Sports Business

Sports Business '15 to Watch': Goodell loses Deflategate battle


Sports Business '15 to Watch': Goodell loses Deflategate battle

1. Are you ready for some football? In a major defeat for commissioner Roger Goodell on the eve of the NFL season, Judge Richard Berman overturned the four-game suspension of New England Patriots quarterback Tom Brady for his role in the Deflategate scandal. The league will appeal the decision, though it appears unlikely the NFL can keep Brady off the field when the season starts on Thursday. This is just the latest Goodell suspension to be overturned upon appeal. Other examples include the New Orleans Saints' Bountygate scandal, Ray Rice and Adrian Peterson. Goodell is planning to skip the season-opening game this Thursday in New England, but with Brady planning to take the field, broadcaster NBC can expect to see a significant increase in ratings. For all of the negative PR surrounding Deflategate, the league’s media partners — who will pay a combined $5 billion this season — must be happy with the attention the scandal is getting and Judge Berman’s ruling to let Brady play. The New England fan base acted like it won another Super Bowl as the Berman decision was announced. The luster has not worn off even a week later. Globally, last year’s numbers showed the average NFL team was worth $1.43 billion, up 23 percent from the year before (the biggest year-over-year increase since 1999). Despite the courtroom setback, the brand continues to excel.

2. And are you ready for some fantasy football? Other than Deflategate, arguably the biggest story heading into the NFL season is the growth of the billion-dollar fantasy sports industry. In additional to fantasy stalwarts CBS, ESPN and Yahoo, new daily fantasy providers DraftKings and FanDuel are spending millions of dollars in an attempt to lure new players. One company that’s generating new content around this industry is Sportsmanias, which is releasing a new feature on its app to provide personalized player alerts and feeds. The feature is agnostic in the sense that it’s compatible with the major fantasy platforms. With over 60 million fantasy players spending $465 million per year, it's a $26 billion annual industry and growing faster than any sports industry market segment. The Sportsmanias campaign features a simple plan: Download the app, import your team and “dominate your league.” Most ads are based on gaining the competitive advantage (either for money, pride or both).

3. Meanwhile, for the NFL, the Los Angeles threat looms large. The NFL offseason always provides a massive game of relocation musical chairs as coaches, veterans and rookie players scramble to find the appropriate housing. But no summer in recent memory brought more relocation uncertainty as at least one, if not two NFL teams are likely to move to L.A. next year. Players like Raiders rookie Amari Cooper and Rams receiver Tavon Austin — as well as their attentive agents from Lagardere Unlimited — must now not only deal with their current season housing situations, they might want to think very short-term lease. As the season starts, the deadline winds down for Oakland, San Diego and St. Louis. However, my experience confirms that most of these deals are done at the last minute, with a realistic deadline looming. Los Angeles stadium sites in Carson, Inglewood and downtown, as well as at the Coliseum, can plan — but they must continue to wait.

4. The U.S. Open enters its second week. The event will generate an estimated $700 million in economic impact for the New York market over the next two weeks. That total doesn’t even include sponsor spending. As Serena Williams attempts to complete the “Serena Slam” — winning all four Grand Slam tournaments this calendar year — she’s helped bring new advertisers to the sport. In addition to official U.S. Open sponsors JPMorgan Chase, IBM and American Express, new companies like Dick's Sporting Goods are buying inventory within live match coverage. Williams has become a definitive U.S. Open “cottage industry,” boosting awareness, corporate activation, advanced ticket sales and other economic indicators 20 to 25 percent this year. The weather has not hurt either. Clearly, two-week tournament records will be shattered.

5. The college football season rolls on, but it’s a costly one for many athletic departments. While the Power 5 conferences say that approval of a cost-of-attendance measure was inevitable, the stipends are exacerbating an existing imbalance between the Power 5 and the other leagues and within conferences. Most Division-I programs already operate at a loss, and that’s before accounting for the new expense, which can cost more than $1 million per year. Across D-I, more than $160 million is being earmarked for cost-of-attendance stipends. Professional sports grapple daily with reconciling the “haves” vs. the “have-nots.” With the new recruiting of high school superstars that will become the inevitable norm, the Power 5 conferences and their teams face the same competitive issue.

6. Entering the home stretch of the NHL’s expansion efforts. Las Vegas and Quebec have begun the final stage of the NHL’s expansion process. The third stage reportedly involves the NHL reviewing the applicants’ business plans and revenue projections. While the NHL has not revealed the details of the process, the stage is scheduled to end this month. The NHL last expanded in 2000 with the addition of the Minnesota Wild and Columbus Blue Jackets. At the time, the teams paid expansion fees of $80 million. That figure reportedly could jump to $500 million in the next expansion. Look for the expansion process to parallel the ongoing arena/lease negotiation/drama in Arizona. Seattle has not formally applied, but many insiders would love a franchise to be relocated there — depending on the arena-financing timetable.

7. Las Vegas and Quebec aren’t the only cities hoping to land a new sports team. A Portland group is renewing its effort to bring a Major League Baseball team to the market and has been in contact with the league office about its ambitions. The group, led by Portland-based Sports Management World Wide President Lynn Lashbrook, has long wanted to lure a team to the city, either by relocation or expansion. While nothing specific is in the works, an MLB expansion fee could nearly double the $500 million the NHL reportedly is considering. Commissioner Rob Manfred has not brought up expansion since his tenure began, and most markets seem to be settled beyond a relocation threat/leverage. Nevertheless, leagues always enjoy nurturing a possible expansion/relocation candidate for future action.

8. Book a flight to see the richest naming rights deal among college sports stadiums. Alaska Airlines has signed a 10-year, $41 million deal for the naming rights to the University of Washington’s football stadium. The deal is the largest of its kind in college sports. More than half of Alaska Airlines’ money will go to directly to student-athlete scholarships and welfare. As part of the deal, UW has also created an Athletic Village presented by Alaska Airlines, which incorporates all of the athletic facilities located around the football stadium. College athletic directors rejoice every time a new naming deal is done. It helps confirm and crystallize the revenue sources available: naming, stadium alcohol sales, unique merchandise/uniforms, etc.

9. After spending heavily on his roster, Brooklyn Nets Owner Mikhail Prokhorov looks to go all-in in another way. Prokhorov is nearing a deal to buy all of the Barclays Center and the Nets from Bruce Ratner’s Forest City Enterprises. Prokhorov has been in talks to buy the remaining 55 percent of the arena and 20 percent of the Nets that he does not already own. The Nets are valued at an estimated $700 million, but after subtracting $210 million of debt, the franchise has an equity value of $490 million. Ironic that Prokhorov seeks to consolidate arena and stadium ownership as his “veteran player strategy” seems to have passed its point of reasonable success. The NBA usually likes owner consolidation processes, regardless of who owns the franchise.

10. Sports teams continue to seek record franchise sales. As originally reported by the Pittsburgh Post-Gazette, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, the Pittsburgh Penguins are asking for a record $750 million for the franchise but could accept less money if a potential buyer is willing to forgo development rights on the old Civic Arena site. If the Penguins get their asking price, it would be the most paid for a U.S.-based NHL franchise, more than doubling the previous high of $320 million that was paid for the New Jersey Devils in 2013. This clearly might be the right time for the sale of NHL franchises with the $500 million expansion announcement, record revenues, labor peace and enlightened management. The proof will be if and when an actual sale is done and a price is announced.

11. For one NFL team, an international presence represents a large growth opportunity. Jacksonville Jaguars owner Shahid Khan hopes to extend his team’s contract to play a regular-season game in London each year through 2030. The London home game accounts for 15 percent of the team’s local revenue. Though the NFL recently signed a 10-year deal to play games at EPL club Tottenham Hotspur’s new stadium, Khan said he would prefer to continue to play games at Wembley Stadium. NFL International continues to thrive with executive Mark Waller looking to expand revenues and reach. Mexico, Germany, Brazil, China and other markets seem poised for NFL attention.

12. After the weirdest free agency drama in NBA history, one athlete makes a predictable agent change. Los Angeles Clippers center DeAndre Jordan has parted ways with his representatives at Relativity Sports. Jordan informed his agents of the decision a few days after the NBA fined the Clippers $250,000 for violating rules designed to keep teams from offering players unauthorized business or investment opportunities. The Clippers made the violations during their pitch to Jordan on July 2, as they apparently discussed marketing opportunities that the NBA said included a third-party endorsement deal with Lexus. Jordan’s decision highlights the volatility of the team sport agency business. Here today, gone tomorrow. Obviously, incumbent on agencies to provide ongoing financial, endorsement and contract assistance to stay ahead of mercurial athletes.

13. Fool me three times, shame on both of us. As originally reported by the Miami Herald, but in an article found on the Sportsmanias app, the site that provides fans with real-time information on their favorite teams, Marlins owner Jeffrey Loria once again is expected to make sweeping changes to his baseball operations staff at the end of the season. Loria has hired 10 managers in his 13 years as the Marlins owner, including notoriously moving general manager Dan Jennings to the dugout this season despite Jennings having no managerial experience. Loria’s relationship with Jennings reportedly has become strained during this disappointing season. Even with a new stadium and their World Series history, the relationship between South Florida fans and the Marlins continues to be strained. In many ways, this offseason might be a watershed one for the franchise.

14. Sports teams face a never-ending quest to improve the fan experience and generate more revenue. The Cleveland Cavaliers are looking to expand their in-seat concession ordering options at Quicken Loans Arena through a partnership with a local app company. During a 22-game trial run last season, customers using the Tap.in2 app spent an average of $32 per arena visit. Fans who used the app received their orders in an average of fewer than six minutes, and the technology was used by 25 percent of the 5,000 potential customers. Another example of combating “de-couching” — the perilous choice between first-class high-tech home and mobile media vs. the new stadium/arena experience. Kudos to the Cavaliers for taking this issue on directly.

15. College sports might be looking to diversify the coaching ranks. Pac-12 commissioner Larry Scott said he would support a version of the NFL's Rooney Rule in college sports. The Rooney Rule requires NFL teams to interview minority candidates for head-coaching and senior football operation jobs. Among D-I football schools, only 11 football coaches are black. Scott has become a pioneer among conference commissioners. The minority-hiring rule applied to colleges might be long overdue, appropriate and a move in the right direction.

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.