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http://www.businessweek.com/lifestyle/content/may2009/bw20090521_710780.htm

Business of Sports

The Indy 500 Turns 100, and Gets a Makeover


1. Family-Friendly Indy 500 Hits 100 (Years, not MPH)
According to The Indianapolis Star, an estimated 1,200 Indiana companies are motorsports-related, "creating about 9,000 jobs that pay 135% of the state's average wage." In the face of our current economic crisis, this weekend's 100th running of the Indianapolis 500 therefore takes on a heightened importance, both for regional companies involved in the sport and for the struggling motorsports sector in general.

An ESPN Sports Poll covering January to December 2008 asked motorsports fans about their favorite kind of auto racing. The results were not encouraging for fans of IndyCar and the IRL. While 39% of fans polled favored the Nascar Sprint Cup series and 20.1% favored Nascar's Nationwide Series, only 4.7% expressed a preference for IndyCar racing and the IRL over all other motorsports. (Surprisingly, 19.3% of those polled answered "none.")

At least the sport has such rising stars as Danica Patrick, Sarah Fisher, and Dario Franchitti, who has returned to the Indy fold after a less-than-glorious turn with Nascar. Patrick endorser GoDaddy.com is serving as presenting sponsor for ABC's Indianapolis 500 telecast for the third consecutive year. Patrick will also debut a new GoDaddy commercial specifically made for the race, said by those who have previewed it to be even more racy and controversial than the Super Bowl spots she has starred in the last few years—though the driver herself insists it's just good, clean fun.

Beginning this weekend, courtesy of Motorola's (MOT) Boost Mobile (her primary sponsor), Patrick's car will also sport a new orange and black paint scheme instead of the familiar blue and black Batman-like Motorola design.

In the wake of filly Rachel Alexandra's stunning win at the Preakness last weekend, it's entirely appropriate that female drivers such as Patrick and Fisher should be in the spotlight at Indy. But the men aren't left out—HER Energy drink is sponsoring the No. 99 car driven by Alex Lloyd for the month of May, including the Indianapolis 500. Lloyd is driving a pink HER Energy car, prepped by Target Chip Ganassi Racing for Sam Schmidt Motorsports. "The pink lemonade energy drink geared toward women," says SportsBusiness Journal, "also plans a Hollywood-style party in downtown Indianapolis on May 22, the Friday prior to the 500," benefiting the Indy chapter of the Susan G. Komen Breast Cancer Foundation.

Like at Pimlico last week, the infield at Indy is geared toward squeaky clean. Admission to the 253-acre space can be had for as little as $20. Backstretch picnickers on blankets abound, and it features an alcohol-free family area.

No wonder the drink of choice for the Indy 500 winner, a tradition started in 1936 and now sponsored by the American Dairy Assn., is milk.

2. La Nouvelle Maison de Tennis? French Open Contemplates Stadium of the Future
Not to be outdone by the All England Lawn Tennis Club, which Sunday debuted its new Centre Court retractable roof and extensive renovations during an exhibition match pitting Andre Agassi and Steffi Graf against Tim Henman and Kim Clijsters-Lynch, Paris' Roland Garros tennis stadium and surrounding complex will take on a whole new look within the next few years.

As revealed by Roland Garros officials last week, the main stadium court will have 14,600 seats and a sliding photovoltaic cell roof that can close in five minutes. At the north of the complex, two outdoor courts seating 1,500 and 750 with a garden overlook will be positioned alongside centre court and be open to the public year-round. The entrances to the complex will also be redesigned. Estimated costs for the project have not been finalized, nor a start date—French tennis federation executives expect to resume negotiations with Parisian city officials after the Roland Garros fortnight.

What has been announced as players prepare to take to the Roland Garros clay is a bigger French Open purse for men and women alike, including a €5,590,800 prize for the men's and women's champions, a 3.05% increase over last year. Total prize money to be awarded for the 2009 championship is €16,150,460, up 3.69% from 2008.

One issue sure to be on the tongues of broadcasters as the French Open gets under way May 24 is better alignment between tennis' primary organizations, namely the men's ATP, women's WTA, and the U.S. Tennis Assn. (USTA). While tennis has enjoyed a surge in popularity and prosperity in the last few years, those gains could be disrupted by the increasing divide between the organizations. Division between stakeholders in the sport have limited its ability to drive new revenue by expanding its sponsorship base, fan base, and media rights, said Larry Scott, the outgoing CEO of the Sony Ericsson WTA Tour, during a SportsBusiness Journal panel discussion last month. "Tennis is doing extremely well, but it can do better," Scott said. "It can do better if there's greater cooperation, not only between the ATP and WTA, but also these four iconic events we've got called the Grand Slam that are each independent events, huge in their own right. But the more we can do together, the more power we'll have in the market."

3. California Special Election and Its Impact on Sports
On May 19, California voters cast votes on four special-election budget initiatives that could determine whether or not the Golden State plunges into bankruptcy this summer. Sports entities within the state are certainly not immune to the financial crisis—to ease the state's cash-flow crunch, Governor Arnold Schwarzenegger has called for the sale of several venerable California sports venues, including the Del Mar racetrack, Cal Expo in Sacramento, and the Los Angeles Coliseum.

One of the reasons California's revenue picture is so catastrophic is that Sacramento now depends on the personal income tax for more than 50% of its annual income. Last year, California collections on capital gains fell 55%; sales tax revenues are estimated to fall 15% this year as well. Among major financial backers of budget revisions on the table are the interests that got their way in annual budget negotiations—Native American casinos, oil companies, a major teachers' union, and businesses including sports entities that blocked new taxes on their operations. The state's pro sports franchises contributed millions of dollars to help kill a proposed ticket tax: AEG gave $125,000 according to state records; the L.A. Lakers and Clippers, $25,000 each.

On May 14, Schwarzenegger introduced a revised budget in Sacramento that proposes selling the above properties. A potential buyer for the Coliseum, valued between $250 million and $400 million by the Legislative Analyst's office, could be its current main tenant, the USC Trojans. Prior to signing a long-term lease last year, the university offered to manage the stadium and invest as much as $100 million to renovate it. The state owns the land under the Coliseum and adjacent Sports Arena, and rents the venues to the L.A. Coliseum Commission for $1 million annually. The commission then "rents the stadium—which is owned in equal parts by the city, county, and state—to USC for roughly 8% of football ticket sales," according to the Los Angeles Times.

In San Diego County, the $350 million-$650 million Del Mar Fairgrounds, including the fabled racetrack "where the surf meets the turf" could be in play; officials quoted in the Times called it "perhaps the state's most valuable commercially used property."

Meanwhile, the Cal Expo site in Sacramento is exploring the development of a mixed-use community that would include new fairgrounds and a new NBA arena with a private developer. Should the state decide to sell the land, the decision could further complicate the Sacramento Kings' quest for a new facility and increase the likelihood that the franchise moves out of Sacramento, possibly to Las Vegas.

4. NHL Not Vs. Versus
With ratings for its playoffs up 18% over last year, boosted by a handful of seven-game series and the much publicized showdown between Sidney Crosby and Alex Ovechkin, NHL Commissioner Gary Bettman and league officials continue to be pleased with their relationship with Comcast's (CMCSA) sports cable network Versus.

Versus, in its fourth year of airing NHL games, just garnered its most watched regular season ever (with viewership up 21% from last year) and is currently experiencing its best postseason ever (viewership up 20% from last year). The network also just aired some of the most watched second-round games on cable since 2002.

"Versus has really been growing and doing a terrific job," Bettman said during a May 15 appearance on New York's WFAN-AM. "They don't get enough credit for what they're doing. If you look at Versus' numbers for the semifinal round this year and compare it to the last time we were on ESPN and ESPN2, we are actually doing better numbers. So this myth that we are somehow not in the right place is ridiculous."

For its nonexclusive coverage of Penguins-Capitals Game 7, Versus averaged 1.141 million viewers. The cable network was also the highest-rated cable destination for men 18-34 during its coverage of the game from 7-9:30 p.m. ET. And now that the Chicago Blackhawks have advanced to the Western Conference Finals, Versus is the exclusive cable television home for all Blackhawks games in the critical Chicago market—including Games 3 and 4 of the Stanley Cup Finals should the team get that far.

For all of Versus' 2009 NHL Stanley Cup playoff games to date in the Chicago market, the network has seen household ratings increase 200%, total viewership climb 156%, and substantial viewership growth among all key male demos: men 18-34 (up 55%), men 18-49 (up 103%), and men 25-54 (up 126%) as compared to last year's first and second playoff rounds in the market.

5. Made for TV: The Best Sports Showdowns
NHL and TV executives could not have asked for better NHL conference semifinal matchups, with three of the four series going to seven games. However, the series that stole the spotlight was Penguins-Capitals. Behind stars Sidney Crosby and Alex Ovechkin, Versus saw record viewership. These five one-on-one sports showdowns are clearly made for TV:

5. Sidney Crosby vs. Alex Ovechkin. As indicated by the hype surrounding their matchup, Crosby and Ovechkin are the stars the NHL desperately needs. FSN Pittsburgh earned a 25.0 for Game 7 of the series, the highest-rated NHL game ever for a regional sports network. With Ovechkin only 23 years old, and Crosby just 21, the future of the league is in great hands.

4. Peyton Manning vs. Eli Manning. Two of the biggest names in the NFL, they each have a Super Bowl ring. One is a three-time league MVP, the other plays in the largest media market in the world. Plus, they're brothers. If an Arizona-Pittsburgh Super Bowl can break viewership records, imagine what Manning vs. Manning could do.

3. Rafael Nadal vs. Roger Federer. The two have met seven times in a Grand Slam final, and if 2008 Wimbledon is any evidence, the rivalry may only get better. Federer and Nadal are credited with reviving tennis, which saw drastic decreases in participation and ratings following the retirements of Pete Sampras and Andre Agassi.

2. Tiger Woods vs. Phil Mickelson. Tiger's impact on golf is well documented, and NBC shows him ad nauseam whether he is leading the pack or is 10 shots back. Regardless, few things likely make Dick Ebersol happier than Tiger and Phil forming the last pair to tee off on Sunday at a major. Also jazzed by that visual are sponsors who throw a collective $150 million-plus at the two, making Tiger and Phil the highest paid sports endorsers in the world.

1. LeBron James vs. Kobe Bryant. The two biggest names in basketball today, Kobe and LeBron are on a collision course for potentially the most watched NBA Finals since the 1984 Lakers-Celtics showdown pitting Magic Johnson and Larry Bird. Single-handedly, Kobe or LeBron boosts TV ratings. Combined, the result will be unprecedented.

6. NFL Owners Convene
Isn't it the offseason for the NFL? Then why is the league grabbing more headlines right now than a couple of sports in their prime? That's what happens when you're the Cadillac in a fleet of arguable Chevrolets.

This week the NFL held its spring owners' meetings in Fort Lauderdale, where owners opted not to vote on expanding the regular-season schedule but did select New Orleans as the host city for the 2013 Super Bowl. More weighty discussion surrounded updates on labor talks with the NFL Players Assn. after the current collective bargaining agreement expires at the end of the 2010 season. A rookie salary cap was also high on owners' agenda for that part of the discussion. The controversial March decision to allow teams to opt out of the NFL's pension plan, a serious factor for assistant coaches in particular (who are not represented by a union), was also due to come up. Nine teams have opted out of supporting the pension plan so far.

TV rights deals also occupied a significant part of the owners' agenda. The NFL extended its current broadcast pact with FOX and CBS through the 2013 season and reached agreement with Comcast to put the NFL Network on a basic digital tier rather than a sports tier.

7. Cities with the Best Sports Owners
This past week, Sports Illustrated released its list of the best and worst owners in each sport. In order to determine which city has the best cadre of owners, we devised a formula in which each city on the "best" list received positive points (5th place = 1 point, 4th place = 2 points…), and each city on the "worst" list received negative points. The numbers in parentheses denote how many points an owner received.

T3. San Antonio, 4: Peter Holt, Spurs (4)

T3. Newark, N.J., 4: Jeffrey Vanderbeek, Devils (4)

T3. Anaheim, 4: Arte Moreno, L.A. Angels (4)*

2. Pittsburgh, 8: Dan Rooney, Steelers (5); Mario Lemieux, Penguins (3)

1. Boston, 9: John Henry, Red Sox (5); Robert Kraft, Patriots (4)

*For this analysis, Anaheim is considered separate from Los Angeles. Miami and California's Bay Area were tied for having the worst owners, at -6 points.

8. Taxpayers Pick Up the Tab for the 2012 Olympic Village
Last week, the British government injected £324 million ($491.5 million) into the 2012 Olympics Athletes Village, meaning the entire cost of the £1 billion project will now be met by public funds. Organizers had rejected an offer from developer Lend Lease and instead pledged to invest £650 million in taxpayer money. The Olympic Delivery Authority (ODA) estimates it will recoup at least £324 million from selling the Village flats once the Games are over.

During the Games, the village will house 3,000 athletes and officials. Later, it will form the regeneration centerpiece for the area. Much of the ROI will depend on how the 2,800 units are marketed and sold. The 11-block development will be promoted as the heart of a new residential district that will benefit from vastly improved transport links, a new Westfield shopping center, and the redevelopment of the Olympic Park.

Private investment for constructing the £355 million International Broadcast Center and Media Center also failed to materialize, meaning they will also be built with public funds.

The ODA has achieved a £179 million reduction in overall cost forecasts. According to its latest estimates, about a quarter of the £2 billion contingency fund will remain intact for unforeseen risks. Another £700 million of the contingency fund will be required to deliver the Games. Cost savings across the site means the anticipated final budget for delivering the 2012 Games will be £7.2 billion.

9. Tightening the Belt on the Premier League
Chief Executive Richard Scudamore announced earlier this week that the English Premier League will strengthen its financial regulations. The proposal includes an independent audit of club accounts to determine whether a club is financially viable, an annual requirement to demonstrate that a club does not have outstanding debts to other clubs, improved ownership rules requiring the disclosure of any interest in a club over a 10% shareholding, and an extension of the rule whereby conviction for certain offences renders a person ineligible for club ownership. The tighter regulations are intended to halt financial corruption and help clubs better survive the down economy. If approved by the league's 20 clubs, the new guidelines should come into effect at the start of next season.

Despite the economic downturn, professional football matches outside the Premier League saw an increase in attendance to a 50-year high. For the fifth consecutive season, the Championship, League One, and League Two, the three divisions below the top-flight Premiership, drew 16.35 million fans to 1,656 matches, a 1% increase. The Championship also retained its position as the fourth-best attended league in Europe, ahead of Italy's Serie A and behind only the Premier League, Spain's Primera Liga, and Germany's Bundesliga.

10. Beer Buildings Part II?
Last week, it was Dolphin Stadium, Jimmy Buffett, and Landshark Lager.

This week, Danish brewer Carlsberg, jersey sponsor for English Premier League club Liverpool, is "ready to discuss the idea of a naming-rights deal" for the club's planned stadium "as part of a renewed deal with the club," according to the London Independent. Carlsberg, whose 18-year Liverpool sponsorship is the lengthiest in the EPL and currently totals about $10.6 million, hinted at having the naming-rights discussion when marketing talks are held at the end of the season. (EPL club Arsenal's current naming-rights deal with Emirates is estimated at around $151.7 million.) The Independent also notes that the naming-rights deal would be a good opportunity for cash strapped Liverpool owners Tom Hicks and George Gillett "to extract serious money from the club," even as they decide whether the Carlsberg naming-rights revenue would be worth the likely opposition from some fans, who clearly love their home brew.

Rick Horrow is a leading expert in the business of sports. As CEO of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and other urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel.

Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports.
Rick_horrow
Rick Horrow is a leading expert in the business of sports. As chief executive officer of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (2010). Horrow is also the host of Sportfolio, a new program on Bloomberg TV that airs Wednesday nights at 9 pm ET.

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