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Walking Through The AAF’s Bankruptcy Declaration

With the Alliance of American Football filing for Chapter 7 bankruptcy, stakeholders in the short-lived league could be waiting a while to get paid.

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Photo Credit: Mark J. Rebilas-USA TODAY Sports

(*Citrin Cooperman is a proud partner of Front Office Sports)

The collapse of the Alliance of American Football (“AAF”) has led to the filing of multiple lawsuits against the AAF as well as the AAF filing for Chapter 7 bankruptcy in Texas. There were early signs that the AAF was having financial difficulties when it needed cash in the middle of the season to meet its operational demands such as payroll.  

“When the AAF suspended its operations in early April, it left many, including players and vendors, wondering if and when they would get paid,” says Maryann Veytsman a director in the Valuation and Forensic Services practice at assurance, tax, and advisory firm Citrin Cooperman. “Collecting unpaid salary and/or payments will depend on how many assets the AAF has and what type of creditor each person or company is deemed to be per the Bankruptcy Code.”

There are two basic types of business bankruptcies:  Chapter 7 (liquidation) or Chapter 11 (reorganization).  

“Businesses such as the AAF typically file for Chapter 7 bankruptcy or liquidation if the business has no viable future,” Veytsman continues. “If restructuring is not an option, likely because the business’ debts are so large and the business does not have substantial assets, then liquidation is necessary. This typically leads to the business being dissolved.”

READ MORE: AAF Files for Chapter 7 Bankruptcy 

In a Chapter 7 bankruptcy, which can take many months or even years to complete, a trustee is appointed by the bankruptcy court. The trustee takes possession of the business’ assets and distributes them among the creditors. After the assets are distributed, the trustee and employees are paid.  

“If the AAF had a realistic chance to succeed, then it could have filed for Chapter 11 bankruptcy,” Veytsman believes. “In a Chapter 11 bankruptcy, a company formulates a plan of reorganization, which outlines how it will pay its creditors. The payments to creditors are typically made over a period of time and may even exceed ten-to-twenty years. The creditors have to vote on the plan, and the court will approve the plan if it is found to be fair and equitable.”

Per the Bankruptcy Code, a business’ assets are distributed in the following order:

  1. Secured creditors are paid first because their money is guaranteed or “secured” by collateral or contract.  
  2. Unsecured creditors are paid second. Unsecured claims can be priority or non-priority claims. 
    • Priority unsecured claims are administrative expenses related to the bankruptcy such as trustee fees, wages and salaries, contributions to an employment plan and taxes owed to the government.
    • Non-priority unsecured claims are all other unsecured claims that are not listed as a priority in the Bankruptcy Code and typically include bank lenders, suppliers and investors with unsecured claims.
  3. General creditors are paid last. General creditors are typically made up of stockholders and shareholders and are paid if there is any money left after paying the previous two groups of creditors.

“Secured creditors get cash first and are typically paid in full while the unsecured claims receive a pro rata share of their debt,” explains Veytsman. “However, some unsecured creditors get priority over other unsecured creditors per the Bankruptcy Code. The priority claims related to AAF would likely be any administrative expenses related to the bankruptcy such as trustee fees, wages and salaries, contributions to an employee benefit plan and taxes.

However, wages and salaries (including commissions and vacation) are only a priority claim up to a maximum of $13,650 as of April 2019 per employee for any money earned within 180 days before the date of the filing of the bankruptcy petition or the date of the cessation of the debtor’s business.”

READ MORE: Mike Trout Will Pay Nearly $57 Million in State Taxes Per His New Contract

As result of what Veytsman outlines, the league’s former employees are not guaranteed all of the money that they earned or was promised to them. Employees may, however, be due additional monies if the AAF failed to follow The Workers Adjustment and Retraining Notification (WARN) Act. The WARN Act mandates that employers with 100 or more employees give employees 60-days advance notice of layoffs or closure. If they don’t, employees will be entitled to an additional claim for back pay and benefits for the number of days for which notice was not given.

Any expenses the players incurred during travel for the AAF, such as hotel rooms, will likely be unsecured claims. As a result, they will likely receive little to no reimbursement. The hotels themselves are also unlikely to recoup the money owed to them. However, if AAF employees paid for any expenses using a corporate card, then it is unlikely that the credit card issuers would look for payment from the employees specifically if the employees filed expense reports with the AAF and followed company procedures.

The bottom line? As the proceedings unfold, it could be a while before all parties receive their due payments.

Citrin Cooperman guides the sports world’s best companies and individuals when it comes to traditional accounting and tax support, guidance on developing business and financial plans, and much more. Visit their website to learn more.

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Examining The Future of Sports Sponsorships

GumGum Sports’ latest report, “The Future of Sponsorships”, details several key trends that sponsorship professionals should be keenly aware of.

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(GumGum Sports is a proud partner of Front Office Sports)

Since the dawn of professional sports, sponsorships have been a critical part of the space. Sponsorships draw massive numbers of eyes to a sponsor’s logo or product and supply teams/organizations with a significant portion of their revenue. GumGum Sports estimates that the combination of TV and social media team sponsorships drives $3 billion alone in media value back to the league’s sponsors, nearly a 5x return on investment.

And that’s not even factoring in value from digital streaming or the viewers that are able to watch via an illegal streaming service. In GumGum Sports’ latest report, The Future of Sponsorships, details several key trends that sponsorship professionals should be keenly aware of:

  • Artificial intelligence will quickly become an even bigger part of measuring the success of sponsorships by providing deterministic insights like sales uplift among rights holder fans vs. the general population.
  • Somewhere between 40-60 percent of every leagues’ inventory is missing a significant portion of its overall value.
  • The key to more accurate media value measurement is the ability to track data against a goal or industry standard. This gives those staff members involved in carrying out the actual campaign something to strive for.

Download ‘The Future of Sponsorships‘ to learn the various ways in which technology will build greater trust and performance between sponsors and rights holder

As the world around the sports industry continues to change, so does the overall sponsorship space. Those organizations who chose not to change with it run the risk of not fulfilling their potential or achieving maximum revenue.  Therefore, it behooves most professional sports organizations to understand how much room for improvement they actually have when it comes to securing and executing their various sponsorships.

To download the full report from GumGum, click here.

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Strategies For Building A Winning Ticket Sales Strategy

It is vital for ticket sales executives within sports to understand what goes into filling a stadium and the analytics used in building that strategy.

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(*StellarAlgo is a proud partner of Front Office Sports)

A strong ticket sales strategy is an important key to success for any professional sports team, especially those looking to grow rapidly.

“When we look at building a strong ticket sales strategy, our first focus is understanding our audience: how our fans engage with the club, their preferences and purchasing behaviors and their experience with our guest services,” says Allison Yee-Garcia, VP of Marketing at Sacramento Republic FC. “We seek to understand these key metrics through genuine interactions and strong data collection and analysis, which then shape how we move forward with new initiatives.”

A strong understanding of the audience gives a team a head start on preparing for the future.

“As we look toward a potential MLS stadium, we are already planning to implement technologies that will enable a robust understanding of our fans, including a cashless environment, beacon technology and data-enabled fan activations,” Yee-Garcia says. “We also recently launched an official mobile app that’s helping us with fan profile development and surveying as well as setting the groundwork for a move to an all-digital ticketing environment in 2020.”

Building a strong sales strategy can be a difficult process. In the opinion of many professionals within the sports industry, however, it comes down to a few critical factors.

READ MORE: The Kansas City Royals Partner With StellarAlgo To Learn More About Their Fans

Get Personal

In an age where everyone carries a screen in their pocket at all times, consumers are being sold products at every possible second. Teams need to find ways to make fans care about their messaging in order to stand out. This is one philosophy that StellarAlgo imparts to the more than 30 professional sports teams they work with.

“Your fans are busier than they’ve ever been in history. They get more marketing messaging than they ever have,” says StellarAlgo Founder and CEO Vince Ircandia. “There’s more demand on their attention than there ever has been in the past. While you have these really, really passionate people that love your brand, teams need to innovate and think hard about how well they understand their fans, and message to them on a more personal basis.”

Personal messaging can help build the lifetime value of that customer. For that reason, teams that develop a strong community around their brand will see better results than using a more generic marketing strategy.

After recently beginning a partnership with the Kansas City Royals, StellarAlgo is working with the team to go through audience analytics including survey data, marketing automation, primary and secondary ticket purchase history, and other datasets to find commonalities amongst their most engaged fans. This helps the team realize the best ways to cut through the clutter and reach new fans.

Know The Important Analytics

It is expensive to find new fans. If teams can better understand the fans within their current databases, they can find ways to bring them back more and more frequently.

“Segmenting those fans starts with having a really good dataset,” Ircandia says. “So we are using pretty strong machine learning techniques in order to really let our algorithms determine how fans cluster and which of those attributes are really important in terms of the messaging around the fans.”

For example, StellarAlgo helps teams pay attention to the size of frequent transactions. This can often be some of the most predictive data. Understanding where a customer is in their customer life cycle can help teams tailor their messaging.

“If there’s someone that’s just made a whole bunch of purchases with you, you’re going to deal with that a little bit differently than you would deal with somebody that maybe hasn’t engaged with you in a while or if they’ve engaged with you in a really specific way as of recently,” says Ircandia.

Behavioral and demographic data also makes a difference. Certain groups of people may like to purchase tickets far in advance, some may prefer to purchase day of game. Others value cheap tickets over premium experiences or family events over other themes. Understanding how those fans cluster helps prepare ticket reps for the sales process.

Know Why Something Was Successful

Engagement, clicks and revenue all factor into whether or not a sales campaign was as effective as it could have been. But why did the customers respond the way they did to the different elements of the campaign? Understanding this is important to replicating success in the future.

READ MORE: StellarAlgo Turns to Machine Learning to Help Solve Ticketing Challenges

Be Able To Change Course Quickly, If Needed

Many organizations don’t have the time to evaluate the success of a campaign until after it is over. Machine-learning and automation can help solve some of these issues.

“Organizations are so lean and people get so busy that the postmortems that they do for sales campaigns are not generally automated. That’s one of the things that we try to do at StellarAlgo with our machine-learning technology,” Ircandia says.

“With this instant insight, teams can pivot in the middle of campaigns and learn. Being able to  iterate on what kind of touchpoints or what types of creative might be resonating with different segments at different points in time is really important. It can make a difference when it comes to turning fans into repeat visitors.”

For more on how StellarAlgo delivers actionable data insights for Major League teams, visit stellaralgo.com/major-league.

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Professional Basketball Combine Prepares Overlooked Prospects For The Pros

The PBC provides a number of prospects not invited to the NBA Draft Combine with the opportunity to show their skills and prepare for the future.

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(*BFWD is a proud partner of Front Office Sports)

Every year, a handful of college and international basketball prospects are invited to the NBA Draft Combine, where their skills, fitness and physical measurements are evaluated by scouts. Prior to 2017, non-invitees missed a huge opportunity to market themselves for future playing opportunities.

Fortunately for these prospects, the Professional Basketball Combine (PBC) provides another opportunity to showcase themselves.

READ MORE: Jennifer Azzi Is Growing the Game of Basketball All Over the World

Two-way contracts between the NBA and G League were introduced in 2017 along with three new G League teams, effectively creating 105 new opportunities for professional basketball players in the United States. Jake Kelfer saw this as an opportunity to give a handful of prospects the additional exposure that could propel them to the next level.

In the two years since Kelfer founded the combine, the PBC has produced nine two-way contract players, 23 NBA Summer League invitees, and the 2017-18 G League Rookie of the Year Antonio Blakeney.

“The event was designed for players to turn their dreams of playing professional basketball at the highest level into their reality,” Kelfer says. “I think the proudest moment is being able to see that the event has created an incredible value to the NBA community and to these players.”

Thanks to an active web presence and quality auxiliary events like a Celebrity Influencer Game as well as a skills camp for those pursuing a career on the business side of basketball, the PBC has been able to create a strong name for themselves on the branding side of things. That’s easier said than done for an event that only takes place two days per year.

“It’s definitely been a process that takes time to build, but for us, the key is really making sure that we highlight our players accomplishments along with the value that we provide to players, agents, and teams,” he says. “Particularly we want our players to know that we’re with them, and we believe in them past the two days when the event takes place.”

Kelfer and team continued to make the combine a year-round brand by debuting scouting profiles and stat trackers for players on their channels.

As the event has grown, the PBC now prepares prospects for life off the court as well as on. This year, Kelfer and company are debuting the first-ever PBC Prospect Development Program in conjunction with BrandForward, PTD Business Management, and Urner, Lemos and Paul of Wells Fargo Advisors.

“We really wanted to create a program to help these guys have the maximum success on and off the court,” he says. “Specifically, we’re going to be working with them on creating a digital footprint. How do you brand yourself as an athlete? How do you use your influence for positive change? How do you generate revenue through your social media channels? In today’s environment, players are able to capitalize on more than just traditional endorsement deals.”

The program will consist of several workshops for the combine participants regarding topics like financial literacy and personal branding. Both are important concepts for young professional athletes to grasp.

READ MORE:  ‘Be Better’: Inside Good Men in Sport’s Hard-Hitting Message for Men

“In today’s hyper-connected world, athletes have tremendous power in their platforms,” says Stephanie Martin, co-founder and managing director of BrandForward. “Brands are eager to leverage the direct-to-consumer relationships that athletes have with their fans, so we help athletes to take the reins of their brand and build strategies that support their larger goals. We’re excited to be part of the PBC Prospect Development Program because we believe personal brand-building can be truly additive to a professional athlete’s career both on and off the court.” 

While the PBC began as a way for athletes to showcase what they can do physically, the event has quickly evolved into something much bigger and into a very important part of the global community surrounding the sport.

The third Professional Basketball Combine will take place on May 21 and 22, 2019 at Mamba Sports Academy in Thousand Oaks, California. For more information on this year’s event, visit professionalbasketballcombine.com/about.

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