tv Sportfolio Bloomberg December 22, 2013 9:00am-9:31am EST
>> the national hockey league strikes gold. that is one reason the ceo is looking forward to the new year. >> it is an opportunity for us, we will tell some great stories around the players. hockey is also thriving in northern california. find out how the san jose sharks have become one of the coolest success stories. >> their fan base is very sophisticated. they have discretionary income that they can spend on hockey. >> college football, is the bowl half-empty or half-full? all this and a look back at the year in sports business.
"sportfolio" starts right now. hello i'm rick horrow and welcome to "sportfolio." what an incredible year it's been for the nhl. when it started, there was a work stoppage that threatened to wipe out the whole season. all signs indicate that the league is back at full strength. last month, the nhl announced a deal with rogers communication that will bring in $5.2 billion for its canadian media properties. rogers holds all the tv rights and will operate the digital services. rogers will also take control of the iconic hockey night in canada franchise on the cbc for at least the next four years.
>> it is a remarkable revenue boost for the nhl. they are also entering into a tv contract with nbc sports. their chief operating officer john collins joins us now on "sportfolio." that canadian tv deal is $5 billion for the league. i assume you are happy with it. >> it is a great deal for our clubs. it is a validation for how good the game is. it is a strategy that we have put in place a couple years ago. it is a way to have fans and sponsors activate around the league, as opposed to the club level. it is a good strategy that has been well received. >> for the commissioner, it is a major validation for the nhl coming on to canada. >> never underestimate the canadian passion for hockey.
fundamentally, what gary has done, he has changed the business model for the league. it was a business that even seven years ago, when we were a $2 billion industry, 95% of net revenue was driven through the clubs. looking forward, we will be a $4 billion industry. more of our revenue will come from the national league level. >> let's talk about how that revenue is divided, 50-50 with the players. it is groundbreaking and incentivizes everybody. and you are leveling the playing field with the larger and smaller markets. >> national revenue is split 50- 50 with the players. with the salary cap system, more national revenue can be shared equally between the clubs. that is why we have had such good success with the clubs.
>> the winter classic started off as a one-off and then an experiment. now it is significant. the commissioner talked about not diluting that classic. now we may have 60 -- who knows what the number is? but it is an amazing event for a lot of reasons. >> the winter classic, the event strategy was a big cornerstone of how do we begin to activate trends and sponsors at the national level? our partner nbc was all in with us at the time. they saw a gap -- as we know around new year's day where there are a lot of college ballgames, but the biggest games have moved off of that window. it was a great opportunity for us to come in and do something on the national level, not just to court hockey fans, but to court casual sports fans. from that moment on, people viewed the winter classic and these outdoor games as a different kind of property.
a property that could really engage the casual sports fan. >> what would you do if it snows on february 2? >> we have the same guys on retainer. the weather channel guys have been here. >> is it an example of leveraging your tv partners for maximum benefit? >> my history is with nfl films. they have done a good job of telling those stories. they had a heavy hand in shaping the image of the nfl. with hockey, we have so many of those stories. our athletes are phenomenal guys. when fans get to know who they are, they will really like them. we have been doing hbo 24/7 now for three seasons. the opportunity with the outdoor games in l.a. and new york and chicago and vancouver, along with the sochi olympics, created some great opportunities for us to tell stories about these players. >> you will come out of the olympics with some very good benefits?
>> hockey is a global sport. the nhl wants to have a global business. the olympics is a great platform. we think we're going to use it more effectively this year. ultimately, i think part of the answer for us is to have our own world cup. a world cup of hockey, which is a big tradition in hockey and has been very successful. whether that is something we do parallel to the olympics or instead of the olympic is something for the commissioner to figure out. other see a big opportunity from a business stand point for the nhl. >> $3.3 billion and you are now publicly stating that $4 billion is a legitimate benchmark. >> i think the rogers deal starts to get us there. we have some maturation of some of the platforms, the event platforms. our digital media platforms begin to do it. international gets us there. >> everybody might argue that there were some challenges about
the rapid growth of the nhl a couple of decades ago. it is reasonable growth in the future. how do you keep the kansas citys, houstons, québec citys, and similar areas happy? you talk about expansion in the near future? do you grow your minor league system? >> the commissioner has said that expansion is not on the horizon. he is hoping and listening. for us, the growth of the business has been at a good annual clip on a national level. we think that is sustainable. we are constantly introducing new media platforms and ways of bringing our product to fans. the rogers deal in canada will be a big part of that. digital media and the ability to
target fans, not just in north america, but internationally, will grow us in the future. >> good luck with the stadium series and good luck with the winter classic. good luck with the stanley cup and everything else you do. hockey is clearly hitting on all cylinders internationally. with 12 nations set to compete in the winter olympics at sochi. coming up, we will go to the heart of silicon valley. the san jose sharks have gone from start up to success story. what is their secret? >> their popularity over time transcends hockey. >> stay with us as "sportfolio" rolls on. ♪
10 in revenue last year. most impressive, san jose is one of four nhl franchises that carries zero debt. the other three are the new york rangers, chicago blackhawks, and detroit red wings. the chief operating officer told me that it all began with clever packaging. >> the focus of the managing team at the time was to educate fans on the game of hockey and to create a uniform and a logo that people can associate with. we created a logo that was somewhat friendly but intimidating at the same time. it is a logo where a five-year- old child would not be afraid of the logo, but it reflects a fast and aggressive hockey team. that is what the sharks have become over the years. we were also the first major team of the four major sports to call san jose home. our popularity over time transcends hockey, it is a very
popular sport here, we have san jose in our name. >> you have been open publicly about operating losses over the last couple years, but now you have zero debt. that gives you a lot of liquidity and options. how does that help you going forward? >> it goes back to our ownership mantra. we have a corporate philosophy, corporate goals if you will, to win the stanley cup each year. it is the same for every hockey club. you need the resources financially to meet those goals. the majority owner is committed to bringing a high-quality team onto the ice. he wants to make sure that that product remains competitive on the ice. we do not have any debt. our owners paid capital each year to get us to break even. we have some flexibility to grow our brand as needed. >> unlike some nhl teams, the
sharks do not own or operate a television network. they have responsibility for the facility, and they maximize the assets in their portfolio. >> we have the arena and our minor league team in massachusetts, but we also manage recreational ice facilities here in the bay area. we have three different locations. >> let's talk about the building. describe the current naming deal and the evolution. >> quite simply, hp was looking to get out of their deal.
everyone is aware of their financial situation. sap was looking to get more active in the sports marketing and sponsorship business. they were willing to take on the last two years that remained on the hp agreement and extended for three additional years. we expect them to activate on their sponsorship very regularly over the next five years. >> it is a global and somewhat iconic company. that helps parallel with your brand. and you would argue that that is a global and iconic brand. >> it parallels very well for us. we have a lot of popularity worldwide and it has been accentuated this fall with the emergence of our star rookie player. it extends our brand even further. >> give us an anecdotal example about how your rookie assists in your marketing strategy. how do you take advantage of that worldwide? >> the magnificent goal that hertl scored on october 8 had 5 million page views on our website the next day. it had the highest number of views on nhl.com. you need a product that wins and plays well competitively.
>> developing winning products has been a hallmark of silicon valley over the last two decades. the sharks have adapted well to the region's culture of innovation. is it fair to say that you grew up with silicon valley? >> we did grow up with silicon valley and we work well with them. we have a number of vibrant partners on the tech side who are sponsors of the sharks. companies like barracuda networks and the like. furthermore, our fan base is very sophisticated and they have for the most part discretionary income that they can spend on hockey. that is a benefit of being in the bay area. even our sharks' ice facilities have the highest number of registered adult hockey players in the u.s. we have over 5000 registered u.s. hockey players. that helps grow the brand as well. people get to it or it is the sport and then hopefully they buy jerseys at the end of the game. >> the sharks have played 28 100% capacity games in their
home arena each of the five seasons. last year, they were the only member of their sunbelt expansion cohort to pull off that feat. coming up, football fans are heading to warmer climates for their teams. what is the business climate in 2013? our next guest offers a forecast. and this week's "sportfolio" stumper -- can you name the first team out of the league's original six to win the stanley cup? ♪
>> here's the answer to the stumper. the nhl had only six teams for 50 seasons. the first expansion team to win the cup was the philadelphia flyers. they won the championship in 1974. the flyers are owned by comcast, one of the largest sports and entertainment firms. they also work with a number of clients to provide marketing services and develop revenue streams. the president of front row marketing talks to us about a particular area of marketing, the marketing of college football games. 35 of them. is it too many or the right
number? >> you think there might be some bowl fatigue in there with 35 games, but what you have is a content game. if content is the new oil, then certainly attendance and the ratings are stalwart. these things are interesting and people watch them. >> looking at last year's attendance, some of the games were hot tickets. others drew very modest crowds, including a record low attendance for the sugar bowl in new orleans. should we be looking at attendance as an indicator of health? >> you always look at attendance. without attendance, you do not have the ability to get sponsors. television comes first, with their ability to put multiple games on over the weekend. it gives a platform to partners. television comes first. localized and national sponsorship is third.
>> all the games are important to us. the most important bowl games are the sponsorship games. >> and they are important alumni? >> there are groups that spend the money to generate the ad time. schools have complained about not having ticket sales and unsold tickets. is that a big issue? >> 11,000 ticket commitments by certain schools put them at the max. they turned to groups like ourselves and we do a good job of marketing the teams and the games. you have to look at attendance and you have to look at where you are going. every city has to be honest about whether or not they are a destination city. >> if they have a shortfall, i assume they factor that in as a cost of doing business. next year, the college football playoff goes into effect and it could be argued that those lesser bowls may be even less relevant.
>> a rising tide raises all ships. there will be some challenges, but what does the fan base do with your alabama? do you go to both games or do you go to one? you will see a rise in attendance and a rise in interest level for three weeks when national partners can actually own the college football playoffs. if you took the super bowl from the nfl and asked, what could you redo -- now you have the college football system. they will struggle to a degree in finding the partnerships that they have. but there are good teams and they will be fine. >> i believe that is the key. -- they were in the semifinal. they will be ok. is it really just a conference alliance between those minor bowls? how are they proactive to make sure they will be ok?
>> management of the bowl games will be even more important. you will have teams that may not have a football background. what do you do with a great kentucky basketball team, but the football team does not travel as well? >> thank you for your insight. i will go to a lot of those games. see you there. "sportfolio" is still far from done. we will assemble a panel of experts to discuss 2013. ♪
>> welcome back to "sportfolio." as we come to the end of the year, we thought we would reach out to some of our regular contributors to get their nominations for the most significant people, deals, and stories in the sports business of 2013. we asked longtime sports media executives, sports columnists, and the legacy agency ceo to weigh in on several different categories. the first is sportsperson of the year. surprisingly, there was some consensus. two people chose the outgoing nba commissioner. they believe that stern has changed the sport more than any
other individual in his sport. he made the nba a globally relevant property. the authors of the book "league of denial" whose investigations brought football concussion issues into focus. i would split the award between two men who managed to crack a labor deal that may have saved their sport. we asked our panel to select the sports business deal of the year. one columnist chose jay-z's roc nation of sports. one person voted for the agreement between the big east basketball school that led to the creation of a new and powerful college basketball league.
i will take an international perspective and take the $100 million partnership between the yankees and manchester city. it is a transformative deal for soccer and brings together two of the greatest sports franchises in the world. there was much to choose from. jason collins became the first athlete in a major sport to say that he is gay. one man declined to highlight a specific story. fox1 also changed the competitive nature of sports media rights. i may choose the tragic bombing at the finish of the boston marathon. sports businesses can be essential to the communities in which they work. finally, we asked each of our contributors to predict a trend in sports business in the year ahead.
for seth abraham, it is continued debate over performance-enhancing drugs. some consumers are taking advantage of mobile platforms to customize their sports experience. we also see sponsors' names on jerseys. i think 2014 will be the year that the business model for college sports changes forever. pay for play, i doubt it. i predict that the power will continue to shift away from the ncaa. it will be interesting to see how it all plays out. our thanks to all of our contributors and all who participated in this week's show. keep an eye on bloomberg.com during the winter holidays for more bloomberg sports business coverage and more "sportfolio" coverage. i'm rick horrow. thanks for watching. ♪
>> baby steps in the right direction. >> this week on "political capital," rob portman. bloomberg news talk nsa and president obama. and margaret carlson and lanhee chen debate paul ryan's ultimatum. >> we begin the program with senator rob portman of ohio. senator, thank you for being with us. you were one of the republicans who voted for the small compromise on the budget, although you said it wasn't nearly sufficient. let me ask you this to start. was this a one-off marriage of convenience? or is this the start of maybe something -- some kind of