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.

Jets, Giants Learn Lessons / NFL Needs to Change Antiquated Rules

In the past week, the New York Jets have started to call people from the season ticket waiting list to notify them of availability and the New York Giants have taken to reduce game ticket prices in the new stadium by up to 37% to help move inventory. Two teams that had given sell-outs for long time periods, now must get down to business for the first time in many years. The announcements illuminate a few issues at play that involve current market conditions, breaking traditional marketing rules with price changes amid secondary market pressure, and the NFL’s local blackout rule.

Dating to 1973, networks will black out any games not sold out within 72 hours of kickoff within the home team’s 75-mile local market. Similar to the Chicago Blackhawks methodology until recent years, the spirit of the rule is to get people to attend the games and avoid television competing with ticket sales. Its now 2009, many studies have shown no correlation between ticket sales and availability on local television. In fact, if anything, blacking out games will negatively effect ticket sales by damaging team affinity in its local market. Often, teams and networks arrange to buy up unsold inventory before game time to avert blackout, a loophole within the rules. However, a better solution – do away with the rule. Roger Goodell could never black out a Jets or Giants game in New York without an onslaught at his Park Ave. office. Using these backdoor loopholes to get around the rules is unfair, since the league and networks then help decide who gets blacked out (sorry Detroit). The league should help promote the local team – dismiss the rule.

Team marketers, and marketers in general, always live by the rule that you can never reduce prices because it trains customers to delay purchases in hopes of more cuts. The Yankees threw that out the window chopping high end ticket prices in half during the season. Taking that lead, the Giants are preemptively reducing prices now, over a year before moving to the new stadium. On one side it’s a smart move because its shows they are cognizant of current market conditions, and will not stubbornly hold out on fans. It also gives the team time to compensate early buyers with additional value in other ways.

On the downside, PSL prices remain fixed, and that seems to be a sticking point with many fans. NFL teams need to look at other PSL systems. Possibly a timeshare system, where PSLs get sub-divided and fans can buy half or a quarter of a PSL, and based on the price determine their place in a lottery to select games each year. Or the team can add perks for PSL owners, group off-season parties, better access within the stadium, and deals for non-football events at the stadium. One problem is that teams put a PSL on almost every ticket, making price the only differentiator. A different approach is to make the PSL a differentiator, raise the prices, cut the inventory, and add a laundry list of features.

Today’s economic situation is exacerbating the situation, but the secondary ticket market is the real problem. Why should fans commit to this upfront investment when tickets can usually be had at market value – much lower than face – closer to the games? Those ridiculously priced Yankee seats, readily available for a fraction of face value. Teams must recognize season ticket holders often rely on the secondary market to recoup expenses, when they price tickets where fans will actually lose money the eventual backlash is significantly lower demand due to the unstable market. Prices must drop until its economically stable.

PSLs help fund the outrageous stadium price tags teams run up. What if teams took a phased, modular approach to stadium building. Build the core stadium and key amenities, but skip on that extra $100-300mm in extras until you gauge what the market is willing to pay for the stadium. Maybe the Yankees could have cut the cushioned OF seats if they knew ticket sales would sag or prices reduced. Maybe the scoreboard can be 10’ smaller without changing demand. Cut stadium prices, reduce PSL or entry-level tickets, but make it easy to add (and actually plan the construction) amenities in the first few years if demand exists.

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.

Cowboys Prove Ticket Demand Still Exists – At the Right Price

…and that price is different in every city for every team at every stadium. The Cowboys are the team in Dallas. Though the Mavs sell out and the Stars usually do well, the Cowboys headline that city. Jones built a palace, charged the highest prices around – $16-150k per PSL as reported by SBJ – and he is still on the brink of selling out the Stadium, coming off a disappointing season no less. Jones knew the market and did an excellent job of extracting maximum value.

On the other hand, look at the NY market. The Yankees, Mets, Jets, and Giants have all failed to an extent, mispricing tickets and leaving revenue on the table. If you view ticket pricing and ticket plans as a negotiation with your fans, as with any good negotiation you need to wait for the best opportunity to come with your best offer. Its arguable that both NY baseball teams came to fans with an offer to benefit the teams at a time when neither had any leverage in the situation.

First, the economy clearly hurt, but that’s out of the teams control, though they could have reacted better by making changes on the fly and won some equity with fans. Second and somewhat overlooked, they are all entering the market at the same time. Part of the allure of new stadiums is the differentiation factor. The NY sports market essentially offset each other on this factor by opening stadiums and selling PSLs all within a few months span – that’s four fan bases, with a lot of overlap smacked upside the head at the worst possible time. Another point, which is minute in this instance is that outside of the Giants none is coming off a recent championship or even a playoff season, and no player has arrived that can move the needle on ticket sales since A-Rod. Since all four teams do spend in free agency and have star players the argument holds less weight, but it’s another point to keep in mind.

The point here is that the lack of differentiation in the NY market for new facilities and the current situation gave the fans leverage in the ticket pricing “negotiation”. This leverage drove down demand, however the teams priced tickets at the point where demand may have been if their stadium was the only new one and they were the only game in town – similar to the Cowboys. It’s not that today’s sports market can’t yield these prices, its that teams can’t operate in a bubble, they need to become more keenly aware of the external environment and remain flexible.

This applies to smaller market teams, who may not receive criticism for high prices, but still play to half empty stadiums. Think bigger than just your team. Management is smart enough to do this and always talks about, yet it often does not show up in practice.

Jets, Giants Had No Choice With PSL Plans

One team is coming off an improbable Super Bowl championship, the other recently acquired a sure fire Hall of Fame quarterback. They play in the biggest media market in the country and will jointly open a $1.6B, presumably sparing no expense to give fans a world class experience. Jet and Giant fans can complain all they want about PSL’s and ticket prices, the teams made the right decision – and the fans could have had it much worse.

Ownership only rattled season-ticket holders with this plan. Imagine the alternative, asking for government funding to help offset stadium costs. The entire metropolitan area would wage war on Woody Johnson, and the Tisch/Mara ownership team. $1.6B stadiums need outside funding. Ownership should be commended by passing the buck onto the people who use the facility, rather than everyone in the area, many of whom careless about football. We all pay gym memberships and apartment rent, look at this as part of the cost to use the facility, and those who use it should pay it.

Simple knowledge of supply and demand proves the Jets and Giants are NOT overcharging fans. If that was the case, the stadium would not sell out. Not only will every last seat license be scooped up immediately, each team will have a waiting list for the right to buy a PSL for season tickets. With demand high, successful companies will increase prices until reaching an equilibrium. While football is not a traditional product, if the teams need money they have every right to raise prices to cover expensives. The loudest protest is not buying the PSL, which does not appear likely.

In fact, NY football fans should consider themselves lucky. Ticket prices for games, on top of the PSL, will increase, but still pale into comparison to season ticket packages at the new Yankee Stadium and Citi Field. Tickets for football and baseball are roughly equivalent (with some generous rounding) per game, making baseball tickets for 162-games exponentially more expensive than an 8-game plus a preseason or two football package. Toss in the cost of the PSL and its still cheaper than baseball. Want to argue this is football, not baseball, check out the Dallas Cowboys PSL costs. Small countries may struggle to afford seats.

Unlike game tickets, PSL’s are investments, not sunk costs. Fans can sell their seat to a rabid fan on the waiting list for any price the market yields, likely much higher than the original purchase price since demand increases once all the PSL’s are sold.

Comparing the two plans is moot since fans seem to take issue with the whole concept, not the fine details of its implementation. However, the Jets earn higher marks for PR by offering seats without PSL costs, and will yield more revenue by using an auction for its best seats. The auction will reveal how fierce demand for the tickets are, and if past NY football ticket performance is any indication, expect these seats to blow past the $25,000 high water mark, proving the fans actually have a good deal.

Favre Pushing the Limits of Overconsumption

Will he play or stay retired? Will Favre report to Green Bay or wait out a trade? He’s flying on his private jet from Mississippi. Wait, no, he’s go back home. For weeks the American public was inundated with Brett Favre news, even when there was none. ESPN staked out Packers camp just to say we’re here waiting for Favre. Then the bally-hooed trade to the Jets, which made things even bigger because, well everything in NY is bigger. Now his every move and every word leads the sports news. When is enough enough?

Actually, it might be too much already. While awareness of who Favre is jumped this summer (according to the Davey Brown Index), his trust and endorsement power took a hit. Favre put himself in the middle of a controversy. It’s disguised because they were no arrests or late night incidents, but it was a full blown controversy. Fans take sides, and many felt Favre was wrong in how he retracted his retirement and tried to force the Packers hand.

Further, Favre is testing the limits of overexposure. At some point public awareness reaches the point of diminishing returns. America had Favre shoved down their throats for weeks. It took weeks for the snail-like story to unfold, so many days he was the news because of no news. At what point do people get sick of him and tune out? Favre put himself into choppy waters. Sure, his Jets jersey set records for single day sales. Chalk that up to the NY factor, and a team with passionate fans desperate for a winner and a superstar. If any other NFL MVP was traded to the Jets, fans would buy that jersey at the same rate. The Jets have not had a superstar for years and are looking for someone to latch onto.

Living in NYC, it’s hard to take the pulse of the rest of the country, but will anyone in LA or Chicago care in October when the Jets are 3-3 playing in mid-October? CBS plans to continue the overexposure and put Favre’s Jets on at every opportunity possible. The story can go two ways from here: Favre plays great, the team makes a surprising run, plays competitively every week, and all hail Favre the savior; or Favre plays average, the team flops, and the fans turn on him quick. Think those Jet fans bought his jersey fast, watch how long it takes to boo him off the field after 4 interceptions against New England. The public will be left with the image of an aging player who didn’t respect the game and got what he deserves, not the star player who made one last run in Green Bay last season.

CNBC’s Darren Rovell reports his marketing clout took a hit because of his indecisiveness and unreliable comments. We’ll monitor his sponsorships as the season approaches and plays hit. If Favre wants to cash in, now is the time. He’s still a hero in NY without taking a snap. The TV and radio appearance deals are certainly on the table, and any Jet sponsor would love to use Favre as the front man. Meanwhile, back in Green Bay local TV should take advantage of the Favre love affair and get his face on the screen whenever possible. If Aaron Rodgers falters, the affection for Favre in Green Bay will multiply. He’s still a valuable commodity in that market, and will only get bigger if the team struggles.

Favre will serve as an interesting case study on where the line is for too much exposure. Marketing firms walk the fine line with their stars, and the news coverage, much of which Favre brought upon himself, was clearly too much. The best way to measure the impact is the fan reaction he receives on the road, the national ratings Jet games receive, and how many marketing opportunities come his way.