Sports Business

Sports Business '15 to Watch': NFL, taxes and troops

sbisuperbowl051915.png

Sports Business '15 to Watch': NFL, taxes and troops

1. NFL teams reportedly received millions of tax dollars to hold military tributes at games. From 2011 to 2014, the government paid $5.4 million to 14 NFL teams for what it termed advertising and recruiting tactics. Senator John McCain called the teams disgraceful for taking military money. Probably since the Ray Rice incident, NFL has almost morphed into “perception becoming reality.” Image issues regarding domestic abuse and other off-field issues expand into Deflategate on the field; expanding further into NFL tax exempt status and military sponsorships off the field again. Despite that, NFL continues on track to reach its $25 billion annual goal that Roger Goodell had set as a target before the end of the labor agreement.

2. Online retailers are seeing a major spike in sales of Tom Brady’s number 12 jerseys since the New England Patriots QB was suspended for his role in Deflategate. Brady merchandise on Fanatics.com has increased 100% following the release of the Wells Report. Clear unintended consequence of Deflategate. Surely, Tom Brady and the Patriots would trade increased merchandise sales for an uneventful off-season!

3. Major news on the international front. FedEx signed a three-year deal to become the main sponsor of the Europa League starting with the 2015-16 season. Valued in the high-seven figures annually, the deal is among the company’s biggest sports sponsorships after the PGA Tour’s FedEx Cup, and is its biggest global soccer partnership. With the FBI investigating FIFA for corruption issues related to the 2018 and 2022 World Cup bidding process, FIFA President Sepp Blatter reportedly is too afraid to enter the U.S. According to ESPN’s Jeremy Schaap, the last time Blatter stepped foot on American soil was in 2011. One clear lesson: international futbol is an incredibly valuable property (my week-long trip to Germany last week validates that in all contexts). The controversy, uncertainty, and turbulence just adds to the dramatic impact of the world’s most valuable international sport.

4. Fans, television, and marketers getting ready for the year’s second major – the French Open. The economics of tennis will take center stage for four of the next seven weeks. Another big event for the mega agencies. Lagardere Unlimited: Andy Murray is the 3-seed in Paris, and will likely only have to face one other “Big Four” player at Roland Garros. On the women's tennis front, Lagardere boasts 2 of the world's current Top Ten players headed into the second major of the year at Roland Garros, world no. 7 Caroline Wozniacki and no. 9 Ekaterina Makarova. As tennis season hits its stride, major corporate marketers and executives use Paris/London as the epicenter of the tennis business world from May through early July. Nearly 75 percent of all major deals are discussed and negotiated during this period on an annual basis.

5. Banner week heading into the Indy 500 at Indianapolis Motor Speedway and the Charlotte NASCAR race. Sponsors identify this week as a major “activation period” tied to the three-day Memorial Day weekend. Economic impact for Central Indiana and the Carolinas approaches nearly $1 billion – fans with multiple hotel day stays; major corporate meetings; unprecedented television awareness – all adds up to banner weeks for two racing hotbeds.

6. MLB Advanced Media has reached an agreement with Snapchat to create regular, curated content on the popular mobile app. The deal does not involve any money changing hands, but does help put MLB content in front of younger fans. Snapchat has also worked on initiatives with the NBA, NFL, and ESPN. MLBAM continues to blaze an entrepreneurial social media trail – one of the reasons it is the most valuable of all Internet properties in any of the leagues.

7. Average attendance at FBS college football games in 2014 was 44,603 fans, down 2.3%, or more than 1,000 fans per game from the previous season. The total marks the worst average attendance for FBS schools since 2003. A poor season resulted in Michigan losing the attendance title for only the second time since 1974. Attendance might have been down, but excitement, awareness, and viewership surely increased thanks to the first year of the College Football Playoff. With 42 bowls scheduled next year, have we reached the saturation point? Of course not.

8. As originally reported by The Coloradoan, but in an article found and accessed from the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, Colorado State is using the $7 million buyout it received when the University of Florida hired Jim McElwain to fund cost of attendance scholarships of student-athletes. The buyout will cover the cost of attendance stipends for the next three-to-five years. As the Five Power Conferences identify their respective governance structures, schools begin the process of using economics as a recruiting advantage – complete scholarships, stipends, etc. in the hopes of luring high school superstars. Just the tip of the iceberg.

9. New York Giants WR Odell Beckham was named the winner of the cover vote for EA Sports’ upcoming “Madden NFL 16” video game. Beckham garnered 52.5% of the final vote against New England Patriots TE Rob Gronkowski, becoming the first Giants player and the youngest player ever to appear on the cover of Madden. Freakish receiver, major media market, young superstar – all elements incredibly important to EA and NFL demographics.

10. As originally reported by The Tacoma News Tribune, 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 Pac-12 Conference announced plans to play a second basketball game in Shanghai in 2016. The conference also has agreed to a two-year deal with Chinese e-commerce giant Alibaba Group to sponsor the Pac-12 China Games in Shanghai in 2015 and 2016. Commissioner Larry Scott undertakes original groundwork in China two years ahead of his college counterparts. The homework clearly paying off – even if the games get fairly little market share. Places the Pac-12 ahead in the “race for new revenue.”

11. Former baseball star Barry Bonds plans on suing MLB, claiming collusion by team owners ended his playing career in 2007. Bonds has long considered taking action against MLB, but postponed filing a lawsuit until his legal issues related to the BALCO case were resolved. Apparently, Bonds feels he is cleared in the “court of public opinion” in order to file this type of lawsuit at this time. Another example of how difficult it will ultimately be to completely remove the “steroid era” from all aspects of the Manfred administration.

12. Michael Jordan is taking his trademark dispute with a Chinese sports firm to China's supreme court. Jordan sued Qiaodan Sports in 2012, saying the sportswear firm built its business around his Chinese name and “23” jersey number without his permission. Just as the Pac-12 seeks revenue in China (see above), Jordan is “lawyering up” to protect his rights in the uncharted waters of Chinese trademark infringement. The “Wild West” meets the Far East.

13. Hot starts for the New York Mets, New York Yankees, and Chicago Cubs have resulted in good TV ratings and profitable broadcasts for Tribune Co. The media conglomerate has a positive outlook for this year's second and third quarters, when the full impact of baseball will hit the bottom line of stations in New York and Chicago. Baseball values up nearly 30 percent, television ratings increase, major market teams performing, games shortening, weather improving – Rob Manfred should sleep well at night.

14. Golden State Warriors make a dynamic run to the NBA Western Conference Finals. At the same time, California Governor Jerry Brown has granted a fast-track environmental review for the Golden State Warriors’ proposed arena. If approved, the $500 million, 18,000-seat arena would be entirely privately financed, and would open in time for the 2018-19 NBA season. Any San Francisco Bay-based waterfront development borders on politically impossible. However, the Warriors performance, coupled with an enlightened plan developed by key industry professionals, may actually merit final approval as rapidly as possible.

15. Turner Sports has signed multi-year contract extensions with “Inside The NBA” studio talent Ernie Johnson, Charles Barkley, Kenny Smith and Shaquille O'Neal. The extensions are for eight to ten years each and are designed to line up with Turner's NBA rights that last through the 2025 season. Probably among the most identified “brand announcers” in the history of all sports television – much of the NBA increase in television value comes from the dynamic interplay between these television professionals (assuming Charles Barkley can be referred to as a “television professional”).

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.