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

Comunidad

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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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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Dundon Cuts Losses, Shutters AAF

AAF

Less than a week after Alliance of American Football Chairman Tom Dundon threatened to shutter the start-up league, the Carolina Hurricanes owner has suspended football operations. While sources tell Pro Football Talk that Dundon has not yet formally decided to permanently disband, his inability to negotiate the use of NFL players with the NFL Players Association (and thus gain subsidies from the NFL) means the end is near; the decision to suspend league operations was made at his sole discretion. ProFootballTalk.com reported that it was going to cost another +/- $20 million (Inside The League says the league’s weekly burn rate could be as much as $8-9 million/week) to get the league through the season’s final 4 weeks.

Howie Long-Short: Credit Dundon for realizing the writing was on the wall – viewership on NFL Network steadily declined from over 600,000 viewers in Week 1 to less than 300,000 in Week 7 and in stadium attendance hit season lows in both San Antonio and Salt Lake City last week – and for the willingness to cut his losses. His decision to throw in the towel before the end of the first season isn’t about the lack of cooperation received from the NFLPA as suggested, though – Dundon’s certainly smart enough to know 3rd string QBs aren’t selling tickets. He realized he’s been sold a bunch of goods and by suggesting that the league’s viability is tied to the NFL’s participation, he’s able to save face.

There is no saving face saving face for Charlie Ebersol here. The league’s co-founder told ESPN in January that he had a “sober business plan” – a slow and steady approach to eventually becoming a minor league for the NFL – but his economic model was always a bit inebriated. There was no logic in signing players without another winter/spring football option to $70,000/year contracts ($15K above the annual household medium income) for 3 months of work (+ 1 mo. of training camp); the G-League’s minimum salary is $35,000 and their regular season is 2 months longer.

There was also no reason to be playing games in 60,000+ seat stadiums. The league had to know it wasn’t going to draw more than 20,000 fans/game (that’s the number Oliver Luck told me the XFL penciled into their budget), so why sign leases for venues 3x the size? One source estimated that the league could have paid as much as $750,000/game to cover all the stadium related game day expenses. They could have played in mid-major college football venues or minor league baseball parks and spent half the amount. Ebersol also frequently told the media that the league had enough capital for 3-5 years “if we completely screw up” – he made it just 8 weeks.

The AAF had always positioned itself as a developmental league, but it never publicly stated that its success was contingent upon NFLPA participation which is why Dundon’s announcement last week sent shockwaves through the football-sphere. Back in January, Charlie would tell anyone who would listen that the Alliance was a “tech company that owns a football league.” That description never made any sense, though. No one would commit hundreds of millions of dollars to demo gaming software and technology companies that operate as loss leaders (think: Uber), do so with billions of dollars in runway behind them; the Alliance failed to make payroll in the first week.

The AAF wasn’t a technology company, but Dundon remains bullish on its “real-time” sports betting application leading some to believe he bought the league to strip it of its assets. That seems unlikely. $70 million would be an exorbitant amount of money to spend on I.P. that’s been “plagued with bugs and setbacks” and has met with a tepid consumer response.

Dundon covered player payroll through last weekend’s games, but apparently, that’s where the buck stops. Robert Klemko reported that “AAF teams are making players play for their own flights home” and a source tells me that “plenty” of the league’s vendors have been left holding the bag (one told me his company is owed $125K); a debate between Dundon and the founding ownership group about who should have been responsible for paying expenses down resulted in invoices ultimately going unpaid.

Fan Marino: The AAF’s demise should prove beneficial to the XFL. The prospective player pool will increase in size and sources told the Action Network that the league has interest in acquiring both the AAF’s football and broadcast equipment (remember, Charlie worked to put forth an NFL quality broadcast, so the equipment is valuable). Commissioner Oliver Luck said the league will also pick up a few of the AAF’s on-field advancements including “fewer stoppages of play so we can get the game done in under 3 hours and offering fans access to insights and experiences not previously available within a football telecast (see: listening in on replay reviews); we might take our fans into the locker-room for a pre-game talk. We want to provide content that you don’t see very often unless you’re a football player.”

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MLB’s Competitive Balance Tax, Revenue Sharing System Create Divide Amongst Teams

MLB 200x200

28 Major League Baseball teams opened their 2019 season on Thursday (the Mariners and A’s opened with a 2-game series in Japan on 3.20), but payroll disparities between the league’s top spenders and everyone else has dampened the hope that typically accompanies Opening Day in many cities. While 3 teams (Red Sox, Yankees, Cubs) will operate with a 40-man payroll of more than $200 million, 11 others plan to compete with payrolls at least $60 million under the league’s $206 million competitive balance tax threshold; including 8 with total payrolls less than $100 million. The league’s use of a competitive balance tax in place of salary cap – and a salary floor – and a revenue sharing system that provides a cushion for clubs unwilling or unable to field a competitive team is at the root of the divide.

Howie Long-Short: Major League Baseball is the only big 4 sports league that does not have a salary cap as a term of their collective bargaining agreement and Indians pitcher Trevor Bauer said “for a long time” the lack of one contributed to the game’s “competitive integrity.” But with few teams willing to assume the penalties that come with crossing the competitive balance tax threshold, it’s now viewed by the players as the pseudo “salary cap [that] it was supposed to prevent.” It’s also resulted in a tremendous divide between the league’s “haves” and “have nots.” According to USA Today, while the Cubs will spend $211 million on players this season, Tampa Bay has less than $54 million in salaries on the books.

The MLB free-agent market operated at a crawl for a second straight winter. High-profile stars Manny Machado and Bryce Harper didn’t sign their 9-figure contracts until they were less than 6 and 4 weeks out from Opening Day, respectively and quality veterans like Dallas Keuchel and Craig Kimbrel remain unsigned as of print. Veterans are finding it difficult to land big money, long-term deals because the teams hold too much leverage. With players having to put in 3 years of service time before they are arbitration eligible and then another 3-years under the team’s control at salaries below market value, there’s a plethora of inexpensive players available. Front offices across the league have wisely decided they’re willing to spend for the elite free-agent who can move the needle, but are no longer willing to break the bank to fill out the roster; and with good reason, the league’s revenue sharing system affords teams the leeway to be bad and still turn a profit.

MLB Deputy Commissioner Dan Halem told us back in January, that despite the slow start he expected teams would allocate more money to free agents during the 2018 off-season than any other. He was right – the 30 teams collectively committed $3.8 billion (previous high, $3.4 billion) to player salaries, but much of that money was awarded to just a handful of players and “many veterans” were forced to take salary cuts. As a result, according to AP studies, the league’s average salary ($4.36 million) as of Opening Day declined for a 2nd consecutive season ($4.41 million in ’18, $4.45 million in ‘17); and for just the 3rd time since the ’94- ‘95 strike.

Even if “every team [wasn’t] acting like its capped out” [on payroll budget], the luxury tax threshold is lower than it should be and that discrepancy is costing veterans money. The current luxury tax system has been in place since 2003 when teams were given a soft cap of $117 million, but while league revenues are up +188% (to $10.3 billion) since that time, the soft cap has failed to keep pace; only rising +68%. Of course, increasing the luxury tax threshold would only grow the imbalance among teams as the big market clubs would be able to spend even more without penalty.

MLB’s existing CBA expires in 2021 and the players’ association is going to need to negotiate some significant changes to it if free agency, “which drives baseball’s economic system”, is “to remain a meaningful option for the players going forward.” Raising the min. player salary in line with league’s revenue growth since ’03 (from $545K to $850K), cutting down on the service time required before arbitration eligibility (so players get to free agency faster) and on service time manipulation (which would also expedite a player’s path to free agency) would all help to tilt the scales back in the player’s favor.

Fan Marino: It’s tough to watch pro sports teams focus on profits, when the penalties for spending too much are a relative pittance to the upside of winning the World Series. It cost the Red Sox just $12 million and 10 draft spots to operate with the league’s highest salary in 2018 and it paid off with their 9th World Series title.

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AAF Majority Owner Threatens to Fold League

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Alliance of American Football majority owner and chairman Tom Dundon has warned that the start-up league is in danger of folding if the NFL players association refuses to allocate young players to its teams. AAF ownership has held on to the hope that the NFL would use the league to get its 3rd string QBs, back-up lineman and practice squad players much needed reps, but the NFLPA, concerned about player safety (and the financial ramifications of injuries suffered), opposes the plan. Dundon, who is “exploring all options, one of which is discontinuing the league”, plans to announce a decision on its future within the next 48 hours.

Howie Long-Short: Wednesday’s announcement came as a surprise. The AAF has always positioned itself as a developmental league, providing players (and coaches) with the best option “if your goal is to get back to (or to) the NFL”, but it never publicly stated that its success was contingent upon NFLPA participation. Founder Charlie Ebersol told us just a few weeks ago that the league’s investment in the “quality of football” and the broadcast presentation was why his league would succeed where others failed before him.

If the AAF business model was predicated on a formal affiliation with the NFL, why spend tens of millions of dollars to play the 2019 season without their support? According to Darren Rovell, it’s because the league strategy changed once Dundon took control. While Ebersol and Bill Polian had hoped to take a slow and steady approach, “potentially becoming a feeder system to the NFL by year 3”, Dundon wants to immediately serve in that capacity. The problem is as we told you in Early Entrants: Vol. V, the NFL is going to take a wait and see approach here and there’s been no indication that the NFLPA would ever agree to such an arrangement.

When the Carolina Hurricanes owner “bought the league” 5 weeks ago he suggested that the “stunning growth in-stadium and across TV, mobile and social media” had convinced him to increase his stake, but gate attendance and television viewership has been trending downward since. It’s likely the billionaire businessman now sees that the writing is on the wall for the AAF and wisely wants to cut his losses (Action Network reported he’s pumped in $70 million to date). Dundon knows 3rd string QBs aren’t saving this league, NFL Europe had NFLPA participation and the league still failed. He also knows the NFLPA isn’t on board and suggesting that the league’s success hinges on their involvement gives him easy out. The 48-hour timeline (by Friday 3.29) is in place because if they are going to disband, there’s no need to burn millions putting on this weekend’s games.

If Dundon does decide to drop the curtain on the start-up league, we can’t say he didn’t warn us. He told reporters back on February 19th that his participation remained a week to week proposition and that he could stop funding at any time if it became apparent that “nobody wants the product.”

The NFLPA opposes an alliance with the Alliance because the risks far outweigh the rewards. NFL players use the off-season to rest and recover and the league’s CBA forbids teams from holding mandatory workouts/practices to ensure the players are afforded that time. Forcing players to compete during the off-season would place them at risk of an injury that could negatively impact their future earnings; remember, NFL player contracts aren’t guaranteed.

Fan Marino: The AAF has drawn respectable television numbers through 7 weeks, averaging 603,000 viewers/game across CBS, TNT and NFL Network, but last weekend’s highest rated game drew fewer 350,000. 600,000 fans/game is impressive relative to what NFL Network would typically draw on a Saturday or Sunday evening, but considering what the league is spending to put on the games (one source suggested it could be as much as $5 million/per) the business model remains a losing proposition.

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Marlins Selling the Fan Experience, Not Wins or Hope

Marlins

FanGraphs projects the Miami Marlins will finish the upcoming MLB season a National League worst 65-97. The team is expected to score the fewest number of runs in baseball (3.65/game) and finish with the game’s 2nd worst run differential (-146). Marlins CEO Derek Jeter knows he has little to market on the field, so the team has taken an unorthodox approach – at least for pro sports teams – to selling tickets; promoting the fan experience. Jeter recently told reporters “we want people to enjoy themselves. A lot of times people come [and] they don’t [recall] who won or lost, sometimes they don’t even [remember] who was playing, but they do know if they had a good experience and that’s what we’re focusing on.”

Howie Long-Short: The Marlins have traded away young talented players Marcell Ozuna, Christian Yelich and J.T. Realmuto over the last 12 months, so one can understand why the club has chosen to turn its focus to the fan experience instead of its on-field product. Chris Lencheski (founder of sports consultancy group Phoenicia and an adjunct professor at Columbia University) believes the team is taking the right approach, telling me “it’s always smart – regardless of if a club is winning or losing – to ensure the fan leaves the game feeling that their time and money was well spent. The Marlins want fans to say that the customer service they received [at the park] was off the charts. It’s the Enterprise Rent-A-Car approach. All rental car companies provide roughly the same services, but Enterprise consistently wins business – even if they’re not the lowest priced, or in this case a very good team – because their customer service is exemplary.”

Minor league teams go to great lengths to ensure a premium fan experience, so it’s worth wondering why more major league teams haven’t taken the approach. Chris said that the league’s revenue sharing system “makes it less of a priority for some clubs; they’re content taking what the league gives them. Others simply don’t need to do as much marketing because the team is a draw.”

While some teams may not need to invest in fan interaction and fan engagement during the good times, they should be because failing to do so is a surefire way to ensure the fan base dissipates during the hard times. “The Phillies are a prime example of that. In the late 90’s and early 00’s, the team sold out every game; they had a good team and had moved into a new building. But their failure to engage fans during those times accelerated their decline when the team’s performance started to slide. Those customers were no longer there.”

Fan Marino: There’s nothing inherently wrong with selling entertainment value – sports are supposed to be fun, but as a fanatic the idea that a team’s primary focus wouldn’t be on winning is difficult to swallow. Unfortunately, teams aren’t catering to the super fan. As Chris explained, avid [fans] will remember the score, but they’re going to come to the game regardless; you aren’t bending the curve for them. You’re doing it for average customer.”

Howie mentioned the team’s decision to trade away several young stars. Some argue it is star power that drives fans to the ballpark and thus the team would have been better off signing Ozuna, Yelich and Realmuto to extensions, but it wasn’t like the team was a league leader (or even average) in attendance with those guys on the roster. That doesn’t mean the Marlins won’t (or shouldn’t) sign high profile players in the future. The team’s previous fire sales are not indicative of future failures, “everything needs to be held in the context of time in baseball.”

Moving your best players typically doesn’t result in an attendance increase (team drew a major league low 10,013 fans/game last season), but that doesn’t mean Miami is going to lose even more money in 2019. It’s feasible that the team’s revamped approach “could raise the KPIs of the individual consumer. They could lower ticket prices, draw fewer fans and still grow revenues by making more money per head.”

Chris added that the team’s decision to lower ticket pricing this year is “the appropriate retail approach. The Marlins are a challenger brand in South Florida (see: many alternative forms of entertainment), so they must take an aggressive approach to the market. Their pricing last year was not aligned with the fans perception of its worth. The rescaling of tickets is a smart and measured approach to re-aligning value for customers – both current and future”

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In-Stadium Technology Just “an Expensive Dot Along a Continuum”

UnitedCenter

Over the last 5 weeks, it was announced that 3 U.S. pro sports venues will replace their existing scoreboards with larger, flashier entertainment systems (Capital One Arena, Wells Fargo Center & United Center); Oracle Park is also set to unveil its “fancy” new 4K scoreboard on opening day. Teams are investing tens of millions of dollars in LED screens and other technological enhancements (like lighting systems) because it’s becoming increasingly difficult to draw people to the stadium. TeamWorks Media co-founder and CEO Jay Sharman said, “psychologically fans need to be able to say to themselves, I want to go to the game because the experience is better than what I can get at home. Most teams know they’re not clearing that bar right now – and that the bar is only going to continue to rise – which is why you’re seeing a little bit of shiny rattle (see: teams spending big $ on scoreboards) going on.”

Howie Long-Short: The venues referenced are marketing the scoreboards as “the largest high definition screen in an arena”, “the first Kinetic 4K center-hung scoreboard” and “the first indoor sky ring”, but Jay says,“marketing greater resolution and the size of screen is missing the point. Fans don’t care about the size of the platform. What is important is the messaging [on the screen] and how you use the platform to make the game experience better.”

Jay’s right, no one is coming out to the ballpark because of a screen, no matter how large it may be – and “I think you’d be hard pressed to find data that shows big screens are responsible for increasing fan engagement” – but that doesn’t mean it’s a bad investment. A state-of-the-art scoreboard is simply “an expensive dot along a continuum – how you’re greeted at the door, the ease in which you can park, the length of the concession lines, the entertainment during TV timeouts – that makes the entire game day experience something memorable; something that makes you want to come back.”

One thing that ensures fans won’t come back is an inability to use social media at the game, so it would seem that at least some of these teams are putting the cart before the horse. “There are many arenas and stadiums where the bandwidth is so poor that you can’t get an out of town score on your phone. When you’re at a venue spending all that money, the last thing you want is to feel like you’re missing out. Teams need to cover the technology basics before they get into the messaging piece.”

If used for fan engagement – and not just for advertisements – the additional scoreboard real-estate could be a difference maker for the hardcore fan (and for the team). “Teams can use the additional space to hypercharge the in-stadium experience – to give those fans access to all of the information that they want” (think: Second Spectrum like analytics/presentation). Jay also thinks there is the potential to use the additional real-estate to cater toward the sports bettor saying, “that would be utilitarian and make for a really interesting use case because now you’re offering a separate experience.”

I mentioned the team because the Tampa Bay Lightning have managed to use their center-hung scoreboard (along with ribbon boards, lighting etc.) to create a “must watch” pre-game show. Eaton’s Ephesus Sports Lighting, Director of Business Development Mike Quijano said the result has been “fans entering the building earlier” (and presumably spending money during that time), “so they’re definitively seeing an ROI on it.”

Fan Marino: It’s unclear why [more] venues aren’t using their “shiny rattle” to draw fans to the building when the team is on the road. The experience of watching away games on a 5,000 SF display would seem far superior to viewing at home on a 50 inch and in-arena watch parties would give fans that “sense of community that they can’t find on the couch.” There’s also the element of conditioning fans to “come to your venue when your team isn’t there, which is a trend you’re seeing across the sporting landscape with these mixed use real-estate plays.

While a 5,000 SF screen would make for a great place to watch an away game, the sheer size of some of these scoreboards (see: Jerry World) makes them less than ideal for home games; fans find them to be districting. Which makes you wonder, if the goal is to create a raucous home environment why are teams investing money in something designed to pull attention away from the field?

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Falcons, United F.C. Announce Attendance of 70K+ 16x in ’18, Fail to Clear Benchmark Single Time

Falcons

The Atlanta Falcons and Atlanta United F.C. publicly reported that more than 70,000 fans attended 16 home game at Mercedes Benz Stadium in 2018, but gate attendance records obtained by the Atlanta Journal-Constitution from the Georgia World Congress Center Authority (GWCCA) show the teams failed to clear that benchmark a single time. The Falcons announced an average attendance of 72,898 fans across their 8 home games last season, but the “actual attendance verification” figures submitted by the team show it scanned nearly 9,000 fewer tickets/game (64,022); United FC was slightly more transparent with their attendance claims, posting an average just 6,000 fans greater (53,002) than the actual number passing through the stadium turnstiles (47,123). The records obtained from the state agency also indicated variances in the attendance figures announced for a pair of high-profile college football games played at the venue; the 2018 SEC Championship game (77,141 vs. 69,614) and 2018 Chick-fil-A Peach Bowl (68,413 vs. 74,006). The SEC explained that it counts all tickets distributed + “credentialed VIPs, participating team bands and credentialed media” in their announced attendance figures.

Howie Long-Short: The discrepancies found by the AJC stem from the leagues’ (NFL & MLS) use of “tickets distributed” – as opposed to “tickets scanned” – as its method of measuring official game attendance. The marketing ploy enables teams within those leagues to announce inflated attendance figures as tickets issued on a complimentary basis – regardless of if they’re used (i.e. tickets scanned) – are counted in the total (complimentary seats issued + tickets sold = tickets distributed).

Teams don’t just give away every unsold seat though, because as Russell Scibetti, President of KORE Planning and Insights, told me “too many comps can actually be worse than unsold tickets. Comping seats devalues the ticket itself. The more comps that get out, the more ways people can get free tickets and the less likely they are to buy – even at a discount. Teams no longer paper the building just to get a show rate because that tactic does far too much damage to any future sales.”

NFL, NBA, NHL and MLS franchises are putting forth the attendance figures that make them look the strongest (MLB requires that teams announce the number of tickets sold), but they’re not using that incorrect data to measure internal KPIs. Russell said, for logistical and operational purposes – like how much staffing is needed at the venue, how many items they plan to give away or to calculate customer show rates – teams are using the real scan counts.” That data isn’t necessarily 100% accurate though. There’s always going to be some variance between the attendance figures tracked and the number of people in the building. Every team has had issues with scanners getting disconnected, which throws off their counts. There are people coming in early for pregame hospitality and others that are on credentials – rather than tickets – that are not being counted.”

Technically speaking, there’s nothing wrong with what either club is doing. As Falcons CEO Rich McKay noted, “the league doesn’t ask us for the other number”, but it bares wondering why marketers/sponsors don’t demand accurate information; how can they accurately measure ROI if the benchmark data they’re getting is inaccurate? Russell said there is no reason to assume they’re working off the announced numbers, “teams could very likely be sharing their internal metrics with their partners.”

Fan Marino: The Falcons claim that they averaged 73,000 fans/game last season is laughable when you consider that the team drew less than 62,500 fans for half the home games – including the home finale which was attended by just 56,470 people (announced at 72,000+). Does this look like a sold-out building?

United F.C. didn’t draw 50,000+ fans/game, but no team in the league scanned more duckets than Atlanta did last season (901,000) and the 47,321 that the team did average was still nearly 21,000 more than any MLS team (besides Seattle, 40,641) even distributed. United F.C. also set a league record for game attendance when 69,004 attended (over 73,000 distributed) the MLS Cup game between United FC and Portland Timbers back in December.

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