Countdown of 10 Top Sports Business Issues
August 18-24, 2008

Olympic Business Minutes

1.       Phelps Phantastic Marketer?

1:54.23.

That's Michael Phelps' world record time in the 200 meter medley.  It's also the approximate length of time his agent Peter Carlisle has to secure endorsement deals for the multiple gold medal winner before his Olympic exposure window closes.  The race is now on to translate Phelps' Olympic feat into marketing dollars on the level of a Michael Jordan or Tiger Woods.  But can Phelps swim that high?

Carlisle has reportedly been quite busy in Beijing since Phelps exited the Water Cube pool for good.  A Wall Street Journal article reports that Phelps' agent is getting 50-60 solicitations a day for the swimming star, ranging from offers to sculpt him to book and movie deals, bobblehead dolls, commemorative coins, and a pet food contract also involving Phelps' bulldog Herman.  Phelps is also the current most-searched name on Facebook, even ahead of teen sensation Miley Cyrus.

The big questions surrounding Phelps this week, as he remains in Beijing to make appearances for sponsors Omega, Hilton, VISA, and Speedo (which has also made good on its $1 million bonus guarantee), is how to turn the $3 to $5 million he currently makes in endorsements each year into $30 million to $50 million.  Carlisle boldly estimates that Phelps could earn $100 million in marketing dollars over the course of his lifetime, even though he doesn't compete on television year in, year out as Woods and Jordan have done.  In contrast, Mark Spitz earned an estimated $5 million from corporate endorsements when he reigned in the early 1970's.)  A key decision for the Phelps team will be whether to renew his contract with Speedo, or forge a relationship with Nike or another company in which he would serve as the tent pole in a swimwear apparel line. 

Swimming's governing bodies usually see a five to six percent increase in the number of people testing the waters of the sport after the Summer Olympics, and expect an even higher percentage to give it a try this year because of Phelps.  Another hint at his appeal beyond swimming is the sale by Speedo of tens of thousands of Phelps jerseys over the last few days - even though swimmers don't compete in jerseys in their sport.

2.  Olympics TV Ratings Smashing World Records Just Like Athletes
According to NBC Universal-released data, the telecast of Phelps' record-breaking eighth gold-medal race drew 31.1 million viewers, the most for the network for any type of Saturday night programming since 31.4 million tuned in for the final episode of "Empty Nest" in 1990.  The total of 191 million viewers for the first nine days of the Games surpasses the 187 million total for the full 17 days of the 2002 Winter Olympics in Salt Lake City and 185 million tally for the 2000 Summer Games in Australia.  Sunday night's audience was 26.8 million, up from 26 million on the comparable night's broadcast from Athens. The network's rating for both nights was 15.8.

NBC's average rating (17.2) and average audience (29.8 million) for the first 10 days of prime-time Beijing Games broadcasts also rose over comparable numbers (26.2 million viewers and a 15.8 rating) during the 2004 Athens Games.  The network said on Monday that its "Nightly News"  and "Today" shows have also benefited from the Phelps/Olympics' "halo effect."

While television remains the king of NBC Universal's content providers, the network's Total Audience Measurement Index (TAMI) is showing interesting patterns as Olympic contests have been available online.  On weekends, TAMI data indicates consumers get as much as 95 percent of their Olympics directly from television. On weekdays, when people are at their desks, NBCOlympics.com gets busier, and TV's lead falls by about three percent and the website NBCOlympics.com sees increased traffic. Through the first five days of the games, NBCOlympics.com attracted nearly 25 million unique users, who viewed 456 million pages and watched close to 22 million video streams.

NBC's remaining challenge is whether other Olympians can pick up where Phelps and gymnastics left off.  "Generally during the Summer Olympics, the average ratings on television decline in week 2," according to a research report released on Monday by Magna, a New York-based media company.

3.  Olympic Sponsorship - The Goods

So far, official Olympic sponsors, all of whom spent tens of millions of dollars or more to get their foot in the Beijing door, seem pleased for the most part at the exposure they're getting at the Games.  Ten days into the event, General Electric claims that the company will generate at least $1.7 billion in revenue from Olympic advertising time and sales of GE industrial products to the host country (profit could top $150 million), and that total revenue from China will reach $5 billion this year, up from $4.4 billion in 2007.  GE's NBC Universal division, of course, is opening up doors for other parts of the global conglomerate.  GE has said that it's sold $700 million worth of equipment for Olympic venues and Beijing infrastructure, but expects to sell even more, perhaps up to $100 billion, annually in London during the ramp up to the 2012 Summer Games there. 

Coca-Cola reports that its animated "bird's nest" ad for the Games is performing well, as are ads for VISA, Oreo, and GE.  And talk about activation - McDonald's has opened four temporary restaurants inside the Beijing Games, all of which serve standard Mickey D's fare as opposed to Asian cuisine and all of which will close August 26.  The company already operates more than 950 restaurants in China; the temporary shops will be dismantled and repurposed for the 2010 Winter Games in Vancouver.

Even tiny WIN detergent is also making its mark.  The $4 million annually company has positioned itself as the official detergent of the U.S. Olympic Committee, and is used to cleanse the sweaty jerseys of U.S. track and field, baseball, softball, and soccer stars - and yes, the itty bitty swimsuits of Misty May-Treanor and Kerry Walsh (which surely don't require more than a half teaspoonful of detergent?).

4.  Olympic Sponsorship - The Bads

On the downside, some sponsors are finding that their visibility throughout Beijing and at official Olympic Games sites has been diluted by BOCOG's stringent security measures, especially at the Olympic Green.  Security measures have made it difficult for visitors to reach the Olympic Green pavilions of Olympic sponsors, all of whom have spent tens of millions of dollars on promotional campaigns.  And the Green itself is so huge that it takes several hours to walk around - perhaps proving that bigger is not always better.

Usually a focal point for sponsors and major gathering place for attendees at the Games, crowds at Beijing's Olympic Green - approximately three times the size of New York's Central Park - remain sparse.  The only people allowed inside the Green are those with VIP tickets to the venues surrounding the area, not the thousands of visitors with day passes common at previous Games.  Sponsors who were expecting 200,000 visitors a day are getting closer to 40,000, making it hard to justify the close to $150 million price tag for a pavilion.

Frustrated sponsors have been pushing Olympic officials for more open access to their pavilions, hinting that the low turnout may affect their decisions on sponsorship dollars for the 2012 London games.  So far, their only hope is that the larger crowds in the adjacent Bird's Nest for track and field this week will spill over into the Green.

5.  Olympic Sports Qualifying Redux
A couple of weeks ago, we informed you that, sadly, tug-of-war and other deserving feats of strength had been yanked from Olympic contention over the years.  But informal surveys of people in sports bars across America over the last week indicate that perhaps adding more fringe sports is the way to go.

At Barney's Beanery in Santa Monica, a hangout for LA-based Red Sox fans, synchronized diving replaced a Sox-Rangers game with no complaints from patrons.  New York sports bar owners report informal wagering on women's weightlifting; a blue collar New Jersey bar featured equestrian dressage. 

And as the Los Angeles Times reports, even more obscure sports across the globe could potentially be available for your Olympic viewing pleasure.  Chessboxing, "which alternates four minutes of chess with three minutes of boxing," is popular in Germany.  Off-road unicycling has a following in Europe and North America.  "And in Afghanistan," the Times notes, "there's a sport in which men on horseback score points by carrying a goat carcass over the goal line."  IOC, take stinky note.

Other Business News of the Week

6.  MLB Owners Meeting Replay

If MLB execs have their way, instant replay could be instituted in baseball before the World Series, and possibly even by September 1, according to widespread reports following last week's MLB owners meeting.  Replay review, maple bat safety and the 2009 World Baseball Classic dominated discussions at the in-season gathering.

MLB is working out technical issues to begin replay review for boundary calls such as home runs and fair/foul balls - prior deal-breakers for Commissioner Bud Selig, who strongly opposed using the technology for that purpose.  Replay would also not be used to review close plays at the bases or balls and strikes.

Implementing the technology does not require a vote by the owners (nor the MLBPA) because it is not a rule change.  The "war room" for replay officials will be at the offices of MLB Advanced Media in New York.

The owners also approved MLB franchise participation in the 2009 World Baseball Classic, discussed once again issues surrounding the safety of maple bats, and did not advance the process for putting a new Chicago Cubs owner in place.

7.  Oh, Behave!  New NFL Code(s) of Fan Conduct in Place

In Indianapolis, the Star-Ledger reports that there are exactly 778 beer taps at the new Lucas Oil Stadium.  But this high volume of free-flowing fun is likely more than the NFL can swallow in the wake of the new code of fan conduct the league implemented last week.

While the policy, first recommended by Commissioner Roger Goodell at league meetings last spring, doesn't specifically target alcohol sales, it is aimed at conduct the league views as "detracting from the game-day experience."  Banned behavior includes that which is "unruly, disruptive, or illegal; drunkenness and signs of alcohol impairment that result in irresponsible behavior; foul or abusive language or obscene gestures; and interference with the progress of the game, including throwing objects onto the field."

The league also left teams the option of adding provisions on a local level - a step at least three teams have already embraced.  In New York, the Giants and Jets have lowered the length of time fans can tailgate in stadium parking lots before games from seven hours to five, and have stated that multiple infractions of the conduct policy will result in the loss of season tickets.  In Chicago, the Bears have announced that fans tailgating outside Soldier Field who can't produce a game ticket will have to leave the lots at kickoff, instead of hanging around eating brats and drinking beer while watching the game on a portable tv.  (They will, however, be allowed back in after the game.)  Inside the stadium, spectators will be able to report foul language in the stands via a new text messaging program called "Help Stop UnBEARable Behavior."

In Oakland, owner Al Davis has declined to add any local restrictions to the national conduct code, largely because the league-wide policy automatically reduced the Raiders' entire fan base at McAfee Coliseum to a handful of spectators in section 217....
 

8.  New Jersey Jersey Boy

Before he's even thrown a single regular-season touchdown pass, new New York Jets quarterback Brett Favre is posting some pretty impressive numbers.  When Favre was traded to the Jets from Green Bay two weeks ago, fans immediately bought out more than 6,500 Favre #4 Jets jerseys from the NFLshop.com, shattering the site's previous one-day sales record of 900 set by Tony Romo on Thanksgiving Day.  Over 60,000 licensed Favre #4 Jets jerseys are now on sale nationwide, ranging from $79 replica jerseys to $215+ authentic team color jerseys.

Through their bargained licensing deal, NFL players receive six percent of the sale of each of their jerseys, though that total is a drop in the bucket compared to the estimated $7 million Favre made in endorsements last year (a number that could very well double in the New York market, on top of the $12 million base salary he's getting to play for the Jets).

Favre is also affecting Jets ticket sales.  So far, team officials report that the franchise has sold 2,000 more season tickets than it did in 2007.  On the secondary market, according to Sports Illustrated, the average price of a Jets ticket has shot up to $252.83 after the trade, as opposed to $138 before.  Jets execs are also confident that Favre will help sell seats in the new stadium set to open in 2010 - even though he'll most likely never play there.

9. Euro Soccer Corner Kicks

While we NFL fans are squirming in our stadium seats for the start of the "real" NFL season in two weeks, pro football fans in Europe are already up and running.  On Saturday-Sunday, Europe's 2008-2009 soccer season got underway in France and Germany, and the English Premier League also began play.  In two more weeks, the European Champions League will get underway, attracting hundreds of millions of viewers worldwide.

This year's global soccer season will perhaps bring more drama even than usual, topped by the headline-grabbing $33.6 transfer of Ronaldinho to AC Milan from Barcelona and the ongoing saga of Ronaldo's contract to stay at Manchester United despite his desired move to Real Madrid.  In a study released last Thursday, it was revealed that 42.4 percent of players in the top five European leagues are foreign, with the Premier League topping 59.5 percent foreign-born talent.  Foreigners accounted for 51.9 percent of the goals scored in these leagues.

Other drama front and center this season includes the Court of Arbitration for Sport's recent ruling that three of Europe's top soccer clubs could (and did) prevent their players from competing in the Beijing Olympics.  As the cost of acquiring talent has skyrocketed in the last few years, clubs have gotten more concerned about players getting injured while playing for their countries instead of in lucrative matches/tournaments for the club that holds their contract.  The decision could at some point have a ripple effect on international basketball as well.

And as SportBusiness International points out, the gap between soccer's governing bodies and its most successful clubs appears as wide as ever, with debates over the way clubs are financed and domestic/foreign player ratios "rumbl[ing] on in the background."  Look for these issues to move to the forefront during the upcoming season.

10.  You think sporting event ticket prices are bad, what about Disney??

So much for summer fun.  Despite a slumping economy, $4 RV gas and Tropical Storm Fay, Walt Disney Co. has just raised theme park ticket prices, effective immediately.

While not on the level of announced season ticket prices at the new Yankees, Mets, and Giants/Jets venues in New York, one-day ticket prices for "adults" 10 and older at Walt Disney World in Orlando have risen from $71 to $75, while tickets for kids 3-9 have jumped from $60 to $63.  At Disneyland in Anaheim, one-day ticket prices have risen from $66 to $69 for the 10 and older crowd, and from $56 to $59 for ages 3 to 9.  The "park hopper" option among all parks at both properties has risen from $45 to $50.

No word on whether Disney will eventually go the PSL route, assigning a $10k up-front price tag to seats on Pirates of the Caribbean, Space Mountain, and It's a Small World.