What does Nets sale to Russian billionaire mean to sports?

Mikhail D. Prokhorov could open the door for a world of investors

BY JOE FAVORITO

NEWJERSEYNEWSROOM.COM

ON N.J. SPORTS MARKETING

While some view the announced potential sale of the New Jersey Nets on Wednesday to be more vanity for billionaire Mikhail D. Prokhorov and buyout for developer and owner Bruce Ratner, the window of opportunities for others could be much bigger, both on the team side and on the investor side into the future and if the deal goes through.

The amount of non-North American majority ownership in professional sports teams on the continent has been zero until now, despite the longtime rumblings of investors in Europe, Asia and more recently the Middle East to get involved and the participation on a minority side by some teams. The large scale investment in the Premier League has caused officials in the UK to caution against additional foreign investment, as player transfer fees skyrocket and the "haves" grow while the "have nots" struggle. Still, the franchise valuations in the EPL for top clubs continue to rise.

So what does this mean for U.S. brands? Top tier franchises are constantly looking for ways to grow brand and fan base. Brands are looking for ways to assimilate new fans into their space before they even come to the United States, either as visitors or as residents, and they are always looking for unique ways to expand partnership relationships.

The NBA's global outreach, MLB's announcement of a China Academy this week, the NFL's attempts at connecting abroad and the NHL's push to connect with fans in Europe are all great examples, not necessarily of having teams in those places, but of making a connection to the generic sports fan, so that when they do watch casually or buy product there can be an assimilation to a US-based brand. It is not unlike what smart global marketers like Coke have done for years. Instead of bringing Mohammad to the mountain the mountain comes to Mohammad.

So now you have a smart global brand — the NBA — who has now said it's OK for others outside of these borders to come and join the "club." You also have a brand — the Nets — that is very well marketed by President Brett Yormark and his sales team, but still struggles financially in the shadow of the Knicks, a team that has yet to embrace any kind of global branding despite its presence in New York. Lastly you have a new arena and a real estate play in a region heavily populated by a Russian community.

The result is potentially great for all those partners, but for teams and brands in other markets that are struggling, the OK to go and look elsewhere for capital and partners now rises. Can the Houston Astros or Texas Rangers go and get a dynamic partner from South America? Can the Vancouver Canucks look to another Russian leader for branding help? Will the Nashville Predators find relief in the Emirates? Could the Pittsburgh Pirates look to India, a country where stick and ball sports are already accepted, for new partners? All are open questions with much more of a possibility today than they were yesterday.

On the brand side, will this open up more opportunities for non-American companies to invest in American sports brands as a way to engage a US consumer? The ideas and possibilities are very intriguing as the world shrinks its connections and American sports looks abroad for dollars and partners.

Are there pitfalls? Yes. The transparency and vetting process for American teams, especially with the recent issues with NHL franchises, is as daunting as anywhere in the world. Salary cap restrictions can be an educational process, and the licensing of brand names for commercial purposes is obviously tighter in North America than anywhere in the world.

Still, American sports fans, brands and teams may have gotten a look at the future yesterday, and for those willing to look and find answers for new markets that make good extended financial sense, it's a future that could be very intriguing and perhaps a bit overdue. Was this a perfect storm of an owner needing financial relief and a new investor looking to build his brand? Close, and such a marriage may not work everywhere. Russian or Arab money in Memphis may not be that readily accepted. But this mix, even with a strong Russian community and a marketing head that has already looked global, seems to be at first look a very good mix, and a harbinger of the future.

So how does this mesh with what's going on in our state? Well for those wishing to keep the Nets in New Jersey, either at the Izod center or for the logical move to the Prudential Center, it doesn't bode well.

Where it makes things intriguing are for multinational corporations housed in New Jersey who have not been able to find ways to build brand in the Untied States through sports marketing yet. Could there be ways for Indian corporations to gain access through American sport now? Or could sports like cricket or rugby gain ground with support of businesses and communities tied to New Jersey? Could teams which have struggled to gain marketshare — the Devils and the Red Bulls — get more assistance and funding through new ownership in a demo not previously tapped?

It is wait and see now. But one thing is for sure, if David Stern says its Ok to have foreign majority ownership, others will follow.

Joe Favorito has over 23 years of strategic communications/marketing, business development and public relations expertise in sports, entertainment, brand building, media training, television, athletic administration and business. Visit him at JoeFavorito.com.