Bruce Dowbiggin
Destroying The Development System: Expect Turbulence
News Item: Child golf phenom Xavier Perez has scored a major NIL deal before even becoming a teenager. The 12-year-old, who has won more than 250 tournaments since he began playing golf competitively nine years ago, landed a name, image and likeness deal with Cobra Puma.
NIL, to the uninitiated, means Name Image Likeness. And it’s about to blow up the development models for a number of sports— including hockey. The right of athletes to profit from NIL is the result of decades of legal challenges by “student” athletes in the U.S. who saw coaches, programs and networks get phenomenally rich while they received only a scholarship in return (only one percent of all collegiate student-athletes receive a full ride.)
If an athlete was seen to be receiving even a meal or a job from an outside party they lost their “amateur” status and were ineligible for play in the U.S. college system that supplies talent to the NFL, NBA, NHL and MLB. Ditto if they used an agent. For decades the system prevailed. Until the explosion in the digital world of video games, when greedy colleges reaped a fortune using the NIL of athletes— never thinking they’d need to compensate them.
The result was O’Bannon v NCAA, a challenge to U.S. antitrust law in which former UCLA star Ed O’Bannon and a number of other former NCAA athletes won the right in 2014 to be compensated for their NIL in the EA Sports series. That produced years of negotiations in which the NCAA tried to create a system that would preserve college athletics while staying within the terms of the decision.
On July 1, 2021, the NCAA announced it had agreed to rules that “removed restrictions on college athletes from entering paid endorsements and other sponsorship deals, and from using agents to manage their publicity”. The only caveat is that athletes can’t use the symbols, uniforms or logos of the school in their advertising. And universities can’t pay athletes directly.
What they created is a wide-open system that 12-year-old Xavier Perez is now exploiting. What does it mean? It means that the top prospects headed to the NFL, NBA, NHL and MLB could now be making millions even as they play FBS bowl games, March Madness, the Frozen Four etc. They will be able to make decisions on what school to attend based on financial remuneration as well as opportunity to play. They’ll also be able to make significant money years before they enter college.
Because the remuneration comes from booster groups, outsider sponsors and equipment companies, schools will not have the ultimate control they’ve exercised for over a century. An athlete who has financial security will not be forced to go pro before he/ she is ready or go to a team they don’t want to play for. (Or he/ she can use the new transfer portals to switch schools as they see fit.)
“I definitely would’ve stayed for a fifth year [if there were NIL laws],” said Cardale Jones, a former star quarterback at Ohio State. “With my draft status, and still having a household name in college football in Columbus, [Ohio,] I’m pretty sure I would’ve made a lot more money than being drafted in the fourth round.”
NIL is not a panacea for all athletes. Even at the top schools opportunities will be limited for low-profile players in the non-glamour positions. There will conceivably be millionaire QBs playing with OL grunts who might have a deal with a sandwich shop. Smaller schools will have trouble competing with the big boys of Div One.
ESPN reported on what Georgia Tech players received for becoming social influencers. “Swanky PJs are part of what Yellow Jackets players received in exchange for agreeing to promote TiVo on social media this month. They also got a prepaid debit card worth $404 (Atlanta’s area code is 404) and the company’s 4k streaming device… the total value is more than $100,000, according to TiVo, who said 90 of the team’s players have signed a contract for the endorsement.”
The system is only now being implemented; dramatic changes will doubtless appear. Already there is tension among the coaches who must now deal with the new rules. Alabama’s football legend Nick Sabin and Texas A&M’s Jimbo Fisher recently got into a heated public bitch slapping over the ethics and inducements of recruiting. “That creates a situation where you can basically buy players,” said Saban, who makes about $10 million a year. “You can do it in recruiting. I mean, if that’s what we want college football to be, I don’t know.”
Prize recruit Bryce Young, who had yet to start a game for Saban at Alabama, had NIL deals closing in on $1 million. Clearly, football and basketball will need to streamline their development system. If colleges are now a pay-for-play system, how does that affect their status as institutions of learning? What happens if excesses in NIL force government into stripping colleges of the development role and giving it to pro leagues?
There has been zero information on how NIL affects the development system of NHL prospects? At the moment a majority of them go to Canada’s low-paying CHL teams which play far more games a season than does the NCAA. One game in CHL disqualified a prospect from playing in the NCAA’s formerly simon-pure amateur system.
But now a Connor McDavid can sign an NIL contract at 14 years old, play in the NCAA and— rich already— still be drafted No. 1 overall. Yes, college hockey has a lower profile and fewer opportunities for endorsements. Some will want the CHL’s experience. But a McDavid-type player would be a prize catch for an equipment company or a video game manufacturer. Or even as an influencer. All things currently not allowed in the CHL.
NIL won’t kill the CHL but it could strip away a significant portion of its stars who choose guaranteed money over long bus rides and billeting with other players. It’s early days, of course, but be prepared for an NHL No. 1 draft pick being a millionaire before his name is even called in the draft.
Bruce Dowbiggin @dowbboy is the editor of Not The Public Broadcaster (http://www.notthepublicbroadcaster.com). The best-selling author was nominated for the BBN Business Book award of 2020 for Personal Account with Tony Comper. A two-time winner of the Gemini Award as Canada’s top television sports broadcaster, he’s also a regular contributor to Sirius XM Canada Talks Ch. 167. His new book with his son Evan Inexact Science: The Six Most Compelling Draft Years In NHL History is now available on http://brucedowbigginbooks.ca/book-personalaccount.aspx
In case you hadn’t noticed. Celebrity Sports Ownership is all the rage. When the Ottawa Senators were for sale Ryan Reynolds, Snoop and The Weeknd were all mentioned among the bidders (that eventually went to Montreal businessman Michael Andlauer). LeBron James now holds a minority position with Liverpool FC.
Jay-Z owns part of the Brooklyn Nets, Usher a piece of the Cleveland Cavaliers while Fergie of Black Eyed Peas fame also partly owns the Miami Dolphins. Gloria and Emilio Estefan, Marc Anthony, and tennis superstars Serena and Venus Williams are owners of pro sports teams. Famously, Elton John owned Watford FC, although he’s now just an honorary chairman.
And, of course, Reynolds and Rob McElhenney used a documentary TV series that showed their Welsh Wrexham soccer team promoted to the FA’s League Two. What’s the attraction?
Clearly a little PR is always a good thing. But sports team ownership has also become a lucrative equity play. As BMO reports, “The average compound annual growth rate since the last purchase price… is 15 percent, a meaningful outperformance to the TSX and S&P. Forbes estimates the Toronto Blue Jays are currently worth US$2.1 billion or roughly C$2.85 billion.
Based on recent sports franchise transactions, expansion fees and annual estimations of franchise values by Forbes Magazine, an $8 billion enterprise value is easily defendable for the Jays’ owners MLSE (who also own the Maple Leafs, Toronto FC and Argonauts).”
It’s the same across the major pro sports leagues. The estimated average franchise value in the NFL since 2013 is $5.1B with a compound annual growth rate (CAGR) of 16 percent; in the NBA it is $2.9B with a CAGR of 18 percent. For MLB it is $2.3B with a CAGR of 12 percent; the NHL is $1.0B with a CAGR of 11 percent; while MLS is $0.6B with a CAGR 21%.
But, BMO cautions, owning a sports franchise is considered “an equity investment strategy rather than a cash flow or income play.” In other words, don’t think that ticket sales and hot dogs are going to make you rich. (Although the NHL’s salary cap, which guarantees owners’ profits is a sweet deal.) The key is sports media which is thriving despite the move to cord cutting..
Sports media rights contracts have grown in tandem with franchise valuations. Not to be ignored in the advertising growth and viewer interaction is the bear knowns as legalized sports betting. Betting companies are flooding the airwaves with commercials while bettors tune in to watch how their selections work out. The casinos and online shops have replaced lower-paying traditional advertisers who’ve dropped off.
In Canada, league or team ownership of broadcast properties is still common. For that reason the real value of those broadcast rights is often opaque. (We had some irritated pushback from Rogers and Bell for writing on this tidy arrangement in the mid 2010s, forcing some limited disclosures). Rogers Sportsnet and TSN own (via MLSE) own a stable of teams in MLB, NHL, CFL and MLS. Good luck finding out what they pay themselves for media rights.
It’s more open in the U.S. Since the New York Yankees pioneered the YES network in 2002— sparking multiple imitators in other markets—the move in the U.S. has been away from outright ownerships of regional sports networks. A number of RSNs in the U.S. are either in bankruptcy or nearing it. Digital and network sources are now absorbing these sources. ESPN, via its owner Disney, is looking to find partners for its many broadcast properties as their bottom line in general has suffered.
Still, ESPN’s legacy business generates revenue and operating income of approximately $12.5 billion and $4.0 billion in 2023. It remains to be seen what new model emerges in the U.S. to answer cord cutting and the death of conventional TV. The NFL’s experiment on Monday, having two MNF games compete on separate networks is one experiment.
In Canada’s monopolistic market, “TSN/RDS penetration rates have declined at a quicker pace than ESPN over the past 10 years. ESPN penetration has dropped from 81 percent of U.S. households in 2013 to 56 percent in 2022, while TSN/RDS penetration has decreased from 89% of Canadian households in 2013 to 49 percent in 2022.
In addition, BMO admits that cord cutting is a thing. “SportsNet subscribers have decreased -23 percent to 5.8 million over the same period. Subscriber and advertising revenues are 60 percent and 40 percent of total revenue, respectively. Since 2017, TSN revenues have increased 13 percent. TSN subscribers have decreased -29 percent to ~7.8 million over the same period.”
But! In the last five years, TSN and SN have increased advertising revenues by 13 percent and 15 percent respectively. The same figure for the top five Canadian non-sports channels (collectively) is six percent. Thank you legalized wagering in Ontario. So who wouldn’t want a piece of this action, especially in Canada?
The red flag in this surging equity market comes in the form of smaller Canadian NHL markets. The Senators sale for $950 suggests a healthy interest in owning, but the Sens sale was also tied into the new LeBreton Flats arena. Ownership or control of a Canadian arena means more than NHL games. It also includes revenue from concerts, rallies, monster-truck events etc.
Even with that can Andlauer produce a winner just two hours from the Montreal Canadiens market? Likewise, the Winnipeg Jets are desperately in need of a larger arena to replace the 15,321 Canada Life Centre. Having Canada’s richest man, David Thomson, as an owner is no guarantee of getting one. And should Thomson tire of being the saviour of a losing Jets hockey property, who in that market has C$1-2B lying around needed to fund the franchise properly?
Likewise, the Calgary Flames. Despite the political press conference this summer about as new agreement the arena that management promised by 2013 has still not seen a shovelful of dirt turned over. The latest gaffe was architect’s drawings for the rink being rejected by the NHL due to inadequate dressing-room space. Start again.
Should the rink not be available till 2025-26 will an evolving ownership group still be interested in shelling out the money to keep the Flames (and Stampeders, Roughnecks and Hitmen) operating in Calgary? And if they don’t, because losing sucks? While energy-rich Calgary has plenty of billionaires, few will want to risk the money needed to keep a competitive team in a small market.
Connor McDavid’s brilliance plasters over the same small-market crack in Edmonton. Yes, they have their new building, but can owner Darryl Katz fund the moves need to keep his stars and build a winner? Vancouver, owned by the Aqulini family, has a larger market base, but with Seattle Kraken just two hours away can they too write the cheques needed to create the first Stanley Cup winner since the Canucks entered the NHL in 1970.
If these Canadian markets do survive longterm it might have to be with foreign ownership. Certainly there is money to be made riding the equity train. But there also no guarantees that those carpetbagger owners might replicate the Montreal Expos and scoot to richer markets.
Sign up today for Not The Public Broadcaster newsletters. Hot takes/ cool slants on sports and current affairs. Have the latest columns delivered to your mail box. Tell your friends to join, too. Always provocative, always independent. https://share.hsforms.com/16edbhhC3TTKg6jAaRyP7rActsj5
Bruce Dowbiggin @dowbboy is the editor of Not The Public Broadcaster A two-time winner of the Gemini Award as Canada’s top television sports broadcaster, he’s a regular contributor to Sirius XM Canada Talks Ch. 167. Inexact Science: The Six Most Compelling Draft Years In NHL History, his new book with his son Evan, was voted the seventh-best professional hockey book of all time by bookauthority.org . His 2004 book Money Players was voted sixth best on the same list, and is available via http://brucedowbigginbooks.ca/book-personalaccount.aspx
In his memoir, former BMO CEO Tony Comper recalled the press conference to announce a merger between two Japanese automobile corporations. Everything was going swimmingly until someone at the presser asked how long would it be before the two corporate cultures fully merged?
One of the CEOs replied without hesitation. “Forty-three years.”
Forty-three years? Why forty-three years? he was asked.
“Because that’s how long it will be until the executives who made this deal are all dead.”
Yes, there are stubborn business cultures. But there are also political cultures that persist against all efforts to convince them they are deluded. People find it hard to change their ways— particularly when they’ve defended them publicly for years. The New Left’s ironclad resistance to reason and debate is a feature, not a glitch. How to reach them in a friendly, inclusive manner?
Good luck. The Right’s challenge is thinking these people will respond to shame or being corrected. Can’t be done. Won’t be done. They’re like Japanese soldiers fighting WW II on a deserted island 25 years after armistice. They’ll die repeating the Donald Trump Bleach meme to themselves.
Marines help a Japanese soldier from a dugout on Tinian Island during the Fall of Tinian in World War II. He holds a cigarette the Leathernecks used to coax him out. (Photo by © CORBIS/Corbis via Getty Images)
This Gallup poll sheds light on how American (and Canadian) cultures can be blissfully unaware of some huge stories and obsessed by other narratives that fit their mindset. It shows that from 1972-2022 that GOP trust of media has plummeted from 41 percent to under 10 percent, while independents have gone from 53 percent to under 36 percent trust. IOW, their former favourite news sources don’t jive with their everyday reality.
But Democrats in the poll have vaulted from 64 percent to 76 percent in trust of media. Why? One reason probably lies with being told the narratives that please them. That give them comfort. These consumers allow legacy media’s fact checkers to sort out what they should know from “disinformation” without getting their hands dirty with the original story.
How pervasive was the scrubbing? The recent Missouri v. Biden recognized that federal government officials had been interfering with social media companies that digressed from the “accepted” line. An appeals court ordered them to stop. In another case, FBI was bribing reporters and scientists to change their opinions on the origin of the Covid-19 virus, sanitizing stories before they are doled out to the Woke.
“The Science” is supposed to be an ongoing vigorous debate with few settled laws. Yet, most cult scientists refuse debate, preferring to dismiss opponents as conspiracy nuts or— as they did with vaccines— dangers to society. When Al Gore allows himself to be cornered by questions, he rolls his eyes, sighs theatrically and asks his followers how anyone could deny The Science.
Gore’s climate apocalypse culture has morphed within a generation from the few fighting pollution to a global dogma of CO2 poisoning nature . Attempts to talk sense on carbon emission obsession, plastics prohibitions, aversion to the nuclear option, Greta Thunberg beatification have all proven futile in the face of an End Oil Now cult that makes Scientology look like the Boy Scouts.
It was the same for the #RussiaHoax, #FinePeopleHoax, #BleachHoax and now Hillary Clinton’s “real war on truth, facts, and reason”. These liberal road-tested canards persists to this day. Here’s Biden on a rare cogent day this summer repeating the #FinePeople hoax that has been debunked years before. Even the Washington Post has had enough, listing Biden’s Top 100 fabulist claims since becoming POTUS.
The latest cult cleansing is Biden’s patently false denial of any contact with son Hunter Biden’s Shakedown scheme. The denial is awarded first position beside #climateemergency on search engines and nightly newscasts. Famously, 51 former security directors and officials claimed, without evidence, that Hunter’s infamous laptop was Russian disinformation. Case closed, said MSNBC. No wonder so many consumers of legacy media in this echo chamber can blithely claim there is no substance to any of the Hunter stories documented by the competition and chronicled on his own hard drive.
The Canadian equivalent of denial culture came with the magic “cure-all” vaccines. Rather than publicly confront the Truckers Convoy on their refusal to take Covid-19 vaccines (which are now accepted as being flawed ), Trudeau hid in the Rideau Cottage calling truckers “an insult to science”. To make sure they never got a chance to question him he sent the cops after them, arrested them, suspended their civil liberties and finances and subjected them to show trials.
And he was supported by the purchased Canadian media who vilified the protesters— for lack of armed insurrection or rioting— for staying too long in their protest. Many promoted false stories of arson and foreign financing of the convoy. This media Trudeau then tried to reward with Bill C-18— designed to make Meta, Google and other large tech sources pay to prop up failing Canadian media. In response, Meta has blocked all news links in Canada and cancelled existing deals with Canadian news outlets. The blocked links cover both Canadian and foreign news in light of Bill C-18.
And the same newspaper lobby that largely gave him a free pass on declaring a national emergency now wants the $595 million “temporary” bailout to be extended with double the subsidies (seeking government tax credits equal to 35% of labour costs.) The bailout meant to aid transition to digital is now instead a Trudeau lifeline in the Toronto Star’s bankruptcy. In the meantime, writes Michael Geist, “investment in the publishing sector has ground to a halt, Canadians have lost access to news on social media, and small and independent media are particularly hard hit. Avoiding the Canadian outcome is a now a top policy priority in other countries looking at media legislation.”
All this as the federal government prepares an online hate speech law— hate to be defined by themselves.
Many are just hoping that a Liberal loss in the next election will cease the encircling madness. That sanity will prevail. But the Japanese car manufacturers are telling us not to get our hopes too high. Trudeau Nation is quite prepared to got to its grave before ever admitting its copious mistakes.
Sign up today for Not The Public Broadcaster newsletters. Hot takes/ cool slants on sports and current affairs. Have the latest columns delivered to your mail box. Tell your friends to join, too. Always provocative, always independent. https://share.hsforms.com/16edbhhC3TTKg6jAaRyP7rActsj5
Bruce Dowbiggin @dowbboy is the editor of Not The Public Broadcaster A two-time winner of the Gemini Award as Canada’s top television sports broadcaster, he’s a regular contributor to Sirius XM Canada Talks Ch. 167. Inexact Science: The Six Most Compelling Draft Years In NHL History, his new book with his son Evan, was voted the seventh-best professional hockey book of all time by bookauthority.org . His 2004 book Money Players was voted sixth best on the same list, and is available via http://brucedowbigginbooks.ca/book-personalaccount.aspx
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