by Frank Maduri

Follow Up: NHL Expansion To Seattle Takes Crucial Step

In a follow up to earlier posts on this topic, the bid by Seattle to become the 32nd franchise in the National Hockey League (NHL) took a crucial step forward on Tuesday.

The Seattle ownership group partners and Mayor Durkan met with a nine-member committee of NHL governors (owners) and other top league executives in New York to make a presentation essentially framing why the NHL should expand into the Seattle market.

The news comes as no real surprise because the Seattle group set records for season ticket commitments and blew away the number that Las Vegas did a couple of years ago in their respective season ticket drive. The region in the Pacific Northwest is untapped in the U.S. by the NHL, and the prospective Seattle team would have a built-in rivalry with the Vancouver Canucks about a two hour drive away to the north.

The committee yesterday voted 9-0 in favor of the Seattle bid moving forward in the expansion process. The financing of the team and the arena renovations to Key Arena at Seattle Center (which was the center of my last article on this topic) were not seen as a deterring factor.

The next step is for the NHL to vote on the formal expansion to Seattle in early December at the league meetings in Georgia. The expansion fee is expected to be (and widely reported) around $650 million. It should also be noted, for those who did not read my earlier coverage, that Seattle is the largest metro area in the United States without a major winter pro sports team.

The city is known for their passionate support of their current teams: the Seahawks in the NFL, the Sounders of MLS, the Mariners of MLB, and the Seattle Storm in the WNBA. The Seattle group used that as part of their pitch to the NHL committee on Tuesday and noted the excitement of the city, as evidenced by the season ticket drive results which were outstanding.

The addition of Seattle (it looks like a mere formality at this point) means that Quebec has no realistic prospect of entering the league unless one of the current teams decides to relocate to their city. The league, once it adds Seattle, will be balanced with 16 teams in each conference for the first time in several years. The NHL will not be looking to expand and “cut the pie” of revenue sharing again for quite some time.

The relocation targets for Quebec of the Carolina Hurricanes or Florida Panthers moving north of the border both look more unlikely. The Carolina team changes owners but the lease agreement on the arena is very friendly to the ownership. The Florida club got better, younger, and they saw their attendance improve somewhat. It seems less likely they will move or that the NHL would allow them to exit the South Florida market.

The last remaining hope is the Arizona Coyotes, but they are looking at a new arena site in The Valley and are also linked to Portland, OR if they were to relocate. I think the NHL, which wants desperately to remain in Phoenix, would more likely approve a move to Portland to keep the conferences balanced before it would vote to move the team to Quebec.

Seattle is going to be an intriguing market for the sport and for visiting teams and their respective fans. The Key Arena renovation is very ambitious and is the mitigating factor on whether the new team begins play in 2020 or 2021. That facility is going to combine the old with the new. The iconic roof will remain in place, the green space around the arena will be kept as well. The modern amenities and wider concourses will be added and the design of the new seating will provide hockey fans with great angles to view all of the action.

The talk in Seattle is that now that the NHL looks like a lock to come to the Emerald City, where is the NBA in all of this? When can the Sonics return to the hardwood? That looks rather unlikely from the standpoint and tone of the NBA and their Commissioner, Adam Silver, in recent statements.

Some people do not understand it, but in my earlier coverage of this topic and the NBA expansion bid to Seattle, it makes sense. The NBA preferred the “SoDo arena” proposal as it was known with Chris Hansen investing in all of that land downtown to build a brand-new arena for the Sonics to return. That agreement with the city was for an NBA-first facility. It would be designed with hockey as a secondary tenant.

The Key Arena proposal which the city ended up going forward with, is an NHL-first agreement which means that the NHL team will be the primary tenant and will get the better end of the revenue and gate sharing agreements in the building. The NBA expansion to that market under those conditions would limit the profitability of the Sonics. The NBA also has no imminent plans to expand and has other markets that will promise and are in better position to deliver, better profitability for the NBA in the long term than Seattle at this point.

The fans of hockey in Seattle should be thrilled, it is an exciting time for them and for hockey fans in general; especially given the success of the Golden Knights in their inaugural season last year. The next big decision once the vote comes through in December is to determine a team name. The NHL is coming to Seattle and the excitement has only just begun.

(thanks to The Seattle Times for some background information and to NHL.com as well)

by Frank Maduri

Healthcare Mergers: The Impact On Patients

CVS and Aetna are just the latest in a list of healthcare M&A activity that is on the deck for the industry. The changing tide of the industry is alarming to some groups of people who see a future of less competition and patient choice. That can be a significant “red flag” for regulators, though so far it does not seem to have derailed any of these acquisitions from moving steadily forward.

The mega-merger that was long rumored between Cigna and Express Scripts was approved on Monday by the Department of Justice. This deal is set to pave the way for the CVS – Aetna proposed merger valued at $69 billion. The reports out of the financial media outlets are that CVS and Aetna would have to divest some holdings to satisfy anti-trust regulations.

Cigna – Express Scripts consolidating creates a combination of a major health insurer with a Pharmacy Benefit Manager (PBM) which they contend will make an environment to decrease costs for the patient. However, some feel that it will have the reverse effect.

Some feel that this deal and the corresponding proposed combination of CVS-Aetna will limit patient choice and force consumers into formularies where they will be faced with having to pay more for prescription drugs in the future.

This activity all comes amid the backdrop of Amazon making a concerted and deliberate push into the healthcare space with their partnership with Berkshire Hathaway and JP Morgan Chase to attempt to reinvent employer provided healthcare provisions. In a subsequent transaction, Amazon purchased the burgeoning mail order prescription provider, PillPack, for $1 billion over the summer.

Furthermore, Amazon announced a joint venture with Xealth which provides the internet shopping giant with a foothold into the healthcare services delivery system. The rest of the industry took notice, and in response Aetna entered into negotiations with CVS, Cigna began talking about synergies with Express Scripts, and Walgreens made certain deals of their own with national insurance carriers on a regional basis such as United Healthcare and Blue Cross & Blue Shield.

In my prior work in the M&A space, I have covered the premise of horizontal and vertical mergers. The vertical merger is one where the two companies may be in the same general industry space, but not in direct competition with one another. A good example of this type of merger was the AT&T – Time Warner deal. They both have business holdings in telecommunications and in television specifically (AT&T owns DirecTV and Time Warner owns multiple cable TV outlets) but they were viewed by the government as vertical in nature.

The example of a horizontal merger would be when Walgreens attempted to consolidate and merge with Rite Aid. I covered that with a series of articles and eventually, the federal regulators struck down that merger because it was between two businesses directly competing in the same industry space: retail drug store. The merger was seen, if approved, to have the effect of limiting consumer choice and potentially increasing costs to the consumer. It would have limited consumer choice in drug stores and the consolidation could have closed locations that were once part of Rite Aid, forcing people in rural areas to travel further to get to a pharmacy.

The CVS – Aetna deal hinges on the sale of Medicare Part D related plans that would most certainly need to be sold off to pass the regulatory standards in place. Some consumers feel that the deal would unfairly limit the choice of pharmacies because if they hold Aetna employer-based benefit plans, they would be funneled to CVS to fill their prescriptions. This could also be seen as giving CVS “a captive” group of consumers.

The Cigna – Express Scripts deal should help them compete against the Amazon healthcare joint venture that will continue to shape the landscape of the industry in the future. The potential impact of all of this M&A activity on the consumer has yet to be determined. Please check with your healthcare provider to make sure that you are aware of any changes this may have on your individual prescription plan coverage.

(Some background information courtesy of Bloomberg News, The Wall Street Journal, CNBC, and Reuters)

by Frank Maduri

Merger News: P&G Gains Approval for Merck Germany

The formal merger announcement came as no surprise that Procter and Gamble received approval from the E.U. regulatory boards to obtain the Consumer Health business unit of Merck Germany. The acquisition has been in the works and approval was being rumored for about a month leading up to the official approval.

This is the largest acquisition for Procter & Gamble (P&G) since they obtained personal care giant, Gillette, in 2005. The consolidation of this business unit from Merck Germany will expand the reach of P&G into new markets in the European Union, Latin America, and Asia.

In accordance with this announcement today, P&G also formalized the end of their strategic joint venture with TEVA Pharmaceuticals in which they had worked for a number of years together on synergies in the Over The Counter (OTC) products space.
The growth of the OTC area is a core strategic direction for P&G within that industry. This move will allow them to grow that business and expand their existing product lines as well as determining new potential growth pathways within the OTC area.

Merck Germany is not affiliated with the U.S. based pharmaceutical company of the same name, it was essentially spun-off several years ago. The company is a big player in the industry with 900 products distributed in 44 countries. The estimates are for 3,000 employees to transfer from Merck Germany to become P&G employees should the merger gain approval.

The financial experts and Wall Street investment types view this move in a positive way for the retail channels it will impact, but have a more cautious view overall because the merged unit does not have synergy. The deal is not expected to close until the summer of 2019. The ramifications for monopolies in certain industry segments will most certainly be scrutinized by regulators in the European Union.

The potential impact on pricing for consumers on personal care products will be an area of significant concern for the anti-trust regulatory boards in the E.U. relative to this proposed merger. The combined entity will have a larger presence in muscle, joint, and back pain relief which will be a certain area of growth within the demographics of a population that is living longer overall.

Some analysts have speculated that P&G could use the technologies acquired in this transaction to bolster their existing product lines in the U.S. and North America. This is to meet increasingly sophisticated consumer demand for products that deliver more efficacy with no major side effects.

The proposal between P&G and Merck Germany also triggered the news that P&G will end their joint partnership with TEVA Pharmaceuticals. The statement from P&G called the partnership “highly successful” and it did last for seven years.

However, the partnership has always been focused on growing OTC business areas outside of the United States. The bid for Merck Germany creates a redundancy in this regard. The other official statement reads that the goals of the two companies are “no longer closely aligned”. Each side will retain their brands and will look to recalibrate their marketing strategies around those brands on an individual basis.

The merger will have more impact in other regions of the world, especially in Europe and Asia, but the North American consumer impact will be most noticeable in the potential for new or enhanced products in the respiratory, sleep, and cough/cold relief.

The other potential impact of this merger in the U.S. is the potential response by the competitors of P&G in the consumer health industry. How will Unilever, Colgate, or Johnson & Johnson respond to this merger? Pfizer is already moving through the early stages of a complete reorganization to be able to compete more effectively in a few key strategic business areas.

Then, the next area to watch is for the new competitors such as Amazon and Kroger and how they will respond to this move by P&G in the coming months. It is essentially like a big domino that could trigger a whole set of other M&A activity within consumer health.

The potential for P&G to grow in geographic areas where they have limited to no presence currently is an intriguing aspect of this proposed deal. The regulatory decision in the E.U. bears watching and the response by the competitors will shape consumer health/personal care products for the foreseeable future.

(Some background information and statistical info courtesy of Forbes, www.bizjournals.com, Pharmacy Times, and CNBC)

by Frank Maduri

“Names” – A Tribute to 9/11 – Poetry by Frank J. Maduri

“Names”

All of these names read aloud
Some read quickly and others –
More measured, more deliberate
All of these names mean something
Most of the names have many titles:
Husband, wife, mother, father
Grandfather, uncle, aunt, sister
Brother, cousin, nephew, niece
Friend, colleague, client, citizen
All of these names represent a life
A life extinguished far too soon
A life taken by a tragic event
Seventeen years ago on a bright
Sunny September morning
The names just keep going
And going, being read by
Family members, friends of those
Lost in the attacks that fateful day
The names and faces all unique
From older men and women
To mid-life professionals
To recent college grads
To firemen and police
The names reflect all ethnicities
All races, all colors, all walks
Of life and religions
With a common thread
They all left this world
On 9/11 and they left behind
A legacy and an imprint
A promise we made as a nation
And need to always keep
We will never forget

Copyright 2018 – Frank J. Maduri – All rights reserved

by Frank Maduri

Transition Your Career and Your Life

In my role as a Certified Professional Coach (CPC) I am focused on helping people find or create their ideal job/work environment. It is through an examination of the values you possess, the talents you have, and your identified purpose in life that this “road map” to the client’s ideal life is determined.

Many times, often, the client is unsure of some of the values they possess, they do not notice or neglect talents they have, and the client will be unclear about their purpose in life. All of this is okay, it is what the coach-client relationship was designed to help navigate. The most important distinction about personal coaching/life coaching is that the coach is not there to provide the answers. The answers are within the client, the answers lie within you, and we help you to connect with those answers to help the client achieve the objective(s) stated in our first initial session.

The aspect of work and career in the lives of people is very important to me because of the many jobs I have had in my life; and the fulfilling and unfulfilling situations I have been in relative to work. In fact, many studies by major universities have shown that fulfillment at work and fulfillment in relationships are the two most important areas for people being satisfied with their lives.

The perspective of the client toward the concept of work is also explored in the coach – client relationship. The background and understanding of all the factors that can shape the client’s approach toward working or vocation is examined in detail. This could be shaped by a parent or role model and their approach to their job or career. The examination of whether that aligns with their values and perspectives on work is a very important factor in how to help with a career transition.

The companies we work for change all the time: people get promoted, supervisors may leave for other opportunities, and colleagues may retire, resign, or be terminated from the job. It is imperative to be able to “roll” with those changes and remain flexible and open to the opportunities that will come along from a variety of external factors: job transfer, job relocation, or your company is sold to a competitor. Those events create conditions that can be viewed negatively or positively. They can be viewed as “the end” or they can be viewed as “a new beginning”.

Some clients will be unsure of their path for their career, and that is totally fine. It is important to realize that some introspective thinking and planning with a career transition coach can help with aligning the values, goals, and personal interests of the client with their ideal career. Then, it entails thinking about how they can transition to that type of career if it is a new track for them, and what skills they possess that will translate well in that scenario.
The connection to a life purpose is also critical when talking about career transition or job satisfaction. The most powerful and effective way to gain that connection to your unique life purpose is through a spiritual connection. Many coaches can help build a spiritual connection and determine ways in which the client can actively nurture that spiritual relationship in order to find their true life purpose.

It is a frequent occurrence that people get caught up in what their parents, friends, spouses, or colleagues tell them they should “do” for a career. Many people say “I want to make my parents proud” or “I want to make my husband/wife happy” so I am going to work in this job, but I am not happy in it. This is another example of how coaching can help determine ways in which you can transition into a career that you are excited and passionate about while maintaining a plan for how to handle the realities of potential financial short fall or different schedules depending on the requirements of the position.

The work – life balance piece is also a difficult component for people to manage today in the age of smart phones, texts, email, and social media. It is a blurry line between work time and personal time because so many of us are able to be reached in a matter of seconds.

Career transition coaching can help you to find balance between work and your personal time for hobbies, family, and other interests. The coach can work with you to help you to determine very concrete and actionable ways to begin to put up boundaries so that work is done and that personal time is also maintained so that you can be the most productive person possible.

If you are interested in learning more about this type of coaching or are in need of support in a career transition or job change please check out my website: http://frankjmaduricoaching.com/

by Frank Maduri

Follow Up: MLS To Austin Gets Real – McKalla Place Proposal

It is shaping up to be a real Texas showdown: the MLS and Precourt Sports taking on some factions of the residents in Austin who do not want a soccer stadium or team in their city. The original piece here on Frank’s Forum focused more on the mechanics around relocating a team, in this case, the Columbus Crew of Major League Soccer (MLS) would move to Austin.

The capital city of Texas is an attractive destination for MLS because of the growing numbers of young professionals and young families, two key demographics for the league. The relocation to Austin is not without controversy, as the Crew are an original MLS franchise; causing factions in Ohio to attempt to keep the team, and factions in Texas who do not want a soccer team .

The stadium is the centerpiece for any MLS team, so the potential relocation to Austin hinges on the location and terms of that central component to the operation of a franchise. The executives at MLS league offices in New York and Precourt Sports have been working with officials in Austin for about nine months now on a stadium site.

The two sites that are on the table, so to speak, right now are the Circuit of the Americas or COTA site and the McKalla Place site. The two sites are very different and present various positives and negatives regarding being selected as the site of a soccer specific stadium.

The Circuit of the Americas is a racetrack just outside of downtown Austin which already has infrastructure in place such as adequate parking and space for a stadium. The soccer stadium would help keep the overall operation of the site busier, it would become essentially a year- round cycle of activity between the racetrack events and the MLS season

The entertainment and other options are somewhat limited at the COTA site. The site is reported to have a pastoral feel to it. The reports in local news out of Austin is that Anthony Precourt (operator of PSV which is the operator of the Crew franchise) has no interest in the COTA site even though some within the Austin political structure favored that location.

The more detailed reporting and some excellent journalism on this topic was done by The Austin Statesman so definitely check out their site as well.

The McKalla Place site is essentially the largest piece of city owned land remaining in the greater Austin city limits. It is located in North Austin but within the downtown core, which is preferable to MLS for a stadium site. That location has entertainment, dining, and hotel options nearby. It is not completely ideal, but it is the best location available within the downtown limits.

However, McKalla Place does not have any infrastructure at all, it is basically an open set of lots. It would need lighting, parking, and utilities to be installed from the ground up. The residents who oppose the soccer stadium have been ramping up the pressure and formulating alternate plans to the City Council.

These alternate plans have no stadium development in them and focus on other needs that the city has such as affordable housing, green space, retail space, a hotel, and buildings to support arts as well as music.

The political side to this scenario is that the city is divided over the land use and the vote will be very close. The Mayor of Austin is in favor of the MLS team coming to town and playing at McKalla Place. The council needs 6 of the 11 members to vote straight up or down on the proposal for the land to be used for a soccer stadium.

Those representing the North Austin district on the council are not in favor of the stadium construction. They are adding amendments to the measure that the Mayor, according to local news sources, has called “poison pill” amendments to try to derail the soccer stadium. The meeting Thursday night postponed the vote until August 15th.

The other proposals for the land have not gained much traction. In my experience covering sports business matters of this type, when a proposal has moved this far and the competing proposals have not been mentioned, it is pretty certain that a stadium is going to get approved in one way or another.

The bigger items around the actual reality if a stadium is voted onto the site are a bit murky. The plans for the site show a mass transit station hub there which is estimated to have a cost around $12 to $15 million. One of those amendments seeks to attach the cost of the transit station to have PSV be responsible for it.

The lease terms for the stadium and how much PSV will pay to rent the facility are on the original terms sheet. The rental fee that PSV will pay is in the range of $400 to $500,000 per year. The city officials put a significantly difficult clause in to block the team from relocating and leaving Austin in the future.

The dissenting members of the council are seeking amendments to the term sheet to double the rent the team would pay to around $900,000 per year and seeks other financial commitments from PSV. The meeting last week contained now debate on those amendments and made no changes to the original terms sheet.

The stark reality here is that Anthony Precourt is a billionaire “operator” of a franchise seeking a sweetheart lease deal without any willingness to commit other money toward infrastructure or mass transit improvements. He is going to end up looking bad in the court of public opinion and perception, but that is probably viewed by both he and MLS as collateral damage in getting the deal that they desire from Austin.

The impact of the vote on August 15th is going to resonate in two cities: it will shape the future of Austin and bring uncertainty to Columbus. The Ohio capital will certainly struggle to find a full-time tenant for that soccer stadium that they are still paying off debt on, and will most likely become a bargaining chip for other cities looking to leverage their current market into a better stadium deal.

In my view, I can understand some of the sentiment in Austin with the residents who are opposed to the soccer club relocating to their city. It will certainly impact the neighborhood in which McKalla Place sits in North Austin, in a way that can be perceived as negative: traffic, environmental impact, noise, and congestion on game dates.

Conversely, the clubs that constitute MLS conduct so much charitable and community service work. These types of efforts would benefit Austin greatly in the years to come, should they become a franchise host city within the league. It may be a “money grab” by Precourt, but I always look at the silver lining in how many jobs it will create and how many people will have positive changes to their lives through sports.

The vote on Wednesday will clarify a very complicated situation and set the course for two cities in the weeks and months ahead. Stay tuned.

(Some background information courtesy of The Austin Statesman, Fox 7 Austin, & Austin Business Journal)

by Frank Maduri

Disconnected: Rite Aid and Albertsons Merger Update

The proposed merger between Rite Aid and Albertsons faces a key crossroads type moment on Thursday, August 9th, when a pivotal vote will be made by the Rite Aid shareholders. The proposal on the table would give the shareholders of Rite Aid a reported 30% stake in the new company.

The prior piece on this merger focused on the transition of the pharmacy / drug store channel and the healthcare landscape. This landscape has adjusted further with the entry of Amazon into healthcare with their acquisition of Pillpack and their partnership with Xealth.

A report in Forbes describes a scenario where the Albertsons merger could be done just strictly out of fear of the impact of Amazon’s entry into the marketplace. The merger proposal is for $24 billion to bring the two companies together to compete against CVS (who is in the process of combining with Aetna), Walgreens (a giant company with Alliance Boots growing their presence in Europe), and Amazon.

A report by Bloomberg states that Rite Aid is set to announce a 2019 net loss of $125 million to $170 million, which far exceeds the numbers in the original guidance that they had reported earlier in the year. The speculation is that the people behind the scenes at Albertsons leaked this information ahead of the crucial vote on Thursday. The thought process being that the fear of the loss of value in Rite Aid will force the hand of their shareholders to vote in favor of the merger.

The Amazon partnership with Xealth provides them access into healthcare networks. The pharmacy side of Albertsons and Rite Aid also have clinics that they operate, which if the merger was approved would create a network of 319 clinics nationwide.

The detractors to the Rite Aid merger feel that the company could compete well on its own in the new landscape. The sentiment from some of the shareholders remains that the proposal from Albertsons does not place the proper valuation on the Envision Rx piece of the Rite Aid business model.

Envision Rx is the pharmacy benefit manager (PBM) piece of Rite Aid which has always been a sticking point in this proposed merger. This is a unique attribute of Rite Aid, which many maintain is an undervalued asset of the current proposal. This all comes at a time where two major investment consultant type groups have issued reports that caution the Rite Aid shareholders to consider rejecting the merger proposal.

There is a disconnection between factions of the Rite Aid shareholders over the Albertsons deal. The one side of the scenario is that Rite Aid is a much smaller company now that they have transferred so many store locations to Walgreens. The management of Rite Aid is stating that they feel that they are better positioned now because they will no longer be tied up with the sales of the locations to Walgreens and can focus on improving operations. The central message is that they can survive and compete as a smaller, leaner company without merging.

The other side of the scenario is the faction that feels that Rite Aid must “grow or die” with the “bigger fish” of CVS Caremark (Aetna), Walgreens, and Amazon. The merger with Albertsons will provide a combined company with 4,345 pharmacy locations, which will allow for a much more competitive company in the new landscape of the industry in the future.

Furthermore, there is the reality that Rite Aid stock has lost 77% of its value in the last two years. The Albertsons people are circulating a message that essentially is that Rite Aid will have no other interested parties for a potential merger if this falls through.

In truth, that is probably an accurate assessment because the government shutdown the Rite Aid merger proposal with Walgreens, CVS has no interest in acquiring Rite Aid, and there are not really any other suitors out there in the industry.

Another argument is one that is against the merger which in brief, is that Rite Aid and Albertsons are both struggling in low-margin businesses (pharmacy/drug store and grocery channel) and merging them together will not remedy those core issues related to being niche focused in industry channels that have low profitability.

The grocery channel could potentially provide a regional partner for Rite Aid that could be interested in buying their Northeast and Mid-Atlantic based locations such as Royal Ahold (parent company of Giant, Eagle, and Stop & Shop grocery chains). This is pure speculation on a potential future course for Rite Aid because so many within the financial industry believe that the Thursday vote is going to sink the merger with Albertsons.

This potential merger between Albertsons and Rite Aid has been a mess from the beginning. The path forward for both companies if this merger does not materialize is unclear. Albertsons could shift their focus to an acquisition within the grocery channel, a regional sort of consolidation move to grow the company.

Rite Aid could move forward alone and try to “keep swimming” in the industry without a larger merger partner. They could maximize their revenue streams by executing a strategy around their clinics and with marketing Envision Rx.

The harsh reality is that the pharmacy channel is running scared from the entry of Amazon into their market. The potential for Rite Aid to make it on their own while being squeezed by larger competitors could spell the end for the iconic American drug store chain.

The merger vote on Thursday will impact both the grocery and the drug store channels and could drastically alter the course of the strategic growth for two companies in the future. The consumer will be impacted by a lack of choice and a lack of competition in the industry which will force many consumers into a situation where they are facing increased out of pocket costs for pharmaceutical products in the years to come.

(Some background information and statistics courtesy of Forbes, Bloomberg, and Supermarket News)

by Frank Maduri

Music Modernization Act: Fate Hinges on Amendment

The Music Modernization Act (MMA) had been on a fast-track pace through Congress with the next stop set to be vote on the Senate floor. The legislation seeks to redefine copyright laws for songwriters, song publishers, and song producers in the age of digital music content.

However, the fate of the bill is now in doubt because of an amendment that an interest group from within the industry seeks to attach to the legislation. This amendment has the aim of creating a “collective” of songwriters who would negotiate their fees as a group. This development throws a wrench into the process for this bill and could send it back to “square one”.

The original intent of the MMA was to have Apple Music, Spotify, Amazon, and other streaming music services work with publishers to manage the licensing process of music in a collaborative way. The main issue being that in the age of streaming music, songwriters are leaving the industry in droves because they make literally no money.

The antiquated laws around the licensing of songs resulted in songwriters being paid pennies for material that they produced. It has resulted in a situation in the music industry that is in dire circumstances and in need of reform. It is estimated that 80% of songwriters have left the industry. The royalty rates for streaming are drastically lower than the royalties made back when an artist recorded the song for placement on their respective album. The archaic laws prohibit songwriters from reconfiguring contracts or entering new arrangements with streaming services to potentially earn a higher royalty.

My own experiences in writing music reflect that, I chose to not pursue the industry after copyrighting several songs because the return on the investment was just not viable. The current conditions in the industry make it very hard for a new songwriter to gain traction because the income scale is completely imbalanced. The writer also has to pay self-employment taxes on the little income earned in the process of publishing the song and marketing it to be recorded.

This scenario also has spawned a feature length movie titled “The Last Songwriter” which was featured at the Nashville Film Festival winning several awards in the festival circuit. The film was produced by Netflix and sheds light on the current state of dysfunction within the music industry as it relates to paying the songwriter.

The argument can be made that the “big time” established songwriters will make out very well if the MMA is passed into law because they will receive larger royalties for their hit songs. The less established, or new entrants into songwriting will still face difficulties staying in the industry with bills to pay and families to support.

The emergence of this amendment, which some claim will help “level the playing field” and others claim will make the situation more acrimonious; in the end analysis could cause the Senate to vote the bill down. A week ago the MMA looked like a “sure thing”, that it was going to sail through passage and change the way the music industry operates with respect to the pay scale for the songwriters, publishers, and producers.

It is a sad state of affairs because the songwriter is the backbone of the industry, without the songwriter the artist has no material with which to work. The songwriter generates the material which then becomes a finished product. It is similar to eliminating the source of a key ingredient like wheat and expect a baker to make bread.

The music industry is struggling to adapt to the changing ways that people are listening to content, and the lack of legislation like the MMA only exacerbates those problems. The listener wants “on demand” and customizable approaches to music, nobody listens to the traditional radio for the most part, and the rights to songs cannot be scaled the way they were twenty or thirty years ago.

Please learn more about this legislation and contact your local Congressional representatives, contact your Senators. The fate of the music we all enjoy hangs in the balance.

(Some background information courtesy of Billboard.com, Rolling Stone, Digital Music News, and www.congress.gov)

by Frank Maduri

Miami MLS Saga: Freedom Park Proposal

The five plus years saga that has been David Beckham’s quest to find a site suitable for a soccer stadium for his planned Miami MLS expansion bid has certainly been unbelievable at points.

The former soccer mega-star and his partners received permission recently to have the latest attempt (site number six for those counting), a development known as Miami Freedom Park, included on the November ballot as a city-wide referendum question. The voters will decide whether or not Freedom Park is a positive project for Miami to undertake.

The land that the proposed Freedom Park sits on is currently a public golf course. The opposition of the planned proposal for the stadium and other retail/hotel/office space construction will be those who want to save the golf course and those who want open space. The other consideration will be traffic impact because the land sits next to Miami International Airport.

Beckham has seen the other attempts to build a soccer stadium for his planned new club come apart for all sorts of reasons. The Port of Miami site received almost instant backlash from the cruise industry due to traffic concerns on weekends when they embark and disembark the most ships.

The site next to Marlins Park failed for a variety of reasons, and the Overtown proposal seemed like it was moving forward (see my earlier article on it) but that proposal relied on a parcel of land that was owned by the county. The sale of that land dragged on for a protracted amount of time until it was finally approved.

However, Beckham brought in new partners, the Mas brothers, and they did not want to move forward with the Overtown site. That area of Miami is notable for violent crime and they may have had concerns over putting a stadium and retail development in that neighborhood.

The issue with the golf course site that is now being dubbed Miami Freedom Park is that, according to reports in the Miami Herald the site has environmental contamination. The land at one time was the site of a large trash incinerator nicknamed by Miami locals as “Old Smoky”.

The disruption of the ground to build a 25,000 seat soccer stadium, a 750 hotel rooms, 600,000 square feet of retail space, and 400,000 square feet of office space is going to require a massive environmental cleanup of the site. The cost of getting the land properly remediated is going to be a tremendous outlay of money. The question of who pays for that is going to be central to this site plan.

MLS has longed wished to return to the Miami market because they see it as a missed opportunity from the failure of the Miami Fusion franchise early in the history of the league. The Fusion played in Fort Lauderdale, far from the downtown area of Miami, and removed from any direct public transportation access.

Miami had tremendous TV ratings both for Spanish language and English telecasts of the World Cup from Russia which took place this summer. MLS has given Beckham a deadline of October 2019 to be the latest point for his group to break ground on a stadium. The league strongly prefers the expansion bids to include a soccer specific stadium because it allows for maximized control of the revenue streams generated compared to renting a facility used by an NFL or MLB team.

The league gave Beckham a sweet clause in his player contract to own an expansion franchise in his retirement by only having to pay a fraction of the expansion fee that other teams have been required to pay upon entry into MLS.

The speculation is that Freedom Park could provide some outstanding enhancements to that neighborhood of Miami that would also benefit the whole city and region by having an MLS team back in South Florida.

The detractors think that the project is too ambitious, and others want to save the golf course. It is being rumored that a golf course, range, and training center are being added to the newest Freedom Park renderings, potentially as a compromise as residents will decide at the polls.

Beckham deserves some credit for sticking with the Miami opportunity for over five years. His bid was not tied to any specific geographical area. He could have pursued a new bid in San Diego, Tampa, or another area where MLS is seeking to potentially add a franchise. He stuck with Miami despite numerous setbacks and uncooperative political and community support at points.

The counterpoint there would be that Beckham stayed with Miami because the market has the most potential financial upside. The demographics of the city coupled with the size of the TV market and the weather all combine to make that an attractive site for a future expansion franchise.

Freedom Park, as the name suggests will ironically have its destiny determined by a democratic voting mechanism known as the referendum. The people will decide whether or not the site should remain a golf course and green space, or whether it will become the site of the next MLS franchise.

In either case, the remaining issue at hand is that Beckham, the Mas brothers, and his other investment partners are running out of time to get this Miami team up and running. It may result in five years of futility for Beckham, and it will leave MLS with no choice but to go in another direction as they look to expand the league.

by Frank Maduri

Dr. Pepper Snapple Merger With Keurig – Impact on the Beverage Aisle

The merger of Dr. Pepper Snapple Group with Keurig Green Mountain, which was initially announced in January, was finalized recently. The deal creates the new publicly traded company known as Keurig Dr. Pepper, according to Bev Net is the 3rd largest beverage company in North America.

The merger is going to have a direct impact on the beverage aisle because the combined entity will be utilizing their respective strengths together to create unique delivery systems for the consumer in the future.

The beverage industry is another sector of the economy which is in a “grow or die” phase at this point. In my professional experience in the industry as well as my time covering mergers and acquisitions, the key factor in this segment of business is the distribution network.

That is the main determining factor behind why Coca-Cola and Pepsi dominate the beverage aisle at the grocery store: it is all driven by distribution and shelf space. The smaller brands have a very difficult time competing with the big players in this space because of the costs associated with distributing the product and gaining shelf space for the product.

The executives at the former Dr. Pepper Snapple Group were faced with having to grow in order to compete with the top two players in the industry. The deal with Keurig allows them to do precisely that, it grows their business and their market share.

The deal also includes Allied Brands which is a distribution network that will now be run by the combined Keurig Dr. Pepper which features 125 different brands. This collection of brands are a mix of beverage offerings that are either wholly owned, partially owned, or not owned at all by Keurig Dr. Pepper.

The news over the past five days is about which brands will be dropping out of the new Allied Brands distribution situation. The ripple effect left by these changes will have a definite impact on the beverage industry. Some brands will be promoted on a regional basis in a more visible way.

Conversely, some brands most notably Fiji bottled water will be leaving Allied Brands, according to CNBC, in order to start their own distribution network. The result of these changes will most certainly have a price impact on the consumer, especially if the new or spin-off brands from the Allied distribution network fold into smaller distribution agreements.

The combined strengths of Keurig Dr. Pepper could translate into lower prices or more advantageous bulk sale pricing for the consumer, but that remains to be seen. The single serve delivery system technology that Keurig has mastered could translate into some new concepts that integrate the Snapple iced tea beverage line or create some new innovations on the delivery of Dr. Pepper and its signature flavor.

The merger also helps both entities compete in a grocery channel that is being shaped by Wal-Mart and Amazon/Whole Foods. The persistent pursuit of low prices by Wal-Mart which they require of their suppliers can put the squeeze on profit margins. The combined Keurig Dr. Pepper now has the distribution and production capabilities to compete in a profitable way against the forces of Wal-Mart and Amazon.

It is in this perspective where the consumer will see enhanced value on their favorite soft drinks whether it is Dr. Pepper, 7UP, A&W Root Beer, or Snapple. The distribution of Keurig and their famous pods of all types and varieties and the Green Mountain Coffee products will all see a significant increase into the grocery channel. In addition, perhaps the drug store channel as well given the relationships that Dr. Pepper/Snapple/Allied Brands have developed over decades of time.

The other consideration here is that the combined Keurig Dr. Pepper company can now be an active player in acquisitions which will alter the landscape of the beverage industry. The combined publicly traded entity could target consolidations within the beverage industry, or could seek to enhance their delivery systems or packaging with a purchase of a smaller player in those industry sub-classes.

Keurig Dr. Pepper has a significant positive component working for them in the future: they have a very loyal base of consumers. The consumers in various survey data have identified as “fans” of Keurig and “fans” of Dr. Pepper. The new leadership team of the combined company will utilize new technologies through social media to build deeper relationships with those loyal consumers with cross-branding opportunities to grow revenue further.

The newly combined company features brands that are iconic in America: Dr. Pepper, Snapple, A&W, 7UP, and Sunkist. These brands have multiple products merchandised around them from tee shirts, cups, keychains, and more. They have an identity of their own and this merger promises that these brands will be relevant for a long time to come.

Keurig Dr. Pepper is the largest beverage merger in history and it will dynamically shape the future for the beverage aisle and provide new innovations to the delivery of beverages in an increasingly fast paced way of life for the consumer.

(some background information and industry data courtesy of Bev Net and CNBC)