Major Players

He’s made a name as the most powerful sports agent in history. He’s brash, aggressive, a cigar-smoking marathon negotiator who knows how to leverage a deal in his direction. He earns 4 percent on every NBA contract he represents and 20 percent on ancillary deals. In 1996 the total revenue from athletes represented by his company, FAME (Falk Associates Management Enterprises), was reported to be about $500 million. Twenty-four percent rounds that up to $120 million for David Falk and his FAME partners Curtis Polk and Michael Higgins.

David Falk admits that his number-one athlete, Michael Jordan, has become a unique property in the annals of professional sport. But it was Falk, working at another agency – ProServ back in 1984 – who first signed and sold the young draft pick to corporate America. Currently representing some 40 athletes, predominantly basketball players, Falk and his partners have recently branched out into negotiating far more than sneaker deals. While they may be at the top, others loom equally large in the world of sports marketing.

According to the IEG Sponsorship Report, North American companies will spend $3.84 billion on sports sponsorships in 1997. In addition, says Brian Murphy, publisher of The Sports Marketing Letter, 400 companies, including Budget Rent-a-Car, Castrol and British Airways, now have sports marketing executives, just about 400 more than existed a decade ago.

Companies are paying more for sponsorships because they pay off. Murphy says product sales can jump between 30 and 50 percent in the month on either side of an Olympic broadcast, with a 1 to 2 percent spike in permanent market share. Sponsorship also generates trial use of the advertised products, crucial for brand development.

Exclusive sponsorships allow companies to dominate an event. They can use it to leverage national or, with the Olympics, global business. “Sponsors found that it was an efficient platform for delivering a message, enhancing image and brand awareness and building trade and retail promotion,” says Murphy, who also points out that the industry lacks talented sales professionals, relying on lawyers, for instance, to negotiate contracts. “But,” as Falk says, “nobody writes a contract until somebody sells something.”

While sponsorship is a major area of sports marketing, Murphy points out that it is also a “vertically integrated discipline.” Not just sponsorship but advertising, licensing, merchandising, public relations and sales promotion are involved. “All the spokes of the wheel lead to the hub,” he says. “The hub is sports marketing.”

This Selling Power report, based on exclusive interviews with some of the most powerful movers and shakers in the field, reveals the techniques and strategies they used to turn sporting events into advanced profit centers.

Dribbling for dollars

Michael Jordan’s contract, over $30 million last year, exceeded the payrolls of most NBA teams. Falk, who negotiated the Jordan deal, has turned the basketball world into a megabucks sweepstakes for such other NBA greats as Patrick Ewing, Alonzo Mourning, Juwan Howard and Alan Iverson, to name but a few of FAME’s 40 clients.

“We keep the clientele small and select the most marketable, personality-driven players,” Falk says. He also says negotiating their salaries is “a small piece of the pie.” A bigger piece is the marketing deals that accompany such contracts. Jordan’s association with Nike has spawned a separate division of the company called Jordan and Iverson’s deal with Reebok has given birth to a line of two shoes, The Question and The Answer. Iverson’s nickname is The Answer.

Falk not only makes deals, he creates the concept that drives them. His idea to use Jordan to market Nike shoes was a revelation in 1984. “It had never worked in team sports and they took a giant leap of faith,” he says. “They saw Michael Jordan could bring something special to the table.” Falk also has worked deals with Beverly Hills designer Bijan to market a fragrance called Jordan and with Warner Brothers executives to create Space Jam starring Jordan and Bugs Bunny. The movie, also Falk’s idea, represents an entirely new effort: to merge sports and entertainment. “I want to meld them,” Falk has said. “Space Jam represents an effort in that direction.”

Falk formed FAME in 1992 after leaving sports marketing agency ProServ. He claims his success is a direct result of having clout. “The most important skill we bring to the table is being able to call up the major decision makers to present our ideas,” he says. “If you can’t create access for your clients, you’re not going to be able to make an impact. Access comes from stature, long-term relationships and success with people we’ve worked with before. I had a relationship with Nike before Jordan and that enabled us to make an unprecedented deal.”

He says Nike originally signed Jordan because “in a small part they trusted me.” Alan Iverson, the number one pick in the 1996 draft and the latest Jordan wannabe, has trusted Falk to complete a huge contract and a multi-million-dollar endorsement deal with Reebok.Because of Falk’s track record, the future looks rosy for megastars down the road. “When Jordan won the fragrance of the year award in 1996 it created opportunities for Tiger Woods five years from now,” says Falk.

In addition to developing personal relationships that lead to lucrative contracts, Falk also has a keen sense of how to leverage his power to make dream deals. He’s been called every name in the book, yet he keeps a steady eye on basketball stats, TV markets and what he calls “priorities.” He is loyal to one thing only: the best deal for his clients. He sold Jordan to corporate executives when they were very skittish about taking on a black athlete as a corporate icon. And are they glad he persevered.

In related areas of sports marketing, others have been breaking new ground, too.

A world view

They call him Mr. Olympics. Although he’s fairly modest about it, Robert Prazmark, senior vice president at sports marketing agency IMG, has made a name for himself selling the Olympics, first to major sponsors and later on behalf of sponsors who want to participate in the games.

“I’m the seller one day and the buyer the next,” he says, explaining how he sold the Olympics to sponsors first and now buys Olympic sponsorship on behalf of his corporate clients. In both cases, Prazmark has generated over a billion dollars for the Olympics and helped major corporations generate millions in profits from their participation in the games.

In 1985 Prazmark sold the Olympic games to VISA which represented a major deal that many recognize as having revolutionized sports marketing. At the time, the Olympics was in financial trouble and there was no such thing as global sponsorships. But when Prazmark got through, VISA paid $15.5 million giving them the exclusive right to say, “The Olympics don’t take American Express.” According to Prazmark the campaign “changed the image of American Express forever, an ironic twist since the company had turned down the offer first.”

The Olympic sale changed the nature of sports sponsorship. “The Olympics began the selling of big-time events for big money,” Prazmark says, “limiting the amount of corporate sponsorships and giving sponsors exclusive benefits, like use of the mark and the five rings, the use of hospitality, the opportunity to sell products on site and the use of Olympic imagery.” Having these rights enables a company to recreate its image. After UPS signed on, it put the Olympic logo on its trucks, employee uniforms and every package that was shipped. “It shows the global reach of the company,” Prazmark says.

Prazmark has generated over $1 billion for the Olympics thus far on behalf of 25 companies and he’s now at work arranging sponsorships for upcoming Olympics, including the Salt Lake City games in 2002 and Athens in 2004. His newest clients are US West and Texaco. But Prazmark won’t simply sell them sponsorship, he’ll assist them in making the most of the deal. “I’ll teach their companies how to maximize the Olympics,” he says. “I’ll go in and interview senior executives about long-term strategies and conduct workshops for people in the field, including sales.”

Prazmark is not just Mr. Olympics, he’s the king of big-event marketing, recognized for selling the Olympics along with such other major venues as the Dallas Cowboys. He must convince corporations to part with big bucks to sponsor major events. “Why is it better to spend $50 million with me than to spend it on a new plant or buying another company? That’s what I’m up against,” he says. He may sell the Olympics, but he offers the world.

Time for the national pastime

In 1995 Barry Frank made a $1.7 billion sale. The senior group vice president at IMG negotiated the television rights to major league baseball in a package deal to four television networks. With past TV deals having failed miserably and baseball losing popularity in the aftermath of a strike that canceled the World Series in 1994, it was quite a coup.

“It was the most complicated deal ever done,” Frank says. It will deliver the national pastime to American homes into the next century.CBS paid $1.2 billion for broadcast rights in 1988, a deal that was “doomed from the get-go,” Frank says. NBC and ABC also failed with the Baseball Network, a time-buy situation that was brought down by the strike.

“The owners didn’t like it,” Frank says of the Baseball Network, so they hired IMG to sell television rights to the games. But past failures made Frank’s assignment tough. “Nobody wanted major league baseball,” he says.

Then he learned that, because of its success with the NFL and desire for a platform to promote its fall programming, Fox was interested. “They became the benchmark to the deal,” Frank says. But one buyer was not enough. “We needed a second major customer to get it to the dollar level we wanted,” he says, so Frank lured NBC in at a lower level than Fox. Meanwhile, ESPN was already broadcasting baseball, so it would be involved, too. Finally, Liberty, another cable network, expressed a strong interest in broadcasting games.

Suddenly there were four buyers, and the job became one of dividing the pie. Fox wanted the biggest slice, a “most-favored-nation clause” that demanded the best schedule. Frank, a talented deal maker, came up with the solution: make it a five-year deal and give Fox the World Series three years and NBC two. That way he wouldn’t have to cut the price to keep Fox while also hanging on to NBC. Meanwhile, NBC refused to broadcast playoff or World Series games on Thursday nights because of its strong prime time schedule, so we “juggled the schedule to handle two sets of playoffs and satisfy both parties,” Frank says. Finally, ESPN wanted exclusive cable rights, which it would lose if Liberty began broadcasts, but ESPN relented after Frank gave it a four-year extension of its contract and promised it some playoff games.

The deal took seven months. It was so complex that Bill Giles, the commissioner at the time, couldn’t follow it. “When you’re all done, tell me what the deal is,” he told Frank. At the final handshake the $1.7 billion deal was nearly double the projected amount. NBC broadcast the World Series in 1997, and will share it with Fox for the remainder of the contract. Fox and NBC share the League Championship Series. The Division Series are shared by Fox, NBC and ESPN. Liberty broadcasts regular season games.

Frank, who calls himself “the graybeard,” has spent 40 years in television. “When people say I sell things, I don’t look at it that way,” he says. “It’s more putting pieces together. Big deals have so many components, it’s like a house of cards. The problem isn’t just to sell but to problem solve. You never sell baseball. Everybody knows what it is. You have to put a package together that solves the problems of the buyers.”

Launching a league

Getting the WNBA off the ground was not easy. Gary Stevenson, vice president, marketing and media, NBA Properties, put together what he calls “the best TV package ever for a new sports venture,” with three networks signed on to do game broadcasts. Print advertising followed. Finally, he designed “the most complete and ambush-proof sponsorship package in the history of sports,” signing major companies to three-year deals that he admits were risky. “It took foresight to buy in. It wasn’t a sure thing,” he says. But the risk paid off when the WNBA became a success during its first season.

Anheuser Busch, one of the world’s biggest sports advertisers and a premiere WNBA sponsor, took perhaps the biggest chance. “We wanted to own something our competition doesn’t have,” says Tony Ponturo, vice president corporate media and sports marketing. They captured the rights to exclusive beer sponsorship, with Bud Light brand as the only beer promoted in association with the league.

Stevenson signed Anheuser Busch and such other major companies as Lee jeans and General Motors to three-year contracts that guarantee ongoing revenue for the league. But long-term deals mean more than money. They suggest a partnership between the league and its sponsors, which is where sports advertising is heading these days. “Leagues are looking for marketing partners,” Ponturo says. “It’s not just how much money you can give but how you can help develop image and awareness.”

Anheuser Busch promotes the league’s image by using its logo in advertising and signs that appear in bars, in restaurants and on billboards. It also holds tailgate parties and ticket giveaways.Before the contract signing, Ponturo attended meetings that included a formal presentation he oversaw with an audiovisual program and mock-up ads prepared by DDB Needham, its advertising agency. Sports marketers, brand managers, creative executives and other Anheuser Busch executives attended, so “we could start the dialogue and excite them with all elements of our marketing plan,” Ponturo says.

The presentation worked because David Stern, the league commissioner, “called and said, ‘We like what you did and we appreciate your support,'” Ponturo says.

“I can pick up a phone and talk to the top people anywhere in sports and try to build a partnership,” says Ponturo, who manages a staff of 150 people. They plan and buy all media for Anheuser Busch, negotiating mostly with TV networks and executives from such sports associations as the WNBA with a key strategy to “know the goals of each brand” and executing the marketing efforts that will realize them.

Stevenson, who drew on 17 years of sports experience to make it happen and sees himself as a “catalyst,” believes the new league will, in his words, “change the scope of sports in America.”

Phone in the score

In the second year of a three-year deal with the NFL, Pam Kramer, group manager corporate sponsorship marketing at Sprint, says, “Our focus is on one program that links all products and services together.” So Sprint launched Mondays Free and Clear, a program that offers free long distance service on Monday nights and free PCS airtime.

The company decided on Mondays Free and Clear after conducting market research that determined customers want free long distance and PCS airtime. Sprint decided to offer the package on Monday nights as the best way to link to the NFL. “Monday Night Football is out there, so let’s tie into it and make our products part of the game,” Kramer says. “We focus on Monday night football and as the season progresses we’ll get involved in the playoffs.”

Sprint is executing Mondays Free and Clear with television spots starring football players and coaches, and there are agreements with member clubs to leverage local affinity, which means Sprint goes to the stadiums to execute promotions. In Kansas City, it has a Sprint Zone where fans can see the latest products. The Monday Night Madness Mobile, a van, travels to different stadiums, running a sweepstakes and hosting player appearances. And Sprint also sponsors Monday Night ticket giveaways.

“I manage the sponsorship from contract negotiation to execution to marketing programs,” says Kramer.

After four months of intense negotiations, while the parties got to know each other, Kramer stepped in to make sure all Sprint’s products and services were well represented. “Everything we do and the NFL does has to be part of the agreement,” she says.

After Sprint and the NFL signed on the dotted line, advertising agencies worked on 30 marketing programs before Mondays Free and Clear came up a winner.

Sprint doesn’t just sponsor NFL football, it provides a variety of telecommunications services to the league and makes the most of it by using it as a selling point to win additional business-to-business accounts.

Last year, the company produced a video that shows some of the Sprint services the NFL uses, including the press box at the Super Bowl where 3,000 members of the media worked with Sprint equipment and the data operations the Oakland Raiders franchise uses to send injury reports and other information to the NFL office in New York.

“We give our salespeople the video so they can take it to sales calls when they meet the prospect’s telecommunications or data manager,” Kramer says. “‘If the NFL trusts Sprint, I can trust Sprint’ is what we hope the customers will say.”

License to sell

“We don’t sell or make anything,” says Jack Fitzgibbons, who, as director of retail sales at NFL Properties, accounts for more than $3 billion of revenue through the licensing division of the NFL, according to Team Licensing Business magazine.

Fitzgibbons, a kind of overseer, makes sure that licensed products reach department, mass merchant and sporting goods stores where merchants give them prominent displays. “We get it into the stores on time, get the set-ups right and do promos that reach fans that pertain to each retailer,” Fitzgibbons says.

He often makes sales calls to the retailers before the licensees do. “We pitch new products and presell for them,” he says. “We speak on their behalf before they go in to give them an edge.”

Of the 300 licensees who make about 1,000 products adorned with team logos or the NFL shield, children and adult clothing and housewares are the biggest categories, with products ranging from team jerseys and caps to blankets and clocks. The top-selling product, replica jerseys, sold more than four million units last year. Many of the products are downright stratospheric, with 49ers Pro Line jerseys selling for $199.95 and autographed lithographs for up to $500.

Fitzgibbons says NFL Properties prepares point-of-purchase displays to use in the stores while he also meets with licensees to help them plan in-store promotions that make the products more salable. This year he worked with Champion Products on a program that gave away season tickets to shoppers who registered for the prizes at 600 JCPenney stores. Champion also worked with NFL Properties and Polygram Video on a promotion that offered discount coupons for Champion apparel to purchasers of a Polygram football video. Shoppers paid $19.95 for the video and received a coupon good for 25 percent off Champion apparel.

The partnerships are profitable to the NFL, which earns a 10 percent royalty on every licensed product sold, Fitzgibbons says. The revenue is split among the 30 teams.

Selling licensed products “is important for revenue,” he notes, “but also for connecting fans to the sport. Owning products to wear or decorate the house are tangible ways fans can pledge allegiance to the game.”

NFL Properties, the division that licenses the products, was started in 1963 and is “the oldest sports marketing group,” Fitzgibbons says. By keeping up with the times, the NFL has leveraged fan support to create a marketing machine second to none.