Sports Business

Sports Business '15 to Watch': The economics of baseball are evolving

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Sports Business '15 to Watch': The economics of baseball are evolving

1. We’re still stuck in the NFL preseason, but relief is in sight. HBO's “Hard Knocks” show continues to generate interest. And the featured Houston Texans are proving they’re just as deft at using their social media real estate to promote the show as they are on the football field. According to data compiled by MVPindex, the Texans are the 16th ranked NFL team on social media. They are currently the eighth most followed NFL team on Instagram with 459,000 followers, the 13th most followed NFL team on Twitter with 644,000 followers, and the 16th most liked NFL team on Facebook, with 1.97 million page likes. As an entity, the Texans have over three million direct audience members to which they can promote Hard Knocks content. Moreover, episode two of “Hard Knocks: Training Camp with the Houston Texans” handed HBO 831,000 viewers, up 23 percent over last year’s second episode performance. The Texans episode two also returned to the series’ tried-and-true formula of focusing on rookies, including DB Charles James, WR Jaelen Strong, LB Lynden Trail, and CB Kevin Johnson, repped by Lagardere Unlimited and selected by Houston as the 16th pick in the 2015 NFL Draft. As for veterans, it’s a sure bet every episode will feature superstar J.J. Watt, and brash LB Brian Cushing.

2. There are opportunities aplenty for digital sports content creators. Sportsmanias (a sports news aggregator site that combines a dynamic mix of professional beat writer news with team and athlete social media content) combined with the Knight Foundation to host the definitive digital media summit in Miami this past Friday. Pew research shows 2.1 billion people had at least one social account in 2014, and in December 2014, the top eight social networks drove 31 percent of all web traffic. As the sports landscape goes digital, 66 percent of devoted fans go online at least once per day for sports related content. A large portion of time sports fans spend online is related to fantasy. According to the Fantasy Sports Trade Association, 57 million play fantasy sports in the USA and Canada. Daily Fantasy players are power media consumers. A DraftKings survey found that 70 percent of respondents said their sports consumption increased after they began playing daily. A FanDuel survey found that 50 percent of its users watched more sports on TV as a result of daily fantasy play. The panelists included digital experts from all major networks, emerging companies, technical providers, opinion leaders, and ethicists. I was fortunate enough to host the event, and it should provide some unique thought leadership in an incredibly diverse and expanding industry!

3. For the first time in a long time, the NCAA gets a major legal win. The National Labor Relations Board dismissed a petition from Northwestern football players that would have allowed them to unionize. The NLRB in its decision held that asserting jurisdiction would not promote labor stability due to the nature and structure of D-1 football. Had the board affirmed a 2014 decision made by a regional director, it would have opened the door for players to unionize at other schools. As a practical matter, the Power Five conferences have already provided governance leadership to allow schools to provide key new benefits for players: guaranteed scholarships, stipends, superior medical care, etc. Ironically, it may actually be the fact that players need unionization protection much less today as the NLRB took its action. Look for this area to evolve significantly in months to come.

4. The economics of baseball are evolving, and the numbers are staggering. As originally reported by ESPN, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, with the acquisition of Chase Utley, the Los Angeles Dodgers are close to becoming the first MLB team with a $300 million luxury-tax payroll. The trade raised the Dodgers' projected payroll for tax purposes to about $298.5 million. Performance bonuses for other players and end-of-season award bonuses could push the Dodgers over the $300 million milestone. Tip of the iceberg as large market teams are driven substantially by stadium processes, mega season ticket sales, suite revenues, and (most importantly) mega TV deals – unshared with their baseball brethren.

5. As more advertisers look to celebrity endorsers to promote their brands on Twitter, one NBA star costs a lot more money than his peers. A sponsored tweet from Cleveland Cavaliers star LeBron James is valued at $140,000, or $1,000 per character, according to Opendorse, a company that specializes in social media campaigns for athletes. LeBron more than doubles the value of the next highest U.S. athlete, the Oklahoma City Thunder’s Kevin Durant, whose tweets are worth nearly $67,000 each. This metric may be industry defining, as we now have a method to evaluate the commercial value of tweets. Look for corporations, agents, and athletes to jump on this process rapidly!

6. With college football season getting underway, a major school signs a major marketing deal. UCLA has decided to renew its marketing partnership with IMG College instead of joining the Pac-12’s new multimedia rights business, according to Michael Smith of SportsBusiness Journal. The deal is valued at $150 million over ten years, or triple what the Bruins got in their old deal. The school and IMG College have been partners since 2005. Every college president, athletic director, media expert, and conference is currently reevaluating the value of respective media deals. Look for significant increases that relate to traditional television (and the increased value of “second screens,” mobile, Internet, etc.).

7. One NFL team is drawing a line in the sand when it comes to public demands for building a new stadium. The Washington Redskins refuse to consider a name change in order to get a new stadium built. The Redskins’ FedEx Field lease runs through 2026, but team officials reportedly already have begun discussions about designs and the site, with possible locations in D.C., Maryland, and Virginia. D.C. in particular appears unlikely to welcome the team if it keeps the Redskins moniker. Redskins naming controversy may have a realistic leverage point as owner Dan Snyder seeks public participation from the District of Columbia, or the neighboring states. In the meantime, all NFL stadiums that were done in the 1990’s or a bit later will soon face renegotiation, renovation, or new structure issues. Stay tuned!

8. With the NFL season just weeks away, league sponsors prepare to roll out new marketing campaigns. Bud Light is launching a new marketing campaign around the start of the upcoming NFL season, selling team-specific cans at retail locations across the country by the end of the month. In all, Bud Light will produce 28 NFL team-related cans for the 28 teams the company sponsors. More than 10 different TV ads have been produced to support the new campaign. A significant part of the $12 billion annual NFL revenue comes from all types of corporate partnerships. As Roger Goodell challenges his staff to increase that revenue number to near $25 billion annually, more companies have been brought into the NFL fold (Hyundai, for example) to generate more revenue in more categories than ever before.

9. Danica Patrick continues to draw new sponsors to the sport of NASCAR. Stewart-Haas Racing signed a multi-year deal with healthy-snack maker Nature’s Bakery to be the main primary sponsor of Patrick’s No. 10 Chevy beginning next season. Nature’s Bakery, which sells products in all 50 U.S. states and 22 countries, replaces GoDaddy as Patrick’s top sponsor. The company will be the primary sponsor on Patrick’s car for 28 of the 36 Sprint Cup races. While terms of the deal weren’t disclosed, SHR was seeking $18 million annually or the rights. Patrick’s deal was more about diversifying the fan base and expanding the demographic than a reward for her past performance. Hopefully for all parties, future performance will justify the new economics in her favor.

10. Baseball pennant races are heating up, but one battle MLB doesn’t want to see is a TV showdown against the NFL. MLB released its schedule for the 2015 postseason. For the second year in a row, the World Series will begin on a Tuesday, avoiding TV conflicts with CBS’ Thursday Night Football and ESPN's MNF. MLB had previously employed a Wednesday-start schedule for the World Series from 2007-13. Should the World Series go at least five games, it will play a November contest for the first time since 2010. A pleasant problem to have – a dynamic baseball pennant race and playoffs competing against a prolific early season NFL schedule. The bottom line is this: Network mega executives understand the value of synergy and cooperation as it relates to increasing the value of the entire industry.

11. The transition from athlete to owner isn’t always an easy one. Michael Waltrip Racing announced that the organization would not field a full-time entry in the NASCAR Sprint Cup Series next season, and that it has granted driver Clint Bowyer a release from his contract at the end of this year. MWR has faced several scandals since entering Sprint Cup competition in 2007, but the team’s lack of on-track success in the last two years proved to be the final blow for its future. Contrasted to Item 9 above (The Danica Patrick deal), the “traditional” NASCAR demographic requires much more creativity and entrepreneurialism to generate long-term future sponsorships in this highly competitive environment.

12. A South Florida franchise has a lot to look forward to this season. As originally reported by the Palm Beach Post, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, the Miami Dolphins have sold nearly all of their 2015 season tickets, and the team expects every regular-season home game to sell out this year. According to team President & CEO Tom Garfinkel, all 47,000 season-ticket packages will be sold by the end of the week. Even with a massive renovation of Sun Life Stadium, 70 percent of tickets cost the same or less as last year. High expectations on the field, Ndamukong Suh, Sun Life Stadium renovation, and 50th Anniversary festivities all combine to substantially increase the value and excitement of the Dolphins in South Florida. More will surely follow suit.

13. Class is back in session and one school is bringing the student back to student-athlete. Florida State University is emphasizing off-field behavior in a new course that’s required for student-athletes. The course, which will be available to all students, will incorporate guest speakers, along with dealing with issues such as domestic violence and drug and alcohol abuse. The course also will teach the athletes how to manage finances in light of the NCAA’s recent passage of cost-of-attendance measures. Clearly, each school has its own responsibility for controlling behavior. While advisers, family, and others bear responsibility, FSU is providing substantial leadership in this area. Kudos to them.

14. When developments don’t go as planned. The Sacramento Kings said that the team's planned 16-story hotel and condominium tower will not be ready in time for the opening of the their new downtown arena prior to the 2016-17 NBA season. The team wanted the hotel and tower to be ready before the first game at the new arena, but the buildings won’t open until sometime in early 2017. The Kings also reduced the number of condo units included as part of the project. Mayor Kevin Johnson, owner Vivek Ranadivé, and Sacramento city experts are committed to the long-term development of this project. Hopefully, this becomes a downtown development success story like similar projects in Oklahoma City, Cleveland, Cincinnati, Denver, Portland, and otherwise.

15. The date makes a big difference. Darlington Raceway officials are optimistic about setting a record attendance mark for its Labor Day weekend NASCAR Bojangles Southern 500 race. The race this year is moving back to its traditional holiday weekend date after being held on Mother’s Day since 2004. Prior to that, the race was held on Labor Day weekend from 1950-2003. The race is expected to draw 75,000 fans. NASCAR continues to tweak the schedule, venues, promotion, television windows, etc. to maximize the opportunity for national growth. Clearly, the Southeast heritage does not automatically mean success in each southern track. In these hard economic times, all parties must work hard to ensure success.

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.