By Douglas Masters and Seth Rose
“Sickening,” “disappointing,” “a sell out.”
Outspoken fans and commentators had a few choice words last month at the news that the National Basketball League expects to move forward with its plan to become the first of the four major U.S. sports leagues to allow sponsor advertising on game jerseys.
The grumblings, which began last March over reports that the league was considering selling advertising space on game uniforms (see our April 6, 2012, article “Dunking Billboards”), escalated into a frenzy of insults, threats of boycotts and petitions when the league recently acknowledged that the advertising patches on game jerseys could become a reality as early as the 2013-2014 season.
At a press conference immediately following the league’s July Board of Governors meeting in Las Vegas, NBA deputy commissioner Adam Silver offered some telling words of his own about the proposed advertising program: “big opportunity.” And perhaps most significant: “$100 million.”
Cautioning that it was “very much a loose projection,” because no major U.S. sports league has such a program in place, Silver reported that by selling the jersey patch the league was estimating that “on an aggregate basis, league wide, our 30 teams could generate a total of $100 million by selling that patch on jerseys — per season.” The $100 million projection is a conservative estimate, according to some market analysts, with reported estimates of average potential revenue between $4 and $4.5 million per team, bringing total revenue closer to $125 million.
Silver reported that the owners had discussed extensively the current proposal, which involves teams selling sponsors the rights to have a single two-and-a-half inch square advertising patch placed on the upper chest of game jerseys. No formal vote was taken, however, in order to give the owners time to further discuss the program and “gain a greater understanding of how the additional revenue would impact their ability to remain both competitive and profitable.”
Under the league’s recently revised revenue-sharing plan, all the teams would share in the advertising revenue generated by the program, and, according to Silver, the proposal has been referred to the league’s planning committee to help teams understand the full implications — on a team-by-team basis — of the revenue opportunity. Despite the need for further discussion, however, Silver reported unanimous support of the sponsorship program: “Every team is in favor of doing this in some form.”
Given the likelihood that the owners will vote to implement the program, the league expects to finalize a set of program guidelines for teams before the start of the 2012-2013 season, and that patches will start appearing on jerseys in the 2013-2014 season. Silver said that the timing recognizes that “teams would need a significant lead time, one, to sell the patch and, two, for Adidas to manufacture the uniforms, because the patch that would be on the players’ uniforms would also appear on the jerseys at retail.” Silver’s comments suggest that the teams, not the league, will be in the driver’s seat when it comes to implementing the program, and that potential revenue from the program will depend on the teams’ willingness and ability to negotiate and secure sponsors in their respective markets. Teams with bigger markets — and more marketable players — would command a revenue in the upper end of the range — by some estimates, as much as $7.5 million a season — for the advertising patch, while teams in smaller markets could bring in lower — but still significant — revenue of about $1.5 million a season.
Both Silver and NBA Commissioner David Stern have acknowledged that “some” fans think the advertising program is “a stupid idea.” Even though fans and commentators may not approve, the initiative is one that for all intents and purposes is making a fast break to hoop, because the revenue recognition is too much to ignore.
Douglas Masters is a partner in the Chicago office of Loeb & Loeb LLP, where he litigates and counsels clients primarily in the areas of intellectual property, advertising and unfair competition. He helps sports leagues, athletes and advertisers protect and exploit their branding, marketing and other intellectual property assets.
Seth Rose is an associate in the Chicago office of Loeb & Loeb LLP, where he counsels clients on programs and initiatives in the fields of advertising, marketing, promotions, media, sponsorships, entertainment, branded and integrated marketing, and social media.
