Sports Business

Sports Business '15 to Watch': Nike’s Jordan Brand isn’t just for basketball

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Sports Business '15 to Watch': Nike’s Jordan Brand isn’t just for basketball

1. The sports media landscape continues its expansion into the digital marketplace. Sportsmanias, a sports news aggregator site that combines a dynamic mix of professional beat writer news with team and athlete social media content is holding a digital media summit in Miami this Friday. The event will feature several panel discussions with some of the country’s top sports writers and will cover topics ranging from today’s digital landscape to tomorrow’s audience and the social media missteps. The Knight Foundation has always been a critical thought leader in ethical journalistic standards. Now, the organization is associated with Sportsmanias to host a watershed conference on the issues surrounding journalism and social media. I am honored to host and keynote at the event, which should provide significant insight into a rapidly growing concept.

2. Is San Diego the new frontrunner to move to Los Angeles? With the Chargers critical of San Diego’s proposal for a new football stadium, it’s increasingly unlikely that a deal will be reached before a September 11 deadline. The city must have a deal in place by that date in order to qualify for a January vote. The proposal made by the city and county called for 32 percent of the stadium’s cost to be funded by public money. It also includes contributions of $362 million from the Chargers, a $200 million loan from the NFL, and $187 million in PSLs. As expected, incumbents San Diego, Oakland, and St. Louis are gearing up for their “final stages” of respective stadium processes. St. Louis has made progress on its $998 million stadium, and Oakland and San Diego are awaiting their next “battles.” Clearly, the NFL will keep its eyes on the end of the season as an ultimate deadline – with Los Angeles ready for return to football after two generations.

3. Nike’s Jordan Brand isn’t just for basketball. The University of Michigan next year will become the first college football program to be outfitted by Nike’s Jordan Brand subsidiary. The school in July signed a record 15-year, $169 million apparel contract with Nike, the largest apparel deal ever for a college program. The school’s basketball team also will wear Jordan Brand gear, one of five programs nationally to do so. Jordan has become the rarest of athletes/ambassadors: transcending his particular sport (or sports in general). Arnold Palmer, Muhammad Ali, and a few others. Now, if he could just his Charlotte Hornets to play somewhere close to his level!

4. What’s in a name? Apparently a lot of money. NBA legend Michael Jordan is in court, suing now-defunct supermarket chain Dominick’s for illegally using his name in an ad six years ago. Jordan is seeking $10 million in damages, claiming he will not do an endorsement deal unless it’s worth at least that amount. As part of the trial, Jordan’s attorneys said that he made more than $100 million in sponsorships last year, and nearly $540 million from 2000-2012. Jordan’s sponsors include Nike, Gatorade, and HanesBrands. As we described in No. 3 above, Jordan understands the value of his name – and the lengths he must go to perfect it. This lawsuit has implications for all celebrities (in the name, likeness, and permissible use area) far beyond Michael Jordan himself.

5. As the world shrinks, it’s becoming easier and more important to provide domestic audiences with international content. International telecom company Globecast recently won a project to contribute Weekly English Premier League Matches for Time Warner SportsNet. The company is picking feeds up in Europe on fiber and delivering them directly on its fiber network to a facility in L.A. Another example of economic efficiencies transcending global telecasts. As transmission becomes easier and more technically efficient with companies like Globecast, look for more international exposure for all sports throughout the globe.  

6. Sneaker wars between Adidas and Nike are heating up. Adidas formally announced a sponsorship deal with Houston Rockets star James Harden, which takes effect October 1. Terms of the deal have been reported at $200 million over 13 years, a total Harden’s previous sponsor, Nike, declined to match. The long-term deal includes an exclusive signature collection, product design collaboration, and global marketing involvement, particularly in Europe and Asia. Nike is the unquestionable leader; Adidas internationally and more now domestically; and Under Armour the “aggressive upstart.” In all cases, the clear winners are players, teams, leagues, and college conferences who will benefit from increased rights fees as a consequence of this sneaker war competition!

7. The growing value of media rights is having a major impact on English soccer clubs. New valuations indicate that the 20 clubs starting this season’s English Premier League collectively are worth $13 billion. The total represents 460 percent growth in the 16 years since Richard Scudamore became the league’s chief executive. Among the league’s most valuable clubs are Manchester United at $2.7 billion, Arsenal at $1.7 billion, and Manchester City at $1.4 billion. In many respects, Premier League values mirror National Football League economics. The biggest differences are the imbalances between the “haves” and the “have-nots” in the EPL – no significant television or corporate revenue sharing, and no salary cap or restraint to speak of in the EPL. Good for the top clubs, but not necessarily everyone else.

8. Not all PR is good, at least in the case of athlete endorsements. EA Sports confirmed that Blackhawks RW Patrick Kane will no longer be on the cover of NHL 16 and that the company has canceled his appearances for the game’s launch next month. Kane, the subject of a rape investigation in his hometown of Buffalo, is the first EA Sports cover athlete to be pulled before a game’s release. The planned cover had Kane and his Blackhawks teammate Jonathan Toews, but now Toews will appear alone. Rush to judgment, or a positive brand protecting itself? In this case, Kane may be a victim of timing, as the 2016 cover must be planned now (potentially before all the facts are known and the investigation is completed).

9. The season doesn’t need to start for ads to be sold. Even with Super Bowl 50 still six months away, CBS has sold a 30-second advertisement during the broadcast for a record $5 million. The amount is up 11 percent on the highest price this year's broadcaster, NBC, earned for its Super Bowl ads. NBC charged as much as $4.5 million for an ad during the most recent Super Bowl. When CBS last aired the Super Bowl three years ago, the average 30-second spot cost $3.8 million. Super Bowl 50 has an extraordinary cachet; first Bay Area Super Bowl in a long while; the technological magic of Levi’s Stadium; and the fact that Super Bowls are a half century old. We can all remember the first one in Los Angeles…

10. Marketing to women represents a huge growth opportunity for sports merchandise manufacturers. Vera Bradley unveiled a new collegiate line featuring 15 different schools. The line will offer a tote, a backpack, a duffel bag, a cross-body bag, and a wristlet for each of the schools through a licensing deal with IMG College and CLC. The schools include Alabama, Ohio State, and Stanford. Vera Bradley joins women’s handbag designer Dooney & Bourke, which launched its own line collegiate line last year. Kudos to the respective athletic departments and the high-end retailer for making a difference in college sports: generating additional revenue for women’s programs (and all programs); and creating a new brand at the time college athletic directors need revenue the most.

11. When the players speak, the league listens. The NBA released its 2015-16 regular-season schedule, which features fewer back-to-back games and four-games-in-five-nights stretches for teams. The changes reflect the league’s desire to improve player health and increase rest days. The 82-game schedule will continue to run from the last week of October to the middle of April, meaning players will still play the same number of games over the same period of time. Good example of players providing appropriate input through NBAPA; and great example of Commissioner Adam Silver and the NBA continuing to develop a unique partnership with all players (not just the superstars). The future key will be the long-term impact on regular season television ratings – expected to be minimal.

12. Profitability isn’t all that matters, at least as it related to EPL media rights. Although NBC renewed its deal for the EPL’s U.S. media rights, network chairman Mark Lazarus acknowledged that the Premier League had not earned a profit through advertising during its current deal and would not in the next one. NBC will spend $1 billion over six years for the rights, which basically doubles the annual cost of NBC’s current, three-year $250 million contract. Value of relationships in international high-stakes negotiations to not be overestimated. NBC strives to hold on to one of their key iconic properties; and EPL awards pioneering royalty. A welcome result given recent “golf majors musical chairs” that has afflicted network television negotiations.

13. One innovative sports owner invests in a league of the future. RSE Ventures, a venture-capital firm co-founded by Miami Dolphins Owner Stephen Ross, is providing $1 million to the first round of funding for the Drone Racing League, which will hold its first public race later this year. The league intends to make money through sponsorships, media and ticket sales. The DRL, which hopes to recreate the success of live videogame competitions, is targeting an audience that includes videogame players and other technology-oriented people. Ross has been the quintessential entrepreneur, real estate developer, and intense sportsman for years. The Miami Dolphins purchase has given him a platform to expand his horizon, and the sporting world has benefited. Now if Suh and Tannehill can propel the Dolphins, he will truly be a happy man.  

14. Scandals know no limits. The University of Minnesota will conduct an investigation into the finances and employment practices of its athletic department after AD Norwood Teague resigned due to sexual harassment allegations. Teague, who was hired by the university in 2012 after six years as Virginia Commonwealth's AD, was paid a base salary of $422,000 annually. Before he resigned, Teague was working on a fundraising campaign for a $190 million Athletes Village project, including new practice facilities for several teams and an academic and nutrition center. College scandals affect the industry at all levels:  players, schools, athletic administrators. As always, the key is speed, transparency, meaningful penalties, and the ability to restructure to reflect the investigation!

15. One network takes a one-time gamble on the important of live streaming. Fox Sports signed a last minute deal to have YouTube live-stream the Bundesliga’s season opening match between Bayern Munich and Hamburg, marking the first time the network live streamed content on the video sharing site. The agreement was described as a one-game-only deal to help build awareness around Fox' commitment to carry the German soccer league for the first time this season. Obviously, look for more of this in the future. As the NFL streams one of the October regular season London games, and as all networks probe to maximize profit, visibility, and reach!

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.