Wednesday, November 23, 2005 

Manchester United going through a rough patch

Manchester United is one of sport's most iconic brands. People the world over watch the team play week after week in the Premier League and in Europe. For long they have been the dominant team in England, winning the Premier League, the Champions League and making lots of money along the way. However, this year started from being a bit shaky to now downright teetering on the edge.

First, the Glazers from America bought the club for over 1.4 billion $, and loaded the club with a huge amount of debt in a very unpopular move among fans. Then, Chelsea have now taken a nearly unassailable lead in the Premier League, and look like runaway winners this season. Just few days ago, Roy Keane, their inspirational captain and midfield general suddenly quit. This shook Man Utd fans worldwide, and weakened their team considerably. Man Utd are currently struggling to qualify for the knock out stages of the Champions League after yesterday's 0-0 draw against Villareal. The financial fallout of failing to qualify is reportedly around 12 million GBP (through TV revenue, gate receipts etc).

The latest is that Vodafone have withdrawn their sponsorship of the club's shirt. The 4 year deal (36 million GBP, or 9 million GBP a year) was in the second year. Vodafone are apparently shifting their focus to Europe and the Champions League, where they should strike a sponsorship that includes content for their 3G services. The United Commercial Director was on telly saying that this is actually an opportunity for them to significantly raise the shirt sponsorship amount for the next deal. While this is true, it is very strange that they did not finalise on a deal before announcing Vodafone's withdrawal. Did Vodafone not give too much advance notice of their intention? if they did, it would have been great for Man Utd to announce a replacement brand at the same time, to reassure worried fans that atleast financially they are ok. Man Utd expect to get more than Chelsea did from Samsung (they raised 10 million GBP a year for 5 years), but given the team's current form, it will be a challenge for them. Sponsors may wait to see how Man Utd progress in Europe this year and in the EPL leaderboard before committing money.

Rooney is playing some brilliant football, but it seems like he is the only one pulling his weight for Manchester United, both on and off the field.

Friday, November 11, 2005 

Stadium naming worldwide and in India

Stadium naming is very big business, especially in the US. A report suggests that nearly 70% (83) of the professional teams in the 4 major sports leagues (NFL, NBA, MLB and NHL) have stadium-naming deals with corporates. This table on ESPN summarizes the existing contracts. The average is around 3 million $ a year, for atleast 10-15 years, which is great money by any standards. The largest deal in the world so far is the Reliant Energy deal with the Houston Texans to name the stadium Reliant Stadium, at a whopping 10 million $ a year till 2032!

Why do teams do stadium naming deals with companies? The major reasons are:
- To raise much-needed funds for the team
- To invest in infrastructure, training, and youth development
- To reduce dependance on local governments, league bosses, and yeah, team performance.

What do companies get out of it?
- High-profile branding association in stadiums
- Constant media coverage. Every commentator, media article and fan will hopefully be calling the Staples Center, well, the Staples Center (in LA, home of the Lakers).
- This kind of publicity and coverage is invaluable in a cluttered media environment
- An opportunity to build meaningful relationships with the local community
- Hospitality opportunities
- Market research reports show very high recall value for the brand

However, there are problems associated with stadium naming. The most significant among them is the problem of legacy. It would be almost sacrilegious to name historical stadiums anything else. Imagine calling Lord's in London or Eden Gardens in Kolkata or Wembley anything else. Fans and the media would be up in arms, generating unwanted publicity. Of course, some teams and stadium authorities go ahead and take the plunge anyways. Did you know the Oval in London is officially called the Brit Oval (named after Brit Insurance)? Bet you didn't! Does not stop Brit from trying though.

Stadium naming works best with newer grounds where just one sport is played. That leads to lesser conflict, and fans tend to associate with it better. Of course, just slapping a name onto a stadium will be a waste of money if the company does not follow it up with meaningful activities in the community and in the stadium. A well thought-out program to involve the fans and the community at large is critical for the success of the association.

This is not just a US phenomenon. Australia has the Telstra Dome in Melbourne, the UK has the Reebok Stadium in Bolton and the JJB Stadium (home of Wigan), and Germany has the Allianz Arena. However, it is not as big as in the US.

What's the scene in India?

The Hyderabad Cricket Association (HCA) signed on the Visakha Group as the stadium naming sponsor for their newly constructed stadium in the city. The deal was reportedly worth 6.5 crores (around 1.5 million $) for an unknown (to me) duration. Small money by international standards, but good money for the Association to spend on stadium infrastructure, the Hyderabad team as well as the leagues in the city. It is critical to get money flowing to the lower leagues to ensure the long term viability of the game. The HCA were the pioneers in the country, and were justifiably proud. Until now!

In India, most decisions are politically tainted, and this was no different. The Chief Minister of the state decided to rename the stadium after Rajiv Gandhi (ex-Prime Minister of India, who was killed many years back). This reeks of sycophancy - done to please his political bosses. Ugh!

So we now have a situation where the stadium is almost certain to be called the Rajiv Gandhi Stadium! The government has offered to contact (read arm-twist) corporates in the state to urge them to contribute money, so that the money can be returned to the original sponsor. The HCA obviously cannot refuse because it is sitting on land given by the Government. Funnily the Visakha Group is run by the brother of the HCA, who is also a minister in the Government. Murkier and murkier!

The net result is that Hyderabad has got a good stadium, the HCA will figure out a way to repay Visakha, and other sponsors will get some stands and corporate boxes named after them. Visakha are the only losers - but I guess even they won't mind too much. Looks like it is all in the family in any case. However, my grouse is the following:

- Sycophancy is terrible. A fantastic stadium is now named after a politician. It would have been much better to name it after an ex-cricketer like Jaisimha (from Hyderabad).
- What signal is this giving to potential sponsors in India? Deals that are done and dusted can be revoked with no notice at all to satisfy political whim?
- Government intervention is a unhealthy trend. Why should they start influencing sponsorship in sports? Don't they have better things to attend to? What next - team selection?
- What happens if the opposition party comes to power next? Will they rename it to suit their own political ends?

Stadium naming is a necessary evil - I would much rather call stadiums by their historical names OR honour ex-players. But sponsors have much-needed funds, and if that can be channelised into sports development, that can only be good. The worst case scenario is stadium naming being used for political gains!

 

Snooker in the UK

This was originally posted here. Am posting it again here to jumpstart this blog.

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Snooker is a relatively big sport in the UK. They have their own World Championships (where most players are from the UK, pretty much like the Baseball World Series), and a series of events like the Grand Prix, the Masters and of course the World Championships. Ronnie O' Sullivan is the reigning superstar, but he is apparently bored with this all, and wants to go to America to try pool.

India has some history in snooker and billiards - with champions like Michael Ferriera, Geet Sethi, and recently Pankaj Advani. Of course, these guys are world champions - but in a different world championship! They have won the tournaments conducted by the IBSF (The Billiards and Snooker Federation), which is a quasi-pro/amateur tournament - and definitely not as rich as the British World Snooker. Unfortunately, they don't make much money, and the sport is very very insignificant in India - which is a real sad issue.

I did see the recent Grand Prix on the BBC, and the coverage was fascinating. TV cameras all around the table and on top as well, beautiful and insightful commentary - world class production values. I am no snooker fan, but the coverage had me hooked. I particularly liked the section where star players like Stephen Hendry take questions from spectators and actually show some shots on the table in response to the questions asked. Very interactive and informative.

Now comes the news that the BBC has retained the rights till 2011. The deal is apprently worth 5 million GBP a year (around 40 crore Rs. a year), which is not huge money, but perhaps good enough to support this sport.

Snooker makes for good viewing - coloured balls, reasonably fast-paced action (compared to billiards anyway), a format that has in-built tension (breaks, snookers, century breaks), low cost of production - all point towards a reasonably good TV product in the making. Scores of youngsters in India play pool in the cities, but since snooker is hardly ever televised in India, there is zero following for the game and its stars.

Interestingly, China is fast emerging as a major snooker center, with one of the World Snooker events actually being held in China. However, the rest of the Asia - Pac region has taken to pool in a big way. Indian viewers may remember the occasional TV program on pool on ESPN, snuck inbetween their wall-to-wall cricket programming!

Sad that in India, with a rich history of table games, there is really no traction at all, not even for pool.

 

The business of golf - or how TV decides everything

This was first posted here. Am posting it again here as a seed post for the new blog. After all, every venture needs seed capital!

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It is no secret that TV pretty much dictates how professional sport is run nowadays. The broadcasters bankroll sporting bodies and the stars, and it is your eyeballs and mine that dictate how much money actually goes to the sport and the players.

Golf is an interesting story. The PGA tour, riding on the popularity of Tiger Woods and its affluent supporter base, sold their TV rights in 2001 at a 50% premium over the preceding 4 year deal - they apparently garnered around 850 million $ from the US networks for 4 years, till 2006. (source: Business Week)

In fact, McKinsey Quarterly did a review of professional golf and tennis, and termed golf as a commercial hole-in-one, commending its success in making the sport a viable business model. McKinsey also highlighted golf's unique bundled sponsorship sale, which basically means that the PGA sold the sponsors the title sponsorship, AND some air time on TV. This helped reduce the risk the broadcasters took while signing on the rights, and also provided value to sponsors by guaranteeing them better air time as well as on-ground coverage.

However, the latest Business Week article seems to go against this grain. Golf seems to be losing it a bit. Thanks to Tiger Woods' relative slump in form in 2003 and 2004, ratings fell (from 3.6 on an average in 2001 to 2.9 this year). This resulted in a 50 million $ loss for broadcasters. Many broadcasters, quoted in that article, said they are considering a reduction in the broadcast fees for the next 4 years, AND perhaps a reduction in the number of events they would broadcast.

Competition from other sports has also put pressure on golf. While the NFL is the gold standard as far as sports is concerned, NASCAR and even the MLB have revived interest, therefore vying for eyeballs.

Another of golf's problems, which the article alludes to, is the "never ending season". Golf has 42 events, thereby taking up almost the entire year! Now Tiger, Phil Mickelson and gang can only play so much. They therefore accumulate as much money and points as they can, and taper out at the end, choosing to skip the smaller events. This creates rating problems for broadcasters, and sponsors put pressure on the PGA.

The PGA Tour stoutly denies they have a problem, insisting that their unique model of pre-selling air time to their sponsors helps reduce any risk the broadcasters are taking. However, they are said to be seriously considering a change in the calendar - trying to adopt a points system, leading up to a set of few tournaments in August where all the biggies have to play. August is a good time, because come September, NFL kicks off, and American sports fans pretty much forget most else.

It will be interesting to see how this plays out - my guess is that rights fees will remain the same, or probably even go up slightly. Tiger Woods has regained his form in the Majors, and that is a good enough reason for people to watch. It is pertinent though to note how much a sport, actually an entire industry, depends on that man. No wonder he is earning over 80 million $ a year. Come to think of it, he is probably worth more than that - take him out of the equation, and rights fees for golf can fall dramatically!

It is also interesting to note how sporting bodies are ready to change the way they function, almost solely driven by TV.

Lastly, from an Indian standpoint - to just compare figures - the bidding for Indian TV rights for cricket (India's largest sport, by a 1000 miles) for 4 years were around the 300 million $ mark. Golf, which is way down in America's pecking order of sports, gets 3 times that amount for the same duration. Of course, not counting other sources of revenue like sponsorship, merchandising etc. Whichever way you cut it, golf is big money, and Indian cricket is still minor league.

 

My first post here

I have decided to start a new blog to express my opinions about the very interesting business side of sports. Many of these posts will have a distinct Indian perspective. Regular sports coverage continues on my other blog Sporting Nirvana.

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