Sports Business

Sports Business '15 to Watch': Royals are world champs


Sports Business '15 to Watch': Royals are world champs

1. KC Royals Win World Series; Host Cities Win as Well. Regardless who wins, there’s no denying the economic boon to host cities from mega events. While financial giant Citi, repped by Lagardere Sports and Entertainment, has earned terrific brand exposure from the New York Met’s World Series run, thanks to its long term naming rights deal at Citi Field, the Big Apple has clearly benefitted too (despite hosting only three World Series games). The New York City Economic Development Corporation estimates the MLB postseason economic windfall at $69 million. In Kansas City, each post-season game played at Kauffman Stadium was expected to generate around $5 million to the community, according to Kansas City's Convention and Visitors Bureau. Many more millions will come in merchandise and related sales in the wake of the Royals’ first World Series win in 30 years.

2. Despite massive public scrutiny from the FBI, NCAA, and others, DraftKings is still betting on its own future. The Daily Fantasy Sports company is quietly raising another $200 million in funding – after receiving $300 million from Fox Sports, the Kraft family, and other enterprises. Data from Seattle-based venture capital research firm Pitchbook shows that the upcoming funding round, not officially closed, would bring total investor funding to about $630 million since the company was founded in 2012 and would put DraftKings at an estimated $2 billion valuation. This valuation is an incredibly impressive marker for a company and industry that has been under fire as of late, with its future up the air as investigations and inquiries loom.

3. After winning nine of his 11 career starts, American Pharoah is retiring. After winning this past weekend’s Breeders’ Cup Classic in record-setting fashion – becoming the first horse to win the Grand Slam – American Pharoah will begin a new career as a breeding stallion at a farm in Kentucky bluegrass country near Keeneland. The young colt earned a total of $8,650,300 for Egyptian-born owner Ahmed Zayat, who originally questioned his decision to buy the horse. To celebrate the horse’s magical career, Breyer, the company known for creating plastic horse collectibles, unveiled a series of collectible products just in time for the holidays at the 32nd Breeders’ Cup. Breyer will ship American Pharoah models to retailers once they arrive at warehouses. The soon-to-be legendary horse deserves a long and bountiful requirement – the most important four-legged athlete in the last 50 years!

4. It may not be the EPL, but the Chinese Super League (CSL) – China’s top-tier pro soccer league – is cashing in on a massive deal to give China Sports Media Co. Ltd. its TV rights. The deal, planned to span the next five years, is worth a whopping $1.26 billion. The number is astounding considering that the CSL is nowhere near a top global soccer league. Its 2015 TV rights fetched only $7.8 million, so signing this deal is extremely good fortune. CSL Chair Ma Chengquan said that "the increased revenue will be put into youth training programs, improvement of club facilities and the upgrading of broadcasting technology to improve every aspect of the league." This is the first major step in a long process to make the CSL competitive on a global stage. China remains incredibly significant in the trillion dollar sports business. Importantly, companies like Globecast and other worldwide media transmission, content, and distribution companies will play an incredibly significant role in revenue generation in years to come.

5. Some sponsors spare no expense to honor their talent. This past weekend, AT&T proved just that when they constructed a mosaic of the 2015 PGA Tour Player of the Year, Jordan Spieth. The mosaic was placed in downtown Dallas and comprised 24,152 golf balls teed up on the grass. A 25-member team constructed the masterpiece, made to honor Spieth and the incredible year he just completed – winning multiple majors and capping his year off with a $10 million bonus for winning the FedEx Cup. AT&T, which expanded its relationship with Spieth to include golf bag branding last year, also filmed content for a national ad on Tuesday. The company on Wednesday posted a time-lapse video of the mosaic installation on its YouTube channel. Large corporations spare no expense in creatively activating their brands, messages, and endorsers. Kudos to AT&T, Jordan Spieth, and Lagardère Sports and Entertainment for the creative “honor.”

6. The debate continues: which NFL franchise will relocate to Los Angeles, and when? Of the three teams vying to move – the San Diego Chargers, St. Louis Rams, and Oakland Raiders – the Rams’ situation seems to be the most complex, if last week’s NFL Town Hall meetings in the three cities are any indicator. The divide between the fan base and owner Stan Kroenke is tangible, but city efforts may not be enough the keep the team rooted in the Midwest. San Diego fans lustily booed Chargers representatives, but turned out in smaller numbers than their peers. Raiders owner Mark Davis was the only owner to attend, and was rewarded for his presence by a standing ovation from Raider Nation. Will fan passion and input help sway the NFL? We’ll have to wait ‘til next month’s owners meeting – or longer – to find out.

7. The Sacramento Kings may not be the most successful team on court, but they are working to be the most lucrative team off it. Since Vivek Ranadive purchased the team in 2013, the franchise has witnessed exponential economic growth thanks to the new ownership group’s technological and marketing know-how. The Kings are scheduled to move into their new $507 million downtown palace next year (the City of Sacramento provided a $255 million subsidy), named for Golden 1 Credit Union after they offered the team $6 million a year. The Kings also signed a new regional broadcast agreement with Comcast SportsNet that pays a reported $35 million annually, more than triple their old deal. These factors have helped the Kings to become one of the NBA’s more profitable teams despite not having a winning season in nearly a decade.

8. The NHL season is off to a rapid start, but action off the ice may be more significant. Las Vegas may be pushing hard to get an expansion team and the Phoenix Coyotes are looking to move their home venue elsewhere in the Valley of the Sun. One other NHL business story stands out: The Florida Panthers have reportedly suffered more than $150 million of losses over the last two decades. Since the 1997-1998 season, the Florida-based hockey franchise has lost an eye-popping $154 million, with their worst financial season coming last year, when they lost $36 million. What’s more, the team is projected to lose $24 million this season. Attendance wise, the Panthers may be turning things around. They’ve averaged 14,628 fans in their first three home games, a significant boost from last season’s 11,265 average. The small fan spike will not resolve the team’s massive financial problem, but it’s a step in the right direction.

9. MLSE has named finance expert Michael Friisdahl President and CEO, effective in December. Friisdahl previously successfully served as President and CEO of Air Canada’s Leisure Group and succeeds Tim Leiweke. Leiweke is now being linked to David Beckham’s effort to bring an MLS team to the Miami area. Friisdahl has no prior sports experience and enters a massive year for MLSE – the company is preparing for the NBA All-Star Game at the Air Canada Centre in February, the World Cup of Hockey will be there later that year, and BMO Field will also host the Grey Cup in 2016. Additionally, Raptors 905, the Toronto Raptors’ D-League affiliate, will begin their inaugural season later this month. Even though the company’s new president may have no prior sports experience, MLSE was looking for a seasoned business executive to lead the way for them, and Friisdahl is just that.

10. After five years of preparation, ESPN has decided to delay the planned launch of an ACC-specific network. Many speculated the network would go live in 2017, but Georgia Tech President Bud Peterson revealed that ESPN has asked for the delay, in order to create a system that wouldn’t lose money out of the gate. The ACC is locked into a partnership with ESPN through 2026-2027 – the deal started in 2012 – so the ACC Network will absolutely come online during this span. The ACC reportedly received $197.2 million in TV revenues 2013-2014, but the average $19.3 million distribution "lagged behind" the Big Ten's $26.4 million, Pac-12's $21 million, SEC's $20.9 million, and Big 12's $19.8 million. The disparity is a significant reason why the ACC and member schools are interested in their own network.

11. Advanced statistics and analytics are prevalent in pro sports – now including golf. The PGA Tour just signed a three-year deal with Microsoft that will create an advanced tier of golf analytics to be used across all of the Tour’s broadcast outlets and digital devices. The new tech platform will incorporate the Tour’s video library and ShotLink statistical data, creating a new bag of relevant stats. The deal makes Microsoft the official operating system, analytics partner, and office productivity software partner of the PGA and Champions tours. The new product should be up and running by the middle of the 2015-2016 PGA Tour season. While the Microsoft partnership will generate substantial revenue for the PGA Tour, look for new technological experiments and innovations to benefit golf in years to come.

12. The ongoing FIFA scandal involving top officials taking bribes, most notably President Sepp Blatter, continues to take a toll on the international soccer federation. Top sponsors are beginning to distance themselves from FIFA in order to preserve their own name and brand. The most recent example of this is Visa, as the major sponsor told FIFA that it "could cut ties" with football's scandal-tarnished governing body if the credit card company "is not satisfied with the reforms being implemented," according to Rob Harris of the AP. This threat follows similar ones from McDonald’s, Coca-Cola, and Anheuser-Busch executives; all top FIFA sponsors. Corporate accountability may be the quickest and most efficient method of insuring long-term structural reform.

13. MLS has become one of the hottest soccer leagues in the world with its ongoing expansion, top talent imports, and multiple new state-of-the-art soccer-specific venues. A marker of the league’s success came this past weekend when the MLS saw strong viewership numbers for the 2015 regular season, a first under a media rights deal with ESPN and Fox Sports. ESPN and ESPN2 as part of the deal received more late Sunday afternoon matches, including many premiere matches moving to the flagship net. That change helped ESPN and ESPN2 combine to average 249,000 viewers for 34 matches, up 4% from last season, when coverage was boosted by the FIFA World Cup. In its first season broadcasting MLS matches, FS1 averaged 197,000 viewers for 32 matches. On the digital side, MLS saw an all-time high of 3.2 million average monthly unique viewers, also up 20% from 2014. These numbers are a great sign of growth for the league.

14. For the first time in nearly 20 years, USC is planning its first major renovation of the iconic L.A. Coliseum. The university plans to spend $270 million in the upgrade process. Every seat will be replaced, as well as new handrails, added leg room, and a new south side structure that will include suites, loge boxes, and a new media center. Most notably, the Coliseum will see a significant reduction in seating, from nearly 93,000 to about 77,500. USC officials admitted the project is not yet funded, but clarified that they planned to pay for it through donations, sponsorships, and naming rights. The project should begin after USC’s '17 football season and be finished in time for the '19 home opener. Creative and entrepreneurial facility modernization plans will undoubtedly be coupled with on-field stability – the next coaching hire is critical!!

15. The Edwin W. Pauley Pavilion, known commonly as Pauley Pavilion, could be getting a name change in the near future. As part of a 10-year, $144 million extension of its multimedia rights partnership with UCLA, WME-IMG is searching for an affiliated naming rights partner for the historic UCLA basketball arena. Pauley Pavilion will still be part of the facility’s official name. Many suspect this new deal could be worth as much as $5 million per year, and that price would make it the richest naming rights deal in college sports. Ultimately though, UCLA "has the right to reject any corporate sponsor, from a naming-rights seeker to any company wanting an advertisement on the school's website." The name of Pauley Pavilion ranks up there with iconic venues like Fenway Park and Wrigley Field – business folks should take significant care in ensuring that the name and brand survives and thrives.

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.