Early Entrants: Vol. VII – Sponsor Logos Coming to MLB Uniform Sleeves in ‘22

Editor Note: Early Entrants is a bi-weekly series of sports business “rumblings” before the news breaks.

Sponsor Logos Coming to MLB Uniform Sleeves in ‘22

When the Cincinnati Reds “hosted” the St. Louis Cardinals for a 2-game set in Monterrey, Mexico last weekend, both clubs adorned the Ford logo on their batting helmets. The league officially says it has no plans to put corporate advertising on helmets (or jerseys) for non-international games, but JohnWallStreet has been told to “expect logos on MLB uniform sleeves – domestically – in ’22.” We’re hearing that MLB needs to bargain with the players on a few issues and they know that they’re going to have to give the MLBPA something in return for their blessing [to put sponsor logos on uniforms], so they’re targeting the ‘21 CBA negotiations (current CBA expires following ’21 season) to do it.”

Charlotte or San Diego to Land MLS’ 30th Franchise

On Friday, MLS announced plans to expand to 30 clubs (27 have been awarded to date). While the league has not yet selected its 28th and 29th markets, the league’s Board of Governors has authorized the Commissioner’s Office to advance discussions with Sacramento and St. Louis. Soccer fans in those cities can put the champagne on ice, it’s a “foregone conclusion” they’ll be awarded expansion franchises. That would leave Detroit as the lone finalist for franchise numbers #25 and #26 still without a club, but according to our sources the wait will continue; we’re hearing that franchise #30 will eventually be awarded to either Charlotte or San Diego and that the expansion fee could actually jump another $50 million to $250 million.

CBA Encourages NFL Owners to Maintain Minority Ownership in OLE

Just a couple of weeks ago reports indicated that Endeavor had agreed in principle to acquire the 80% of On Location Experiences owned by RedBird Capital, Bruin Sports Capital and Carlyle Group for a figure upwards of $700 million; with the NFL retaining their 20% stake. The NFL generates 40% of OLE’s profits, but league was never a threat to re-acquire the majority stake it sold to the P.E. firms – for $70 million – back in ’15. That’s because as a minority shareholder the league collects its cut of the profits “free and clear. There’s no risk involved, they don’t have any expenses.” If the NFL took control of OLE once again, it “assumes 100% of the corporate tax responsibilities, without an allowance for any of the expenses”; remember, under the CBA the players are entitled to 48.5% of gross (not net) revenues.

WNBA Draft Selections Further NBA’s Chinese Growth Initiative

Han Xu became the 1st Chinese player to be drafted by a WNBA team – since ’97 – when the New York Liberty (owned by Joe Tsai) selected her with the 14th overall selection (2nd round) in the 2019 draft; Li Yueru became the 2nd a round later. It is Tsai’s involvement that makes the selections particularly noteworthy. The NBA wants to do business in China, Tsai gives them the “insider” needed to do it and the Chinese government has made basketball a priority in the country, so the opportunity is ripe, but without a Chinese national on an NBA roster the possibilities are limited. With Xu and Yueru, the WNBA can now position itself as a testing ground for “Chinese native companies looking to engage in American sport, in a cost-effective way, before getting into the big dollar waters of the NBA.”

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Pay-Per-View Supplementing Subscription Streaming Services Is “The Future”

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Terence “Bud” Crawford will defend his WBO welterweight title against Amir “King” Khan on Saturday night at Madison Square Garden. The showdown is headlining ESPN’s first pay-per-view card since the network agreed to a 7-year distribution deal with Bob Arum’s Top Rank Boxing promotion back in October ’18.

Crawford-Khan is the 3rd boxing pay-per-view event of 2019 – corroboration that despite the emergence of OTT subscription services (like ESPN+ and DAZN) the PPV platform remains “alive and well.” Arum explained that there’s a misconception the “subscription model and the pay-per-view model are at conflict with one another, but moving forward you’re going to see that they’ll supplement each other. Look at the ESPN-UFC deal. That’s the future.”

Howie Long-Short: Bob’s right, PPV boxing has a future – despite companies like ESPN+ and DAZN making 9 figure investments into the sport – because the rights fees to the biggest fights are too expensive for a linear television network or streaming service take on. “Fighters command big purses for big fights and the only way to make the math work on those fights is to show them on pay per view.”  

I was quick to point out that the Cinco de Mayo bout between Canelo Alvarez and Daniel Jacobs is airing on DAZN – subscribers of the monthly service will get the fight for just $19.99 (or $99.99/year) – but Bob insists John Skipper’s platform is simply using the marquee bout to get subscribers in the door and “once they build up a large enough subscriber base, they too are going to price major fights above their monthly subscription fee.” He might be onto something. When I asked Matchroom Boxing promoter Eddie Hearn last December if a Wilder-Joshua matchup would air on DAZN, he said “not necessarily. We’ll go to the broadcast [platform] that puts the most amount of money up.”

Speaking of Matchroom Boxing, GGG recently signed a 3 year, 6 fight contract with the promotion – choosing Hearn and DAZN over ESPN and Top Rank (and Premier Boxing Champions and Fox). Bob acknowledged that he would have liked to add GGG to his stable of fighters but “budgetary constraints forced us – and ESPN – to make a choice; to put our bucks with 37-year-old Golovkin or a 27-year-old lineal heavyweight champion in Tyson Fury. We think you get a much bigger bang for your buck with Tyson Fury.”

Tyson Fury’s next fight will be against Tom Schwarz on ESPN+ in June. While the bout would get more eyeballs if it aired on ESPN’s linear network, Bob understands that the transition to digital is “a process” and that Tyson’s presence is necessary for ESPN+ to continue building its subscription base – “which is now more than 3 million.” Arum said, “I’ve been through this before. I remember when people asked ‘how could you abandon radio when millions of people are listening and make a fight exclusive to television when there are so few sets. You’ll see that within 10 years most of the content that we watch – including sports – will be on a streaming platform.”

Fan Marino: If you watched the Final Four, you likely saw an interview with WBC heavyweight champion Deontay Wilder in between games. Many wondered why CBS featured the boxer during college basketball’s biggest event, but the decision was “part of a [savvy] overall strategy to introduce Wilder to the American sports fan.” The network was incentivized to use the valuable time slot (segment averaged 13.77 million viewers) on Wilder with his next fight on Showtime – a CBS subsidiary.

Cross promotion is among the benefits of Top Rank’s deal with ESPN too, and Arum & Co. first got a taste of the marketing possibilities (now that they’re aligned with The Walt Disney Company) this week with the release of a recent spot co-promoting Crawford-Khan and Avengers: End Game. ESPN VP of programming and acquisitions Matt Kenny recently told Multichannel news that it’s the company’s ability to “leverage that intellectual property to create an even bigger event feel” that gives them an advantage over “the streaming services or our competitors” [when selling a pay-per-view card].

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Ford Logo on MLB Batting Helmets Sets Social Media Ablaze

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The Cincinnati Reds “hosted” the St. Louis Cardinals for a 2-game set in Monterrey, Mexico last weekend. Location aside, there was nothing noteworthy about the series, but a minor tweak to the teams’ uniforms sent social media ablaze; both clubs adorned the Ford logo on their batting helmets. Sponsor logos have been permitted on MLB uniform sleeves and helmets – for games played outside of the U.S. – since ’00 (here’s a shot of Jeter, circa ’04), so this wasn’t the introduction of a new initiative, but with the success of the NBA’s jersey patch program and MLB playing more games abroad than ever before it stands to reason that sports business professionals are paying greater attention.

Howie Long-Short: It’s somewhat ironic that the use of sponsor logos on MLB uniforms is first making headlines in 2019. As Tony Ponturo, EVP at Turnkey Intelligence (strategic consulting for leagues/teams/facilities) pointed out “you would have expected this type of commercialism to stand out 20 years ago, not in today’s cluttered world.

While MLB has no plans to put corporate advertising on helmets (or jerseys) for non-international games, it’s reasonable to suspect the owners will eventually decide to sell ad space on team uniforms for all 162 games. In fact, Ponturo was adamant that “it will happen. Leagues need to find new ways to fill the revenue pipeline.”

Ponturo acknowledged “baseball is going to have the toughest time [among the big 4 sports] balancing their heritage with the need to keep up with the times. The baby boomer generation is going to believe that ads on the  uniform goes against tradition of the sport, but the next generation doesn’t feel that way and if teams can grow incremental revenues it’s something that must be considered.”

There’s no doubt that teams can grow the revenue pie putting corporate logos on the uniform. The NBA’s patch sponsorship pilot program has far exceeded expectations. All 30 franchises have found a sponsor and the teams are raking in more than $150 million/year in revenue. Back in April ’16, Commissioner Adam Silver projected patch sponsorships would generate +/- $100 million in newfound revenue – so the league has overshot its goal by +50%.

To be clear, the Reds and Cardinals did not sell the real-estate on their helmets. While the teams (and players) share in the revenues generated from the logo placement, sales for international games – like the World Series and All-Star Game – are controlled by the league. The revenue generated from advertisements “helps to off-set some of the costs.”

MLB reasons that the use of sponsor logos on uniforms abroad remains consistant with the tradition in those countries – which is true – but Ponturo suspects it’s also a way for the league to cautiously gauge the fans reaction before making a commitment to buck tradition here in the U.S. Considering that the presence of corporate logos on the uniform has been a non-story in the NBA – fans who buy team jerseys are clamoring for replicas with the sponsor insignia be made available at retail – it’s reasonable to assume any initial pushback would quickly quiet down.

Fan Marino: MLB returns to Monterrey (for the 3rd time this season) next month for a series between the Astros and Angels, but Houston GM Jeff Luhnow insists that “it’s the idea of commissioner Rob Manfred” to eventually anchor a franchise south of the border. Luhnow believes when the league ultimately decides to expand to 32 teams, there’s a real opportunity to place a franchise in “either in Monterrey, in Mexico City or in Guadalajara.” Las Vegas, Montreal and London were also named as possible destinations for an expansion franchise.

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Big 12 Becomes 1st P5 Conference to Put Football, Basketball Behind ESPN+ Paywall

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The Big 12 Conference has inked a 5-year $40 million pact (SBJ) with ESPN that will give the cable network (or ABC) the exclusive broadcast rights to the conference’s football championship games in ’19, ’21 and ’23 – they already owned the rights to the ’20, ’22 and ’24 games. The deal also provides ESPN with the exclusive streaming rights to a package of regular season football and basketball games (plus a collective of events from non-revenue generating sports). Every school (except Texas and Oklahoma) will have a football game (+ their annual spring game) air exclusively on ESPN+ and all conference basketball games not televised on a linear ESPN channel (expected to be 75+/season) will be exclusive to the platform.

Howie Long-Short: When Fox passed on the opportunity to carry the Big 12’s odd-year championship games (because they’re preparing to go “all-in” on the Big 10), we told you that ESPN would grab them. What we didn’t expect was for the conference to agree to tie football and men’s basketball broadcasts exclusively to a digital platform, so the deal is quite the coup for ESPN+. Collegiate sports rights are particularly valuable to the burgeoning OTT service because of the emotional connection fans have to their alma mater. The belief is that bond makes it “more likely [that the fan would] buy a $5 monthly subscription” to watch their team’s games than a supporter of a pro sports franchise. There may be something to that. No sports have a higher percentage of “fanatics with high net worth” than college football and college basketball.

SBJ reported that the Big 12 had been seeking $20 million/per for each of the 3 championship games – and they’re getting $30 million/per for the ’20, ‘22 and ’24 games – so there’s no question the WWL won this round of negotiations. They held the leverage because with Fox out of the bidding, “few [other] media companies” wanted to buy the rights. Inclusion of the 3rd and 4th tier television inventory enabled the Big 12 to squeeze more out of the network than they would have been able to get for just the championship games, but considering the AAC just signed a deal with ESPN worth $83.3 million/year (it’s a more expansive package, but it’s digital heavy) it’s hard to believe that their streaming rights weren’t worth more.

$40 million – over 6 years, split 10 ways – does little to close the gap between the Big 12 schools and college athletics’ wealthiest conferences. In 2018, it was projected each of the 10 schools would receive $36.5 million in media rights payouts, while Big 10 and SEC schools raked in +/- $50 million and +/- $43 million, respectively.

When the ACC Network launches in August, the Big 12 will be the lone P5 conference without its own network. This deal doesn’t change that, but with 8 of the conference’s 10 schools serving up “more than 50 exclusive events per year” to a Big 12 branded section of ESPN+, it’ll feel like one – just not on linear television. Texas and Oklahoma will occasionally appear on the streaming service as the road team, but UT’s commitment to the Longhorn Network (ESPN) and OU’s to the Sooner Sports Network (Fox) prevent those schools from producing content for ESPN+.

Fan Marino: Big 12 fans may not love paying $4.99/mo. for games they used to receive for free, but they should enjoy games kicking/tipping off in prime-time as opposed to in the early (or late) TV window; remember, unlike linear tv channels, streaming platforms can serve up several games to a subscriber at the same time. The conference’s deal with ESPN+ gives the schools the ability to determine the start times for games.

The expanded partnership between the conference and ESPN will also benefit non-revenue generating sports that previously lacked the exposure needed to recruit nationally.

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Woods’ Return to Prominence Generates Interest, Won’t Change Golf’s Fortunes  

Tiger

Tiger Woods’ improbable victory at The Masters Tournament served as a reminder that no active athlete is capable of captivating sports fans across the nation like he can. His ability to attract the casual fan is uncanny and the outsized media coverage he commands when in contention lifts the sport’s profile. Woods playing well drives viewership – and value for his sponsors – but not even Tiger trying to chase down Jack Nicklaus’ record 18 major wins can change golf’s trajectory. NPD Group analyst Matt Powell explained to Footwear News that “there are a lot of systematic headwinds for golf that are just not going away – in particular: millennials are not picking up the game as quickly as Boomers are aging out of it; and the game needs young people to be playing to reverse its fortunes.”

Howie Long-Short: Woods’ Thanksgiving ’09 run-in with a fire hydrant (+ the messy divorce scandal that followed) and a series of crippling injuries resulted in most of the golfer’s major sponsors dropping him (or deciding not to renew their agreements) over the last decade (see: Accenture, AT&T, Buick, Gillette, TAG Heuer), but the brands that stuck by the now 15x major winner were rewarded on Sunday. The sponsorship analytics research firm Apex Marketing estimated that Woods was responsible for $23.6 million worth of exposure (during just the LIVE broadcast) for Nike, Monster Energy and Bridgestone during Sunday’s final round – a figure that would have been higher had bad weather not pushed the event out of prime time. Ratings were flat YoY – despite Woods’ being in contention – because of the move.

No brand spent more time on-camera on Sunday than Nike did. Phil Knight’s company no longer makes golf equipment – not even Tiger in his prime could make the sport profitable for them – but Woods continues to endorse their golf apparel and the attention paid to his signature red mock neck golf polo (with a swoosh) brought the company $22.54 million worth of exposure; for comparison purposes, the Nike threads Patrick Reed wore when he won last year’s tournament generated just $12 million worth of exposure. Tiger played Augusta with Bridgestone balls. His caddy carried his sticks in a bag with the Monster Energy logo embroidered on it. The Japanese manufacturer – relatively unknown to the U.S. golfer  – received $134,000 worth of exposure from close-up shots of Woods’ ball, while the placement on his bag earned Monster Energy $960,000 worth.

Woods’ win won’t have a material impact on the 3 businesses referenced, but there’s a school of thought that his return to prominence will spur the sport’s resurgence; both Callaway Golf (ELY, +1.45%) and Acushnet Holdings (Titleist, GOLF, +1.65%) shares rose on Monday. I’m not betting on it and neither is Powell, who explained that “the values of the game just aren’t [akin] to the way millennials do sport: The rules are complicated. It takes a long time to play. It’s not inclusive. It’s not diverse. Representation of minorities is low. Golf courses smell like a chemical factory to keep them green [and millennials are environmentally conscious].” Greens fees are also costly and many millennials lack the discretionary income to pick up the game.

If there is a business that’s going to see a boost from Woods winning his 5th green jacket, it’s going to be TaylorMade. While Tiger been using TaylorMade clubs since 2017, the company just began selling sets of his custom irons (model: P-7TW Milled Grind irons) earlier this month. Bloomberg reported on Monday that they had already seen a “boost in interest” from Sunday’s win. Adidas sold TaylorMade to KPS Capital Partners back in 2016.

Fan Marino: Ron Torossian (CEO of 5WPR) told CBS that despite Woods’ resurgence “in the #metoo era, it will be difficult for [him] to come back as the mega-endorser he once was (he earned $105 million in endorsements in ’09, earned just $42 million in endorsements in ‘18). I don’t think many Fortune 500 companies will come back to work with him.” Ron’s point is valid, brands are certainly less tolerant for abhorrent behavior, but he’s kidding himself if he doesn’t think companies will be falling all over themselves for the chance to work with Tiger. Infidelity didn’t make Tiger radioactive, his inability to win a major over the last decade did; if Tiger is “back” on the course, the sponsors won’t be far behind.

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NASCAR Experiencing Attendance Woes, Great Racing Key to Resurgence

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Last Sunday’s Food Series 500 at Bristol Motor Speedway (BMS) drew just 38,000 fans (track seats 162,000) and Saturday night’s Toyota Owners 400 at Richmond Raceway didn’t fare any better; no more than 40% of the venue’s 51,000 seats were occupied (granted, 10K people were in the modernized infield or on the Chaos Corner Party Deck). Gate attendance has been a problem for the Monster Energy NASCAR Cup Series all season. The Daytona 500 was the only race among the first 9 to sell-out. While weather has been a factor the past 2 weekends, driver Clint Bowyer has attributed the fans’ decision to stay away from the track in droves to the cost of lodging for a weekend; hotels near NASCAR venues regularly mark-up rooms +/- 200% (to $300+) on race weekends. Speedway Motorsports Inc. (TRK, owns Bristol + 7 other NASCAR tracks) CEO Marcus Smith acknowledged that hotel pricing is a part of the reason fans aren’t showing up, but said he ultimately believes that “the key for a NASCAR resurgence” is great racing.

Howie Long-Short: BMS used to be “the toughest ticket” on the NASCAR circuit – selling-out 55 consecutive races between ’82-’10 – so seeing large portions of the grandstands closed off (no fans in the turns) made for a shocking optical.

Hotel pricing is the result of supply and demand – there are typically few rooms available in the area because the tracks are located in rural destinations – and the revenue generated on race weekends helps keep many of these places afloat for the year. Track owners could lower the price of camping on-site, but the costs associated with renting an RV for the weekend are roughly the same as what a hotel room would charge, so there’s little the series can do to reduce the costs of lodging. NASCAR races have long been costly to attend if you don’t live driving distance from the venue (and most fans don’t because of said rural location) – so this isn’t a new problem – it’s just getting more attention now because of Bowyer’s comments, which completely missed the mark.

Race promoters had no problem selling seats during the sport’s mid ‘00s heyday, but when the economy collapsed in 2008 a large portion of the fan base could no longer afford to attend races. While the economy has since recovered, many of those fans have never returned.

Part of the reason why is that NASCAR’s core fan base has aged out of the demographic that attends sporting events over the last 10 years. Just 21% of those over the age of 53 went to a sporting event within the last year. The NASCAR fan that grew up cheering for Dale Sr. throughout the 80s and 90s is now in their 50s and 60s.

NASCAR race attendance has declined, but any declarations that the sport is dying are premature. The races still draw +/- 3 million people on television each week (ratings are up slightly YoY) and Cup Series races are the top-rated sporting event on television most weekends over the first 8 months of the year. NASCAR’s current TV contract is worth $820 million/year (tracks keep 65%). As long as the value of live media rights continues to increase, the tracks will remain flush with cash.

Fan Marino: Critics of NASCAR will tell you that the series lacks excitement and that the outcomes are too predictable; a Joe Gibbs Racing (6) or Team Penske (3) car has won all 9 races this season. While the statistic is accurate, the criticism is off-base; the racing has been great, of late. The Bristol race had 21 lead changes among 9 drivers and Martin Truex Jr. held off a late charge from Joey Logano to win his first short-track race on Saturday night. That’s good news for the sport because Smith is right, the surest way to win back the fan is to consistently put a great product on the track.

Existing 5-year sanctioning agreements prevent changes from being made to the race schedule before the end of the ’20 season, but NASCAR officials are already said to be exploring the possibility of a shorter season come ’21. That’s a smart call, no sport needs a 10-month schedule (see: oversaturation); cutting down on the number of races makes the remaining ones that much more important. There’s also no reason for the series to visit so many tracks twice. Demand for tickets (and thus attendance) would increase if there was just a single race weekend in a given locale.

NASCAR would also be wise to explore some changes that would make the sport more appealing to the the next generation of fans (see: millennial/Gen-Z fan). Cutting race times (i.e. laps) to under 2.5 hours (currently can run upwards of 4) and outfitting tracks with Wi-Fi would be good places to start.

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MLS, MiLB Doing Best Job of Engaging a Multilingual Fan Base

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The U.S. Hispanic audience will have a combined purchasing power of $1.7 trillion by 2020, so teams across the sporting landscape are taking aim at the demographic, but cursory efforts – like heritage nights – to appeal to the Latino fan base aren’t sufficient; teams that wish to establish meaningful connections with the community need to show they’re fully committed (think: participate in cultural events, follow trends and news) and share the same values (think: family, tradition). No club has done a better job of speaking to the Latino fan than LAFC, embracing their feedback on everything from the team colors and logo to stadium design.

Mario Flores is the managing director of Sportivo, a Hispanic public relations firm that counts LAFC as a client. Flores said teams need to authentically engage with fans – starting at a grassroots level – to build trust and loyalty within the Hispanic community. “You can’t just decide on Cinco de Mayo to put the Latino fan at the forefront of your marketing campaign and expect an ROI. You need to be committed to that community 365 days/year. Whether it’s reading to bilingual students at the library, hosting a youth camp or nonprofits for a game; simple things like that go a long way towards building their allegiance.”

Howie Long-Short: To reach the Latino fan teams need to speak their language and depending on who the target audience is, that varies. Flores says that “younger millennials prefer Spanglish (which is why MLS ran a campaign in the language) because that’s the way they speak to their friends; if you’re speaking to an older audience, you’re going to be speaking Spanish.” Teams also need to be where the fans are – which is on mobile; half of all Hispanic millennials are considered smartphone “power users”, meaning they use their phones at least 25% more than the average person.

Flores believes that MLS and MiLB have done the best jobs (among U.S. pro sports leagues) of engaging the multilingual fan base. “MLS teams have really embraced their local communities and have been good about putting out Spanish language media content; and MiLB’s Copa de la Diversión has been phenomenal from a marketing standpoint.” 

You’ll often see pro sports franchises wear alternative uniforms (think: Los Mets or El Heat) as part of their multicultural outreach efforts. While the gesture may not seem like much, Flores believes the temporary name change – which often reflects the nickname the announcer uses to refer to the home team – “actually speaks to the community.” That doesn’t mean that trotting out fresh threads 2 or 3 times/season is enough to build a Latino fan base, though; “it needs to be part of a bigger program.”

It’s not a coincidence that MLS and MiLB are widely recognized for embracing the Latino community.  Having Latino athletes within the sport is crucial to driving Spanish language media coverage. Teams/leagues that don’t have them find that the Spanish speaking media “only wants stories with Hispanic athletes tied to it. It’s one of the reasons why the NHL hasn’t made inroads within the community.”

If a team is going to make inroads with the Latino community’s local leaders “the front office needs to reflect what the fans look like. Teams in Los Angeles better have more than one person who is Hispanic in the front office. Oftentimes the only Spanish speaking person within a front office is the receptionist or an administrative assistant, so they’re asked to be part of the club’s multicultural group. The intentions are well, but those individuals may not understand true nuances of the Latino fan from a marketer’s point of view.”

Fan Marino: Teams need to make Hispanic sports fans feel welcome if they’re going to come to the stadium. Providing bilingual signage is one way to accomplish that. Flores said communicating in Spanish is “a welcoming nod to the Hispanic consumer. It conveys we understand you, we want you to be comfortable here.” Having Spanish speaking staff on-site doesn’t hurt, either.

During the 2018 offseason, the Marlins turned a section in right field into Comunidad 305 – a fan zone welcoming instruments, dancing and flags in an attempt to recreate the raucous environment found at the World Baseball Classic. The efforts were well intentioned, if misguided. Latinos “don’t want to feel like they’re being assigned to a specific section. They want to maintain their cultural identity, but they still want to feel like they’re a part of the fandom with everyone else.”

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XFL Will Consider College Players, Clemson Star Says Opportunity Will Be Hard to Turn Down

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NFL rules prohibit players from entering the draft until their high school class is 3 years removed from graduation, but as of 2020 football players who wish to turn pro sooner will have a viable option besides the Canadian Football League; the XFL. Commissioner Oliver Luck has said his league won’t recruit kids on college campuses, “but there are categories of college players that may be of interest to us including those who have graduated early, but are not yet ready to declare for the NFL draft or guys no longer academically eligible. Players who want to transfer but decide they don’t want to sit out a year, may also be a fit.” If Clemson WR Justyn Ross has a pulse on the average college football player, the league may not need to recruit to land underclassmen destined for NFL careers; Ross said the chance to play football for money – beyond the “cost of attendance” – is going to be “hard for an 18 or 19-year-old to turn down.” Ross personally has no plans to leave Death Valley after his sophomore season – his mom wants him to earn his degree.

Howie Long-Short: Ross reasons that players would consider the XFL over college football because “something could happen. You can get hurt. You have to take care of yourself because it can be over just like that.” He’s not wrong, but players with surefire NFL futures must consider the risk-reward. While they might be able to earn a respectable annual salary (ceiling is +/- $250K) for a season or three, it’s a pittance compared to what top NFL draft picks sign for. Even with a national TV deal (keep reading), the XFL can’t provide the platform that big-time college football can and as Zion Williamson showed this past season at Duke, success on a national stage could be worth upwards of 9 figures in endorsements and improved draft stock.

Back in June ‘18, the NBA introduced a viable alternative to NCAA basketball for elite prospects not yet eligible for the draft, but to date, not a single 5-star prospect has signed a G-League contract (Bazley ended up signing with New Balance). Luck acknowledges “that it hasn’t happened yet because most young men love the idea of playing college hoops”, so he’s certainly not under the impression that he’s building this league around “one and done” talent. Instead, the plan is to focus on the quality of play and fan access.

Luck envisions an “up-tempo, fast-paced game with fewer stoppages” and thinks one way to achieve that is to eliminate the huddle. “We’re considering outfitting the entire team – not just the quarterback – with earpieces. I always thought it was the height of inefficiency for the coach to use the communication system to tell the quarterback what the play was going to be and then have it take 5 or 6 seconds for the quarterback to tell everybody else.” To be clear, up-temp doesn’t mean no defense. Despite his experience in the Big-12, Luck says he’s “not a fan of the 65-64 games. You want it to be hard to make a 3rd and 7 in the 4th quarter when the game is on the line. Games shouldn’t be determined by who has the ball last.”

Providing fans access to content they haven’t been exposed to prior is where Luck believes he can bring innovation to the broadcast. “We’re looking at giving fans the ability to listen in on the communication between the coaches in the booth and players on the field; and there may be an opportunity to bring fans into the locker room for the coach’s pre-game speech without impacting the integrity of the game.”

Speaking of the game broadcast, Luck told me the league would be “announcing a very powerful TV deal with a broadcaster whose alphabet letters you will recognize – as well as one with a fully distributed cable broadcaster.” The commissioner acknowledged that streaming is the future, but said “for a young league like ours, the exposure we can get from over-the-air television – as well as cable – is the most important thing.”

Fan Marino: I’ve been critical of the XFL for making a big deal about coaching hires – no one attends a football game to watch the coach. That’s not to say Bob Stoops, Jim Zorn, Marc Trestman and Pep Hamilton aren’t great hires, I’ve simply argued that spending big money on coaches was missing the point. Luck disagreed saying, “quality coaches give us credibility and help us to recruit better players” and relatively speaking the league really isn’t paying coaches all that much; “we’re paying our head coaches $500,000. While that’s certainly a nice salary, it’s modest compared to what NFL and even the smaller FBS schools are paying.”

The XFL isn’t the only league considering going after players not yet draft eligible. Don Yee’s Pacific Pro League has said they’d like Clemson QB Trevor Lawrence to serve as their answer to the AFL’s Joe Namath.

Editor Note: You can find Part 1 of our interview with Oliver Luck, here.

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Hulu Building Live Sports Strategy Around Interactivity and Personalization

Hulu

Hulu’s “No Sellout” advertising campaign – featuring Damian Lillard, Joel Embiid and Giannis Antetokounmpo – plays off consumer cynicism towards influencer marketing campaigns (thanks: Fyre Festival) to draw attention to the service’s live sports content. In the humorous spots worth watching (hit the links in the player names), the NBA stars offer up some refreshing “honesty” – they’re only promoting the corporate message “Hulu has live sports” because they’re being paid. The campaign, designed to poke fun at brands using paid influencers in advertisements disguised as organic content – and the influencers who act as if that is not the case – has resonated with a consumer well aware that “athletes are getting paid a lot of money to endorse these products.”

Howie Long-Short: The pursuit of live sports programming gets away from the Hulu’s core “on-demand” mission, but the game window is only 3 hours long and fans follow their teams 24 hours/day. Wayne Sieve, EVP of Thuuz Sports believes that “there’s all kinds of shoulder programming – with a shelf-life – that would be relevant to the passionate fan and supplement any live rights that they might have; and the on-demand portion of Hulu is built to service that content”.

Live sports rights are expensive and there’s “enormous competition for that 3-hour window”, so Hulu won’t be pursuing the “network feed” of games; instead, their plan is to serve up “alternative broadcasts.” The company’s sports strategy will place an emphasis on interactivity and personalization. Subscribers will be able to “choose between stats-heavy broadcast overlays or a stripped-down display”; they’ll also be able to record and watch later (for the next gen. of fans who won’t watch 2.5 hour broadcasts) and catch games on mobile devices.

It remains TBD if there is a consumer that is willing to pay for a data/insights driven broadcast, but even if there’s not Wayne sees Hulu’s addition – as well as Amazon, Facebook, DAZN etc. – to the sports broadcasting landscape as a win for fans. “The linear broadcast networks have gotten lazy. The exclusive rights deals signed before streaming became prevalent meant they didn’t have to work very hard to retain the viewer. New competition forces those with broadcast rights to make their product more compelling. They now need to provide a value proposition to the viewer greater than what can be obtained from another platform.” It’s also a win for the leagues. “As the number of bidders increases, so too does the price of their broadcast packages.”

Hulu’s (25 million domestic subs) decision to supplement its on-demand programming with live television runs contrary to Netflix’s (58 million domestic subs, 81 million international) stated strategy. While it currently serves as a differentiator between the 2 services, Sieve is expecting competitors – including Netflix – to eventually follow the company’s lead. “If you’re in the content business, you have to pursue sports programming; and if you’re going to do sports, then you have to do them live. It’s only a matter of time until everyone with this type of VOD entertainment experience offers live programming.”

Speaking of “everyone”, Hulu is owned by The Walt Disney Co. (60%), Comcast/NBCUniversal (30%) and AT&T/Warner Media (10%). Each of those companies has plans to launch their own streaming service and Disney already has ESPN+ for sports content. It will be worth watching if Hulu “rides the coattails of their parents to acquire sports rights because they can’t compete on a dollar for dollar basis with a company like Amazon.”

Fan Marino: Getting back to the commercials for a second, Howie wrote in Monday’s newsletter that “the U.S. consumer had wised up to the pay-to-wear sponsorship model, realizing that celebrities/athletes will endorse whatever they are paid to wear.” The commercial makes light of a problem that brands are encountering (which is why they’re looking outside of sports), but a Mavrck survey of over 1,000 influencers found that consumer distrust is warranted; 40% of influencers admitted to failing to follow guidelines for proper disclosure.

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With Municipalities Rejecting Public Stadium Financing, International Ownership Expected to Increase

ChaseCenter

Relocation from Oakland (where no public funds were available) to San Francisco forced Golden State Warriors ownership to self-finance the team’s new $1.4 billion venue – city statutes prevent the use of public money on privately owned sports venues – but speaking in general terms team President Rick Welts says that it’s the local community that benefits (see: “better quality of life”, “more varied cultural offering”) most from a building’s (and presumably the team’s) presence and thus it should bear the costs associated with construction. To hear Welts tell it, there really is no other choice but for teams to rely on public funding; they need new buildings to remain competitive (on the court/field and as a business) and cannot afford to pick up the costs themselves.

Florida House Rep. Bryan Avila disagrees citing Steven Ross’ decision to self-fund a $500 million renovation to Hard Rock Stadium (after the state legislature rejected a $350 million funding request from the Dolphins). Avila said, “we often forget that these sports franchises are a business” – and particularly lucrative ones at that; Jeffrey Loria bought the Miami Marlins for $158.5 million in ’02, only to sell it once he got a new stadium for $1.2 billion in ‘17 (with the help of $488 million in bonds from the County). The Miami Springs Republican is doing his part to end the handouts filing a House proposal that would both “repeal an unused pool of sales-tax dollars ($13 million/year) intended for building and improving professional sports stadiums” and prohibit the use of public funds to construct facilities used by sports teams moving forward.

Howie Long-Short: There’s no doubt that a “roaring economy, a championship caliber team and a city that never in its history has had [a modern arena]” eliminated much of the risk associated with the Warriors self-financing their new arena, but it’s disingenuous for Welts to suggest that it would take a perfect storm to replicate the model; we’ve seen stadium privatization trending on both coasts for nearly a decade now (see: Rams Stadium, Levi’s Stadium, MetLife Stadium). There’s also no shortage of wealthy individuals around the globe capable of self-funding – people that Andy Dolich, the president of the sports consultancy Dolich Consulting, says “literally have billions of dollars in disposable income that wouldn’t hesitate to spend $750 million on a stadium.”  The leagues simply need to alter their bylaws to allow for foreign ownership.

Most cities, states, counties and regional districts oppose financing buildings that house sports teams because the costs have become exorbitant and it’s difficult for an elected official to justify – to the public – giving a billionaire the money to build a palace for a privately held business that continues to appreciate; the Warriors have increased in value from $450 million in ‘10, to an estimated (Forbes) $3.5 billion in ‘19. If the Florida bill passes, expect other states to draft their own versions. Dolich explained, “within the sports world (and public sector), the line always forms behind the first one to have any success in terms of revenue generation and distribution.” 

Those that support the use of public money on stadium/arena construction talk about job creation, tourism revenue and a “sense of community” but studies have shown that the costs outweigh the economic benefits; the jobs created are low-paying and seasonal and the tourism revenue generated from most sporting events is negligible. Dolich said there are some cities like “Memphis, New Orleans and Oklahoma City, where you can make a legitimate argument that having a pro sports franchise helps to attract other business”, but even in those locales the economic upside is limited; “when those teams are playing poorly, there aren’t a lot of people coming so that means less hotels and all the associated tax revenues.” Public financing for sports venues in major metro areas is history.

Historically speaking, sports venues have done little to stimulate the local economy, but the last generation of stadiums (think: built between 1970 – 1995) were built on the outskirts of town where land was cheap. As we’ve written about, the current trend is to build downtown – as part of greater mixed-use real-estate plays – where the venue can serve as a 365 day/year revenue generator (think: NE Patriots, SF Giants). Chase Arena is being developed alongside retail, restaurants and a public park. It’s those additional money making opportunities that will make stadium ownership attractive to investors worldwide moving forward.

Fan Marino: Relocation remains the leverage that team owners hold over the local municipality. The Raiders are moving to Las Vegas because unlike Oakland, the state agreed to contribute $750 million in public funding to the new stadium; and the city of Phoenix recently awarded the Suns $150 million for renovations (that total $230 million) after their owner Robert Sarver threatened to move the franchise to Seattle or Las Vegas. Seattle and Las Vegas remain strong stalking horses for NBA owners looking to extract public funds from the local government, so I expect to continue seeing the league’s teams use that strategy effectively. That’s not the case on the NFL side, though. With Los Angeles now spoken for, no real desirable major North American city exists – unless an owner is willing to go to Mexico City.

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