NBA Warning Signals Premature

The NBA fired off the first Class of 2010 free agent salvo, one year before the festivities begin, with a warning about a lower salary cap. It’s SOP to issue a forecast in the annual league memo, and it’s obvious where the warning stems from, but these projections seem premature.

Flash back to last year, same time, same memo, could anyone have predicted the economic situation 3, 6, 9, and now 12 months later. No way. I think the same holds true now, its unpredictable. The recession has definitely affected sports more than past economic slow downs, and 2009-10 will be the first full NBA season played since the financial crisis, however in sports flat could be the same as down.

Of the major items that contribute to BRI, the league has all major national TV deals, and teams have most, if not all, local TV deals locked in. While harder to come by, most major league and team sponsorship deals are multi-year contracts, guaranteeing that revenue. Plus, the NBA is not the LPGA, renewals continue to occur. That’s a significant amount of BRI that will increase next year due to annual escalator clauses in long-term deals.

Ticket sales, and related income such as parking and concessions, represent the wild cards. Despite the problems, the NBA posted strong attendance numbers last season, right near the record setting pace of the past few years. Off-season transactions thus far indicate a growing disparity in the league, a few teams getting stronger, many teams choosing to rebuild. Attendance figures should follow that, with the good teams filling the house every night (Cleveland, LA, Orlando, Boston, San Antonio), while bad teams in bad markets see attendance drop (Sacramento, New Jersey, Indiana). It’s the middle of the road teams that will swing revenue, mostly coming down to performance.

A few perennial disasters with renewed hope could give the league hope, and stabilize BRI. Memphis finally has some players to get excited about, the Clippers took the only prize from the draft, while Denver has room to grow after a deep playoff run, and Washington should bounce back from a poor season. Charlotte even has some hope. To put a spin on the negative teams, Indiana, Sac-town, and NJ can’t go much lower, so if they find a way to stay flat, and a few other teams get a lift it should off-set the lower overall ticket prices.

My point here, it’s all hypothetical. The NBA’s projection, my scenarios, Wall Street experts, everyone. Another key component, the NBA CBA is the most convoluted in sports, making it easy to manipulate. Heck, even Larry Bird has a rule named after him. Finding ways to exceed the salary cap are not difficult. If it comes to that, teams will find a way – the Knicks have done it the past decade for players not even on the team, I think they can find a way for Lebron and whoever else they want.

As a league, the NBA should not take to defusing the anticipation of next year’s free agent season. If it plays out well, it could be the tipping point to catapult the NBA to become the prominent league in US sports. It has the potential to be that big. They should go out of there way to make sure the media gives it front page coverage for the whole season and then every day next July, leading into the biggest Opening Night in league history. All the cards are in place, the league should do everything it can to leverage it. Not to mention that stirring the pot with the union for a possible strike/lockout standoff the following off-season could be debilitating.

Will Customers Say ‘YES’ to Double-Charging for Streaming

YES Network officially launched its partnership with Cablevision to stream Yankee games in New York Wednesday, the first local market live streaming deal in the major professional sports that rely on local TV revenue. A day later, the network had the perfect bargaining chip – a mid-week afternoon game. Now fans can catch every minute of the Bronx Bombers, even at work.

A few aspects of the deal boggle my mind. Start with the combination of exclusivity and price point. Only customers of Cablevision’s cable and Internet product are eligible to sign up, thus some form of authentication is in place to manage access. I’m all for charging for online content, however if Cablevision and YES implement an authentication system, doesn’t that assure that all the users already pay for YES Network on cable? The point of charging for online content is to avoid giving it out free, not to double-charge customers that follow the rules.

Given the operational cost of live streaming and the anticipated demand networks and teams project, a small fee is justified, but nailing customers for $50 for the season while still charging them for YES on their cable bill will not help gain traction for the service.

On to the second key point, content distribution. Streaming video will most benefit users who can’t access the network on TV, so why cut exclusive deals for people who already receive the network. YES should focus on those who currently have no access to YES, thus presumably have higher demand for the live stream. This may be less pertinent in the NY market, since YES is widely distributed, but look at San Diego, the next market to roll out the service. Cox has withheld Padre broadcasts from AT&T IPTV subscribers, so a significant audience that demands baseball has no access – the perfect place for live streaming. Yet, the team is dealing exclusively with Cox, who already broadcasts the games.

I understand the politics surrounding these decisions, yet it still perverse action by the teams and leagues as they attempt to usher in a new revenue stream. Given the choice of HD on a nice TV or streaming video on a little computer screen, which by the way inhibits multi-tasking, the choice is clear. However, given the choice of nothing or live streaming, sports fans will shell out.

The current price point appears to high to gain traction among cable subscribers that already have access at home. Is it really worth $50 to sneak a peek at the handful of weekday games the next 3 months? And listening to the YES marketing pitch, someone should advice them that most people don’t go to the beach and plan to watch Yankee games on the Internet. Maybe they should rethink that campaign.

If they have an authentication mechanism in place, baseball should consider different price points for current cable subscribers and non-subscribers, plus add the option to purchase individual games, in addition to the rest of the season or 30 days to encourage incremental purchases. Right now, I envision single game options would increase revenue more than lost revenue from potential 30-day purchasers trading down.

Athlete In-Game Twitter Use: Teams Need to Take Control

With every passing day Twitter is gaining more traction in the sports world, not less, so for all those that said it’s a passing a fad and ignored it, open your eyes. It will have a growing place in sports over the next year, like it or not. Chad Ochocinco proclaims he plans to tweet during games, and though we usually take his comments with a grain of salt, this has some merit. NBA players already started this past season, countless athletes are tweeting before or after playing, and many times in between, coaches are there, the list of tweeters is an almost endless cross-section of society.

Rather than prevent it or ignore it, teams and leagues need to take control of it. As silly as some people think it is, Twitter is a perfect in-game tool to further fan engagement. Fans consume media on multiple screens using multiple mediums, sometimes simultaneously, sports either needs to find a way to provide multiple engagement points, or make way to share its fans with other forms of entertainment and communication.

Teams should allow players to Tweet, however control the platform they use during games. Develop a branded Twitter extension that fans of the team need to register to use and that only displays tweets among fans and players on your team. Maybe it has an extension that can tie in with a similar system that manages tweets for your opponent that night so you can see those player tweets and maybe do some smack talk with the opponents fans. Don’t you think fans attending a game would be interested in what a player has to say after coming off the court, or about what happened on the last play, or even deliver a message to solicit more noise from the home crowd?

If sports properties can intelligently, and unobtrusively insert themselves into the process while still giving players as much free reign to speak as they have now, its creates an opportunity to add those 1 million Shaq followers, or at least a subset that’s willing to deal with a small registration process, into your team marketing database. That’s valuable. Armed with that marketing info, and an undoubtedly engaged audience given the research on how tribal and passionate fans are, especially during a game, it’s a great sponsorship opportunity. Brands can certainly extract value from this type of engagement – especially brands already associated with the team that can inject calls to action, or a brand the players believe in and can inject into their Tweets. Smells like measureable ROI.

Forget the argument that player’s should focus on the game, not Twitter. Tell me that next time some sideline reporter stops a player between quarters to ask pointless questions. I’d much rather give the athlete an open mic and let journalists report on the game and describe the action, not try to dictate what the player is thinking.

More to come on this, but I think its ripe for its own platform.

Islanders Blackberry Deal Makes For Strange Bedfellows

Last week the revenue starved New York Islanders reached a one-year wireless deal with Blackberry to sponsor the chance to text its prized top draft pick John Tavares. On the surface, it sounds like a good integrated sponsorship deal that adds value for both sides – good marketing for the team, promoting its new star and providing a platform to connect him with fans, while Blackberry gives an exclusive to owners of the device and another channel to promote its product to a key target audience in the ever-competitive smart phone market.

Digging slightly deeper, it’s a deal between an owner indirectly threatening the league to move his team due to mounting financial losses and an inability to get approval to build a stadium, and a CEO currently battling the league in court over the future of another financially doomed NHL team. Though it’s tough to question the deal, which also includes some Blackberry promotions linked to on ice performance and ticket giveaways at retail outlets, however its at least somewhat ironic that these two particular businessmen linked up on deal.

From a pure sports sponsorship perspective, the deal should actually be lauded and held as an example of good product integration into sports. It’s a strategic business partnership between two partners who have aligned goals. Balsillie could make things even more interesting than they already are by signing a slew of deals with NHL teams, smattering his company all over the league then using it as a mini-platform to continue to get his message out.

Would be interesting, just saying…

TV Everywhere, Anywhere, Somewhere…

Programmers and cable operators, other than CBS of course, tout it as the savior, putting the proverbial “genie back in the bottle”. But the $64,000 question is if the TV industry is already too late to the game and if this plan is what can save them?

One key concept from Chris Anderson’s “The Long Tail” is how technology has democratized the tools of production, reducing the barriers of entry to previously capital-intensive businesses such as television. This raises a few fundamental questions about the TV Everywhere plan. What prevents someone from recording a show on DVD (or a networked DVR for that matter) and putting it on the Internet through a pirated video site? Legal authorities can do only so much to prevent illegal sites, but like it or not they exist. One only needs to look at the frustration over NBC’s tape-delayed Wimbledon coverage. Disappointed users had no problem finding a live feed on the Internet.

Technology evolves faster than corporations can react. Even if the TV Everywhere concept comes up with a successful authentication plan and finds a way to address pirating, how long before someone figures out a way to beat the system. Shedding light on Cablevision’s recent court victory allowing it to deploy remote DVR, it may actually help the industry in the end. A DVR is yet another Internet-capable device in the possession of users that consumers can use to put unlicensed content online. Removing these boxes from cable homes can help prevent this. It may sound farfetched, but its not outside the capabilities of the increasing tech-savvy world.

Putting the genie back in the bottle is tougher than it sounds. It’s like telling kids not to smoke. They know about it, they have seen it, telling them smoking is bad only makes them want to do it more. Giving the customers free content, then taking it away from them, will only inspire them to want to find ways to get it free.

Bringing up another Chris Anderson concept, one I don’t agree with, free does not work. It killed music, its killing broadcast television, its ruining newspapers, and it will destroy everything in its path. iTunes did not save music. 99 cents is not sustainable revenue. Kindle is about to ruin the book industry with its low-cost business model. Offering services free drives user numbers, not businesses. The key is to find ways for the product to drive usage and squeeze as much revenue out of the situation as possible – something Apple has done well for the most part, in selling premium products.

TV Everywhere is necessary. Content providers will not remain sustainable in the long run if they can’t charge for content. TV Everywhere is the effort to save big programmers. If it fails, and users begin an attrition from cable to online, revenues will start to shrink, programmers will be unable to afford content development, and users will be left with a smattering of UGC and You Tube videos to watch.

Obviously, its an exaggeration, but it’s the path the industry is heading towards. Leno at 10PM is the first step, a major network unable to afford traditional programming due to shrinking revenue. It may take years to manifest itself, but successfully charging for online content and maintaining current revenue levels with reasonable growth is necessary for the industry to avoid disaster.

Comcast Sportsnet Digital Strategy Remains Elusive

A few weeks back I read a Washington Times article (http://tinyurl.com/m2qaew) about CSN Mid-Atlantic ramping up its digital presence with web exclusive content, more video, and adding digital correspondents, but mentions the lack of central office support from Comcast. It prompted me to do an unscientific look around the Comcast RSN digital properties to see if they were making a coherent push online across the board, or if the Times reports was true and it’s a decentralized effort.

It appears somewhat decentralized, though many are learning lessons from other markets to keep up with the competition. The disparity from region to region is amazing. First, Mid-Atlantic deserves credit because they have put together a solid digital plan and are executing well. The site has a clean design that is easy to navigate and enjoyable to view – something most of the Comcast RSN websites do share. However, Mid-Atlantic has tremendous content depth and takes advantage of new media features. The site offers an extensive lineup of bloggers, podcasts covering all the major teams in the area, extensive video on the home page and each of the team pages (though I had trouble with the video player), social network tie-ins, message boards, and lots of editorial about all the teams in the area. Mid-Atlantic also offers Fantasy Games and a fan membership club. On the surface, they are taking advantage of what digital can do to complement a linear cable network.

My expectations now high, I checked out Chicago, New England, Northwest, and Bay Area. New England and Bay Area offer many of the same features as Mid-Atlantic. Execution and design varies region to region, but from a high-level they are similar offerings. Chicago surprisingly lacked any fan integration or social networking options. It’s video centric and has a solid lineup of bloggers, but I didn’t get the same perception of content depth that Mid-Atlantic has. It also lacks current athletes, something New England and Mid-Atlantic use successfully – nothing drives traffic like a high-profile name.

At the bottom of the barrel, Northwest is barely a web presence. It offers no content that I can’t find on another site. The URL is basically a basic information site with ads plastered around – no blogs, no video, no editorial, no sign of a digital staff.

I am particularly curious how Chicago plays out, since the 800-pound gorilla entered the room recently when ESPN launched ESPNChicago.com. The implicit marketing push and the big names it can pluck from the mothership can move the needle in the market, something Comcast needs to be concerned with – and every RSN in a major market must prepare for because I doubt ESPN stops with Chicago. The ESPN site lacks depth right now. It’s front is unique, and it leverages the local ESPN radio affiliate for local talent to write editorial content and create multimedia features, then it pulls in Chicago relevant content from ESPN.com to fill the site out. However, the link to team pages directs you to the ESPN.com page. It makes sense, but lacks that local authenticity.

Overall, its surprising that each Comcast market is not more closely modeled both functionally and aesthetically, especially use the audience is not the same. However, most of the big markets are doing a solid job, likely thanks to competitive forces since each market has multiple RSN’s. One thing all the sites need to work on is the video player in preparation for local streaming agreements with NBA and MLB teams. The players seem geared for short-form video, not a full screen dedicated player that works for streaming. Another key is compelling content. I think prominent newspaper writers have a place on RSN websites, as do current and former athletes with a strong perspective. Both can bring an audience.

Panthers-Rosenhaus Campaign Achieves First Goal, Will it Lead to $$$?

Chalk up a marketing win for the Florida Panthers. Whenever a team gets attention for a marketing campaign before it even starts, you concede the achieved the brand awareness aspect of marketing. Officially launching next week, Florida enlisted NFL super agent Drew Rosenhaus to negotiate lower ticket prices for its fans in a series of spots. Rosenhaus leaked the news via Twitter this week, starting the viral spread of the campaign.

On the surface, it’s a great move by Florida. Many teams are lowering ticket prices in this economy, but they found a clever way to differentiate themselves from other teams and engage fans in the process. Rosenhaus is a great pick by the time because sports fans universally know him, has the reputation of a ruthless negotiator, and his high profile status within the media guarantees word will spread.

What remains to be seen is if the campaign will lift ticket sales? Florida has made the playoffs just three times in its 15-year existence. This is the NHL, where seemingly half the league makes the postseason and they have been there just 20% of the time, and not since 2000. That’s remarkable ineptitude for hockey. Throw in the fact they play in a market with fickle sports fans in general, and that nobody will ever mistake Miami for a hockey town. It’s a tough sell. One of the toughest in sports.

Intuitively, the marketing effort will definitely generate buzz, though I’d be surprised if it sold many tickets. In the end, the team, the players, and the sport usually sell tickets – Florida has all three working against it. One other key factor is how much they decide to lower the price – how effective Rosenhaus is in negotiating.

This would be an interesting case study in marketing ROI. Measuring the ticket sales and ticket revenue (since price is changing too) lift that Florida achieves compared to a hockey team that lowers it price by a similar percent without the splashy advertising serving as a control group, and for further analysis find a team that executed a similarly high-profile campaign but raised ticket prices. We’d also need to control for off-season acquisitions and projected team success relative to last year. It would be an interesting study to conduct nonetheless.

Florida’s execution of the campaign could have an effect. If they make it truly interactive, it becomes more enticing. For instance, they could release a new You Tube video of the negotiations each week, and fans then have the choice of buying tickets at the last offer price made by the team in that negotiation with Rosenhaus, or they can wait until the next video comes out to see what the new price is. Another way is not to announce when new videos are released and reward the first few buyers with special deals that buy immediately after a new negotiation is released.

Unless the price change is significant, this will likely end up as a memorable campaign that ends up short on results simply because the Panthers have been a bad team for a long time and Miami will never support hockey. Some forces are too great to overcome.

NFL Should Look Within To Expand Fan Base

Nike signing Jets QB Mark Sanchez to a 4-year deal is only be a footnote this week, but years down the road it may become a seminal moment in NFL marketing, the first deal for someone that could become its most marketable player. The teams threw the league a bone with this one, putting a star QB of Hispanic decent with a polished personality, good looks, and on field potential into the biggest market in the country, on a team about to move into a world class stadium. All the stars are aligned.

It was obvious to everyone in sports that Sanchez holds tremendous marketing potential from the day he left USC because of his heritage and pedigree, and that potential only increased when you add NY to the mix. However, this opportunity transcends any one athlete. It’s represents a chance for the NFL to penetrate an entirely new demographic. One the league has struggled to gain traction with, and thus far the one battle it’s lost with soccer.

The Hispanic population is the fastest growing of any ethnic group in the US, and they will represent a significant portion of the growth in spending power over the next few decades. Saying the NFL needs more Hispanic fans to remain the number one sport for the next half century may not be an overstatement.

Though the NFL already commits community and youth initiatives to this effort, developing a more thorough strategy to market to Hispanics in the US would benefit the league more than its efforts to put a Super Bowl in London. Why bring the fight overseas to foreign soil, in a place where you can’t deliver consistent content when you still have not conquered the home land. In addition, the US Hispanics, the entire country of Mexico is a potential extended market, one that may be as interested as the country north of the border the NFL is so desperately trying to win over.

Of course, the chips need to fall into place on the field for Sanchez to become the face of the league, but if they do he will be the successor to Favre, Brady, and Manning as the NFL poster child. Instead of playing games in London, perhaps the NFL will decide to play games in LA again and just maybe a franchise will wind up there again. Sanchez could help make all this happen.

If the player succeeds, its up to his advisors and the league to shift its focus away from Europe and back to its growing its core fan base in the US.

More Golf Commentary: Turner Extends PGA Partnership, US Open Decisions

Turner announced a long-term extension to continue carrying the PGA Championship and operating PGA.com. The burning question – when will they start to leverage the asset for the value its worth? Turner should take a note from the USGA’s digital presentation of the US Open – then take it up a notch from there.

Golf is event driven, the website should reflect this with tons of in-event interaction for fans. Golf should embrace live streaming, and give the user more opportunities to customize the experience. A golf event is a microcosm of the “long-tail” effect of digital media – many story lines simultaneously playing, each with some interest. Put small, low cost cameras out on each hole, so a fan can follow players around the course, watch a mosaic view and skip around to holes, or view a specific hole. It doesn’t need to be HD production, since viewers still have the TV coverage, but supplement it.

In addition, unlock the archives and all its potential. Let users watching a hole call up shots that the same player hit in past years on that hole, or check what recent champs did on that same shot, or watch the best all-time shots on that hole or by that player or on that course – get the point, endless options. Get the footage online and tagged. Building on that, have a player instruction section with tips, have caddie’s blog, make more interactive games like the US Open, also put Fantasy games to generate more interest, allow fans to debate golf strategy and club selection during an event. Bottom line, digital media is more than throwing up some video and a Twitter feed. The PGA and Turner are behind the curve, and need to make progress for this partnership to succeed.

Back to US Open for a second, one of the most poorly run big sports events in history. Lessons. Be proactive, not reactive to potentially damaging situations. The USGA was shamed into allowing fans from Thursday’s rainout use their tickets on Monday, and were lucky to have a Monday. They should have a contingency ready for what is obviously a possible situation.

Another lesson, be content with not finishing on Sunday. Starting the third round at 7 PM on Saturday night, and the 4^th round late on Sunday made NO SENSE. Golf is meant to be played in 18 hole increments, don’t start when you have no chance to finish. Fans had trouble following the tournament, players were not in the same rhythm they follow each week. Live with the fact you need Monday to finish. People will flock to the US Open, don’t put a low-quality product out to meet time constraints. It hurt the ratings, and hurt the tournament.

Another comment on fan experience, outlawing cell phones does not work in 2009. Fans complained about not being able to meet each other, not knowing the weather situation, and not knowing what’s going in general. They need to change this.

Another Word on Franchise Ownership – Beware the Real Estate Mogul

Building off yesterday’s discussion of the Phoenix Coyotes ownership mess, the problem is actually rooted in Jerry Moyes’ original purchase. He partnered with Steve Ellman, who’s sole purpose was to build a development near the arena. Another one of these grandiose retail areas that real estate developers sell the public on how it will infuse the local economy, however usually only benefits the developer.

Fast-forward a few years, Ellman builds his development, sells his share to Moyes, and eventually we’re left with Moyes unable to fund the losses the team sustained. It’s hard to know the original intentions of the owners in 2001, but this deal smells of real estate motives. The goal was to build and arena and retail development – not run a hockey franchise. And that’s how its played out. Maybe Moyes had better intentions, but without he was not equipped to run the team or finance its losses, at least without Ellman. Look at the Islanders, taking just as big a hit in the pocket, however Charles Wang is not running into bankruptcy court and causing controversy.

With so much power over who joins the ownership ranks, the NHL and every other sports league should evaluate the motives of the potential owner and the commissioner’s office should consider contractual obligations that allow the league to mettle in team business if a franchise is not meeting certain performance expectations. On the second point, it’s no different than operating a company, the board of directors are accountable to shareholders. In this case, the shareholders are the other owners and the league office represents them. A poorly run team diminishes the value of the entire league, while a well run team improves the economics of the league at large.

The first point specifically targets owners who try to use sports teams as pawns in a real estate project. Bruce Ratner is playing out this same game with the New Jersey Nets. He bought the team with the sole purpose of creating a mammoth development in Brooklyn with an arena, apartment buildings, and retail. The focus has been on his project, not the team for the past 5 years, as he has battled court cases, had his staff strike landmark sponsorship deals, hired and then fired a well-known architect, and for better or worse stirred controversy. Meanwhile, the team was forced to cut expenses and trade its best players, and is losing over $40 million a year. Admittedly, they probably needed to make the trades and start over from a player development perspective, but the franchise is in a holding pattern. Everything centers around “when the Nets move to Brooklyn” – the free agents will come, fans will come, profits will come.

The deal may never happen. Ratner reportedly wants to sell, another indication it will never happen. If that’s the case, they are stuck in the Meadowlands losing boat loads of money and have basically lost the last 5 years when they could have addressed the situation because Ratner was trying to leverage the team for a project to benefit his business.

Owners with real estate motives destroy franchises, then leave the problem to the next person. The franchise suffers, the league suffers, the fans suffer, and the players probably suffer. Given their control over the situation, leagues should recognize this type of deal and either prevent it or put stipulations in that prevent an owner from leveraging a franchise for real estate, ruining the team in the process, then walking out on it. The leagues should blame themselves – and do something about it.