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Before we dive in, a note from Alex:

Believe it or not, this week marks one year of Sports Business Playbook.

What started as a small experiment to give myself a creative outlet during a time of professional challenge/frustration has evolved into a weekly publication with a growing readership base that has become a deep source of pride for me.

I love the sports business space, and I think it’s one of the most interesting industries in the world right now. But, it is often covered at too high of a level to give real insight or with too much “inside baseball” to be understood by someone that’s not an industry veteran.

My goal with SBP has remained the same since Day 1: to thread the needle in between those two worlds and help give you, the readers, a look behind the curtain to understand the “why” and the “so what” of the biggest business stories in sports in a fun, insightful manner. I hope you have found these newsletters as enjoyable to read as they have been for me to research and write.

Lastly, what I want to say most is thank you. Your support over the past 12 months has been more meaningful than I can put into words, and I’ve loved interacting with you. It’s one of the best parts of my week when I get a follow up question/thought on a topic, a word of encouragement, or a piece of feedback from one of you.

Please keep it coming (and sharing this newsletter with others), and I look forward to continuing to pop into your inboxes each Thursday with some knowledge and fun.

With that said, let’s get to the main event!

Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: The Phoenix Mercury have signed an innovative new jersey patch deal with venture capital firm Cleveland Avenue that will see it feature one of the investor’s portfolio companies each season. I think this is the start of an interesting shift in how this sponsorship asset is looked at.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: Caitlin Clark’s record-setting $28 million deal with Nike is complete, and the PGA players are starting to get equity.

• 💪 Weekly Reminders that Sports are Awesome: An improbable journey to the MLB, Nike nails another ad, and an NBA star morphs into Gru.

Hey team,

Interesting news out of the desert this week, as the WNBA’s Phoenix Mercury announced a jersey patch partnership with venture capital firm Cleveland Avenue.

In addition to being the most lucrative jersey patch deal in the WNBA at around $3 million per year (putting it on par with some of the smaller NBA teams — women’s sports 📈), the unique partnership will feature the logo of a different company in Cleveland Avenue’s portfolio each season.

Partake Foods, a Black-owned, women-led natural food company, will be the brand featured this season, and it will then rotate to other companies in subsequent years.

Many are rightfully focusing on the revenue of the deal and the new watermark set for this sponsorship category.

In addition though, this could lead to further innovation with jersey patch deals that capture more interest and tell a better story than the traditional models.

In this week’s SBP, you’ll learn:

• How jersey patch deals and what both parties get out of them

• The recent innovations in jersey patch sponsorship

• Possible opportunities for applying this rotating concept and beyond

Sacred Real Estate No More

While everywhere now, jersey patch deals are a relatively new phenomena in American major league sports (note that the English Premier League and other major European soccer leagues have had them for decades).

Among the U.S. professional leagues, the MLS and WNBA were the first ones to implement it back in the late aughts as means to create an incremental revenue stream for their fledgling leagues.

The Big Four leagues held out for another decade, viewing the space on the jerseys as “sacred,” but all but the NFL (NBA: 2017-18, NHL: 2022-23, MLB: 2023) have now implemented them.

It’s understandable why they’ve changed their minds.

These deals are usually in the seven figures, and for some of the bigger clubs, they can climb to $20+ million. Generally, they’ve grown to represent 8-12% of a club’s overall sponsorship revenues, per Revenue Above Replacement (RAR).

For the brands, the standard goal is increasing brand awareness. To track this, the companies rely on two standard measures:

1. Tracking incremental awareness among fans of the sponsored team compared to nonfans via surveys and focus groups.

2. Equivalent media value, which calculates the value of exposure the brand patch brings versus how much it would cost to reach a comparable audience with traditional ads.

While the initial sales were strong and the top-end clubs are still driving interest, there is some perceived softness in the market due to two factors, as RAR points out:

1. Since the Big Four leagues started allowing these deals relatively close to each of other, the number of teams out looking for jersey patch deals flooded the market, inflating supply and outstripping demand.

2. In a post-COVID world and with the current macro environment, marketers are shifting towards more active promotions with a direct line to ROI. This goes against the norm with jersey patch deals, which are usually “passive” activations that are focused on general awareness and rely on fuzzier metrics to demonstrate value.

Given the price tag, these jersey patch deals have been typically reserved for large corporate organizations who were comfortable with this approach. That’s changing in some areas of the industry, though.

New Innovations in the Space

As I mentioned in my piece a few months ago about the Charlotte Hornets’ first-of-its-kind deal with YouTube star MrBeast and his Feastables CPG brand, we're starting to see more innovation in this category, with the NBA leading the way.

• The Indiana Pacers became the first team to have jersey patch with QR code functionality after they signed a deal with Spokenote, a company that specializes in QR codes for business. Scanning the QR code takes you to an explainer of the partnership and will feature highlights, content, and other surprises for fan engagement.

• The Knicks, one of the highest valued and most sought after brands in sports, announced before the season that Sphere Entertainment (yes, that Sphere) would become the NBA team’s official jersey patch partner for the 2023-24 season. Both companies are owned by James Dolan, and the deal enables cross promotion of the club and the new Vegas entertainment venue.

• The Dallas Wings announced a seven-figure jersey patch sponsorship with the Dallas Mavericks last year that features the Maverick’s “GEM” initiative. GEM is a development program created by the Mavericks that reaches more than 3,000 girls in the Dallas area, with camps, wellness clinics, and workshops focusing on finances and leadership skills.

The common threads here: authenticity, connection, and brand alignment.

The Mercury/Cleveland Avenue deal embodies these characteristics while also creating a new innovation path.

A New Paradigm?

This Mercury/Cleveland Avenue tie-up fulfills each party’s needs.

The Mercury gets invaluable revenue in the door during a soft market with a partner that is amplifying smaller, mission-aligned businesses.

A startup CPG company like Partake Foods gets outsized exposure for a company of its size, and the hope is that this awareness leads to a material increase in sales (and additional funding).

Cleveland Avenue is betting that this marketing investment, spread across a number of its portfolio companies, enables one or some of their portfolio companies to grow and reach a successful exit that generates the 10x return venture capital traditionally shoots for.

Time will tell with how successful the partnership is, but the concept makes a lot of sense on paper in today’s environment.

Plus, I think there are a number of applications for this new distributed sponsorship model that can be used to push specific companies, causes, or titles.

A caveat — this would require a lot of planning, vetting, and league governance since you don’t want the clubs to turn into the Bad News Bears promoting a bail bondsman. But, there are opportunities out there.

CPG and retail conglomerates are obvious ones, and here are three thought bubbles from me on other possible industries who could be interested (and could incorporate some of the other interactive elements like what the Pacers did):

1. Movie Studios: There is usually a summer blockbuster or Oscar contender each year that the bigger studios throw their weight behind. Could the companies rotate in promo materials for the upcoming marquee film each season?

2. Video Game Publishers: Similar to movie studios, but with the added benefit of how ubiquitous gaming is amongst both the players and the younger generations of fans.

3. Philanthropy: Charitable groups have been involved in sports sponsorship before (i.e., Barcelona — UNICEF), and some philanthropic groups and high net worth individuals focus on multiple causes. Rotating those in drives incremental awareness for each of them.

In sum, another “W’ for The W with this Mercury/Cleveland Avenue deal, and a potential new avenue to explore in the sponsorship world.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: The WNBA’s Phoenix Mercury announced an innovative jersey patch partnership with venture capital firm Cleveland Avenue. In addition to being the most lucrative jersey patch deal in the WNBA at around $3 million per year, the unique partnership will feature the logo of a different company in Cleveland Avenue’s portfolio each season.

• Shot: While everywhere now, jersey patch deals are a relatively new phenomena in American major league sports. Among the professional leagues, the MLS and WNBA were the first ones to implement it back in the late aughts as means to create an incremental revenue stream for their fledgling leagues. The Big Four leagues held out for another decade, viewing the space on the jerseys as “sacred,” but all but the NFL (NBA: 2017-18, NHL: 2022-23, MLB: 2023) have now implemented them.

• Shot: Jersey patch deals are now big business. They usually comprise ~10% of a club’s total sponsorship revenue, and the deals can reach upwards of $20+ million annually for the big clubs. The brands see this as an opportunity to drive increased awareness amongst a captive, often more affluent audience.

• Shot: The market has become oversaturated though, and there is not as high of a demand for a traditionally passive marketing asset like jersey patches. But, there have been some recent innovations, mostly from NBA teams, the past few years that are pushing this sponsorship category forward. This deal furthers that growth.

• Chaser: This Mercury/Cleveland Avenue model makes a lot of sense on paper — the Mercury gets cash, Partake gets subsidized marketing and exposure, and Cleveland helps its portfolio companies hopefully succeed and have a successful exit. Plus, the rotating, distributed model could have interesting applications in other industries. A few examples: movie studios, game publishers, and philanthropic ventures.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Caitlin Clark’s record $28 million-dollar deal with Nike is now done. This tweet captures the essence of my piece last week — Clark highlights both the massive demand a female superstar can generate and how historically undervalued the W has been.

2. The PGA Tour starts to offer equity in its new commercial arm.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Cam Booser’s improbable journey to the MLB.

2. Nike perfectly captures young superstar Nelly Korda’s dominant LPGA run.

3. Nikola Jokic becomes Gru as a part of a timely promotion.

Thanks for reading! Let me know what feedback you have.

Also, if you enjoyed this breakdown, please consider sharing it with your friends and network by clicking the social media icons at the top of the newsletter.

Until next time, sports fans!

-Alex