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Tackles, Chicken Wings, and the Quest for a New Cash Cow

8 November 06
by Mike Stevens

Next summer, first pitches at U.S. Cellular Field will come firing home at 7:11 on weeknights. As in 7/11—the convenience store. The Chicago White Sox have sold their start time to the chain for half-a-million dollars.

The impact of MBAs on the MLB or any other sport is nothing new, of course. Sports enjoy a profitable relationship with the tie & steak set, who, in turn, are attracted to games because they are big business. How big? The Census Bureau calls it the “commercial sports sector” and valued it at $17.7 billion in 1998. A better yardstick, many sports economists argue, is the more expansive—and grandiose “Gross Domestic Sports Product” or GDSP. A 1995 estimate put our GDSP at $152 billion.

Increasingly, sports business transactions are moving beyond the simple sale of a ticket or jersey. (For guidance, see the Omnivore.) Take chicken wings. Keystone Capital Markets stock analyst Conrad Lyon got bullish on a chicken-wing chain. His reasoning? The Cleveland Cavaliers made it deep in the postseason last year and a quarter of the chain’s stores are located in Ohio. More hoops equals more chicken wings consumed.

The NFL provides particularly fertile terrain for financial wizards. The league now asks for stock options as well as cash for sponsorship deals. In August, sports apparel manufacturer Under Armour became an authorized supplier of players’ cleats. (Players are generously allowed to wear any cleats they wish but must tape over logos of manufacturers without an agreement with the NFL.) As part of the Under Armour deal, the league gets a reported $50 million over six years as well as the right to buy almost 2 percent of the company (roughly 480,000 shares) at a price of $36.99. As of early November, Under Armour shares were up more than 22 percent in the three months since the deal was signed. (Here’s a graph.)

Baseball has also been exploring ways to boost its share of the GDSP by keeping an eye out for lost money streams. The Yankees began revoking the season tickets of fans caught selling unused tickets on the web this year. The Yankees, of course, want a shot at exploiting the lucrative secondary market themselves. “Pinstripe Marketplace” coming soon.

In the NFL, quarterbacks get a fair share. But who comes next? Would you believe offensive left tackles? Of all positions, these meaty men pull down the second-highest salaries on average. (Michael Lewis, of Moneyball fame, highlights this anomaly in his new book Blind Side, thus named because left tackles protect right-handed quarterbacks from the blind side rush.)

It’s not necessarily fat cat owners and athletes who are benefiting from the financial boom in sports. College coaches seem to be raking in quite a bit. And more than 70 caddies on the PGA circuit now enjoy paydays topping $100,000, according to Bloomberg. Steve Williams, who carries clubs for Tiger Woods, is even sponsored—thanks, Valvoline.

As commercially crass as America is, the front of a jersey is still sacrosanct here. For 11 years, Major League Soccer has used only sleeves and backs as billboards despite a global tradition of selling advertising space across the chests of soccer players. (In Europe many people identify clubs as much by their sponsor as by anything else.) Finally, though, starting in the 2007 season, MLS will join the Europeans and South Americans. Perhaps, the NFL will be next. The Spectator is having internal discussions on which squad would best represent our brand. The high-flying Arizona “TMS” Cardinals?

FC Barcelona was one of the few soccer clubs to resist the temptation of selling advertising space. They held out for their first 107 years. But their noble run is up. The contrarian-minded club does offer a twist to the old sell-out story, though. Barcelona is paying for the rights to put a sponsor on the front of their jerseys. The club will donate nearly $2 million a year to UNICEF so that Ronaldinho and friends can wear the child welfare agency’s logo on their home and away kits. But don’t worry about Barça. Nike recently agreed to pay the club $189 million for the right to continue supplying the Unicef shirts. With Nike’s reputation for exploiting third-world children and Unicef’s work feeding them, Barça seems to have become an economic model unto itself.