Antiquated NFL Blackout Rule Looms Over 2009 Season

Dating back to a time when team owners felt TV viewership cannibalized ticket sales, the NFL blackout rule is now a legacy, antiquated rule that the league should revisit. The rule essentially states that if a team does not sell out (or reach a certain number of tickets sold) a home game, the networks black out the game in the local market, defined as a 75-mile area around the stadium.

Darren Rovell penned a good piece that highlights the significant decrease in blackouts the past few years, relative to previous decades. Given the severity of the economic recession and the pressure on teams to increase prices to cover increased player salary expenses that trend may see a detrimental reverse, as many teams struggle to move ticket inventory. Since so few games have been blacked out in recent years, an influx of blackouts could surprise the fans and create negative reaction.

The NFL owes national much of its ascent to the top of the US sports ladder to national television. Sunday afternoon is appointment viewing for many fans. The broad reach and compelling action attract big audiences week after week. Fans develop loyalty to the home teams and they become more entrenched in the sport. Taking away that television exposure at a local level takes away the teams and the leagues best marketing tool. Not having the local team in front of fans week in and week out risks losing the casual fan to other sports or entertainment venues, and risks turning away some of the die hard fans in anger. Especially given the availability of a wide range of alternatives that did not exist when this rule was created, the NFL would be mistaken to risk any portion of its fan base.

First, its proven over years that showing games locally does not directly cannibalize ticket sales. In fact, arguably it helps boost sales by marketing the teams to potential customers. Ask the Chicago Blackhawks. Second, and more important, its less fans choosing not to buy tickets, and more fans forced to cutback on discretionary expenditures due to the severe economic conditions. As the NFL, do you want to be in the business of saying, we know its expensive to attend one of your games and that you may be unemployed, but if you don’t buy a ticket you can’t watch your favorite team. If anything the league should be finding more affordable ways to accommodate fans priced out of the stadium that are die hard fans and want more than a TV in the living room type experience.

If the league were to blackout games in any big football market, New York for example, its TV partners that pay billions in rights fees, would suffer from significant ad sales losses. NFL football is one of the top rated programs on TV. Ratings in local markets are magnitudes higher than over ratings, making ad time more valuable in those markets, black outs would strip TV sales teams of this audience. Further, if it’s a big market, it can significantly damage the national value of the ad inventory.

At a time when the NFL faces a potential work stoppage and numerous negative off-field publicity it to maintain focus on retaining its current core fan base. Blacking out local games could slow down the gravy train the NFL has rode the past few years, especially at a time when teams are pricing fans out of the stadium, not fans choosing to stay home. Widespread black outs would be a slap in the face to fans, and certainly hurt the NFL as a brand.

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NHL Not Extracting Full Value from Winter Classic Concept

Yesterday the NHL officially confirmed Fenway Park would host next year’s Winter Classic between the Bruins and Flyers. It’s another great choice – historic venue, great hockey town, two traditional teams with tremendous followings – all the makings for another successful event in attendance, ratings, and publicity. The game has become big enough and has enough potential that I feel the NHL should leverage it more, particularly in two areas.

Earlier this spring rumors swirled about a second Winter Classic, hosted in a Canadian city. NBC’s concern over the ratings impact and the NHL’s concern over dilution eventually quashed the idea, however the league is missing an important opportunity. College football used to own New Year’s Day. With the new BCS system they have let the pedal off the gas, cutting back on quantity of bowls played January 1st and putting what is essentially a meaningless game, often a poor matchup, as the sole primetime game. Hockey should carry the momentum and publicity of the Winter Classic concept to become a major player to own New Years Day sports. Keep the early afternoon time slot played in a historic stadium between two traditional teams (no Tampa Bay or Florida – EVER), and then throw in a night cap, under the lights from Canada between two Canadian teams. Remember, a bigger percentage of NHL revenue comes from Canada relative to overall revenue when compared to any other major US sports league. How big a TV rating would a Toronto-Montreal outdoor night game do, or at somewhere like Skydome? Needless to say, the teams would sell as many tickets as they could print.

The NHL also fails by letting NBC control the situation. NBC does so little for the league its absurd. Maintaining a broadcast network presence is a perceived requirement for legitimacy, but the NHL needs to get over that hump and realize broadcast television has little, if any, advantage over big cable networks and a fraction of the power it used to wield. NBC only shares ad revenue with the league, no rights fee. They fail to market the sport well, they dictate the schedule, they treat the sport like a daytime soap opera that desperately needs the network and is grateful for any speck of attention it receives.

Hockey is better than that. Forget NBC, find a way to play a second Winter Classic, assuming the TV rights, attendance, and sponsorship can offset additional costs and generate some revenue. Any positive revenue will be worth the enormous marketing boost. In addition, the NHL should strip the Winter Classic away from the NBC package, and either sell the two games as a New Years Day TV package, include them on a cable deal that has a rights fee where these games could increase that fee, or sell the games individually in each market. These games have some value in the open market, at least enough to warrant a deal better than the ad-share on NBC, and they warrant bigger build-up.

The NHL has an opportunity to become the story on New Years Day, they have some big stars (Crosby, Ovechkin, now possibly Tavares) in big cities to highlight, and great stadiums to play in. They should make it a platform to launch the season into full gear, try to maintain the hype during the All-Star game and hope it can catapult ticket sales and boost TV during the playoff run. At the least, the league can generate more revenue and more positive buzz by further developing the event and for once dictating the terms to NBC, not the other way around.

Why Even Fight, Customers Not Demanding Two Olympic Cable Channels

For a moment, put aside the fact that the USOC completely dropped the ball by announcing the launch of its Olympic TV Network without having the IOC on board, without previously working with other NGB’s to secure rights, and without some handshake agreement with NBC – the TV czar of all things Olympics. Even without these factors, launching this network is still a bad decision.

NBC partnered with InterMedia Partners for Universal Sports, a network essentially premised on the same strategy as Olympic TV Network. It fit well into NBC’s Olympic coverage, where NBC disperses events across a group of cable networks. However, the two years between Olympics remain somewhat of an abyss.

If ever there was a time to push the Olympic theme, I agree now is that time. Michael Phelps is still prominent in the public eye, Chicago is in the mix for the 2016 games, Bejing is still fresh in everyone’s mind, and a cable network can provide the marketing platform that Olympic sports desperately need to return to the mainstream. However, further segmenting an already small, niche audience is not typically a successful strategy. Neither is creating negative PR with in fighting among various governing bodies. The USOC-Comcast backed network launch may do more harm than good.

Clearly, with Comcast involved as an equity partner the network will get some distribution – replicating the recent strategy used by multiple sports networks to achieve wide distribution. But it goes against the current of the overall cable industry movement. Providers face a dilemma. Continuing to add programming increases MSO expenses, while competition from telcos and Internet viewers puts downward pressure on prices, squeezing profits at a time when ad dollars have disappeared. The proliferation of niche cable networks through the 1990’s and early 2000’s is not a sustainable business model for cable because none of these networks can directly increase customer revenue. Adding a second network based on programming with minimal interest outside of two bi-annual windows is not a good economic decision for MSO’s.

The USOC and Comcast would have added more value by trying to partner with the Universal Sports network and maximize the value delivered by Olympic programming. Develop a solid, singular marketing platform that promotes it as the place to go for Olympic coverage. The competition is the entire sports universe, not each other. MLB Network competes against ESPN, TBS, ESPN 2, Versus, multiple regional RSNs, TNT, and the other league networks. Another entity walking in to start a baseball-only network to compete with MLB makes no sense because you weaken each other in a fight against other behemoths that already hold an advantage.

Throw into the fire the haste the USOC showed in announcing this, and it has all the makings of a disaster. I have a hard time seeing either of these networks succeed unless they dump money into marketing and find a way to generate interest in more than Michael Phelps during the time between Olympics. And if the US lost the Chicago for reasons related to this situation, cable viewers would never forgive them.

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.

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.

NHL, NBC Fail Local Fans

NBC ended what had become a tradition for many teams during Stanley Cup road games, hosting a viewing party at the team’s arena, when it prohibited Detroit from holding one during Game Six of the Stanley Cup in Pittsburgh. NBC didn’t comment, but its clearly an attempt to protect its ratings, and the NHL did little – and probably could do little to stop it.

It’s a slap in the face to some of the sports most loyal fans, the same fans that the NHL needs to help revive the sport. Yet another example of why the NHL should not put itself at the mercy of a broadcast partner who does not pay a significant rights fee. The network puts its own interest before that of the league and the league receives essentially nothing in return – unless you count poor marketing and harmful schedule changes.

While 20,000 fans on this one night may not sound substantial, it adds up. What about the 20,000-plus that Pittsburgh would host during the deciding Game 7? NBC probably has to cancel that as well. This mentality is what can damage the league’s repair process. Look at this from a business perspective, customers are king, the lifeblood that drives the business. In sports you need to develop a relationship so they come back when the team is not in the Stanley Cup, when the team is not winning, and so they watch NBC when the team is not playing. Ruining this night – and potentially more if they repeat this – leads to losing customers.

NBC made a short sighted decision. Instead of focusing on ratings in the Detroit market, they should have insisted on inserting themselves into the in-arena telecast. Perhaps employ local ad-sales to sell against the in-arena screen, or insist on promotional activity that benefits the network and the league. They had an opportunity to get access to the most passionate hockey fans in the country in a moment when they would be highly engaged, a great target market if I’ve ever seen one with many opportunities to benefit from it, and NBC found a way to ruin it.

And for what? Will these viewers effect the Nielsen ratings? What if they went to local bars instead, where the Nielsen system is ineffective at tracking the number of users anyway? They lose the ratings impact.

Hockey needs to focus on grassroots, bottom-up marketing. While NBC was at fault here, the league has to stop allowing league partners who provide little or no value to the league from harming fan relationships. Its time to move past this theory that the NHL needs broadcast television. What they need more of is lessons on customer service and fan experience.

Listen to NHLPA, Versus is Not NHL’s Problem

Everyone is quick to bash the NHL for its deal with Versus, and point to the fact that it’s not on ESPN as the biggest problem with the league. ESPN brings a lot to the table, with its almost 100 M household reach, strong programming lineup, multimedia platform, and brand name. However, the NHL putting its games on ESPN will not magically increase the league’s popularity.

ESPN currently has deals with the NFL, NBA, MLB, and Grand Slam events for golf and tennis. Do you envision them bumping any of those sports in favor of hockey? So, in its current state, the NHL will only be a step ahead of the PBA and World Poker Tour, probably buried on ESPN2. That does not help the league. In fact, that treatment feeds the stereotype that hockey is not a major sport. It will need to fight for air time with college basketball and the NBA during most of the regular season, then MLB and the NBA during the postseason, so ESPN will inevitably bury the sport. Ask MLS how its ESPN deal is working out?

Versus has slowly built a strong audience, posting ratings at about the same level as ESPN did prior to the 2005 lockout, though Versus comes with a smaller audience. Its now in 75 million homes. Again, not ESPN, but not bad. The network caters its schedule to the NHL, and showcases the league (the Game 7 conflict and lost minute of a playoff game, notwithstanding).

Hockey’s real problem is not distribution, it’s marketing. NHLPA Director Paul Kelley has called the league’s TV partners to do more to promote its players – and they should listen (http://tinyurl.com/ldmru3). A few weeks ago Sidney Crosby and Alex Ovechkin faced off in a classic matchup of the league’s two biggest stars in a 7-game duel, with both players performing at a high level. A Kobe-Lebron matchup that may not happen has received more publicity that the series, thus exemplifying the NHL’s problem. Versus didn’t get the message out using other media – I didn’t see much in the way of online or traditional advertising anywhere from Versus. The NHL failed to develop a campaign around it. Everyone knows about the NBA’s “Where Amazing Happens?” playoff marketing, what has the NHL done?

This is where ESPN would help. They could give Crosby or Ovechkin the commercial time, the Sportscenter interviews, the appearances on the Morning Show, create shoulder programming to publicize the duo, headline them on ESPN.com, and so on. That is what hockey needs. They need more GQ, more talk shows, more coverage outside of games. People will find them games if they want to watch.

NBC is a bigger problem. They do the league a disservice. It’s the red-headed stepchild for a network that does not even hold the rights to another major US professional sport. Like most networks, they dictate game times, except they pay hardly any rights fee to the NHL. The Stanley Cup gets moved to accommodate NBC, but for what, a few dollars that the league could easily make in many other ways. A few more viewers may watch – at least according to Nielsen – since NBC reaches more homes than Versus, however its rating is lower and its not quality viewers.

The NHL needs to dump NBC. Sports no longer need broadcast television in today’s digital world, where the Internet and cable television have overtaken broadcast in mainstream society. The league needs ESPN, not because more people will watch the game, but for marketing. In conjunction, the league and Versus need to really step up the marketing programs. Just like any business, growth requires an investment.

On another note, hockey should reevaluate its revenue sources. TV is not big revenue right now – its ticket sales, merchandise, and sponsorships. The league should look at more ways to monetize the sport locally. Continue to build strong RSN ratings, create more events around the games themselves to fill up the building. When the building is filled, create another event to capture the excess demand, similar to Pittsburgh holding a viewing party showing the game on a big screen outside the stadium. The league should capitalize on local demand and make a strong bottom-up marketing push to build a sustainable fan base. Again, people will find them on television, the NHL needs to make people want to find them.

The NHL deserves credit for building a strong digital media platform. It does not need broadcast partners to give it multimedia reach. The PORTAL strategy is yielding record numbers of video streams and page views. It fits well with the NHL’s international strategy and provides the experience its deeply engaged niche fans seek. Taking this strategy to the next level, the league should employ a more definable “freemium” online business model that allows free sampling of content, with the rest of the content behind a paid wall. Many hockey fans are die hards and they are willing to pay for access, so it can capture revenues and still allow casual fans to sample content.

Overall, Versus is not the problem, but its not helping solve the problem either. The NHL needs to ditch the idea that broadcast television is necessary to succeed, get ESPN on board with Versus (they work pretty well together with Turner on the NBA), develop a strong marketing machine in unison with both networks, and continue to build out and highlight its online strategy. I should not be able to read about sports on the Internet without seeing a ploy to visit the PORTAL. In conjunction, the league should take focus locally in each market on filling the stadiums, and creating secondary events for excess demand, which has more direct impact on the league’s bottom line than a national television deal.