By Rick Horrow and Karla Swatek
January 2, 2013
The top ten sports business stories of 2012, from our perspective:
1) The NHL began its third lockout under Commissioner Gary Bettman’s 20-year tenure and its second work stoppage in the last eight years. Unless a resolution is reached between the league and its players by mid-January, according to those in the know, the entire 2012-2013 season is in jeopardy, as is the health of a $3.3 billion business and the NHL’s reputation with sponsors and fans.
2) Lance Armstrong ended his fight against drug charges brought by the U.S. Anti-Doping Agency, which issued a lifetime ban against the cyclist that stripped him of his seven Tour de France titles, emptied his endorsement portfolio of such blue chip backers as Nike, Anheuser-Busch, and Radio Shack, and severed all ties to his LIVEStrong foundation. Globally, pro cycling may never recover from its elite athlete doping stigma.
3) The London Olympic Games become the most-watched U.S. TV event in history, and set milestones for online viewership as well. The London Games saw Michael Phelps retire and Andy Murray triumph, and made sweethearts of Missy Franklin and Gabby Douglas. The NBC family of channels took in an estimated $1 billion from such advertisers as Proctor & Gamble and General Motors, which allowed NBCUniversal to break even. The IOC now turns its attention to replacing outgoing chairman Jacques Rogge and to the upcoming Games in Socci and Rio de Janeiro.
4) Guggenheim Baseball Management buys the Los Angeles Dodgers for $2.15 billion. The storied franchise cements its new position as the Yankees of the West after completing hot stove deals with free-agent right-hander Zack Greinke and Korean left-hander Hyun-Jin Ryu. The agreements send the Dodgers’ 2013 payroll north of $230 million, a MLB record. Next up might be the acquisition of AEG, which could give Guggenheim a veritable monopoly on all SoCal sports and concerts.
5) Two seasons after the Saints won the first Super Bowl in the franchise’s 43-year history, the “Bountygate” pay-for-injury scandal rocked the team and its town. While appointed arbitrator/former NFL Commissioner Paul Tagliabue recently dismissed the players’ suspensions and fines (but not the year-long banishment of head coach Sean Payton), the issue is not resolved and in February, will make for chilly relations at Super Bowl XLVII…in New Orleans.
6) Television rights fees escalate dramatically for live sporting events. From ESPN’s $500 million payment for the upcoming BCS playoff to NBC agreeing to pay $85 million annually for rights to the English Premier League to Time Warner Cable reaching a carriage deal with NFL Network and 10 regional sports channels launching, including the Pac-12 Network, the total for national media rights deals signed in 2012 topped $25.9 billion.
7) The NFL season started in a labor impasse with replacement referees, but after a badly blown call during the Week 3 Packers-Seahawks “Monday Night Football” game the league had finally heard and seen enough. A deal was soon struck, but the blown call may still impact the playoffs.
8) The Brooklyn Nets begin play in Barclay’s Center. The franchise’s move and rebranding have revitalized the surrounding Prospect Heights neighborhood in Brooklyn, produced a legitimate rivalry with the Knicks, and brought celebrity fans courtside. And for the first time in many seasons, the team is in contention.
9) Even though it scuttled the ING New York Marathon and postponed the first cross town rivalry game between the Knicks and Brooklyn Nets, like Katrina before it, Hurricane Sandy brought out the best in the sports industry. The NFL, NFLPA, NBA, and MLB all donated more than a million, while dozens of athletes organized charity events and donated significant funds of their own. Athletes also manned the phone lines during the 12-12-12 Concert for Sandy Relief in Madison Square Garden.
10) Over the last year, 50 schools within the 11-conference structure of the Football Bowl Subdivision (FBS) have changed conferences or announced their intention to do so. Amidst this musical chair maelstrom, however, the sitting commissioners and the NCAA finally green-lighted a four-team football playoff starting in 2014. We have no idea where the teams will come from, but from the madness—just maybe—will emerge a legitimate national football champion.
The top ten sports business stories to watch for in 2013.
1) Will the NHL lockout cause a freeze out? The NHL lockout topped our 2012 list and will shape 2013 as well. While the league will receive $200 million in national media revenue from NBC even if it never drops a puck, at stake is the long term health of a $3.3 billion business and the NHL’s reputation with its stakeholders.
If the league can settle its labor impasse by mid-January in time to salvage a 48-game season, then its fan base may stay intact. However, when a recent survey revealed that 58% of Canadians, for whom hockey is as essential as virgin forest and beer, don’t care if the season is saved, the NHL may have rough ice ahead.
2) I-5 MLB Arms Race. The Los Angeles Dodgers sell for $2.15 billion, but that’s just the beginning of the SoCal baseball money dance. Agreements with pitchers Zack Greinke and Hyun-Jin Ryu send the Dodgers’ 2013 payroll north of $230 million, a MLB record.
Not to be passed like a Prius in the carpool lane, neighboring L.A. Angels of Anaheim sign slugger Josh Hamilton to a five-year, $125 million deal, bringing their 2013 payroll to $114 million, with $500 million in salary commitments through 2021.
The locally-farmed golden goose, of course, is TV money. The Dodgers may receive up to $6 billion over 25 years in a new regional deal with Fox—potentially raising cries of preferential treatment from other teams if only a portion of the funds are subject to MLB revenue-sharing. The Angels are negotiating a lucrative TV deal of their own.
3) World Baseball Classic. 2013 IS a WBC year, and this time around, the tournament has expanded to 28 teams in a new qualifying and pool play format. The U.S. will host games in every round, with first-round games at the Diamondbacks’ Chase Field and spring training ballpark they share with the Rockies, Salt River Fields at Talking Stick. Miami hosts second round matchups, while San Francisco will host the finals; Mayor Ed Lee anticipate a $100 million economic impact there.
Delta Air Lines and Brand USA have signed on as sponsors, and MLB is creating a special edition of its “Fan Cave” for the tournament. Will WBC finally catch on with fans?
4) The NBA revisits Jersey. Outside of MLS, corporate sponsor logos are almost entirely absent from American pro sports jerseys. While most leagues have gotten comfortable with practice jersey logos, a longstanding mindset about the sanctity of sport and concern over sponsor leverage have thus far prevented official game jerseys from becoming, as the New York Times put it, “a running, passing, shooting and dunking billboard.”
Now, the NBA is seriously considering becoming the first of North America’s four major sports leagues to put sponsors’ logos on game uniforms. Even if the NBA took in only a fraction of the revenues generated by EPL shirt sponsors such as Chevy, Emirates, and Samsung, that has to be near irresistible to the owners and Commissioner David Stern. We may see corporate brands on NBA game jerseys by October.
5) Conference musical chairs continue. 2013-2014 will likely see the end of the Big East, as Forbes notes, since its widespread members, such as San Diego State, Boise State, and Tulane have lost the perceived benefits of joining the conference in the first place after the departure of Syracuse, Louisville, Pitt, and the like.
Further, in the Big East, the new Catholic school basketball super conference, and elsewhere, many schools that have announced that they’re switching affiliations will do so sooner than planned. Legal proceedings involving West Virginia and Rutgers will affect the pace at which change occurs.
6) Você fala português? Brazil will be the epicenter of the sports business world in 2013, both physically and digitally. While Latin America is booming from a sports perspective, Brazil is readying for both the 2014 World Cup, building 10 new arenas, and the 2016 Summer Olympics. At the same time, thanks to 24/7 digital access, American sports fans are paying more attention to international sports properties such as the EPL, cricket, and F1—another Brazilian obsession.
7) Social media continues to spread. For sports as for other industries, much growth is happening on social media networks. Fast Company notes that Facebook users grew by 47% in Latin America alone last year, and total social media users are forecast to grow by 12.6% in Latin America, 21.1% in Asia, and 23.3% in the Middle East (compared to 4.1% in the U.S.). American sports brands will implement better social media management tools and continue to see a strong return on their global digital investments.
8) Rory rockets. Golfer Rory McIlroy reached #1 in 2012; in 2013 he will stay there. McIlroy finally looks like the true heir to Tiger Woods, with the wherewithal to pass Jack Nicklaus’ record of 18 Majors. In 2012 he won $8 million on course, added a second Major, was Player of the Year, and signed a $250 million deal with Nike.
The just-filed Oakley breach of contract suit is a mere leaf in McIlroy’s 2013 lie. Look for the Northern Irishman to add at least one more major, with nary a slump in sight.
9) America’s Cup sails into SF. Not only does the City by the Bay welcome the World Baseball Classic Finals in 2013, six months later, it plays host to the America’s Cup Finals.
Oracle founder Larry Ellison brought the America’s Cup back to the U.S. in a runaway victory off the coast of Spain. Ever since, San Francisco has been busily preparing for a series of major events that bring glamorous sponsors and a heady economic impact. From the Marina Green Moet & Chandon Champagne Lounge to on-the-water opportunities sponsored by Lexus and Red Bull, the Bay Area should see around $1.4 billion in economic benefits from America’s Cup events.
10) Court gestures. 2013 is a critical year for hobbled tennis star Rafael Nadal, trying to return to his prior form, and the ATP, locked in a battle of wills with the USTA over a Monday night U.S. Open final they don’t want (they’re losing) and bigger purses at the Slams (they’re winning—next month’s Australian Open is ponying up US $31.5 million, a 14% increase). Will Andy Murray win another major? Will an American woman not named Williams finally break through?