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Cavs' International Reach Could Be Lucrative

Crain's Cleveland Business, September 27, 2015

By Kevin Kleps

With the world’s best player on a roster complemented by standouts from Australia, Brazil, Canada and Russia, the Cleveland Cavaliers truly are global players.

This season, the Cavs, with the help of two branding agencies, are poised to turn their international reach into lucrative partnerships. To get there, they have to navigate the NBA’s long-standing restrictions on marketing outside a 75-mile radius of Quicken Loans Arena.

The Cavs, especially since the return of LeBron James, have done plenty of big business in Northeast Ohio. In 2015, however, they have focused some of their efforts on Australia, China, Russia, Thailand and other countries in which their research shows they have a sizable audience.

“We have a finite number of seats in the building, 20,562. We have a finite number of suites,” said Cavs senior vice president and chief revenue officer Brad Sims. “The only way you can move the needle there ultimately is with pricing. But with partnerships, I like to say there’s infinite opportunity. It really comes down to how creative you can get.”

The Cavs have taken that part of their game to a different level for the 2015-16 season.

When the Cavaliers host the Minnesota Timberwolves on Jan. 25, they will celebrate Australia Day at The Q. The country that is home to backup point guard Matthew Dellavedova and was the birthplace of All-Star Kyrie Irving will be finishing up breakfast when the Cavs and Timberwolves tip off.

Dan Migala, whose Chicago-based Property Consulting Group is working with the Cavs on establishing partnerships with Australian companies, expects “Thanksgiving-like viewership” for a game that will be televised throughout the country.

Two weeks after the Aussies are celebrated at The Q, the Cavs will ring in the Chinese New Year with another Monday night game, a Feb. 8 matchup against the Sacramento Kings.

The Cavs requested home nights on both dates, and the NBA, which has marketed its league outside the U.S. better than any other, obliged.

“They’re extremely unique,” Migala said of the Cavs.

“They’re thinking globally, and that’s money that’s brought into the Cleveland economy.”

Closing In On A First

During the NBA Finals last June, the Cavs announced they had hired ESP Properties and Property Consulting Group “to help maximize the franchise brand outside North America.” PCG is focused entirely on Australia, which has the largest total of NBA League Pass downloads outside the United States.

ESP Properties, a division of London advertising and public relations giant WPP, is shopping the Cavs’ brand in Europe, Asia, the Middle East and South America.

Migala, PCG’s co-founder and chief innovations officer, said the work began months earlier, and a crucial moment happened when he was in Melbourne, where Irving was born.

“I was walking by a Foot Locker, and there were Kyrie and Delly jerseys everywhere,” Migala said.

“This was pre-Delly in the Finals and cult status. It was a Tuesday in January.”

Migala said the store’s employees told him the jerseys were one of their best sellers, so he took pictures and texted them to Sims and Cavs CEO Len Komoroski.

“That was the moment of truth where we hit the go button,” Migala said.

Sims said the Cavs’ international emphasis “is selling rights and inventory that is within our current marketing territory.”

The talks “tend to go outside of that because of the interest level (in the Cavs), and that’s where we have to work closely with the NBA.

“That’s been kind of the feeling-out process,” he added.

NBA rules prevent teams from using their brand marks outside a 75-mile radius of their headquarters.

The policy was put in place decades ago to prevent clubs from doing business in another team’s market.

The Cavs are hoping some of the restrictions will be relaxed within the next year, Sims said.

But doing a deal in Columbus or Cincinnati is much different than Australia and China, which is why the Cavs and NBA International have been working hand-in-hand.

Sims said other NBA teams have established international partnerships, but only for “team-controlled” assets such as in-arena signage and digital and social media sales that fall within the club’s marketing area. The organization’s chief revenue officer said the Cavs are hoping to become the first club to strike a deal in conjunction with NBA International “that would allow a partner to activate” the team-controlled assets, plus use the wine and gold brand in their home country.

“This is all theoretical until we can actually get a deal done — one that works for the partner, for the NBA and for the Cavs,” Sims said. “It’s tricky. I think we are very close with our first, but still may be a few weeks out to close.”

'It's a win-win'

Migala said discussions with “brand decision makers and research companies” in Australia have shown that the Cavs are the country’s most popular NBA team. The data they’ve compiled is attractive to potential partners — an audience of League Pass consumers that is almost entirely age 44 and under (93%). Nearly half (46%) of the Australian League Pass subscribers are between 25 and 34.

In a one-year span that started on July 1, 2014, the Cavs’ website generated more than 1.3 million page views in Australia, and visitors spent an average of 7.2 minutes on the team’s online home.

The PCG co-founder said discussions with prospective partners are “educational.” They begin by laying out possibilities and explaining how the NBA territory rules work.

“It’s very innovative,” Migala said. “It’s not, ‘Here’s the box, here’s what the sign looks like, here’s what we want you to pay for the box,’ and then we haggle over the price. This is a very collaborative process.”

The Cavs will have unique in-arena elements during the Australia Day game, and PCG is attempting to sell a partnership to pair with each promotion, in addition to signage that will be visible to the Aussies watching James, Irving and Dellavedova on TV.

“There is a short, medium, long component to this,” Migala said. “The NBA is focusing on emerging markets. They really want to support the Cavs’ efforts to develop this emerging market.”

The Cavs’ digital channels get a heavy amount of traffic — 31% to, for instance — from outside the U.S. International traffic on the Cavs’ website increased 137% during the 2014-15 season.

Mike Conley, the team’s vice president of digital, said 69% of the Cavs’ considerable Facebook audience resides outside the U.S. (compared to 37% on Twitter), and 69% of that group lists English as their primary language, which creates “immediate opportunity” to market the team’s brand “without translation services.”

During the NBA Finals, Sims told the Sports Business Journal that the Cavs expect to have six seven-figure partnerships in 2015-16. By going well outside their market, that number could expand.

“Hopefully, the ideas grow in a pie, right? It’s companies that they’re not really calling on,” he said of the NBA, “so all of a sudden we’re putting a warm lead on their plate and saying, ‘This company is interested, so let’s have a conversation and get a deal done together. You can get a deal for NBA Australia and we’ll get a deal for the Cavs, and it’s a win-win.’ ”

International Sensations

During a one-year period beginning July 1, 2014, 31% of the traffic to came from outside the United States — a 137% year-over-year increase. In the 2013-14 season, 21% of the visitors to the team's website were from outside the U.S.

A look at a few more notable tidbits on the Cavs' international reach:

  • The most frequent international visitors to came from the Philippines, Canada, Israel, Australia, the United Kingdom, Brazil, France and Germany.
  • Israel, at 175%, had the largest year-over-year increase, followed by the Philippines (155%) and Canada (134%).
  • 69% of the Cavs' Facebook audience resides outside the U.S. The top visitors are from the Philippines, Australia, Israel, the U.K. and France.
  • A much more significant portion of the Cavs' Twitter audience, 63%, is based in the U.S. The team's 37% international share is led by the Philippines and the U.K., which combine to account for 12% of the international Twitter audience.
  • Since the Cavs' new app debuted prior to the 2014-15 season, 15% of the iOS downloads have come from outside the U.S., led by Australia, and 13.5% of the Android downloads have been international. The Philippines paced the latter category.
  • Australia ranks second to the U.S. in NBA League Pass subscribers. A combined 93% of that audience is between the ages of 18 and 44. A whopping 46% of the League Pass subscribers in Australia are ages 25 to 34, 25% are 35-44, and 22% are 18-24.
    n The Aussie League Pass audience is almost entirely male — 98%. It has an average household income of $77,562.

Sources: Cleveland Cavaliers, Property Consulting Group