The Washington Wizards were one of the last NBA franchises to take up the new opportunity presented by the league for teams to sign up jersey sponsors when they finally agreed a multi-year deal with Geico, one of USA’s leading insurance companies, last November.
However, Ted Leonsis, the owner of Monumental, the Wizards’ parent company, has no regrets about the time it took to secure a partner, saying it was necessary “to get the best of the best local sponsors” (Geico is headquartered in nearby Maryland), and have it fully buy into the endeavour.
All but one of the 30 NBA teams (the exception being the Oklahoma City Thunder) have now taken advantage of the additional revenue source opened up at the start of the 2017-18 season when the league launched a three-year pilot programme allowing the logos of brands to be displayed on jerseys, on a patch measuring approximately 2.5 inches by 2.5 inches, opposite the logo of new kit supplier Nike.
It was reported last May that the contracts signed up to that point were worth an average of $6.5 million a year, with the largest being the Golden State Warriors’ $20-million-a-year agreement with Japanese e-commerce company Rakuten.
Geico is the first NBA team jersey sponsor to have secured branding across the Women’s NBA and the development NBA G League
However, Geico is the first NBA team jersey sponsor to have secured branding across the Women’s NBA and the development NBA G League as, in addition to the Wizards, its deal includes other Monumental-owned franchises in the Washington Mystics and the Capital City Go-Go respectively.
Monumental had previously convinced existing partner Capital One, the financial services giant based in Virginia, to succeed telecoms firm Verizon as the naming rights sponsor of the downtown arena in Washington D.C. that is home to both the Wizards and the NHL’s Washington Capitals, the reigning Stanley Cup champions.
The deal for the Capital One Arena came into effect in the second half of 2017 and was reported to be worth $100 million over 10 years, as Monumental, which owns and operates the venue, sought to extract full value from the site in the nation’s capital.
Explaining the company’s sponsorship strategy Leonsis tells Sportcal Insight: “Washington D.C. is a global, powerful city and I’m very aware of what’s transmitted from federal Washington around the world, and would like our organisation and our teams to be of high quality and have a narrative that is very relevant.
“So, in this past year, we said we had to get the best of the best local sponsors and then the best of the best global sponsors, and we should be able to do that.”
He describes Geico and Capital One as “the two biggest, most important companies in our community,” and emphasises that the deals have strengthened ties with two prominent billionaires in the former’s owner Warren Buffett and the latter’s co-founder, chief executive and chairman Richard Fairbank, a minority owner of Monumental.
Leonsis says: “We had lots of opportunities to do what I call coin-operated relationships and deals and just throw a patch up there and get some money. By waiting and working with Geico and having them believe in our platform, we have a really deep, integrated programme with them.”
Leonsis is speaking at a media briefing ahead of last week’s NBA London Game between the Wizards and the New York Knicks and is eager to highlight his team’s international partners, including Alibaba, the Chinese e-commerce giant that is a TOP sponsor of the International Olympic Committee, Etihad, the Abu Dhabi-based airline, and Charles Tyrwhitt, the British high-end men’s clothing retailer.
He says: “We’re the only NBA team to have a relationship with Alibaba, one of the world’s most valuable companies. They’ve got very involved with supplying technology to venues and the Olympics and know how important Washington D.C. is to them… It is a well-developed, well-thought-out programme with us.”
The deal came into effect last October with Alibaba serving as the presenting partner of a week-long training camp involving Chinese outfit the Guangzhou Long-Lions and the Wizards, and a game between the two teams at the Capital One Arena.
Monumental houses basketball, ice hockey, Arena Football League (indoor American football) and eSports teams, sports venues and the Monumental Sports Network, which features live streaming and on-demand reruns of games.
The company has 4,000 full- and part-time employees, generates $500 million in annual revenues and is valued at $3.5 billion.
The 62-year-old Leonsis has been an influential figure at the NBA, both as a team owner and previously as the chairman of the league’s media committee, which, in 2014, helped negotiated renewals of the US broadcasting rights deals with ESPN and Turner, which are worth $24 billion over nine years, until the end of the 2024-25 season.
The NBA has also been in the vanguard of digital coverage of sport, this season upgrading NBA League Pass, its subscription streaming service, to enable fans to buy portions of games, as well as full games, while it remains the most popular North American major league online, with the 10.6 million subscribers to its YouTube channel more than double the 4.5 million for the NFL’s equivalent.
Leonsis commends NBA commissioner Adam Silver and the team owners for having developed the league as “a true platform, like a Facebook, an Amazon or a Google
Leonsis commends NBA commissioner Adam Silver and the team owners for having developed the league as “a true platform, like a Facebook, an Amazon or a Google, but as a big platform company that has multiple brands that plug into and self-reinforce each other.”
He continues: “What we’ve tried to do in Washington is mirror the platform on a regional basis. We’re a big believer in the vision that Adam and his team at the NBA have brought together. We own an NBA team, we own a WNBA team, we own a G-League team, we own and operate an NBA 2K [video game] team. We own our network and the first regional streaming sports and entertainment direct-to-consumer network.”
Leonsis believes that basketball, as a product, is in good health, saying: “I’d say of all the sports right now that the NBA is the most ascendant. The players are superhuman.”
He also reiterates that because of high-speed cameras and increased bandwidth that enables the capture of huge amounts of real-time data, for the liberated US betting industry and other purposes, that “indoor sports will have the biggest trajectory of growth.”
As a successful businessman who made his name in the technology sphere, notably at internet giant America Online, Leonsis argues that the NBA has led the way in embracing innovation, spurred on by more dynamic franchise owners than in other sports.
Indeed, he insists that the teams should be regarded as akin to Software as a Service (Saas) companies in that, with a large proportion of recurring revenues, they can be valued at eight to 12 times turnover as opposed to the three to four times that has been the model.
Leonsis says: “The one thing that I have seen is that the NBA has younger, very progressive owners who have come from other industries and who see opportunity.”
He gives the example of Steve Ballmer, the former chief executive of Microsoft, who paid a then record $2 billion for the Los Angeles Clippers in 2014, only to subsequently claim, to the surprise of many observers, that the team was undervalued.
My goal is I’d like us to be one of the few [NBA teams] that is doing $1 billion in [annual] sales revenues
On targets for the future, Leonsis says: “My goal is I’d like us to be one of the few [NBA teams] that is doing $1 billion in [annual] sales revenues, and we’ll get there by growing organically and working with the world’s most important media partners and big sponsors.
“Because of Washington we should be able to say China’s an important market and Europe’s an important market, and then we’ll look at some acquisitions if it makes sense.”
However, the Monumental owner points out that financial growth and expansion are not the only priorities and that winning a title is the only true way to connect with and reward the local community.
He says: “Never ever at AOL, and I’m on the board of American Express, nobody’s ever come to me and said, ‘that new card that was announced has changed my life, or that latest version of the software’.”
“But when you win a championship you make lifelong memories, and the emotional payback you get is indescribable… There’s no business that gets that kind of feeling, that’s why you feel so privileged. It [Monumental] is a great and growing business, but from an art and from a social responsibility standpoint owning sports teams is the greatest thing.”