Enshrinement Extends HOF Inductees’ Commercial Viability, Could Increase Marketing Opportunities By +50%

NFL HOF

Last night’s Hall of Fame Game between the Denver Broncos and Atlanta Falcons kicked off the NFL’s annual ‘Enshrinement Week’. The Class of 2019 Hall of Fame (HOF) induction will take place tomorrow evening (8.3). For most NFL players, retirement means the end of lucrative marketing opportunities, but HOF inductees will find that a six (or seven) figure career awaits. The gold jacket represents the “gold standard” amongst pro football players – it also ensures an extension of the athlete’s commercial viability and immediately enhances their consumer marketability. Jordan Bazant, who is head of the sports talent division at WME, explained “players are commercially viable until they stop scoring touchdowns. Entering the Hall of Fame keeps the spotlight on the player in their post-playing days extending that window. The title ‘Hall of Famer’ also adds credence to a player’s message. They’re no longer just a former NFL star, they’re now recognized as an all-time great with these valuable brands attributes.

Howie Long-Short: Commercial opportunities are greatest for the highest profile Hall of Famers, not necessarily the ones who accomplished the most on-field. As a result, those who played post 1990 receive the bulk of the work. Remember, the NFL didn’t offer an out-of-market television package that allowed fans to watch every game (and thus every player) until ’94. Believe it or not, there was a time when if a team wasn’t scheduled to play on Monday Night Football (or Thanksgiving) and wasn’t on the local team’s schedule, fans didn’t see it play.

Steve Rosner, co-founder of 16W Marketing, says that the most marketable HOFs will find a variety of potential options to engage in both their pro and college markets. “There will be a lot of opportunities to do appearances and corporate events. There will also be team and league sponsors looking to activate campaigns.” Part of the reason why retired players are attractive to brands is that an injury to a current star could derail a campaign. “Of course, there are always memorabilia deals to be had too.”

Rosner estimated that a retired player’s revenue opportunities could climb +50% to +70% in the first two years following induction before leveling off. Bazant, who represents Troy Aikman, Chris Carter & Marshall Faulk among others, didn’t dispute that a +50% increase could be achieved, but he said that it would take a less heralded player to enjoy that kind of jump. Players with the national visibility the three guys referenced have are unlikely to see a jump greater than +10% to +20% because the value of their brands were already strong to begin with.

The position the inductee played also impacts their post-career earning potential. The reason brands seek out quarterbacks is because while their teammates’ faces remain mostly anonymous behind facemasks, fans see the signal caller regularly being interviewed without a helmet on. Bazant said that a high-profile quarterback could still command enough work to rake in seven-figures in marketing deals annually. While the bar is lower for other positions, Rosner suggested that reaching the mid-to-high six figures remained feasible.

Fan Marino: This year’s HOF inductees are Champ Bailey, Tony Gonzalez, Ty Law, Kevin Mawae, Ed Reed, Pat Bowlen, Gil Brandt and Johnny Robinson. The average football fan likely knows the first five names on the list, Pat Bowlen was the influential owner of the Denver Broncos and Johnny Robinson was an all-pro safety for the Chiefs in the late 60’s/early 70’s, but it is Gil Brandt’s contributions to the league that will live on the longest. Brandt, the Cowboys VP of Player Personnel of 29 years, is credited with developing the talent evaluation process that ultimately led to the creation of the NFL Scouting Combine (and the selection of 9 HOFs). He’s also recognized as one of the first front office executives to use a computer in the player evaluation process and the first to use psychological testing to measure a player’s ability to respond under pressure.

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Perception Tennis is Struggling Misguided, Simply Case of “Rest of the World Catching Up”

USTA

U.S. men’s tennis has failed to produce a Grand Slam singles champion since Andy Roddick won the U.S. Open back in 2003. The drought, the longest in U.S. men’s tennis history, comes on the heels of a 14-year period (began in ‘89) where American men combined to collect 27 pieces of Grand Slam hardware. The disappearance of the American male from the Top 10 of the ATP rankings, along with a precipitous decline in the number of tournaments hosted on American soil has led to the perception that professional tennis in the United States is struggling. But tennis historian Randy Walker says that domestic interest in the sport remains strong and the U.S.’ diminishing influence on the game is simply a case of “the rest of the world catching up.

Howie Long-Short: The drop-off in the number of domestic tournaments – in 1978 the U.S. hosted 37 tournaments, in 2019 it will host just four Grand Slam or Masters Series tournaments – can be tied directly to globalization of the sport. Until 1974, the United States, Great Britain, France and Australia were the only countries to have won the Davis Cup, so it wasn’t as if competition to host tournaments outside the U.S. was particularly strong at that time. The turning point was the 1988 Olympic Games. Tennis was reinstated as an Olympic sport for the Seoul Games and countries throughout Eastern Europe and the U.S.S.R. began subsidizing participation in the sport.

Walker points to the strength of the remaining Grand Slam and Masters Series tournaments as an indication that interest in the sport remains strong. He said, the U.S. Open is “generating more revenue and drawing larger crowds than ever before; it’s no longer just a tennis tournament, it’s become a must-attend event. Indian Wells has exploded in popularity since Larry Ellison took it over roughly a decade ago. The Miami Open experienced a huge jump in attendance this year with Stephen Ross involved and Hard Rock Stadium hosting the event and Cincinnati has seen such a large rise in attendance over the last 6-8 years that they’ve had to increase the size of their venue.” It certainly appears as if this is a case of less is more.

The decline in the number of U.S. men in the ATP Tour rankings and the lack of transcendent American star is also contributing to the perception that tennis lacks popularity, but Walker says that if you look back at domestic television ratings for Wimbledon over the last two decades “they have been pretty consistent.” The greatness of Roger Federer, Rafael Nadal, Novak Djokovic and the Williams sisters and the emergence of several young female stars (see: Sloane Stephens, Madison Keys and Coco Gauff) have managed to prevent a ratings decline. It’s worth noting that ESPN reported ratings for the 2019 tournament climbed +30% YoY (to an average of 877,000 viewers).

If there is a cause for concern for the U.S. Tennis Association, it’s in the lack of enthusiasm surrounding lower-level WTA and ATP tournaments. The emphasis placed on the U.S. Open and the three Masters Series events has “sucked the air out of the smaller tournaments in those regions.” Without the tour’s biggest stars, many struggle to draw beyond the hardcore tennis fan. Walker believes that “charismatic promoters” can overcome that problem, citing new Washington D.C. ATP/WTA Citi Open owner Mark Ein and the success he’s had turning WorldTeam Tennis (see: Washington Kastles) into “one of the big social events in D.C. during the summer.”

Fan Marino: Did you know? Tennis’ Grand Slams (U.S. Open, Wimbledon, French Open, Australian Open) originated because of the early domination referenced in the Davis Cup. In the first half of the 20th century, the winner of the Davis Cup hosted the event the following year. Host nations began holding national championships as warmup events in the week leading up to (or following) the Davis Cup. The ability to draw the best players from around the world – they were making the long trek by boat, so they were motivated to make the most of their visits – gave the newly formed events gravitas.

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Unique Revenue Streams, Elimination of Costly Expenditures Keys to The Spring League’s Success  

TSL

The Spring League (TSL) – a professional developmental football league founded in 2017 – is wrapping up the second of two ‘Summer Showcase’ events in Mission Viejo, CA later today. Nearly one-hundred former college players paid to participate in the four-day camp that will culminate with a full-speed 6-quarter scrimmage. Those in uniform are hoping to catch the eye of a team scout and continue their football career, while the XFL executives and coaches in attendance are using the mock-game format as a product innovation lab to test rules adjustments and in-game technologies in preparation of the league’s February 2020 debut. ESPN and Fox also sent teams to Southern California to provide real-time feedback on how the proposed on-field changes would impact broadcast coverage.

Howie Long-Short: To be clear, the relationship between the XFL and TSL is that of 3rd party vendor and vendee – the XFL does not own a stake in The Spring League. However, Vince McMahon’s spring league is among TSL’s biggest clients having spent six-figures on three mini-camp like tryouts thus far. For contextual purposes, The Spring League will hit the $1 million revenue mark for the first time this year.

The Spring League has managed to survive three seasons and will reach profitability this year because its business model has eliminated the costliest expenditures associated with operating a football league. CEO Brian Woods said, “the players are not paid, they self-insure and all of the games are played in Texas, so there’s minimal travel and stadium costs remain low; essentially that’s what keeps the ‘academy model’ sustainable.

Finding ways to monetize the product without having to rely on traditional revenue streams (think: tickets, sponsorships, merchandise) has also been crucial to TSL’s success. In addition to player participation fees and the affiliation agreement referenced with the XFL, the league draws a unique annual subsidy from the State of Texas for operating out of Austin. Woods added that TSL recently signed a two-year deal with STATS, which has enabled the league to “explore a model where wearable tech companies would pay to have TSL players wear their products on the field for R&D purposes. We could also package that data and sell it to a company like Google or to professional sports leagues.

There’s no question TSL maintains an attractive value proposition. As XFL Commissioner Oliver Luck noted, “it’s really hard to find places where you have talented guys in full uniform willing to test football thesis.” He’s right. Outside of the independent Atlantic League, which has been testing robotic umpiring in partnership with MLB, I’m unable to name any other unaffiliated organization that serves as a real-time incubator for pro sports innovation. The relationship between TSL and the XFL has gone so well, that Woods said he’s had preliminary discussions “with Oliver about our league becoming the ‘Official D-League’ of the XFL.”

Fan Marino: TSL provides the XFL with the opportunity to “test rule changes in a game environment.” Luck said to properly evaluate the viability of an innovation like a 25-second play-clock, “you need to see how it looks over four quarters – if the pace is sustainable for an entire game on the field and in the broadcast trucks.” In addition to the play clock, the XFL is testing “a different kickoff, a new overtime format and a double forward pass (forbidden in CFB & NFL) – as long as the recipient of the first completion remains behind the line of scrimmage.

There’s also a scouting component to the TSL-XFL relationship. Luck said his league is “looking at the talent [on the field] and will certainly end up signing a handful of their guys.” To date, Woods said that “over 120 of our players have either signed with an NFL or CFL club or were invited to an NFL training camp.

It’s worth mentioning that The Spring League season is played between the months of February and April. TSL doesn’t permit draft eligible prospects to participate, so the ‘Summer Showcase’ gives players who went undrafted one last opportunity to impress NFL talent evaluators in time to make a training camp roster for the upcoming season.

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California Bill Could Force NCAA Reform, See Athletes Profit from Name, Image & Likeness

NCAA 200x200

California’s Committee on Higher Education passed a vote to proceed with a bill that would permit athletes competing at the state’s colleges and universities to profit off their name, image and likeness without forfeiting eligibility (i.e. the rights afforded to Olympic athletes). The state’s Appropriations Committee will next review the legislation (likely in mid-August). Should it gain their approval, the bill would be up for an assembly-wide vote before making its way to Governor Gavin Newsom for final signature. Naturally, the NCAA opposes the bill. Senator Nancy Skinner has accused the organization of “bullying” and of using stall tactics to dissuade legislatures from moving it forward.

Howie Long-Short: Chargers lineman Russell Okung, advocating for the bill, told Committee members that the NCAA’s current system is akin to “how prisoners are treated – provided room and board and allowed to work without a chance to be paid fair market value for their services.” While the vote was unanimous (9-0, one member abstained), I can’t imagine that silly comparison – they don’t have facilities like this in prison – strengthened what is already a strong case for those in favor.

Len Elmore is one of the ACC’s 50 greatest basketball players of all-time, a former player agent and currently serving as a professor at Columbia University, so unlike Okung he’s able to provide an objective opinion and he’s not banging the ‘college athletes are being exploited’ drum. He says that student athletes understand “what they’re foregoing when they sign that letter of intent and if they’re looking for compensation beyond the value of a scholarship (and the additional benefits received that are ‘tethered to education’) there are other avenues to go down.” But the former Maryland great agrees that the one concession the NCAA needs to make is granting athletes permission to monetize their name, image and likeness – “those are natural rights, they can’t be taken away from a person and if a player’s name, image or likeness is used for marketing or promotional purposes they should be compensated monetarily.

Should California pass the Fair Pay to Play Act, schools within the state would theoretically gain a significant competitive advantage – it’s certainly reasonable to assume that players would begin to flock out west. The NCAA has suggested it would consider excluding the CA schools from sanctioned championship events, but it seems more likely that they’d elect to alter their bylaws (and allow student athletes nationwide to monetize their name, image and likeness) to re-level the playing field before other states follow California’s lead and force their hand; the Indianapolis based organization has already formed a ‘group’ to discuss the possibility. Either way, the NCAA is going to have to make a decision quickly; if the bill becomes law, the legislation would take effect in January 2023.

The proposed bill allows for players to hire agents and attorneys to manage their business affairs. While on the surface that may sound logical – one can’t expect a college student to be negotiating their own marketing deals – involving agents in college athletics is more likely to “add to the problem, than be part of the solution.” Elmore says that “it’s such a competitive business, once an agent gets their hooks into a player they’ll do whatever it takes to keep them. So, unless those representing athletes are going to start doing what’s right, instead of acting in their own self-interests, NCAA violations would run rampant.”

Allowing players to monetize their own name, image and likeness will lead to a scenario in which schools with the greatest resources gain even more power. The bill being considered “restricts schools from prohibiting player compensation, but it doesn’t dictate how payments are delivered. Those able to offer the most in the way of marketing opportunities are going to have an awful lot of leverage when recruiting players (even if they can’t explicitly offer sponsorship deals as part of a scholarship package).

Fan Marino: To be clear, while Elmore referenced “other potential avenues” besides college sports, he’s not advocating for kids to take them; it’s his belief that spending time on a college campus best prepares individuals for both their pro career and the remainder of their life. He reminds that “football and basketball players aren’t playing for their rookie contract, it’s their second contract that is most lucrative – and players only get that second contract if they fulfill their potential.” It’s a valid point. If you look at the NBA players with super-max contracts – Curry, Harden, Westbrook, Lillard, Wall and Antetokounmpo – all but Antetokounmpo went to school and of the remainder, only Wall left after his freshman season. Kemba Walker, who passed on a super max contract this summer is another example of a player that benefited from an extended college career.

For those who enjoy video games, good news; permitting players to cash in on their name, image and likeness would certainly result in the return of EA Sports’ NCAA Football game for the first time since ’14 – and this time with player names!

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With Costs Far Outpacing Revenues, SEC Athletic Departments Slash Budgets

Auburn

Auburn University has announced plans to cut athletic spending by 10% across the department. The decision to slash program budgets comes on the heels of a fiscal year (2017-2018) in which AU athletics posted record revenues ($147.6 million), but watched its overall profit margin fall. With spending (+ $6.9 million YoY) far outpacing revenue growth (+ $109,000 YoY), athletic director Allen Greene made the call to “reshuffle the department’s financial priorities” – eliminating spending on luxuries with minimal return (think: hotel stays, meals), in favor of investments in “elite-level coaching staffs and current and future facility upgrades”; expenditures perceived to directly assist in the mission of winning championships.

Auburn isn’t the only SEC institution looking to reduce their cash output. The chief revenue officer at another southeastern conference school told JohnWallStreet that its athletic programs were now traveling commercial (or by bus) as opposed to on chartered planes (excludes football/basketball) and that the school had begun to cut back on costly dinners at high-end restaurants. Like the Tigers, “we’re just trying to be better stewards of the money we have recognizing that expenses have gone up.

Howie Long-Short: Cutbacks in spending are unusual by college athletics standards – and almost unheard of within the SEC – so Greene’s announcement reverberated throughout athletic departments nationwide. The mindset within college sports has been “costs don’t matter – if it’s needed to compete or to attract recruits, we’ll figure out how to pay for it later – but those days are coming to an end.” With the money being spent on facilities and coaches spiraling out of control, most schools now have little choice but to cut corners elsewhere.

Stadium infrastructure aside, people are an athletic department’s biggest expense. The CRO we spoke to said that in addition to the highly-paid coaches (Auburn spent $26.2 million in ’18), his school carries upwards of 200 administrative staff members to support teams in 18 sports (Auburn spent $26.7 million on support staff in ’18). It seems that athletic departments could save hundreds of thousands of dollars by cutting back on the salaries of coaches for non-revenue generating sports, but “the money to build state of the art facilities has to come from somewhere. It’s not going to come from ticket sales or television – it’s going to come from donors; and it only comes from donors if they’re buying into the belief that the program is doing its best to compete for a national championship in the sport they’re supporting.” Hiring the best coach available is part of making them believe.

For that same reason, schools will play in post-season bowl games or invitational tournaments even if they’re going to be a loss financially. “It always come back to our donors not wanting to be left out of the national conversation.

It’s unclear how long Auburn’s run of fiscal responsibility will last. While YoY revenues are currently flat (see: SEC Network maxed out market penetration), the conference’s broadcast deal with CBS expires after the ’23 season. With media executives projecting the value that deal to increase 5x (currently worth $55 million/year), the conference’s 14 schools should have an extra $15 million/year to spend. It’s highly unlikely that they’ll decide to simply bank that capital.

Fan Marino: Adding $15 million/year to the more than $40 million/year SEC schools bring in now will only further the gap between college athletics’ haves and have nots. The SEC CRO we chatted with believes that “there’s going to be tiers – even amongst the power 5 conferences. There will be a conference or two – perhaps the SEC and Big Ten – that keep the value of their television contracts rising and the other three conferences won’t be able to keep up with their spending levels. You’ll see some schools dramatically outspending others.” Perhaps, but as noted in Early Entrants Vol. XI, the formation of a Pac-12 and Big-12 alliance has been deemed very likely and there’s strength – and more importantly revenue – in numbers. Don’t count those schools out just yet.

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United Talent Agency Takes Significant Stake in Klutch, Rich Paul to Lead U.T.A. Sports

Uta

The New York Times’ Marc Stein reported that United Talent Agency (U.T.A.) has purchased “a significant stake” in Rich Paul’s Klutch Sports Group as the Hollywood agency looks to keep pace with William Morris Endeavor (W.M.E.) and Creative Artists Agency (C.A.A.) – rivals with prominent sports representation businesses. Paul will retain “substantial control” of Klutch and lead U.T.A.’s new sports division (U.T.A. Sports); Klutch will continue to operate as its own brand. The price paid and size of the stake taken were not disclosed.

Howie Long-Short: U.T.A.’s desire to be in the sports representation business is driven by the revenue potential. Jason Belzer (agent who represents collegiate and professional coaches, manages Forbes’ Sports Agency Rankings) explained that “there are a lot of athletes that are now making significantly more money than movie stars, so why not pursue those high profile, high-earning clients. And don’t forget, U.T.A. already has the agency infrastructure in place to market and package these players and to create businesses around them.

Conglomerating an agency also facilitates self-reinforcing activity for the firm’s clients. Belzer suggested that existing relationships with television networks and movie executives could pay off for athletes under the Klutch or U.T.A. Sports banners. “When those entities look to feature players in their content or want to use them to promote their products, they’re going to look in-house before they go to another agency.” Of course, the best opportunities go to the “athletes at the top of the food chain. There’s no demand for the middle or lower tier players, so there’s minimal value in signing with a large agency for those individuals.

It’s simply not practical – no matter how large the bankroll – to start-up a sports agency without an existing book of business; the competition is far too stiff. U.T.A. reportedly kicked the tires on Tom Gores’ Paradigm Talent Agency before coming to terms with Klutch, so I wondered if Paul’s agency was the best fit for Jeremy Zimmer’s company. Belzer says that it was. “The top five basketball agencies – C.A.A., Excel Sports Management, Wasserman, Priority Sports & Entertainment and Octagon – are all already large conglomerated practices or weren’t on the market, so the only real options were B.D.A, Klutch and Landmark Sports Agency; and Klutch is certainly the highest profile of the three.

Belzer suspects that if U.T.A. were to make a similar move for a baseball agency that “they would look to buy ACES. That’s the logical acquisition.” On the football side, he says Select Sports Group or Rep1 Sports would be the companies most likely to be targeted for takeover because “Rosenhaus is probably not going to sell.

There’s an argument to be made that much of Paul’s success is tied to James – he’s negotiated just over $1 billion in contracts and LeBron has earned 342 million of those dollars. With the Lakers star unlikely to sign another basketball contract and W.M.E. representing his media company (SpringHill Entertainment), it does appear as if Paul cashed in at least some of his chips at the right time.

On a final note, James tweeted “I had it laid out before you knew what a plan was. Three Hundred mil’ later, NOW you understand us!” which lead some to speculate Klutch sold at a $300 million valuation, but that’s not the case. Even if W.M.E. was interested (as Stein noted) and there was a bidding war, Belzer says “there’s no way U.T.A. paid anywhere close to $300 million. The agency brought in a maximum of about $25 million in commissions on current contracts as of 2018. Paul has done some new deals since then, so maybe Klutch does $30 million over the next few years. You’re not getting 3x revenue for a sports agency. Assuming he got 2x, the asset was probably valued in the $50 million to $60 million range.

Fan Marino: The heavy concentration of star athletes tied to just a few agents has altered the power dynamic in the NBA. Belzer said that “these large agencies now control so many players, they’re able to dictate the future of teams.” C.A.A. orchestrating Paul George’s recent exit from Oklahoma City is just the latest example.

James didn’t own a piece of Klutch (NBA bylaws prevent it), but it’s been surmised that he and Paul are working together to buy an NBA franchise. This transaction does little to further that mission – there simply wasn’t enough money in the deal. Belzer agreed saying, “let’s assume he gave up 50% of his agency, but retained control – there’s no way he’s walking away with more than $20 million or $30 million.” NBA teams are selling for upwards of $2.5 billion.

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MLS’ Fire to Pay $65.5 Million to Amend Stadium Lease, Play Home Games Downtown

Fire

MLS’ Chicago Fire Soccer Club – ranked last in home attendance (11,417/game) – has announced plans to amend their lease at SeatGeek Stadium to allow for future home games to be played “in other Chicagoland sports venues.” Majority owner Andrew Hauptman believes moving games from the suburban Village of Bridgeview to downtown Chicago will give the club “the opportunity to play [in front of] more fans than ever.” The Fire reportedly plan to start playing home games at Soldier Field (home of the Bears) next season. The team will continue to train and host its youth academy at the Bridgeview facility.

Howie Long-Short: Chicago Fire S.C. is paying $65.5 million to get out of their existing lease – a significant chunk of change for an organization that lost $6 million in 2017. Hauptman won’t be making a lump sum payment, though. The organization will pay the Village $10 million upfront and make an additional $5 million donation to upgrade sporting facilities around the stadium. The $50.5 million balance will be paid in $3.5 million increments annually through 2036.

At $65.5 million, Hauptman is paying $30 million more to move the team’s home games than he paid to acquire the club in 2007. But considering expansion franchises are now selling for $200 million, even with the buyout – and the $70+ million he’s lost over the last 7 years – the Andell Inc. co-founder is certain to come out ahead. MLS’ 1st commissioner Doug Logan reminds that “sports aren’t a P&L play, they’re an asset play. If owners can grit their teeth and stomach the operating losses along the way, what they’re really playing for is an appreciation in the value of the club – or in this case, the market agreement for the Chicago territory since MLS is a single-entity.

With the cost of expansion franchises continuing to increase (it was just $10 million when Real Salt Lake joined in 2005) and a scarcity of viable pro markets, there is a case to be made that the team could have played out its lease, ate the annual losses, rode the back of a growing league and still appreciated in value. Logan agreed. He said that his advice to Hauptman would have been to “put the absolute best product you can on the field and then market the hell out of it. One thing that is often overlooked when discussing Atlanta’s success is the phenomenal coach they had (Tata Martino, Mexican National Team) and his incredibly exciting style of play. If the team wins and you’ve done every promotion under the sun and the organization still isn’t drawing fans, then you look at the real estate.” In Chicago, the team has won playoff series in a decade.

Chicago Mayor Lori Lightfoot refused to confirm that Soldier Field is where the team is headed, but Logan insists it’s the only option – at least until there’s public money available to build the franchise a new venue on the North side. “Bridgeview is an industrial park – it’s Midway airport – and the neighborhoods that surround it are very ethnic in nature; it’s on Chicago’s orange L line. The young audience that the Fire wants to draw resides alongside the L’s purple line and that line, which runs closer to the lake front, doesn’t go past Soldier Field. Wrigley Field isn’t a fit. There really is no other place to play.

Relocating from a soccer-specific venue to a cavernous NFL stadium is a puzzling decision – particularly when you consider that the team drew over 17,000 fans/game in Bridgeview when it was winning. Sure, the league’s two best attended teams (Atlanta & Seattle) play in downtown NFL stadiums, but those clubs have captured the hearts of their respective cities. It’s unclear if that type of enthusiasm can be generated in Chicago with a “do-over.

To be clear, a change of venue isn’t going to turn the Fire’s fortunes around. Logan said that “lazy sports executives always blame their failures on the real estate and not their marketing plan.” He suggested that it’s going to “take a total rebrand for the club to achieve instantaneous success at Soldier Field.” The franchise is said to be considering the possibility.

Fan Marino: Chicago Fire S.C.’s best season was its first. Logan says that ’98 was a “charmed existence” – the team won both the Lamar Hunt U.S Open Cup and the MLS Cup. “A lot came together for that team to be successful. Peter Wilt – a top tier soccer executive – was the President. Anschutz was a great owner because he had deep pockets and let the soccer guys do their thing. Bob Bradley was as good an MLS coach as there has ever been and Piotr Nowak was like a 2nd coach on the field. It was just a magical season.

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Celebrity Ownership Won’t Boost G-League Attendance, But an Investment in the Community Will

G-League

The NBA’s G-League has come a long way from its humble beginnings as the National Basketball Developmental League (NBDL). Founded in 2001 with just 8 teams (all owned by the league) across 5 Southeastern states, the NBDL became the NBA Development League (D-League) as part of the 2005 NBA collective bargaining agreement. Over the next decade teams relocated, the league expanded and NBA organizations began buying up teams or negotiating single-affiliation partnerships with them; by 2015, every club in the Development League was either owned by or maintained sole affiliation with an NBA franchise. The league will begin the 2019-2020 season with 28 teams (only Denver and Portland will be without).

Sponsors and media partners began to take notice during the 2017-2018 season. Gatorade signed on to be the league’s title sponsor – which sparked another rebrand (see: G-League) – and both Twitch and the ESPN family of networks began carrying live game broadcasts. Progress on the business end lent credibility to the NBA’s minor league and recent investments in team ownership from celebrities like 2 Chainz and Ben Wallace, has only strengthened the narrative that the G-League – an overwhelming success in terms of churning out players, coaches and executives who can contribute at the pro level – is also a viable business.

Howie Long-Short: The NBA was less than forthcoming when asked if the celebrities referenced had made financial commitments to acquire their investment stakes, so I initially suspected the ownership titles awarded were simply part of broader licensing or marketing partnerships, but Jeff Feld (author of ‘Celebrity Ownership is the Newest Tool in the Aggressive Expansion of the G-League’) says that he has confirmation from team sources that both 2Chainz and Wallace ponied up hard cash. Feld said he didn’t cite the amounts invested or the ownership percentages acquired in the Forbes story “because the team sources asked that it not be disclosed.”

Ben Wallace rejoined the Pistons franchise (in May ’18) as part owner and chairman of basketball operations of the organization’s G-League team, the Grand Rapids Drive. Wallace, a fan favorite from Detroit’s ’04 championship team, indicated that his interest in minor league basketball stems from his own experience. As an undrafted free-agent, the JUCO/D-II prospect needed time to develop before he was ready to help an NBA roster. He hopes to “keep the dream alive” for the next late bloomer.

This past May, the Atlanta Hawks introduced Tauheed Epps – aka 2 Chainz – as a new partner in their G-League franchise, the College Park Skyhawks. For Epps, the opportunity to combine a love of basketball with an investment in the community he grew up in was a “dream come to fruition.” Of course, G-League ownership also gives both guys a formal affiliation with the NBA and the clout that comes with that, for significantly less money.

G-League teams are not particularly profitable (some still lose money), but NBA organizations – and now celebrities – are investing in them because they’re appreciating assets. The CEO of one Eastern Conference NBA franchise told me “we are close [to profitability with our G-League team]. The G-League is the 2nd best basketball league in the world. So, as part of a $2.5 billion NBA organization – the Clippers, Nets and Rockets all went for north of $2 billion and the NBA keeps on getting bigger – it’s a great property to own.

Quentin Williams (currently chairman of The Butler Lappert Williams Firm PC), who was the first president of the North Charleston Lowgators (one of the league’s original 8 teams), agreed saying that “team owners will make money on the resale. Profitability while operating depends on how good the club is at selling corporate sponsorship and what they do in the community; commitment to the local community remains a big part of minor league sports – it translates in attendance figures.

Feld called celebrity ownership “the [G-League’s] newest route to relevancy”, but the team executive we spoke to was “not confident celebrity [ownership] makes any impact – and if it’s a faux relationship, it’s destined to stumble.” No argument here. If 2Chainz or Wallace are hosting meet and greets before games perhaps there’s a bump in attendance, but no one buys a ticket to watch the owner.

Fan Marino: The G-League is about development on the court (and in the front office) and family fun entertainment off of it. While I’ve never had the experience of attending a G-League game and can’t speak to the in-arena atmosphere, the league has certainly made an impact on the NBA game; 40% (198/494) of the players on opening night rosters last season spent time in the G-League. The league also now holds claim to having developed its first NBA All-Star – Milwaukee’s Khris Middleton.

Williams said that in addition to developing players the NBA has two other goals for the G-League; “expanding the local fan base, as many of these teams are located on the periphery of an NBA market (think: Greensboro & Charlotte), and constructing greater demand for the game of basketball.

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Players, Coaches Pushed For The BIG3 to “Deactivate” Underperforming Co-Captains

Big3

The BIG3 announced that Lamar Odom, Baron Davis, Bonzi Wells and Jermaine O’Neal have been “deactivated” for the balance of the 2019 season. Odom, Davis and Wells were shut down after failing to contribute (Odom played 1 of 3 games, Davis and Wells missed all 3), a potentially serious medical condition forced the end of O’Neal’s season. While the decision to “deactivate” the foursome was ultimately made by the league office, sources tell JohnWallStreet that the idea of replacing the underperforming co-captains “came from the players and coaches.” Their desire to win and the prize money at stake motivated those invested in the nascent league to push out the few mailing it in.

Howie Long-Short: From a league perspective, the decision to “deactivate” Odom, Davis and Wells was an easy one. League co-founder Jeff Kwatinetz has been clear that The BIG3 “is not the Drew League or the [NBA] Summer League. It’s not a novelty act. It’s a professional 3×3 league and the players have a responsibility to show up ready to play.

When we spoke to Kwatinetz just a few weeks ago, he mentioned that the league had a deeper player pool this season than years’ past, so Wednesday’s announcement that three guys were being let go for performance related issues was a surprise. But it shouldn’t have been. While most of the league’s players went through a combine-like process, co-captains were exempt. As a result, the league never saw Odom, Davis or Wells in action until it was too late. It’s a safe bet to assume co-captains will be participating in the league’s 2020 combine.

In other The BIG3 news, the league has partnered with Adidas to reduce the cost of tickets for the balance of the season. Seat prices will be slashed by 50% along with all Ticketmaster and facility fees. Kwatinetz said that the decision was motivated by the desire to make the product more affordable for families and of course to draw more fans – attendance is down from 13,500/game in ’18 to 9,500/game this season. The lowest priced ticket to The BIG3 was $27, but with fees it came out to upwards of $50. By comparison, the NBA Summer League has seats available for $25. Ticket prices were simply too high. The former entertainment executive knows the league is unlikely to make up the lost revenue in new tickets sold, but firmly believes that giving more people the opportunity to experience the event supports its long-term growth ambitions.

Kwatinetz attributes the YoY attendance decline to the league’s television contract. With CBS scheduling games on Saturday and Sunday afternoons, as opposed to Friday evenings, The BIG3 is now playing in a window that people aren’t used to spending on. “People generally plan to go out on Friday and Saturday nights, so coming to The BIG3 last season wasn’t an additional expenditure; it was simply the fan’s choice to attend basketball games over dinner or a movie. On Sunday afternoon, we’re asking people to spend discretionary income that they may not have – and we were really expensive relative to the other choices they have.” Kwatinetz said that if the league were to be in the same weekend timeslot next season, he would expect ticket prices to remain where they finish this season.

Fan Marino: Former NBA stars like Joe Johnson and Amare Stoudemire receive most of the promotional attention, but it has been Royce White who has caught the eyes of scouts. White was the 14th overall selection in the 2012 NBA draft (Rockets), but a severe anxiety disorder tied to flying and his insistence on the development of a comprehensive league-wide mental health policy quickly landed the forward from Iowa State in exile. 7 years later, White finds himself as the best player on the floor in a league full of guys with NBA experience. He’s flying coast to coast for games and living in a society far more accepting of mental health diseases. For the first time, a return to the NBA seems like a real possibility (he’s 28). Kwatinetz said that he “would be shocked if Royce White isn’t starting for an NBA team by December.

On a final note, Glen ‘Big Baby’ Davis made headlines for tossing his jersey and shorts into the crowd following an ejection last weekend. Reports indicated that Davis would be suspended (since rescinded) and fined heavily for the incident, so I expected to be appalled with his behavior when I finally tracked down video of the incident. It turns out ‘Big Baby’ was simply playing to a crowd that ate up his antics. I asked Kwatinetz why the league would fine a player that was seemingly giving fans the good time they came for (and some great memorabilia). He said that while Davis’ post-ejection actions received a mixed reception in the league office, the real concern was a pattern of “abusive language towards players and coaches. He was also aggressive towards the officials and that can’t be tolerated.

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Corruption Allegations Swirl as D.C. Council Awards ‘No-Bid’ Sports Betting Contract  

Intralot

On Tuesday, the Council of the District of Columbia voted 7-5 in favor of awarding Intralot (the state’s lottery provider) a “sole-source, no-bid contract (worth $215 million) covering lottery and sports betting operations for the next five years.” Despite concerns about the bill’s sponsor (see: ongoing FBI investigation into council member Jack Evans), his ties to the gaming operator (see: Intralot lobbyist wrapped up in the FBI investigation) and a corporate credit rating that’s been downgraded 3x since September ‘18, the chamber selected the Greek gaming company to be the District’s mobile sports betting technology provider; the alternative was to restart the process and solicit a series of competitive bids. Ultimately, the desire to beat neighboring Virginia and Maryland to market and the misguided belief that Intralot would generate the greatest returns outweighed those hesitations. The contract does not impact legislation authorizing sports betting at (or around) D.C. stadiums and arenas.

Howie Long-Short: Gaming industry experts agree that competition amongst operators drives the best products, competitive pricing and the most revenue, so the council’s decision to limit mobile sports betting to a single operator is a foolish one.

A feeling exists amongst those on the regulatory side of the industry that the District’s non-competitive bid process gives detractors ammunition – a prime example of the ‘race to the bottom’ feared while PASPA reigned – in their pursuit of federal oversight. One well respected insider said that it’s “particularly concerning given that everyone’s trying to avoid federal scrutiny and this is going on in Congress’ backyard.

There was no real urgency for the District to get to market – both VA and MD have already bumped the possibility of passing sports betting legislation into 2020. The decision to fast track a deal, as opposed to holding a more customary procurement process, gives off the impression that something is up even if there’s not. Of course, pending investigations into the state lottery – which was also awarded to Intralot without a bid process – do little to quell doubters’ beliefs.

Council member Elisa Silverman said that “the whole thing stinks” and she’s right. Evans’ bill wouldn’t have passed without the support of council chairman Phil Mendelson. Mendelson reportedly used his authority to bump an amendment authored by council member Vincent Grey (related to how gaming proceeds would be spent) to the top of the ledger in exchange for ‘yes’ vote. While Gray’s bill failed to pass, he still cast the deciding ballot in favor of sports betting monopolization.

Gray’s fellow council members were hesitant to vote against Intralot’s interests because they’ve become convinced that introducing new gaming options would cannibalize the local lottery (thus hurting Intralot’s business). States have gotten so dependent on lottery revenues, they’re now afraid to bite the hand that feeds.

It also appears as if Intralot exaggerated potential revenues to gain the support it needed. Claims that the company would retain as much as $30 of every $100 bet likely helped to convince an uneducated council to vote in its favor. Of course, for Intralot to hold 30% they’ll either need to operate under a parlay model or offer bettors significantly worse odds than they could find off-shore. While a fixed payout sports lottery may help Intralot retain more money per bet, it’s also guaranteed to result in less money wagered overall and less revenue generated. For information purposes, sportsbooks with a traditional standard hold model typically retain $5 of every $100.

Fan Marino: One would presume D.C. would look to have mobile sports betting in place for the start of football season, but that seems highly unlikely. Intralot is a lottery provider, they’re not a brick and mortar casino operator; they don’t have a switch to flip on a sports betting application. There are also unique geo-fencing issues within the District (because you can’t place a wager on Government owned land) that make roll-out more complicated.

Once they do introduce mobile sports gambling to bettors the District, expect to find the parlay model used in Delaware and Oregon. D.C. is a small market and sports betting is a low margin business. Intralot doesn’t have a sports gambling contract in any other states. They’re not going to invest the money it would cost to build a full fledge mobile sportsbook.

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