Sports Business

Sports Business '15 to Watch': Bettman suggests Vegas franchise fee


Sports Business '15 to Watch': Bettman suggests Vegas franchise fee

1. Comcast has dropped its plans to acquire Time Warner Cable due to pressure from regulators. The failed merger has implications in the sports world, as Los Angeles Dodgers executives previously said that the TV impasse with SportsNet LA would be resolved once the Comcast-TWC deal went through. Seismic ripple through the entire industry with the multiple implications becoming clearer this week; cable, Internet, broadband, mega-events, team rights, league negotiations, technological advancement – all altered by this decision!

2. As originally reported by the Atlanta Journal Constitution, 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 group led by Tony Ressler has agreed to purchase the Atlanta Hawks and Philips Arena for $750 million. The sale price is the second highest in NBA history behind Steve Ballmer’s $2 billion purchase of the Los Angeles Clippers last year. Deal might even be higher after the “dust settles”; significant franchise appreciation reflects stability, television revenue, relative labor peace, and (by the way) good Atlanta Hawks basketball.

3. NHL Commissioner Gary Bettman suggested that the expansion fee for a new Las Vegas franchise could be around $500 million. That would mark a significant increase from the $80 million price tag Nashville, Atlanta, Columbus, and Minnesota paid when the NHL last expanded in the 1990s. Last-minute maneuvering might push the franchise price even higher as the expansion process changes from a multiple city “beauty contest” to a hand-picked Las Vegas public/private partnership.

4. Through their global reach and local presence on each continent, Globecast’s “one stop shopping” allows broadcasters to get mobile and fixed satellite uplink/downlink, multicast distribution on any screen, including an IP feed broadcast who can be embedded into any web portal during the event. Another example of media international efficiencies causing transmission capabilities that maximize revenue, profit, and long-term growth.

5. The NBA will test for HGH under the league’s anti-drug program beginning next season, with stiff penalties for positive results. Players will receive a 20-game suspension for the first positive test, 45 games for a second positive test, and dismissal from the NBA after the third. Another example of league stability, player relations, and labor peace providing the appropriate “framework” to deal with issues that are also important to the game (performance enhancing drugs).

6. NBA regular-season viewership fell on cable TV during the 2014-15 NBA season, with TNT’s games down 12 percent from last year and ESPN’s down 10 percent. The drop in national viewership was attributed to the struggles of big-market teams and star players suffering season-ending injuries. Exciting playoff matchups, new deals with Nike and Pepsi, and long-term growth and development fuel NBA profits – obviously have to improve the “other” teams in the New York and Los Angeles markets.

7. The decline in value of the Canadian dollar against the U.S. dollar has hurt the value of the NHL’s TV rights contract with Rogers Media. The deal is paid in Canadian dollars, and Commissioner Gary Bettman declined to say if any hedging was done to minimize losses. Interesting dynamic with cyclical economics – Atlanta moves to Winnipeg at a time of “favorable exchange rates” – now the “economic shoe may be on the other foot.” Players and agents can earn a “makeup” through negotiations, but owners have nowhere to turn.

[RELATED: Sports Business '15 to Watch': Manfred makes his mark]

8. YouTube is seeking a $10 million commitment from advertisers interested in the company’s new NFL channel. YouTube is asking for $5.2 million for a full football season’s worth of ads, as well as an equal spend on non-football content. The NFL and Google in January reached a multiyear deal to launch the YouTube channel. The deal includes in-game highlights and NFL promotions on Google search pages. NFL enjoys creating value for their partners, which will inevitably generate more revenue for them in years to come.  During the next television rights bidding cycle, look for players like YouTube to be instrumental in increasing the value of traditional rights negotiations.

9. The University of Cincinnati signed a lucrative new apparel deal with Under Armour. The 10-year agreement includes more than $11 million in cash and more than $36 million in equipment. The school’s expiring deal with Adidas is worth about $2.7 million annually. Under Armour validates its claim as the “second retailer” in the North American market.  It has surely come a long way since the outlandish Kevin Plank Maryland uniforms.

10. DirecTV on signed Colts QB Andrew Luck and Cowboys QB Tony Romo to multiyear deals to endorse its NFL Sunday Ticket package. The pair will join Broncos QB Peyton Manning and Giants QB Eli Manning in a variety of PR, advertising, and marketing activations to promote the satellite TV provider's exclusive subscription service. Four “high character” quarterbacks, four substantial paydays, one huge conglomerate intending to increase its value through NFL endorsers – with contracts that are no doubt shorter, smaller, and easier to terminate.

11. The University of Texas athletic department sent representatives to Dubai to explore ways to grow the brand internationally. Texas officials also are looking at hosting a future football game in Mexico and will open its basketball season with a game in China. Kudos to entrepreneurial Athletic Director Steve Patterson for “pushing the envelope” globally.  Maybe the Longhorns will learn how to play defense during their visits to the desert.

12. The NHL and NHLPA have opened negotiations with at least four apparel companies interested in supplying jerseys for the World Cup of Hockey. Reebok, Nike, Bauer, and Under Armour are all interested in winning the contract, which could be worth $6 million for the league and union. New revenue streams abound as the World Cup looks toward its initial tournament; television, apparel, tickets, sponsorships, etc. all will be treated as “newfound revenue” for the NHL and NHLPA.  

13. BET has partnered with Roc Nation Sports to air up to nine live, two-hour telecasts of boxing events in the next 18 months. In addition to the actual boxing matches, telecasts will be supplemented with a live musical performance as well as a DJ. A positive unintended consequence of Pacquiao-Mayweather is the validation of the recovery of the boxing business.  Look for more opportunities to promote boxing in different corners of the globe.

14. As originally reported by the Dallas Morning 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 NFLPA could sue the NFL over the suspension the league levied against new Dallas Cowboys DE Greg Hardy. At issue for the union is that the league did not mention domestic violence in its announcement, which would have triggered a six-game suspension. Instead, Hardy got 10 games for conduct detrimental to the league. First series of cases post new NFL domestic abuse policy will trigger the most careful scrutiny ever; while everyone argues about the length of the hardy suspension, all seemingly agree that the new policy provides a more appropriate framework for future discipline.  

15. The Rose Bowl has decided not to bid on hosting the 2020 College Football Playoff title game. The Rose Bowl, which currently is one of six bowls that can serve as a semifinal in the College Football Playoff, spent months studying the feasibility of hosting. Economics of hosting the mega-events always looks better for the host venue than it might actually be; economic impact around the community, television, exposure are key – not always so for the venue itself.

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.