A Countdown of 10 Top Sports Business Issues, January 22-28, 2007

1) In South Florida for Super Bowl XLI:  dream television match ups? 

Super Bowl XLI matches deliver mixed results for television executives.  Chicago (#3 market) plays Indianapolis (#25 market); two African American head coaches for the first time in NFL history, and the most endorseable superstar in the NFL (Colts quarterback Payton Manning at $11.5 million of corporate sponsorship annually).  On the other hand, the #5 television market (Boston) is eliminated -- along with talks of a potential Patriots dynasty.  While the New Orleans Saints may have represented the 54th television market, they were fast becoming the post-Katrina "America's team" -- now they'll wait until next year.  In any event, the Super Bowl will draw in excess of 180 million viewers, lagging only behind the World Cup every four years as the preeminent international "appointment viewing" telecast.  NFL ratings were generally up this year -- from 5% for FOX, to up to 39.4% for ESPN (ranging from 1% for CBS, 5% for FOX, and increases for ESPN and NBC).  National television revenue generates about $17 BILLION cumulatively for the NFL over its 6-year contract cycle -- about $3.03 billion per year this year (compared to $468 million in 1989.  A far cry from the $35,000 annually that the Green Bay Packers received in 1962 when the watershed revenue sharing agreement was reached -- all television and ticket revenues are shared equally among NFL teams (85% of the $6 billion total NFL revenue).   The NFL Network seemingly recouped its $100 million investment, with over 40 million subscribers (of 111 million subscription candidates).  Networks seem happy with their arrangements.  General Electric's third quarter revenue from the NBC Universal unit rose 20% this year.  The NFL remains the economic juggernaut for the business of television.

2) In South Florida for Super Bowl XLI:  Corporate America and creative Super Bowl ads.

Corporations spend over $2.1 billion annually on the NFL.  The cost of a 30-second Super Bowl spot rose from $675,000 for Super Bowl XXIII in 1989 to over $2.6 million this year.  The new Super Bowl corporate advertising trends merit analysis.  For example, (a) pre-posting ads on the Internet in advance of the ABC spot (Nationwide); (b) "cutting edge" ads after significant rejection (GoDaddy.com); (c) intense intra-category competition (Ford and General Motors fight); and (d) new approaches beyond previous ads (CareerBuilder.com dropping their famous monkeys).  Emerald Nuts provides a good case study -- transitioning from college to pro ads with this Super Bowl.  Also, the NFL, Doritos, and Chevrolet will have produced ads based on interactive contests for consumers to "design the best ads."  Overall, the NFL continues to be a sponsorship juggernaut as well -- 21 corporate partners starting the season, adding Motorola, Home Depot, State Farm, and Under Armour.  The Under Armour $60 million deal provides an interesting twist -- the NFL taking equity in the growing company as part of its corporate sponsorship deal.

3) In South Florida for Super Bowl XLI:  the great stadium construction process -- how Super Bowls are awarded. 

I have personal knowledge of this, previously working with the NFL on its 24 stadium deals since 1995 worth $8 billion, described in my book When the Game Is on the Line.  Super Bowl XL in Detroit and Super Bowl XXXIX in Jacksonville were born out of a public/private partnership that included the commitment of a Super Bowl assuming substantial public stadium investment.  San Diego is evaluating proposals from Chula Vista and National City; Los Angeles rethinks its $1 billion stadium investment, the San Francisco 49ers move forward on its Santa Clara stadium plan while considering the city's last ditch financing offer (including $765 million for transit improvements).  All three California locations would be prime candidates to fit the Super Bowl rotation.  Super Bowl XLII in Glendale, Arizona was included as part of the successful referendum that produced University of Phoenix Stadium (home of the recent BCS Championship Game, and other mega events for the Valley of the Sun). 

4) In South Florida for Super Bowl XLI:  NFL business trends and major recent developments. 

The NFL continues to set the gold standard of all professional sports -- league revenues exceed $6 billion.  Ten years ago, average franchise values approximated $174 million -- today, the Washington Redskins are worth over $1.4 billion (according to Forbes).  Each team makes approximately $200 million in revenue, compared to $75 million 10 years ago.  The average NFL players salary was $627,000 10 years ago -- now the average salary exceeds $1.3 million (and total player compensation is above $2.5 billion).  Over 85% of total revenue is shared (the reason Green Bay can co-exist in the league with New York and Chicago), and the salary cap exceeds $100 million annually -- a factor the players love.  The key story is how the deal got done, how the NFL compares favorably with other sports, and what are the future business challenges facing the NFL.

5) In South Florida for Super Bowl XLI:  the NFL, Congress, and gambling. 

The Senate is moving this week to ban members from accepting free tickets to major sporting events -- attempting to enforce the $50 limit on gifts they can accept.  Any new rules will not be in effect before Super Bowl XLI, even though the face value for tickets is $600-$700.  California Senator Dianne Feinstein introduced the Football Fairness Act of 2007 attempting to keep the 49ers from leaving San Francisco.  New York Senator Charles Schumer met with Commissioner Goodell in order to discuss the future of the Buffalo Bills.  New Jersey Senator Frank Lautenberg attempted to influence the NFL Network to show the Rutgers and Kansas State game in his home state.  U.S. Senate Judiciary Chair Arlen Specter plans to sponsor legislation to eliminate the antitrust exemption that allows the league to negotiate broadcast rights for all of its 32 teams.  Then there's gambling.  The favorites are only 8-7-2 against the spread in the last 17 Super Bowls.  Expectedly, Super Bowl gambling is a large part of the $7.4 billion wagered annually on the Internet, and the $55 billion wagered in casinos.  The recent federal attempts at offshore gambling regulation will have a profound effect on this year's Super Bowl

Next week, we will look at the following five issues on location at Super Bowl XLI in Miami:

1. NFL marketing initiatives for women, minorities, and kids
2. NFL international (games in London, China, and the international Super Bowl broadcast business)
3. NFL superstars and Super Bowl endorsers (corporate ads and individual spokesmen)
4. Super Bowl ticket distribution ($3,500 scalped tickets vs. $700 face value; the $2 billion "resale" industry)
5. Economic impact of Super Bowl XLI in South Florida (out from the tundra of Detroit and Jacksonville), and why this impact will be the biggest ever

6) National Hockey League All-Star Game Wednesday in Dallas:  mixed business reviews. 

Though back from the Labor Armageddon of two years ago, the league will exceed $2.2 billion in revenue, driving franchise values higher as a result.  The league has experienced a 2.5% increase in attendance, and a 23% rise in licensed merchandise on NHL.com.  On the other hand, television ratings have been stagnant, the Pittsburgh Penguins need a permanent home, and the league All-Star Game in Dallas appears to be met with some ambivalence.  That is part of the story.

7) The name game. 

Barclays Bank announces a $400 million, 20-year naming deal for the new Nets arena deal in Brooklyn.  The reasons for the Barclays investment are interesting, especially since the company has no retail banks in this country.  In any event, banking institutions now account for 17 naming rights deals in major league sports -- the most of any other industry.  The nature of the specific commitments is worthy of exploration. 

8) Halfway through the tennis Australian Open:  will U.S. mediocrity pull the entire sport down under? 

Though Roddick on the men's side, and Serena Williams on the women's side emerged through the first week, only 3 of the top 50 ranked men and 5 of the top 50 ranked women are American.  The ratings and revenue generation from the Australian Open stagnate accordingly.  Some suggestions:  move the tournament to later in the year; more grass roots marketing by the ATP and other tennis organizations; and the like. 

9) An Olympian competition. 

Chicago Mayor Daly introduced a development plan paving the way for construction of $1 billion Olympic Village on 77 acres in Chicago.  In California, Governor Schwarzenegger will lobby hard for the Los Angeles bid.  The USOC picks its American city this Spring to compete against international competition for the awarding of the 2016 Games.  London looks to a $1.5 billion overspend for the 2012 Games, and British Columbia complains about the 2010 Vancouver Olympic budget, yet the competition for future Games is stronger than ever. 

10) International retail, David Beckham, and soccer expansion. 

A week after the Beckham signing in Los Angeles, the impact continues.  The Galaxy sold 4,000 additional tickets.  The Beckham deal itself is now viewed as a vertically integrated marketing deal:  only $50 million of the total $250 million is for his soccer playing acumen.  At the same time, San Jose State University attempts to develop a soccer stadium; the MLS announces a top tournament with Mexican soccer leagues called Super Liga.  Across the pond, the English Premier League lands a $1.23 billion international media package, and Beckham himself gains the expected title as "wealthiest soccer player" -- worth over $171 million BEFORE the Galaxy deal.