10 TO WATCH WEEK 11/21/16

lafc-boc_arial_small10 TO WATCH WEEK 11/21/16

PUBLIC SECTOR SPORTS ENTERTAINMENT ISSUES OF THE WEEK

 

  1. It’s official — DraftKings and FanDuel will merge, a move that is expected to draw the scrutiny of the Federal Trade Commission. On Friday, the fantasy sports leaders confirmed their long anticipated tie-up, saying that they have “agreed to set aside years of bitter rivalry and become one as they face down continuing regulatory and legal challenges,” according to the Wall Street Journal. DraftKings co-Founder and CEO Jason Robins will be CEO of the new company, while FanDuel CEO Nigel Eccles will serve as chairman. The new board will comprise “three directors from FanDuel and three from DraftKings,” with company headquarters split between New York and Boston offices. The deal is “expected to close in the second half” of 2017. The companies “haven’t yet decided what brand they will operate under, or if they will maintain both brands” – after having together spent upward of $500 million on advertising last year to differentiate themselves. Regarding the anticipated FTC attention, FanDuel and DraftKings currently make up more than 80% of the DFS marketplace, but a source said that they would like to grow their pooled customer base by tapping into the much larger season-long fantasy market. With A-list investors including most pro sports leagues, major media companies, and blue-chip venture capital and private equity firms, it is likely that the merger will expand the fantasy sports marketplace rather than narrow it.
  1. The English Premier League, already one of the most lucrative sports leagues in the world, with bottom-feeder teams making more annually than top teams in other leagues, is about to get richer. According to the London Daily Mirror, EPL clubs just received the green light to sell sleeve sponsorships on game jerseys, which could bring in “up to $12.5 million more per season” for each team. The proposal, “put forward by clubs” to league execs, was agreed on two weeks ago, and clubs’ business divisions are “already negotiating deals for the start of next season.” Sources close to the league noted that the new sleeve sponsorships are valued at around 20% of each respective clubs’ main shirt deal. For Manchester United, its kit deal with Chevrolet is worth $70 million annually, meaning its sleeve deal could be worth as much as $14 million per year. The rich continue to get richer. No salary cap means unlimited player signings and transfer fees for the big guys, leading to kit deals and other bonanzas. The smaller teams continue to struggle – as they have in international soccer for 100 years.
  1. The Phoenix Coyotes will build a new $400 million arena in Tempe, according to the Arizona Republic. Under current plans, the team will pay half of the incurred costs while local taxpayers will cover the rest. The deal would make the Coyotes “one of the first tenants” in Arizona State University’s Athletic Facilities District, but it would “need approval from lawmakers when they convene in January.” If the plan is ultimately approved, the arena should be set to open for the 2019-2020 season. The team remains optimistic of the plan coming to fruition, but many local legislators think otherwise. “A deal is far from complete, and appears to require new levels of support from both state of Arizona and City of Tempe taxpayers,” said Phoenix Mayor Greg Stanton. “My thinking hasn’t changed: Building a third professional arena in this market doesn’t make sense, especially when it would likely require new public dollars.” Four mainstream teams have leveraged any number of communities and Indian nations in the Valley of the Sun in order to generate public/private partnerships. This will be no different except that a university is added to the mix.
  1. Many professional athletes have followed Colin Kaepernick’s lead on kneeling or sitting during the National Anthem, but Buccaneers wide receiver Mike Evans will protest in other ways. According to ESPN.com, Evans has “reversed course on his decision to protest” the National Anthem and will stand with his teammates, opting to “find what he calls ‘more effective ways’ to communicate his message.” Evans was seen sitting during the anthem to protest President-elect Donald Trump, but was quick to apologize “to all the U.S. military members, their families, and the fans” whom he offended with his actions. Sitting during the National Anthem to protest social issues has drawn large amounts of scrutiny because it comes off as a rebellious act – one of defiance against the country. Evans’ initial urge to protest came from his upbringing from biracial parents who “weren’t wealthy, and growing up in Texas, it’s not inconceivable that he experienced racism.” Kaepernick, meanwhile, has announced his “Million Dollar Pledge” initiative, detailing organizations in underserved communities that are receiving funds from his foundation, thus putting a positive spin on an act widely viewed as negative, and underscoring pro athletes’ ability to use the field-as-pulpit in order to make a difference.
  1. Presidential politics continue to color professional sports, as three NBA teams have “stopped staying at Donald Trump-branded hotels this season in part to avoid any implied association with the new President-elect,” according to ESPN.com. The three teams – the Milwaukee Bucks, Memphis Grizzlies, and Dallas Mavericks – have decided to stay elsewhere while in New York City and Chicago. Sources said “another Eastern Conference team contracted to stay at the Trump SoHo” in New York this season has “likewise already decided to switch to a different property.” Both Bucks Co-Owner Marc Lasry and outspoken Mavericks Owner Mark Cuban are “high-profile supporters” of former Democratic nominee Hillary Clinton. Besides Chicago, other NBA markets with Trump hotels include Miami, Toronto, and Washington D.C. Seven other unnamed teams are currently scheduled to stay at Trump hotels and have not publicly altered their plans. Though Brand Keys suggests the Trump brand has gone through an astronomical increase through the election, his resort and golf properties may be exceptions to that rule. The jury is still out on whether the LPGA and PGA Tour will embrace the Trump properties in years ahead.
  1. MLS expansion side LAFC is determined to stand out in a crowded market despite being the newcomer to town. According to ESPN FC, LAFC faces a tough challenge of drawing an active fan base in a city that already houses the Los Angeles Lakers, Clippers, Galaxy, Rams, Dodgers, and Kings. One thing that the team has going for it is its stadium location: Banc of California Stadium is set to be built “in the heart of the city,” whereas the Galaxy play 17 miles from downtown Los Angeles. The LAFC ownership group includes boldface names like Magic Johnson and Will Ferrell, but team President and CEO Tom Penn expects the team to carve out a foundation for itself in a competitive market. “In L.A., you have every immigrant population and they all love the sport, so we feel like we can build something that brings all those groups together, and lasts,” Penn said. Clearly, Los Angeles requires unique marketing savvy, consistency, and tenacity to fight through the clutter. Look for LAFC to appeal to an entirely different demographic.
  1. The Oakland Raiders continue to inch closer and closer to leaving the Bay Area for Las Vegas. According to the Las Vegas Review-Journal, local Nevada commissioners voted for “a pair of hotel room tax increases and officially enacted financing for the 65,000-seat stadium and upgrade of the Las Vegas Convention Center.” The tax for the proposed facility would directly translate to an additional $1.35 in taxes for every $100 spent by Las Vegas visitors. Nevada Governor Brian Sandoval on Monday said that he “wants to take a wait-and-see approach before deciding whether to fast-track” at least $899 million in freeway improvements to “support construction” of a new stadium in Vegas. The Raiders have been unsuccessful in finding a new location and financing for a new stadium in the Oakland area, which has prompted the team to seriously consider a move out of state. A decision regarding this move should be made by January. Ironically, the NFL went from mass uncertainty less than a year ago to having all the franchise musical chairs completely buttoned down by January. The prediction: Los Angeles with two teams, Las Vegas with one.
  1. DePaul University, whose campus is nestled into Lincoln Park in Chicago, is finally building an on-campus basketball arena for both its men’s and women’s teams. According to Crain’s Chicago Business, the university has signed Wintrust Financial to a “15-year facility naming rights agreement” for the school’s new 10,387-seat basketball venue.” The arena is currently set to be open in time for the 2017-2018 basketball season. Wintrust is “one of the largest sponsors” of the Cubs and has a partnership with the White Sox. Wintrust is “second only to Northern Trust among Chicago’s largest locally headquartered banks by assets.” Apart from serving as a basketball arena, the facility plans to attract a wide range of other events, including “concerts, amateur sporting events and small and midsize trade shows.” DePaul is set to have a 50-year lease on the new arena, and will pay about half of the $82.5 million construction costs. Chicago always has led the nation in building large and small arenas and stadiums – minor leagues, college programs, and major league sports. The Cubs first World Series victory in 108 years generates more positive publicity for the Chicago sports industry.
  1. San Diego-based sports marketing firm Brandiose certainly has a knack for flare. This offseason alone, Brandiose has worked to rename several minor league baseball teams, including the Triple-A PLC New Orleans Zephyrs becoming the New Orleans Baby Cakes. According to the New Orleans Times-Picayune, the team’s new identity “has many Mardi Gras themes, starting with the team colors of mixing the Zephyrs’ dark navy blue with purple, green and gold.” The primary logo is a baby, “wearing a crown, emerging from a king cake while swinging a baseball bat.” As part of the rebranding, team President Lou Schwechheimer has “pledged lifetime passes to Baby Cakes games for each child born in the state of Louisiana” in 2017. Other teams Brandiose has worked with during the offseason include the Double-A Jacksonville Jumbo Shrimp, Double-A Binghamton Rumble Ponies, Single-A Florida Fire Frogs, and the Single-A East Wood Ducks. Minor league baseball franchise success in many ways depends on merchandising success, keyed to the most bizarre nicknames possible. What would be unheard of in major league sports is warmly embraced in the minors.
  1. The European PGA Tour is set to debut a new format for its Rolex Series in an attempt to compete more directly with U.S. tournaments. According to the AP, the European PGA Tour will now “group at least seven of its marquee events together as the Rolex Series and will be scrapping the Final Series format” beginning next season. The seven events are the BMW PGA Championship, the Dubai Duty Free Irish Open, the Aberdeen Asset Management Scottish Open, the Italian Open, the Turkish Airlines Open, the Nedbank Golf Challenge, and the DP World Tour Championship. The French Open is expected to be added to this list as the eighth and final tournament in the Rolex Series. Each tournament will increase its prize purse to at least $7 million. European Tour CEO Keith Pelley said the $7 million minimum “is the threshold that we felt that was needed to produce something of a high quality” for the series. Look for the competition to improve tournament quality, fan-friendliness, and television alternatives for consumers, golfers, and casual fans alike.

 

 

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