Monday, December 30, 2002 Updated: December 31, 8:41 AM ET
Forecasting the sports business future
By Darren Rovell ESPN.com
This year, we found out that Rafael Palmeiro uses Viagra. That game-used anything could be sold for a hefty price on eBay. That Anna Kournikova could still do no wrong and that Bud Selig could do little right even if he helped avert a work stoppage. Oh, and that Mark Cuban can serve a mean Blizzard at Dairy Queen and that scandal still sells. (Do you think the general population would be able to recognize Jamie Sale and David Pelletier if they simply won the gold?)
We realized that continued dominance by Tiger Woods and the Williams sisters is good for business and that parity is one of the keys to the NFL's business model. That despite a small bump in interest during the World Cup, Major League Soccer will never be considered a major sports league. And that NASCAR, the most sponsor-dependent sport, could survive a turbulent year of corporate budget trimming.
Since we already know what happened in 2002, here are ESPN.com's top 10 trends to watch for in the sports business world in the coming year:
1. The NBA and Major League Baseball will experience exponential international growth
Helped by the record 67 international players who opened the season on NBA rosters -- including 2001-02 rookie of the year Pau Gasol (Spain), Peja Stojakovic (Yugoslavia), Tony Parker (France) and Dirk Nowitzki (Germany) -- the NBA is clearly the most globally recognized U.S.-based sports league. International revenues are likely to grow by leaps and bounds thanks to the success of one man alone: Yao Ming, the rookie center from China, who has his native country craving replica jerseys while watching Rockets games in the wee hours of the morning.
In baseball, millions of fans in Japan will be watching former Yomiuri Giants slugger Hideki Matsui playing for the Yankees, much in the same way they're still watching Ichiro. Teams that have invested in international players have helped the entire league since every team gets a piece of international merchandise sales and television rights. So far, there's been little protest, but now that the Yankees have a Japanese star and a working relationship with his former team, expect more debate over distribution of funds.
2. More teams will institute variable ticket pricing
Since at least 1980, ticket prices to some college football games have been dependent on the opponent. While professional teams knew that market conditions -- such as opponent and time of season the game was being played -- affected prices on the secondary market, they never attempted to cash in. But given the success of the variable pricing programs instituted by the St. Louis Cardinals, Colorado Rockies and the San Francisco Giants -- who made more than $1 million this season by charging $1 to $5 more for weekend games -- other teams are seeing variable ticket pricing as a new business practice. The Ottawa Senators, Pittsburgh Penguins and Vancouver Canucks have instituted the practice this season and the Anaheim Angels, Cleveland Indians and New York Mets have joined the growing list of baseball teams that will charge more for premium games in 2003. The airline industry has been doing this forever; the sports world could eventually adopt the airline practice of charging different prices depending on how close your purchase comes to the day of the game.
3. The older the better
Thanks to endorsements by high-profile singers, rappers and models, the sports apparel and shoe business has been galvanized by the retro market. Old flashbacks once considered ugly -- such as the 1980 Houston Astros and the 1984 San Diego Padres jerseys -- are now top sellers. Sales of retro NBA replica jerseys made by Mitchell & Ness have tripled since last year despite the hefty price tag. Reebok, which produced throwback uniforms for six NFL teams this Thanksgiving, is aggressively extending its Gridiron Classics line to retro polyester track jackets next fall. The shoe business is also seeing growth, as the plain white shoe is popular again. Nike's Air Force 1's, which have been in stores since the early 1980s, are hotter than ever before and troubled brands Puma and Converse have a chance of making a healthy comeback as long as old stays in.
4. More athletes will buy interest in sports teams
When athletes retire, many don't want to leave the game. In the past, they've taken executive positions with the teams they played for, but the new athlete has the income to invest in amateur, minor league, and professional teams. It starts at the lowest level with NBA players Vince Carter, Tim Thomas and Antoine Walker investing in AAU teams, Cal Ripken owning the Aberdeen Ironbirds and three Japanese pitchers -- Hideo Nomo, Hideki Irabu and Mac Suzuki -- buying a controlling interest of the independent Elmira Pioneers earlier this year. Wayne Gretzky bought a $10 million share in the Phoenix Coyotes and Michael Jordan will likely repurchase his share of the Wizards or perhaps take a piece of the Charlotte Hornets when he retires at the end of the season. Magic Johnson, who owns 5 percent of the Los Angeles Lakers and John Elway, who is co-owner of Arena Football League's Colorado Crush, have done so well in other business endeavors that they can probably be the primary owner of a team.
5. Action sports will continue to garner attention
Big money will continue to be invested by networks and corporations in skateboarding and snowboarding in 2003 as there's no better way to reach and captivate the attention of the highly coveted 7- to 17-year-old demographic. Skateboarding participation has skyrocketed by 123 percent over the last five years in this age group and snowboarding, which got more attention by the American medal sweep in the half-pipe in the Olympics, has seen almost a 50 percent rise in participation. The X-Games have reaped in major money from companies like Mountain Dew, Right Guard and adidas.
6. Stadium naming rights will continue to rise
The Houston Astros bought the Enron out of Enron Field and CMGI defaulted when the New England Patriots found a more stable partner in Gillette. The state of the economy this past year had many professional teams worrying about naming rights partnerships, but experts say there are enough companies still interested in having their name on a stadium or an arena that bidding wars will still drive up prices. Given the rising costs associated with Division I-A college football operations, expect more colleges that desire their athletic budget to be self-supporting to work deals with corporations. While companies involved in naming rights deals with professional teams have pledged more than $3.2 billion, only $163 million has been invested in Division I-A facilities.
7. More teams will rely on ethnic marketing
Teams are finally starting to discover that having Hispanic or Asian Night isn't an adequate way to get people to the ballpark. Teams wanting to tap into the wealth of minorities have to show that they care. Two baseball teams -- the Los Angeles Dodgers and the Anaheim Angels -- have been willing to do this. The Dodgers have had a Spanish radio broadcast for decades and recently began sponsoring events in the community such as AIDS awareness events. With 47 percent of the population of Anaheim being Hispanic, the Angels used Spanish language media to advertise Domingos Alegres (Fun Sundays). In 2003, teams will have to rely on more marketing to the undermarketed demographics to get more fans out to the ballpark.
8. Insurance coverage will dictate size and length of guaranteed contracts
Only four free agents in Major League Baseball this offseason have received guaranteed contracts for at least four years. One of the major reasons? If the team signs a player more years, contract insurance is much harder to come by. Insurance premiums skyrocketed after the terrorist attacks on Sept. 11, 2001 and rates are only expected to slightly decrease as a result of President Bush signing a terrorism insurance relief bill on Nov. 27. The insurance industry's capacity to cover losses in the event a player gets hurt has and will continue to discourage teams from signing long-term deals.
9. High school basketball games could be the next frontier
High school basketball has been broadcast on local networks and the McDonald's All-American Game has become a nationally-televised staple. But the hype surrounding LeBron James, and the high ratings on the ESPN broadcast, could mean the start of a regular schedule of high school broadcasts featuring the nation's up-and-comers. There are enough future stars to hype up -- some Web sites rank the best eighth graders -- that high school games will easily outrate NBDL, WNBA and even NHL games. One can only expect that more players will leave college early, which could devalue the 11-year, $6 billion television deal CBS signed with the NCAA to broadcast March Madness.
10. Technology will compete with live action
We still won't have the remote control that will enable us to replay and play we want from the comfort of our homes, but it's coming some time in the near future. In the meantime, more sports fans will get games next year by subscribing to digital cable or satellite television, which will have more specialty sports channels than ever before. Those who can't watch their favorite sporting events live can tape them on TiVo, which is is projected to grow by 20 percent in 2003. It lets fans pause live television and -- to the network's dismay -- skip over commercials. There is also high-definition televisions -- which now cost about the same as most regular big-screen TV's but are said to provide about 10 times the detail. About six million TV's are currently high-definition capable and that number is expected to grow exponentially. This year, 80 MLB games were broadcast on HDTV's channel HDNet and 65 NHL games are scheduled to be broadcast this season. CBS and HDNet broadcast college football and college basketball in high definition and ABC will have the Super Bowl in high definition In January. Next year, HDNet and ESPN will launch networks dedicated entirely to 24 hours of sports in high definition.
Darren Rovell, who covers sports business for ESPN.com, can be reached at email@example.com