The impending collapse of a London-based company Sportsworld will have profound implications on the Australian sports market.

1. Geoff Brown is an Aussie.

2. Sportsworld have huge interests in Australia including AFL signage rights, the Boyer Media business and Craig Kelly’s Elite Sports Management operation, not to mention a 15 per cent ownership of the National Basketball League.

3. The global sports business market has never been worse with Rupert writing off $1.5 billion last week, Kirsch poised to go bankrupt and the company behind tennis, Swiss outfit ISL, also collapsing last year.

GUARDIAN YARN

Sportsworld Media, the television company that part owns the Popstars format and produces the Pepsi Chart show, was struggling for survival last night after issuing a second profits warning in less than three weeks.

The company, which acts as an adviser to the England and Wales cricket board, has been forced into negotiations with its lenders regarding its ongoing funding requirements after discovering another “substantial” shortfall in profits.

Chief executive Geoff Brown, who was refusing to take telephone calls yesterday, is likely to come under pressure from shareholders to quit.

The new warning had a devastating effect on Sportsworld’s share price and it fell a further 87% to close at 3.5p. Last October the stock was changing hands at 220p and the company’s broker, Investec Henderson Crosthwaite, was recommending the shares as a strong buy.

Analysts say the sudden reversal in Sportsworld’s fortunes could prompt an investigation by financial regulators. They also believe that the company might be forced to write off more than pounds 100m to reflect the fall in the value of acquisitions made over the past two years.

On January 28 Sportsworld warned that a sharp deterioration in the market for sports sponsorship would reduce profits for the year to pounds 9m. The shares fell 96p to 65p.

A rapid round of bridge-building meetings with angry investors followed before Sportsworld shocked the market again with yesterday’s profit warning and the resignation of a high-profile director.

Non-executive Chris Akers, a former Leeds United chairman, is understood to have quit after arguing with Mr Brown about how Sportsworld was run.

“I don’t think I’ve ever seen a chain of events like this,” said one analyst, who declined to be named.

Mr Brown, who earns almost pounds 500,000 year, was forced by shareholders last year to pay back a pounds 350,000 bonus awarded following completion of an acquisition. In March 2001 he banked pounds 1.9m by selling 650,000 shares into an employee share option scheme at 298p per share, a 25% discount on the then market price.

PAYING TOO MUCH FOR THE SPORT’S RIGHTS

The Sportsworld collapse adds to the turmoil on world sport’s markets in the current weak advertising climate. Clearly the AFL consortium are now seriously worried they’ve massively overpaid for the AFL rights.

Rupert, Kerry and Channel 10 are yet to write down any of the $500 million commitment over 5 years although News Corp really took an axe to his balance sheet in the December quarter result announced last week.

News Corp paid $8.8 billion over 10 years for US sports rights and wrote off $1.5 billion last week including $758m on gridiron, $582m on NASCAR and $441 on baseball.

Souths are now in the NRL and Rupert also lost about $500 million on this little Super League experiment. Rupert hasn’t taken an axe to his 10-year, $600 million deal with rugby union and seems comfortable with his British soccer rights, although BskyB have just written off more than $1 billion of their investment in Kirsch, the German company which paid way too much to take over Formula One two years back.

Given that Rupert and Kerry got rich out-foxing dopey sporting associations over the years, it is nice to see the tables turning.

The history of Sportsworld

Sportworld was originally a company started by two young Aussies, the Chapman brothers, who built it up mainly out of Dubai but have since left the scene with one of them now living and working in Albury.

There interest spread far and wide with one Crikey subscriber emailing in the following:

Crikesters

Further to The Sportsworld Media Group reporting bad, bad, results and issuing profit warnings for the past ten days.

SMG signed a five year, $25 million deal with the ASP (Association of Surfing Professionals, organisers of the surfing world tour aka WCT) last February, which was reported at the time as the entry into the bigtime of sports media broadasting for the surfing fraternity.

One possible consequence of SMG falling over (if it does) is there may NOT be a pro circuit of standup surfing this year. The ten event international tour is/was due to commence March 5-17 at Australia’s Gold Coast, followed by the RipCurl Pro at Bells Beach (also Australia) from March 26 – April 7.

Situations’ fluid, but I think there’ll be a comprehensive report at Surfline (www.surfline.com) in the next day or so.

Cheers, Michael

And Crikey’s very own Neal Woolrich put this excellent piece together on the troubled state of Australian basketball a few months back when Sportsworld bought a 15 per cent stake.

UK Media Group Acquires 15% of National Basketball League

By Neal Woolrich

When the 2001/2002 National Basketball League season commenced on October 11, the health of Men’s basketball in Australia will be profoundly worse than in it was when the previous season finished in April this year.

The NBL has lost its major sponsor of the past 10 years, Mitsubishi, and has failed to secure a naming rights sponsor for the new season. The Men’s national team has recently been embarrassed in losing a three-game series to the New Zealand national team and has failed to qualify for the World Championships for the first time since it first qualified in 1970. In the wake of this debacle, newly appointed national men’s coach Phil Smyth tendered his resignation a mere eight months into his four year tenure.

Television coverage of the NBL this summer will be restricted to pay television, with the ABC deciding to not broadcast the Men’s league.

And, with a truly national competition which includes teams from as far apart as Perth, Melbourne and Townsville, the NBL is potentially the worst affected of any Australian sporting bodies by the turmoil created by the collapse of Ansett. The effect of the Ansett crisis has already been felt by the NBL, resulting in the cancellation of the NBL’s pre-season competition.

With the retirement of Luc Longley, Australia no longer has a representative in the premier league in the world, the US National Basketball Association. By contrast, more than 20 Australian women were in training with WNBA teams in May prior to the commencement of the current season.

Perhaps the only constant is that the game’s governing bodies, the NBL and Basketball Australia, appear no closer to unifying.

Paradoxically, despite the apparent lack of support for the premier men’s league in the competition, the main positive in terms of the state of men’s basketball in Australia is that participation rates are as high as ever.

Against this backdrop of uncertainty, a UK sports marketing group, Sportsworld Media Group, has acquired a 15% equity interest in the NBL and has assumed responsibility for the promotion of the game in Australia.

So can a foreign part owner of the league revive the flagging fortunes of Australian Men’s basketball? More importantly, will it be able to tap into the consciousness of Australian basketballers, who are keen participants in but reluctant spectators of the sport.

Sportsworld acquired a 15% equity interest in August in a deal which required a $3.5 million up-front payment and includes incentive payments of an estimated $25-$30 million over 10 years. The acquisition of a stake in the NBL continues the company’s aggressive global acquisition and partnership-building program.

Sportsworld’s business includes the management of outdoor advertising in more than 40 sports stadia, development of interactive internet content, the production and distribution sports-related television programs and the staging of sporting events such as surfing, snowboarding competitions and triathlons. It produces over 80 magazine-style television programs in more than 20 countries.

Earlier this year, the company signed an exclusive 5-year media and marketing partnership with the Association of Surfing Professionals.

The company’s focus is unashamedly on youth-oriented sports. Sportsworld has a global relationship with the Professional Windsurfing Association and the International Triathlon Union and are involved in snowboarding, surfing, in-line skating. These are sports that appeal to a particular demographic that advertisers have traditionally found hard to reach.

Prior to investing in the NBL, Sportsworld’s presence in Australia was confirmed with the acquisition of Elite Sports Properties. The acquisition adds a stable of stars to Sportsworld’s portfolio, which includes 20 Olympic and World Champions (including Michael Klim and Susie O’Neill), along with royalties from the AFL and the Australian Cricket Board.

Brian Paterson, Sportsworld’s Managing Director in charge of its NBL program, explains that Sportsworld is “still in acquisition mode, but is now focused on organic growth. It is looking for like-minded companies, particularly those which are under-capitalised. Sportsworld will provide capital and contacts and grow the organisations.” The investment in the NBL in particular, the acquisition of an equity interest in the league is unique for Sportsworld in Australia. According to Paterson, the company may adopt this model again depending on the success of its NBL venture.

Paterson views the health of Australian basketball in positive terms. “When we bought in during August we obviously performed a thorough due diligence and found from a marketing and brand recognition perspective, the league was in far better shape than we had previously thought. The participant base and attendance levels have been holding, not falling, and have been up in the last two years. Basketball is the number 1 team sport played in Australian schools and there are over 600,000 registered players in Australia more than any other team sport, 05 The NBL had 1 million patrons attend last year which on average would equate to 500,000 people attending twice a year. ABC ratings were on average 250,000 viewers per program.”

With the simultaneous retirement from international competition of senior players Andrew Gaze, Shane Heal, Luc Longley, Mark Bradtke and Andrew Vlahov, the national Men’s team faces an uncertain future. Its failure to qualify for the 2002 World Championships will at the least deny it substantial international competition in the near future, both in terms of the Championships themselves and the lead-up games the team would otherwise have played. The absence of serious international competition over the next 12 to 18 months will leave the current Australian squad in the same position in 2 years as they are now raw and underdone in terms of quality international experience.

And a lack of success at international level will inevitably put pressure on the promoters of the game to interest children to take up basketball.

Sportsworld will not be directly involved in the growth of the game at the “grass roots” level, but Paterson explains that it has been impressed with what is already being undertaken by Basketball Australia and the NBL clubs. “In terms of developing and growing the game, our main aim is to get those who play the game feeding into the NBL. We see our role as promoting the NBL and its players to make it more popular. Basketball Australia will continue to run clinics and training, Sportsworld will promote them on air and at games. Each club runs its own promotions and clinic program – all clubs visit a school at least once a week.” Paterson concedes that while the clubs have been doing such clinics widely in the past, perhaps they have failed to promote them as widely as they could. Paterson adds that “we hope to get a one-on-one marketing relationship with every participant in the country it is made easier these days via mass electronic communication.”

Meanwhile, the game’s peak bodies, Basketball Australia and the NBL, appear no closer to bedding down their relationship. Earlier this year, Basketball Australia (which has responsibility for the overall running and development of the game) over-ruled an NBL decision to increase its import quota. The decision frustrated the NBL and the clubs and illustrated that, ultimately, the NBL was not allowed to run the league on its own terms. Later in the year, Basketball Australia acceded to the NBL’s request, but the later decision gave clubs less than three months to finalise their playing lists under the revised import rules prior to the season commencing.

It was important in Sportsworld’s view that the voice of grass roots players be heard by the NBL, and to this end they insisted that Basketball Australia have one representative on the Board of the NBL.

The loss of free-to-air coverage is obviously a blow to the NBL, and Paterson will be monitoring its effect on attendance levels and sponsorship dollars. The popularity of Australian Men’s basketball reached its symbolic peak in 1991 in Channel Ten’s first season of broadcasting the league. For the first seventeen weeks of its broadcasts, the network regularly attempted to push the game into new markets through its live broadcasts. The pinnacle of the league’s popularity with television audiences occurred when Channel Ten broadcast Friday night finals games between the Melbourne Tigers and the then Melbourne Magic live on free-to-air television in prime time. But Channel Ten struggled to achieve double-digit ratings figures and since its first promising season of coverage, the appeal of the NBL as a television sport has waned. In 1997, the ABC replaced Channel 10 as the NBL’s free-to-air broadcaster with Saturday and Sunday daytime broadcasts and a Sunday morning panel discussion. This year, the ABC has opted out of covering the Men’s league and has only continued to show the Women’s NBL following vocal lobbying and petitioning from, among others, Federal Sports Minister Jackie Kelly.

Paterson said that “we plan to get live coverage of the NBL back onto free-to-air television as quickly as possibly, but it will not happen in our first year. Through our television contacts, we have secured two television slots on Channel 10 “Fastbreak” on Sunday afternoon and “Inside Basketball” on Thursday night, which will show NBL, WNBL and amateur basketball.”

Similarly, the end of Mitsubishi’s 10-year tenure as naming rights sponsor of the NBL and subsequent failure of the league to secure new sponsorship is an equally alarming signal of the health of the competition. Mitsubishi was privately fuming at the inability of the league to promote its product. It is believed that the deterioration in relations between the league and Mitsubishi was in part responsible for the resignation of John Rymarz as CEO of the NBL. Paterson obviously would prefer to be able to secure a major sponsor and adds “we don’t know if we will secure a naming rights sponsor in the short term. We may settle for 2 or 3 “partners” and leave the NBL brand name untouched at least for the current year.” The Sportsworld model is to work in “partnership” with its sponsors, developing a close connection between the sponsor and the sport and adding value to the traditional sponsorship arrangement. Paterson cites Sportsworld’s promotion of sponsor hospitality functions at the Olympics as an example and adds that what Sportsworld does is “more than just stick an advertising sign up”.

Paterson is excited by the way the corporate world has embraced the overall Sportsworld package to date he has not received negative feedback, every client has thought their investment has been money well spent. Sportsworld have offered television packaging for the first time in Australia and clients have warmed to this. The NBL model is the first of its kind as far as Sportsworld is concerned but it may not be the last depending on its success.

The fact that Sportsworld has interests in so many sports a list which is ever expanding might on the surface appear to set the company up for a conflict between the interests of its clients. How could Sportsworld effectively promote both the NBL and the National Soccer League, for instance, when both are competing against cricket in the summer market? Paterson disagrees that Sportsworld’s many interests make promotion of multiple sports untenable and argues that, in fact, its many contacts are an advantage. “It is not difficult for us to manage our conflicts”, Paterson says. “We have 30 salespeople in our two Sydney offices and they are constantly out in the market seeking revenue. The fact that we are into so many sports works well because we know where the money is. Most sponsors operate on a 6 or 12 month sponsorship cycle, and our knowledge of when money might be coming available from particular sources is an advantage. We have a dedicated basketball management / promotion team but share the company’s sales teams.”

Paterson admits that while there are reasons to be concerned with the state of Australian Men’s basketball, none of these diminish the positives that were identified when Sportsworld decided to invest in the NBL. Sportsworld’s job will be to raise the profile of a sport whose attendances have flattened out in recent years when once it was considered Australia’s next “boom” sport. Working against Sportsworld is an environment of general economic decline, resulting in “belt tightening” by the corporate sector and highlighted by the lack of a major sponsor. The ever-increasing salary cap for players will also cause increased costs and exacerbating the losses for club owners. Player quality becomes an issue as both imports and now locals are looking to play in overseas leagues (this is particularly prevalent in the Women’s competition) in a bid to get more money, reducing the quality of the Australian league. And the lack of a free-to-air broadcaster will restrict coverage of the league in local and regional centres such as Wollongong and Townsville, areas where the sport in recent years has become firmly entrenched.

The 2001/2002 NBL season will soon tell us whether Sportsworld’s optimism is justified.

Peter Fray

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