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Early Season NBA Attendance November 19, 2009

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“90% of life is just showing up.”

-Woody Allen

The current NBA season has been noted more for off-court economic issues than on-court performance.  While the league product has been great, with a number of exciting young players and teams, the recession has put a damper on the excitement around it.  People are spending less of their disposable income on entertainment, according to a March Zogby poll.  Subsequently, NBA teams have faced a noticeable decline in attendance.

Last season, NBA teams averaged 17,520 fans each game over the course of the year.  This season, however, the NBA has already seen a significant drop in attendance.  Through about 14% of the games this year, the attendance is down 3.5% from last year.  This projects to about 750,000 fewer fans over the course of the season.  At an average ticket price of about $50, according to the Fan Cost Index, this leads to a $37.5M revenue shortfall.  Add another $23 per fan for food, souvenirs, and such, and the shortfall rises to $54.75M.  While some teams can absorb these losses, a lot of them are experiencing cash flow problems due to the lower attendance.  This precipitated the league to secure a $200M line of credit to allow teams to meet these shortfalls.

This decline in attendance, though, does not necessarily equate to a loss in fan interest.  While in-game attendance is down, the television ratings are up.  According to Sport Media Watch, the TNT broadcasts of NBA games are up 36% over the same time period last year.  Realizing that the NBA likely cannot renegotiate the TV rights deal that they signed two years ago, it needs to find a way to take advantage of this increased viewership to replace the lost revenue of lower attendance.  One way might be to increase advertising revenue, due to the increased exposure that sponsors can leverage.  Or the NBA could undertake an aggressive campaign to increase NBA TV’s viewership, in order to increase subscription and advertising revenue.  However the NBA decides to tackle this problem, the answer could lead to how well the NBA can take advantage of the exciting on-court product it has to offer to increase its fan base.

The league office, however, can only do so much.  Individual teams will need to address the issue also.  Next week, I will look at some team-specific marketing campaigns to try and overcome the early season attendance and revenue short fall.

Why NFL On-Field Disciplinary Fines Matter November 18, 2009

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By, Scott Mittleman

Co Founder SF Fun Raisers

Each week the NFL does it’s best to protect the leagues image along with safety on the field.  Issues such as uniform violations, late hits, and gestures by a player or coach that Roger Goodell deems improper can result in a fine. 

Last Sunday’s game between the Buffalo Bills and Tennessee Titans involved the only two remaining owners from the AFL, Ralph Wilson owner of the Bills and Bud Adams owner of the Titans, formerly the Houston Oilers.  These teams have had a long history between the greatest comeback in football history and the Music City Miracle!! View the links at the end of the post to relieve joy or suffering. 

After the Titans had won the game owner Bud Adams felt it necessary to show the Bills and owner Ralph Wilson exactly what he thought of their team with a gun slinging middle finger salute from his luxury box!!  Sure he was happy the Titans had now won 3 in a row after losing their fist six but was his middle finger shooting really necessary?  Regardless of why he did it or what anyone thinks about it his actions the NFL imposed $250,000 fine has benefits that many may not be aware of. 

Here is a tidbit of where the on-field disciplinary fines go “In addition, NFL Charities has traditionally donated funds to charitable causes from revenues generated by annual on-field disciplinary fines of players and coaches. On-field fine money has netted over$2 million per year for charity in each of the past four years. Each year, one-quarter of the fine money received by NFL Charities is donated to support former players in need through the NFL Player Association’s Players Assistance Trust (PAT). In the last fiscal year, that amount totaled more than $827,000. Other organizations that receive funds through NFL Charities from the player fine pool include the Partnership for Clean Competition, the Brian Piccolo Memorial Fund and the Lombardi Comprehensive Cancer Care Center”  

The Players Association’s Player Assistance Trust (PAT) just by name doesn’t really explain what a valuable non-profit it is.  Former NFL players are left with debilitating injuries due from the beating their bodies took while playing football. I could write about this topic non-stop but just wanted to point out that the NFL is not donating to some super rich retirement fund for ex-players living the good life. 

While the NFL continues to be referred to as the No Fun League, no one can question its support of non-profits through a multitude of programs.  In future posts I will explore these programs along with the players and teams making it all possible.

Bills Greatest Comback Ever

Music City Miracle

Bud Adams Flipping off  The Bills (Only open if you don’t mind his quick draw middle figer gestures)

4th and 2 from the 28 November 17, 2009

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If it wasn’t for the three super bowl rings and the great legacy Bill Belichick has already left, that could be the title of his autobiography: 4th and 2 from the 28. For any other coach or team, the decision to go for it on 4th and 2 from their own 28-yard line with 2:08 left and a six-point lead with Peyton Manning waiting to get the ball may have defined a career. However, Belichick and the Patriots have a great decade of football to fall back on. But, in a way, it does show the kind of coach Belichick is. Despite his calm demeanor and vague answers at press conferences where he never takes credit or blames anyone, Belichick has an ego. He feels he’s a genius and wants to be seen that way. Although he is one of the best coaches of all-time and will find himself in the Hall of Fame when his time comes, sometimes his ego can get in the way. Maybe going for it did give the team the best chance to win. Manning did drive the Colts down on the previous two drives without much resistance from the Patriots defense. The Patriots offense is still one of the best in the game, and putting the ball in Tom Brady’s hands is never a bad idea. It was a do-or-die play. By going for it, it was pretty obvious that Belichick did not believe in his defense. They knew that, and therefore had even less confidence when they had to take the field to stop Manning with a short field. It was inevitable that they would score. Belichick now has to win back his defense, after sending a very strong message that they were not ready to help them win the game. This could be something that haunts the team for the rest of the season, with a crucial game against a conference rival coming next week. Maybe this is a sign that times are changing. Manning led a ferocious comeback against the Patriots in the 2006 AFC Championship game as well, leading to a Colts Super Bowl victory. Manning changed his legacy from a great quarterback who couldn’t perform in the playoffs to a clutch quarterback. He showed that once again Sunday night, leading another great comeback with the Colts entering the 4th quarter, trailing by 17 points. I’m not saying that it was a bad call or that I don’t see why Belichick did it. But it does bring to question if the crown has been turned over. It takes a lot to win a Super Bowl, and the Patriots have not done it since 2004. There is a long way to go in the season, but plays and games like that can send a team in one of two directions. Belichick will really show himself as a coach if he can bring this team back from that loss and go deep into the playoffs, with a chance at a rematch of Sunday’s game in Indy for the AFC title.

Statistically Insignificant Thoughts November 12, 2009

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“The most reliable way to forecast the future is to try to understand the present.”

-John Naisbitt

The NBA season is upon us and it is important for a franchise to understand where they are and where they are going, in order to make sound business decisions.  As any good statistician will tell you, 6-9 games are too small of a sample size from which to pull any significant insights.  So with that disclaimer, here is a look at some teams, records in parentheses (all stats from Basketball Reference):

Phoenix Suns (8-1) – Phoenix has been the talk of the NBA.  With an older roster seemingly rejuvenated, their explosive start has been head-turning.  However, it has come with a relatively easy schedule.  Five of the teams they have faced are in the bottom 10 of the league, according to SRS, with only 2 games against top 10 teams (Miami and Boston).  A fall may be coming soon.

Boston Celtics (8-1) – Boston has been more than impressive, with a point differential more than 50% than any other team (currently +16.2).  However, they have played only two above-average teams (Cleveland and Phoenix).  Though SRS still has them way above the other teams, we will see how they hold up when the harder part of the schedule arrives.

Miami Heat (6-1) – Of the four one-loss teams (the Lakers being the fourth), Miami has been the most under the radar.  Currently, they have the second best point differential, and a difficult schedule, having faced only one team from the bottom 10.  Their defense has been stifling, so if they keep that up, they may be in for an unexpectedly great year.

Orlando Magic (6-3) – Orlando has to be worried about their defense.  Last year, their top ranked defense carried them through the playoffs.  As of today, their defense is below average.  If they do not improve, Orlando’s season will be a lot shorter this year.

Cleveland Cavaliers (5-3) – Cleveland has to be the biggest disappointment so far.  Their defense has been stellar, as usual under Mike Brown, but their offense is currently below average.  John Kuester, the de facto “offensive coordinator” last year, left to become the Pistons head coach, and the Cavs have felt it.  They have also had a relatively easy schedule so far, having played only one top ten team, so Cleveland may be in for tough times ahead, if they do not fix their offense.

Chicago Bulls (4-4) – Chicago is similar to Cleveland (great defense, no offense), but they have had a more difficult schedule thus far, putting them in a solid position.  They could be a top playoff team, though they will have to improve their offense to do so.

Washington Wizards (2-6) – So far, Washington has faced 6 of the top 11 teams so far, without Antawn Jamison and with a new coach.  So of all the teams with poor records, they are the most likely to bounce back and make a run for the playoffs.

The NBA season is shaping up to be an exciting one, with lots of great teams and players.  Is any one watching it, though?  Next week, I will take a preliminary look at attendance at games this year.

Coach Lewis Impacts The Community November 11, 2009

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By, Scott Mittleman

Co-Founder SF Funraisers

It’s that time of the week again to look at sports and philanthropy working together.  This week, I will shed light on a coach’s community foundation devoting their efforts to numerous causes. 

Last week, I mentioned The Steve Patterson Award for Excellence in Sports Philanthropy and the Red Sox winning the team award for 2009.  The individual award for 2009 went to Cincinnati Bengals coach Marvin Lewis and the Marvin Lewis Community Foundation.   

The Marvin Lewis Community Foundation is not just something that Marvin Lewis considers a side project.  He devotes as much time and effort to the foundation as he does to coaching the Bengals.  The foundation has worked on many projects involving youth camps, after school learning and breast cancer prevention.  Despite a struggling economy and internal hardships with their executive director passing away, the foundation has still prospered. 

I know first hand the difficulty of running a non-profit while having a full time job.  People might think, ‘oh a football coach, that’s not a real job’ and of course Marvin Lewis should have a foundation.  The fact is it takes true dedication to run a foundation that consistently goes above and beyond to help the community.  Thanks to Marvin’s leadership and a wonderful staff, the Marvin Lewis Community Foundation continues to be a leader in sports philanthropy. 

Seeing how the Red Sox and The Marvin Lewis Community Foundation are making a difference inspires me to do even more for non-profits and bridge the relationship between sports and philanthropy. 

Read my posts each Wednesday for insight into how Sports can effect more than just a score!! 

Related Links:

Press Release

Radio Interview: The Front Row with Betsy Ross on NPR affiliate WVXU interviewed Greg Johnson and Carlette Patterson

Public vs. Private Financed Arenas November 6, 2009

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Designing your product for monetization first, and people second will probably leave you with neither.

-Tara Hunt

Last week, I talked about the documentary Sonicsgate and how the public battle over the Sonics would likely cause a team trouble if it relocated to Seattle.  This week, I will examine the issue at the heart of the Sonics move, the public financing of NBA arenas.  In Seattle, both Howard Schultz and Clay Bennett’s ownership groups called KeyArena obsolete and asked the city to finance a new arena for the Sonics.  When the city refused, Clay Bennett took the team to Oklahoma City.

Over the last decade, the NBA, led by David Stern, has been pushing cities to publicly finance new arenas for NBA teams, with the threat of relocation if they do not.  Of the last 8 arenas built (including the new Amway Center for the Orlando Magic, set to open next season), 7 arenas have had at least 50% public financing.  The question is, with legislatures throughout the country tightening their budgets, can the NBA keep pursuing this line of strategy?

The main benefit to the NBA for public financing is the bonds used for financing are usually tax-exempt, saving the NBA a lot of money.  However, in the wake of the Sonics ordeal, the NBA needs to reevaluate its strategy since the battle for public financing may produce more drawbacks than advantages.  Tax payers in the cities are now organizing to prevent their tax dollars from being spent on NBA arenas.  For example, in Seattle, the “Citizens for More Important Things” led an effective campaign against the NBA.  These citizens would rather spend tax dollars on things like healthcare, especially as the budgets get tighter and tighter.  The NBA’s only legitimate argument against these groups was that an NBA team would provide an economic benefit to a city. However, in the trial in Seattle, the NBA undermined its own claim.  Clay Bennett’s group (which had the support of the NBA) had expert witness Brad Humphreys, an associate professor of economics at the University of Alberta, testify that the Sonics leaving “won’t have an impact on Seattle’s economy,” that the money not spent on an NBA team would just be spent elsewhere.

So, going forward, the NBA needs to be careful about its overt push for public financing.  Since statistically, there is no difference between public and privately financed arenas, in terms of revenue, income or franchise value, the NBA does not need public financing.  By pushing the issue, the NBA risks tarnishing its image, making it seem a greedy enterprise that does not have the fans interests in mind.  This will turn off casual fans, a key demographic for the future viability of the NBA, which may cause more losses than they would save through tax-exempt bonds.

Next week, I plan to take a look at the early part of the season, highlighting important stories and trends.

Is the NCAA Too Strict? November 3, 2009

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NCAA Too Strict?

A recent case involving an Oklahoma State pitcher and the NCAA has once again demonstrated the problems with NCAA rules and how they hurt more than help student athletes. The case involves Any Oliver, who was the second round pick of the Detroit Tigers in the most recent Major League Baseball amateur draft.  Oliver was a highly touted prospect coming out of high school, and was actually selected by the Minnesota Twins in the 2006 draft. Oliver hired Tim Baretta of Icon Sports Group to help with contract negotiations at the time he was selected by the Twins. Baretta was present during the negotiation with the team, which turned out to be in violation of NCAA Bylaw 12.3.2.1 that states “ a lawyer may not be present during discussions between a student-athlete and a professional team or have any direct contact (in person, by telephone or by mail) with a professional sports organization on behalf of a student-athlete.”

Oliver decided not to sign with the Twins and decided to pitch for Oklahoma State instead. During his time there, Oliver decided to change agents and sign with the Boras Corporation. Subsequently, angered by the change in agency, Icon disclosed their relationship with Oliver to the NCAA. As a result, Oliver was suspended for a year (usual suspension is to take away all eligibility), which was eventually reduced to 70% of one season. Oliver then went on to challenge the decision in the state court of Ohio where he was granted injunctive relief and the suspension was nullified. The state court of Ohio determined that the NCAA bylaw was arbitrary and capricious and that it limits the players’ ability to effectively negotiate a contract. This was a big ruling against the NCAA, however they said that they would stand by the bylaw and that it still applied to student-athletes in the other 49 states. Oliver continued with a case that sued the NCAA for damages, but the NCAA settled out of court for $750,000. As part of the settlement, the NCAA bylaw would continue to be upheld in all 50 states. Oliver agreed to the settlement because the NCAA said that they would just keep appealing the case and tie it up in courts for years.

To me, this is just another case of the NCAA bullying student-athletes and using rules that do more harm than good. There is no way for the NCAA to police all student-athletes who may be negotiating contracts as to whether they have had a lawyer present or not. The only way the NCAA finds out is if someone turns the player in, as Icon Sports Group did. Eighteen-year-old kids and their parents cannot be expected to negotiate contracts with professional teams. Also, it is foreseeable that more athletes will change their mind like Oliver did and decide to attend school as opposed to turning pro. Again, someone who is only eighteen does not necessarily know exactly what they want to do with their lives. Having a lawyer present to protect a student-athlete should not mean that the athlete loses his or her amateur status. The NCAA needs to take a step-back and look at how they can better help the athlete instead of sticking to rules that are outdated. The bylaw is ridiculous and cannot be policed. Amateur status should only be taken away once an athlete actually turns professional. The NCAA has to consider the student-athlete.

The Future of NBA Basketball in Seattle October 29, 2009

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090211_bitter_sonics_fan

In 2008, The Seattle Supersonics moved from Seattle to Oklahoma City in one of the more contentious sports issues in recent memory.  The Seattle Supersonics Historical Preservation Society produced a documentary entitled Sonicsgate detailing the history of the Sonics, the issues that affected the team and the eventual move to Oklahoma City.  The movie was very rich, providing a thorough account of the financial, legal and psychological aspects of the move.  It is a must watch for those interested in sports business and want to learn the behind the scenes action of the Sonics move.  There are countless topics that can be covered from the movie, but I will focus on the future of an NBA team in Seattle.

On the surface, a team in Seattle seems like a no-brainer.  The city is passionate about its basketball, not only when it was winning (during the Payton-Kemp peak years) but also during the lean times, as evidenced by the consistent attendance of over 90% capacity (about 16,000 fans) of Key Arena.  Also, business-wise, Seattle is the largest market without an NBA franchise.

However, two recent examples show that the political drama that played out may contribute to a lower attendance figure if a team were relocated there.  Ideally, the Seattle fan base would see themselves like the Cleveland Browns fans, whose team moved to Baltimore in 1995.  In Cleveland’s case, there was no public battle.  Art Modell did a private deal with the city of Baltimore to move the team there, even with an initiative on the ballot for $175 million to refurbish the stadium yet to be voted on.  Before the move, Cleveland’s attendance was about 70,000 per game, which is about 88% capacity.  Now the Cleveland games are near full capacity, at about 73,200 per game.

However, a more apt example might be the Charlotte Hornets, who moved to New Orleans in 2002.  In Charlotte, the beginning of the end started when owner George Shinn was accused of sexual assault.  He admitted to two adulterous relationships, and the charges were dropped, but support for the team quickly diminished.  A team that in the 1990’s nearly sold out every game (capacity about 23,000) struggled to attract fans, with attendance falling from 97% to 80% capacity in one year, then down to less than 50% by the end.  Shinn demanded a new arena from the city of Charlotte in order to keep the team viable, but the city would only finance the arena if Shinn sold the team.  The result of this battle was Shinn taking the Hornets to New Orleans.  Two years later, the Bobcats began operations, but they have not been able to recover the attendance levels from their 1990’s success, with attendance being about 15,000 a game, or about 80% capacity.  (Attendance figures from ESPN)

The Charlotte Bobcats example, with some similarities to the Sonics affair, will likely make some owner more reluctant to go to Seattle.  Many NBA teams have potential to move to Seattle, including the Charlotte Bobcats, whose owner, Bob Johnson, is looking to sell the franchise due to mounting losses.  However, even if a franchise moves there, as author Sherman Alexie so aptly states at the end of Sonicsgate, “If we get a team, it’s going to be somebody else’s team…I’m going to have to break the hearts of people just like me.”  It is sad to think how this episode has tainted a great basketball culture in Seattle.

To continue this, I plan next week to look at public vs. privately financed stadiums, which is one of the issues at the heart of the Seattle Supersonics move.

NFL and Globalization October 26, 2009

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I know Mondays are supposed to be an alumni/faculty spotlight here at the UMass sport blog but I wanted to put that on hold to talk about what I feel is a pretty important topic. Yesterday I watched the annual NFL London game and I had tons of different thoughts going through my head. I was primarily upset that the Patriots had beat my Titans so badly the week before, but thankful they didn’t do it in front of an international audience. Mostly I thought about how far American Football has expanded outside the US border.
Like it or not, and this is my opinion, but Football is America’s game, not baseball or basketball. Football rules the American sports arena in fans, tv ratings, and most importantly, TV money. But one area that the NFL has failed to capture as well as the other markets, is the international market. Sure everyone watches the Super Bowl, but really only for the spectacle that is the ultimate in American indulgence. Throuhgout the 80′s and 90′s, the NFL enjoyed so much success that it didn’t really need to worry about the international market. But with changes in technology has come changes in the way sport leagues need to attack fans. The US market became saturated with everything football. The NFL created its own TV network, and I can watch NFL games anytime I want to.

The NFL had tried expanding outside the US with the occasional international (usually Mexico) preseason game and the now defunct NFL Europe, but by and large the international community has been completely uninterested in American football. Perhaps it is the cultural differences, or maybe people see football as the ultimate American sport and fot that they disapprove. But whatever the reasons, it seems the international sport fan has shunned American football much the same way we have shunned soccer.

But in watching yeserdays game, I am seeing things a bit differently. The NFL seems to have taken a slow, but steady approach to building the following of American Football abroad. With programs aimed at educating international fans (nflatino.com, etc.) the NFL may actually be able to chip away at the international market that the other American Sports Leagues have already attacked. Only time will tell…

Impact of NBA Referee Lockout October 22, 2009

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“The referee is going to be the most important person in the ring tonight besides the fighters”

-George Foreman

As of today, it appears the NBA referee lockout will be over, with reports that the two sides will finalize a deal Friday, much to the relief of Larry Brown, Lionel Hollins and Stan Van Gundy.  The question is what has been learned, besides that NBA coaches do not like replacement refs?

There are two issues that strike me as important, one current and one future.  The current item deals with the integrity of the game.  The replacement referees brought to the forefront again the lack of faith in officiating in NBA games.  In the wake of the Tim Donaghy scandal, the NBA has been scrutinized in public opinion as being a “rigged” league, as evidenced by a poll showing 37% of people believe the NBA alters the outcomes of games.  Perceptions of “superstar” calls and allegedly favoring the larger markets are persistent stories (whether true or not) in the American consciousness regarding NBA basketball.  The NBA needs to address this issue in order to gain more traction with the casual sport fan market.  As a first step, the NBA has added to their web site a video rule book to be more transparent with fans, a good start in addressing this image problem.

The other issue is the upcoming players’ collective bargaining agreement renegotiation.  With the referees, the NBA wanted to cut $3.2M in expenses from the referee budget, with the referees coming in at $2.5M in cuts (depending on the final details, not yet released).  Either way, the fact the agreement will have substantial budget cuts lays the foundation for the player negotiations.  In this economy, the league will expect the players to make concessions to control the league’s budget, most likely in player salaries.  The NBA has already shown it is willing to impose a lockout (both in 1999 with the players and 2009 with the referees) if its demands are not met.  A lockout could be a major problem for the players, since their financial strength is not solid.  According to Sports Illustrated, 60% of former players are broke within 5 years of retirement, meaning the likelihood of players being able to withstand a lengthy lockout is low.  Also, the league has a strong financial position, as evidenced by its receiving a $200 million extra line of credit during a recession, although you wonder how long lesser teams like the Hornets will be willing to go along with the lockout.  Either way, if the negotiations almost caused the referees to miss the regular season, you have to expect that the future negotiations with players will be even more contentious.

Next week, I plan to move from a recent contentious issue to a past one.  I plan to review the “Sonicsgate” documentary and look at it in the context of relocation of NBA franchises.