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Total wagers fell again at the 2008 Kentucky Derby. In the midst of a recession will bettors continue to keep their hands in their pockets?
1. The Kentucky Derby and the State of Horse Racing
This week, as a Mexican swine flu epidemic threatens to further penetrate the U.S., health and safety issues are front of mind with pretty much everyone. That mindset certainly extends to the Kentucky Derby. The 135th Run for the Roses, coming on the heels of last week's horrifying death of 21 horses at the International Polo Club Palm Beach, after an improperly administered vitamin supplement felled a good part of the Lechuza Caracas polo stable, is facing unprecedented scrutiny this year concerning the health and safety of the field of horses.
Since the deaths of Barbaro, after a breakdown at the Preakness in 2006, and last year's trackside euthanasia of the second-place filly Eight Belles—in front of tens of thousands of Churchill Downs spectators and millions more watching at home—questions have escalated about track surface safety, sound breeding practices, and the sketchy measures of some trainers. A professor at St. Catherine's University in St. Paul told The New York Times recently that there have been approximately three breakdowns a day nationwide since last year's Derby. Since Nov. 14, 12 horses at New York's Aqueduct track had to be put down, a development the New York Racing Assn. director outrageously framed as the cost of doing business rather than the atrocity it is.
Is the "Sport of Kings" dying on the vine—a demise that started well before the recession? If so, can a new generation of owners, trainers, and fans revive the billion-dollar thoroughbred racing business?
"A billion dollar industry, riding on the backs of 3-year-olds" is how CNBC aptly titled a full-page ad in Monday's Wall Street Journal promoting a show about the racing business due to premiere on Thursday. And a big business it is. According to horse-races.net, in 2007, the minimum cost to enter a horse in the $2 million 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 Mar. 31).
It's slightly more economical to attend the race for the projected 155,000 fans. Tickets for the May 2 Kentucky Derby offered on stubhub.com range from $95 for a single infield club ticket to $5,883 for Millionaire's Row (a $2,000 increase over last year at this time) and $7,354 for the Turf Club. We presume that includes parking.
At the betting window, total wagers placed on last year's 12-race card fell 1.99 %, to $164,688,176, from the $168,018,982 recorded in 2007, and 5.97 % from the record $175,129,090 tallied in 2006. Watch for that total to be even lower in our current recession, and heed this bit of wisdom from BetUS.com. According to that company, odds are 7-to-1 that a horse will win racing's Triple Crown this year—the last horse to do so was Affirmed, in 1978.
2. MLB: From the League's Biggest Market to its Smallest
For Major League Baseball, 2009 so far is shaping up not as the haves vs. the have-nots but the who'ves vs. the who've nots—at least as far as the fans are concerned.
Overall, according to Forbes' most recent valuations, MLB franchise values increased an average of 1% over the last year, to $482 million, an all-time high. MLB revenue jumped 5.5 %, to $5.8 billion, while operating income rose 1.8 %, to $501 million.
At a $1.5 billion appraisal, the Yankees once again topped Forbes' list, followed by the Mets ($912 million), Red Sox ($833 million), Dodgers ($722 million), and Cubs ($700 million). However, the Yankees and Mets, with their pricey new stadiums and proprietary TV networks, are distorting the averages; in reality, there's an ever-widening gap between the franchises at the top of Forbes' list and those at the bottom. To paraphrase one pundit, there's no middle class in baseball anymore.
Last week, the gap in MLB's smile was exemplified by the empty Legends Suite seats at Yankee Stadium, where the up-to-$2,625 seats have only been filled once since the stadium opened, according to the Associated Press. The Yankees and Mets are drawing only 70% to 75 % attendance every day there's a game at one of their new ballparks; together, the teams had failed to sell about 5,000 tickets by Apr. 22, according to The New York Times.
However, in Milwaukee, baseball's smallest market, the Brewers have already sold over 2 million tickets for the current season, "marking the second-fastest climb to the milestone in team history," according to the Milwaukee Business Journal. The Brewers, whose value Forbes pegged at $347 million (24th in the league), last season set an "all-time franchise attendance mark" of over 3 million fans. Through six home games the team had drawn 212,197 fans to Miller Park, an average attendance of 35,366 at the 41,900-seat facility.
3. Swine Flu Outbreak Infects Mexican Sports
There are empty seats at sporting events—and then there are empty seats. A handful of stadia throughout Mexico this weekend experienced the true meaning of habitacion libre.
Three futbol games were played to stadiums devoid of fans over the weekend, with like scenarios expected this week as well. Mexico City club Cruz Azul played in an empty stadium Saturday at Pachuca, about 35 miles outside the city center, while south of Mexico City, Pumas took on Chivas at the picturesque Olympic Stadium with its signature volcanic-rock bleachers sitting empty. And America faced the Tecos in Mexico City's Estadio Azteca. Azteca normally holds 105,000. On Sunday, it held none.
Losses for the Chivas-Pumas match alone meant reimbursing more than $500,000 to 50,000 ticket holders and losing more money in concessions, especially beer sales.
On Monday, concerns about swine flu spread prompted CONCACAF to cancel the rest of its under-17 soccer championship in Tijuana. Mexico, the U.S., Costa Rica, and Honduras had clinched spots in the tournament semifinals, but in cooperation with the Mexican government CONCACAF said it would cancel this week's championship rounds "to safeguard the health of players, officials, and fans." (All four teams will still advance to the U-17 World Cup, Oct. 24-Nov. 15 in Nigeria.) CONCACAF also postponed the second tier of its Champions League finals until May 12. Mexican squads Cruz Azul and Atlante FC were to play Wednesday in Cancun for the title of best club team.
Outside of soccer, top Mexico City pro baseball team Los Diablos Rojos (the Red Devils), on Sunday said it would play three games next week away from its Mexico City stadium—the games will instead be played in Coahuila in northern Mexico. And players assembled for the LPGA Corona Championship in Morelia "received up to three e-mails from the tour's tournament operations office outlining specifics of the swine flu threat and precautions players should take," according to the Golf Channel; the swine flu epidemic also caused a mad dash out of the country by the 30-odd Korean women on the LPGA Tour. In the U.S., along with school, hospital, and other community officials, sports executives are laying contingent plans should the flu spread deeper into this country.
4. Shoot Around: NBA Gets Look at Second Round
Who's in, who's out, and who's hanging on to the rim? From the NBA's front office in New York to playoff sites around the country, NBA franchises and fans are sensing excitement on the horizon, not dismay.
Adding a Hollywood element to the playoffs, as part of its marketing plans, the NBA has signed a deal to promote four summer movies. Each round of coverage will feature ads for a different co-branded spot, beginning with the now oft-played X:Men Origins: Wolverine.
On Thursday, the league's own superhero, Commissioner David Stern, insisted that the NBA was doing fine financially. "We have no teams that are in any trouble," Stern said in response to a report released last month that a dozen teams had borrowed $200 million from a league-commissioned credit line, "despite reports that several teams…are suffering debilitating financial losses this season." The commissioner also stated that the credit line "was not an emergency fund," yet the potential exists "that teams again will need to reach out a hand in two years" when the current collective bargaining agreement is set to expire. In anticipation of that, Stern concluded that he will "put together a labor relations committee sometime next month."
Except for a handful of expected technical fouls during the intense playoff stretch, player relations, extending to the fans, have excelled during the post-season. The two dozen odd playoff match-ups to date have been played before sellout crowds, with some franchises being hot sports of success stories. According to Forbes, revenues of the Trail Blazers, hanging on despite the Rockets 3-1 series lead, jumped from $78 to $114 over the last three seasons, boosting the team's value to $307 million from $227 million. The team averaged 20,521 fans per game this season, third in the NBA, and ticket revenue and merchandising have both increased by around 30%.
In Philadelphia, the 76ers (tied 2-2 with the Magic) gave away free gasoline and a supermarket shopping spree to lucky fans, and asked the city to temporarily refer to the Schuylkill Expressway as the I-76ers, according to the local business journal. The Magic have signed IT firm Harris Corp. to a five-year deal, worth seven figures annually, to be the first founding partner of their new arena; Magic COO Alex Martins has also said that he is confident the team will sign a naming-rights agreement in the next 60 days.
And could this be the year that a Cleveland team wins it all? As they completed their sweep of the Pistons, the Cavaliers are breaking nearly all their merchandise sales records. Overall, total sales are up 45% from last season, more than double sales of any other team—even over the showier Lakers.
5. NFL Primetime Appearances
The schedule for the 2009 NFL season is out, and what better way to recognize playoff teams than with primetime TV appearances? The season will kick off with the Super Bowl Champion Steelers playing host to the Titans, and all told, 42 games will air during primetime on NBC, ESPN, and NFL Network. Of last season's playoff teams, here are the five with the best primetime appearance-to-2008 win total ratio:*
5. 36.4 % Miami Dolphins (4 appearances/11 wins)
T3. 41.7 % Indianapolis Colts (5 appearances/12 wins)
T3. 41.7 % Pittsburgh Steelers (5 appearances/12 wins)
2. 44.4 % Philadelphia Eagles (4 appearances/9 wins)
1. 50.0 % San Diego Chargers (4 appearances/8 wins)
* It's worth noting that the Dallas Cowboys, who will appear on national television a record six times during the upcoming season, have not won a playoff game in 13 years. Can you say overexposure?
6. Rookie Salary Cap Next NFL Battleground?
Now that the dust from the 2009 NFL Draft has settled, and Matthew Stafford, Jason Smith, Aaron Curry, and Mark Sanchez, among others, are destined for exorbitant guaranteed contracts, it is once again time to complain about the NFL's current rookie pay scale.
Like the playoff pay I mentioned last week, rookie wages are sure to be one of the primary issues in the upcoming CBA negotiations. It is ridiculous how much money is given to players who have never stepped on an NFL field. Consider that after being the first player selected in last year's draft, Jake Long instantly became the highest-paid offensive lineman in the league. It is impossible to justify Long having a larger contract than proven veterans like Walter Jones or Jordan Gross.
To illustrate how big of a burden is a high draft pick, look no further than the Detroit Lions. It's rumored that when the team was in the Jay Cutler sweepstakes, Denver preferred the Lions' 20th overall pick to the top selection. That means the financial obligation to the first pick was so great, the Broncos favored a more economical choice over the chance of taking a potential franchise quarterback.
The NFL needs to emulate the NBA by slotting money for rookies. The current process is so broken that the only people it benefits are those hoping to enter the league, and not those already committed to it. Not only would slotted money prevent player holdout, it would also keep teams more fiscally sound.
As for Stafford, Smith, Sanchez, and Curry, they will have no problem if the current scale is changed…next year.
7. Wimbledon Raises Roof and Grows Pot
Last week, the venerable All England Club unveiled its new retractable Centre Court roof, part of a two-year, $146.2 million renovation, a feature that will end rainout broadcast wipeouts as we have come to know them. Gone will be NBC's seemingly endless shots of raindrops thudding on the tarp, leaving anchors Mary Carillo and John McEnroe nothing to do but rehash and reminisce.
With the roof comes court lights, also a first for the 132-year old event, meaning that Centre Court matches will no longer be limited to daylight hours and play can extend long into the night as it often does at most other tennis tournaments. The All England grounds capacity will grow from 36,000 to 40,000, because of the increased seating on the revamped Center Court and the new, 4,000-seat Court Two. Ticket applications for the June 22-July 5 tournament are up by 20%.
Wimbledon's pot of winnings has been improved as well. Prize money at this year's Wimbledon championships is going up by 6.2%, to £12.55 million pounds ($18.20 million). The winners of the men's and women's singles will receive £850,000 ($1.24 million), a 13% rise over last year. However, the increases will be offset by the weakness of the pound against the euro and dollar—the pound has dropped by around 25% against the dollar since last year's tournament and about 10% against the euro.
The All England Club has also signed a five-year extension to its sponsorship deal with IBM (IBM) and a broadcast deal with Star Sports Asia. The moves were decided in a vote of confidence in the strength of Wimbledon's brand coming through and commercial opportunities continuing unabated.
8. NASCAR: Social and Other Media
Among the biggest pro sports entities, steeped-in-tradition NASCAR has almost always been an early adapter when it comes to highly personalized, grassroots marketing techniques. And the racing circuit has certainly not been late to the starting line when it comes to Twitter and other social media.
According to the Florida Times-Union, a "growing NASCAR community…uses the Internet to connect with fans" through such social networking sites as Facebook, MySpace, and Twitter. Ford Racing, for example, "has its own page on Twitter and Facebook," through which the company "keeps in touch with hundreds of fans on a daily basis."
Such drivers as Marcos Ambrose, David Ragan, and Joey Logano regularly maintain social networking accounts. Says Logano in the Times-Union, "It's fun to talk with other people, keep in touch with them. You want to know what people are thinking. You want to know how they feel. This gives us a chance to connect."
Imposters can pose a problem: Dale Earnhardt Jr. was reportedly "listed on 10 different MySpace pages earlier this month, all by fans claiming to be [Earnhardt]." If driver Carl Edwards has imposters, none had stepped up to claim responsibility for last weekend's nasty Talladega crash.
9. New Dubai Stadium Opens Doors to City
Dubai's first and only cricket stadium had its official opening over the weekend after three years of construction. The cost of the new stadium is over $100 million. Its opening was marked with a one-day international match between Australia and Pakistan, two of the world's best sides.
The match signified the potential of the facility as a truly international venue for test, one-day international, and Twenty20 cricket matches. The stadium was designed by architects Gerkan, Marg & Partner (GMP), who have previously worked on the Berlin Olympic Stadium and Commerzbank Arena in Frankfurt.
The cricket facility is the first of four stadiums to be built in Dubai Sports City. To come are a 60,000-seat stadium for football, track and field, and rugby; a 5,000-seat field hockey stadium; and a 10,000-seat indoor arena for sports including basketball, indoor hockey, volleyball, handball, netball, and ice hockey.
10. Sugar, Sugar: The Integration of Sports and Sweets
In honor of the announcement late last week that Mars is adding NBA team-logos to M&M's in a sweet licensing deal, here are our five favorite examples of the blending of sports and sweets:
1. Reggie Bar. Named after Mr. October himself, the "Reggie Bar" debuted at Yankee Stadium on opening day 1978. The candy bar failed to sell outside of New York, and was discontinued in 1982.
2. Baby Ruth. To this day, Curtiss Candy Co.—now Nestlé (NESR.F) —insists that their 1921 candy bar is named for President Grover Cleveland's daughter, Ruth. Nonetheless, the candy remains strongly associated with a certain baseball player. Rumor has it that when Curtiss could not reach an endorsement deal with the Babe, they concocted the namesake story to avoid paying a licensing fee.
3. Cracker Jack. A staple at baseball parks across the country, Cracker Jack is best known for its mention in the 1908 song Take Me Out to the Ballgame. Cracker Jack is so beloved by baseball fans that in 2004, after the Yankees replaced it with Crunch n' Munch, public outcry was so great that the team immediately switched back.
4. Big League Chew. The relationship between gum and baseball dates back to the Golden Age, when trading card packs were sold with gum enclosed. In 1980, a minor league pitcher came up with the idea to market bubble gum as a safe (and fun) alternative to chewing tobacco. The rest is history.
5. Oreo. The 97-year-old cookie recently made its first foray into sports as part of the newly formed Double Stuf Racing League (DSRL). With top-tier endorsers (the Manning brothers and Williams sisters), and a new corporate sponsor (AstroTurf), the DSRL held its first competition in West Palm Beach, Fla. last Friday. T