In light of yesterday’s trade/non-trade of Chris Paul from the Hornets to the Lakers, I feel the need to re-publish my take on the inherent conflicts of interest that arise from having a franchise owned and operated by a league. I’ve heard and read several different arguments over the merits of this trade and why it should have been allowed, including:

• The Hornets got back a lot of talent and it was a fair package for Paul.
• The Hornets have a GM in place that is keeping the best interests of the team in mind.
• Paul wasn’t going to sign an extension with the team, so it’s best for them to make a trade.

The actual reason why the trade wasn’t allowed to go through is unclear. The “official” statement was that the Hornets decided against it, but in reality, there has to have been a decision at the league level, which makes sense because…THE LEAGUE OWNS THE TEAM! General managers have to report up to the team owner, and in this case, the team owner is the group of all 29 other team owners. If those team owners do not want the trade to go through, whether or not the reasons are justified or completely selfish in nature, then the trade cannot go through.

Update: For all those people who feel that David Stern either made this decision himself or shouldn’t have “allowed” this veto to happen (cough, cough, Bill Simmons), his bosses are the other 29 team owners. For all of his authority, he still has to listen to them, even if he disagrees with them.

Clearly, this is a gigantic conflict of interest, and it’s a big reason why situations like this should be prevented at all costs. It affects both team decisions (trades, signings, contracts) and business decisions (television contracts, relocations, sponsorships). I wrote about this earlier this year with regards to the Los Angeles Dodgers, and I also include other examples with the Texas Rangers, Montreal Expos, and funny enough, the New Orleans Hornets.

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By now, you’ve probably already seen the news that Major League Baseball has taken control of  day to day operations of the Los Angeles Dodgers away from current team owner Frank McCourt. Instead of trying to weigh in on whether MLB’s decision in this case was right or wrong and what McCourt should or shouldn’t do, I’d like to take a philosophical look at the concept of a league-owned or league-operated franchise. This situation has come up a few times in professional sports over the past decade, including the Texas Rangers, the Montreal Expos/Washington Nationals, the New Orleans Hornets, the Phoenix Coyotes and now the Dodgers. While the circumstance behind each situation is different, there are some fundamental issues at hand any time a league steps in to manage an individual franchise.

If a league owns or operates an individual franchise, in essence the other 30+ owners within that league are now in charge of that team, since the league itself is owned equally by all of the separate team owners. While each owner is primarily concerned with their own franchise, even having a 1/30th stake in another team is a significant investment. This additional “ownership” can represent a unique conflict of interest for those put in charge of the team’s operations.

The owners want this franchise to be run profitably, but what is the best way to do that? Often times, the best way to generate a short-term profit is through reducing costs, whereas long term profit is more sustainable via investing in the team’s operations. If the other owners care more about the short-term, which could easily be the case since they theoretically won’t own the team for long, then those in charge may be forced to cut costs. In addition, the specific approaches the team takes in their operations could be dictated by that league’s revenue sharing system. If more revenue is shared from ticket sales that local media, will those in charge be forced to focus more on that specific revenue stream to the detriment of the other.

This problem is even more significant when looking at the on-field operations of the team. Those in charge should theoretically continue to do what they can to help the team win, since that will in turn lead to more revenue. However, if that team wins more games, logic dictates that other teams will lose more games, which can decrease revenue for those team owners. This question came up last year with the Texas Rangers. The team was doing well, but until new ownership was in place, the team seemed unlikely to make any roster changes. A more recent example took place this year with the Hornets, when those in charge of the team did make a significant trade in an attempt to improve the team. Mark Cuban spoke out vehemently against this trade in particular because the team took on additional salary, which mean as a partial owner of the Hornets, Cuban could end up losing more money. He didn’t seem upset about the team’s attempt to improve (he said that he wouldn’t mind the trade if they hadn’t taken on additional salary), but I wouldn’t be surprised if behind the scenes, other owners were angry about this aspect as well.

Finally, you also need to look at the context under which the league steps in. One of the most unusual arrangements was when MLB decided not only to “purchase” the Expos, but also arrange for the sale of the Marlins to former Expos owner Jeffrey Loria, and in turn the sale of the Red Sox to former Marlins owner John Henry. While I will not attempt to analyze the various motivating factors behind these deals (how often do you see owners “trade” their team?), there’s no doubt that Henry and Loria benefited greatly from the situation, while the “rest” of the league ends up owning the orphaned Expos, which surely had a negative cash flow until the time they were sold as the Nationals. Again, there does seem to be some conflict of interest when other owners end up having to support the operations of an additional team as part of another owner’s franchise purchase and sale.

Even putting that unique situation aside, other events will continue to arise where a league has no choice but to step in and own or operate a franchise. It is clearly in the best interest of any professional sports league to make sure all of its teams can operate successfully. The conflicts that these situations present are real, and must be delicately managed by all parties involved until operations can be turned back over to the team, hopefully as quickly as possible.

Today’s post is from guest blogger Travis Yost, an Arizona State University graduate with his B.S. in Business Management. In the past, Travis has covered the World Series of Poker for BLUFF Magazine and acted as a contributor to the likes of Deadspin, KuklasKorner, and MSN FoxSports. Currently, he covers the Ottawa Senators for HockeyBuzz.com.

Just last week, NBC was able to extent its partnership with the Olympic Games through the year 2020, forking over a hefty $4.4B sum in exchange for broadcasting exclusivity.

Exact terms of the contract are not yet known, but one certainty is that the Olympics will remain on NBC for the next four games, starting with the 2014 Winter Games in Sochi, and ending with the 2020 Summer Games in a locale still to be determined.

Obviously, NBC’s been pretty forthright and open about making the Olympics their proverbial bread and butter, but it does beg the question of whether or not spending such massive amounts of money for a competition that’s waned in popularity over the past couple of decades is truly a smart business decision.

When Dick Ebersol decided to step down as Chairman of NBC Universal Sports & Olympics, many expected the business plan for the network to change. As a sports entity, NBC’s primarily targeted two fronts – the National Hockey League and the Olympics – in an attempt to stay ahead of the curve and build on the potential for growth in unsaturated markets.

For that reason alone, it wasn’t entirely surprising to hear that NBC and Comcast managed to strike a deal with the National Hockey League a month ago. NBC’s been fairly adamant that the National Hockey League, by and large, will continue to grow over the next decade.

The success the league’s had since the devastating lockout in 2004-2005 is quantifiable, so when NBC handed the NHL $2B for exclusivity and broadcasting rights over the next ten years, many praised the network for it’s focus on building in both the short and long-term. With the deal, NBC and the soon-to-be renamed Versus will offer a much more enviable product line, one that’s going to deliver the game of hockey on a daily(as opposed to weekly) basis.

Dick Ebersol – now Mark Lazarus – and NBC’s other business venture in the Olympic Games has been far more treacherous. When reports surfaced back in 2010 that NBC Universal would lose almost $200M on the Vancouver Games alone and continue their hemorrhaging in the 2012 London Games, many expected the network to shy away from a massive overpayment at the very least, and in all probability, back out of a bidding war with other network conglomerates.

That wasn’t the case.

The $4.4B bid NBC put forward crushed the opposition. For a benchmark, ESPN had offered just $1.4B for the 2014 and 2016 games, putting an average at $700M per. NBC’s deal is 1.5 times that. Said ESPN in a public statement:  ”To go any further would not have made good business sense for us,” ESPN said in a statement. “We put our best foot forward with a compelling offer that included the enthusiastic participation of all of The Walt Disney Co.’s considerable assets.”

For whatever reason(s), it’s pretty apparent that NBC thinks the American public will begin to buy figurative stock of the Olympic Games and tune in with regularity, but considering recent trends, I’m not sure the general public is as confident.

Again, the deal makes fiscal sense if the Peacock Network can change how they deliver their product and make it once again appeal to men and women of all ages. NBC took a royal beating from media types for their ‘tape delay’ broadcasts of the 2010 Olympic Games, but that now seems like a thing of the past. In this day and age, there’s really no excuse for tape delay in the first place, especially when you consider how readily available information is through the internet. After the merger with Comcast,  NBC is changing its tune and remains confident that they’ll be able to broadcast all events live, meaning an almost certain ratings jump across the board.

One problem, though – the United States is approximately 14 hours behind Russia(host of the 2014 Summer Games), meaning that the appeal of ‘live events’ rapidly diminishes. Aside from a very select few sports – basketball, soccer, and hockey come to mind – there aren’t a whole lot of events that will have Americans staying up during all hours of the night.

Another problem includes general availability when it comes to broadcasting. As per USA Today, NBC is strongly considering using internet web streams as one of their primary ways of delivering live content. Again, there seems to be a certain disconnect between NBC’s aspirations and the reality amongst the general public. For many, if it’s not on television, it’s not worth tuning into, period. And, that’s without even mentioning the fact that many still do not have consistent high-speed internet access to follow the Olympic Games online.

There’s no question that NBC and the Olympic Games remain optimistic about creating and sustaining a profitable relationship, but the reality is this deal – coined ‘egregiously large’ by some – is of the high-risk, high-reward nature. You have to admire NBC’s courage and faith in their forecasting, but another contract that sees the hemorrhaging of funds for years to come could mean the downfall of one of America’s largest commercial broadcasting television network.

By now, you’ve probably already seen the news that Major League Baseball has taken control of  day to day operations of the Los Angeles Dodgers away from current team owner Frank McCourt. If not, you can read more about it over at ESPN.com and on Darren Rovell’s SportsBiz blog.

Instead of trying to weigh in on whether MLB’s decision in this case was right or wrong and what McCourt should or shouldn’t do, I’d like to take a philosophical look at the concept of a league-owned or league-operated franchise. This situation has come up a few times in professional sports over the past decade, including the Texas Rangers, the Montreal Expos/Washington Nationals, the New Orleans Hornets, the Phoenix Coyotes and now the Dodgers. While the circumstance behind each situation is different, there are some fundamental issues at hand any time a league steps in to manage an individual franchise.

If a league owns or operates an individual franchise, in essence the other 30+ owners within that league are now in charge of that team, since the league itself is owned equally by all of the separate team owners. While each owner is primarily concerned with their own franchise, even having a 1/30th stake in another team is a significant investment. This additional “ownership” can represent a unique conflict of interest for those put in charge of the team’s operations.

The owners want this franchise to be run profitably, but what is the best way to do that? Often times, the best way to generate a short-term profit is through reducing costs, whereas long term profit is more sustainable via investing in the team’s operations. If the other owners care more about the short-term, which could easily be the case since they theoretically won’t own the team for long, then those in charge may be forced to cut costs. In addition, the specific approaches the team takes in their operations could be dictated by that league’s revenue sharing system. If more revenue is shared from ticket sales that local media, will those in charge be forced to focus more on that specific revenue stream to the detriment of the other.

This problem is even more significant when looking at the on-field operations of the team. Those in charge should theoretically continue to do what they can to help the team win, since that will in turn lead to more revenue. However, if that team wins more games, logic dictates that other teams will lose more games, which can decrease revenue for those team owners. This question came up last year with the Texas Rangers. The team was doing well, but until new ownership was in place, the team seemed unlikely to make any roster changes. A more recent example took place this year with the Hornets, when those in charge of the team did make a significant trade in an attempt to improve the team. Mark Cuban spoke out vehemently against this trade in particular because the team took on additional salary, which mean as a partial owner of the Hornets, Cuban could end up losing more money. He didn’t seem upset about the team’s attempt to improve (he said that he wouldn’t mind the trade if they hadn’t taken on additional salary), but I wouldn’t be surprised if behind the scenes, other owners were angry about this aspect as well.

Finally, you also need to look at the context under which the league steps in. One of the most unusual arrangements was when MLB decided not only to “purchase” the Expos, but also arrange for the sale of the Marlins to former Expos owner Jeffrey Loria, and in turn the sale of the Red Sox to former Marlins owner John Henry. While I will not attempt to analyze the various motivating factors behind these deals (how often do you see owners “trade” their team?), there’s no doubt that Henry and Loria benefited greatly from the situation, while the “rest” of the league ends up owning the orphaned Expos, which surely had a negative cash flow until the time they were sold as the Nationals. Again, there does seem to be some conflict of interest when other owners end up having to support the operations of an additional team as part of another owner’s franchise purchase and sale.

Even putting that unique situation aside, other events will continue to arise where a league has no choice but to step in and own or operate a franchise. It is clearly in the best interest of any professional sports league to make sure all of its teams can operate successfully. The conflicts that these situations present are real, and must be delicately managed by all parties involved until operations can be turned back over to the team, hopefully as quickly as possible.

In the second half of my “Olympic Insights” posts, I’d like to share some information from Carlos Nuzman, President of the Rio 2016 Host Committee:

On the geographical design (see picture):

• They are using a four cluster plan, deciding not to concentrate all venues in one area of the city. The games needed to go to all areas of the city and the legacy needed to reach all people throughout the city.

On transportation and security:

• The biggest challenge for any bidding city is transportation, because 300,000 people come to your city. Rio is building multiple new metro lines, including one that is 30 meters under the sea. They are also building new BRT (bus and rail) lines between other clusters, which will be operated by the city, over 100km of BRT lines in total.
• The metro lines and tunnels are already started, with some parts done by next year. They have also started work on the port as well.
• Transport is top priority and security is second.
• The city is committed to solving all security issues. There is enough time until the Games, and safety is important to the legacy of the games and the city.

Other thoughts:

• Having the World Cup two years ahead of Games will be a big help in preparing. Both events share the problem of transport, so the airports will be ready to handle increase usage for the Cup. The two events have different organizing committees, but work in a similar way, raising private funds and working with public resources for infrastructure.
• Politicians are very active and support the process, but they are not the ones driving the process.
• Every organizing city will be different and it is hard to compare. Rio will be unique, just as London and Sochi will be unique.

The Rio 2016 Bid and Victory Video:

www.youtube.com/watch?v=_2elAldj2JU

Carlos Nuzman talks about the legacy of Rio 2016:

www.youtube.com/watch?v=i3SyNFyxgNI

This is my last post until next week. Time to enjoy some of the sights of Barcelona. Early next week, I will have additional posts on FC Barcelona, social media, and more, along with more pictures and videos. In the meantime, you should also visit www.TrendsInSpots.org, the official blog for the conference. Thank you for reading!

Today, we heard from not one but two Presidents of Olympic host city organizing committees, Dmitry Chernyshenko from Sochi 2014 and Carlos Nuzman from Rio 2016. With a limited amount of time per panel, there are only so many topics you can really dig into, but the discussion included mascots, logos, planning, transportation, the bid process, security, environment, social media and legacy. Here are some of their thoughts:

Dmitry Chernyshenko and Sochi 2014:

• On new media:  He’s very active on Twitter (@DChernyshenko) and Facebook, both personally and on behalf of Sochi 2014. The power of new media is the speed of distributing information. It’s the most powerful communication channel, especially with their focus on youth.
• On legacy:  The Games will go a long way to improve the environment. Green standards are being used for all new venue construction. They want to be as carbon-neutral as possible throughout the construction and the Games. There is also a lift for the Sochi national parks, which in turn will help save the snow leonard (being used as one of the mascots as well)
• On planning:  They literally started from nothing, a “blank canvas” which was a big advantage allowing them to build an infrastructure. They are the biggest construction site in the world and have over 42,000 workers involved.
• On accessibility:  Sochi will be a barrier free environment, building full access for disabled individuals. They are committed to changing the public attitude about disabilities, and want to establish best practices to become a model city.
• On corruption: There is an image of corruption in Russia, but the Sochi project is very transparent and wants to act as an anti-corruption model for other projects.
• On security:  You can never completely stop terrorism, but the authorities are doing everything possible. There are 100 different nationalities living in this area in peace. Sochi “will be” the safest place ever for the Olympics.
• On measuring the impact: The IOC measures a lot. There are 111 different social, economic and environment measurement points measured to show improvement. They are already showing positive results for the environment, disabled access and their volunteer program. This builds a legacy for the city and the country.

Background on the design of the Sochi Olympics:

www.youtube.com/watch?v=YbCh1xXOJXo

Thoughts on the NHL’s participation and on post-event economics (my questions!)

www.youtube.com/watch?v=JAFNh4_N0y4

I will be back with another post on Carlos Nuzman and Rio 2016 later today or tomorrow.

We’re halfway through the first full day of the conference and there have been lot of great comments from the panelists. Here are some general remarks from some our today’s speakers (these aren’t specific quotes, but I tried to attribute the best I could). You can also see my photo recap of the event in the Global Sports Forum Barcelona photo album on our Facebook page. Finally, check back later for videos from each session – I’m working on uploading them all ASAP!

Opening Remarks from Sergey Bubka:

• Sport and the Olympic spirit has an incredible ability to impact society and reach a global audience.
• We can use sport to help overcome the obesity problem that has spread to the east.
• When we consider “what’s next” for sport, we must always think first about our youth.
• The expansive reach of Facebook and socail media is now an important tool to promote sport and communicate with fans around the world.

www.youtube.com/watch?v=qSSkwGzp1-Q

Women Who Make a Difference in Sport:

On the current state of women’s sports:

• Donna De Verona: On how far women’s sports has come: We have the expansion of womens swimming race options, growth of women’s soccer, the Women’s world cup, netball, a female minister of sports, women who sailed around the world, women competing more than ever. We’re up to 43 percent of all Olympic athletes and we have women serving on the IOC.
• Chantal Jouanno: There’s still aa big difference in the percent of women vs. men that competes in athletic competitions, ten percent of women to 25 percent for men. Cultural reasons and young women having children definitely impact this number.
• Mia Hamm: There are still a lot of “firsts” when referring to women and sports, including a panel like this. I want to see women’s sports just be another part of the conference.  I’m hopeful for the opportunities for my girls have as they get older.
• Samantha Davies: I’m making the most of being a leader for women in sports. For me, in a sport where women compete on same field as men, we gets a lot of media coverage. Two women competed out of 30 racers in last competition and we finished fourth and sixth.
• Katerina Witt: Figure skating is a historically female sport. Only recently have I seen on the business and television side, and in viewing other female sports how much the discrepancy exists in terms of male vs. female involvement.

On the topic of a recent ESPN nude photo layout:

• Katerina Witt: In the end, its about tv ratings. We need to get people to watch. It is possible for something provocative to be done well and tastefully, and in a way that can promote the athletes and the sport.
• Samantha Davies: Men’s rugby teams have done similar things. It creates buzz and interest. It creates and communicates an image, and builds a following.

Why do womens sports get less media coverage:

• Chantal Jouanno: Current male sports already dominate a large percentage of existing coverage, leaving less hours for womens sports coverage.
• Donna De Varona: The men at television networks are making the decisions. Even the Women’s World Cup was a hard sell at first, but it was a huge success. We need leadership in place to push for it.

The Yahoo! Experience

• Yahoo is number one for sports content online in the world. A completely advertiser supported model but they want their ad content to be an additive experience for the user.

Four components to digital content:

1. Maximize your content:  Leveraging your content across multiple digital channels along with offline integrations and events for buzz and traditional media exposure.
2. Personalize your content:  Making that content relevant for each person. People wants a custom experience but the don’t want to take the time to edit things themselves, so do it for them. They also want to connect with fans with similar interests via social media, which makes the content personal. Finally, local is very personal, whether its little league or niche sports (the long tail of sports content).
3. Build your brand:  How does the digital canvas tell a story in a way that makes an impact for a brand. Incorporate the brand into the online experience for the user.
4. Be Everywhere:  The mobile internet has grown and is now a real channel to consume sports content. This means custom applications to deliver content via these mobile options.

Adidas and the UEFA: For this panel, I sent several Twitter updates, as did the other attendees (search for #GSFB). Here were some observations:

• For adidas, the Champions League ball is the iconic element. And the partnership with UEFA is a big platform for them. #GSFB
• Adidas introduces ball, footwear & apparel every year tied to the Champions League platform. Opening dedicated retail store this year. #gsfb
• UEFA: Decisions on format changes are purely based on the game. They discuss with partners, but decisions aren’t designed for them. #GSFB
• adidas admits that they’d love to see adidas on an FC Barcelona jersey. Not too shocking I’d imagine. #GSFB
• I really get a feel from current panel that adidas+UEFA really is a true partnership. Deep investment and strong value to both sides. #GSFB
• From @krisgotsch: UEFA at #GSFB; ‘What Adidas call customers, we call fans’
• From @martina_lacey: It would be hard for Adidas to walk away from UEFA & see someone else w/ their hands on their balls #GSFB

A few weeks back, I noticed that Kristi Dosh (@SportsBizMiss) was tweeting a bit about what sports leagues are the “healthiest.” This was in response to some comments from others saying that MLB was in trouble, to which she vehemently disagreed. This seemed like a great topic to discuss for all four of the major U.S. sports leagues, and who better to discuss them with than Kristi herself (you can learn more about Kristi at www.KristiDosh.com).

For each league, we’re going to use the following five criteria to determine an overall grade:

• Labor Stability
• Financial Success
• Media Coverage
• Fan Affinity
• Competitive Balance

Russell: First off, I want to thank you for participating and sharing your thoughts on this topic. I really appreciate it.  Let’s start with MLB, which I know you’re particularly passionate about.  I have to say that ever since the 1995 season, I’ve been very impressed with the relationship between the league and the players association, at least when it comes to keeping the product on the field (I’m going to put aside their roles in PED usage for now).  They’ve bested themselves year over year when it comes to total revenue generated, and I believe their attendance numbers have stayed fairly strong in spite of the economy.

To me, the biggest challenge to be in grading MLB comes from the tremendous impact of the local market on media exposure, revenue and team performance.  Revenue sharing has helped, but as we learned earlier this year, some teams don’t apply their share of the pie to improving the team, and that impact on competitive balance hurts the league as a whole.

With all that said, my initial inclination is to give MLB a solid B.

Kristi: I agree with you on the great working relationship we’ve seen between the league and the players association since the strike.  Not only have they reached new collective bargaining agreements without the threat of another work stoppage, they’ve done it without going to the media to make threats and grandiose statements (which is more than I can say for the other three leagues).  For that reason, I recently wrote they are the healthiest of the four major professional sports leagues.  While the other three leagues take to the media to throw around accusations and demands, MLB will quietly come to a new agreement following the 2010 season.

You’re right about the growth of revenue sharing, and I think we’ll see some modifications made to the provisions in this next agreement.  Overall, however, I think the model is working in terms of the amount of money being moved around between teams.  MLB now moves upwards of $400m a year between teams, which is massive compared to the NBA, which barely moves around $50m a year.  I’m not sure any major tweaks need to be made to the formula for revenue sharing, but the leaked financial statements we all saw a few months ago prove that there need to be rules regarding the use of funds, or some sort of consideration given to how teams use funds to improve on the field performance.  It could even be modified to take into account how well the team is run.  For example, the NBA’s formula takes into consideration certain market performance standards, such as the value of the team’s media deal in relation to its market size and the value of sponsorships in relation to the size of the corporate base in the market.  The bottom line is that revenue sharing is going to need a little bit of a face-lift this time around, but there’s no reason to believe that won’t happen since the revenue sharing provisions have been modified with each new collective bargaining agreement.

The real coup for MLB is MLB Advanced Media.  MLB is head and shoulders above the other leagues when it comes to their media content.  No numbers have been released since 2007, but MLBAM grew from $36m in revenue in 2001 to $450m in revenue in 2007.  MLBAM not only manages MLB.com content, including live game packages, it also manages content for the NCAA and tennis’ French Open.

The last thing I thought about in terms of health of the league as a whole was attendance.  MLB got some negative press for decreased attendance in 2009, but I believe it was deceptive.  Attendance was down 6% in 2009, but it was the fifth highest attendance in MLB history.  When you take into consideration that 2008 was the second highest ever, and the fact that smaller stadiums for the Yankees and Mets opened and accounted for nearly 30% of the decline, MLB had nothing to be ashamed of in terms of attendance.  The season that just ended saw only a 0.42% decline, which isn’t really disappointing considering the economy.

I would give MLB an A-.

Russell: Great thoughts. I think the amount of revenue sharing shows both MLB’s strength and weakness. The teams willingness to agree to this system that supports teams in smaller markets shows a deep commitment to health and sustainability of all teams. However, the size of the revenue number shows how skewed those numbers are across the different markets, much more so then the other three major U.S. leagues. Unless specific structures are put in place to make sure that money goes back into the game, it’s too easy for small market teams to take the profit and run. And with such differences in local media revenue between small and large market teams, I can’t see that revenue sharing number dropping without other significant changes in league structure.

MLBAM is also a very valuable asset, but has its own set of limitations. One of the grading criteria was fan affinity, and some of MLBAM’s control measures when it comes to sharing and distribution of content can be frustrating for fans, and in my opinion, hinders their ability to engage with fans. My hope is that they will eventually find a better balance between ownership of content and shared distribution through non-MLBAM channels to stay better connected with younger audiences.

I completely agree with your take on their attendance numbers. With the current economic landscape, I was actually very impressed with how MLB has maintained their level of attendance the past couple of seasons.

The only other potential “problem” I wanted to bring up was with television ratings, specifically the World Series. This year’s ratings could be a sign of baseball fans being too fragmented across markets. Without the presence of a major market playing for the title, too many sports fans just didn’t tune in. I know that the time adjustment for this year’s games and the conflict between Fox and Cablevision also contributed to the low ratings, but I hope baseball hasn’t become too dependent on the success of major-market teams like the Yankees and Red Sox.

While I see why you’re giving them an A-, I don’t think I can go any higher than a B+ at best.

Hopefully if you’re reading this, you are a member of The Business of Sports LinkedIn group… if not, what are you waiting for? A few days ago, Deandra Duggans (a previous guest blogger and author for www.sportsandalatte.com) shared a great article with the LinkedIn group regarding how the Pac-10 has rebranded their image (“Led by savvy commissioner Larry Scott, Pac-10 rebrands its image”, sportsillustrated.cnn.com). She picked a great topic, because a few of the other group members started a nice conversation about the conference’s efforts. I want to share that conversation with you here in case you missed it.

Dallon Christensen CMA, MBA, CPA/CITP:

Larry Scott is an absolute visionary. His idea of how to create a complete brand image of the Pac-10 is a model for any organization (not just sports organizations) looking to create a clear image in the minds of consumers. I’m sure that the Pac 10 will eventually create their own TV network, so building this integrated brand will do wonders for their image. As a Midwest native and a Big 10 fan, I see a lot of similarities between the two conferences in terms of academic and athletic balance as well as geographic spread. Scott’s efforts to capture an image are important.  I love the new logo. It reminds me a lot of the traditional shield logos I see on European soccer jerseys. It’s very catchy.

AJ Maestas:

The Pac-10 is going to have a tough time replicating the revenue generated by the Big 10 through media rights — even after creating its own network — because the Pac-10′s fan base, in terms of both reach and affinity, can’t quite match the Big 10. Our firm’s research suggests the Pac-10 should eventually get about $14.5 million per school per year, which is obviously short of the Big 10′s $21 million per school per year.

However, if Scott can continue generating buzz for his conference, and if he can keep alive the idea that a 16-team super conference is still a future possibility, he could very well generate a bidding war in upcoming media rights negotiations and drive that number up. There are more interested parties than ever (Fox, Turner, Comcast, etc.) and Scott could use that to his advantage.

We still don’t think the Pac-10 can reach Big 10 revenue numbers, but maybe it can approach the SEC’s $17 million per school per year, which would be remarkable considering where the Pac-10 used to be.

Alan LaFleur:

Pac-10 can certainly get there given enough time. They have markets ranging from LA to Denver and then all the way up to Seattle. That is a lot of population. The problem they will face is that their demographics are not as sport-driven as the Big 10 demographics or even the SEC demos. It will be interesting to see what the PAC-10 can do.

Kathy Deboer:

Scott’s ideas for reaching out to Asia are innovative and his conference is perfectly situated to be a leader in this area. Look at all the IMG investment in sports in Asia in the last couple of years. Obviously some of the folks in the business sector think college sports and global expansion is the next growth marketplace. Asia outreach will also be a major boost for volleyball, which the Pac 10 plays pretty well. The sport is huge in China, Japan, and Korea, in terms of both participation and media interest.

Dallon Christensen CMA, MBA, CPA/CITP:

AJ, what kind of population growth projections did you factor into your analysis? I’m curious because the American population continues to move away from the Midwest and Northeast (Big 10 country) and toward the south and west (SEC, ACC, and Pac 10 country). In fact, there were rumors flying about the Big 10 attempting to lure ACC schools like Georgia Tech and Virginia to move toward the southeast. While I agree the Pac 10 probably will not reach Big 10 or SEC revenue levels in this contract, I think the chances are high they could reach those levels in 10 years because of the population shifts in this country (same holds for the SEC).

Soccer and baseball are also very popular in the Asian countries, and the Pac-10 is extremely strong in those sports as well as volleyball. In fact, Scott’s vision in seeing the Olympic sports as a gateway to the Asian sports market is the most remarkable thing I’ve taken from this story.

This is the type of engaging sports business discussion I love to see on the blog and in the LinkedIn group. There are so many great industry professionals that are a part of the group and willing to share their opinions that all of us can benefit from their knowledge and insight. If you haven’t already, join the group today and join the discussions!

After a hectic couple of weeks, I need to ramp up my writing again. So let’s get it started today with some links and recaps of some interesting sports business stories from the past couple of days.

Brits May Challenge Visa’s 2010 Olympics Exclusivity – Marc Perton, The Consumerist (thanks to @khuda1 for the link)

As one the highest level sponsors of the Olympics, Visa has benefited not only from the traditional sponsorship elements, but also complete exclusivity for any credit card purchases made at the Games. The Office of Fair Trading in Great Britain has some issues with this, as it restricts commerce and hinders open competition in the marketplace. This reminds me a bit of beer and beverage sponsorships here in the United States. In order to not restrict competition, the pouring rights for a particular stadium cannot be directly tied to a sponsorship for that company. This is definitely a story to watch for the 2010 (and future) Olympics. If this aspect of the sponsorship is overturned, does the sponsorship hold the same value to Visa? And would they still be required to pay the full cost of their deal?

How Much Will Hayward Cost the Pacers? – Darren Rovell, CNBC

It was almost the “perfect” scenario for the Indiana Pacers. They were one pick away from being able to take their hometown hero Gordon Hayward in the 2010 NBA Draft, until the Jazz swooped in and selected him. This could have been one of those unique opportunities where a team could have made a draft decision (outside of the top 2-3 picks) that fits the team on the court and would provide an immediate lift to ticket sales off the court. Darren Rovell reminds us of other past situations where some teams have made picks with too much focus on the revenue side (the Charlotte Bobcats picking two UNC players in 2005) and where other teams looked past the short-term revenue lift and stuck to their on-field preferences (Houston Texans passing over Vince Young and the same Pacers selecting Reggie Miller over Steve Alford).

Old Navy co-sponsors Coney Island hot-dog contest – Adrianne Pasquarelli, Crain’s New York

Hot dog eating may not be viewed as a sport, but competitive eating has grown in popularity over the past few years, with more media coverage, attendees, and revenue. The Coney Island competition is the biggest event that Major League Eating runs, and through their partnership with Old Navy, they have created two new revenue streams: the sponsorship itself and jersey sales. That’s right, you can buy an official jersey for a hot-dog eating competition. But don’t laugh – as the article points out, over  1 million people tuned in to watch last year’s event, with another 35,000 people attending it live.

Today’s post is courtesy of guest blogger Jude Russo Caserta.

Originally every five years and now every ten each NCAA school must complete a self-study of their athletic department followed by an on-site visit from peer institutions to verify they are in compliance with Title IX. This hugely symbolic exercise is one of the largest time suckers known to mankind or because this author is female I should say womankind to satisfy the first prong, proportionality, of Title IX compliance. Here are the three prongs from www.ncaa.org:

The OCR’s three-part test for Title IX compliance involves the following options for providing participation opportunities:

• Male-female athletics participation that is proportional to the institution’s full-time undergraduate enrollment, or
• A history and continuing practice of expansion of athletics opportunities for the under-represented gender, or
• Accommodating the interests and abilities of the under-represented gender (Hosick, 2010)

In 2005 the Office of Civil Rights (OCR) said you only had to do internet or e-mail surveys to determine if you were accommodating interest of the under-represented gender. Easy peezy, lemon squeezy! The odds of this survey actually determining the interest were slim and the NCAA told its folks – not so fast – step away from prong three. As a result, proportionality remained the most quantitative way to comply.

I am here to say that proportionality has absolutely killed college football. Do you think this was an intended consequence when Congresswoman Patsy Mink wrote the law back in 1972? In my job as athletic business manager and as a former Senior Women’s Administrator I think of Title IX all of the time. When I build or manage budgets and work with the daily micro-transactions which support sport programs I am constantly aware of what goes to men and to women. Our athletic director supports a culture of fiscal integrity which I instill every day. We dropped football in 2002 along with Men’s and Women’s Tennis, Track & Field and Rifle. We picked up Men’s Swimming. This made an immediate impact on proportionality. Dropping sports is painful and challenges tradition.

Still, there are schools that do not apply the three prongs appropriately and do not offer the under-represented gender equal opportunity. Just last week OCR announced it is rescinding its 2005 clarification. For prong three, in addition to surveys there must be “1) unmet interest sufficient to sustain a varsity team in the sport(s) 2) sufficient ability to sustain an intercollegiate team in the sport(s) and 3) reasonable expectation of intercollegiate competition for a team in the sport(s) within the school’s normal competitive region.” (Rights, 2010) If a group of champion skiers wants to start a downhill ski team in Florida they would not be successful because of competitive region. You must fulfill all three things to start a sport.

Perhaps I should openly admit I have my job because of Title IX (actually from the 1995 time-robber self study) when it was determined our school did not actually have fiscal integrity. I was asked to write a job description which would cover all of the concerns of the peer review committee, decide how many hours it would take to complete these tasks and determine how much compensation would be appropriate. In other words, I wrote my own job description, determined my hours and decided my pay…good gig if you can get it!

Unspoken in this are the financial resources needed to sustain a sport. Do you drop a male sport to bring on a female sport? I think the greatest moral dilemma remains the balance between opportunity and what I believe are the unintended consequences of dropping sports.

I sincerely hope there is a day when girls are not aware of Title IX and just get to play.

Jude Russo Caserta is the Athletic Business Manager at Canisius College and helped the MAAC Conference create Agreed-Upon Procedures years before the NCAA. She has a B.S. in Accounting and M.S. in Sport Administration and, as president of Athletic Business Systems, wants to help institutional business offices partner with athletic departments to create a culture of fiscal integrity. You can read more from her at www.AthleticBudgetCoach.com/blog, follow her on Twitter as @JudeCaserta, or email her at judi_caserta@athleticbudgetcoach.com.

Normally I don’t like to just directly publish press releases that I receive (I’m on several lists now), but this one caught my attention, and I think you will all find it quite interesting. It came from Robert Passikoff, Founder and President of Brand Keys, Inc.

“After years in the #2 spot, Major League Baseball is now tied with the National Football League with the “most loyal fans,” according to the 15th annual 2010 Brand Keys Sports Loyalty Index,® a survey which helps professional sports teams increase broadcast, ticket and merchandise revenues by providing loyalty rankings and fan diagnostics in their home and national markets.

2010 League Rankings

1. NFL/MLB
2. NBA
3. NHL

“The Sports Loyalty Engagement Index gives an apples-to-apples comparison of the intensity with which fans support professional sport leagues and their home team vs. the corresponding values for the fans of other teams in the market,” said Robert Passikoff, president of New York-based Brand Keys, Inc. a leading brand and customer loyalty consultancy.

“These insights allow leagues and teams to identify areas that need strategic reinforcement. Done correctly, an increase in broadcast viewership, merchandise purchase, and ticket revenue will follow, and happier fans. Everybody loves a winner, but it’s important to note that win/loss ratios do not entirely govern fan loyalty,” noted Brand Keys’ Passikoff.

Fan loyalty is driven in four ways:

• Pure Entertainment – How well a team does, but more importantly, how exciting is their play?
• Authenticity – How well they play as a team. New stadia can help on this driver. Oftentimes, so can a new Manager.
• Fan Bonding – Are players respected and admired?
• History and Tradition – Is the game and the team part of a fan’s and a community’s rituals, institutions and beliefs?

The top-5 teams in each league in terms of fan loyalty for 2010:

Top Gainers: Teams with the largest growth in fan loyalty include the Portland Trail Blazers and Oklahoma City Thunder in the NBA (both up five positions), the New Orleans Saints (+6) and the Minnesota Vikings (+5) in the NFL, and the Colorado Rockies and Minnesota Twins in MLB, both up 4 positions. In the National Hockey League no team moved up more than one position, although many moved down as many as 4 rankings. A list of the bottom-5 teams with lowest fan loyalty in each league can be found at www.brandkeys.com/awards/sports.cfm

Methodology:  The Brand Keys Sports Fan Loyalty Index is an outgrowth of Brand Keys’ specialization in measuring customer loyalty that began with work for the National Football League in the mid-90’s. Interviews are conducted by telephone and in-person (to account for cell phone-only fans) includes 150+ local fans for each professional sports team in the four major leagues. Participants self- select a preference for a particular league and then indicate an allegiance to the local team being evaluated. The methodology identifies the four drivers of fan loyalty and rates each team on each of the drivers. The respondents are also asked to rate the sports leagues that they’re interested in on an overall basis.

“Since overall league and team rankings correlate very highly with TV viewership and sales of licensed merchandise, rankings can be influenced depending upon how loyalty drivers are addressed and managed,” said Passikoff. “It’s critical that marketers do accurate scouting regarding the strategic game they intend to play with their fans because today, when it comes to loyalty, there are no free-agent fans!”

The most general principal of sports marketing on the team side is finding a way to promote and sell your brand without being dependent on winning, since the on-field results are outside of your control. It seems like along those lines, Canada may have made a mistake with their “Own the Podium” program. I had this thought while reading a recent ESPN.com article about Canada conceding the Olympic medal race.

To provide a quick background, the “Own the Podium” program was an effort by Canada to commit more money to their Olympic athletes that have the best chance of winning medals, with the overall goal of taking home the most medals of any competing nation. Canada currently sits in 5th place with just ten medals, 15 behind current leader, the United States. Now I’m not saying they shouldn’t have committed the money towards their athletes to help them try and succeed in their respective sports. I applaud their efforts to provide extra support to their athletes leading up to and during their host Olympics. However, I think they mis-branded their efforts, and because they are going to fall short in the overall medal count, the program now appears to have failed.

By publicly branding their efforts to “Own the Podium” with a goal of winning the most medals of any country, they created a perception that anything less than perfection would be failure. Canada finished third in the medal count four years ago, and before that, they never finished higher than fourth, so this was quite a goal to set. They could have made the same financial commitment to their athletes with a goal of being in the top 3 (which fits with the general theme of the top 3 athletes receiving medals), and this still would have been a huge (and still achievable) accomplishment. They also could have branded their program with something more related to being the host country than with specific results, something like “The Pride of Canada”. This focuses the rallying cry around supporting the local athletes, not just on their results. By conceding that they will not reach their goal, Canadian athletes and fans alike could easily look back to the 2010 Vancouver Games and think about their nation’s failure instead of pride in their country for hosting the Games and in their athletes for their efforts. Not only that, by making this public concession now, they’ve potentially overshadowed any additional medals that Canadian athletes win during the remainder of the Games.

Of course, the other side of this would be if they did achieve their goal, the Canadian Olympic Committee would look absolutely brilliant. In general, tying any branding or marketing platform to the on-field results is a high risk/high reward proposition, and when you’re dealing with a global stage like the Olympics, I don’t think it was worth the risk.

This week I have been busy finishing up trimester number 5 (out of 6) of my MBA, so I’ve only been intermittently paying attention to the Olympics, and I’ve been leaning heavily on those I follow on Twitter to keep me updated on which sponsors are activating in unique ways and which are practically non-existent.

One quick aside before I delve into specific sponsors… I think some Olympic sponsors will be hurt by NBC’s decision to air the competitions in prime time in MST and PST. I personally know that after I’ve seen a result earlier in the day, I’m less likely to watch the entire broadcast,  if I choose to watch at all. Now that we’re in the twitter age, networks will need to re-think their policy of playing everything in prime time. Also, I enjoyed watching uninterrupted footage of the snowboard halfpipe. Other events have been chopped up, competitors cut out, and drama ‘manufactured.’ I’d rather watch the full competition every time.

Ok, now on to the sponsors. Coke includes an environmentally-friendly aspect to their activation by encouraging Canadians to “adopt sustainable environmental practices.” They will purchase carbon offsets to offset the carbon footprint from their operations at the Games as well as the torch run. This means their carbon emissions will have been reduced 100%. (Courtesy of Cokenews.ca). “Every piece of our Olympic marketing has a social and mobile component,” says Katie Bayne, marketing chief for Coca-Cola North America.

Meanwhile, much has been made of Visa‘s decision to put 40% of their activation budget towards digital, quadrupling past spends. Their YouTube channel unveiled their Olympic spots before they were even shown on TV. These spots drive awareness and help reach their objectives, spelled out in this interesting document.

According to a USA Today article, GE is “using the Olympics as a ‘launch pad’ for it’s biggest social media push.” They have created a Twitter hashtag (#GEhealthy) and an account (@gehealthy) with the bio of: A shared commitment to creating better health for more people . Together. With only 184 followers, it remains to be seen if this push will be fruitful for them.

One company who seems to really get it is Red Bull. On Tuesday night, NBC showed a segment about Shaun White and his secret halfpipe. The segment really reinforced why Red Bull is the perfect sponsor for the halfpipe competition. They didn’t just slap their logo on one of White’s boards, they instead found a way to help him achieve his goals, thereby making the partnership valuable from both perspectives.

I thought the remark that best summed up what these Olympic sponsors should strive for was said by Mark Pritchard, CEO of Proctor & Gamble: “So what really makes the difference? The idea. When the idea is good, people flock to it and build on it.”

There is still a significant amount of time left, and many amazing Olympic moments that are sure to occur. What sponsor(s) are you most looking forward to stepping up to the challenge?

I realize that the locations of our sports business networking events (like tomorrow night’s event in New York – there’s still time to RSVP!) don’t work for all of our readers. So when I learn about events in other locations that I think would be just as valuable, I like to share them, and this is a perfect example.

UF Sports Law Symposium to examine legal playbook as Collective Bargaining Agreements expire

On Jan. 29 sports agents, litigators, salary cap analysts and sports law students will huddle up at the University of Florida Levin College of Law to get ready for a whole new ball game.

In the next two years, time will expire on the Collective Bargaining Agreements affecting the negotiation of salaries and playing conditions for professional athletes. The 2010 UF Sports Law Symposium, “Discussion: Bargaining Collectively,” presented by UF’s Entertainment & Sports Law Society, will bring together sports law experts and representatives from the National Football League, National Basketball Association and Major League Baseball to discuss why CBA’s exist, how they help players and owners, and to identify contract terms that will likely be argued before the agreement expires. The free event, set to kick off at 11 a.m. at UF Law’s Chesterfield Smith Ceremonial Classroom 180, will offer CLE credits.

“The 2010 UF Sports Law Symposium will be an excellent forum for students, athletes, professors and others interested in sports law to network and learn from the brightest minds in sports law,” said Darren Heitner, president of UF Entertainment & Sports Law Society.

The keynote speaker for this year’s symposium will be Harvey W. Schiller, Ph.D., who has served as president of the International Baseball Federation since 2007 and is also chairman of the board and CEO of GlobalOptions Group, a multidisciplinary international risk management and business solutions company located in New York. Prior to joining GlobalOptions in 1994, Schiller held posts at Turner Broadcasting System, served as the executive director/secretary general of the United States Olympic Committee and was the commissioner of the Southeastern Conference.

“It’s an honor to be able to address future sports-business leaders in Gainesville,” Schiller said. “We live in very challenging times where the changes in the way we conduct business occurs in minutes. Adapting and understanding those changes is critical to our success as professionals. It is my hope that forums like the one being held at the University of Florida, provide the framework for the growth of the industry and to inspire further discussion and opportunity.”

Closing the day-long symposium will be Donald Fehr who served as the general counsel of the Major League Baseball Players Association beginning in 1977, and as its executive director for 26 years from December, 1983. In his role as executive director, Fehr served as the players’ chief negotiator in collective bargaining with major league owners and was responsible for contract administration, grievance arbitration and pension and health care matters. Fehr will address the role of collective bargaining in professional team sports, and discuss his experiences in his role with the players association.

“Interesting things are on the horizon for the four major professional team sports in North America,” Don Fehr said.

To view the symposium agenda, speaker profiles and designated CLE credits, visit http://www.ufsportslaw.com/symposium.html. For more information regarding the symposium, contact Darren Heitner at heitner@gmail.com.

Normally, I don’t like talking about events that take place on the field, but today I’m going to make an exception. On Wednesday night, a World Cup qualifying soccer match was decided by one person who made a mistake that was easily identifiable by a simple video replay. However, because the sport was dependent on an archaic system of in-game governance that was developed decades if not centuries ago, the result of the game and any number of future events has been permanently altered.

This same situation has happened in multiple major sporting events over the past few months, including several prominent errors in the MLB playoffs, but for the most part, the governing bodies for these organizations prefer to stand by and depend on their “traditional” means for making all in-game decisions. This system may have made sense was professional sports was more of a casual pastime, but now it is a multi-billion dollar global industry, and each one of these incorrect decisions can have serious repercussions. A team that misses the next round of playoffs because of a bad call loses out on millions in ticket revenue. A player that is invalidly judged by an official’s decision can lose the chance at significant endorsement money. An entire league can suffer (or benefit) because of an officiating decision that impacts what teams are playing and the television ratings that come with those teams.

Meanwhile, sports organizations have embraced technology in almost every other form, from evaluating the players statistically to refining their business processes. Clearly everyone recognizes the importance of technology as sports have evolved, but yet for some reason, they refuse to let the technology onto the field in the form of instant replay. Would any other industry operate in this manner? Can you imagine if Walmart decided that they needed to use a more “traditional” way to run their checkout lines and made the staff type in each number, because “that’s how they’ve always done it.” The errors that would occur would ultimately have a significant impact on their business, ruining their other technological advantages that they’ve developed in their inventory management processes.

I understand that trying to add instant replay into sports is a complicated process with many potential pitfalls. This is why I give a lot of credit to the NFL for their work in this area. They acknowledged the problem, created a replay system, and constantly work to refine it based on the needs of the sport. I would hope that more sports, like soccer and baseball for example, eventually decide to follow the NFL’s lead and develop their own comparable systems. Putting aside the game for a moment, there is simply too much money riding on what happens on the field for everyone to overlook these issues.

Last week, the International Olympic Committee (IOC) officially announce that Rio de Janeiro, Brazil would host the 2016 Summer Olympics. This will be the first time that the Games will take place in South America, and it has been hailed as a tremendous achievement for Brazilian President Luiz Inacio Lula da Silva. Meanwhile, at the other end of the spectrum, there has been significant disappointment in the United States for Chicago’s failed bid to host 2016, which included the support of President Barack Obama.

I will be honest in that I didn’t follow this story very closely. I let my “U.S. bias” lead me to believe that Chicago was the likely favorite over Rio, Madrid and Tokyo.  However, along that line, Darren Rovell wrote an excellent post on how much additional revenue would be generated through media rights and sponsorships by hosting the games in Chicago.

With that said, my questions to all of you are:

• What city did you except to be named as the 2016 host city and why?
• What do you think hurt Chicago’s bid the most?
• What do you except from Rio as the first South American host city?

This post is completely designed for all of you to provide the content through the comments below. Please share your thoughts and let’s get a nice dialogue going.

Today’s post is courtesy of guest blogger Paulo da Silva, Arizona State Sports Business MBA, Class of 2009.

Major League Soccer (MLS) and its Commissioner Don Garber seem to be committed to take the world of sports by surprise. Since 2006, David Beckham’s transfer to the LA Galaxy and the continuous team-expansion announcements to Seattle and Philadelphia (starting 2009 and 2010, respectively) have given the MLS a year-after-year unprecedented growth not only in retail sales, which has more than doubled from $145 million in 2006 to $300 million in 2007, but also in visibility over the South and Central American leagues worldwide, with an increasing regular season stadium attendance registered at 3.27 million people in 2007. 

Don Garber once said “We don’t know how this is going to work, but I’m excited about it, very much so”. However, Garber seemed to have a very good idea of how he wanted the MLS to proceed and, in order to achieve these results, they decided to implement the following five-point strategy:

1. Raising the level of respect and credibility given to MLS in both North America and around the world: David Beckham made the international community take notice of the league. Most importantly, even though the LA Galaxy haven’t won any competitions since, Beckham’s quality of play on the field has convinced the media and won him the respect of fans across the MLS. At the same time, there is an increasing acknowledgment of the talent generated in North America, as the recent sale of New York Red Bulls youth product and MLS star Jozy Altidore to Spanish club Villarreal confirmed last summer.
2. Get all MLS teams playing in team-owned and operated soccer-only stadiums: Garber said that by 2010, 12 of the league’s 16 teams will be in soccer-specific stadiums, including Real Salt Lake’s new home opening next season, New York in late 2009, Philadelphia in 2010 and new stadium projects underway in San Jose and Kansas City.
3. Continued growth in metrics like TV ratings, attendance and corporate support: 2008 was the first season in which every MLS game was broadcast either locally or nationally on ESPN, ABC, Univision, Fox Soccer Channel, HDNet, and in Canada on Rogers Sportsnet and CBC. These games are shown not just in North America, but also in Mexico, Central America, Europe and parts of Asia. League numbers state that TV ratings are up 20 percent from last season on ESPN, and 10 percent on Univision.
4. Turn North American soccer fans into MLS fans: North American soccer fans, used to watch European and Central and South American soccer, need a solid and attractive league in order to transition to MLS fans. The MLS Designated Player Rule is a step towards better quality and to a better identification with the fans’ sporting culture in the US.
5. Continue to improve the quality of play, and come up with innovative ideas to reaching new levels of quality: The main initiative implemented by the MLS on this matter was the MLS Youth Development Rule that provided a League-wide structure for youth development and positioned the MLS as the leader of the sport that now totals nearly 18 million participants in the United States.

This plan was designed following the strong and determined leadership of Don Garber, who has been League Commissioner since 1999. As a senior vice president/managing director of National Football League International (NFL International), Garber was well aware of the needs and challenges regarding the internationalization of the American sports business’s model and, throughout the years, he has been able to build a strong basis for the league to grow and think as global as the sport of soccer itself.

The outstanding measure undertaken by Garber happened in 2001 when he re-structured the MLS and led the formation of Soccer United Marketing (SUM), a company owned by MLS investors that stands as the preeminent commercial soccer entity in North America. SUM represents several prominent soccer properties, including the U.S. Soccer Federation, the CONCACAF Gold Cup and the Mexican Soccer Federation for all sponsorship, marketing and game promotion in the United States. In addition, SUM manages American tours for some of the world’s most powerful soccer clubs, including Real Madrid, FC Barcelona and Chivas de Guadalajara.

Most recently, Garber was instrumental in the creation of the SuperLiga, the innovative professional tournament between MLS and Mexico’s First Division club that has both helped Central American clubs and audience to change their perception of MLS soccer and improve its teams’ quality of play by interacting with better teams in a consistent basis.

These outcomes were not but the result of the hard work developed by Don Garber, the MLS and its partners and the benefits from it are starting to show in an unquestionable fashion. Nonetheless, some challenges still lie ahead: Are all league partners and members up to the quality of play and business Garber wants to ultimately implement? Can the competition for the US sports fan market smother MLS’s growth? Is this growth sustainable? If so, when is it going to stop? Hopefully not soon, I’d say.

It’s been a busy week in sports business, which is a little unexpected since things tend to die down a bit after the Super Bowl.  I’ve already written about the potential Ticketmaster/Live Nation merger, but here are some quick thoughts on other news items from the past few days:

- Michael Phelps:  So the golden one was caught on film with a bong, not exactly a good PR move.  If this was his first “offense,” then I think it would be less of a story, but he also had a DUI incident a couple of years back.  Some people are sticking by him, most notably the USOC and Speedo, while others like Kellogg are ending their relationship with Phelps.  USA Swimming is withholding their training money, which for some Olympic athletes would be significant, but this will have little impact on Phelps. 

To me, this story is pretty straight-forward.  Some brands are much more sensitive about any potential negative PR, so they will decide to stray away from Phelps.  He’ll still make plenty of money from other partnerships.  The best thing for him to do is simply stay out of the news for a while and concentrate on a strong performance in July’s world championships.  Nothing helps blow away bad PR like championship performances.

- Spurs Sit Their Stars:  Imagine being a Spurs fan living in Colorado, and buying tickets to see your team when they come to town to face the Nuggets.  The game starts without Duncan, Ginobli, Parker or Finley in the lineup.  No big deal at first, maybe Popovich is trying something out.  But then the quarter, half, and entire game ends without them ever stepping on the floor.  I know this was a strategic decision by the team, but those fans have to be ticked off.  This is an example of a unique conflict between the business side and the team side.  Since the game took place away from San Antonio, the implications are not as significant, but what if “Pop” wanted to do this at a home game against a weak opponent?  What do you tell your fans that expect to see the stars play?  I don’t have the answer to this, but it is an interesting dilemma. 

Also, a friend of mine asked me about the gambling implications of this event.  Think about how much money was wagered on this game in advance, and then the best players for one team just don’t play.  Clearly Popovich is a well-respected and ethical coach, so no one is questioning him along these lines  But imagine if this was a Pete Rose type of character making this decision.  Then what would you think?

- Who Needs $25M?  Apparently Manny doesn’t need it, or at least feels he’s worth more.  For the public, it is hard to imagine someone turning down $20-25 million per year in this economy.  I believe that Boras is overestimating what the teams are willing to commit to, considering the teams don’t know how the recession is really going to impact ticket sales and other revenue streams.  I would not be surprised for Manny to come back to the original two years, $45M offer that the Dodgers started with (or something close to it).  Boras has caved before when deadlines get close (Matsuzaka’s negotiation comes to mind).

- How About $18M?  Bud Selig might not hit like Manny, but he gets paid almost as well.  News came out about Bud’s salary from last year, which I don’t feel is inappropriate considering he’s the senior leader for a company that generated over $6 billion in revenue last year.  The unfortunate thing is the timing – it looks bad for MLB for this salary to come out when others are losing their jobs.  I think this story blows over pretty quickly, and maybe Bud could generate some good PR by donating a part of his salary next year to charity.  Maybe he could start a league-wide initiative that other owners and players could support.  That would make for some positive PR.

Jason Peck also has a good weekly recap on his sports business and social media blog.  His site is a great resource for social media content in sports.

With 2008 winding to a close, I want to countdown the top sports business stories of the year.

#2 – The Summer Olympics in Beijing

Since the Olympics only happens once every four years, they are naturally a huge story. But this year in particularly, the Olympic Games in Beijing had a tremendous impact in sports business across the globe. Here are some of the notable impacts:

- The Political Climate:  Many people were upset that Beijing was allowed to host the Olympics.  There are accusations of human rights violations, protests over possession of Tibet, concerns about air pollution, and questions about media access.  There was also the banning and subsequent unbanning of Iraq from participating.  How would a major international event like the Olympics be able to proceed in this type of environment?  Surprisingly well, it turns out.  The city seemed to manage the various protests and keep the distraction to a minimum once the Games began.

- The Global Business Landscape:  China’s government makes it difficult for non-Chinese companies to develop a foothold within China, which poses many challenges for sponsor companies.  So some companies needed to find local partners to truly leverage their Olympic partnership.  For others like Coca-Cola and McDonald’s who were already in China (and every other country in the world), having the Olympics in Beijing  provided the largest global stage for them to leverage. 

- Michael Phelps:  Not since Tiger Woods has an individual male athlete captured the attention of a nation, and quite possibly the world.  Because of his historic performance in this year’s swimming events, Phelps instantly became the most marketable athlete of the year and for years to come.  From his athletic ability to his charming smile, he is a natural target for almost any company looking to align themselves with a successful and engaging athlete.

- The Stories:  There were many great story-lines to this year’s Games, many of which were also significant on a business and marketing level.  The “Redeem Team” was a huge success and was a wonderful platform for Nike.  Usain Bolt became the fastest man ever, which also comes with a great deal of marketability.  The battle between the Chinese and American female gymnasts was heightened by the age controversies.  The opening ceremony was generally considered one of the most magnificent ever, even in light of the lip-syncing and fireworks controversies.

- The Business:  Over seven million tickets to the various events were sold.  Over 5,000 different Olympic product were available for sale, generating millions in revenue.  On the media side, the entire event was broadcast in HD, over 2,000 hours of online content were created by NBC, and for the first time, some content was streamed live on the Internet.

Clearly, the 2008 Beijing Olympics was one of the biggest sports business stories of the year, and this was just a very brief summary.  The coverage of the games was tremendous, as was the exposure for the corporate partners.  I am excited to see what Vancouver and London have in store for 2010 and 2012!

Football Hits the Economic Wall – The NFL announced a 10-15% reduction in their staffing earlier this week, showing that even the most powerful league in sports is vulnerable to the economy.  They’ve also implemented salary/hiring freezes and are trying to slash expenses. Meanwhile, the AFL announced they may suspend operations for the 2009 season, although now it looks like they may be able to avoid this.

I’ve written several times about how the economy is hurting sports, but most of the time, I’ve referred to specific events or smaller organizations.  While the AFL is still a smaller league, the NFL seemed to be the league most likely to stave off these types of cuts.  Ultimately, it comes back to the drop in corporate dollars.  The automotive and financial industries have always been two of the biggest players in the sponsorship arena, and they are all making significant cuts, which is finally trickling back to the NFL.  But the NFL is still arguably the number one sports brand in the U.S., so they should have the ability to identify new categories that can benefit from aligning themselves with the league, even if they’re not as high-value as cars and banks.

Yesterday the Seattle Mariners named Don Wakamatsu as their new manager, the first Asian-American manager in MLB history.  This is a great story for MLB, as the league has really tried to enhance their international presence over the past few years.  The number of foreign-born players continues to increase, including from outside of North and Central America.  The World Baseball Classic was viewed as a big success and the next WBC is coming up in March.  The league also ran the China Series in Beijing this preseason and actually started the regular season in Japan.

MLB is not the only league making large strides in reaching an international audience.  The NHL started their regular season in Prague and Stockholm this year.  The NFL has had a regular season game in England each of the last two seasons.  The NBA had preseason games in China and Europe this year, and has an international department dedicated to developing the game and leagues in Europe and Asia.  I’m not even going to talk about soccer, which is the most international game of all (although I do believe that there were more international exhibitions with MLS teams this year than ever before).  Clearly the U.S. sports leagues have a global focus.  My question is, for which sport(s) does it make the most sense, and are the leagues doing it the right way?

I think that the NBA has the best international plans of four major leagues, at least at this point in time.  Their dedicated global offices have done a great job in promoting and developing the game internationally, and the increase in popularity has been tremendous.  We are not too far away from seeing NBA-managed leagues in other countries.   The NHL has more work to do, but they took a good first step this year with the Prague and Stockholm games.  The U.S. audience has not embraced hockey as much the last couple of seasons, but the game is very popular in Europe and Russia, so tapping into this audience is very important.  MLB has done a pretty good job with the first WBC, but there are still some kinks to work out logistically.  They also haven’t been able to really spread the game much beyond Asia and Central America. 

The NFL has probably done the worst job of the four, and the game just might not translate well internationally.  After all, every other country has their own game of “football.”  The regular season game in London is just a novelty at this point, and the NFL Europe was a complete failure.  The more interesting markets for the NFL to look at might be Mexico and Canada.  They had a great audience with their preseason game in Mexico City, and Canada has a long track record in football with the CFL. 

What do you think of the various international efforts the leagues have made recently?  Which sport has done the best/worst job?  What sport has the biggest needs internationally?  Let me know what you think in the comments, and please answer the poll question on the right.  Thanks!

Hopefully you’ve all noticed that I always have a poll running on the right side of the page.  If you don’t already, please vote!  I try to change the poll every 1-2 weeks and the results can be quite interesting.  So on that note, here are the results of some of my first few polls.  I will make sure to post on the results semi-regularly, so the more people participate, the more valuable the results will be!

This poll ran after a series of events where politicians were getting involved in the outcomes of games (Patriots Spygate, RU-Tennessee clock malfunction, etc).  I agree that they’ve gotten too involved in the recent past, with the exception of the steroids issue, and only there because of the implications for the health of younger aspiring athletes.

I ran this poll after the unfortunate passing of Gene Upshaw.  I was curious to see what the perception is of the various League/Players Union relationships.  I had also recently finished reading the book “Money Players” by Bruce Dowbiggin which talked about the disastrous relationship between the NHL and NHLPA over the years.  As such, I was not surprised to see the NHL receive the fewest votes.  I was also pleased and saddened to see the NFL receive the most votes – I hope the NFL and NFLPA can continue their positive relationship, especially with the upcoming CBA negotiations.

There was a great article in today’s LA Times about how Barack Obama’s election should help Chicago get the 2016 Olympic bid.  Normally I stay away from political topics (everyone has their own opinions), but the article makes some good points.  Obama clearly brings a lot of attention to Chicago, especially the wonderful scene at Grant Park last night.  The IOC can see how this would translate to an Olympic experience in the same locations.  Obama is also quite the sports fan – he could easily assist the city’s Olympic bid efforts, which would come off very impressively to the IOC.

The only thing about the article I don’t really like was the idea that a McCain win would have actually hurt Chicago’s chances.  Yes, McCain did challenge the IOC is 1998, but for good reason – that Olympic Games was overrun with bribery and corruption, and previous Games had a history of “questionable” ethics as well.  Either way, this is clearly not an issue since Obama won, and I do hope that the victory helps Chicago win the bid!

First, let me start by saying that my former classmate Brian came up with the idea I’m about to share (he said I could post it), and I think it’s brilliant.  The NFL is working on plans to extend the regular season by 1-2 games.  If they do add one game, Brian’s idea is for it to be a cross-conference regional rivalry game, with the two opponents playing and alternating home and away each year.  Here is his list of matchups:

This list of pairs leaves Minnesota, New Orleans, Cincinnati and New England, so the system is not perfect, but maybe some adjustments could be made (leave your own ideas in the comments…hint, hint).  You have to believe that this “rivalry” game would generate a lot of fan and media interest, the NFL’s version of interleague play if you will.  They could even play each other every year on a designated “AFC/NFC Rivalry Week” to really capitalize on it…the ratings would be huge!

I’m going to ask Brian to leave some more comments on the idea.  It really has a lot of potential, so hopefully the NFL will read this and use his idea!

Major League Baseball is possibly the premier league in terms of identifying new revenue opportunities through the Internet.  MLBAM is raking in money for the league and teams, and they are on the forefront on live media through MLB.TV (which got even better this year with the higher quality stream now available…for $5 more a month, of course).

Considering this fact, I’m surprised that they have left an obvious revenue stream untapped.  As of now, if you watch games through MLB.TV, whenever there is a break between innings, all you see is an image that says there’s a break in the action and stay tuned.  They do not play any commercials or show any advertising.  To me, this is a wasted opportunity!  In a time where more and more companies prefer to focus on regional, team-based sponsorships, here is a prime opportunity for a league sponsor to get additional exposure with MLB.TV customers, individuals that have willingly identified themselves as having a deep connection with MLB.

I know the MLB.TV does use the local affiliates for their video streams, so there may be some concerns about devaluing the advertising that those stations offer.  But with the blackout rules that the site has implemented, this should be of little concern.  Other websites with streaming content, like NBC.com, have already leveraged this opportunity for their station’s major advertisers to gain more exposure during “commercial breaks” in the television shows.  The opportunity is there for MLBAM…I just wonder why they haven’t taken advantage of it yet.

In what seems to be quite the developing trend, a political official is pursuing a resolution regarding the results of a sporting event.  In this case, it is New Jersey State Senator Robert Singer (R-Ocean) who is trying to press the NCAA to investigate the controversial ending of the Rutgers/Tennessee women’s basketball game from February 11th.  In the game, which took place in Tennessee, the game clock froze at 0.2 second for almost a full second and a half, and a foul occurred on a Tennessee player after, in theory, the game should have been over.  You can read more about the incident and the Senator’s position in this ESPN.com article.

It certainly seems that this trend of political officials meddling in all aspects of sports is getting out of control.  It started with Congress’ initial involvement in the MLB steroid issues, getting worse with the specific focus on Roger Clemens.  Arlen Specter took it farther with his desire for more investigation in the Patriots’ videotaping issues, and now we have the Senator from NJ.  I understand the potential trickle-down impact that steroid use among professional athletes can have on younger athlete, but the other two incidents seem to be nothing but a shallow political move with the goal of gaining votes and local support.  With all the substantial issues that politicians do need to deal with, how is investing the result of a professional football or college basketball game an effective allocation of government resources? 

There is one other perspective to take away from this - the NCAA, conferences, and professional leagues need to be (or at least appear to be) more vigilant in their own investigations.  Once they appear to be more thorough in their work, there should be significantly less reason for the politicians to attempt tactics like this, and if they still do, hopefully their constituents would realize that they are nothing more than publicity stunts.