Three decades of growing popularity couldn’t offset growing financial losses
Beach volleyball completed an arc familiar to minor sports last week with the grounding of the AVP. It went from a game played for bragging rights, to a profession, to a game played for bragging rights.
In 2008, AVP Manhattan Beach Open winners Todd Rogers and Phil Dalhausser took home $50,000. Next week’s Manhattan Beach Open winners will get plaques on the Manhattan Beach Pier Volleyball Walk of Fame. (At press time the California Beach Volleyball Association, the Manhattan Open’s newly enlisted organizer, was negotiating with potential sponsors for prize money.)
The immediate cause of the AVP’s death was the economy. The economy was already in a downward spiral when AVP’s newest management team took over in 2008. Under the leadership of West Point graduate and former JP Morgan turnaround specialist Jason Hodell, AVP cut its annual $23 million budget by an estimated 30 percent. All the AVP needed, it appeared, was to hang tough until the economy recovered, which, Hodell’s Wharton MBA taught him, always did in a year or two. Only not this economy.
Last year, title sponsor Croc threatened bankruptcy and begged out of its $6 million a year commitment. Other longtime sponsors, including Jose Cuervo, Hilton, Nautica, McDonalds and Banana Boat also withdrew their support.
With ticket sales limited by the Coastal Commission, and by public resistance to pay admission to a sport they were accustomed to seeing for free, the AVP was almost wholly sponsor-dependent.
During a conference call last Friday, AVP players were advised by AVP’s vice president of player relations Al Lau that the tour was ceasing operations that day. RSJM Partners, AVP’s majority owner, was no longer willing to cover the substantial losses.
Troubled history
The question now is when the economy does recover, will a major investor, like Shamrock Investment, whose $37 million offer for the tour in 2007 was rejected by stockholders, be interested in beach volleyball.
History is not on the sport’s side. Over the past three decades promoters, player-owners, super agent Leonard Armato, and finally two teams of venture capitalists all failed to make beach volleyball profitable.
Art Couvillon, in his exhaustive, three volume “Sands of Time: The History of Beach Volleyball,” writes that beach volleyball first captured the attention of sponsors such as Jose Cuervo and Miller Brewing Company in the 1980s when “Magnum PI’s” Tom Selleck and NBA players Wilt Chamberlain and Bill Walton began playing at Sorrento in Santa Monica and in Manhattan Beach.
Huntington Beach-based Events Concepts organized the first Pro Beach Volleyball tour in 1978. By 1983, according to Couvillon, Pro Beach Volleyball had a 12-stop national tour and $137,000 in prize money. Tim Hovland was the top earner with $25,000 in prize money.
The next year the newly formed Association of Volleyball Professionals organized a strike at the Jose Cuervo World Championships at the Seaside Lagoon in Redondo Beach. (find story).
The strike was precipitated by Events Concepts’ decision to speed up the game by instituting rally scoring. Traditional side-out scoring awards points only when the serving team wins the volley. Rally scoring awards points after each volley, regardless of who serves.
The 1983 finals, which matched Sinjin Smith and Randy Stoklos against Tim Hovland and Mike Dodd, went four-and-a-half hours, recalled Kevin Cleary, who became the AVP’s first president that year.
The following year, volleyball became the nation’s only player-owned professional sports league when the AVP took over management of the pro tour and reinstated side out scoring.
“I could take the top 10 beach volleyball guys, walk them through the L.A. airport, and no one would ask for an autograph. They have an unrealistic idea of what they’re worth,” said Event Concepts co-founder Craig Masuoka commented after he lost control of the sport.
Cleary and fellow player Matt Gage ably managed the tour through 1987 with assistance from former player and rising sports agent Leonard Armato. With sponsorship from Jose Cuervo and Miller Beer, the tour grew to 30 events, nationwide.
In 1988, Armato, who had become AVP’s CEO, and whose clients now included the Lakers’ Kareem Abdul-Jabbar and the Houston Rockets’ MVP Hakeem Olajuawon, asked for equity in the tour. The players voted down his request and brought in former UCLA quarterback turned sports agent Jeff Dankworth as CEO.
The early to mid ‘90s are viewed as beach volleyball’s golden era, culminating in the sport being added to the 1996 Olympics in Atlanta. Karch Kiraly and Kent Steffes won gold and Mike Dodd and Mike Whitmarsh won silver, vindicating the AVP, which felt slighted after the Swiss-based FIVB was allowed to select who represented the U.S.
The 1994 Miller Lite/AVP tour offered $4 million in prize money and 27 events, 10 broadcast by NBC.
But Dankworth resigned that year for personal reasons and the AVP began to destabilize. Karch Kiraly’s agent Jerry Solomon had a controversial four-year reign, followed in 1998 by former Los Angeles Olympics CEO Harry Usher, who was replaced within the year by former player Bill Berger.
Berger found the tour $2.4 million in debt and behind on its payments to players, including Olympic Gold medalist Kent Steffes, who sued the tour for $52,000. That year the tour lost Miller Beer, its title sponsor for the previous 18 years, forcing Berger to put the tour into Chapter 11.
It’s not just about money
Compounding beach volleyball’s unremitting financial challenges were its unremitting political challenges, particularly in Manhattan, which maintained a love-hate relationship with the AVP. Residents were proud of the tournament’s reputation as the Wimbledon of Beach Volleyball, but leery of the AVP, in particular its determination to charge for seats. The AVP saw paid admission as its best hope to relieve its unstable dependency on sponsors.
After a four-hour-long parks and recreation commission meeting in 1996, AVP’s request for permission to sell 7,000 seats was denied. At an equally contentious appeal before the City Council, the denial was overturned. The following year the council and the AVP fought over naming rights. (This year’s Manhattan Open was to have been called the AVP Nivia Tour Manhattan Open Presented by Bud Light Lime.)
In 1997 and 1998, negotiations between Manhattan and the AVP broke down entirely, leading the AVP to move its year-ending championship tournaments to Hermosa Beach those two years.
In 1999, the AVP returned to Manhattan, but without a stadium or paid seating, and only after fighting back a Coastal Commission appeal by Manhattan activists.
The scaled-back tournament was a hit with residents.
“Everybody I talked to loved it,” said Manhattan volleyball director Charlie Saikley, the “godfather of beach volleyball,” who had run the city’s volleyball tournaments for over four decades.
“It’s old-style. People are enjoying themselves. It’s not too big a crowd,” said player and Manhattan Councilman Steve Napolitano.
But the smaller crowd meant bigger losses for the AVP.
In 2001, Spencer Segura, the New York investment company that bought the tour in bankruptcy in 1999, offered it to Armato. Armato wasn’t just interested in an equity position. He wanted to own the whole thing, and he could afford it. Shortly after being rejected by the AVP in 1998, the Manhattan Strand homeowner had signed 22-year-old NBA rookie Shaquille O’Neal to the highest salary in professional sports history.
During a meeting in May 2001 at his El Segundo Digital Media Campus office, Armato told players he would merge the men’s and women’s tours, and put on an eight stop tour that summer with $1 million prize money. To conform with Olympic rules, the AVP would play on a short court with rally scoring, and allow net serves.
All players, from the rookies to Olympic gold medalists Eric Fonoimoana and Karch Kiraly would be required to sign identical contracts.
Players weren’t happy. Canyon Cemen, winner of the 1997 Hermosa Open, referred to the new rules as a “bastardization of the game.”
But, as Ceman observed, “We’ve all been humbled by the terrible state the sport is in. We keep getting thrown smaller lifeboats. But to a drowning person a small lifeboat looks good.”
Fonoi also expressed guarded optimism. “I’ve seen him on the floor of the Lakers. He knows everyone at NBC, and Fox… and he has a passion for volleyball. If he can mix the two correctly, we have a chance.”
Armato made no secret of his ambition to un-tether beach volleyball from the beach.
In a 1997 Easy Reader interview he said, “When it comes to taking beach volleyball to the next level, it’s not going to happen on the beach.”
That year, he had organized the Volleyball World Championships at the UCLA Tennis Center. Just 3,000 people attended, prompting FIVB President Ruben Agosta to say if the world championship would ever return to California, “I would go to Manhattan Beach.”
Undeterred, over the next nine years, Armato talked of volleyball stadiums, while trucking sand and stadium scaffolding to parking lots across the country.
The tour appeared to be flourishing. Prize money rose from $1 million in Armato’s first year to $4.5 million in 2009. Revenue skyrocketed from $1 million in 2002 to $24 million in 2007.
NBC Sports increased its coverage to over 15 live hours in 2008. Fox Sports aired 72 hours in 2009.
“We were able to take an emerging sport from the beaches in Southern California to over 30 sites across the country,” said the Manhattan Beach resident.
One of his proudest moments, he said, came during the 2008 Olympics in Beijing when the AVP’s Misty May-Treanor and Kerry Walsh captured their second consecutive Olympic gold medals and Phil Dalhausser and Todd Rogers also reached the top of the podium, becoming the first men’s and women’s beach volleyball teams from the same country to win gold in the same Olympic Games.
“It solidified the position of the AVP as the world’s best platform for beach volleyball,” Armato said.
What the revenue growth and the gold medals didn’t do was make the AVP profitable. To keep the tour afloat, Armato had taken it public in 2004, and then gradually diluted his ownership stake.
In September 2008, he secured $3.5 million in funding from the investment firm RJSM Partners, on the condition that board member Jason Hodell be made chief financial officer.
Last year, when RJSM upped its stake in AVP to 60 percent, Armato was ousted and Hodell named CEO.
Hodell quickly earned high marks for cutting costs, smoothing over player relations and smoothing out operations. What he couldn’t do was turn around the economy, which led to Crocs cancelling its title sponsorship and other potential sponsors deciding to sit out the recession.
Last month, on the Monday following what appeared to be a sensationally successful Hermosa Beach Open, RJSM principal Nick Lewin told Hodell and newly appointed AVP commissioner Mike Dodd that he would not cover the tour’s anticipated $4 million to $6 million shortfall.
Players were advised during a conference call that week that the tour was in jeopardy. This week, on VolleyballNetwork radio, Hodell said he approached 30 different investment groups in an effort to find new funding.
“If we had a longer shot clock, we might have been able to run a winning play,” Hodell said.
The biggest hurdle, he said, was AVP’s costly contractual agreements with sponsors to provide stadium settings and television air time, which the AVP has to pay for despite its strong ratings.
Dodd, who has five bronze plaques on the Manhattan Beach pier, said that after last Friday’s conference call with the players, he took the long way home from AVP’s Torrance offices, around the Palos Verdes peninsula.
“I was thinking of a different model, more old school, less stadium, more interaction between players, spectators and sponsors, more of a festival,” he said.
“During the modern era of the AVP, we thought we needed to be big time, to talk like we were the NBA. We need to embrace what we are and let the opportunities develop from there,” he said. ER
