Controlling The Assets…

With every passing week the stakes for team ownership continue to rise. The casual dollar of the fan gets tighter, costs rise for everything from labor to player development, social media drives more and more interest but also more and more expectations and brands want to see more and more of an ROI for the dollars they spend. While in most major team sports in North America revenue sharing has helped even some of the playing fields between big and small markets, the quest for added dollars at the local level continues to be very very high. At some point the ticket price will hit somewhat of a ceiling, and while the value of live sports is unlike anything else in entertainment, the price on that value still fluctuates. It is true that team sale prices for the most part rise every year, but what to do to generate dollars once you own the team leaves many members of senior leadership scratching their heads from time to time.

One key area that is being revisited is overall rights control. The ability to control your digital and broadcast rights have skyrocketed, and the idea of starting ones own network, once thought to be out of the question, is now still the way to go for many teams, especially in major markets. Six regional sports networks in Los Angeles you say? If you have the content and can provide live programming and fill around with low cost shoulder programming, then bring it on. Not the easiest route, but a sure way to at least control your own destiny.  Just ask the LA Dodgers.

Anther trend in recent years is to take some of your brightest most entreprenurial business minds, with some funding, and form a joint venture outside of the core team to develop new ventures to bring added value back to the ownership group. Finding other sports properties to purchase, developing real estate, making sure that ancillary events are filling a venue and then selling against those ventures requires time and fulltime effort, something that is hard to do when senior staff are concerned with the primary goals of a team…selling game sponsorships and filling seats. In the past those type of ventures were farmed off to consulting companies to concentrate on, and the ownership group took a cut but did not have full control of the venture.

In recent years however, ownership groups have seen a different tact work, especially in major markets, and are using that tact to keep control over all the ancillary and new business away from team day to day functions. It is becoming more financially viable to control all the intellectual capital and the ventures than to partner with an outside group and share. Some of the more bold strokes have been funded ventures like Fenway Sports Group in Boston or Silver Chalice in Chicago, which look at new ventures to bring into the fold of existing well run sports organizations like the Boston Red Sox or Chicago White Sox. yet others are joint ventures like Legends Hospitality, formed between the Dallas Cowboys and New York Yankees to not just manage food services for the two premier brands, but to go and partner with other venues and properties to build additional revenue streams. RSE Ventures is another, created by Miami Dolphins owner Steve Ross not just to help his NFL team, but to work on new and emerging ventures that expand the holdings of Ross into other areas. The latest was announced this week, with longtime sports executive Wally Hayward leaving the Chicago Cubs to form W Partners, co-founded by Cubs owner  Tom Ricketts to concentrate on ventures in and around Wrigley  Field but also in other areas of business like the teams’ new training facility in Arizona. Whereas in years past Hayward or a Cubs executive would oversee that work with an outside consulting firm, all that work now falls under the owner directly, outside of the day to day responsibilities of the club but within arms reach. It is convergence of opportunity and control of new revenue streams at a time where every dollar counts to be competitive. TV rights come up every few years, but ancillary dollars with a quality and iconic brand never seem to go away.

Now for sure there are pratfalls. Teams in the past have tried to combine ventures in sports and entertainment and have failed because of a lack of understanding of different cultures. Other owners have been too bullish and have gone the all-out takeover  of teams without fully understanding the challenges in a different country. You can’t always impose a new culture on a successful brand. This is also not the same as an ownership group with multiple teams in multiple areas, like Comcast Spectacor or Altitude in Denver or AEG. They own several teams that operate under a shared umbrella, and that is their core business. These new offshoots look to new business really outside the main scope of work. Some of it is unconventional, some is entreprenurial some will take years to develop and some may be try and fail, but all the efforts go to identifying new and sometimes revolutionary revenue streams that were not thought of before. It is not for everyone, even at the highest level, but it is intriguing.

Will this be a trend that continues? There are still well qualified consulting and sales groups out there globally doing outstanding work with many ownership groups as partners, so there is a great deal of work to go around. However for some owners with this new vision, it seems that the drive to identify and control what could always be farmed out is an interesting challenge, and one which certainly bears continued watching in places like Chicago and other markets around the world.

 

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