MKTG-541 | Quiz #2
Sponsorship Philosophy: Tier III
$ High Five to Six Figures, Often Year by Year - Smaller companies, typically local - Restaurants - Newspaper - Hotels - Auto service/parts - Healthcare - Others
Sponsorship Philosophy: Tier II
$$$ High Six Figures, Multi-Year - Energy - Financial Services - Quick Service Restaurant - Insurance - Airline
Sponsorship Philosophy: "Founding Partners" (Tier I)
$$$ Seven Figures, Multi-Year - Automotive - Telecommunications - Bank - Beer (not NCAA) - Soft drink
LA Dodgers TV Deal
- $7B over 25 years with Time Warner - MLB calculates that 34% of a team's local revenue, after subtracting costs, is available for redistribution throughout the league
Naming Rights: History
- 1972: Rich Products Corporation acquires the naming rights for Buffalo's new NFL stadium - 1979: Syracuse-based Carrier Corp. acquires naming rights for Syracuse's new domed facility - 1986: Pilot Fright acquires the naming rights for Buffalo's new class-AAA minor league stadium - 1986: Atlantic Richfield Corp. acquires the naming rights to the new basketball arena being constructed by the Sacramento Kings - 1988: Great Western Bank acquires the naming rights for the LA Forum (NHL) - 1990: Coors Brewing company announces its bid for naming rights for a proposed MLB expansion club in Denver
What's Next for NFL?
- 2016: Twitter pays $10M for a 10 game package - 2017: Amazon pays $50M for a 10 game package - 2018: Amazon pays $65M
Football: America's Favorite Sport
- 37% of Americans identify football as their favorite sport to watch - America's favorite sport since 1972
MLB TV Deals
- 8-year contract with Fox and Turner Sports that will run through 2021; World Series will air on Fox - Revenue about $800M with Fox's share averaging $500M - ESPN and MLB announced a new deal covering 2014-21 that will increase ESPN's average yearly payment from about $360M to $700M - MLBAM: generates approx. $450M/year - Extra Innings: InDemand, DirecTV
Rookie Wage Scale/Cap
- A designated percentage of the overall salary cap for rookies - All 4 leagues have this - Rationale: skyrocketing salaries for unproven rookies
Naming Rights: What are they getting?
- Category exclusivity - Use of team marks and logos - Intellectual property rights - Signage - Media (TV, radio, internet, print) - Promotions - Hospitality - Exposure, Exposure, Exposure - Brand Integration
College Football Playoffs TV Deal
- Contracted to be in place through at least the 2025 season per an agreement with ESPN, which owns the rights to broadcast all games - Reportedly paid $7.3B overall
NFL TV Rights: Average Annual Cost for Rights
- ESPN: $1.9B (pays 4x the rate of the other big 4 networks) - FOX: $1.1B - CBS: $1B - NBC: $950M - Amazon: $65M (streaming only) - DirecTV: $1.5B
Aggregate Average Audience Size for 2013 NFL Games (avg. audience per game x # of games)
- FOX: 570,240,000 - CBS: 502,983,000 - NBC: 413,231,000 - ESPN: 232,543,000
CBAs by League: NFL
- Hard Cap - $188 million in 2019; 90% is the floor - Non-guaranteed contracts on salary - why bonuses are so important - New 10 year deal started in 2011 - Players and teams receive roughly 50% each of total revenues
CBAs by League: NHL
- Hard Cap - 10 year agreement through 2021-22 - 50%-50% split on revenues - 2019 salary cap: $81.5 million- floor at approx. $60 million - Max player contract = 20% of salary cap
CBAs by League: MLB
- Implement a luxury tax (also called a competitive balance tax) instead of a salary cap in which an teams whose payroll exceeds a certain figure are taxed on the excess amount in order to discourage large market teams from having a substantially higher payroll than the rest of the league. The tax is paid to the league, which then puts the money into its industry growth fund. - A club exceeding the luxury tax threshold for the first time must pay a 20% tax on all overages - A club exceeding the threshold for a second consecutive season will see that figure rise to 30%, and 3+ straight seasons of exceeding the threshold comes with a 50% luxury tax - If a club dips below the luxury tax threshold for a season, the penalty level is reset
Naming Rights: Objectives
- Increasing brand awareness - Reaching specific demographics or geographic regions - Business-to-business opportunities - Growing marketing share/"gaining ground" on competitors - Building brand/corporate esteem - Enhancing community relations
Average Audience Sizes for 2013 NFL Games
- NBC: 21,749,000 - FOX: 21,120,000 - CBS: 18,629,000 - ESPN: 13,679,000
CBAs by League: NBA
- New deal in January 2017 - Players and teams share roughly 50/50 split on all league revenues - Soft cap with punitive luxury tax - $.50 per $5 million - $4.25 +$.50 per $5 million - 90% of cap is the floor - 2019-20 cap is $109 million - Max. salaries at 25, 30, or 35% of the cap, depending on years of service. A player coming off his rookie scale contract, who would normally be eligible to receive a salary of 25% of the cap, will be eligible to receive 30% if he is named MVP, makes an All-NBA Team twice, or is selected as a starter the two All-Star Games
Naming Rights: Naming Opportunity
- Not about "slapping signs" on the side of a facility - Driven by media exposure and impressions - Contain a comprehensive list of elements - Represents a value buy when compared to typical advertising - Integrated branding - Opportunities to drive business-to-business relationships
NBA TV Deals
- Prior deal: 2008 to 2015 with both TNT and ABC/ESPN; $930 million per year - New deal: $24B over 9 years with ESPN and TNT; $2.666B/year
Sponsorship: What are they selling?
- Signage: courtside/home plate, dugout/player's bench, fascia, LED, scoreboard, special, concourse, parking lots - Media: TV, radio, internet, print - Promotional Programs: in-venue, giveaways, sweepstakes, community relations - Hospitality: suites, club seats, season tickets, block tickets, experiential opportunities
MLS TV Deals
- The league has finally sealed a new eight-year agreement with ESPN, Fox, and Univision that will run through the 2022 season - Approximately $90 million combined per season
Two Parties in Sports
1. Teams (Leagues) 2. Players (Player Unions)
CBAs by Year: NBA Luxury Tax Bills
2019 Projected Tax Bills: - OKC Thunder: $61.6MM - Golden State Warriors: $51.5MM - Toronto Raptors: $21.4MM - Portland Trail Blazers: $15.1MM - Boston Celtics: $3.9MM
Salary Floor
A minimum amount that must be spent on the team as a whole (this is separate from the minimum player salary that is agreed to by the league).
Collective Bargaining Agreement (CBA)
A special type of commercial agreement, usually negotiated "collectively" between management (on behalf of the company) and trade unions (on behalf of employees).
Lockouts
A temporary work stoppage or denial employment initiated by the management of a company during a labor dispute (different from a strike)
Salary Cap
An agreement or rule that places a limit on the amount of money that a team can spend on players' salaries. It exists as a per-player limit or a total limit for the team's roster, or both.
Why are NFL TV rights so expensive?
As of 2017... - The NFL accounted for 36 of the top 50 highest-viewed single broadcast events of 2017 - Top three most-watched events on TV were all NFL games - 15 NFL games had more viewers than the most-watched NBA broadcast
NFL TV Deals
CBS/NBC Thursday Night deal (2017) - Combined $450M per year - 5 games each, 10 total - Other 6 are on NFL Network FOX (2018) - $600M per year - 11 games per season - $55M per broadcast vs. $45M of the previous deal with CBS/NBC
Naming Rights: Examples
Chicago Bulls: United Center NE Patriots: Gillette Stadium Colorado Rockies: Coors Field Pittsburgh Penguins: PPG Paints San Diego Padres: Petco Park Miami Dolphins: Hard Rock Stadium Seattle Seahawks: CenturyLink Field OKC Thunder: Chesapeake Arena Sacramento Kings: Golden1 Credit Union
Hard Salary Floor
Implemented by the NFL; requires teams to meet the salary floor each year which helps prevent teams from using the salary cap to minimize costs.
What is the purpose of a CBA?
It regulates the terms and conditions of employees in their workplace, their duties and the duties of the employer.
NHL TV Deals
NBC Sports Group; 10 years at $200M per year
Player Agents
Procures and negotiates employment and endorsement contracts for an athlete - Responsible for communications with team owners, managers, coaches and other individuals - Used to broker and negotiate contracts - Responsible for making recommendations in regard to the athlete's options - Many have a background in contract law - Can work independently or part of large companies
Naming Rights: Alternatives
Quadrant Naming Rights (Exterior) - Also known as "Gate" naming rights Interior Naming Rights - Consist of a sponsor acquiring the right to name a designated portion of a stadium or arena - Usually the luxury suite level Presenting Sponsorships - A company is noted as helping to present the team or facility in question Playing Surface Sponsorships - Sponsor acquires the right to name the actual playing surface of the stadium or arena
Sponsorship Philosophy
Term - How long? Rate Card/Pricing - Local area - Other teams - History/precedent Exclusivity - To do it or not? - Which categories are best for "carving"? 3:1 Ratio As Impressions (CPM) Vs. :30 spots Impressions and Assumptions - Not always valued the same - High margin of error/"fluff" - Example: signage or game program
What is the most profitable time slot for the NFL?
Thursday Nights- retail giants, movie studios, and car companies are willing to pay a premium to encourage viewers to spend their dollars during the upcoming weekend
