Tag / TV Markets

by Frank Maduri

TV Markets and the Expansion of Sports – Part 5

This series has demonstrated the importance of particular demographic information on the decisions to expand a specific professional sports league. Each league has varied rationale behind the importance of this information and it can be weighted differently based on the respective league.

 

The first four parts of this series focused on the “Big Four” professional sports in the United States and North America. This final part of the series will focus on the emerging sport of professional soccer in the U.S. and their top league, Major League Soccer (MLS).

 

Unlike some of the other major sports reviewed in this series, Major League Soccer has already announced their intention to expand in the future. The league currently consists of 19 teams split into two conferences: the Eastern Conference and the Western Conference.

 

MLS Commissioner Don Garber has publicly detailed some of the future expansion plans for the league. Mr. Garber has indicated that the league wants to expand by 5 teams to 24 teams in the next four to five years. They have several candidates and have already announced 2 of those 5 expansion teams (www.mlssoccer.com).

 

The expansion criteria outlined by the Commissioner is:

  • Location
  • Ownership stability
  • Stadium Plan
  • Demonstrated fan base
  • Sponsors and TV market
  • Strategic Business Plan

 

Overall, the league has seen a drop in TV ratings, which they are going to have to address. MLS is currently televised by ESPN and NBC nationally, and many of the individual teams have deals for television coverage with Regional Sports Networks (RSN).

 

This past week, Forbes conducted a survey of the league and detailed the values of the franchises as well as providing some other data on the overall business side of league which just concluded its 18th year of operation.

 

On the Rise

 

The report noted that the average franchise value for MLS is $103 million, which represents an increase of 75% in the last 5 years (www.forbes.com). The most valuable franchise is the Seattle Sounders at $175 million.

 

The report continues by detailing the TV ratings slide on ESPN and NBC. The ratings for ESPN are down 29 percent to an average of 220,000 viewers. The NBC telecasts (air mostly on NBC Sports Network) are down 8 percent to 112,000 viewers (www.forbes.com).

 

However, the league is up for a new TV contract before the 2015 season begins, and MLS currently earns $30 million combined per year in national TV revenue from NBC, ESPN, and Univision according to Forbes. I have covered in other articles the trend toward huge sums of money being spent by networks to obtain the rights to live sports programming of any kind. MLS should be able to negotiate for a substantial increase in their next TV deal.

 

A particularly interesting note on the future TV deal negotiations is that Fox launched a new sports network, Fox Sports 1, in August. The Fox group lost the bid to retain the English Premier League television rights in the U.S. to NBC, so Fox will be looking to pay a premium to obtain the rights to MLS.

 

The Game Experience

 

The biggest statistic in the Forbes report was regarding the attendance figures for MLS for their games. In 2011, the average MLS attendance was 17,872 and in 2012 it rose to 18,611 (www.forbes.com). The figures for 2013 are not yet available, but the figures from both 2011 and 2012 are better average attendance numbers than both the NBA and the NHL. That is very impressive for a league that is only 18 years old.

 

Many trends drive that increase for attendance for MLS in recent years. First, the popularity of soccer is on the rise in the U.S. with so many youth leagues popping up everywhere. Next, the quality of players in the league has been dramatically upgraded. The league is starting to gain traction and so many youth leagues run trips to their local MLS team games and go in large groups.

 

The final and most lasting change in the trend toward attendance growth is that the younger people and teenagers who went to games in the early years of MLS entering the U.S. sports landscape are now older. They have jobs and disposable income and they spend it by going to MLS games with their friends. I am a perfect example of that trend because that is exactly how my affiliation with MLS progressed.

 

In fact, the average MLS team earned $26 million in 2012 from in-stadium revenue streams (tickets, merchandise, luxury suite sales etc.) according to the Forbes report.

In my own experience, I have gone to several games for my home area team, the New York Red Bulls. The live game experience is very good. The skill level of the players and the speed of that level of the sport translates so much better in the live experience compared to watching an MLS game on television.

 

However, I watch numerous Red Bulls games on TV and I think MSG Network (the RSN for the Red Bulls) has an excellent production value for their telecasts of the games. I do not like the camera angles or production presentation of the NBC telecasts, and I think ESPN does a very good job at presenting MLS, but most of their games are West Coast games which air very late in the Eastern time zone.

 

Two New Teams

 

The first two expansion slots of the five teams that MLS wants to add have already been announced. The league will expand to the following locations in 2015:

  • New York
  • Orlando

 

The long anticipated addition of a second team in New York will be a reality in 2015 and it is a very lucrative deal. The team will be called NYC FC and it is owned by a partnership between the New York Yankees and the owners of the English Premier League team, Manchester City (www.nbcsports.com). The ownership group paid $100 million dollars for the expansion rights in New York, which is a sign that MLS has truly gone up a notch.

 

The Yankees will be handling the logistics of building the stadium and operating the team in New York. The Manchester City side of the group will handle the player personnel side of the team, evaluating talent and stocking the roster with players. The team will be based in Queens, and the new stadium site has not been completely finalized but it is likely going to be constructed near the US Tennis Center and Citi Field in Flushing Meadow (www.nbcsports.com).

 

The league just last week announced the Orlando expansion approval. The city in central Florida has a very successful minor league level team called Orlando City FC, which will be elevated to MLS in 2015 (www.mlssoccer.com). The team is nicknamed the Lions and will keep that name and their purple uniform color scheme, which is extremely popular with the fan base there.

 

These decisions keep with the MLS expansion directives of a demonstrated fan base and strategic business plan. However, the biggest key piece in the Orlando expansion approval was the stadium plan approval by the government entities in Florida.

 

The new stadium will be built in an area of downtown Orlando that is in the midst of a huge development trend. The stadium is a major component of an MLS expansion bid and is required for any new teams to enter the league (www.nbcsports.com).

 

The new stadium requirement is very important to MLS because it significantly improves the live game experience for both the fans and the players. MLS began playing in the mid-1990s in mostly gigantic NFL or college football stadiums, which were not conducive to hosting soccer games. The adjustment to the configuration for soccer created some poor sight lines, and made the fans feel too far away from the action.

 

The MLS move to the Soccer Specific Stadium (S.S.S.) provided a huge lift to the revenues of the teams and the league. The teams were able to use the majority of the revenue to improve the quality of the players and the operations of the team rather than paying rent on a stadium that they were tenants playing within.

 

Potential Expansion Candidates

 

The following cities are currently on the short list for an MLS expansion team either by 2017 (three slots are left) or in a future expansion round. The revenues are going up so steadily for MLS that many analysts believe that they can add several more expansion teams in the future.

 

The league has openly discussed that they intend to target the Southeast region for near-term expansion (www.mlssoccer.com).  That region of the country has no presence for MLS currently and will have only the Orlando club by 2015. MLS prefers to develop regional rivalries, which will require additional teams around Orlando very soon.

 

The list of potential expansion franchises for MLS are as follows (all TV Markets data is courtesy of www.stationindex.com , the population demographic information is courtesy of www.census.gov and the Fortune 500 corporate data is courtesy of www.money.cnn.com ):

  • Atlanta, GA – the largest city in the Southeast is a major city of high interest from MLS for future expansion.

TV Markets Rank: 8th

Metro Population Rank: 9th

Fortune 500 Company HQ: 5

Synopsis/Overview: The Atlanta bid achieves many of the expansion directives for MLS. The rumor is that the current owner of the NFL’s Atlanta Falcons, Arthur Blank, is interested in owning an MLS team. Blank has a son who plays soccer and the Falcons are going to be moving into a brand new stadium in a few years in downtown Atlanta (www.nfl.com).  The stadium could be built with coverings that will drape the upper levels of seating so that it makes for a more intimate seating configuration for soccer. This is similar to the system currently used in Vancouver who plays in a shared stadium with a football team. The sponsorship support should be excellent. MLS has current franchises in all of the metro population centers larger than Atlanta, with the exception of Miami.

 

  • Miami – This bid is intriguing to MLS but could have some issues.

TV Markets Rank: 16th

Metro Population Rank: 8th

Fortune 500 Company HQ: 4

Synopsis/Overview: The Miami bid is a bit complicated because it centers upon David Beckham. Part of the bid by MLS to lure David Beckham to play in L.A. and raise the profile of the league included an option for Beckham to, upon retirement, gain an expansion team for a bargain price fee of $25 million in a city of his choice (www.mlssoccer.com).  It has been widely reported that Beckham intends to move forward with the expansion bid and that he likes Miami for the bid. The issue here is that he needs other partners to be able to finance the project, and he has had some trouble lining them up. Beckham has a December 31 deadline to get an ownership group together and get approval of a stadium plan (www.mlssoccer.com). It is not known if MLS will give him an extension if he gains an ownership group and needs additional time to gain government approval on a stadium deal. Beckham has approached basketball megastar LeBron James about partnering with him and James is interested in a piece of the MLS team but nothing is agreed upon (www.cbssports.com).  Beckham also has to find a temporary home field until the soccer stadium is ready. MLS seems interested in Miami and has stated that the demographics there have changed since the league was there previously (MLS had a team in the Miami area – Fort Lauderdale and the team folded because of lack of support and financial losses). Other sources say that MLS is lukewarm on the Miami market and wants assurances on the stadium financing before moving forward there. This bid has very strong potential if Beckham gets it done because MLS feels indebted to Beckham for putting the league on the global map.

 

 

 

  • Sacramento, CA – location in Northern California is an area where MLS has only one other team (San Jose) and the bid has many positive aspects.

TV Market Rank: 20th

Metro Population Rank: 27th

Fortune 500 Company HQ: 0 (several large companies located in city/metro area)

Synopsis/Overview – The Sacramento bid to MLS is one that is very positive but also has a few potentially problematic issues. The city has a solid TV market rank but the population of the metro area is smaller than other cities they would competitively bid against for a team. The bid has many moving parts because right now the city is fielding two bids on alternative tracks to gaining an expansion franchise. The first group is headed up by the co-founder of the Sacramento River Cats (minor league baseball) Warren Smith, who has purchased a USL-Pro minor league soccer team franchise to play in downtown Sacramento in 2014 (www.mlssoccer.com). Mr. Smith’s plan is to establish a fan base (part of the MLS requirements for expansion locations) build a front office that understands American pro soccer, and then deliver a new stadium downtown. The other area bid is from the suburb of Elk Grove which is being spearheaded by a public-private partnership involving Mayor Gary Davis and the City Council. The Elk Grove bid is focused completely on the business side of the scenario with the focus on building a brand new stadium on the site of an unfinished mall called Elk Grove Promenade (www.fox40.com).  The Elk Grove contingency has had discussions with MLS and is rumored to be the favored bid of the two. The area having two competing bids would not be good and would most likely resort in the city getting passed over by MLS. Mr. Smith has stated to local media outlets that if it looks like one bid is progressing better, they would all get in a room and rally around one bid for Sacramento (www.news10.com).  Time will tell if they are successful.

 

  • Detroit – The “Motor City” is in the mix for a MLS team but it is more of an outsider at this point at least in terms of the initial expansion to 24 teams.

TV Markets Rank: 11th

Metro Population Rank: 14th

Fortune 500 Company HQ: 9

Synopsis/Overview: The Detroit rumor of expansion to MLS began four years ago, when the Apostopoulos family and their company, Triple Sports & Entertainment submitted the winning bid for the Pontiac Silverdome, which is the former home of the NFL’s Detroit Lions. The dome has not been used much since the Lions moved out in 2002 to play in downtown Detroit. The Silverdome is about 30 miles outside of Detroit and can seat 70 -80,000 depending on the type of event. That would be too large for MLS standards, so they would have to renovate the stadium or tear it down and build a new stadium on the site (www.sports.yahoo.com).  The family has deep pockets and would control all of the parking and other revenues at the stadium, which MLS finds favorable in a venue setup. The family had an elaborate plan to renovate the site which has changed dramatically. Now, the roof had been deflated in early 2013 to save energy and it has been torn apart by high winds (www.mlive.com). The family has said it is installing a solar paneled roof and they have winterized the building. The TV market ranking is very good, the corporate sponsorship support would be strong as well. The big issues with the bid are the state of the economy in Detroit, the population demographics, and the ability of a fan base to support the team long term. At the time of Triple Sports buying the dome site, Detroit had not had a major soccer event since the 1994 World Cup. Since then, the city was awarded a minor league team, Detroit City FC, and they have pretty solid attendance numbers (www.sports.yahoo.com). The population demographics are trending on the decline and MLS is probably unsure of the long term fan support based on the bankrupt city economy in Detroit (though Triple Sports maintains that they need no public money to build the stadium). The very latest proposal is for a new soccer stadium at the old dome site along with a 275,000 square foot retail space development project (www.cbssports.com).  This bid seems like an outside type of bid based on the priority system of MLS at this point.

 

 

 

 

  • Minneapolis, MN – A very strong contender for the final expansion spot of the first wave announced by the league.

TV Markets Rank: 15th

Metro Area Population Rank: 16th

Fortune 500 Company HQ: 18

Synopsis/Overview: The Minneapolis area has all of the elements of a successful MLS expansion bid. They have a potential ownership group, they have an established fan base, and they will have a world class stadium in the near future. The media market size has been the draw for MLS, they need a franchise in the top 15 TV markets and in that northern region of the U.S. Midwest. The Minnesota United currently play in the minor league NASL and are the defending champions with an established loyal fan base (www.mnunitedfc.com).  The owner of the Minnesota Vikings NFL franchise has so much interest in an MLS team, he had the soccer configurations built-in to the plans for the new NFL stadium for the Vikings, which broke ground last week and will be completed by 2016 (www.nfl.com).  In a move that is very similar to the Atlanta bid, the roof would be lowered for soccer, or a covering would enclose the entire upper bowl of the stadium to bring the seating capacity in line with other MLS facilities. This is a very solid bid which has great potential.

 

  • San Antonio, TX – A rapidly growing city with a successful minor league soccer team and a diverse population.

TV Markets Rank: 37th

Metro Population Rank: 25th

Fortune 500 Company HQ: 5

Synopsis/Overview: The San Antonio bid for MLS has been ongoing for several years. At one point, the city was hoping to obtain an expansion franchise as a tenant for the AlamoDome, which was built with taxpayer dollars in the hope of getting an NFL team, and has never had a primary tenant. The city abandoned that plan and moved forward to explore other uses for that facility when MLS informed them they did not get an expansion bid in the prior round in 2007-08. A few years ago, San Antonio was awarded a second tier minor league soccer team, the Scorpions (www.bizjournals.com).  The Scorpions are regularly near the top of their league in attendance at their new soccer stadium, Toyota Field, which is considered by many to be among the nicest soccer facilities in the minor leagues (www.mlssoccer.com).  The stadium can be expanded to MLS standards, and most definitely would be if the bid was accepted. The ownership group would not be an issue and the corporate support for sponsorship would be very strong. The fan base is established through the Scorpions current presence in the market, and the population is growing there and is very diverse, which is attractive for MLS. The TV market is small, which could be an issue, but remember that ranking is of a lower priority to MLS than it is to other sports leagues (www.sportingnews.com).  San Antonio has great potential for an expansion bid, however, it may be in the second wave of expansion further down the line. The success or failure of this bid is tied to whether or not the Miami bid falls apart (because MLS is still a bit lukewarm on that market) and the progress of the Sacramento bid as well. Those are the main bid cities in competition for those last two slots with San Antonio in the mix.

 

 

In the end, the demographics of the TV market, the metro area population, and the involvement of Fortune 500 corporate support are all very crucial elements in the expansion of professional sports.

 

The role of government is also of paramount importance in the expansion of professional sports leagues because the politicians are involved in many facets of developing land for a new arena or stadium and to garner support for the team within the business community.

 

This article series covered the interaction between all of these elements as they contribute to a bid for a potential expansion franchise. The series also covered each major sports league, their respective current situation, and the challenges which are uniquely inherent to each league regarding expansion.

 

In a society that is becoming more technologically advanced, where job related stress is expected to rise due to many factors, and where family time together or time to spend with friends is becoming more limited; sports has and will continue to take on a larger role.

 

The outlet which sports provides through following a team or a particular athlete, attending games or events, participating in sports fantasy leagues on-line, and the interaction it provides with others: either family, friends, or members of fan clubs are going to combine to make sports increasingly relevant as a source of entertainment.

 

That demand for professional sports of all types will create a need for more teams or leagues. The demographics of the country will shape that trend as well with population shifts to other regions of the U.S., for instance the migration of people out of the Northeast to Southern states. The trend is also evident in the population increase in Texas due to the economic growth there and in the migration of more people to the Western United States.

 

It will be interesting to follow the developments over the next several years of some of these situations described in this article series. The scenario currently in Detroit with the bankruptcy filing by their city government is a case study into the rationale behind the impetus by these other cities to explore gaining professional sports teams. The theory being that if their city obtains one or more teams, they can develop and revitalize their downtown centers with an arena or stadium as the centerpiece.

 

The domino theory being that these developments will bring jobs and population retention keeping the tax revenue within the city and making their city vibrant for years to come. The future will determine whether sports will play a central role in the rebirth of the American city. One factor is clear, the money involved in expanding these leagues is too significant to ignore, so expansion is in our future. The other details will be filled in over the course of the years ahead.

 

 

by Frank Maduri

TV Markets and the Expansion of Sports – Part 4

The demographics of a city or metropolitan area, their media market size, the support of the political leadership in the city and the support of the business community are important aspects in determining the expansion of a professional sports league.

 

In this fourth installment of this series, the focus will be on the National Hockey League (NHL) and the potential expansion opportunities for a league which is rapidly growing in popularity. The NHL has witnessed some outstanding revenue growth in recent years which enabled them to obtain a huge television and media rights deal with Comcast/NBC (www.nbcsports.com).

 

In 2012 and 2013, every playoff game from every series was televised nationally via the Comcast/NBC for the first time in the history of the league (www.nhl.com). The NHL has long been considered the “fourth league” of the “Big 4” professional sports in the United States, but the ratings are growing exponentially.

 

The 2013 Stanley Cup Final between the Chicago Blackhawks and the Boston Bruins was a ratings record breaking series on NBC (www.nbcsports.com). This was in a year where the league had a lockout shortened season over a revenue dispute between the owners and the players union.

 

Realignment

 

The NHL realigned their divisions for the 2013-14 season into two conferences with two divisions in each conference. However, unlike other sports, the conferences are unbalanced.

The Eastern Conference has two divisions of eight teams each for a total of sixteen teams. The Western Conference consists of two divisions of seven teams each for a total of fourteen teams. That brings the total number of teams to 30, but many reports have indicated that this uneven conference split was done with expansion in mind.

 

The most obvious expansion would be by two teams to a total of 32 and have both of those teams be added in the Western Conference to balance the league. Numerous sources close to the league have reported that the increased revenues from two additional future expansion teams via the league entry fee and the entry into two new markets was part of the discussion during the lockout negotiations (www.cbssports.com).

 

The other rumor circulating throughout the media is that the NHL may expand by four franchises in the near future. If those reports are true, that would mean a significant revenue infusion to the league through the expansion franchise entry fees and subsequent introduction into four new marketplaces in North America.

 

The TV market metrics are probably the least important in hockey than in other sports because the average person and the consensus among the casual sports fan is that hockey does not translate well to the medium of television. Now, NBC has tried to enhance the broadcasts to change some of that perception and offers some unique camera angles and outstanding production value to their hockey telecasts.

 

However, the NHL makes their money with the live game experience. Last season, following a protracted labor stoppage, the hockey arenas in the NHL averaged game attendance levels at 95% of capacity (www.nhl.com). The NHL live game experience is, in my opinion, the best sporting event to attend.

 

The NHL executives and franchise owners know that they will get their die-hard fans in the building for the games and they have proven that, in a recession or otherwise, those fans will spend money at the games. So the addition of four potential new franchises could bring in more revenue through in-game expenditures, season ticket sales, luxury suite sales, and merchandise sales.

 

North of the Border

 

It is important to note that unlike the other major sports, Canada is a legitimate expansion area for the NHL, and a likely area of future expansion. The sport of hockey is so well loved and supported in Canada, that the NHL could put a franchise basically almost anywhere in that country and it would be a successful venture.

 

That type of widespread and virtually assured support cannot be found in the U.S. hockey marketplace, but it is surprising how well the NHL has done in cities such as Nashville, Tampa, Dallas, San Jose, and Anaheim.

 

The list below will also demonstrate that the interest for an NHL franchise in some U.S. markets is very high at this point.

 

Potential Expansion Markets

 

The following cities are potential candidates for expansion franchises in the NHL (all TV markets data courtesy of www.stationindex.com – all Fortune 500 company information courtesy of www.money.cnn.com – and all Metro Population data courtesy of www.census.gov ):

 

  • Seattle, WA – Has emerged as a very strong candidate for expansion based on the plans to build a new arena in the downtown area. The location, and population size and demographics make it a good fit for the NHL.

TV Market Rank: 14th

Metro Area Population Rank: 15th

Fortune 500 Company HQ: 4

Synopsis/ Outlook: The Seattle bid gained traction with the league when the Phoenix Coyotes looked as if they may relocate. The NHL quickly lined up Seattle as a potential alternative site to move the franchise. They even had an ownership group lined up. The location is key for this bid because it addresses a region (Pacific Northwest) where the NHL has no current presence other than the Vancouver Canucks. The population and TV Market sizes are very good, and corporate support would be strong. The population is hockey-savvy as they have several youth hockey and minor league hockey teams in the region. The arena situation would be the murkiest part of the bid today. The team may have to play temporarily at the Key Arena, which would be very small for hockey and has a strange configuration for hockey. The new arena being planned (see Part 1 of this series) is primarily for the NBA expansion team. The hockey team is viewed as the second tenant. I do not know if they would build the arena solely for a hockey team with no assurances from the NBA on a future expansion franchise for the city. Overall a very strong bid.

  • Quebec City – The second most widely regarded bid from NHL insiders is the bid from Quebec, which of course, was home to the Nordiques until they moved to Denver in the mid 1990s. A historic city with a rabid base of hockey fans.

Synopsis/Overview – The TV markets and other data does not apply to this Canadian city. The potential for regaining an NHL franchise is of tremendous importance to this city. The Mayor and the city government in Quebec City approved a new arena without a team or the assurances of an expansion team. In a “if we build it they will come” type of move they are currently in the construction phase of the new arena which is next to the old arena where the Nordiques once played. The NHL was so impressed with the confidence of the government and the people there, that the Quebec bid is thought to be a very strong one among league insiders.

  • Houston, TX – A “dark horse” candidate but a place that has shown interest in the past. It was one of two cities (Hartford was the other) that was used as a bargaining chip by the Penguins ownership to get the new arena in Pittsburgh done.

TV Market Rank: 10th

Metro Population Rank: 5th

Fortune 500 Company HQ: 23

Synopsis/Overview: Houston has some very strong positives for a NHL expansion bid including excellent demographics and TV market rankings. The city has a rapidly growing economy and is home to a whopping 23 Fortune 500 companies – so the right ownership group and strong corporate support would not be an issue. Due to the rapid economic growth the city has a changing population with transplanted residents from across the country. The bid would pitch the fact that the changing demographics mean more hockey fans living within the city metro area. The arena is state of the art and hosts the NBA’s Rockets currently. This bid has potential, and hockey has been successful in Dallas, but the league may be resistant if they are unsure of long term fan support with all the other major sports already having a presence in that market.

  • Markham, Ontario (other Toronto area city) – Toronto is the largest hockey market in the world. It currently has one team, the Maple Leafs, and they have struggled for a long period of time to get back to relevancy.

Synopsis/Overview: Since the other metrics do not apply here in a Canadian market, I will summarize this complicated bid. The issue here is that the league office and ownership had great support behind a bid for a second team in the Toronto market. In the past two years, some of that support has waned. The reports I have read indicate now that the Markham bid, or a bid by another Toronto area city, would very likely not get approved if the league expands by two franchises. It would have a better shot of getting in during the next round of expansion by two teams. The rationale behind this is two-fold: 1. The Maple Leafs are not thrilled about sharing the market with another franchise, especially an expansion franchise that will cut into their revenues directly. 2. The front runners for expansion at this point are not two Western cities which the NHL would need to balance the two conferences. Tim Leiweke who is a top executive with AEG (owner of arenas and sports teams) did a presentation last week and during the Q & A session which followed he stated the second Toronto team may not happen at all. He stated that the meetings he was involved with have Seattle and Quebec as the two front-runners and Kansas City and Las Vegas as very strong contenders for the second round of expansion(www.yahoo.com)  This would make sense because Quebec would bring the Eastern Conference to 17 teams, and Seattle would bring the West to 15 teams, and then the potential additions of two more Western teams would balance the league at 17 teams in each conference (total of 34 teams). Markham just approved financing of $350 million for an NHL caliber arena north of Toronto (www.cbc.ca). It could be very interesting what happens here with this bid. The University of Toronto commissioned a study which was reported by the CBC that the country of Canada could easily support 12 NHL teams (they currently have 9 teams in Canada). However the concentration of wealth in Toronto is what makes that market so attractive to the NHL. It is a risk to build an arena, but Markham decided in a slim margin in their city council vote, that the risk was worth taking.

  • Las Vegas, NV – One of the most popular tourist destinations in the world would provide a very robust stage for the NHL to showcase their international star players.

TV Markets Rank: 42nd

Metro Area Population Rank: 31st

Fortune 500 Company HQ: 4

Synopsis/Overview: The Las Vegas bid is considered within many circles close to the NHL to be a very strong potential contender for a franchise. The TV market ranking is a little low (Buffalo has an NHL team and is 51st) and the TV market as I stated earlier is not looked at in hockey as crucially as it is for other sports. The population is low too, but the league has several current franchises in smaller metro areas currently. The three biggest issues with a potential Las Vegas expansion bid are: the selection of a stable ownership group, the ability of the metro area population to support a team for the long term, and the arena. The NHL offices have expressed issues with the arena situation there numerous times in the past through various media reports. The largest arena in the city, The Thomas & Mack Center, does not have an ice sheet. That means that the temporary home for the team would have to be the MGM Grand Garden Arena which seats about 16,000 for hockey which is small (www.cbssports.com). However, MGM and the before mentioned AEG group recently announced a joint partnership on a brand new 20,000 seat arena to be built between the Monte Carlo and the New York, New York Casino Hotels (www.finance.yahoo.com). Just last week, the first renderings of the new Vegas arena went public. It will immediately be able to host an NBA or NHL team. The project is slated to begin in April 2014 and be finished in 2016. This project addresses the key issue the league had with Las Vegas. The NHL has always talked about wanting to be the first professional league to tap the Vegas market, and one final note, Jerry Bruckheimer is very close with the top executives at AEG. He has openly discussed wanting to own an NHL team in Las Vegas. A very strong bid made stronger by the new arena project.

  • Kansas City, MO – An interesting bid it would open up that part of the Midwest to the NHL and create an instant rivalry with the St. Louis Blues.

TV Markets Rank: 31st

Metro Population Rank: 30th

Fortune 500 Company HQ: 2

Synopsis/ Overview: Kansas City was also included in the NBA potential expansion bids. The strength of the bid is still the arena, Sprint Center, which is world class and has no permanent tenant. The taxpayers want a team for the building since they approved tax money to build it. The political goodwill is very strong here, and the corporate base would be supportive of an NHL team, though that support could be better in other cities with less sports teams already (Kansas City has the Chiefs in the NFL, and the Royals of MLB) and the other issue that may or may not be a mitigating one (depends on what reports you read) is that the NHL was already in Kansas City (the Scouts) and it lasted only a couple of years and the team struggled to get attendance and fans, so they moved to Colorado and rebranded as the Rockies. The Rockies eventually moved to New Jersey and became known as the Devils (www.nhl.com). So much has changed economically and demographically since the time of the Scouts that I think it is an unfair comparison to hold against Kansas City at this point. This city has a solid bid and the NHL brass will have to determine if it is worthy of a team when comparing all the variables as compared to the rest of the cities on this list.

 

The Future

 

The unique aspect about the NHL part of this series on sports expansion is that the league intends to expand. The other leagues talk about expansion as an eventual thing if all goes well, other leagues like the NBA only want to expand by one or two teams to avoid splitting revenue dollars further.

 

The NHL is fairly aggressive in their expansion goals. They have talked at media events in the past about expanding within certain time frames. This list is a very viable list of cities that could very well be hosting an NHL team in the next three to five years.

 

In the event that the reports are true and Seattle and Quebec City are the front runners for the two expansion spots, that would probably create a second round of expansion because of the geography and politics involved.

 

The entry of Quebec into the Eastern Conference would still leave the East with more teams, so the NHL would have to add two more teams in the Western Conference to balance the league. The relocation of one of the current teams in the East being sent to the Western Conference would be highly problematic from a political point of view.

The owners of the Detroit Red Wings and Columbus Blue Jackets fought for years to get moved into the Eastern Conference, and now that they have moved East, then the league will be reticent about moving one of them back to balance the conference sizes.

 

If you are a hockey fan, that is exciting news, and if you are not a hockey fan, but you are a sports fan; then it could give you something else to do while on a long weekend in Las Vegas in the future.

 

The final part of my series will be up next and that is the future expansion of MLS (Major League Soccer).

by Frank Maduri

TV Markets and the Expansion of Sports – Part 3

The role of TV markets in the potential expansion of professional sports has been well documented in the first two parts of this series. The first part dealt with the potential expansion of the NBA, the second part dealt with the potential expansion of Major League Baseball, and this third part of the series will deal with the potential expansion of the National Football League (NFL).

 

The focus on the NFL is timely, since the expansion discussion was again central to the media coverage of the league recently. The NFL began playing regular season games in London calling them the “International Series” beginning in 2007 (www.nfl.com). The most recent game in London was played on October 27, with the San Francisco 49ers taking on the Jacksonville Jaguars.

 

In the media events leading up to this game in London, NFL Commissioner Roger Goodell spoke openly about the determination for the NFL to place a team in London and Los Angeles. He added that he did not care which city went through the process first, but that they are both targeted areas for the NFL to have a presence within in the future (www.cbssports.com).

 

The initial expansion talk for the NFL began around the Super Bowl in 2012 when the Commissioner discussed the league expanding from 32 to 34 teams. In recent months, the NFL owners committee has stated that they like the league at 32 teams and that any changes would most likely come by relocation of struggling franchises.

 

 

Current Situation

The NFL is currently made up of 32 teams split into two conferences of 16 teams each. In each conference the teams are split into four divisions of four teams each, so the schedule is perfectly balanced. The alignment makes sense and they have an excellent system for rotating the schedule for inter-conference and inter-divisional games.

 

The NFL is the most watched sport in the United States, and has a huge level of interest that dwarfs the other members of “The Big Four” major sports leagues. The number of people to support and watch additional NFL teams is there, so the debate will always rage on about potential expansion of this tremendously successful league.

 

The NFL frequently has seven or eight of the Top 10 most watched television events every year. The Super Bowl, of course, is the most watched television event on the calendar in the United States. It has set records in recent years for TV viewership, which some reports have speculated is driven by the recession in the U.S. and more people staying home to watch it in smaller groups.

 

Sunday Night Football on NBC is the most watched network primetime show every year. The importance of the medium of television to the NFL is very crucial for an expansion market, more so than with other sports.

 

Potential Expansion Markets

 

The potential for expansion in the NFL is a much shorter list than for the other leagues because the league has publicly stated that it does not want to expand much beyond the 32 franchises they have currently. This is also due to the fact that the owners do not want to split the revenue sharing “pie” too much further.

 

Here are the most likely candidates for an NFL expansion franchise:

(TV markets data courtesy of www.stationindex.com , Metro population data courtesy of www.census.gov and the Fortune 500 data courtesy of www.money.cnn.com )

  • Los Angeles, CA – The largest city and the largest TV market without an NFL team. It has been on the NFL expansion radar screen for a long time. At one point the city had two NFL teams that both left, which is why support for a replacement franchise lagged for many years.

TV Market Rank: 2nd

Metro Population Rank: 2nd

Fortune 500 Company HQ: 10 (in general area)

 

Synopsis/Outlook: The Los Angeles bid is a very likely expansion or relocation destination for an NFL franchise or two. The population density, the huge TV and media market, and the corporate sponsorship capabilities are definitely sufficient to support 2 teams. The plan at this point would be that those two teams would share a stadium similar to the Giants and Jets currently. The downtown stadium plan supported by AEG has lost support politically and will not happen. The City of Industry plan is still on the table and is the most likely site for a future state of the art NFL stadium. The temporary stadium would most likely be the Rose Bowl in Pasadena until the new stadium construction is completed. The most likely relocation candidates would be the Oakland Raiders (who have a major stadium issue with the Coliseum and no public dollars to fix it in Oakland), St. Louis Rams (who have an “out clause” in their lease after next season and are fighting with the city of St. Louis over a renovation plan for their current stadium), and the San Diego Chargers (they are just a couple of hours down the road and they have been working on a new stadium deal for over 15 years now). The NFL and the owners have all made statements indicating that they will be in L.A. sooner rather than later. One final note, MSG Network interviewed former basketball legend and current L.A. Dodgers part-owner, Earvin “Magic” Johnson during halftime of the NY Knicks game recently, and he publicly stated that he wanted to help bring an NFL team to Los Angeles. When high profile men with money and connections start talking about their desire to do it, we have all seen that it is only a matter of time before it gets done.

 

  • San Antonio, TX – The second largest city in the country by population without an NFL team. The city has a diverse group of potential fans, and the area is known for being very loyal to their other professional team, the Spurs of the NBA.

TV Markets Rank: 36th

Metro Population Rank: 25th

Fortune 500 Company HQ: 5

 

Synopsis/Outlook: Many reports I have read throughout the media reference sources from within the NFL that believe that San Antonio and Toronto are the only other markets outside of L.A. which could successfully support an NFL team. The issues with San Antonio and a potential bid for expansion are still numerous: the city is in the territorial rights zone for the Dallas Cowboys, the metro population is good but the suburbs are non-existent, the TV market is good but not great (though the NFL has current franchises in much smaller TV markets), and the stadium is problematic as well. In order for a bid to be successful, Cowboys owner Jerry Jones would have to approve the move into his territory (he has made statements of support in the past). The right ownership group would have to emerge with enough capital to compete against the Cowboys (who are immensely popular in the entire state) and the Houston Texans (who play about a 2 hour drive away). The final piece is the stadium, they have the Alamo Dome currently, but it was built several years ago. It would need by some estimates between $100 million to $500 million in renovations to be an NFL level facility. Most people believe that for a San Antonio bid to be accepted, the Alamo Dome would be used as a temporary home while a brand new stadium would be built for the NFL team. The government willpower and support is there to undertake that project, they have a growing economy, and the corporate sponsorship for such a venture is there as well. If the right pieces fall into place, this is also a very likely future expansion location for the NFL.

  • Toronto – Intriguing potential expansion opportunity for the NFL to fully integrate into Canada.

Synopsis/Overview: The TV market and other demographic data are not applicable for this Canadian city. The potential bid does have some very strong attributes. Toronto has a very diverse population base which appeals to the NFL and their strategic interest in growing the sport internationally. The city currently hosts one regular season game each year under an agreement with the Buffalo Bills. The game in Toronto regularly plays to a sold out crowd, so the demand is there for the NFL product in Canada. The other potential avenue outside of expansion is the potential for the Buffalo Bills to relocate to Toronto. However, the City of Buffalo just committed a huge amount of money and resources to the renovation of Ralph Wilson Stadium and the Bills signed a new lease in Buffalo as well, making that relocation rather unlikely. The stadium in the short term would be the Rogers Centre (formerly the SkyDome) and then a new stadium would be built for the expansion NFL franchise. Corporate support would not be an issue, nor would the right ownership group. A solid potential bid.

  • London, United Kingdom – The London bid is gaining tremendous momentum at this point. It would bring the NFL into the global stage faster than the other major U.S. sports leagues.

Synopsis/Outlook: The situation in London is similar to Toronto, the TV markets and other demographics do not apply. The NFL has an “International Committee” which has been studying the potential for international growth of American football for years now. Some sources inside the NFL in the reports throughout the media say the committee should be named “the London Committee”. London is really the only viable option for international expansion. The corporate support, with London being a major financial and commercial hub in Europe, would be excellent for a future NFL franchise. There are fans who question why the NFL would want to put a team in London and believe that it is a bad idea. If you take away all the other positive attributes about the city, the only statistic needed for the rationale behind why the NFL wants to have a full time presence in London is: population. Some estimates have the population of London within city limits at 9.7 million, the greater metro area estimates are 13 million to 21 million people (courtesy of the Greater London Authority). The NFL is not currently in LA, so after the New York/New Jersey metro area, the next largest metro area the NFL has a franchise in is Chicago at approximately 9.5 million people (www.census.gov). The potential expansion to London would add another market with the population base of New York or Los Angeles. That offers the NFL a very unique way to expand the league into a very large marketplace. The bid would be solid as the team would have several potential ownership groups and they could play at Wembley Stadium at least initially. In fact, Fox Sports, reported over the weekend that the London based professional soccer club, Tottenham Hotspur, is proposing to build a brand new 65,000 seat stadium that could be shared with a future NFL franchise. When that sort of project is being proposed it validates that the NFL and the city of London have had several behind the scenes meetings about the expansion possibilities there. The relocation route could be another potential avenue into London, with the Jacksonville Jaguars being the most likely franchise for relocation there, according to several media reports. The owner of the Jaguars, Mr. Khan, has ties to London and the Jaguars have the lowest merchandise sales in the NFL. They also currently play in the league’s smallest market, Jacksonville, and they have committed to playing 3 games in London over the next 3 years.

 

Final observations

 

 

The NFL is the most popular professional league in the United States, and it is poised to expand into a few of the remaining markets left that they have not tapped. In my opinion, I think the NFL needs to be in Los Angeles, the game translates so well to the medium of television and it makes no sense to not have a franchise in the second largest TV market in the country.

 

Furthermore, I think the league would do very well with a team in San Antonio, but I do not think it will happen for a long time. The Toronto move is less likely now that the Bills are staying in Western New York, and the London move is complicated. On the surface, I understand why they want to make the move over to London, but logistically that would be a major headache for the NFL.

 

Every U.S. based team that played over there would have to have a bye week the following week, and the London based team would have to fly over here and spend three to four weeks straight on the road in various regions of the U.S. (Northeast, Midwest, etc.).

 

An additional consideration is the conversion rate of the currency, if the contracts for the players are in U.S. dollars, and they are living during the season in London and using the Euro, that is going to be a problem. London is also one of the most expensive cities to live in, so most of the players would opt to leave their families back in the U.S., which I think will definitely impact how the team in London would be able to attract top players to sign to play over there.

 

So each expansion possibility has unique issues here, even the L.A. bid, it will be interesting to see what the future holds for the NFL. The next part of this series will focus on the National Hockey League (NHL) and the potential for that league to expand, which is very realistic in the near future.

 

 

by Frank Maduri

TV Markets and the Expansion of Sports – Part 2

The expansion of professional sports is tied to a few very important factors, and one of them is the size of the television market that city is within, other factors are tied to population and corporate support. The first part of this series introduced those factors and the role of revenue sharing in league expansion. It then went on to look at the NBA potential expansion sites.

 

In this second part of the series, I will look at Major League Baseball (MLB) and the potential expansion of this top-tier sports league. I have read and researched these potential bids for years, and I have a great deal of knowledge on the subject.

 

Structure

 

Major League Baseball (MLB) consists of 30 member teams split into two leagues. Each league has 15 member teams split into three divisions. Each division consists of five teams. The league recently made the change to two equal leagues after years of the National League consisting of 16 teams.

 

One theory for this shift to two even leagues is that it was done to expand the league by anywhere between 2 and 4 teams. The MLB is largely recognized as the second most popular sport in TV ratings, revenues, and media coverage next to the NFL, so the league executives and owners are always looking at ways to grow revenues.

 

Some analysts and experts covering MLB believe that for the league to expand it would have to do it by four teams. Meanwhile, others believe that expansion by two teams is enough, and that any further expansion would further dilute the talent pool of players. This dilution of the talent pool would ultimately damage the integrity of the sport.

 

The MLB owners do have a system in place of revenue sharing, and if certain teams do not meet certain benchmarks, then they are entitled to additional revenue sharing funds. The owners, particularly those who own the larger market teams, will be very reluctant to share revenues with smaller market expansion franchises that will struggle initially to put a decent team on the field.

 

The impetus for expansion though, is that the current owners could probably obtain record amounts of money in entry fees for each expansion team, and the entry into new markets will grow the media revenue streams as well.

 

One final note on the background for the MLB to keep in mind is that, similar to the NBA, they have a couple of teams that are struggling which could be relocation candidates. This could impact the expansion process as well because if a current franchise is relocated, then that ownership group does not have to pay an expansion entry fee, which is lost revenue for the league. Moreover, the relocation of one or both franchises to another city could eliminate a very viable market for future expansion.

 

Relocation for the A’s and Rays?

 

The two teams that are involved in potential relocation discussions at this point are:

  • Oakland A’s
  • Tampa Bay Rays

 

 

The situation in Oakland is a very long and convoluted story, but basically it boils down to this: the A’s play in a very old stadium (the Coliseum) and they would like to move to San Jose. The city of San Jose has a stadium site set aside and ready to be sold to the A’s ownership group. MLB has stated that the A’s cannot move to San Jose because it is within the territory belonging to the San Francisco Giants. The Giants have been unwilling to negotiate a deal with the A’s to allow them to move to San Jose (www.mlb.com).

 

Recently, San Jose filed a law suit against MLB saying that they have delayed making a decision on the A’s relocation. The delays by MLB have hurt the city of San Jose because they have set aside land that they cannot sell, and they are not collecting any tax revenue on the vacant land (www.cbssports.com).  This issue has been lingering since 2009.

 

The most recent development with the A’s is that their lease has now expired with the Coliseum and, according to several reports, the team wants a 2 year lease extension (www.cbssports.com). The Oakland Stadium Authority wants the team to sign a 5 year lease. The A’s obviously do not want to play there for another 5 years in a stadium that has a lot of current issues.

 

The MLB main offices have interjected and said that if the A’s do not get a 2 year lease in Oakland, then they will play their home games in 2014 in San Francisco and share AT&T Park with the Giants (www.cbssports.com). The situation is a mess, and MLB has to determine a way forward with the A’s very quickly whether it is San Jose or elsewhere as the future home of that franchise.

 

 

The Tampa Bay Rays have a stadium and attendance issue as well. The current stadium, Tropicana Field, is in St. Petersburg and some fans complain about the location and distance from downtown Tampa to get to the ballpark. The Rays are locked into a lease there until 2027, and the Mayor of St. Petersburg will not allow the team to even discuss other stadium sites outside of the city limits.

 

The Rays ownership maintains that they need a new stadium to gain increased revenues so that they can stay competitive with other teams. Others believe, myself included, that the stadium is fine and that the real issue is that the current ownership group does not have the money to compete and that they hoard the revenue sharing money they get from the league. The struggling economy is the other issue effecting attendance in that market. The ownership should sell to a new group that has the money to keep the team competitive.

 

 

Expansion Possibilities

 

The following cities have the potential to be expansion locations for MLB in the future: (all TV Markets data courtesy of www.stationindex.com all Fortune 500 corporate info courtesy of www.money.cnn.com and all metro area population info courtesy of www.census.gov )

 

  • Sacramento, CA – location in Northern California is an asset that could be used by MLB and the A’s to relocate the A’s or expand the league.

TV Market Rank: 20

Metro Area Population: 27

Fortune 500 Companies: 0 (several large companies in area)

 

Synopsis/Outlook: Sacramento has several positives for an expansion bid including a very good TV market ranking, strong metropolitan population ranking, and demographically it is a very diverse city. Baseball has fans across the spectrum of ethnic groups so that is a big positive. It could be a solution to the before mentioned A’s situation as it is a 90 minute drive from the Bay Area. The city has only one major professional team, the Kings of the NBA, so the corporate sponsorship dollars would not be spread among multiple major teams. The stadium situation would entail renovating and expanding a very nice facility they currently have for their AAA team, Raley Field, which was constructed in 2000.

  • Portland, OR – A good strategic location in the Northwest, and a previous contender for MLB expansion, but the bid could have some issues.

TV Market Rank: 22

Metro Population Rank: 24

Fortune 500 Companies: 2

 

Synopsis/Outlook: Portland has been in the running for an MLB expansion/relocated team in the past, most recently losing out to Washington, D.C. when MLB relocated the Montreal Expos. After they lost that bid, the city decided to not fight the relocation of their current minor league baseball team which moved to Arizona. The city government then converted the baseball stadium to a soccer specific stadium in an ultimately successful bid to land a Major League Soccer franchise (the Timbers began play in 2009). The city has one other pro team, the NBA’s Trailblazers, and the fan support is very good. They would have a regional rival with Seattle, though the two cities are further apart than most people think: they are the approximate distance between New York City and Baltimore. The question would be whether the population base can support another team over the long term, the corporate sponsorships are more limited than in other cities, and the biggest issue with the bid is a stadium. Now that the other stadium was converted for soccer, a new stadium for baseball would need to be built. The climate there has several days of rain in the MLB part of the calendar, so a retractable roof could be a needed element for a winning expansion bid which is very expensive. I do not believe the political or public will is there to approve money for use in a stadium construction project. Unless that issue is resolved, Portland is an unlikely choice for an expansion team.

  • Nashville, TN – An interesting contender in a city that is experiencing growth and is located in an area where MLB has a limited presence.

TV Markets Rank: 29

Metro Population Rank: 36

Fortune 500 Companies: 3 (along with numerous large corporations)

 

Synopsis/Outlook: Nashville is experiencing tremendous growth and would be an intriguing bid for an MLB expansion franchise. The issues here though are the population rank is still a bit low when compared to other cities, and the stadium is a big problem. The AAA team in Nashville plays in a very old stadium, so a new facility would definitely need to be built for an MLB team to play there. It is unclear whether the state and county government would support a stadium referendum, and whether the public would divert tax dollars to that endeavor. Due to the high tourism there for music, they could use the model of Atlanta and other cities and approve new tourism and hotel room taxes to cover the outlay of the public contribution to finance a new stadium. They do have several sites under consideration for a new AAA facility at this time, land is not an issue. The city supports two major sports teams at this point (NFL’s Titans and NHL’s Predators) and the corporate sponsorship support should definitely be robust. They would have regional rivals with Atlanta and Cincinnati if they were in the National League. It is an interesting potential bid but much of it would depend on the viability of the stadium being constructed and if MLB feels the population could support the team over the long haul. Ownership groups could be an issue here as well.

  • Charlotte, NC – This is also a very interesting potential site for MLB, it fills a void in their current franchise makeup between the D.C. area and Atlanta in a growth region in the Southeast.

TV Market Rank: 25

Metro Population Rank: 23

Fortune 500 Companies: 11 (plus numerous Fortune 1000 companies)

 

Synopsis/Outlook: Charlotte is an excellent potential contender for MLB expansion. The city is in the Top 20 fastest growing metro areas in the U.S. and it is the second largest financial center (next to New York) in the country. The population demographics, the TV market in the top 25, and the immense corporate sponsorship support potential are very attractive attributes for a Charlotte bid. The city is just finishing construction of a brand new baseball stadium for the AAA Charlotte Knights which will open in April 2014 (www.charlotteknightsuptown.com). The city supports two major sports teams and could definitely support a third team. The stadium would need to be expanded and renovated to MLB standards but the political support would be there and corporate support as well. I see it as a great fit for an American League expansion city with so many transplanted people from the Northeast living in Charlotte. A berth in the AL East would bring the Yankees and Red Sox in regularly which would create tremendous attendance nights for an expansion team, similar to the effect it had initially with the Tampa Bay Rays drawing very well on nights where those teams visited.

  • Montreal – The MLB bid to potentially return to this city in Canada is interesting.

Synopsis/ Outlook: The other market data is not applicable in Canada so I will summarize this bid quickly because it is an outside choice, but it has been discussed within MLB as some media outlets have reported. The strong points for a Montreal bid are: population size in line with Portland and Charlotte, a built in fan base with the former Expos fans, a history to jump start the “new” Expos franchise, and strong corporate support potential. The downsides are the media rights deal locally would be smaller than a U.S. based expansion team, the right ownership group might be an obstacle, and the stadium: Olympic Stadium was constantly being renovated when the Expos played there. It will be next to impossible to get funding for a new stadium but it may be cheaper than overhauling Olympic Stadium to get it to current MLB standards. The other sign that MLB is testing the waters in Montreal: the Toronto Blue Jays are going to play exhibition games there in 2014 at Olympic Stadium (www.mlb.com).

  • Hartford, CT – Intriguing location between New York City and Boston but too many issues to be a real contender.

TV Market Rank: 30

Metro Population Rank: 46

Fortune 500 Companies: 4

 

Synopsis/Outlook: Hartford has been mentioned in other sources I researched as a potential candidate for MLB because of the location and TV market size. The city is the insurance capital of the U.S. and corporate support would be robust since this MLB team would be the lone major league team in the city. The population demographics are small by MLB standards but the fans would be baseball savvy due to the Northeast region being very strong in that regard. The city has no stadium for baseball and would have to build one which would be difficult in the economic climate today, plus the right ownership group is problematic. This bid is a long shot.

  • San Antonio – A city that has been mentioned often as a relocation potential location when the Marlins had stadium issues. A growth area both economically and demographically.

TV Market Rank: 37

Metro Population Rank: 25

Fortune 500 Companies: 5

 

Synopsis/Outlook: San Antonio is the second largest city in the country without another major sports team, and is the largest city in the country without an AAA or MLB team (www.census.gov). However, the biggest issue they have they have is the small population of their metro area. San Antonio has almost no suburbs, so the population is packed within the city limits. The TV market rank is not great either, and they have one major sports team (NBA’s Spurs) which receive excellent fan support, but it is well known that when the Spurs play on national telecasts that the ratings suffer. The economic growth and the corporate support would be strong points for a bid, they would have no issue getting an ownership group together. The government support is excellent as they were very willing to put up funding for a new stadium, which would be absolutely critical, since the baseball stadium for the AA Missions is not suitable even as a temporary home. San Antonio served as the “stalking horse” by the Marlins to get a new stadium built in Miami. One last interesting note, the Texas Rangers played two exhibition games at the Alamo Dome in San Antonio in 2013 (www.espn.com). The dimensions were strange because the dome was built for football, but it could prove to be a useful experiment should the dome have to serve as a temporary home for an expansion team.

  • New Jersey – A very interesting potential target for MLB. It is a longshot but it is potentially plausible given the right ownership group.

TV Market Rank: 1

Metro Population Rank: 1

Fortune 500 Companies: 21

 

Synopsis/ Outlook: The New Jersey bid is a stretch because of the anti-trust exemptions which place it within the territory of the Yankees and Mets. However, an exception to that rule was worked out when the Nationals moved to D.C. which was within the Baltimore Orioles territory. MLB did a study in the year 2000 which concluded that New Jersey was the top expansion location because of the population, the TV markets, the revenue from cable television to broadcast games, and the population size. The government would be very willing to partner on building a stadium in Northern New Jersey, and the right ownership group would be needed to pay an extra fee to the Yankees and Mets for territorial rights infringement up to estimates of $100 million. That would be on top of the expansion entry fee, but the cable networks could pay a huge sum of money to televise games for a third team in the New York metro area.

 

The next article in this series will be much shorter in length as it will cover the expansion potential of the NFL, which does not have many viable avenues for expansion.

 

 

 

 

 

 

 

 

 

by Frank Maduri

TV markets and the expansion of professional sports – Part 1

A major factor in the decision regarding the expansion of professional sports teams is the size of the television market for the respective city proposing to join one of the major sports leagues.

 

In the changing landscape of the medium of television, live sports event programming is a ratings gold mine for the networks. Due to the advancements in smart phones, tablets, social media, and other devices it has created a scenario where it is very difficult for a fan to not learn the outcome of a given sporting event.

 

These advancements have changed the practices for the viewing of sporting events because many of them are no longer recorded to watch at a later point. The fans of a respective sport want to watch the event live as it happens, which has created a surge in the ratings for sporting events on television, and it also creates added importance for the major sports leagues to be in position to capitalize on those ratings.

 

Each league has their own unique challenges when it comes to expansion and the maximization of television ratings and other revenue streams. This first part in a multi-part series will detail the current status of each of the “Big Four” sports leagues and their future potential expansion prospects.

 

The “Big Four” leagues are each in different positions in their own respective growth cycles with regard to expansion. This is driven by a variety of factors:

  • Size of the league currently
  • Locations of their current franchises
  • Current revenues/revenue projections for the future
  • Stadium/arena situation
  • Dedicated and stable ownership in the respective market
  • Corporate Sponsorship and local/state government support

 

A point of clarification on the revenues and projected revenues item listed above before moving into the individual leagues. Each league divides certain revenues among all of the respective member franchises.

 

Some leagues (NFL, NBA) have ownership boards that like the number of teams they currently have and do not want to “split the pie” too much further with expansion franchises. Particularly because most expansion teams will not be successful in the standings, so they could qualify to receive higher amounts of revenue sharing funds based on the rules for that respective league.

 

The revenues for the National Hockey League (NHL) are expected to rise but the league is at a point where they just came through a labor disruption with the 2012 lockout. The owners and players both have an interest in getting more out of their “piece of the pie”. One way for them to do this quickly is to expand the league because the fees paid by the new owners for entry into the league is an immediate revenue injection.

 

National Basketball Association (NBA)

 

The National Basketball Association (NBA) currently has 30 member franchises split into two conferences of fifteen teams each, within each conference are three divisions consisting of five teams in each division.

 

The NBA could conceivably expand by two teams to 32 at some point in the future. Those who follow the league know that they NBA just went through a roller coaster saga with the Sacramento Kings franchise and their ownership change.

 

The former owners, the NBA, and the city government could not come together on a deal for a new arena, and the current arena in Sacramento is badly outdated compared to other venues in the league.

 

It appeared that the team might be relocating to Seattle, where the league had a presence for years, until they moved the Seattle Supersonics to Oklahoma City in 2008 (www.nba.com). The loyal fans in Seattle have been trying to get their NBA team back and were very upset that it was moved away (also over a failed new arena deal) and the NBA has been trying to correct that public relations nightmare ever since.

 

In the end, the city of Sacramento put together a solid ownership group to bid for the team to keep it in the capital of California. The NBA approved the deal because it did not want to relocate another franchise and have angry fans in Sacramento like they did in Seattle. The new ownership group quickly moved on a new arena deal in a different location of Sacramento than the previously failed sites, and the team did not move out of Northern California (www.nba.com).

 

This last minute change thwarted all of the work that Seattle did up to that point to secure a new team to replace the franchise the city lost. Therefore when you consider the expansion markets for the NBA they are as follows: (all TV markets data courtesy of www.stationindex.com and the demographic info was provided by www.census.gov and the Fortune business info is courtesy of www.money.cnn.com )

 

  • Seattle – they have a history and established fan base from the Supersonics years of being located there.

TV Market: ranked 14th

Metro area population: ranked 15th

Fortune 500 companies: 4

Synopsis/Outlook: The Seattle market is too large from a population and TV market size perspective for the NBA to ignore. They have a dedicated potential ownership group lead by Chris Hansen, who has spent large sums of his own money to secure land near the other 2 stadiums in downtown Seattle to build a state of the art arena. The political climate has changed because the officials there learned from the past mistake of not allocating government
funds to a new arena back in 2007-08. The public there is very dedicated to gaining a new team, and they have a built-in fan base. The outlook is highly likely that they will gain a team, either through expansion or relocation. The latest news here is the Milwaukee Bucks have an arena issue, and the NBA has said they need to solve it or else they would entertain relocating the team elsewhere. Seattle would be the first destination on the list for a relocated franchise, if the Bucks cannot get an arena deal consummated with the State of Wisconsin.

 

  • Tampa/ St. Petersburg – attractive location for the league could join Southeast Division in expansion.

TV Market: 13 (pretty big compared to markets currently in league)

Metro Population: 18th ranked

Fortune 500 companies headquartered: 0  (5 in Fortune 1000)

 

Synopsis/Outlook: The population demographics and the TV market size are strengths for this city. The arena there hosts an NHL team and is state of the art. The issues with a bid from this city are the lack of major corporations which could negatively impact: corporate sponsorships, luxury suite spending, and media air time buys. The other factor to consider was the area was hit hard by the recession and that could have an impact on attendance figures. The two other major detriments are no known committed ownership groups and the NBA has two other teams in Florida including one a couple of hours away in Orlando.

 

  • Pittsburgh – has the other 3 sports and wants to be a “Big 4” city

TV Market: 23rd

Metro Population: 22nd

Fortune 500 company HQ: several- including suburbs estimated 13-15

 

Synopsis/Outlook: The strengths for this city for the NBA bid are numerous including top 25 TV market, a brand new arena built for the NHL Pittsburgh Penguins, and very strong major corporation presence. The Sporting News has named it the “Best Sports City” in the past, and the fans of their current teams are known for their passion. If the right ownership group could put together a strong bid, this could be a very viable option for an NBA expansion franchise.

 

  • Kansas City – an outsider looking in – some good points and some question marks for a potential expansion bid.

TV Market: 31st

Metro population: 30th

Fortune 500 Company HQ: 3 (several other large corporations with offices here)

 

Synopsis/Outlook: This city is a solid contender for NBA expansion bid with the location being between Oklahoma City and Denver, which would create regional rivalries which help expansion teams. The arena, Sprint Center, was built in 2007 and the taxpayers desperately want a full time professional tenant to use it, since they shelled out money to pay for it. The players in exhibition games have raved about the arena being completely state of the art and nicer than some current facilities in the league. The arena is a huge component of an NBA bid and it is a very strong positive for this city. The issues here could be public support long term of the team with the immense popularity of the University of Kansas basketball team in competition directly. The right ownership group could be a challenge as well.

 

  • Louisville – my last entrant for the NBA based on a mention in an interview by NBA Commissioner David Stern regarding potential expansion sites.

TV Market: 50th

Metro population: 42nd

Fortune 500 Company HQ: 3

 

Synopsis/Outlook: Louisville is an interesting contender for an expansion team but might be on the outside looking in. If the NBA expands it will be by one or two teams and I think Seattle will definitely be one of them. The TV market rank looks bad at 50th –  but then the NBA has a current team in New Orleans, the Pelicans, and that TV market is ranked 53rd. Since basketball has very strong local support it generally does a solid rating even if it is a small market. The corporate presence is good here, and the arena is only a few years old. It is very close to Indianapolis (about 90 minute drive time) which could be looked at as a plus or minus by the league with a team currently in Indiana.

 

Europe?

 

The last consideration as far as NBA expansion is concerned is the potential for European teams. Some might feel this is further away than it actually is, it could be a serious consideration in the next 5 years. The NBA and soccer are the only two global sports.

 

The NBA has so much international appeal that David Stern has talked about a potential division of teams in Europe. In my opinion, you are probably looking at London, Paris, Rome, one team in Spain (probably Madrid), and because of the health of the German economy probably two teams there for a total of six. I would think six teams would be the only way it would be worth launching in Europe, and is a solid number without overreaching in the early stages. The players would probably dislike the travel, but it is something that could become viable in the future.

 

The second part of this series will detail Major League Baseball, and the potential for expansion of the game that has defined America for generations.