The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, analyzes five of the the top business issues of the next 10 days after the Rose Bowl and BCS, and before the Super Bowl.
Following closely on the cleated heels of the most watched, hyped, and advertised BCS National Championship in history, Super Bowl XL will attract 130 million U.S. viewers. Not to be outdone, NBC’s 17 days of Winter Olympics coverage a week later will attract an additional 200 million domestic viewers.
The next two weeks are the calm before the “spending storm”. The NFL leads into the AFC and NFC Divisional round with at least three teams (Chicago, Indianapolis, and Pittsburgh) within relatively short driving distance of Detroit – Super Bowl XL organizers are worried about the reduced economic impact depending on the number of “day trippers” that ultimately visit the Motor City. At the same time, the City of Anaheim vs. Angels “name game” trial begins this week in Orange County, with over $400 million of potential damages at stake. Stadium issues also continue to surface in San Diego, Kansas City, and Minneapolis. Even with all of this going on, five other major sports business issues are worthy of concern:
1. SNEAKER WARS AND SPORTS RETAIL
Going into the mega marketing period of Super Bowl XL, Nike posted a 15 percent surge in profits last quarter, thanks largely to their superior performance in China, Canada, Mexico, and Central and South America. At the same time, Under Armour had its stock rise 20 percent at the beginning of the year, continuing to climb since its IPO six weeks ago. The company has “developed a strong following with the important younger demographic and is poised to expand into women’s, international, and other product categories.”
The increased retail performances are examples of successful cross-marketing, avoiding the clutter and standing out in the crowd. These sports brands, for example, have been mentioned on-screen in at least 20 movies over the last two years. Under Armour was featured in the movie “Fantastic Four,” and Nike was a big star in the “Dukes of Hazzard.” The endorsement game is critical as well, as Corporate America spent over $7 billion in sports sponsorships, and over $210 billion in ad revenue and sales activity as well. Nike paid nearly $3.2 billion for athlete spokesmen and women.
Challenges, however, are on the horizon. The expensive signature shoe may be causing problems in the retail market. Houston Rockets forward Tracy McGrady and his new $125 adidas shoe includes “small pieces of wood from an actual basketball court imbedded in the heel and outsole.” Cavaliers forward LeBron James’ $125 Nike Zoom LeBron III “boasts twice as much cushioning as most Nike shoes.” And Puma noted a 63 percent jump in U.S. sales during the third quarter, largely from its sneaker sales to teenagers. However, sales of men’s basketball shoes over the last year have been down four percent, and there is “evidence that teen consumers who drove athletic footwear sales may be turning to cheaper and more fashion forward styles from European companies.” The “unfair labor practice abuse charge” has also raised its ugly head again, with the National Labor Committee and China Labor Watch charging New Balance with significant violations.
2. THE “PREMIUM TICKETING” GAME
As the Rose Bowl ticket crunch morphs into the problems of getting good seats for Super Bowl XL and the Winter Olympics, StubHub.com announced that its inventory tripled in size last year, moving 60,000 tickets per week, worth about $200 million per year.
The fast-growing “secondary ticketing industry” generated up to $25 million in actual growth over the last year, with companies such as Ticketmaster, StubHub, and RazorGator dominating the space, and others like Tickets of America involved as well. Some companies enter into relationships directly with teams – 26 major league clubs have done deals with Ticketmaster where more than 250,000 tickets have been sold under a TicketExchange system from season ticket holders. Others will buy the tickets directly, and broker them after that. The hardest tickets to get these weeks involve the scarcity with the Indianapolis Colts, as StubHub pays an upfront fee to the Colts to give the company access to Colts season ticket holders through team mailings and advertising.
As this market evolves, remember that the average NFL ticket price is $58.95, NBA at $45.28, NHL at $41.19, and Major League Baseball at $21.17. Contrast this to a day at Disney World at $59.75, or an evening on Broadway, attending “Wicked” at $82.23.
3. BEGINNING OF THE 2006 PGA TOUR SEASON
The first full field event is held this weekend in Hawaii at the Sony Championship – a chance for Michelle Wie to make her first cut after four tries; Tiger Woods is absent for the first year in recent memory. Overshadowing this is the business progress the PGA TOUR made in a new event called the FedEx Cup beginning next season. The top 144 players will compete during a year-end event whose details will evolve as the season continues. Commissioner Finchem predicts the potential for a $30 million payday – patterned after the NASCAR “Chase for the Championship,” and other season-ending events. Simultaneously, the LPGA formally unveiled details of its new season-ending playoff at the ADT Championship, an 18-hole shootout for a $1 million top prize.
