SEC Charges Cuban with Insider Tradiing

How much money does a multi-billionaire need? Apparently, at least another $750,000. That's the amount the Securities & Exchange Commission believes Dallas Mavericks owner Mark Cuban avoiding losing by dumping all of his Mamma.com stock one day before the company announced it had concluded a successful private offering of its stock. The day after Cuban sold his entire 6% interest in the company, the share offering was announced and the price of the company's stock dropped more than 10%.

The SEC has filed a civil action charging Cuban with insider trading. You can see a copy of the complaint here. The good news for Cuban is that it is a civil action so, unlike Martha Stewart, if he loses he won't be facing jail time. The bad news, aside from the fines and penalties involved should he lose, is that the filing of this action no doubt seals his fate with respect to the Chicago Cubs. No matter how much higher his bid may be, with this complaint hanging over his head, Commissioner Bud has all the ammunition he needs to torpedo Cuban's bid.

More on Cuban and the Cubs

Interesting column from Harvey Araton in today's Times on Mark Cuban's attempt to buy the Cubs. I don't know how much Cuban wants any other team although he did once make a run at the Pirates. He would probably did a good job at resurrecting that franchise which sorely needs it. Araton is right that the Cubs don't need Cuban's brand of overhaul, but that shouldn't disqualify him - especially if he is the high bidder. After all, Zell needs every dollar he can find to save the Tribune these days.

Impact of the Recession Cont'd. - GM

Further to my post of the other day on the impact of the recession on Super Bowl advertising, take a look at this article in today's New York Times on GM's pullback from sports advertising and sponsorship. Nice of the Times to finally weigh in.

British Open Moves to ESPN in 2010

The transition of major sporting events to cable TV that I wrote about the other day is happening faster than anticipated. ESPN and the Royal and Ancient Golf Club of St. Andrews announced that beginning in 2010, all four rounds of the British Open, along with the Senior British Open and the next two Walker Cups will be shown on ESPN. The last two rounds of the Open have been shown ABC.

The deal with the WWLS includes extensive multimedia rights, including live coverage of ESPN360, the digital streaming service available in a few broadband served homes in the US. It is not yet available in any home served by Comcast or Time Warner Cable, significantly limiting its reach. Nevertheless, ABC/ESPN's ability to deliver technology and extensive multimedia platforms appears to be crucial to R&A's decision. "Envisaging the platforms where a younger generation could be positively influenced to experience The Open Championship over the next decade was a significant factor in assembling this arrangement with ESPN," said Alastair Johnson, IMG Vice Chairman who led the negotiations on behalf of the R&A.

Although financial terms weren't disclosed, ESPN is reportedly paying $25 million a year for six or seven years.

ESPN is paying $25 million a year for five or six years to move all four rounds to cable.

Impact of the Recession Cont'd. - Super Bowl

This is another in our continuing series of the posts on the impact of the global economic crisis on sports. Regular readers may have noticed that I have changed the title of these posts from impact of the credit crisis to impact of the recession. It's not that I think the credit crisis is over, although credit is clearly beginning to loosen up, it's just that there is no longer any doubt that we are in a recession and that it is likely to continue for at least the next three quarters.

NBC, a unit of General Electric, is charging up to $3 million for a Super Bowl spot this year and that has some longtime Super Bowl advertisers rethinking their plans. Of course, the economy hasn't helped. GM for one has decided to forgo the big game this year, which has advertising in 16 games. If GM's pleas to Congress are to be believed, the car maker may be in bankruptcy by the time the game rolls around anyway.

FedEx has yet to commit to advertising in the Super Bowl partly out of concern about how paying the price of ads and the surrounding activation campaign would appear when asking employees to tighten their belts due to the economic climate.

While on the surface this migh t be damaging to NBC at a time it can least afford it, in truth it may not hurt much at all. As of September 1, the network had sold 90% of its total inventory at mostly regular asking price, so it profit picture is pretty well locked in. However, at last check the available inventory is the same as it was on September 1, which is not a great sign. I'm guessing it will remaing the same until sometime in early January. You know that the economy is in a major slowdown when the year's highest rated program and its true event programming has yet to sell out only a little over two months away.

UPDATE: The NFL is reducing the price of playoff tickets approximately 10% in response "to the economic challenges facing fans." Commissioner Roger Goodell sent pricing guidelines to all of the teams which also authorized them to charge less for opening round games than for later games. The price for Super Bowl tickets has also been reduced from $800 to $500, the first time a Super Bowl ticket has been reduced by the league.

Court Orders NFLPA to Pay $28.1 Million to Retired Players

The men who made the NFL what it is today, that is those who toiled in the 1950s and 1960s in the era before the giant contracts, seem to have been forgotten by those who have enjoyed the spoils of their labors. Oh sure, the late Gene Upshaw, the former head of the NFL Players Association used to speak warmly of the past generation of players and did make some changes to the retirees disability plan that has had beneficial effects. However, for the most part, Upshaw and the rest of the NFLPA staff had little use for the retired players and did not feel as if they were responsible in any way for the well being. It's as if those players were never in the league or members of the NFLPA. In fact, the retired players had taken their fight to Congress.

As can be seen from the handling of class action suit filed by retired players against the NFLPA involving licensing fees for the use of their identities without compensation, the NFLPA held the retired players in complete disdain. The Court however felt differently and ordered the union to pay $7.1 in compensatory damages and $21 million in punitive damages. While the case only involved licensing fees, it will almost surely change the dynamics of the relationship between the retired players and the NFLPA, although that was hard to tell from the reactions of the union's attorney,

The NFLPA attorney, Jeffrey Kessler said: “Even my grandmother, if she were here today, would be shocked at the vindictive attack of deceit, name calling, requests for punitive damages, that came out of this effort to try to help these retired players.”

The union has said it will appeal if its post trial motions are denied. Nevertheless, I think that no matter how any appeal is decided, this decision will force the NFLPA to take the retired players interest into account in how it operates in the future. As it selects Upshaw's successor the opportunity to forge a new and more cooperative relationship is there and should be seized upon for the good of the players and the game. The collective bargaining agreement will be coming up for negotiation in the next year in a dramatically different economic environment and it will be much better for the players if the active and retired players are unified as they enter into negotiations with owners under a new Executive Director.

BCS Moving to the Worldwide Leader??

According to a story in today's Sports Business Daily, the BCS Commissioners are considering a proposal from ESPN/ABC which would see all four of the BCS bowl games now under contract to Fox move to ESPN. The Rose Bowl has a separate contract with ABC, however a clause in that contract provides that if one of the BCS bowls move to cable then ESPN/ABC has the right to move the Rose Bowl to ESPN. The BCS proposal is thought to be worth $500 million for four years or roughly $20 million more per year than Fox had been offering. Fox has several day to match the offer, but that is thought to be unlikely.

The movement of the BCS bowls to ESPN continues a trend of moving high profile events to cable/satellite television and away from the broadcast networks. In many respects, cable, with its dual revenue stream of subscriber fees and advertising, is in a better position to pay up for events than is network TV. Expect this trend to continue and even accelerate as the value proposition for network TV will continue to deteriorate. There is only on Super Bowl and most other events can't begin to charge those types of ad rates.

The other takeaway from this deal is don't count on a playoff anytime soon. If the Big Six conferences can get this kind of money for their little bowl cartel, why in the world would they want to upset the applecart with a playoff.

Are You Ready for Bevo TV?

First came ESPNU, an all sports network devoted to college athletics. It was followed quickly by what is now called CBS College Sports. Both have wide distribution thanks to the ability of their corporate parents to leverage their popular channels to force cable systems to carry the college sports networks if they wanted to get ESPN or any of Viacom's properties such as Showtime.

Then, we got mtn, but the problem was no one could see it, not even the people living within the footprint of the Mountain West Conference who presumably would be interested in watching. Then came the Big Ten Network, with instant carriage on DirecTV by handing over an equity stake to Rupert Murdoch, who then owned the sat network. However, with BTN came nasty disputes with cable systems, primarily the large systems led by Comcast and Time Warner so that in its season, Comcast viewers in Big Ten country either had to switch to satellite or did without.

Why the quickie history lesson? The next step in specialty college sports networks is about to make its presence felt. What could come after channels devoted to college sports in general or a particular conference? Why, one devoted solely to a single university of course. The University of Texas is planning a channel devoted to Longhorn athletics and is currently discussing partnerships and carriage issues with the two satellite channels and the major cable networks. It will not, at least initially, carry football or most men's basketball games as those rights are held by the Big XII and sold as league-wide deals, which places the channel at a severe disadvantage in getting viewers. I just don't know how big the market is, even in Texas, for a channel devoted to baseball, volleyball, track and field hockey. There is only so many hours of watching Bevo graze in a field that even the most diehard Longhorn can take. Nevertheless, this experiment will be watched very closely in certain offices in the South and around Los Angeles.

Looks Like No Cuban for the Cubs

Published reports are that the sale process for the Chicago Cubs is proceeding more slowly than Tribune owner Sam Zell wanted or expected. Even before the credit crisis, Zell had hoped for a quick sale so that the proceeds could be used to pay down some of the crushing debt load he incurred in the Tribune Company buy-out. With the credit crisis and the depression that has hit the newspaper industry, the need for a quick sale has only gotten that much greater.

However, one can never push the Lords of Baseball, who march to the beat of their own drummer, especially Lord High Commissioner Bud Selig. Zell has likely favored the bid of Dallas Mavericks owner, and fan favorite, Mark Cuban, because Cuban was willing to pay top dollar (read roughly $1 billion) and close quickly. Cuban, is not exactly the Commissioner's idea of a member of the baseball club, despite the testimony of David Stern and other basketball owners. He is too brash, too loud and too fan friendly. Not only that, he is a damn fine businessman who takes ownership of his sports teams as a serious business. The longer the sale takes, the more likely it is that the buyer will be someone more to the Commissioner's liking. In fact, the Sun Times is now reporting that Cuban is out and the likely buyer will be the group led by John Canning, Jr., the front runner all along. Why, the front runner? He is Selig's friend and has been a minority owner in the Brewers - you remember the team that Selig used to own.

Sports and the Ballot Box

Aside from the historic nature of last night's election, and that is not something that is easily forgotten or should be something easily set aside, there were several former athletes on ballots across the nation. Most fared well. The most prominent was probably Kevin Johnson, the former All Star point guard of the Phoenix Suns, won election as Sacramento's first African-American mayor by defeating two-term incumbent Heather Fargo in a run-off election. Also elected mayor was Mufi Hannemann, a 6-foot-7-inch former Harvard basketball player, who won re-election as mayor of Honolulu. Here's video of KJ following his election:



In Hawaii, Michael Victorino, the father of Shane, the outfielder of the World Series champion Phillies won election to the Maui county council, unopposed. Other relatives of athletes winning yesterday included George Unseld, Wes' brother and a former basketball player and coach himself, was re-elected to the Metro Council in Louisville, Ky and Connie Mack, the grandson of the great manager of the A's was re-elected to Congress from Florida.

Speaking of Congress, freshman Congressman Heath Shuler, formerly of the Washington Redskins, won re-election in North Carolina. Two former college athletes won re-election to Congress: Baron Hill, a Indiana University basketball player, and Norm Dicks, a University of Washington football player. Heading to Congress for the first time will be Jason Chaffetz, a former BYU kicker.

Perhaps the biggest winner of the night, however, was the Oregon State University basketball program, which gained the best recruiting advantage any college athletics ever had. You see, the Beavers coach is Craig Robinson, who played at Princeton and was a two-time Ivy League Player of the Year. He later served as an assistant coach at Northwestern University on the staff of former Princeton coach Bill Carmody. None of that however explains the special recruiting advantage Robinson possesses for that you must look at his family - his sister is none other than our next First Lady, Michelle Obama. Now, how are Pac-10 coaches going to compete with that?

Newark to Devils: Pay Up or Else

It's only been a year since the New Jersey Devils moved into their new Newark home at the Prudential Center, but relations between the Devils and its landlord have already gone straight into the toilet. The Newark Housing Authority, the owner of the Pru, has issued a demand letter to the Devils declaring the team in default of its lease of the stadium and demanding immediate payment of $2.4 million in rent.

Not surprisingly, the team disputes that it owes the money, claiming that the Authority cost the team roughly $2.9 million in penalties and costs resulting from cost overruns and delays in construction.

Any lease dispute, including this one regarding rent payments, goes to arbitration if it can't be resolved within 30 days.

The arena seems to be a success, the rental dispute aside, having taken in $3o.1 million in gross revenue in the eight months since it opened. Attendance at Devils games also increased substantially following the move from the Meadowlands. This dispute is simply about money and will be resolved, I'm sure. It is not the best way to start a long relationship, however.

The Run to a Billion

For Tiger Woods, 2008 was a year unlike any other. Oh, in some respects it was the same. He finished the year on top of the world golf rankings and led the US in both Ryder Cup points and Presidents Cup points. He came in second in the money list with $5,775,000, despite not playing after June 15, and oh, yeah, he won another major - this time the US Open at Torrey Pines. However, there was that knee injury which required surgery right after the gripping 18 hole Open playoff win and caused Tiger to shut down the rest of the season. So, no, 2008 was unlike any other season, but he did get to spend valuable quality time with one year old daughter Sam Alexis, and, apparently, with Elin who is pregnant again.

Nevertheless, Tiger's quest to become the world's billionaire athlete continued as his earnings didn't suffer much while he was recuperating. The bulk of Tiger's earnings come from endorsements - to the tune of $100 million per year. In dollar value, Tiger's two largest endorsement deals are most likely Nike and Gatorade, which each are supposedly paying him $100 million over a number of years (5 in the case of Gatorade). Those are followed by Gillette and Buick, with his golf course design and development business in Dubai close behind. The Buick deal is up for renewal next year and given GM's financial difficulties, I suspect that it will not be renewed. Of course, that just frees Tiger up to negotiate an even better deal with a car company more suited to his place in the world, like maybe, Porsche or BMW?

The race to a billion dollars may now have a new entrant and one that may well give Tiger a good run for his money, so to speak. With his fifth place finish in the Brazilian Grand Prix, the second year driver Lewis Hamilton grabbed what was denied to him in this race last year, the world championship of Formula One. At the tender age of 23, he becomes the youngest driver in the history of the sport, one that has consistently seen its champion populate the upper reaches of the Forbes list of the highest paid athletes in the world. Assuming his success on the track continues, he is likely to follow closely on the Tiger's heels in the billionaire club. His current contract with McClaren, which runs to 2012, pays him an estimated 75 million pounds over five years, with endorsements bringing in another 30 million pounds. However, when the contract is renewed in 2012, expect that McClaren to jump to about 30 million pounds a year. He has already achieved a first in getting McClaren to allow him to obtain personal sponsors outside the team sponsors; something else which should ratchet up his income before the new contract.

As the first black champion in his sport (his father is black and his mother is white), he is practically a marketer's dream - young, good looking, bright and a winner. A package remarkably similar to Tiger Woods in a sport that is arguably more popular worldwide. If Hamilton's success on the track continues, the future is practically limitless for him and I wouldn't be a bit surprised if he follows Woods into the billionaires club just a few years later.

Will the NCAA Finally Find Teeth?

On Thursday, the NCAA Board of Directors heard recommendations from the Division I Committee on Infractions that would significantly beef up the penalties that the heretofore toothless NCAA would levy against member schools found to be violating the myriad rules in its several inch thick rulebook. The Infractions Committee recommended that the NCAA dust off some old but now rarely invoked penalties that would hit offending schools where it would hurt the most - their pocketbooks.

Among the recommendations suggested by the Committee are greater use of fines, postseason bans and that oldie but goodie, television bans. The Committee also recommended that the cooperation of the school committing the infraction not be taken into account in determining the penalty to be applied.

The Board of Directors has taken the recommendations under advisement but has delayed taking any action while it confers with member schools. It should be a short period for investigation. The decision on these recommendations should be a "no brainer". It is long past time for the NCAA to start imposing penalties that actually mean something to the offending school. Without meaningful penalties, the NCAA is nothing but a toothless, old hag who mouths idle threats. If the sanctions applied for violating the rules do not include post season and television bans as well as fines, and the NCAA starts to actually apply the tools in its arsenal, then the rampant rules violations that currently plagues college sports will just continue unabated. The sooner the NCAA acts, the sooner it can begin to clean up after itself.

Impact of the Credit Crisis Cont'd.

The common wisdom has always been that sports would be immune from most of the gyrations of the American economy. Unless there was a depression on the order of the Great Depression, then the impact of a recession would be fairly minimal. After all, Americans still want their entertainment and watching televised sports is cheap. Sure, attendance in the cheaper seats might be a little less, but businesses would still need to entertain customers and besides, if you weren't the NHL, then your money came primarily from television anyway.

Well, welcome to the recession of the 2008-09, when the received wisdom is being tossed away like most businesses ability to obtain a loan from their friendly neighborhood bank. The NFL has responded to the crisis in a way that demonstrates once again just how much different it is from other professional sports leagues. According to Chief Financial Officer Anthony Noto, the league is about to close on almost $2 billion in financing to ensure that the 32 clubs can weather the storm without difficulty. This at a time when most major corporations in this country and around the world are having trouble tapping into the commercial paper market or their bank credit lines to finance their ongoing operations. While the NFL is an obviously good credit risk, since the borrowings are backed up by nearly $3.5 billion in annual television revenue, creditworthiness does not seem to count for too much in this market. However, the cachet of the league and its reputation for operations as well as it TV revenues, and the new stadiums coming online, made this financing appealing. Access to tickets may not have hurt either.

In another sign of the weakening economy, Chevrolet, traditionally one of the largest sports advertisers, announced that it would be significantly reducing its sports sponsorships because of falling sales and the economic slowdown. General Motors has begun closing plants and downsizing as it is hemorrhaging red ink. It is currently in Washington seeking a federal bailout to aid a possible merger with Chrysler, although why GM execs believe that will help matters is beyond me. GM had previously announced that it would not air a Super Bowl commercial this year. By next season's Super Bowl, there may not be a GM to consider a commercial.

The Making of the OKC Thunder

In honor of the opening of the NBA season, be sure to check out the article in Sunday's New York Times Magazine relating the saga of the creation of the Oklahoma City Thunder, or if you prefer, the hijacking of the Seattle Sonics to OKC. It's an interesting take on the story.

Kentucky's Governor Goes All In

I've been meaning to write about this amazingly ridiculous and downright scary litigation for some time but for some reason, just haven't gotten around to it. In case you haven't heard about it before now, let me fill you in briefly on what Kentucky's hypocritical Governor has been up to.

At the Governor's direction, the Commonwealth of Kentucky has seized the domain names of 141 online gaming companies, including some of the biggest names in the business. In an order issued in Franklin Circuit Court, in Frankfort, Kentucky, Judge Thomas Wingate agreed with the Commonwealth's argument that the website names were "gambling devices" under Kentucky's gambling statutes and therefore capable of being seized by the state. Since Kentucky residents could access the sites, Judge Wingate determined that they were doing business in the state and subject to the state's jurisdiction. A copy of the decision can be found here.

Needless to say, this case has stirred up a hornet's nest of opposition and not just from gaming site operator's. If this decision, which has been appealed, is allowed to stand it would set a very difficult precedent for the operators of websites everywhere. It would mean that all websites would be subject to 50 different state statutes not to mention 200 something different national legal schemes, rather than just the legal system in the state and nation in which the operator is physically located.

An appeal has been filed by the Interactive Gaming Council (IGC) and the Interactive Gaming and Media Association (IMEGA) and will be heard by the Kentucky Court of Appeals (the intermediate appellate court) on November 18th, which is unusually fast for Kentucky. It is difficult for me to believe that the seizures could ultimately be upheld, if not by this court then by the state or US Supreme Court. If ever there was an instance of interstate commerce which should be reserved to the federal government, this would seem to be a shining example of it. I would also point out that the state's signature industry, thoroughbred racing, is allowed to maintain its own Internet gaming sites, see twinspires.com, a unit of Churchill Downs, which certainly smacks of unfair and discriminatory treatment.

As this case moves forward, I will try and keep you posted. If you are concerned about the future of the Internet and ability to keep it free and unfettered from regulation, be very, very concerned about this case.

Curlin's Co-Owners Disbarred

Since today is Breeders Cup Day, I would be remiss in not updating the story of Curlin's minority owners, the lawyers who fraudulently diverted millions of dollars from their clients in the settlement of a class action arising out of the diet drug commonly known as fen-phen. The criminal trial of Shirley Cunningham Jr. and William Gallion ended in a hung jury and they are scheduled to be retried in federal court in February.

The two filed motions with the Kentucky Supreme Court requesting voluntary withdrawal from the Kentucky Bar as permanent disbarrment. The Court entered an order disbarring the pair on October 23.

In a separate state court civil action in which the lawyers former clients are seeking recovery of diverted funds and have received a $42 million judgement, the judge has ordered that the pair's 20% interest in Curlin be sold and the proceeds used to satisfy the judgement. The interest will be sold pursuant to a sealed bid auction with bids due by November 5. Curlin seeks to close out a memorable season by winning the Breeders Cup Classic this afternoon at Santa Anita. A hoped for match up with Kentucky Derby winner Big Brown will not take place as Big Brown has been retired due to injury.

Rutgers In Search of Naming Rights Sponsor

We should be getting a good indicator of the impact of the global credit crisis and the global recession on sports fairly soon. Rutgers is in the process of expanding its football stadium and, in conjunction with the expansion, is seeking to sell the naming rights for "somewhere in the $1.5 million to $2 million range." Supposedly there are four companies now interested.

Should Rutgers get that much and should it get at least a fifteen year deal, that would make the deal one of the higher naming rights deals in place for a college facility. It would indicate that the naming rights market remains strong despite the economy and should certainly make the New York Giants and New York Jets very, very happy. The Giants and the Jets are in the market trying to sell the naming rights to their new stadium under construction at the Meadowlands. Their target is to exceed the current market top reached by the Mets with CitiField opening next season. That deal is worth $400 million over 20 years, a figure matched by the New Jersey Nets for their new arena in Brooklyn with Barclays as the rights holder.

Moneyball to be a Movie

Looks like Billy Beane is slated to become not only a baseball sensation but a Hollywood screen idol. Moneyball, Michael Lewis' popular look at the use of statistics to run a baseball team, specifically the Oakland A's is being made into a movie. According to Variety, Columbia Pictures is putting together a movie focusing on Beane and based on the book as a potential starring role for Brad Pitt. That should do a little something for Mr. Beane's ego. HT to Clusterstock.

More on the Impact of Credit Crisis

The credit crisis and economic downturn is affecting sports in a myriad of ways. One sign that the impact is deeper than perhaps first believed are reports from the NBA that the league has laid off 80 employees, which amounts to about 9% of its workforce. In addition, Commissioner David Stern recently said that he expects tickets sales throughout the league to "drop modestly."

The New Jersey Nets, whose move to Brooklyn will be delayed at least a year by the downturn as groundbreaking on its new arena has been delayed, are employing a novel, for the NBA at least, "buy now, pay later" promotion for season tickets, which certainly reflects the times. It seems to be working too.

Also significantly affected are college athletic departments who have been receiving large donations that are either gifts of stock or are pledges to be paid over time and the donor intended to use stock sales to meet his or her pledge. With the market downturn, those gifts will be increasingly hard to collect. Exhibit A for this problem is Oklahoma State whose record $165 million gift from T. Boone Pickens is tied up in Pickens' hedge fund, which has sustained heavy losses this year. OSU is certainly not the lone ranger in this category as the market travails are affecting colleges and universities large and small. Only those institutions with the staying power to wait out the crash will escape with minimal damage.