clinton's chances in '08, on the Golden Globe Awards, on Danish hockey or Croatian soccer.

Last Tuesday, two Canadians who created companies that processed Internet gambling transactions were arrested and charged with laundering billions of dollars in gambling proceeds. The charges against John David Lefebvre, 55, and Stephen Eric Lawrence, 46, who founded the company, Neteller, in 1999, were in two criminal complaints unsealed in Federal District Court in Manhattan on Monday, Michael J. Garcia, United States attorney, said in a statement.

According to a New York Times report the Justice Department believes both men knew when they took their company public that what it was doing was illegal and knew they were violating American laws.

“Blatant violations of U.S. law are not a mere ‘risk’ to be disclosed to prospective investors,” Michael J. Garcia, United States attorney said in a statement at the time of the indictment. “Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States.”

The Canadian angle on this is ‘interesting’. According to FBI reports, NETeller transferred money bet online in the United States and sent it to a bank account in Calgary. But NETeller wasn't the bookie handling the betting action. It merely charged a fee allowing U.S. gamblers to transfer their betting dough to offshore gaming companies in places such as the Isle of Man. If you’re a fan of the Soprano’s Lefebvre and Lawrence were the “middle men”.

The Calgary Herald reported Friday, that according to the FBI, $50 million US was transferred by NETeller between March and April alone last year. The billions involved in this trade made Lefebvre and Lawrence -- the most unlikely shylocks imaginable -- rich beyond their dreams. According to documents, Lefebvre cashed in $123 million US in options on NETeller in November 2005 (some of which ended up in philanthropic enterprises in Calgary).

Over the weekend, the Justice Department determined to put the final nail into the coffin for Internet based gambling on the eve of the biggest event of the year, the Super Bowl, first reported by The Sunday Times of London: subpoenas were issued by the Southern District Court of New York to at least 16 banks, including HSBC, Dresdner Kleinwort, Credit Suisse and Deutsche Bank. The Justice Departments demands included records and copies of e-mails, telephone records and other documents directly relating to the Department of Justice ability to build cases against individuals and companies who profited from online gaming in the US.

Alan Duncan, Shadow Trade and Industry Secretary, told The Times of London: “There is growing suspicion that the US Department of Justice is using its muscle in a highly unpleasant manner, and is targeting financial institutions beyond their own shores in a way that cannot be justified. I hope the Department will stop and review its approach so that its behavior doesn’t sour relations between us.”

Vince Cable, the Liberal Democrat Treasury spokesman and a former chief economist for Shell, said: “This appears to be another case of extra-territorial and retrospective action from the US authorities that goes against two basic principles of justice.”

A senior banking source, who asked not to be named because of the “immense legal complexity and sensitivity” of the issue said: “The US is saying to itself, ‘We must get somebody’, and in the process it seems to think it can foist . . . US legislation, even individual state legislation, on anybody.

“They are going after parties removed several steps from the business of gambling. To pursue say, an adviser on a float is frankly ridiculous. It is a straightforward case of the Government being responsible for setting and arranging sensible boundaries on what the US can request.”

“It appears that the Department of Justice is waging a war of intimidation against Internet gambling,” said I. Nelson Rose, a professor of law at Whittier Law School in Costa Mesa, Calif., who is an expert on Internet gambling law in a New York Times report.

Monday the British Stock Exchange reacted. Shares in European based online gambling firms dropped by as much as 9 percent.

``They're trying to make the founders sweat, as well as current management,'' said analyst Tejinder Randhawa at Evolution Securities in a Reuters report. Shares in PartyGaming, the world's biggest online gaming group, were down 6.5 percent by 1122 GMT, while rival Sportingbet was down 6 percent, Playtech was down 4.2 percent and 888 was down 1.7 percent. Austria's Bwin fell 0.8 percent.

``They seem to be on a mission,'' said Evolution's Randhawa.

``Extradition requests are unlikely, but they're not impossible, given what happened to the NatWest Three,'' he added, referring to three UK bankers extradited to the U.S. on charges linked to collapsed energy giant Enron.

Lawyer Clive Gringras, head of Olswang's e-commerce unit (a British based law firm), believes the move would probably have a ``chilling effect'' on the industry amid fears other countries would follow the U.S. lead.

''The only way an Internet company could really avoid risk and uncertainty would be to stop doing international business,'' he told Reuters.

According to several media reports the Justice Department believes the 1961 Wire Act, which outlawed telephone betting, could also be interpreted to include the Internet.

''I would have thought the DoJ would have been more reticent, given that the legislation was ambiguous at best,'' said Olswang's Gringras.

It appears the Justice Department regards Internet gambling as a clear and present danger to American citizens. Is it a victimless crime, or is it a crime at all. That no longer appears to be the issue. When the Justice Department is delivering subpoenas to major intentional banks including but not limited to HSBC, Deutsche Bank, Credit Suisse and Dresdner Kleinwort (the news broke over the weekend but the subpoenas were actually delivered three weeks ago) if it wasn’t obvious before the events of the last few days – the days of Internet based sports betting, an industry that generated well over a billion in 2005 and close to that total before its collapse in early October is now a dead industry, an opportunity that no longer exists.

And the final message the good folks at Pinnacle Sports left their clients: “It is with sadness that we have chosen to leave the US market, but we are so grateful for all the customers we've acquired throughout the years.”

The only remaining question, just how will anyone associated with Pinnacle Sports honor any of the future bets their ‘customers’ had made with Pinnacle, how will these Pinnacle shysters honor their promise to pay people whose account balances they absconded with? Sorry suckers – all bets are off.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Times of London, Reuters, The New York Times and The Calgary Herald

Labels: , , , ,

Monday, January 22, 2007

Location, Location, Location – the sports naming rights bar is raised again thanks to the Big Apple


In a naming rights agreement that defies economic logic, Barclay’s Bank and the New Jersey (soon to be Brooklyn) Nets last week announced a $400 million, 20-year agreement for the Nets new arena. Scheduled to open in time for the 2009-10 NBA season, the $637 million arena is part of the $4 billion Atlantic Yards project. Even as the announcement was being made Thursday, protestors were seen demonstrating outside the Brooklyn Museum against the redevelopment real estate project.

The Atlantic Yards, planned for a 22-acre site near Downtown Brooklyn, includes 6,400 rental apartments and condominiums, office towers and a boutique hotel, in addition to the arena. The project was approved by the state last month. The arena serves as the center-piece for the Atlantic Yards project. Bruce Ratner paid $300 million to buy the Nets in 2003; it’s unimaginable to think that less than four years later the Nets (who have never been considered one of the NBA’s marquee franchises) would secure a record arena naming rights sponsorship agreement.

According to a New York Times report: the protestors were accusing Barclays of participating in the state’s attempt to use eminent domain to condemn property for the project. They also said Barclays profited from the slave trade yet is aligned with Bruce Ratner, who is marketing his team to African-American fans. A company spokesman said Barclays had not been involved in slavery.

This was the first and it won’t be the last time the controversial real estate project, with the Nets arena seen as a key to the entire project, has drawn critical attention. Two weeks ago on January 10, a group of tenants currently residing on the land earmarked for the $4 billion project filed a lawsuit against the Empire State Development Corporation, the state agency that is prepared to seize properties on behalf of Forest City, Ratner’s Company (the Nets are owned by Bruce Ratner) for the project. The Empire State Development Corporation is prepared to cite ‘eminent domain’ (The power of the federal or state government to take private property for a public purpose, even if the property owner objects). Protestors, seizing land and upset populous – nothing was going to bother anyone associated with last week’s momentous announcement.

"Barclays is thrilled to partner with the Nets in this exciting endeavor. We are delighted to put our name to a development that will be a visual and economic landmark in the renaissance of Brooklyn," said Robert E. Diamond, Jr., President, Barclays PLC. "This opportunity brings together economic prosperity for Brooklyn and the chance to participate, in a unique way, in the cultural and sporting life of New York."

In addition to the agreement, Barclays has also agreed to partner with the Nets in the Nets-Barclays Sports Alliance, a non-profit organization whose goal is to promote athletics, education and personal development among young people in Brooklyn. The alliance will, as its first objective, repair and renovate basketball courts and other sports facilities throughout the borough, as well as sponsor amateur athletic tournaments and clinics for Brooklyn's youth.

This initiative mirrors the Barclays Spaces for Sports program in the UK, which helps local communities transform neglected land into the sporting facilities they want -- from skateboard parks to soccer fields or multi-use game areas. So far Barclays has opened more than 100 community sports sites across the UK.

"We are very proud to be a partner with Barclays, a prestigious company that exemplifies and shares our commitment to excellence, leadership and success," said Bruce Ratner, President and CEO of FCRC and Chairman of the Nets. "We believe this partnership marks an important moment in Brooklyn's history and its place on the international stage. With this essential investment in Atlantic Yards and the borough, we are now one step closer to our goal of bringing thousands of jobs, mixed-income housing, and, of course, a world-class arena and franchise to Brooklyn."

"We are excited that one of the most respected global financial services companies has chosen to partner with an NBA team to demonstrate its commitment to the United States market as well as its desire to make a difference in the communities where it operates," said NBA Commissioner David Stern.

"This partnership is a defining moment for the Nets business and brand," said Brett Yormark, President & CEO of Nets Sports and Entertainment. "It truly strengthens our position as a leading sports and entertainment franchise. We could not be more pleased than to have a partner as distinguished and well-respected as Barclays."

Sports are a significant part of the Barclays worldwide sponsorship portfolio, which includes The Barclays, the PGA TOUR event at the Westchester Country Club scheduled for August 20-26 this year. In addition, Barclays sponsors The Barclays Scottish Open golf tournament at Loch Lomond, the Barclays Singapore Open golf tournament and the Barclays Premiership, the world's leading soccer league.

How big a dollar deal is this? Consider the most expensive arena naming-rights deal before the Barclays Center, the 20-year, $182 million Philips Arena deal in Atlanta. And that deal was made it 1999. Earlier this month Prudential Insurance put their name on the New Jersey Devils arena set to open in Newark in September. The Prudential Center moniker will cost Prudential an estimated $105 million over the lifetime of the agreement, making the $400 million Barclays agreed to pay the Nets that much more remarkable. Geographically the two facilities will be within 20 miles of each other. Either Prudential is getting a great deal or Barclays paid far too much.

And let’s remember the New York Mets and Citigroup announced a twenty year naming rights agreement that will be worth at least $20 million annually, be for a term of 20-years, and include an option to extend the agreement to 35-years. Over the life of the agreement, the Mets stand to generate between $400 and $650 million from the sponsorship agreement. The Mets/Citigroup agreement obliterated the $10 million annual fee Reliant Energy pays the Houston Texans to call the home of the Texans Reliant Stadium.

Last year there where 13 major arena/naming naming rights agreements for the "Big Five" sports (Major League Baseball, the NFL, NBA, NHL and MLS) negotiated. The sum for those 13 sponsorship agreements naming rights deals in North America was more than $4.5 billion. 2007 has offered an impressive start with the Nets and Devils agreements with more than $505 million.

“To have an international investment bank without a major local presence to invest the way they are in the image of Brooklyn and the image of New York just is a remarkable vote of confidence,” New York City’s deputy mayor for economic development, Daniel L. Doctoroff said. “The idea of using Brooklyn and New York to build a global brand is one that we think is a very wise investment.”

Barclays’ lack of market awareness in the United States played a key role in the Nets search for a major corporation who might be interested in paying significant dollars for their arenas naming rights. Brian Schecter, an analyst who tracks naming rights for Kagan Research told the New York Times the deal made perfect senses.

“It strikes me as a nice price tag,” he said. “What makes this deal even more lucrative is that it’s basically a basketball-centric arena.” (Philips Arena is home to both the NHL’s Atlanta Thrashers and the NBA’s Atlanta Hawks)

Brett Yormark, the president of Nets Sports & Entertainment, made it clear in seeking a major sponsor for the Nets new arena he targeted Barclays as a possible naming rights buyer, with a New York-based fashion company, a bank and two telecommunciations corporations. With the arenas projected cost now pegged at $637 million the $400 million will go a long way towards paying a significant share of the arena’s capital construction costs.

“We said: ‘Who needs a game changer here? Who’s got a footprint here, but isn’t big enough?’ and Barclays was on the list,” he said in a New York Times report. “As we scoured financial institutions we saw Barclays needed a game changer, that they don’t have as big a presence or brand recognition here as in the U.K. And we saw that it got involved with the Barclays Classic in Westchester.”

As big and important as the Nets agreement with Barclays will be, many believe Wasserman Media marketing, the naming rights for the yet to be built Giants/Jets stadium located in The Meadowlands, minutes from the heart of Manhattan, will negotiate the biggest stadium/arena rights deal ever.

The new 82,500-seat New Meadowlands Stadium, scheduled for completion in time for the 2010 football season, will be located just north and east of the site of the current Giants Stadium at the Meadowlands Sports Complex in East Rutherford, N.J. The Giants and Jets ownership families have formed a joint venture to build the new stadium as 50-50 partners, working together to create the NFL's premier sports and entertainment facility. The new stadium is being 100 percent privately financed by the two joint venture partners.

"The New Meadowlands Stadium arguably represents the most unique opportunity in the nascent history of naming rights," said Casey Wasserman, Chairman and CEO of WMG. "Combining the power of the NFL and its reach with two of the greatest sports teams creates an unparalleled platform for a marketer to align itself with the most prominent media, entertainment and sports destination in the world."

New York Giants Chairman Steve Tisch said, "Our overall objective is to create a strong identity for the stadium and environs as a world-class sports and entertainment facility. Wasserman Media Group has the experience and background to help us explore all the alternatives we have and to make the important decisions about how best to achieve our goals by associating ourselves with dynamic and exciting sponsorship, marketing and naming partners."

Woody Johnson, Chairman and CEO of the Jets, said, "This marks another important step as we work to build the premier football stadium and entertainment complex in the NFL. Wasserman Media Group will expand and enhance our vision to make the New Meadowlands Complex the most innovative and memorable spectator environment in professional sports. We welcome them as partners in this process and look forward to working together in the coming months and years."

John Mara, President and CEO of the Giants, said, "We look forward to establishing mutually beneficial affiliations and relationships that will serve to enhance the prestige and image of what promises to be a truly extraordinary facility. We expect to secure a naming partnership arrangement that reflects the unique nature of the opportunity."

New York Jets President Jay Cross said, "Designed from a fan perspective, this facility will transform the game day experience for our fans through cutting-edge technology and new amenities. We look forward to engaging potential sponsors and marketing partners who are as excited as we are about a project which will boast the best entertainment experience in the NFL."

"Given the strength and heritage of the Jets and Giants, coupled with the appeal and size of the market they serve, we anticipate there will be monumental interest in this historic opportunity," said Jeff Knapple, President, WMG Marketing. "We look forward to helping the teams realize the potential for a select partner to fully utilize this extraordinary marketing platform."

It’s easy to appreciate why everyone associated with the selling of the Giants/Jets stadium naming rights believe they have the Holy Grail of corporate sports naming rights to sell. It begins with an opportunity to showcase your company’s name a minimum of sixteen days each year on national television. It’s reasonable to expect either the Giants or Jets to host playoff games on a regular basis, bringing even more value to whatever company agrees to spend hundreds of millions of dollars in a long-term agreement. It’s likely during the lifetime of the stadium the United States will host at least one World Cup and with a state-of-the art facility located in the shadow of Manhattan. In all likelihood the World Cup final (the most watched event in the world) will be played there.

The Yankees who broke ground on their $800 million stadium in August have no plans to sell the naming rights for the new Yankee Stadium. Give George Steinbrenner credit, it’s another example of how he does business, and realizes what the Yankees brand name is worth. The Yankees would have been able to sell the naming rights to their new stadium for more than $10 million a year. However, renaming Yankee Stadium with a corporate name would sully the Yankees brand, taking away from the big picture philosophy Steinbrenner has always had during his stewardship as Yankees owner.

The new Yankee Stadium has been designed to generate tens of millions of dollars annually in corporate sponsorship naming rights fees. Each gate at the new Yankee Stadium will have its own lead (title) sponsor. The Yankees brand will drive decision makers to buy parts of the stadium for millions of dollars. Assuming the Yankees can meet their goals of what amounts to a series of ‘mini-naming rights deals’, and there is no reason to believe they won’t, the Yankees will easily surpass $10 million in annual corporate naming rights.

The variable in the three recent stadium/arena New York area agreements is the yet-to-be signed multi-million annual for the Giants/Jets stadium, and the Yankees knowing full well the tens of millions of dollars they’ll be able to generate without giving up the sanctity of the Yankee Stadium name is the New York market. There is no bigger or more important market. It’s a marketing and sponsorship selling advantage New York based sports franchises have, that other markets know all too well they do not have.

"I think the Jets and Giants right now are licking their chops," Michael Kelley, a senior VP for the Bonham Group, a consulting firm with vast experience in naming rights told New York Newsday.

Best guess? "With people seeing 20 million for the Mets and Nets, they could get up to 30 million," he said. "The question is who can afford that? There's a small handful of companies that can."

Deep pockets are a must. Said Kelley: "All these numbers have been blowing the cap off what everyone thought they'd go for."

Jeff Knapple, the president of WMG Marketing said to The New York Times: “We’ve watched with a keen eye toward what the Mets and the Nets have done. It’s an indication of the power of the New York marketplace and its position in the nation and the world.”

Knapple negotiated the most expensive arena naming-rights deal before the Barclays Center, the 20-year, $182 million Philips Arena deal in Atlanta.

“Philips was a massive leap above Staples Center, and it’s held for seven, nearly eight years,” he said.

The key isn’t the teams that are playing in the facilities, the key isn’t the leagues or the number of teams using those facilities, and it really is location and timing. Yormark, the Nets President did his homework and found Barclays a British based company who believes they can generate greater market awareness through a sports naming rights agreement. Is it possible, if not likely probable Barclays may be involved in helping to provide some of the financing for the $4 billion Atlantic Yards project? If nothing else the awareness could serve as a catalyst to the many businesses looking to find a bank to help put together their needed financing.

The New York market had, until 1996, barely entered the naming-rights world except for the Continental Airlines, 12-year, $29-million deal to rename Brendan Byrne Arena in the Meadowlands. Now, a combined $800 million is going to the Nets and the Mets. And in a deal announced earlier this month, Prudential Financial will spend $105.3 million to name the Devils’ new arena in Newark for 20 years. In less than two months three separate stadium/arena naming rights agreements in the Greater New York area have generated close to $1 billion in sponsorship fees. That’s the power of location, location, location.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The New York Times

Labels: , , , ,