Basic Economics Driving Super Bowl Ad Buys

This year the focus of Super Bowl advertising has been more on who is not in the game, then who is. Annual stalwarts Pepsi and FedEx are out, and major US car companies will obviously take a back seat. It’s easy to point to the economic recession causing major companies to reassess internal spending, but a better reason is that $3m for 30-seconds only makes fiscal sense in specific situations.

What the recession has forced companies to do is assess ROI (or some measure of impact) of its marketing spend. In doing so, some major brands have come to the realization that all the theatrics and hoopla surrounding the Super Bowl don’t necessarily add up to sales increases. In fact, if a brand drops the ball during the big game, it may actually hurt sales, while a good commercial may find itself into the highlight reels for all of the following week but not necessarily into the next 10-Q. It raises the age old question if someone is going to pick Coke vs. Pepsi based on which commercial they like better.

The Super Bowl is great for smaller or start-up brands looking to emerge into the mainstream and announce themselves. It also benefits more established brands launching a new product line, attempting to reposition within the marketplace, or putting out a specific call to action with the goal of capturing market share. E-Trade and Monster successfully pulled off the former, while Denny’s was hit using the latter strategy with its popular offering last year. Denny’s returns with a similar spot this year, which they can easily measure the success of by counting customers who use the offer, and is a smart ploy since once you have customers in the restaurant you have a greater chance of retaining that customer.

While E-Trade and Monster continue to use the Super Bowl to build their brands, many first-timers will attempt to catapult themselves into the public eye, including Qualcomm’s FloTV, Boost Mobile, and tru TV (a Turner network). The Super Bowl makes sense for all of them as they are announcing themselves and their products to a broad audience, or in the case of truTV, introducing a show related to football that will attempt to capture new viewership for the channel.

On the other hand, does it really help AB-InBev to continue putting up Bud and Bud Light ads every year, or Coke to come up with a new creative and spend close to $6m for one-minute? That’s why Pepsi and FedEx made smart decisions not buying time. They have nothing new to say, no new products to launch, they are already well-established brands that everyone watching the game is familiar with, and to be honest, they may actually receive more hype leading up to the game by deciding NOT to advertise than some competitors who do decide to advertise, an interesting reverse psychology.

In the end, it should not be a big story that FedEx and Pepsi are out, and the likes of kgb and Motorola (desperate to push its new phone) are in. It marks the natural evolution of Super Bowl ad economics. Established brands buying simply to showcase a new creative and be the talk of Ad Week is not worth $3m+, while new brands and new products can use the game as their introduction to the world since it’s the broadest reach it can achieve in one spot all year. However, given the cost relative to the marketing spend and revenue for some smaller, growth companies, a Super Bowl ad buy can be make or break – as many found it during the dot come era.

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PGA Shows Online’s Ability to Attract International Fans

Omniture data showed South Korea accounted for .9% of Turner’s record setting web traffic for Thursday of last weekend’s PGA Championship, ranging up to 2.3% for Sunday’s final round. In absolute numbers the 30-50k unique users may not move the needle, and Y.E. Yang may not be the player that captivates a nation (at least yet). However, take South Korea, add in the many other countries on that side of the globe with an interest in the sport, either because of Tiger or country representation in the tournament, and on the aggregate these fans add significant valuable.

I’ve wrote about this in the past – golf and tennis are two of the sports that can most benefit from live streaming and in-depth, user oriented online coverage. The individual play that creates simultaneous action in multiple locations, and international tilt of the players create an opportunity. Golf embraced live, free online streaming last year, tennis more so this year, thankfully removing the pay wall from Wimbledon – or maybe not. Live streaming does call for a “fremmium” model, free sampling of coverage provided by the network, then a fee-based service to give users the opportunity to control their own experience, follow who they want, get advanced stats, etc.

Neither sport is their yet. South Korea tunes in and they want to Yang. England tunes in to tennis and they only care about Andy Murray. Digital providers need to allow fans to really customize their experience and give them the tools to watch any player they want online. Provide access to archives of that player, let them see his/her greatest shots, past performance at the tournament, even throw a camera on the practice range. An all-encompassing experience needs to be possible.

Not everything must be HD or professionally shot, sometimes a web-cam in the sky is sufficient for a tertiary view to feed the long-tail of viewer interest. Leagues can generate engagement with the data and archived video they already own. Once they put all of that online in an accessible format, expenses to provide the customized experience should remain low, with potential revenue increasing.

As a marketing tool, which digital is though people often forget this point, it promotes the game in these various countries. Live streaming, minimal spending on aggressive viral awareness campaigns can lead to audience sampling, and if they like what they see these sports can start to build a sustainable audience into the future. This increases the value of holding international events, selling international television rights, selling separate sponsorships through the digital platform, and someday integrating more overseas sponsors into live events), if they can generate enough interest.

With TV ratings suffering, particularly on the women’s side, and TV coverage waning between majors, online is a critical component to the long-time sustainability of these sports. It can drive attendance, introduce new revenue streams, enhance ancillary revenue streams, and most importantly build a new fan base.

Inherent Flaws in Sports Nielsen Ratings

Not exactly a shocking headline, but with the playoffs bringing TV ratings to the forefront it’s relevant. Every news outlet that reports TV ratings for sports events documents both the rating and number of viewers, usually adding the annual change in each number.

Maybe it’s a pet peeve of mine, or I’m making too big a deal of it, however the annual change in the number of viewers is a biased statistic that often masks poor ratings. The Nielsen rating is based on the percent of TV households that are tuned in, a relative measure, while the number of viewers is an absolute measure.

While the viewership number includes households with more than one viewer, the number of Nielsen TV households has grown slightly year over year, which will inherently boost the viewership number. I’m admittedly making a few assumptions here, as I’m not intimately familiar with the intricacies of the Nielsen process. Looking at the year over year ratings and viewership numbers, the only explanations are: more TV households, a change in viewership patterns, and/or change in Nielsen’s viewership calculation.

In any of the above cases, the total viewer number is not a good year over year indicator because it ignores the relative changes in the system. A better metric is share – the percent of TV households watching TV at the time that are viewing a program. Though programming faces different competition each year, its a better indicator of what the population is watching.

With all the inherent flaws of the Nielsen sampling process that the media industry has come to accept – for the time being, at least – harping on this point may not be worth it. But when ratings are decreasing and every story at there makes a point to mention that viewership is flat or viewership is up, the stat must be taken with a grain of salt. The lesson – some sports are struggling on TV more than they lead on.

Costas Now Brings Out Stars, Lacks Controvesy

Hank Aaron and Willie Mays on stage with Bob Gibson in the audience. Few shows, or hosts, can attract baseball diety like Bob Costas. Wednesday’s second townhall format of Costas Now brought more star power, better timed panel discussions, but failed to replicate the controversy that Buzz Bissinger and Will Leitch stirred – though the two sat side by side, toasting beers, in the audience.

Costas opened with Dave Winfield, Jim Palmer, and Pete Rose via satellite, discussing the Hall of Fame. Removing Rose from the live show (illness) took away some potentially awkward moments on stage when debating his reinstatement. Can Winfield take a side? He’s not there to tell us what he hear’s other people saying – we hear those people too – tell us what you think, straight out about Rose, in or out. Palmer advocated Pete. As usual, Rose paraded for himself consuming more time than planned, leaving less time for other issues among the topic. Suspected and convicted drug users came up – Bonds, McGwire, Palmeiro – and stat accumluators like Jim Thome that have denigrated the meaning of 500 homers. Most agree drug users are out, so are are accumulators, but I wanted to go one by one through a list of about 5 players and get everyone’s opinion – in or out, including Costas. They didn’t even get into pitchers. What is the new 300 wins and new criteria? Is Mussina a hall of famer? The hall is about more than Rose and steroids.

Panel discussed baseball’s first half, yet I don’t think the word playoffs came up once. Evan Longoria, Jimmy Rollins, and Todd Jones are all in the playoff hunt still, which precludes them from any bold predictions. Who wants to hear more about maple bats? Give it a two minute answer and move on. Instead of the writers picking first half MVP’s, surprises, disappointments, and Cy Youngs, put the players on the spot. Ask these guys if they want Barry Bonds on there team – a major baseball 2008 question. How did the Sabathia and Harden trades change the NL race? THe panel is baseball’s first half, so discuss baseball’s first half.

Costas called out Arte Moreno, the Angels owner, about ticket prices, in a panel with Dave Winfield and Andy Van Slyke. Public tax funding of new stadiums followed by lack of affordable tickets received a big stir from the audience, who will certainly suffer from that dichotomy with the new Yankee and Met stadiums starting next year. The remainder of the panel, The State of the Game, was interesting, but lost in the shadows of anticipation of Hammerin’ Hank and the Say Hey Kid.

Mays and Aaron had a great dynamic – Aaron’s stoicism accompanied by Mays’ humor and passion. Priceless stories, great commentary. One valid point that arose from this discussion, and a comment by Jimmy Rollins, is how the Nego Leagues demise may have led to the disintegration of African-American players in the majors. The discussion evaded controversy, as it should with two older, living legends. Both players are anti-PED’s, as most older players are, but neither will go on a diatribe about how wrong it is. Aaron gracefully annointed Bonds the home run champ, handling it like he did last year, and like he always does, with class. This discussion was about the stories. Aaron breaking Ruth’s record, Willie asking for a raise then charging a Cadillac to his owner after the owner refused to give him a hgiher salary.

What started as five extra minutes for HBO.com turned into an entire half hour to forty minutes that will now air as an entirely separate Costas Now episode just about Aaron and Mays. I’ll never forget being in that room with those two guys and Bob Gibson, who looks like he can still knock down a hitter that leans over the plate.

Somehow an ad or link for this Costas Now show was nowhere to be found on HBO.com. The 5-minute turned half hour segment not available for streaming. This is rare stuff that baseball fans live for, get it on the home page. What’s new on Cinemax can wait a day. No excuses for not having the video up there either, those at home missed out. Mays went on a roll after the HBO segment stopped. Even though it will air as a separate episode, studies prove online video does not cannibalize TV, get the video on the website immediately, and make it a presence on the homepage.

CBS Ushers Out Old Generation With Packer

34 years is an historic run of broadcasting championship games. That’s 102 Final Four games, 34 Championship games. All good things come to an end, and well, Packer was no longer that good.

Let’s put that in perspective. Packer knows basketball, he can break down a coaching strategy with the best of them, something Dick Vitale should learn one day. Problem is he never changed with the times. Packer possessed a pompous attitude that came through in his broadcasts. He was stubborn, tackling controversial subjects with less tact than a professional wrestler. In today’s world, that emphasizes political correctness, Packer was a sad reminder of the way things used to be, constantly feeding into stereotypes, then making contrived apologies. Aggravation CBS did not need.

In full disclosure, I did not enjoy Packer as a broadcaster. In fact, I could never figure out why they stuck with him in the spot with such a strong arsenal of analysts sitting behind him. Too many times I felt Packer made the game about him. His delivery gave off a negative aura. Maybe it was his tone, or the the fact he doesn’t have the same excitement that other analysts bring, but he always seemed to look for something negative. He erred toward criticism, not praise. The broadcasting game passed him by. I can’t name one person younger than 30 that actually enjoys Billy Packer.

Still, he called games at the side of three legendary broadcasters – Dick Enberg, Brent Musburger, and Jim Nantz. Behind the scenes he did a lot for the game of college basketball, and, though it may not come through in his broadcasting, he genuinely cares about the game and the players.

One note on CBS, if they made this decision because of his “this game is over” comment in the National Semifinal when Kansas was torching UNC in the first half they made a huge mistake. They teach you to avoid that statement in broadcasting 101, but honestly, I don’t need Billy Packer to tell me the game was over. I thought it was too. I stayed tuned in to see if they could make an unbelieveable comeback. I guarantee not one person turned this game off because of that comment. The big college basketball fans – and the bettors – stayed with it. Those who switched, changed channels because it was a blowout, not because Packer told them to. It just gave CBS another reason to pull the trigger.

On Clark Kellogg, he’s a solid analyst, not a bad choice, but is he the best choice. I think Bill Raftery is a relic and Jay Bilas is an emergin star in the analyst position, who really knows the game. Like him or not, next March will feel and sound different.

Cable Providers And Sports Networks Continue Stand-Off

In one corner stands the cable and satellite providers. Criticized for rate hikes, standing tall against adding niche sports programming to its basic package forcing further price increases by customers who have no interest in the programming. Across the ring, sports programmers, notably NFL Network and the Big Ten Network along with all other league or sport-specific channels. Seeking wide distribution to maintain sustainable, at high per subscriber rates – some of the most expensive in the cable industry. Stuck in the middle: the consumer. Looking for the best of both worlds, access to the programming and lower cable rates, feeling neglected and disenchanted by both sides. Somewhere a compromise exists.

So far the providers have the upper hand. No league network has basic cable access yet. The Major League Baseball channel will when it launches next year, but gave up an equity stake in the network to each major provider and charged lower subscriber fees to earn that right. A model the other networks should investigate and learn from.

Cable providers have a gripe with programmers, some of the rates they seek are irrational for networks that are not yet proven entities, and have a niche following. Under more pressure than ever, with telecom companies joining satellite providers as consumer programming options, cable operators must keep costs down to remain competitive, an impossibility at the rates sports networks are seeking. That same competition also brings pressure to reach an agreement with sports programmers. Customer attrition is not extreme yet, but as these new players increase their reach, consumers may opt to switch providers to get the programming they desire, rather than succumb to a sports tier.

Programmers need to get on basic digital cable tiers to have any chance to become viable. Only the die hard fans will opt to splurge for sports tiers. Carriage numbers and costs vary per cable provider, but one consistency is a significantly lower reach than basic cable. Less distribution leads to less advertising revenue and lower revenue from subscriber fees, which leads to less money for quality programming and eventually less viewers. A vicious cycle that adds up to an unsustainable business model.

League-owned networks relegated to sports tiers also risk cannibalizing themselves with their own pa-per-view packages. Fans of a particular sport may be more inclined to plop down the one-time fee for the NBA Season Pass or NHL Center Ice package to get access to all the games for one particular sport then pay for a sports tier that includes a handful of networks they have no interest in. Most season packages include broadband access, and various digital benefits that make it attractive. The more in-depth one-sport package holds more perceived value to a fan. This factor could reduce sports tier adoption.

A recent Sports Business Journal in-depth study on cable TV and sports outlined another quandary programmers face. Stuck on sports tiers, they could assist cable operators by marketing sports tiers to increase adoption, thus increasing their own revenue because they would collect that per subscriber fee from more subscribers. However, if the sports tier gains traction, cable operators have more reason not to put league networks on basic packages. A catch-22 for programmers.

A la carte programming across the board might be the best solution – or the worst, depending on how the pricing structure. The concept received further discussion earlier this year when the FCC Chairman said he sees a la carte in the near future. Just as cable programmers can argue that adding sports programming to basic cable will increase costs for many subscribers that will not watch, consumers can argue they already pay for numerous basic cable channels they don’t watch. My digital package has hundreds of channels available, I watch maybe 8-10 on any regular basis. A la carte programming levels the playing field – pay for what you want. Again, depending on the price structure that could be good or bad for consumers.

Proposed Solutions: Providers and programmers need each other. All league networks cannot be treated equal, especially when it comes to fees. The NFL is more popular than the NBA, and markedly more than the NHL (note: NHL Net is content with sports tiers for now), thus can charge higher subscriber fees. Late last year, during the NBA’s negotiations with TNT, the two sides discussed a proposal to expand NBA TV coverage to the digital basic tier on Time Warner cable systems in exchange for lower per subscriber rates. In this case, both sides win. The leagues stand to increase revenue, both in the near term and future. Though the per subscriber rate would decrease, they would collect the fee from significantly more subscribers. The unit value decreases, but the total increases. Using the wider distribution, networks can increase ad rates. By working with programmers in the short term, the league networks get their foot in the door. If ratings prove themselves out, the networks have leverage to increase fees during the renewal process. First, its important to get on that basic tier. Programmers settle for the lower fees, and make customers happy with new programming.

Another tea leaf the NFL can offer is access to it’s out-of-market package, currently licensed to DirecTV exclusively. The other major leagues already offer their packages to all providers. They could, however, provide more favorable pricing on those packages, likely much less lucrative than a mainstream network (note: without access to the books), to help sweeten the pot for programmers.

Providers are not as threatened by secondary competitors yet, however the threat lingers. Cable outlets can likely hold out longer than networks if it comes to a stare down, since they have more to offer and the network suffers more from lack of distribution. But do providers want to risk customer attrition, long, bloody, court battles, and negative public perception. Verizon and AT&T are ready to swoop right in. In the long run, providers stand to benefit from striking a deal, as long as its a sensible business deal.

Both sides need to give in a bit, no different than any other negotiations. One lesson from the MLB Network deal that bodes following is how they worked with a large group of cable providers at the same time, rather than striking individual deals. If all the major players come to the same table, a deal is more likely since the providers don’t have to worry about competitors one-upping them, and everything can remain equitable the first time around. Fees may vary based on a provider’s distribution, still having everyone at the table is beneficial.