It's all about sports!!

The other night I was watching TV and saw the 2001 movie “Ali” with Will Smith. Automatically my memories went back to the time when I was a kid when I was watching famous world title fights together with my father in the middle of the night. Who cannot remember the names of Mohammed Ali, Joe Frazier, George Foreman, Sugar Ray Leonard and Sonny Liston? Even my little cousin has heard of these super champions. But if you ask someone to name the current heavyweight champion of the world, he will stare at you blankly, ignorance all over his face. I have to admit, I also had to look it up; stay tuned, they are Vitali Klitschko for the WBC, David Haye for the WBA and Wladimir Klitschko for the IBF and WBO. Confused? So am I. What happened to boxing and will old times ever revive again?

Boxing used to be a sport with a high fan base. Boxing was loved as it was a good simulation of a real man to man fight and as mankind always will fight and likes to watch violence, it appealed to many and hence boxing has experienced several golden periods like the twenties and the sixties and seventies. The sport has been cyclical to some extent and some claim there will arrive a new golden age sometime in the future. This could well be true but not without the necessary action. Not only has the sport of professional boxing changed, the environment has changed even more and this makes it an entirely different ballgame this time around, where just sit and wait for the next hay day probably won’t work.

Let us analyze briefly what the current problems in professional boxing are:
1.Media coverage. The big boxing fights are not broadcasted on the public networks. The boxing community seems to totally rely on pay per view. This is expensive and can run up to as much as USD 50.0. So a sport intended for the masses has eroded into one that is available almost exclusively to the upper class. This just doesn’t make sense. If boxing indeed aims to be a popular sport again with the sports fan, one that can compete with other sports, boxing should be seen on cable again. As far as the other media are concerned, there is little coverage on boxing (sports magazines only pay little attention etc)
2. Confused mindset of the consumer. Apart from the diehard fans, it is difficult for the average consumer to comprehend the boxing scene. Firstly there are 4 different unions (WBC, WBA, IBF and WBO) and the vast majority doesn’t have a clue, which union is most important and hence who is the true undisputed champion of the world. Moreover, again apart from the diehard fan, for the uneducated viewer, it is difficult to comprehend the points system as boxing is a jury sport.
3. Bad image of the sport. Boxing hasn’t the best of reputations amongst sports. It is often associated with the criminal scene, whereas there is the public perception that fights are often fixed. Promoters like Don King have aided to this perception. Promoters often decide when a boxer will fight, against whom he fights, where he fights and against what fee he fights. Moreover, promoters often protect their champions and hence purse by letting them fight with much lower ranked opponents instead of the strongest challengers. For example for a long time Mike Tyson only fought low ranked opponents. This obviously does not help the image of the sport. Spectators want to see the strongest boxers in the ring.
4. Overcrowded sports market. Clearly the world has changed. Boxing in its hay days in the seventies enjoyed much less competition from other sports. Not only were baseball and football seasons much shorter, at the time there were few other sports, which enjoyed the same popularity. With the advance of TV, other major sports expanding and several new sports emerging (amongst them other fighting sports such as MMA), boxing has not taken the right steps to remain competitive and sufficiently attractive.
5. No charismatic stars means no connectivity. The sport of boxing is lacking any stars at the moment, where fans can connect with; stars are either being loved (the good guy) or hated (the bad guy) but in both cases there is connectivity. If a sport has stars it sells itself. If the sport would have personalities like Mohammed Ali or Sugar Ray Leonard, it would be much easier to grab a piece of the pie.

The conclusion should be that boxing has positioned itself in a very difficult position and action should be taken if it wants to regain some of the ground it has lost. The sport is not entirely knock out; it still has some popularity (particularly in the US and some parts of Europe) and if the right buttons are pushed, it can fight its way up again. MMA (Mixed Martial Arts) has proven it can be done, so no reason why boxing could not regain. In fact both sports could easily co-exist and learn from one another. For example boxing events could learn a lot from the production and marketing of MMA events, which attract a much younger crowd. So what would be the major solutions for boxing?

1. Give boxing back to the people: Pay Per View is too expensive to attract a big television crowd. Either PPV prices should be cut and a volume policy should be chosen or even better PPV should be entirely eliminated. In any case fights should become available again to larger audiences, which in turn would make it increasingly attractive to sponsors again. This way boxing would no longer be exclusively available to a small upperclass only. Obviously one could think of combinations between PPV and the channel networks in order to generate most revenues.
2. Clarify and regulate the sport: as explained, the mindset of the average boxing fan needs to be clear. In this perspective the sports should be better regulated. For example the points system may be changed, which might lead to more spectacular fights, which could be more competitive with for example MMA. Additionally it would help to have one undisputed champion of the world (the current titles have become somewhat meaningless); so unions should sit together and either merge or find ways to accomplish such clarity. Finally, the best fighters should regularly fight each other instead of worldchampions exclusively fighting minor fighters in order to keep their belts
3. Change the image of the sport: as boxing hasn’t the best reputation amongst sports, it should try to improve. It means the role of the promoter may have to be looked at and regulators and boxers themselves should take up their responsibility.
4. Reposition the sport: boxing may need a refreshment. Other fighting sports have proven that active marketing increases the connectivity. Boxing may need an overhaul and review its mission and values, particularly as it plays an important role in less privileged local communities, where values do not always play a role. The sport could take up its responsibility. Additionally boxing has a couple of advantages. First of all it is Olympic, which the sport can build from. By increasing the visibility of amateur boxing and emphasizing the values, the sports may attract larger audiences again. Secondly recreational boxing is becoming very popular in the gyms. This means the interest in the sports is still very much present. Proper marketing may unlock this potential. The conclusion is that rather than starting at the top (professional boxing), it may pay off to start at the bottom. And if stars re-appear (and they will), they could be role models for the sport again.

I am far from an expert and more importantly I am not a boxer (apart from hitting a few in the gym during my university time). I am aware some of these changes may be rather difficult to implement. However I have noticed other fighting sports have been able to do this, whilst simultaneously boxing has lost some of its appetite. I am a believer the sport should be managed and regulated by sportspeople themselves, they know best. So action required!

When did we hear this before? Over the last couple of months several stories on the poor state of Dutch footbalclubs popped up over and over again. RKC, Roda JC, ADO Den Haag, Willem 2, AZ, Vitesse, Feyenoord, just to name a few Eredivisie (Hollands premier division) clubs, that are suffering from financial problems. Even Ajax is now rumoured to significantly cut its number of players. In fact from the 38 Dutch professional football clubs only 10 seem to be financially healthy; clubs like Heerenveen and Heracles are for example healthy exceptions. Clearly governance is not to blame here; in fact without the Dutch Football Union (KNVB) the situation would likely be far worse. So where is the problem? The answer must be with the management of the different clubs.

Imagine the following situation. Fact 1: the season 2008/09 has come to an end and as a league a loss of EUR 34mln has just been realised down from a profit of EUR 64mln in 2007/08, a pretty hefty decline I would say, partly the result of a stagnating players transfer market. Fact 2: we are in the middle of a heavy financial and economic crisis. Fact 3: we keep our budgets for 2009/10 virtually unchanged at around EUR 410mln. Fact 4: average players salaries have just risen by EUR 65,000 to EUR 335,000 and are expected to rise further. Just read the facts again and let it sink in, does this make sense? Are we surprised there are casualties along the way? The answer is of course a capital NO. It was just a matter of time for this news to materialise.

Let us explain.
Fact 1 tells us that the season 2008/09 has been difficult and that the league as a whole suffered a loss of EUR 34m and could have turned out significantly higher were it not for the transfers of Huntelaar and Vermaelen (in spite of this Ajax still managed to suffer an overall loss of EUR 3.4m). The main reason for the overall decline could be found in a stagnating transfer market. Just think of it, it implies that the financial results of clubs are for a large part dependent on its ability to trade players. If there is a stagnating market (for example following a financial crisis) this means clubs immediately dip into losses. Even worse in case of cash flow problems they could even be forced to sell players (possibly with a loss) in order to generate cash. In any case, the fact that clubs partly rely on income from an irregular or exceptional item like transfers is asking for difficulties. Healthy clubs (and thank god there are a few) rely just on their regular income stream such as attendance, sponsorships and media rights. It is difficult enough to estimate these items.

Fact 2 tells us that we are in a financial and economic crisis. In such times football clubs should buckle up to weather the storm. Yes, similar to other industries, football is also very cyclical, albeit that awareness within football often does not align with the phenomenom of cyclicality. The football business is a very high fixed cost business (think of salaries and rent of stadium responsible for 70-90% of sales). This means that a club cannot afford to see its sales or top-line drop by too much as it will very quickly dip into losses. In an economic crisis companies either go down (see DSB/AZ and possibly Afab/Vitesse) or they cut heavily in items such as sponsoring in order to save money. Luckily some clubs have longer term contracts with their sponsors but renewals (if there will be a renewal) are likely to be difficult or are granted at a lower price. A second issue is of course that the number of spectators and skyboxes rented out might come under pressure as the consumer and companies prefer to keep his money in his pocket. In any case, it should be clear that it might be difficult for some clubs to realise similar sales levels, which are required to realise profits or to be at least break even. In such an environment you would expect clubs to become creative and find alternative ways to support the top-line. Somehow I am still surprised clubs do not make sufficient use of one of their most treasured assets, the supporters. Think of the hidden power here and the enormous database these supporters represent, think creative. I know there are exceptions but there is still lots to be done.

Nevertheless fact 3 tells us that clubs have kept their budgets virtually unchanged as far as income is concerned. Of course a budget is a budget and can be adjusted along the way. In the end it is cash management and contingency planning which determines the final result, but somehow we have our doubts whether such actions will take place, particularly given the high fixed cost base of some clubs as the recent past proves. Of course there are clubs that have reduced their budgets, but this also implies that others have increased it, which seems risky.

In the mean time fact 4 tells us that clubs are still raising their fixed cost levels, increasing player salaries by as much as 25-30%! This implies fixed cost levels are even increasing and that dependency on healthy sales levels even increases. There are around 644 contract players in the eredivisie. Their salaries alone (644 x average salary of EUR 335,000 = EUR 216m) already account for 53% of total sales. Adding the salaries of the remaining 1200 people (technical staff, management etc) employed by clubs in the eredivisie, we have assumed that by now salaries account for some 65% of total sales (vs 57% in 2006/07)! Come to think of it! And this is before stadium rental costs, variable costs, depreciation, selling costs, media costs etc. No wonder clubs are having difficulties to survive.

So it is clear something has to be done! Sales are stagnating, costs are rising! This has to be turned around, one cannot always count on the community (government money) coming to the rescue….Is management in Dutch football capable of doing it? I sincerely hope so. I hope they will find creative ways to grow the top-line, I hope they will be able to reduce costs (recent reports at least suggest that clubs like Ajax and Feyenoord are going to reduce salary costs), I hope they will implement contingency planning procedures. The proof of the pudding will be in cash flow management. I am sure some clubs with good management will be able to do this properly but there are also examples of clubs where I have my severe doubts. If I still hear management of clubs saying “ I am sure all clubs largely depend on transfer sums” or “ why always look at finances, it is good players which are important and then financing automatically will be allright”. Brrrrh, luckily the last comment was not from a financial guy, but it is exemplary for the mindset of some, which tend to be short term.

I do realise that better players will lead to better results, but reality tells us that we just will not be able to match the budgets of European clubs in the bigger leagues, which is a function of scale. Equal competition and a level playing field can only exist through rules of the regulators. In the mean time we have to start thinking longer term as in the end players are better off with a solid health of the clubs they are playing for. Holland has always been a producer of talent, our football schools are often examples for many clubs, this is a strength we should focus on. Financially it is also much more attractive then buying expensive stars from abroad. The youth is relatively cheap and by treasuring and growing talent in the right way and with the right values, the financial outcome will also be more attractive, a win win situation in my opinion.

See article in Telegraaf: bestuurders en BVO

Recently new rules were unveiled related to the next edition of the Volvo Ocean Race. Against a background of an economic backdrop and ever rising team budgets seen during the last few editions, Volvo Ocean Race CEO Knut Frostad and team have done a remarkable job; without having compromised the spirit and objectives of the Volvo Ocean Race, they have created rules that should be acceptable to all main user groups. And contrary to what one would expect in such an environment, the end result is clear and well formulated and has not become a “consensus monstrosity” as we have lately seen in for example Formula 1. As a result the race should get cheaper and more competitive, possibly resulting in a higher number of entries.

Let us first examine the main new rules.
– Boats: the rules limit the number of sails (New pre-race sails limited to 15 for one boat entered the race. Race sails reduced from 24 to 17 per boat) used and the construction of one single boat for each team. A team is permitted to campaign one second generation and one third generation boat. Additionally rules are set related to weight, keel, bulb, mast (a maximum of 2), stacking and testing are set.
– Testing and crew; No two-boat testing before the race is allowed. The number of crew allowed will remain at 11 for each of the VO70 yachts, including a media crew member. However, a female team can comprise a crew of 14. Three crew members to be born on or after 1st September, 1980. An increase of one from 2008-09. No additional crew for port races is allowed
– In-port races and points system: there will be an in-port race in every stopover with no additional crew allowed. Simultaneously the points system will be revised. points for offshore legs will now be multiplied by five, and scoring gates multiplied by two. The in-port races will not attract a weighting and points will continue to be awarded for the best performances over two races to be held on each in-port race day.
– The race will be shorter than the last one

So what were the reasons behind the new rules? What were the main problems the Volvo Ocean Race organisation was confronted with? The main one could be found in mounting costs for the teams. As a result of ever rising budgets it had become more and more expensive to participate in the Volvo Ocean Race, severely limiting the number of entries. In the last race only 8 teams started the race, whilst one of them had to quit because of funding. A second related problem could be found in the wide variety of team budgets (from approx. EUR 10mln for Delta Lloyd to close to EUR 90m for Ericcson), which theoretically should benefit the richer teams; for example the richer teams could pay for a first generation boat, whilst the “poorer” teams” use second generation boats. Given both this background and the economic crisis, it would be questionable whether there would be sufficient interest in the 2011/12 edition of the race. Hence the neccessity for drastic action is explained.

So in such an environment what would (similar to Formula 1) have been easier than just proposing a budget cap? Praise should go to the organisation to not go for this escape route, which would have led to all kind of problems; think of how to police and administer a cap and the many grey areas which are open to interpretation and open to competitors taking advantages out of the regulations, again think Formula 1. Rather than choosing this negative approach, the organisation has come up with a much more positive strategic and lateral solution. By introducing rules that limit what it takes to win the race, it makes winning it more achievable and entry into the race more attractive to a larger number of teams as well as to the sponsors. In fact the organisation has turned the picture around, first working out what is required to win the race and control these elements. Therefore the incentives in terms of performance gains for spending lots of money has been reduced, which could lead to significant cost reduction. Teams can still pay excessive amounts (if they want )but incremental benefits are likely to be much smaller and hence competition should be more tight.

What were the organisation’s key objectives when drafting these Volvo Open 70 Rules and have they been met? And the user groups, should they be happy? Lets first look at the objectives of the organisation:
A. Reduce costs for participating teams. Clearly these rules should lead to significant savings; it is no longer allowed to build more than one boat for a campaign, two boat testing is no longer allowed, the number of sails allowed has been significantly reduced, personnel expenses for the teams should come down and shared services for the teams may be introduced. By containing these costs, it is now believed that somewhere around the 20m Euro-mark is a winning budget. Some teams will do the race well for 15m Euros and for others it will be 25m Euros.
B. To ensure improved safety and reliability of the boats: under the new rules everything has to meet the safety test. The new rules are strict. The biggest message that came back from the designers and sailors was ‘don’t change too much’. The boat is fast and it is strong. The furling headsails introduced are aimed at keeping crew off the foredeck as much as possible, note the foredeck is the biggest danger area.
C. To ensure that the Volvo Open 70 Class maintains its status as the fastest and most spectacular offshore racing monohull. As Ken Reed of Puma phrases it well; theules eliminate the need to have a huge budget teams but it doesn’t do it so radically that this isn’t still the grand prix of sail boat racing right now. Moreover high budgets are still allowed, which still should leave room for R&D, the difference being that the incremental benefits are likely to be smaller
D. To ensure that an entrant can be competitive with a second generation boat from the 2008-09 race. The changes are designed to produce closer racing between the existing and future fleets of Volvo Open 70s and discourage the expensive research and long, slow builds that result in maximized bulb weights (strict limits are set related to bulbweights). The advantages enjoyed by the most powerfully-backed entries have been narrowed and hence the expectations for the lower budget teams should improve

Looking at the user groups, we believe there is little reason for complaints. Sponsors should be happy as their ROI should be significantly higher. Not only should the initial investment be smaller, the returns could turn out substantially higher than before. By having a higher number of entries and by having closer racing, competition should increase and the attraction of the event should become bigger.Sailors and teams should also be happy. The Rules have been designed in close cooperation with the teams and a lot of attention has been paid to safety and the complaints during the last race. The new rules should ensure there is a next race and hence most of the sailors assured from a decent job. The media and audience should also benefit. Closer racing with more boats and leveraging through the new media should lead to more spectacular racing. Finally the race organisation itself should be happy as with these rules, the future of their existence should be guaranteed for at least a few more editions.

In my opinion these rules are an excellent piece of lateral thinking. Frostad and team have been able to come up with a solution which should guarantee the sustainability of the race for both the short and long term without compromising either the spirit or the objectives of the race. That is a great step for the race, great for the sailors and sponsors, and most important it will ultimately improve the contest Having done the race himself a few times, Frostad knows as nobody else what is in a sailors mind and has safeguarded their interest and safety. It again shows sports organisations are often best managed by the people that have been actively involved in the sports. Frostad seems to be well on his way to win yet another race.

One of golf’s most famous and celebrated holes in the world, the 17th St Andrews hole, the Road Hole, will be lengthened by 35 yards, to 490 yards. Work will begin this week and a new tee will be built on a driving range nearby.

For years the Road Hole has been considered by many great players as one of the hardest par 4’s in the world. Its uniqueness includes a tee shot played over a building, a road that is in play immediately behind the green, a greenside pot bunker that doesn’t easily give up ball or player, and a green that slopes into that same bunker (also called the Sands of Nakajima). Over the years the Road Hole has claimed many victims such as David Duval in the British Open in 2000. Being in 2nd place behind Tiger Woods he ran his ball in the bunker, took four increasingly feverish shots to get out and ended the hole with 8. Besides losing his dignity and a considerable amount of money, he also swapped 2nd place for tied 11th.

So why change it? Clearly next year’s British Open is a major catalyst. According to Royal &Ancient chief executive Peter Dawson, the Road Hole has become too easy and no longer plays the way it was originally intended. The threat from both the road and the bunker has diminished now that players use shorter irons for their approach shots. Ironically it is the R&A who has the reputation of being one of the guardians of the game’s tradition.

Undoubtedly cricticism will erupt and I fear I am amongst this bunch. Yes I agree that the hole may have become easier to some as both athletic abilities and particularly equipment have improved. Nevertheless and in spite of this the Road Hole never has become easy, certainly into the wind when it is difficult to reach in two. It’s all back to the chicken and egg discussion I reckon. Should holes and even courses be reconstructed each time that improved equipment is leading to increased yardage, or should we just change the rules for equipment? Again ironically some of the equipment rules are to be changed in 2010; most club heads will have smaller grooves in an attempt to reward accuracy off the tee and rein in golf’s power-hitters. Moreover it will become more difficult to hit the green. Golf’s major stars also seem to disagree. Goossen prefers the current hole, Harrington wants to see it even more intimidating.

If it was me I would have waited at least one more year with lengthening this Holy Hole in order to see what impact these rule changes will have. However I fear the pressure of hosting a spectacular 2010 Open has outweighed, sadly at the expense of………

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