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2014: Top Sports Business Stories to Watch

By Rick Horrow and Karla Swatek
January 3, 2014

Here’s what’s on our radar as we settle in to 2014:

The Sochi Winter Olympics
Few Olympics have experience more controversy before actually beginning than these upcoming Sochi Games. Russia has committed at least $51 billion to prepare for the Games, making Sochi the most expensive Olympics in history. And it’s not even close.
The 2010 Vancouver Games cost just $8.2 billion, while the previous record for most expensive Olympics belonged to Beijing’s estimated $44 billion cost in 2008. Most of Sochi’s cost overruns have been blamed on corruption. The problems in Sochi don’t end with the price tag. Russia has been under fire for its anti-gay laws, and a suicide bomber recently killed 14 people on a bus between Moscow and Sochi. February could bring a tense few weeks for the IOC.

The FIFA World Cup
When Brazil was awarded the 2014 World Cup back in 2007, the rising Latin American power hoped to use the 12-city competition as a coming out party, a testament to its rightful place in the global economy. It also hoped that construction of new stadiums and related amenities would provide an unprecedented opportunity to modernize the country’s rudimentary infrastructure, including roads and public transportation that would benefit all Brazilians.

But as early as 2011, federal investigators were asking why the signature Rio de Janeiro stadium, slated to hold the World Cup final, cost four times as much as similar projects in Europe. Mass protests in June against spending taxpayer money on World Cup facilities followed, and the estimated $3.4 billion project has been hit with widespread accusations of corruption and even possible criminal negligence (for the recent death of Sao Paulo construction workers). As the ball dropped on New Year’s Eve, only six of the dozen World Cup stadia were declared complete, and it is unlikely that FIFA will grant the struggling country much stoppage time.

The First Cold-Weather Super Bowl
It could be a perfect setting, or it could be one of the biggest blunders in NFL history. Will the NFL’s first cold-weather Super Bowl be a success? That’s the billion-dollar question as we’re less than a month away from Super Bowl XLVIII at MetLife Stadium in New Jersey.

While NFL executives can’t predict whether a blizzard will hit on February 2, they do know that by business metrics, this will be one of the most successful Super Bowls ever. At a cost of $70 million, the game will be the most expensive in league history, according to NFL officials. By comparison, last year’s Super Bowl in New Orleans cost $13 million, while the 2011 Super Bowl in Dallas cost $38 million. Ticket demand for the game also is at a record high, with some seats on the secondary market ranging from $2,200 to $12,000, a 15-20% premium over past Super Bowls. However, the game’s ultimate legacy will be the weather, which could determine if future Super Bowls are played outdoors in cold-weather climates.

The TV Landscape
For the last decade, ever-escalating media fees have been the revved-up engine driving the sports industry’s growth spurt. ESPN alone pulls in $6 billion a year in subscriber fees; the network is in 100 million households paying $5.54 per month, according to a recent New York Times article. And then there’s the NCAA’s $11 billion deal with CBS/Turner for its men’s basketball tournament, signed in 2010.
However, if either Charter Communications or Comcast manages to follow through on purported bids to purchase Time Warner Cable, we may see at least a subtle application of brakes on programming rights fees, sports and otherwise. Why? Leverage. Combining either Charter’s four million cable TV subscribers or Comcast’s 21+ million with Time Warner Cable’s 11 million, conventional wisdom says, would greatly improve the new company’s negotiating leverage with content providers – the ESPNs, Turners, and A&Es.

The College Football Playoff
After Florida State and Auburn meet in Pasadena for the college football national championship, the much-maligned BCS will be no more. Beginning this year, college football will determine its champ with a four-team playoff.

The first College Football Championship Game will take place at AT&T Stadium in Arlington, Texas, with the Rose Bowl and Sugar Bowl serving as the first semifinal sites. The playoff teams will be selected by a 13-person committee, which features one athletic director from each of the five “power conferences,” as well as former Secretary of State Condoleezza Rice. Though it remains to be seen how much the new model will be embraced – there always could be a “fifth team” left out – there’s no doubt it’ll bring boatloads of money. ESPN has committed to paying $7.3 billion over 12 years for the playoff’s TV rights.

The Best of the Rest

  • Ed O’Bannon vs. the NCAA - A trial date for this class action lawsuit has been set for June, but a summary judgment could come even sooner. If O’Bannon and the athletes were to prevail, the action would dramatically change the landscape of collegiate sports, in terms of athlete pay, rights and marketing deals, and the like.
  • Adam Silver Era Begins - Silver has a tough act to follow, replacing David Stern, who will retire in February after 30 years as NBA Commissioner. While he has long-term labor peace, Silver will begin his new role by looking at the league’s TV rights, continued international growth, and participation in the 2016 Olympics.
  • Summer of LeBron, the Sequel - Each of the Miami Heat’s Big Three can opt-out of their contract at the end of this season, but the real attention will focus on the Big One: four-time MVP LeBron James. If he does become a free agent, expect him to announce his decision with something other than The Decision.
  • Foreign Ownership - Will foreign billionaires look to Mikhail Prokhorov and Vivek Ranadive as models for investing in U.S. pro sports teams? It remains to be seen what franchises might hit the open market in 2014, but don’t be surprised if bidders come from overseas.
  • SEC Network - Just what we need. Another sports cable TV channel. The SEC Network is scheduled to launch in August. A 20-year partnership between the conference and ESPN, SEC Network is expected to generate a monetary windfall for the conference’s member schools. To be determined: how much your cable bill will increase.

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