Countdown of 10 Top Sports Business Issues
July 14-20, 2008 

1.  You're Joshing me!  All-Star game concludes; a look at MLB's second half of the season

For a span of 20 minutes and 28 home runs, the Rangers' Josh Hamilton on Monday night added yet another unforgettable sports moment to a summer already electrified by Tiger at Torrey Pines, Dara in Omaha and Roger and Rafa on Centre Court.  Hamilton's record-breaking first round of the All-State Home Run Derby will no doubt be the lasting image of the 2008 All-Star break regardless of what happens in the All-Star Game itself.  What's more, the event helps MLB begin the second half of the season on a feel-good note, and for starters will no doubt draw many new fans to Texas Ranger home and away games and to all of their televised match-ups.

Any new hook to get butts into ballpark seats will be welcomed by the league, which like most pro sports leagues this summer has seen a decline in ticket revenues from the sagging economy.  In Los Angeles for example, the Dodgers are averaging 45,240 fans per home game this season, down from 47,614 last year; based on the club's data collection, fans who normally come to four to six games per season are attending only one to three.  To compensate, like many other MLB clubs the Dodgers have developed last minute promotions offering heavily-discounted tickets.  A recent one targets Travelzoo.com members, pricing normally $16 reserved seats at $3, $20 reserved seats at $6, and $50 field box seats at $18.  Gas car promotions are also big throughout the Bigs.

Even though people are attending fewer games they're not necessarily watching more on TV - baseball is also contending with 13-to-16-percent declines in ratings from last year on ESPN and Fox respectively, while TBS is down 30 percent.  MLB executives point out that the second half of the season is back-loaded with more compelling match-ups, and expect to see an up-tick in ratings as a result.

The league is also focused on two major business issues as the season's second half begins.  One is enforcing rules aimed at shortening the average time of games - dead time is a possible factor in the ratings decline.  A nine-inning game was averaging 2 hours, 51 minutes, 33 seconds this season through July 3, three minutes longer than 2006 and 5.5 minutes longer than five years ago.  A more serious issue is the pressure building for a draft of players from outside the U.S.  An FBI inquiry into whether scouts and MLB executives have been "skimming" money earmarked for Latin prospects may lead to changes in international scouting and prospect-signing procedures, including the possible institution of an international draft.  Stay tuned.

2.  Tiger-free British Open tees off at Royal Birkdale

In just a few days, the PGA Tour will witness the first true test of a Tiger Woods-less remainder of the 2008 season, as the British Open tees off on Thursday at Royal Birkdale in Southport, England.  Like ratings for Tour events since Woods bowed out for knee surgery and rehabilitation, Royal Birkdale is considered lackluster, without the ancient roots, storied history, and rugged beauty of its more glamorous cousins like Muirfield and St. Andrews.

Television ratings are definitely down since Woods went down - televised tournaments since the U.S. Open have averaged lower than a 1.7 rating, compared to an average of 3.4 when he plays and a 4 average when he's in contention on Sunday.  Without host Woods, the crowd at last Sunday's final round at Congressional was down 7,000 spectators from last year's 37,000, and down 15,000 on Saturday.

But the British Open is more insulated from Woods-influenced ratings fluctuations than the three other golf Majors in the first place - for starters, it captures more of an international audience, and largely due to the time zone difference has always been the lowest-rated major in the U.S. already.  Moreover, while the event at Royal Birkdale will see fewer U.S. dollars around the course (more a reflection of the U.S. economy than Tiger's absence), organizers are far less dependent on American spectators in the first place and thus won't feel the sting nearly as much as their American tournament counterparts, especially in corporate hospitality and sponsorship income.  Local officials in Britain also report that not a single fan has canceled a house rental since Woods' withdrawal.

One strong economic factor around the British Open that's skyrocketing without Tiger - legal wagering.  Last year bookmakers made just under $48 million on the British Open industry-wide, and with no strong favorite in the tournament are expecting to pull in more mid-level bettors and closer to $60 million in total wagers this year.  Sergio Garcia is the current odds-on favorite at 8-1, followed by Ernie Els at 9-1 odds.  Woods had been 13-8.  Whether Els, Garcia, or someone else not named Eldrick, the winner of the 2008 British Open will take home about $1.487 million, out of a total purse of $8.236 million.

3.  Bye, Bye Bud?

On Monday, Anheuser-Busch announced that it had accepted a takeover offer from Belgian In-Bev for $52 billion.  The newly combined company will become the world's biggest brewer, giving A-B products more of a presence in the global market and landing In-Bev almost half the U.S. market for beer.  (At an estimated net sales of $36 billion a year, the new company will be 62 percent larger in terms of revenue than its next-largest brewing rival, SABMiller.) The takeover of the newly-christened Anheuser-Busch In-Bev ends a month of very public disputes over the future of the 156 year-old maker of Budweiser and Bud Light, and begins a whole new debate on how the merger will affect the sports industry.

While no sports-industry- specific news has been announced thus far, speculation points to a reduction in sponsorship dollars.  In public discussions, In-Bev executives have made clear their interest in swift cost-cutting initiatives, which could well affect the multi-billions of dollars A-B currently spends on sports sponsorships, including those for the Olympics and the World Cup.  It is also unlikely that sports fans and other consumers will see a drop in the price of their A-B beer of choice.

North American headquarters for the newly-combined company will remain in St. Louis, home of the 2009 MLB All-Star Game.  About 40 percent of the combined company's revenue would be generated in the U.S.
 
InBev CEO Carlos Brito claimed he has no plans to cut Anheuser-Busch's marketing spending.  Brito said he hopes to complete the deal by the end of 2008.

4.  Steve & Barry's files for Chapter 11 bankruptcy protection

While some merge, some float up to that great mall in the sky.  As A-B was formally announcing its acquisition by InBev late last week, Steve & Barry's was filing for Chapter 11 bankruptcy protection.

The bankruptcy filing of the chain of 276 stores, founded in 1985 in Philadelphia selling deeply discounted University of Pennsylvania apparel, is more a reflection of the desperate state of affairs of American malls than it is of poor financial management practices at the Port Washington, New York company.  Steve & Barry's rapid expansion from 31 stores at the end of 2004 to 250+ in 2007 was largely fueled by huge up-front incentives from mall-owners who were desperate for a tenant to fill the large spaces left by closed or consolidated anchor department stores.  The peak of the payments came in Steve & Barry's fiscal 2006, when the company received $122.3 million in payments but needed to spend only $59 million to build out new stores.

While Steve & Barry's isn't a sporting apparel retailer per se, the company has largely built its marketing programs around licensing deals with such sports superstars as the Knicks' Stephon Marbury, big wave surfer Laird Hamilton, and Venus Williams, who just won Wimbledon dressed visor-to-tennis shoe in her own EleVen clothing line, like the rest, a Steve & Barry's exclusive.  However, Marbury, Hamilton, Williams and "Sex and the City" star Sarah Jessica Parker will eventually likely be free to take their apparel lines elsewhere, according to the terms of their contracts. The agreements allegedly call for Steve & Barry's to pay a royalty to the celebrities of as much as four percent of sales of their branded goods.

5.  Concert industry apparently not shot through the heart by economy

Despite the hit most of the sports and entertainment industry has taken from high gas prices and the sluggish American economy, the concert industry is still going strong, according to the results of a midyear poll just released by Pollstar magazine.

Pollstar reports that the combined gross from the top 100 tours during the first half of the year was $1.05 billion - the same figure reported for the same period one year ago.  At the top of the list of high-grossing acts were Bon Jovi, which grossed $56.3 million, and Bruce Springsteen & the E Street Band, which earned $40.8 million.  Rounding out the top five earners were Van Halen ($36.8 million); Kenny Chesney ($35.3 million); and Michael Buble ($32.5 million).  Obviously not living on a prayer, Bon Jovi grossed more than $2 million night to night through 39 straight shows.  While the industry did see a 5.6 percent drop in overall ticket sales, it was offset by roughly the same increase in the average price for a ticket, which increased to $62.07.

One possible explanation for the sustained growth in a down market?  Since more people are embracing "staycations" this year, blowing $500 for a pair of prime Van Halen tickets seems like a reasonable splurge compared to the cost of an exotic vacation.

6.  Rumors continue to swirl around sale of Steelers

One of the most storied franchises in the NFL may soon have new owners.  Last week, billionaire financier Stanley Druckenmiller confirmed that he had begun talks with the Rooney family to acquire a controlling interest in the NFL Pittsburgh Steelers.

In a statement made public on Friday, Druckenmiller pledged to keep the Steelers in Pittsburgh and indicated that he wants eldest son Dan Rooney to continue to run the team (and likely, to keep his 16 percent stake intact.)  Rooney, longtime Steelers chairman, has helped lead the team to five Super Bowl wins.  After his four brothers stated their intent to sell the team in favor of their racetracks and other family businesses, Rooney allegedly offered them a plan in which he would buy out part of the stakes over 10 years; the offer valued the team at around $700 million.

However, while Druckenmiller has yet to sit across the table from the Rooney family's Goldman Sachs & Co. representatives, insiders said that his tentative purchase price would be closer to $800 million in the franchise's current state as a C Corporation.  The Steelers ranked No. 16 on Forbes' 2007 index of NFL team valuations, at $929 million, with annual revenues of $198 million.  The Steelers were purchased for $2,500 in 1933.

7.  Petty includes investors in family business

Declaring "It's better to own 30-to-40 percent of something than 100 percent of nothing," King Richard Petty last week sold a majority of old guard Petty Enterprises to private equity firm Boston Ventures for an undisclosed sum estimated to be in the tens of millions.
Much like the Rooney family's presumed reasons for selling a percentage of the Steelers, Petty claims he's sold a large stake in his company to preserve for his family the empire he's worked so hard to build.  He also acknowledges that the parameters of running a winning NASCAR team have changed so dramatically that he needs a partner to thrive - while Petty Enterprises cars have clocked a record 268 wins, close to 100 more than closest competitor Hendrick Motorsports, they haven't won a race since 1999.  So Petty took the same route as Roush Racing did in 2007 when it sold a 50 percent stake to Fenway Sports Group, and as Evernham Motorsports did when that company sold a majority share to George Gillett (also owner of the Montreal Canadiens and Liverpool FC).  Diversified ownership will also help stave off sponsor erosion in the nervous economy.
Petty remains on the board alongside new CEO David Zucker, former head of Playboy Enterprises, and plans to keep his foot firmly on the accelerator of running the company.

8.  Olympus U.S. Open tennis series kicks off - sans Gimelstob

This week, following a thrilling Wimbledon that is universally acknowledged to have raised the profile of tennis, the USTA kicks off its annual "greatest road trip in sports," the six-week, $30 million, series of 10 tournaments leading up to the August 25-September 7 U.S. Open in Flushing Meadows.  And next year, tennis diehards and casual fans hoping to see a Roger Federer-Rafael Nadal rematch alike will be able to see more of the Olympus U.S. Open Series than ever before, thanks to a groundbreaking new six-year television and multi-platform partnership between the USTA, ESPN, and the Tennis Channel.

Beginning in 2009, the summer-long series will feature more than 400 hours on television, an increase of nearly 100 hours over current coverage by USA Network and partners.  (USA had been paying $22 million a year to broadcast the Open, and is getting out of the sports business to focus on its prime time entertainment schedule.) The new multi-platform deal also includes broadband, wireless coverage, and Spanish language distribution via ESPN Deportes.

This year at least, the televised series will be without its planned master of courtside ceremonies, commentator Justin Gimelstob.  Television commercials featuring Gimelstob promoting the U.S. Open Series are being scrapped by the USTA because of his derogatory remarks about retired WTA player Anna Kournikova and other women on a radio show last month.  Run your mouth, get kicked off the big blue bus.

9.  Soccer - U.S. Development Academy prepares to crown a champion

At the Carson, CA Home Depot Center this week, the future of soccer in the U.S. may be laid out on the pitch.  The U.S. Soccer Federation's Development Academy, a "super league" of the best 64 youth soccer clubs from across the country, kicks off a week-long finals tournament to end its inaugural season.  The teams comprise the eight conference champions that prevailed during a 10-month regular season; the U-15/16 and U-17/18 championship matches will be broadcast on ESPNU and ESPN2 on Friday and Saturday, respectively.

The Development Academy was created to help bring American youth soccer talent up to par with the rest of the world.  In California and a handful of other states, however, the academy is reviled by high school soccer coaches, whose best players often must choose between playing high-level club team soccer and representing their school.  But with possible international attention, and more important for most kids, college scholarships on the line, the decision for whom to suit up is easier than a free kick with no goal tender.

10.  Knocking knees?

On the opposite coast of Britain from the 2008 British Open, golf club members are wrestling with far different issues than the membership of Royal Birkdale.  The Frinton Golf Club on the English coast northeast of London recently ended a 113 year-old rule requiring that players wear knee-length socks with shorts.  The legs-on-the-links vote has apparently left the club's 600 members divided.  While most younger members hailed the decision, the older crowd wasn't so sure.  When you consider the majority of senior knees - usually not a pretty sight - perhaps the club should make a slight revision and adopt a new slogan to accompany the dress code change.  "If You're over 50, Kneesocks are Nifty."