2010 San Diego State University MBA Sports Competition

David Adelman, Kat O’Brien, Scott Roslyn and Jeff Wilen teamed up for the San Diego State University MBA sports case competition in late February. On Thursday morning, the nine teams (among them Columbia, NYU and San Diego State) went to Petco Park, where the San Diego Padres play, and were given the case they would be working on. This year, it turned out to be about the Padres, and each team had 24 hours to prepare its case and presentation. The presenting format was 20 minutes of presentation and 10 minutes for questions and answers, with four judges (three from the Padres and one a professor from SDSU). It was interesting to have to think through so many aspects and come up with solutions in that amount of time, but thankfully one of us (David) had consulting experience, so at least the case format wasn’t new to him. Georgetown wound up winning, but we put in a good showing and were pleased with the efforts.

After the winner was announced on Friday afternoon, there was a reception with time to visit with Padres executives, including owner Jeff Moorad, which was a great opportunity to really chat with top sports figures, and even talk with the Padres about some MBA internships they have planned. Later Friday evening there was another reception across the street at the bar atop the Marriott Hotel. We had the full day free Saturday, and got to experience a little more of sunny San Diego, a great change from February in Philly. We went for some fish tacos along with the SDSU organizer and a team from Hong Kong, and even got to walk on the beach. While it would have been great to bring home the prize, participating in the competition was a great and fun experience.

Article Contributor: Kat O’Brien

Basketball Agent Steven Olenick - April 16th

Steve Olenick joined the Wharton Sports Business club over lunch to discuss his career path as a sports agent. Steve is a basketball agent with Entersport, LLC, one of the top agencies representing professional basketball players in the United States and abroad. Steve works with Mark Fleisher, whose current client roster includes Mehmet Okur and Andrei Kirilenko. Steve has worked within the sports representation industry for the past 8 years as an advisor and business manager for professional athletes. Prior to joining Entersport, Steve worked as an attorney for Paul, Weiss, Rifkind, Wharton & Garrison LLP in New York City, focusing on sports and media transactions.

Steve talked about the hard work, focus and ability to cultivate relationships that has helped him succeed as a basketball agent. We discussed a number of interesting topics during a wide-ranging hour long conversation:

NBA contracts. Interestingly enough, Steve said that the first contract for a player is typically very basic. Draft pick compensation is “slotted”, so there is not really a lot of room to negotiate an improved deal. Most of the value an agent can deliver during the first contact comes from their ability to land marketing deals, etc. The second contract is typically more complicated, and this is where you can see the deal-structuring ability and creativity of an agent pay off.

LeBron’s next contract. You might have heard, but there’s a rumor that LeBron might sign with the Knicks after becoming a free agent in 2010… One WSBC member said he’d heard that LeBron is looking for an equity stake in his next deal. Steve thinks that Dan Gilbert, the owner of the Cleveland Cavaliers, should strongly consider giving him an equity stake because if LeBron leaves for a larger market in 2010, the franchise value will take a very big hit anyway.

Overseas teams. In light of Josh Childress defecting to Olympiacos Piraeus, someone asked whether or not Steve thought this would become an emerging theme. He made several interesting points. First, the style of play of a typical NBA player does not necessarily translate well to the European game. NBA players are typically great athletes, but in games predicated upon spot-up shooting their ability does not always stand out. Second, Steve thinks the economic downturn will hurt the overseas market. Many of these owners are paying for players out of pocket. Russia in particular sets the market for players. Many of the Russian owners made their fortunes in oil, so the current economic downturn has hit them particularly hard.

Niche vs. mega-agency. Entersport, LLC focuses exclusively on basketball. One member of the audience asked what the pros and cons were of the niche vs. mega-agency approach. Steve thinks that the relationships IMG has are definitely helpful. However, he explained that a large agency like IMG will actually have in-house marketing and PR departments. In his opinion, if you have a great player, you can afford to hire a player-dedicated marketing and PR staff. In the end, the strength of an agent or agency’s relationships – both within the industry and with his players – is what will determine their success.

Overall, it was a very entertaining and enlightening hour. The Wharton Sports Business Club would like the thank Steve his time and condor in describing the life of a sports agent.

Article Contributor: Robert Sebastian

Digital Media Panel - March 23rd

The Wharton Sports Business Club hosted a digital media panel and reception on Monday, March 23rd. John Ourand, who writes for the Sports Business Journal, served as the moderator for the discussion. The panel consisted of Neal Pilson (Pilson Communications and Former head of CBS Sports), Sara Jeon (VP, Content and Strategy, Sling Media), Kyle Ragsdale (VP, Business Affairs, SB Nation), and Neal Scarborough (VP, Digital Media, Versus Network 2).

Ourand wasted no time in getting started, asking Neal Pilson – the former head of CBS Sports – if the TV networks were a dying breed. Pilson suggested that, while the broadcast networks have recently been referred to as dinosaurs, they are at the very least adaptive dinosaurs. They still have the muscle and reach necessary to be dominant players. He believes networks will continue to be heavily involved in digital rights, because the coordination of broadcast, cable, mobile and internet are all still controlled and orchestrated by the broadcaster.

The follow up question was whether or not broadcast networks can effectively compete with subscriber based channels, specifically ESPN. Ourand framed the question by saying that he couldn’t remember the last time he had seen Rupert Murdoch get outbid, as he had been when ESPN outbid FOX for the rights to the BCS Series starting in 2011. Pilson agreed that ESPN may well dominate, saying he expected ESPN to be very aggressive when the next digital rights come up. It is very difficult for broadcast networks to compete with ESPN, which garners ad revenues like a broadcast network and then augments them with over $4 billion annually in subscription fees (~$3.70 / subscriber / month x 12 months / year x 98 million subscribers). CBS may look to create a competitive counterbalance to ESPN / ABC by looking at Turner, but even Turner only commands around $0.70 per subscriber – a far cry from ESPN’s premium. Pilson contended that political fall out is often the only barrier to ESPN because it can be difficult to justify airing a major sporting event on cable at the expense of the ~15mm US households that don’t get cable. That said, Pilson suggested that the NCAA would almost certainly explore its options for its hugely popular Men’s College BB Tournament contract. It has the right to opt out of this contract with CBS after this year’s tournament, and Pilson sees ESPN to be the likely top suitor.

Neal Scarborough weighed in on his experience at Versus Network. The Versus Network 2 is home to college football, bull riding, cycling, hunting and fishing and other niche sports. Currently he is focused on strengthening the brand and enhancing Verus’ online offering.

Next up was Sarah Jeon from Sling Media, creator of the popular Sling Box. Sling Media was established in 2004 and acquired by DISH Network in 2007 at a valuation of around $380 million. Sarah heads the Sling.com online effort, which is a professional-only video site that partners with content creators. Currently, Sling.com offers over 90,000 videos for free including shows, movies, sporting events and highlights. They are streaming some sporting events live, such as the Masters per an agreement with CBS. ESPN, on the other hand, does not share its content, in part because they have their own broadband sites. Interestingly, Neal Scarbrough said Versus is happy to share content with Sling.com because, at this point, they are more concerned with developing brand recognition than subscription fees per se.

Kyle Ragsdale gave us a view into the blogosphere’s role in sports while describing SB Nation. Kyle joined SB Nation after embracing the blogosphere as the associate director of media relations in the Georgetown athletics department. SB Nation was created over four years ago when a displaced Oakland A’s fan realized how hard it was to get quality coverage of his favorite team. It has since evolved into a collection of nearly 200 individual blogging communities, oriented around major professional and college teams. Each team’s blog has an editor under contract with SB Nation, whose role is to moderate content. SB Nation depends upon an ad-driven revenue model.

In response to Ourand’s question, the panelists generally agreed that they were not concerned about potential knock-on implications of newspaper’s demise. As Kyle Ragsdale put it, SB Nation’s content is going to continue whether the Kansas City Star exists or not.

Neal Scarbrough fielded a question regarding Versus’ support of nascent sports such as MMA. The question asked whether or not he was concerned about the prospect of helping grow a sport and then losing the rights to a bigger competitor. Scarbrough that, to the contrary, Versus is fully aligned with the growth of new sports they promote. Though Versus stops short of altering the content and character of a sport, they do provide advice on how to market it. Interestingly, Scarbrough’s primary concern with emerging sports was not that they would outgrow the channel, but rather that the reallocation of airtime would marginalize the sports on which Versus was built (hunting, fishing, hockey, etc.).

After an excellent panel, the panelists and attendees continued the discussion over food and drinks at a reception in MBA Cafe. The WSBC would like to thank the Wharton Sports Business Initiative for their generous support, and each of the panelists for their time and insight into the world of digital media in sports.

- Rob Sebastian WG'10

Parody As We Know It

As we conclude the first weekend of the NCAA Tournament, one thing has become increasingly clear when looking at the final sixteen teams remaining. The top programs in the country have reestablished their dominance over the 393 school landscape of college basketball. Every one of the top three seeds have advanced, and the lowest remaining seed, Arizona, is one of the preeminent programs in the country. So what happened to the Davidsons and George Masons of the world?

As far as I can remember, the NCAA Tournament has been the residence of Cinderella; the place where any team that makes it can grind out an upset that will have the whole country buzzing, delivering us images of Steph Curry and his textbook stroke gracing newspapers and websites everywhere. This year, there are no such images; instead we are given the powerhouses, five Big East teams demonstrating that they are, in fact, the consensus conference of choice.
Jay Bilas made the argument that this year is a “down” year for the mid-major teams, but that seems to go against the grain of what is happening with basketball in this country. With top college players staying in school for only one season, it would appear that the top programs would have difficulty reloading with talent as they have in the past. This would seemingly level the field and provide increased opportunities for the smaller programs to achieve the much desired upset.

In football, we all believe that the best teams come from the BCS conferences and the traditional powers. There will always be a Boise State, but in general, most agree the only programs that have a real chance at the National Championship come from the big six. In basketball, however, we have been trained to think differently. The fact that there are no mid-majors remaining in the Sweet 16 certainly must make us think twice about the reality of parody in college basketball today. Regardless of who comes out on top, it will be a program that is no true surprise; a team that countless fans, pundits, and “experts” chose before Thanksgiving.

So does this Tournament bring us true excitement? I certainly think so. While it is always nice to see a story such as Davidson, the reality is, we, as Americans, are only interested in sports at their highest level. The remaining programs have the best talent, coaches, staff, facilities, and resources. This year, decades of developing powerhouse programs have certainly paid off, as we are left with the cream of the crop.

- Andrew Chun WG'09

San Diego State Case Competition

The Wharton team had a great time at the San Diego State Business Case Competition. The task, to find a creative way to use the 2010 World Cup to promote non-profit organizations aimed at eliminating Malaria in Africa, was very timely and relevant. Although our Wharton team did not take home the trophy we really enjoyed the process. Who can complain about preparing a case while sitting in a private box at Petco Park and interacting with executives from the San Diego Padres? The competition was also a great opportunity to meet MBA students from other programs who are interested in sports; the nine teams came from all over, from Oxford to Columbia to nearby UCLA. San Diego State was an amazing host, the whole competition was extremely organized and to conclude our beautiful San Diego weekend we spent an afternoon racing two sailboats that had formerly raced in the America’s Cup! The team would like to thank the Wharton Sports Business Initiative for their generous support that made our participation possible.

Professor Panel Series - Professor Reibstein - Nov. 18th

As part of the Professor Panel Series, Professor David Reibstein hosted a session entitled “Exploring Ways to Increase Interest in Major League Baseball”. He discussed his time working on a panel with MLB commissioner Bud Selig and fielded questions and comments from the audience on the state of the game.

Professor Reibstein recalled a day several years ago when he fielded a call from a man claiming to be “Bud Selig”. Convinced that it was one of his friends masquerading as the Commissioner of Baseball, it took Professor Reibstein several minutes to finally realize that he was, in fact, talking to the top man in Major League Baseball. Selig asked to join a panel comprised of those with a vested interested in baseball’s welfare. The panel included executive from ESPN, Pepsi, and TBS, pitchers Tom Glavine and Al Leiter, two team owners, MLB union (“MLBPA”) chief Donald Fehr, Bud Selig and Washington Post writer George Will. Bud Selig brought them together at least once a month to consider all aspects of the game that could be addressed to make the game more marketable to a dwindling and aging fan base. Professor Reibstein proceeded to discuss a litany of ideas, some of which were eventually implemented.

Shortened season. The panel considered shortening the season, which currently runs 162 games. One proposal would shorten the regular season to 154 games, and introduce another round of the playoffs and a 2nd Wild Card team for each league, thereby expanding the playoff field from 8 teams to 10. Professor Reibstein ran scenario analyses in order to determine how much longer each team would be “in contention” due to the addition of a 2nd Wild Card slot in each league. Revenues would benefit from the addition of an extra round of playoff revenues. Regular season revenues would also improve as teams remain in contention for a greater percentage of the regular season. However, there are drawbacks to shortening a season given the game’s statistical legacy. Hallowed milestones like 300 strikeouts, 200 hits and 20 wins – all of which are anchored around a 162 game season – would become more scarce. Furthermore, a contemporary performance over 154 games would become more difficult to compare against great historical season in the 162 game era. While the jury is still out, it sounds as though this is a proposal still being considered by Major League Baseball.

Player privacy. Another proposal involved making players more accessible, either by “miking” a player on the field or through more extensive interviews during and after the game. Who wouldn’t want to know what a team’s star pitcher though about being pulled in the middle of the 6th inning with the bases loaded and two outs? Unfortunately, this seems to be at best a remote possibility as the MLBPA is very protective of player privacy. Donald Fehr, who heads the powerful players’ union, was opposed to miking more than one player per game, and both he and player representatives Glavine and Leiter had sincere misgivings about in-game interviews.

Competitive imbalance. No discussion of America’s Pastime would be complete without addressing the league’s perceived competitive imbalance. No doubt the shoestring budget AL Champion Tampa Bay Rays would beg to differ, but most fans believe that MLB competitive balance is hopelessly skewed towards the big market, big money teams in major cities like New York and Boston. Professor Reibstein went into the panel with this as his number one issue, but learned that this is a conversation that has been rehashed “a million times” with very little to show for it. The case against revenue redistribution is that TV ratings are highest when two big-market teams square off in the playoffs. However, there are several reasons to consider revenue redistribution – one need only look at the NFL to recognize the value of the resultant competitive balance. First, it would introduce an element of fairness that appeals to every true sports fan. Second, it could result in a positive revenue impact to help offset (and potentially outweigh, as evidenced by the NFL’s success) the “big city” benefits under the current system. Many NFL fans will watch games that don’t even involve their home team because they are fans of the competitive product the NFL puts on the field. At the start of any given season, virtually every team thinks they have a chance to win a title and that boosts interest in the league as a whole. So while it’s true that the NFL would rather have two big market teams square off in the Super Bowl, they seem content to risk having two small market teams play because of the attendant benefits of competitive balance. While many in baseball recognize the potential benefits of revenue redistribution, the gating factor has been existing big-market owners. Owners of big market teams feel justifiably threatened, since they paid far more for their asset than they would have for, say, the Florida Marlins. Revenue sharing would reduce big market team valuations and be a boon for small market team owners. With these very real financial considerations in mind, it will take creative solutions to pave the path to more comprehensive revenue sharing in Major League Baseball.

Earlier start times. Baseball’s fan base between the ages of 12 and 30 is dwindling, and one of several culprits often cited is late start times. October baseball, laden with the sort of every-play-matters drama that can hook a new fan for the sport, often drags into the early hours of the morning on the East Coast. Most of the World Series games had scheduled first pitches after 8:30 PM EST, meaning that even an average game wouldn’t end until after 11:00PM EST. Young fans especially have a difficult time staying awake to catch the end of playoff games. However, TV executives argue that if MLB were to move the games earlier, MLB would lose “a billion dollars” in TV revenues. They pointedly ask if baseball is willing to make that kind of an investment in hopes of recapturing younger fans, and the question remains one open to debate.

Shortening games. Back in the era of Sandy Koufax, baseball games took on average 2 hours. By the time the panel met to discuss, that average had crept to over 3 hours. Part of this was driven by increased offensive production, which is generally seen as beneficial for attendance. However, another culprit was the increasing number of pitching changes in an era where terms like “pitch count” and “lefty specialist” were now part of baseball lexicon. Longer games during an age of compressing attention spans were viewed as a significant problem. A number of ideas were set forth to address the problem: managers could just announce an intentional walk rather than throwing four ceremonial pitches outside of the strike zone; MLB could limit the number of pitching changes per game; MLB could reduce the number of warm up pitches allowed each inning and for each relief pitcher; MLB could limit the number of times a pitcher throws over to 1st base to check a runner. Rather than tinker with the rules of the game, however, the committee decided to encourage the umpires responsible for managing game times to speed the game along. Professor Reibstein drew an analogy to the airline industry. Once airlines started publically reporting on time arrival rates among airlines, every airline realized this was a metric upon which they were judged and almost instantaneously improved. The committee took a similar approach by internally circulating the average game length for each umpire, and then proceeded to encourage those presiding over longer games to pick up the pace of their games. This simple measure, which didn’t entail any fundamental changes to the game, reduced average MLB-wide game times by 14 minutes.

Interactive in-game entertainment. Professor Reibstein suggested that if MLB can’t easily pull levers to shorten the game itself, they could at least shorten the perceived length of games with in game entertainment. For example, MLB could wire stadiums for hand held devices on which fans could “bet” on the outcome. Between pitches, fans could guess the outcome of the ensuing play. The stadium would post the highest scores after each inning and offer prizes for the best totals at the end of each inning or game. For a generation of children growing up playing video games, it is a way to make baseball more interactive. Fans of any age would be more engaged during “down time” between pitches rather than counting the minutes towards three hours in a ballpark.

Worldwide Rule 4 Draft. Professor Reibstein said in response to an audience question that the concept of a worldwide Rule 4 Draft was “never discussed”. Professor Scott Rosner, who is currently writing on the topic, was also in attendance and lent his expertise on the matter. The MLB and MLBPA reached an agreement in principal during the 2002 Collective Bargaining Agreement (“CBA”), but could never reduce it to writing. There are several implications of a Worldwide Draft to consider. Teams (particularly the smaller ones) that have invested in “baseball academies” would lose the benefit of their investment, because players who could have been developed and then signed through the academy would now be scouted and signed through a league-wide draft system. Second, baseball participation in the countries to be added to the draft could actually be adversely impacted. Puerto Rico was added to the Rule 4 Draft in 1989, and this winter the Puerto Rican Winter League was folded after 69 seasons because of financial problems. Professor Rosner postulated that the MLB Draft offered fewer opportunities for the large signing bonuses that used to offer young Puerto Rican players a shot a financial freedom. Finally, the MLB would like to incorporate the Japanese Major Leagues into a Worldwide Draft but is confounded by a player posting system. By the time the next CBA came up for negotiation in 2006, there were so many other issues swirling that the concept of a Worldwide Rule 4 Draft was pushed to the background.

Baseball’s global footprint. MLB is very focused on trying to grow the game globally. Baseball was dropped as Olympic sport for the London 2012 Summer Olympics. MLB is very concerned about the international implications of losing baseball in the Olympics, and are working to get back into the games in 2016. Baseball’s status as an Olympic sport and the attendant funding is important for the development of baseball in small countries.

Thanks again to Professor Reibstein for an enjoyable and informative hour.

Article Contributor: Robert Sebastian

Sports Business Career Trek - Nov. 14

On November 14, the Wharton Sports Business Club organized their first career trek of the semester to New York City. First up were the offices of the NFL, where we were greeted in the reception by a 150 inch plasma screen TV beaming the latest news from the world of American Football. After a brief presentation from five members of the NFL, we were given the opportunity to ask questions about the NFL’s functions, strategies and possible career opportunities.

Many questions centered on the international strategy of the NFL. While internationalization is something that the NFL has been working on for some time now, it is only recently that they have realized that the key is to offer their best product. This means that instead of hosting less-intense preseason games overseas or supporting a developmental league such as the now disbanded NFL Europa, they must offer competitive regular season games. While concerns were voiced about whether this was fair to fans of the teams that had to travel to Wembley Stadium in London to play a regular season game, it was pointed out that the NFL offered travel packages and first option on the tickets to home fans should they wish to travel overseas for the game. Further, under the current arrangements each NFL team will only have to play one game abroad every sixteen seasons.

Following a tour of the memorabilia laden offices of the NFL, it was then time to visit the NBA. Although the NBA has 1,187 employees and offices all around the world, it soon became clear from the presentation that the real focus for growth and hiring over the next few years would be NBA China. With 100 employees already working in China, the NBA seeks to double this number in the next 2 years. So if you’re a MBA with a passion for sports and are lucky enough to speak fluent Mandarin, then the NBA could be the perfect opportunity. If on the other hand you’re like me and can barely speak English never mind Mandarin, then there are in the range of five paid internship positions available this summer in functional areas ranging from marketing, team partnerships and business development to mention a few.

The fact that the NBA seeks to hire those with functional rather than sports backgrounds was emphasized by Nina Tamenbaum, who herself joined the NBA from Blackstone 2 years ago. In her role as a Senior Director for Strategic Development she also emphasized the importance of China and India, where her department were focusing on grassroots events to grow the market. In addition to the international growth another topic that came up throughout the day was the impact of the current economic climate. The NBA is not immune to this downturn, and a large amount of time and energy is currently being spent on developing new strategies to ensure that people renew their season tickets, given that ticket sales are still the largest source of revenue for the NBA.

Next stop was the Jockey Club, where the smell of rich mahogany represented a striking contrast to the more contemporary offices of the NBA and NFL. For those of you unfamiliar with the work of the Jockey Club, its mission is to improve thoroughbred breeding and racing in North America and you must be registered with the Club in order to breed or race a thoroughbred. A thoroughbred is a breed of horse whose ancestry traces back to three foundation sires – the Darley Arabian, the Godolphin Arabian and the Byerly Turk. This selective breeding process in the horseracing industry has been going on for more than 300 years.

There was a period in the US when horseracing filled grandstands to capacity but in recent times it has dropped down the list, being eclipsed by the likes of Nascar in terms of popularity. With regards to how to respond to this, James Gagliano, Executive VP and Chief Administrative Officer of the Club explained that unlike the NFL and NBA which operate revenue sharing schemes, one of the problems with racing is that each racetrack is by and large out for itself as a result of the organizational structure. Further, there is no central marketing authority to promote the sport and there is no central regulatory body in the United States with each State having its own racing commissioner. A very informative Q&A session ended with a discussion about the interrelation between horseracing and gambling, and with an estimated $15 billion bet (legally) on the sport of horseracing last year, it’s safe to say that the sport still has a great deal going for it even in these difficult economic times.

Thanks again to Wharton Sports Business Club Trek Directors Jeff Wilen and Amrita Bagaria for organizing the event and to the NBA, NFL and Jockey Club for their time and hospitality.

Article Contributor: Donal Mcelwee