Sports Business

Sports Business '15 to Watch': Golf superstars dominate British Open

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Sports Business '15 to Watch': Golf superstars dominate British Open

1. Sports $ across the pond – Part One.

This year’s Open Championship is being held at the birthplace of golf, St. Andrews in Scotland. With the event taking place at such an iconic venue, local economic impact could top £100 million. Last year’s tournament generated £75 million for the Merseyside economy, while the 2013 event at Royal Lytham & St. Annes delivered a £65 million benefit to Lancashire. Scottish tourism promotes the St. Andrews rotation on a five-year cycle, with hotels, restaurants, and other activities booked years ahead. I am staying at the Monarchs House in downtown St. Andrews, providing a perspective of the significant economic impact and unique customs surrounding the “epicenter of golf.”

2. Golf superstars dominate the British Open.

Heading into the Open Championship, no golfer is hotter than Jordan Spieth. Spieth has won the first two majors of the 2015 PGA Tour season, and with Rory McIlroy out with an ankle injury, Spieth is the heavy favorite to capture another victory. While Spieth is on his way to becoming the next big thing, legendary golfer Tom Watson prepares for his 38th, and likely last, British Open. The R&A extended an exemption to Watson to allow him to play one more time in golf’s oldest championship. He’s won the British Open five times in his storied career. ESPN/ABC phase out its coverage of the British Open, with NBC gearing up to take over two years from now. Key is as it always has been: the golf superstar. Tiger and Phil representing the “older guard” as opposed to the newer corporate relationships (the Lagardere-driven Spieth deal with Under Armour).

3. NFL prepares for the 2015 season.

September 10 kickoff just eight weeks away. In training camp news, RC Cola is the new presenting sponsor for the upcoming Chicago Bears training camp in Bourbonnais, Illinois. The brand replaces Chase, which is presenting sponsor of last year’s Bears training camp. On another note, Tottenham Hotspur and the NFL have reached a deal for at least two games a year to be played at the Premier League club’s new stadium starting in 2018. According to the NFL, the Tottenham deal gives the league flexibility in either moving a team to London or simply playing more games overseas. Roger Goodell challenges his staff to produce $25 billion of annual revenue at the end of this labor cycle. Increased training camp and international revenues drive the NFL business toward that goal.

4. Baseball’s All-Star Break and beyond.

Major League Baseball consolidates its business interests in Cincinnati as the Great American Ballpark home for the All-Star Week. Substantial economic impact driven by a 5-6 day celebration (as compared to the previous 1-2 All-Star festival). Additionally, baseball is driven by new and diverse sponsorships. MLB and Beats by Dre unveiled a limited edition line of team branded wireless headphones. The collection includes team-specific sets for the Red Sox, Cubs, Dodgers, Yankees, and Giants. Each set will cost $379.99. This is said to be the first partnership between Beats and a pro sports league. As Commissioner Rob Manfred emphasized in a recent interview with me, MLB demographics are getting younger and more diverse. Clearly, this corporate partnership serves as an example.

5. Sports $ way across the pond – Part Two.

While England and the rest of Europe dominate the $1 trillion sports business headline, Australia is generating its share. Globecast Australia has enhanced its Online Video Platform, to provide media owners with the ability to charge for content, according to Advanced Television Daily News. Globecast earlier this year helped launch the Australia Channel, which is supported by the company’s platform. As Australia’s first global TV service, Australia Channel offers international audiences live news, sports, and business content. Sophisticated companies like Globecast have the international ability to transcend borders, as well as consolidating efficient television distribution from the mega-challenges posed by the Tour de France to geographical challenges posed by the Australian distance factors. Major challenges call for sophisticated solutions!

6. Sports $ across the pond – Part Three.

Wimbledon winners. Kudos to Novak Djokovich and Serena Williams. Wiliams with her 21st major championship heading to an incredible bonanza at the U.S. Open in her chase for the “calendar slam.” Andy Murray, repped by Lagardere Unlimited, has reportedly turned down millions in endorsement offers since his 2013 Wimbledon win, snubbing all products he doesn’t believe in and any deals that would interfere with his training schedule. Murray has deals with Under Armour, Head, and Standard Life Insurance. Lagardere and other companies understand that bigger is not necessarily better – selectivity may be better for the superstar athlete in the long-term (even though the dollars may initially be less).

7. NBA player bounty.

The NBA announced that the salary cap has increased 11% to an all-time high of $70 million for the 2015-16 season. The luxury tax level also increased 10.3% to $84.7 million next year. The cap is expected jump to $90 million for the 2016-17 season as a result of the NBA’s new lucrative TV contracts with ESPN and Turner. Deals with Kevin Love, DeAndre Jordan, and others might have been unexpected, but teams are protecting their long-term stability (even if it means overpaying in the near term).

8. Television economics in the new competitive era.

ESPN has lost more than 3 million cable TV subscribers over the last year, leading the company to emphasize cutting expenses. The network in the past few months has opted against resigning high-paid talent Bill Simmons and Keith Olbermann. Cord cutting has especially high implications for ESPN, which has by far the highest monthly subscriber fee at an estimated $6.61. The resounding battle focuses on cable subscribers as well as the rush to Internet/video on demand. Both processes will cause tremendous economic turbulence in the years ahead.

9. College sports economics – a new frontier.

As originally reported by the Detroit News, but in an article found and accessed from the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, the University of Michigan agreed to an apparel deal with Nike that reportedly is the most lucrative in college sports. While terms of the deal have yet to be disclosed, the largest known deal is Under Armour’s 10-year, $90 million pact with Notre Dame. Michigan’s expiring deal with Adidas pays the school $8.2 million annually. Mega schools like Michigan generate unbelievable revenue on the heels of CLC’s $100 million guarantee with Alabama for licensing and merchandising revenue. The issues are the same. How do you restock your athletic war chest facing increasing demands for guaranteed scholarships, stipends, and licensing royalty payments to players in the years ahead!

10. NHL expansion process.

The NHL has received five requests for expansion bid applications, with Las Vegas, Quebec City, the Greater Toronto Area, and two from Seattle expressing interest. The league has set an expansion application fee of $10 million, $2 million of which is non-refundable. The eventual expansion fee for new teams is expected to be $500 million. Commissioner Bettman may be looking at an “offer he can’t refuse,” especially with significant financial interests poised to spend well over $500 million in any one of five or six expansion markets.

11. Could the Redskins become the Pigskins?

As originally reported by CSN Washington, but in an article found and accessed from the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, a federal judge ordered the cancellation of the Washington Redskins’ trademark registrations, which have been opposed for years for being disparaging to Native Americans. The team argued that cancellation of the trademarks could allow for copyright infringement. Owner Dan Snyder admonition that he would NEVER change the name of the Redskins may be revisited (especially if he wants public money for a new stadium, etc.).

12. The highly competitive daily fantasy market.

Yahoo Sports has launched its own daily fantasy games, placing the company in direct competition with market leaders DraftKings and FanDuel. Beginning immediately with MLB contests, Yahoo Sports Daily Fantasy will offer cash prizes for one-day and one-week competitions. Yahoo already has significant market share for traditional fantasy sports games. Daily fantasy sports has become the fastest growing sports-related business in entrepreneurial history! Look for more companies to break in to “smaller niches,” expecting to capture some significant market share.

13. NBA franchise musical chairs?

The Milwaukee Bucks are threatening to relocate to Seattle or Las Vegas if a deal for a proposed $500 million arena can’t be reached. The Bucks need to start construction on a new arena this fall in order to have the building ready by 2017, when the team’s current BMO Harris Bradley Center lease expires. Owner Marc Lasry counted on political support from Governor Scott Walker when he bought the team. Walker’s presidential aspirations may shift priorities, and Lasry may be in a race against NHL expansion in either Seattle or Las Vegas. While previous owner Herb Kohl would not use the relocation threat, current ownership may have no choice.

14. NHL in the Valley of the Sun – time running out?

NHL Commissioner Gary Bettman is denying reports that the Arizona Coyotes will relocate to Las Vegas beginning with the 2016-17 season. The Coyotes face uncertainty with the upcoming season as the city of Glendale recently terminated the team’s lease at Gila River Arena. Commissioner Bettman has been an avid supporter of hockey in the region, but time may be running out in this case as well. Time for the politicians to step up and make the next move. Leadership in Houston, St. Louis, Baltimore, and Cleveland all understand how difficult and expensive it is to recapture a franchise once a team initially leaves!

15. Women’s soccer, the next step!

Fox Sports generated $40 million in ad revenue from the FIFA Women’s World Cup, far surpassing the $17 million the network was expecting to bring in. The large total is attributed to the performance of the U.S. team, which boosted interest and viewership. ESPN drew $6 million in ad revenue for its 2011 World Cup coverage. Just like 1999, time is of the essence to evolve the ticker tape parades into tangible corporate commitments – both for superstar endorsements and long-term league stability!

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.