Sports Business

Sports Business '15 to Watch': 2020 Tokyo Olympics

2020tokyoolympicsrenderingslidenew.png

Sports Business '15 to Watch': 2020 Tokyo Olympics

1. Putting on an event like the Olympics often costs a city and country billions of dollars, and even then, budgets typically run well over the originally anticipated number. According to Japanese public broadcaster NHK and Junko Fujita of Reuters, the 2020 Tokyo Olympics will cost the organizing committee “six times than their original estimate,” and come in at a whopping $14.9 billion. This cost explosion “was caused by unexpected payments for building lanes on highways, as well as rising materials costs and personnel expenses.” A shortfall of nearly $9 billion is expected to occur as the Tokyo 2020 Organizing Committee is predicted to raise only about $3.71 billion from sponsors and ticket sales – two of the largest income areas surrounding the Olympics. The initial cost of the 2020 Games was estimated at $2.4 billion; plans to cover the remaining billions of dollars needed to put on the event will be split between the Olympic Committee, the Tokyo government, and national government. Even if these Olympics end up costing $14.9 billion, they will be considerably less expensive than the 2014 Winter Olympics in Sochi, Russia, which amounted to an astounding $46.24 billion. Brazil, Korea, Tokyo on notice – significant impact on long-term Olympic planning and legacy. 

2. With football and basketball programs continuing to grow, along with conference reallocations and TV revenue, a total of 28 Division I athletic departments listed at least $100 million in revenue for the 2014-2015 academic year, according to Jon Solomon of CBS Sports. This number reflects the latest sign that the “infusion of College Football Playoff dollars and increased television money continues to change the landscape of college sports. Leading the way amongst these 28 schools is the SEC, where 10 of the conference’s 14 schools pulled in at least $100 million of revenue this past year. The only schools in the conference not making this elite list are Mississippi State, Missouri, Ole Miss, and Vanderbilt. The Big Ten followed next with eight schools making this list – 18 of the total 28 schools in this exclusive club come from the SEC or Big 10. According to the analysis by CBS Sports, “As recently as 2011-12, just 11 schools comprised the $100 million club. Now, the SEC alone is just one institution shy of that mark.” Texas ($179.6M) and Ohio State ($170.9M) were 1st and 2nd, respectively, while Alabama ($150.6M) and LSU ($138.9M) were 3rd and 4th. Forty-one bowl games; $5 billion of economic impact in all regions; 165 televised hours of college football. It’s only just beginning!

3. Adding to his current sponsorship portfolio, Warriors Guard and NBA sensation Stephen Curry has signed a three-year endorsement deal with Brita. The water filtration company will use the deal to feature Curry in its TV ads, PR, and social media campaigns, according to E.J. Schultz of Ad Age. While many athletes (like LeBron James and his deal with Sprite, sponsor soft drink companies), Curry made it clear that water is his drink. The company’s advertising campaign featuring Curry is set to begin in January, with the TV ads expected to debut in March. While financial details of this deal have yet to be disclosed, it is expected to be on par with Curry’s other multi-million-dollar endorsement deals. Ed Huber, general manager of the Brita brand, voiced his excitement and the company’s excitement to have been able to sign the NBA’s hottest player to a deal: “By deciding to work with Brita – and make no mistake, Stephen Curry could endorse any beverage he wants -- he's sending a powerful message that clean, clear water is the right choice for everyone in America.” Curry and Brita a good brand match: “powerful and clean.

4. Top WTA pro Caroline Wozniacki took part in a shoot for an episode of HBO’s hit sports comedy series “Ballers” staring Dwayne “The Rock” Johnson in Miami.  Pictures from the set were posted to social media by both Wozniacki and Johnson that also featured Rob Corddry, and Academy Award nominee Andy Garcia. These kinds of cross-marketing activities are key to the overall appeal of Wozniacki, repped by Lagardere Sports and Entertainment, and the WTA as a whole. As leagues wrap up the year, the WTA unveiled its 2015 end-of-season global audience report, by SMG Insight, with worldwide broadcast coverage seeing an overall viewership boost of 25% year-on-year, with 395 million cumulative viewers in 2015 versus 316 million in 2014. Meanwhile, digital viewership for the WTA’s 2015 season grew 44% year-over-year, with 44.6 million viewers watching women's tennis through online broadcast platforms in 2015, compared to 31 million in 2014. As such players like Wozniacki, her close friend Serena Williams, and Maria Sharapova branch out into entertainment ventures off the tennis court, the WTA’s numbers are sure to keep on rising.

5. St. Louis, Oakland, San Diego finishing their home seasons: clarity no more than two months away. This past week, rumors spread around the league that Commissioner Roger Goodell would supply Stan Kroenke and the St. Louis Rams with an extra $100 million to build their riverfront stadium if their move to L.A. did not come to fruition. But in a “sternly worded letter” to Missouri Governor Jay Nixon and his stadium task force, Goodell “warned that the league has no current plans to provide" $300M toward construction of the planned stadium. According to league policy, the NFL can provide a maximum of $200 million in funding toward the construction of a new stadium. The extra $100 million would be beneficial for any stadium that needs construction, but especially in St. Louis where private investment has been deemed crucial. St. Louis stadium task force co-head Dave Peacock said that local planners "have been clear from the beginning that the project is counting on private investment" -- including $250M from Rams Owner Stan Kroenke. December 28 the purported “final deadline” – then the fun really begins.

6. In a report citing research from FIFA and Kantar Media, FIFA stated that more than 1 billion people watched the 2014 World Cup final. A total of 1.013 billion tuned in to at least one minute of Germany’s triumph over Argentina. Along with an overall 7% increase in TV rating, more than 105 million American residents watched at least 20 minutes of the match during the multi-week tournament, FIFA claimed. With an “average in-home global audience” of 570.1 million, FIFA concluded this past summer’s tournament to be a success despite ongoing allegations of scandal. Looking forward for the soccer organization, they are looking to secure back big name sponsors after many longtime partners rescinded their sponsorship amid Sepp Blatter’s bribery scandal. Further, Russia is set to host the World Cup in 2018, but stay tuned to see if Qatar is either reconsidered as host of the 2022 World Cup or if major changes come to soccer’s international governing body before then.

7. While there may be 151 NBA stores outside the United States, the first U.S. one is set to open on 5th Avenue in NYC Christmas week. The 25,000-square-foot store will mark the NBA’s new flagship store and replace a temporary NBA Store run and operated by Adidas, which shut down this past August. Fanatics, the company who is responsible for the NBA’s online merchandise shop, will be held accountable as operator of the league’s new store. The store itself will span three levels and offer products for infants, teens, men, and women – which is the NBA’s fastest growing category for merchandise sales. While Adidas is still the official sportswear supplier of the NBA, shoes from Nike and Under Armour will be featured as well. Changes are also to be expected in a few years’ time, with Nike planning to take over all apparel starting for the 2017-2018 season. The eight-year, $1 billion deal will put Nike’s logo on game jerseys – a first for the NBA. With licensed goods sales up more than 10% last season and a similar gain expected this year, look to see the NBA Store be a smashing success right in the heart of basketball-crazed NYC. NBA merchandise drives the holiday gifting season – domestically and globally.

8. The Golden State Warriors are the NBA’s best team, and so far, fans have shown their willingness to pay to see them play. According to an article on FiveThirtyEight.com by Carl Bialik, Warriors fans are paying the highest prices on the ticket-resale market to attend home games this year and then “On the road, the Warriors are vying with LeBron James’s Cavaliers and the Lakers’ Kobe Bryant retirement tour to be the league’s biggest box-office draw on the road.” Over the past three seasons, the Warriors have seen a massive spike in average ticket-resale prices, thanks largely in part to their rapid rise to the top of the NBA. Last season, they ranked third in average ticket-resale prices both at home and on the road, despite winning a league-high 67 games. Two seasons ago, the 47-win Warriors sold tickets for about one-third of the price they are getting now, all while ranking near the middle of the pack of league box office sales. Although the streak has been snapped, expect ticket prices to continue to rise as games continue to gain importance deeper into the season. Warriors an incredibly unique hit on and off the court – the new arena process now front and center.

9. The NFL has decided to take a new approach to marketing, signing on as the first sports partner for Snapchat Story Explorer this past weekend. Under the NFL’s current relationship with Snapchat, weekly primetime games are featured on the application with fans being given the opportunity to upload their personal stories chronologically for the world to see, giving fans a new perspective of in-game experience. The two companies made their partnership official in September when it was announced that the NFL was coming on board as a Live Story provider. This new deal deepens the relationship, marking an exclusive partnership. Blake Stuchin, director of digital media business development for the NFL talked about this new relationship with The Wall Street Journal, saying, “It’s a great showcase for the excitement of being at an NFL game, and it’s a great second-screen experience to complement live game broadcasts by our TV, digital, and audio partners.” Another example of NFL broadening its media partnerships to increase the value for everyone -- $25 billion annual revenue goal still in sight.

10. The NFL is ready to accept new bids for the “Thursday Night Football” package. The league recently told TV networks that it will look at bids for a two-year deal to sponsor the primetime package. The NFL sent formal RFPs to CBS, ESPN, Fox, NBC, and Turner outlining their plans to sell a one-year deal with a built-in option for a second year. RFPs were also sent to top digital companies like Google, Yahoo, Apple, and Amazon, to stream the entire TNF schedule on a non-exclusive basis, sources said. CBS is currently paying $300 million per season for the rights to this package, and the NFL expects the new round of bidding to start at around $300 million, with a nominal escalator in year two. In a recent interview with Re/Code, NFL Exec VP/Media & NFL Network CEO Brian Rolapp, he commented, “We are talking to numerous people -- both traditional media companies and some of the Internet guys -- and I think there will be a heavy digital component [for Thursday]. It is just a question of what the model will be and how we will do it.” The league’s surprisingly successful online streaming of a game earlier this year with Yahoo may have set a precedent for years to come, so do not be surprised to see the likes of Yahoo, Apple, Google, and Amazon included on the list of targeted companies. NFL will leverage traditional bidders with “new media” partners. 

11. Athlete Focus: Brooke Pancake. Brooke Pancake may have the best name on the LPGA Tour. She may also have the most fitting sponsor to complement her name. For the second straight season, Waffle House has renewed their sponsorship with golfer Brooke Pancake, according to David Uchiyama of the Chattanooga Times Free Press. Terms of the deal have not yet been released, but Pancake will make “public appearances at restaurants” when tour events are located in areas close to Waffle Houses. The company’s title will remain emblazoned across Pancake’s black and yellow golf bag, as well as the tagline “Scattered, Smothered, Covered.” The seemingly perfect match between Pancake and Waffle House will be seen all throughout the duration of the 2015-2016 season. Brooke Pancake beats Howard Johnson as the all-time favorite “easy endorser.”

12. Athletic Focus: Candace Hill. You might not have heard her name yet, but Candace Hill is poised to make it big after becoming the youngest track athlete in the United States to turn professional. The 16-year-old runner just signed a 10-year endorsement deal with Asics, according to a front-page piece by Lindsay Crouse of the New York Times. This deal, which many consider to be “unusual” in its structure, will go beyond athletics. Asics is set to cover Hill’s full tuition cost at any college that admits her, even though she will not be eligible to race collegiately. Hill plans to attend college regardless; this deal effectively serves as an athletic scholarship that extends beyond the four years of college. Now as a professional athlete, Hill will enter the international professional racing circuit instead of running high school races. The stakes will be higher, the competition will be tougher, but the 16-year-old phenom is poised to make it big with Asics supporting her. American track and field needs a new endorsement darling --  maybe this is it.

13. Athletic Focus: Jeff Samardzija. Two-sport athletes are a rarity on college; that is, competing at the Division I level in not one, but two sports, is truly something special. In a recent article featured in The Washington Post, San Francisco Giants Pitcher Jeff Samardzija, an All-American wide receiver and baseball player at Notre Dame University, was compared with All-American wide out and NFL All-Star Calvin Johnson. Both Johnson and Samardzija were considered two of the best wide-outs in college football in 2006, but elected to follow different career paths after college. After being questioned as to why he chose to play in the MLB early on in his career, Samardzija just proved that athletes would be foolish to pick the NFL over MLB. Through this season, Johnson has collected $113,816,068 earnings, making him one of the wealthiest non-quarterbacks in league history. On the other hand, Samardzija, by virtue of the five-year contract he just signed with the Giants, is guaranteed to have made over $122,725,000. The raise in pay seen here can be seen when directly comparing the MLB against the NFL: “the top 30 contracts in the history of team sports – ranked by total compensations – all went to baseball players. Johnson’s career earnings would rank 64th in baseball, just behind retired pitched Carlos Zambrano.” Advice to new parents: put a baseball in your kid’s hand!

14. According to multiple sources close to the issue, Bank of America will not renew its official NASCAR sponsorship that ends this year. Dating back to 2007, Bank of America has been NASCAR’s official sponsor since then in the categories of Financial Services, Checking, Savings, Credit/Debit, Mutual Funds and Security Brokerage, Mortgages, and Credit Cards. The bank is electing not to renew its deal amid a time of cutbacks across its sponsorship portfolio, as its deal with NASCAR is certainly one of its most expensive. Sources valued BofA’s deal in the low to mid-seven figures annually. While it will not stay on as title sponsor, the bank will not completely step away from NASCAR – they still have a Hendrick Motorsports sponsorship and entitlement of Charlotte Motor Speedway’s Sprint Cup Series race in October. Neither Bank of America or NASCAR would comment directly to confirm the move, but a statement by NASCAR COO Brent Dewar summed things up pretty well when he said, “Beginning in 2016, NASCAR has an opportunity to explore several options with financial institutions across a range of categories. We will be making announcements in the new year.” As always, sponsorship musical chairs this time of year as NASCAR continues to grow and heads for Daytona Rising.

15. After a 30-year absence, the U.S. Figure Skating Championships will be returning to Kansas City. After an official announcement by former champion John Coughlin this past weekend, the 2017 Prudential U.S. Figure Skating Championships are set to be held at the Sprint Center and Silverstein Eye Centers Arena in Independence in mid-January in two years. While Kansas City has failed to reclaim the bid since last hosting in 1985, the region honed in on its facilities and through the work of the Kansas City Sports Commission and Visit KC, the city’s tourism and convention bureau. According to Bob Dunlop, senior director of events for U.S. Figure Skating, the championships will be one of the largest national sports events in the Midwestern city’s history. The event is said to annually attract 1,700 athletes, coaches, officials and media, with an estimated economic impact of $18 million. Kansas City outbid multiple other cities to be awarded the right to host this event, but the names of those other cities have not yet been made public.  Mega-events should be treated as industries temporarily relocating to a region – with unique economic impact.

Jamie Swimmer contributed to this story.

Why Cirque du Soleil, NFL experience could come to Chicago

Why Cirque du Soleil, NFL experience could come to Chicago

With the success of the NFL Draft going mobile, the league may eventually decide to take another NFL experience on the road.

The NFL has partnered up with Cirque du Soleil to launch an interactive exhibit in New York City this fall.

The attraction, titled NFL Experience Times Square, will include interactive screens, an auditorium for 4D shows, coaches clinics, autograph sessions and much more.

[BEARS TICKETS: Get your seats right here]

CSN Sports Business Insider Rick Horrow explains why taking the experience on the move could be a good thing for the franchise value of the Bears.

"This is an example of a $25 billion NFL business joint-venturing with another pioneer in the entertainment industry Cirque du Soleil to make it better," Horrow explained. "Here's the case, because the NFL Draft has become mobile with Chicago leading the way, then Philadelphia, the Pro Bowl, the Super Bowl, you can't believe it's not an opportunity for potentially doing this NFL experience along the streets of Madison Avenue, along State Street, as well as Michigan Avenue.

"How about downtown Chicago on the way to other places."

Watch the video above to see what else Horrow had to say about the NFL Experience possibly coming to Chicago.

Sports business: Using targeted promotions to earn more dollars

Sports business: Using targeted promotions to earn more dollars

In Monday's episode of National Public Radio’s (NPR) Fresh Air Joseph Turow, professor of communications and associate dean for graduate studies at the Annenberg School for Communication at the University of Pennsylvania, ominously "Warns That Brick-And-Mortar Stores Are Watching You."

While this may seem a bit like the real-life equivalent of "Big Brother" from George Orwell's book 1984, Turow is describing the reality that the tracking companies do in e-commerce has moved more fully into the offline stores. Using technology including mobile applications, iBeacons, loyalty cards, geo-targeting, and geo-fencing companies have more information about customers in-store buying and behavioral patterns. This enables companies to design targeted adds and promotions specifically tailored to customers that can increase the likelihood of them making a purchase.

While the ethical implications of this activity would require and entirely separate blog post, Turow and host Terry Gross discussed an important idea that comes from having this technology. In the past, companies have focused on rewarding and retaining loyal customers. Those are the customers that keep coming back and buying a company's products or service offerings. Because the cost of keeping a customer has been much lower than attracting a customer it would seem to make sense that companies would want to focus on keeping the customer's they have.

However, this may no longer be the optimal strategy for maximizing revenue growth. Instead, companies should be focused on the marginal customer rather than the most loyal customer. A loyal customer is loyal for a reason – he / she likes the company's service offerings. Why spend money on advertising and promotions if that person is already likely going to buy the product anyway?

Instead, targeted promotions should be focused on customers that will only make a purchase if they are influenced in the right way. For example, let's say a customer is indecisive about buying a pair of jeans. In the past, this customer may have tried a pair of jeans on and then left the store without purchasing them. Now, a customer can download a company's app to access additional content, deals, and other helpful information. In return for delivering these benefits the company can receive information from the app that shows the location of the person while he/she is in a store. It can then use a geo-fence, a virtual fence that surrounds a geographic area, to determine when a customer leaves a specific geographic area. If this customer leaves the store without making purchase after spending a certain amount of time (i.e. the time to try on the jeans) then the company could send a targeted ad saying that the customer has 15 minutes to come back to purchase the jeans at a 15 percent discount. Essentially, companies now can identify "disloyal" customers and then attempt to bring them back to stores to make purchases.

Using technology to reward "disloyal" customers is something that sports organizations need to increasingly focus on given the demands of the business. More specifically, there are loyal fans that are going to buy tickets, watch games, and purchase merchandise even if they do not see any advertising from a team. These customers add significant value and should not be ignored. However, sports organizations want to focus on targeting the marginal customer using new technology to encourage ticket sales, in-venue purchases and increase game viewership.

The added benefit of using technology and customer outreach in this way is that it should increase sponsorship revenue as well. Not only can sports organizations use targeted promotions to help their current sponsors expand reach, but organizations can also show how these targeted marketing efforts cause lifts in purchasing. For sports teams, clearly communicating how sponsorship/marketing assets are used to create a lift in sales provides powerful evidence of how similar tactics can drive new revenue for partners. Rewarding "disloyalty" seems counter-intuitive, but there are many ways that targeting marginal customers should lead to substantial revenue growth.

Adam is the CEO and Founder of Block Six Analytics. He is also a lecturer for Northwestern University's Masters of Sports Administration and the co-author of The Sports Strategist: Developing Leaders For A High-Performance Industry.