May 5, 2008

Rick Horrow's Weekly Sports and Entertainment Dollar Countdown of 10 Top Sports Business Issues April 28 - May 4, 2008

1. The Kentucky Derby: Big Business as Usual, Just Not Monkey Business Days before Saturday's race, Big Brown, Colonel John and Pyro are the odds-on favorites to win the 134th Kentucky Derby, vying for a $2 million total purse in which the winner gets a cool $1.24 million along with his chic blanket of roses. It usually takes well over that $1.24 million to even get a horse to the starting gate - just ask Michael Tabor, owner of the $16 million Green Monkey, which last summer was the early talked-about favorite to win this year's Race for the Roses. The Monkey, claimed by Irish tycoon Tabor in a bidding war with a Middle Eastern sheikh, is not only not entered in Saturday's Derby, he has yet to win a race. Compare his price to recent Kentucky Derby winners sold at auction: Fusaichi Pegasus was sold for $4 million, Funny Cide for $22,000, and the horse known as War Emblem? An equine bargain at $20,000. $16 million is also close to the purchase price for a professional arena football team - or a AAA minor league baseball franchise. According to horse-races.net, in 2007, the minimum cost to enter a horse in the Derby was $50,600, including a $25,000 entry fee, a $25,000 start fee, and a $600 early nomination fee (which can go up to $200,000 for a supplemental nomination after March 31). It's slightly more economical to attend the race. Tickets for the May 3 Kentucky Derby offered on stubhub.com range from $45 for a single infield ticket to $3,883 for Millionaire's Row - a two-day VIP package for eight is also on offer for $37,648. Those big floppy, flowery Derby hats? Top milliners charge up to $2,500 for couture pieces, while your average Churchill chapeau is $500.

At the betting window, the total "handle" from the 2007 Kentucky Derby was down slightly to $118.3 million from $118.4 million in 2006 (off-track wagering on the 2007 Derby was $106.2 million). As always, celebrities will be out in force in Louisville this weekend, including Chelsea Clinton, attending the Derby for fun and votes for mom ahead of the May 20 Kentucky primary. For the first time, "Access Hollywood" will be part of NBC's Derby coverage. "Access at the Derby" will kick off the network's 2½ hours of race coverage at 4:00 p.m. ET. Churchill Downs' move to provide its own television coverage by buying half of Horse Racing TV has been a money-losing deal so far; HRTV is available in only 16 million homes, compared to longtime horseracing cable channel TVG, available in nearly 30 million households. Churchill Downs this year also debuted a YouTube contest for a "Chief Party Officer" to preside over the infield. The CPO will perhaps be pouring Herradura, selected as the official tequila for the 134th Kentucky Derby, the first tequila maker to receive that designation. On the nonalcoholic side, Shaquille O'Neal is reprising his Super Bowl ad for Vitaminwater - the Suns' center appeared in last weekend's Daily Racing Form "wearing riding silks and getting ready to send a letter to the National Thoroughbred Racing Association announcing his intent to enter the Kentucky Derby." Will we one day see Shaq on a Green Monkey's back?

2. NFL Draft Post Mortem In 2007, a reported 37,980,000 people watched at least part of the NFL Draft, and that number increased by several percentage points this year. The biggest winners, of the 2008 Draft, however, weren't ESPN executives, but rather the fans. The first two rounds of this weekend's NFL Draft lasted a combined 5 hours and 53 minutes, compared to 6 hours and 8 minutes last year for the first round alone. Commissioner Roger Goodell's new 10-minute time restriction gave us the shortest first round in memory. The picks came faster, the waits got shorter, and plenty of trades got made even without the extra five minutes - all of which made for much more compelling t.v. While most pro football experts agree that it takes at least two to three full years to fully evaluate any NFL Draft, my "teams that needed the most help based on franchise value" from last week scored big, from the #32 Minnesota Vikings Jared Allen trade earning a "B" to the #31 Atlanta Falcons landing Matt Ryan and beginning to erase all memories of Michael Vick (A) to the #28 Oakland Raiders landing talented but character-questionable Darren McFadden (A-).

Other big winners include USC, which boasts 10 total players drafted, including 4 first round picks; Nike; which signed nine of the top 11 players drafted, including #1 overall pick Jake Long and #2 pick DE Chris Long; and CAA, which represents six first-round picks. Oh, and offensive linesmen - a record seven were taken in the first round.

Two major changes might be in store for the 2009 NFL Draft. Its location, for one. The NFL's contract with New York's Radio City Music Hall expires this year, and several other cities have expressed an interest in holding the event. Whether or not a move would change the personality of the Draft - and the entertainment caliber of the audience - is one of the biggest variables. Second, with this year's shortening of the draft process, the league has proved that it can likely put the event on an even stricter time diet and get it down under four hours - and into a more desirable Friday night prime time television slot. Stay tuned.

3. NBA Playoffs Intensify - Notes from Courtside On the court, the NBA is enjoying one of its most intense playoff seasons in its history, especially in the highly competitive West. Off the court, however, attendance, team relocation, and other concerns impact nearly a quarter of the league's 30 markets. New Orleans and Indianapolis (once one of the league's top markets), drew fewer than 14,200 and 12,200 fans per game on average - despite the Hornets now being a playoff contending team. Some basketball analysts, in fact, are calling for contraction as a sound NBA business strategy.

Although the NFL Draft beat out the NBA Playoffs in Saturday's tv ratings, the NBA playoffs still have plenty of TV ratings power compared to the NHL playoffs and early season baseball. NBA games took the top spot and five of the top 20 sports programs for the week of April 14-20.

As Tiger Woods watched from courtside, the Orlando Magic became the first team in the NBA Playoffs to advance to the second round, beating the Toronto Raptors 4-1. (There goes the Canadian market.) The Magic was closely followed by the Lakers, who swept the Nuggets in four and took one step closer to NBA brass' ideal NBA Finals Lakers-Celtics match up. (Or, Commissioner David Stern's long-mythical "Lakers vs. the Lakers" contest.) The league's across-the-board ratings jump this season, in fact (TNT up 14 percent, ESPN up 12 percent, and ABC up nine percent) has been attributed to the resurgence of the LA and Boston teams.

At Monday's Celtics-Hawks game in Atlanta, in which the Hawks tied that series at 2-2, beers were going for $6, hot dogs for $5.50, and 5th row seats a surprisingly low $125 - a far cry from the $200 per nosebleed seat the Lakers command at Staples, and where a group of four can expect to spend $1,000 per playoff game on tickets, gas, parking, hot dogs ($8.50 each), sodas, T-shirts...and kid-size Lakers Crocs. Finally, off court, NBA owners, seeking to narrow the gap between have and have-not franchises, have approved a plan that is based on market performance and "increases the amount of shared revenue doled out annually to deserving teams" to $49 million, up 63 percent from $30 million, according to SportsBusiness Journal. Under the three-year plan, approved during the NBA Board of Governors meetings on April 18, teams which qualify for revenue sharing "will receive a maximum of $6 million" for 2008-2009, the first year of the plan, and increasing to $6.6 million by the 2010-2011 season. Under the current structure, no NBA team receives more than $5 million annually. The current funding mechanism, which penalizes teams for eclipsing the salary cap, will continue, but the added $19 million will come from "contributions from all 30 teams, with the amount based on how much local revenue each team generates"

4. Chicago Marketing Love Fest vs. New Orleans - Madder than a Hornet? In a poll spanning 2007, ESPN asked a sample 5,238 respondents how often they participate in five different lifestyle activities. "Attend pro sporting event" came in fourth behind 1) "Go to the movies" 2) "Eat at a non fast-food restaurant" 3) Attend local non-pro sporting event, ahead of only "Go to a bar or nightclub." The results of the poll should well serve to remind pro franchise owners that cooperation with other teams and marketing creativity will only help them remain competitive in an age of ever-increasing entertainment options. Consider, for instance, contrasting activities in Chicago and New Orleans. In Chicago, the NHL Blackhawks have entered into a so-far-successful marketing partnership with the Chicago White Sox. Blackhawks President John McDonough recently described the partnership on Comcast SportsNet as "a 12-month marketing cycle. Just because the regular season is over, we still have to be visible and relevant. This is the prime season that we're going to be selling season tickets and sponsorships." Likewise, Chicago's sports teams have been known to comfortably share sponsors. United Airlines just announced a seven-year sponsorship extension with the Bears in which the airline will assume naming rights for the former Cadillac Club premier lounge at Soldier Field. The Soldier Field deal, a reflection of a current trend by companies to contain marketing costs and get more bang for the buck, is the airline's most high-profile local deal since obtaining naming rights to the Bulls/Blackhawks United Center in 1994. In New Orleans, however, Jeff Duncan of the New Orleans Times-Picayune states the "distance between" Hornets Owner George Shinn and Saints Owner Tom Benson and their two franchises has "heightened since Hurricane Katrina. The competition for disposable income, government subsidies, and sponsorship dollars is at an "all-time high because of a shrunken population and business base." Shinn and Benson have "met and spoken only a handful of times, and only in business settings." Duncan also notes that New Orleans Arena, where the two clubs share tenancy, is "one of the few places where the orbits of the Saints and Hornets intersect." The AFL VooDoo, owned by Benson, plays its home games at the arena and is a "primary source of the friction between the two organizations." Attendance for the VooDoo's first four home games is down 20 percent from their 2007 league-record average of 16,645. Additionally, under the Hornets' contract with the state of Louisiana, the Hornets get "first dibs on playing dates in the building, and its sponsors receive exclusive advertising rights for all events." Hornets and Saints executives met recently to "begin the process of developing community initiative partnerships." Shinn has also enquired about purchasing Saints season tickets, and possibly, a suite.

5. NHL at the Stanley Cup Semi-Finals For the last five seasons, the defending NHL Stanley Cup champions have failed to make the second round of the playoffs. This year, the Anaheim Ducks continued that rueful tradition when they lost their first-round series to Dallas last Sunday. The Ducks will, however, retain the services of General Manager Brian Burke, who confirmed last week that he would remain with the Anaheim team at least through the final year of his current four year contract; Burke was rumored to be headed to the Toronto Maple Leafs, the NHL's most profitable franchise, with an estimated net worth of $413 million.

For the first time since the 2004-2005 lockout, NHL attendance and television ratings were both up. The league set its second post-lockout attendance record, attracting 21.2 million total fans. Average attendance rose 1.8 percent, to 17,268 fans per game. Among teams reporting double-digit attendance increases were the Blackhawks, St. Louis Blues, and Washington Capitals - only Washington made the playoffs, losing 4-3 to Philadelphia.

Attendance success this season was matched on tv. On Versus, ratings improved from a 0.2 to 0.3 average cable rating, while average total viewership was up 28 percent, to 272,417. On NBC, boosted by the New Years Day outdoor game in Buffalo, viewership rose 11 percent to 1.5 million viewers over the networks nine telecasts. The numbers were so encouraging for NBC that last Wednesday, the network announced that it had extended its revenue-sharing broadcast agreement with the NHL for another year, including 2009 NHL Playoff and Stanley Cup coverage.

6. BCS Honchos Meet - Playoff in the Works? This week, college football's BCS commissioners are meeting to discuss, among other topics, a modified college football playoff "Plus One" model. However, the proposal as introduced by incoming BCS coordinator John Swofford in January has only a slim chance of success as long as officials from the Big Ten and the Pac 10 conferences remain opposed.

While college football holds "no chance of the NFL-style playoff that many people want," according to the New York Times, the Plus One model, which would involve seeding the top four schools in the final BCS standings, with the winners playing for the national title, is the "most realistic alternative." However, a major stumbling block is university presidents, who remain vehemently opposed to a playoff system and extending the season to 14 games. Says Big Ten Commissioner Jim Delany, "Our position has been crystal clear for the last 13 years. We're interested in helping the bowl system, helping our regular season and creating a 1 versus 2 game without going further. If someone has a new idea, they have to carry the burden." Opposing commissioners are also concerned a Plus One system would "minimize the other three BCS bowl games."

From the television perspective, tv rights would obviously be more valuable as more Plus One games were added. On the hot seat is Fox, whose $320 million BCS deal has two years remaining. In the Chicago Tribune, Fox Sports President Ed Goren is quoted as saying that the current BCS system has "given college football some of its greatest regular seasons...Five teams go back to campus as champions," he states. "If you go into a different system, you have one winner and everyone else goes home a loser."

And it must be an election year - in Hawaii, U.S. Representative Neil Abercrombie is supporting a bill "claiming that the BCS is an illegal restraint of trade violating the Sherman Anti-Trust Act." The Representative is convinced a Plus One playoff would "remedy that problem."

7. Ballpark Blitz In a week in which the "cursed" Red Sox jersey planted at the new Yankees Stadium and later exhumed netted $175,100 for a cancer charity on eBay, high-profile Major League Baseball facilities on the West Coast are also making national headlines.

In Los Angeles, the Dodgers unveiled a $500 million, environmentally-friendly renovation to 46-year-old Dodger Stadium, complete with shops, restaurants, a parking garage, and a franchise museum, all designed to get notoriously tardy LA sports fans to the ballpark earlier, keep them there long after the final out, and even lure them during the off-season. The renovation, 100 percent privately financed, is scheduled to be completed by Opening Day 2012, in time for the 50th anniversary of the stadium's opening in Chavez Ravine. Public transportation to the stadium remains an issue - Los Angeles Mayor Antonio Villaraigosa was quoted over the weekend as saying "Isn't it amazing that we built a public transportation system and it never connected to Dodgers Stadium?"

Up north in San Francisco, attendance at AT&T Park is down 15 percent from last year, largely attributed to the departure of Barry Bonds from the Giants. Retail sales, particularly of Bonds memorabilia, are down sharply, as are the $20,000 a pop advertisers on kayaks in McCovey Cove - only two companies have chosen to brand kayaks with their logos this year.

Across the Bay in Oakland, the A's expected move to Fremont will likely be delayed until at least 2012 due to the complexity and intense public involvement with the project. Cisco Field, the "Ballpark of the Future" designed and sponsored by Cisco Systems (in a reported 30-year, $4 million annual naming rights deal) will use cutting-edge Cisco technology to enhance every part of the stadium, including ticketing, concessions and management of game day operations.

8. Behind the Wheel, the Women Keep on Winnin' Danica Patrick, move over. Ashley Force has just replaced you as the latest woman to win a top-tier motor sports event. Against her father, no less. On Sunday, Force faced off against her famous drag racing father to win the Funny Car class of the National Hot Rod Association's Summit Racing Equipment Southern Nationals. With the win, the 25-year-old Force leads the Powerade Drag Racing standings, through six events.

Although Force has just hit the road as a challenger to her father's 125 career victory record, what is not clear is whether she will challenge Patrick - and such other standout female athletes as Candace Parker and Lorena Ochoa - for endorsement opportunities. Parker, just signed with the WNBA Los Angeles Sparks, has signed sponsorship deals with adidas and Gatorade, and is being eyed by sports marketers for cross-over nonperformance products. Crossover products will be the next challenge for Patrick and Force as well, especially outside of automotive staples like Peak antifreeze (Patrick) and Castrol motor oil (Force).

9. China Tries to Sell Olympic Tickets. Again. On May 5, the final phase of Olympic tickets in China will go on sale. This time around, the Beijing Olympic Committee will attempt to sell 1.38 million tickets, only months after an attempt in October to launch real-time online sales for a lower number of tickets crashed the entire system in a matter of minutes.

Approximately 75 percent of the 6.8 million tickets being made available for the Beijing Games are reserved for domestic sales within China, a practice that has drawn complaints worldwide that there aren't enough tickets being made available for foreign tourists - or in some cases, for the immediate families of the athletes themselves.

Ticketing technology in China is rudimentary compared to that in the U.S. and elsewhere, where such innovations as Cisco Systems' "Stadium of the Future" will deploy ticketing and turnstile systems and food, beverage, and retail purchases with one swipe of a cellphone. In China, event ticket purchasers frequently still have to stand in long lines, or use expensive courier services; counterfeiting is commonplace. Beijing Olympic tickets will include such anticounterfeiting measures as radio-frequency i.d. tags and microfiche-text processing developed jointly by Ticketmaster and Beijing CSI Ticketing Development Company - if and when they make their way into the hands of would-be Olympic event attendees, that is.

10. Torched Part II As the Olympic flame continues its lap around the world, democratic governments hosting the torch run continue to struggle with an acceptable balance of freedom of speech for their people, expensive deployment of public safety officers - and respect for China, a global superpower and potentially the world's biggest consumer of pretty much everything.

In Seoul on Sunday, police deployed 8,000 officers as Chinese students clashed with anti-Beijing demonstrators throwing rocks and fists. A similar scene was found in Nagano, Japan, the previous day, as well as in Canberra, Australia last week. In contrast, Monday's trek through Communist - and equally repressive - North Korea went smoothly, despite the withdrawal of U.N. agency torchbearers wary of the motives of Kim Jong Il's regime.

Inside China, however, a backlash by citizens against worldwide Olympic torch protests is unexpectedly giving a boost to brands associated with the Beijing Olympics, according to the Chicago Tribune. Chinese consumers are participating in a groundswell of patriotism that's making Olympic sponsorships even more valuable than they already were. After Chinese wheelchair athlete Jin Jing fought off a protester trying to douse the Olympic torch in Paris, she became a national hero - as did her sponsor, Lenovo. And other sponsors who paid for the rights to the Chinese market including adidas, Volkswagon, UPS and Haier, "may have gotten the best bargain," the Tribune article continues. The companies "don't have to deal with the difficult balancing act of promoting their sponsorship in other parts of the world where the politics of Tibet and Darfur, and China's human rights record, have tarnished the marketing power of the Olympic rings."

Johnson & Johnson is running a Chinese ad campaign "showing how the company helps bring health care even to China's most remote provinces." And sponsor Coca-Cola is projected to sell 1.5 billion cases of soft drinks in China this year; its U.S. sales, like a can of Coke in the fridge too long, have gone flat.