By Edward H. Schauder
(Part I of this article, and the first two considerations, appeared in the last issue of the Alert. The author is a Partner and the Chairman of the Sports and Entertainment Practice Group at Davidoff Malito & Hutcher LLP in New York. The author is one of the foremost experts in organizing groups of athletes — either for players or team alumni associations — that are designed to generate revenue generating opportunities that currently do not exist and to create a win-win situation for all parties involved. For further information, please contact the author at (212) 557-7200 or at ehs@dmlegal.com.)
3. What Are Some of the Revenue Streams Generated by These Programs?
The programs are typically designed to be flexible to allow the participants to participate as little or as much as they would like to. The potential revenue streams and revenue generated will therefore vary accordingly. As a general rule, these programs generate the following revenue streams (many of which are passive):
• Licensing and merchandising transactions;
• Endorsements and sponsorship revenues;
• Memorabilia signings and card shows;
• Clinics and fantasy camps;
• Charity dinners and golf tournaments; and
• Settlements from companies that have exploited member likenesses without proper authorization.
The 1969 Mets were even entertaining offers for a traveling exhibit of their personal memorabilia and an interactive musical and time capsule experience to chronicle the year 1969!
I believe that there are many additional passive revenue streams that will benefit athletes through internet technologies including webinars with the players and password protected exclusive content and offers. The key for the players to always remember is that there is always strength in numbers! By compelling a third party interested in securing the rights to members of the team to negotiate with a single representative acting on behalf of such members, the leverage shifts to the players to dictate and negotiate the best deal terms for a particular transaction.
4. What are Some of the Ancillary Benefits for the Players Participating in These Programs?
Nostalgic marketing programs allow former players to reconnect with each other and relive their accomplishments, not only amongst themselves, but also with their families, friends, business associates and their fans. Shortly after I organized the 1969 Mets, Ron Swoboda, who made a spectacular catch in Game 4 of the 1969 World Series, was quoted as saying: “We are trying to create a fan friendly environment for our fans to interact with each other. If someone wants to talk to me about my catch, let him bring his glove and we can play catch while we do so!” The programs also are an excellent opportunity for the players to become relevant again and afford them an opportunity to promote their businesses and charitable causes with the publicity generated by their reunion platform. When the 1980 Olympic Hockey Team played an exhibition game against the New York Rangers at Madison Square Garden in 1995 many of the players not only brought along their family members but their clients as well.
These programs are structured so as not to interfere with a player’s existing post-career opportunities. This is especially important if a particular team has members that are in the Hall of Fame or that are considerably more accomplished than some of their lesser known teammates. To the contrary, the programs are designed to create additional opportunities for such players that did not exist before and to allow them to help their former teammates (many of whom have unfortunately fallen on hard times) generate additional revenue and get themselves back in the public spotlight and on their feet.
5. “One- Stop Shopping” for Potential Sponsors and Licensees
I can not begin to tell you how happy many potential licensees and sponsors were when they discovered that they could secure the rights of all of the members of the 1969 Mets or 1980 Olympic Hockey Team with one single phone call! We had done all of the hard work for them by securing the requisite intellectual property rights necessary to create and distribute a particular product or air a particular commercial or advertisement capturing that championship moment! Many companies, determined to commercially exploit the likenesses of historic teams, do so innocently not realizing that the individual members of the team (even in a collective team picture) enjoy certain rights to privacy. Other companies are more calculating and “assume the risk” that the players, scattered across the country, will never find out about the infringement or simply shrug their shoulder in disgust and do nothing. To the reputable potential licensees and sponsors, these programs afford them an opportunity for “one-stop shopping” to secure the valuable collective rights of the members of the group. To the disreputable companies that have historically exploited the players, there is always the lesson to be learned from Shamsky vs. Garan once the players are organized.
6. Who Is in The Best Position to Organize These Programs? (This Answer May Surprise You!)
Historically, I have actively been the catalyst in reaching out to players that have won championships to organize them and represent them. Oftentimes this proves to be extremely challenging trying to track down players that played on the team and convince them (sometimes one by one) of the benefits of a team marketing program. Sometimes you get lucky. In 1994 when I was determined to organize the 1980 Olympic Hockey Team, Boston University and the University of Minnesota were playing in the Frozen Four in Saint Paul Civic Center in St. Paul Minnesota. Since many of the members of the 1980 Olympic Hockey Team hailed from these two perennial hockey powerhouses, having already pitched the idea to Mike Eruzione, at his suggestion I flew to this event and was able to pitch the concept to 17 former members of the team at one time.
I have since come to believe that the entity that is in the best position to organize these programs are the former teams that the athletes played for! Here’s why. In an era where teams are selling game used equipment and other memorabilia, PSLs, fan experiences and fan tours to increase their bottom line revenue, teams often neglect capitalizing on their greatest asset–the goodwill of their alumni and especially championship teams. I am aware that many teams have active alumni associations that are sponsored by a major corporation. However, these alumni associations for the most part, have limited and sporadic events and are not structured to become a potential 24/7 revenue generating stream that benefit the players and also the team. In such a circumstance, a particular team will benefit in its capacity as the holder of certain additional intellectual property rights and also as the promoter/agent seeking and negotiating opportunities on behalf of its alumni. The team, especially if it has an active alumni association, also has a logistical advantage in coordinating these programs since many alumni are already involved with the franchise in some capacity and the franchise undoubtedly already has contact with the other members of its championship team. Accordingly, a franchise is in the best position to approach its former players and create a joint venture nostalgic marketing program with its alumni. Furthermore, the teams are in a great position to work with the league’s governing bodies and existing sponsors to create additional fan friendly and revenue generating opportunities that will not result in a conflict with the franchise’s existing sponsorship arrangements.
7. What Are The Costs Associated with Putting Together A Successful Program?
The costs for organizing these programs are relatively inexpensive. I should note that I have never asked an athlete to contribute a single penny in forming these programs Instead, I have usually relied on licensing advances or on a third party investor/promoter or on a particular or entity to cover the start up expenses. Recently, I was approached by a former member of a World Championship team who wanted my help in organizing his former teammates and offered to front all of the start up costs (including legal fees). In one instance, all of the program’s members equally contributed to the start up costs.
The start up costs are generally comprised of:
• Legal fees associated with forming the entity and securing the requisite player rights;
• Creating a unique player owned program logo that does not infringe on the intellectual property rights of the team or any other third party;
• Costs associated with applicable trademark filings;
• The development of marketing materials; and
• Website design and hosting.
Depending on the complexity of the foregoing, startup costs will vary. Ongoing costs will consist of accounting, legal and public relations services (which is optional). Oftentimes many of these fees are covered by a portion of third party licensing fees and/or are passed on to third parties contracting with the program.
8. Other Issues to Consider Prior to Launching a Program
Although getting into specific detail is beyond the scope of this article, set forth below are some of the additional considerations that must be addressed in creating programs for nostalgic athletes:
• Which members of the team should be part of the program? For example, Miracle of 1969 Enterprises was limited only to the players that were on the active World Series roster, the coaches and the estate of Gil Hodges.
• How will deal specific decisions be made by the players? Members of the program may designate a committee to approve transactions or require majority approval and allow certain players to opt out of a particular deal if there is a conflict.
• How will revenue be divided among the players? Most programs will divide licensing royalties pro rata and allow the market to dictate appearances fees and signing fees. There have been notable exceptions to this rule. For example, Hall of Famer Tom Seaver participated in many events during the 1969 Mets program for the same consideration received by the lesser-known players on the team. In doing so, Seaver afforded all of his former teammates the opportunity to receive additional revenue from the program.
• Do players have exclusive arrangements that could preclude their participation in certain specific deals? Typically, any issues are flushed out by asking the athletes or their representatives to complete a detailed questionnaire prior to the launch of the program.
• What third party rights will be required if the program is envisioned as a joint licensing program? Typically, I will meet with the applicable governing bodies (e.g. Major League Baseball Properties or USA Hockey, as applicable) to fully inform them about the program and address any potential conflicts ahead of time. The goal is to secure a letter of support for the program from the applicable governing body prior to formally launching the program. These concerns may be somewhat mitigated to the extent that a team is taking the initiative of organizing and promoting the program.
• Determine if there are any conflicts between potential sponsors of the program and the current sponsors of the franchise. To eliminate potential conflicts, corporate sponsorship of the program should be offered to existing current sponsors of the franchise and conflicts between potential program sponsors and existing sponsors of the franchise (in particular exclusive sponsors) should be avoided and/or resolved ahead of time.
• Retain experienced professional advisors that are experienced in building and protecting a brand to offer their expertise in organizing and launching any program involving nostalgic athletes.
