What Hockey Needs, What Soccer is Getting, and Why Sports Cable Ratings Thrive – ESPN

Monday Night Football on ESPN is up over 20% from last season. College football on ESPN had its best year in over a decade, including its most watched game since the 1990’s. The Heisman Trophy presentation reached new high water marks. Last season’s NBA playoffs finished up. During football season ESPN is consistently the highest rated cable network each week, often by substantial margins.

Yes, sports in general and football in particular, are carrying TV ratings across the board, but much of ESPN’s success should be attributed to the marketing machine it’s created. A daily listener to their morning radio show, a few weeks ago I realized all they day on Monday morning is review Sunday’s games and hype Monday nights game, then on Tuesday they spend most of the show recapping Monday night’s game, bringing in a cavalcade of guests. This is not just a recap, its four hours of national radio smacking you in the face. I noticed it because I got sick of listening to it. Then when you turn on ESPN they are live from the sight of the game, it leads Sportscenter for a full 12-hour cycle at a minimum. Go online, same thing. As a more well-rounded sports fan, I was searching for a crumb of baseball coverage from the winter meetings, but nothing – all football, all the time. Even when the MNF game stinks, they still smack you upside the head with it.

Same thing with the Heisman. Cover stories all week, interviews, enough promotions so that you have the time, date, and tag line memorized. However, given how big the NFL is, maybe this would happen anyway, so its last night that really magnifies what ESPN can do. Broadcaster of roughly 90% of the college bowl games, last night ESPN had the less than illustrious Las Vegas Bowl, pitting BYU and Oregon State in what on paper was a decent matchup, but turned out to be a blowout. They moved the top two teams in college basketball to ESPN2 to put the game on the mother ship, then led Sportscenter with Las Vegas Bowl highlights and full coverage from the sight. The Las Vegas Bowl, a 24-point blowout, the lead on a night with NBA action, almost the entire Top 10 in college basketball on the court, and a significant MLB trade? When you have the control to dictate what people watch like they do, its amazing what is possible. If that game was on Versus, you would get a 30-60 second highlight no earlier than two segments into Sportscenter.

Don’t criticize ESPN for it, they are maximizing value of their assets, and the ratings show that people don’t mind. It shows that any sports property not bigger than ESPN, needs to partner with ESPN, notably hockey. ESPN is planning the white glove treatment for World Cup soccer in 2010, and its almost a guarantee that the ratings will set new records for soccer in the US. In the midst of their coverage, its also a guarantee that the NHL playoffs will get buried as ESPN goes double-barreled with World Cup and NBA playoffs.

It’s not the first time I’ve brought up this subject, but I think its worth noting now as ESPN’s tailored programming and the resulting ratings reached new heights this fall, at a time where hockey is more lost in the media landscape than ever before. They need to get on ESPN, they need to get on now, and they need to let ESPN show them how to market superstar athletes to the public.

NHL Trip Abroad Misguided

A few weeks ago the NHL dropped the puck on its new season, which many of you may have missed. Even those who watch hockey might not know opening weekend took place in Helsinki and Stockholm. Another misguided, failed business move by the league, though I can’t say what they failed at since its not clear what the goal was.

For the NFL, MLB, and NBA, international makes sense since these sports are near a saturation point in many domestic markets and need to establish themselves outside the country to develop new revenue streams. Further, most of the world is not as familiar with baseball and football – though baseball has come a long way recently and is big in the Pacific Rim, so the mission of those leagues is part educational, part evangelist, all to drive future business, similar to what the NBA did starting with the Dream Team.

On the other hand, hockey is arguably more popular in some Northern and Eastern European countries than it is domestically. Not to mention the NHL is far from a saturation point in the US, and still has growth opportunities in its home base of Canada. By taking opening weekend out of the country, it became out of mind, out of sight on the sports scene. The games started at noon, a losing proposition during the week or on the weekend against college football. They were buried on Versus, so no casual fan was likely to stumble upon it. And most importantly, the league did next to nothing to market the games, neither hear nor in Sweden, according to reports from the game. If the NHL plans to have the games, at least stand behind the decision and try to make it successful.

Here’s my confusion. No marketing push. No chance that a team will move to Sweden, so cross off market testing. No need to establish the sport there, as its already popular. Maybe I’ll buy extending the NHL brand, but Sweden has produced numerous NHL players, so fans are likely familiar with the league – and Sweden does play in the Olympics, often finishing better than the US.  Attendance was disappointing, and the league garnered no additional media deals or sponsorships (to my knowledge), so not much on the revenue angle.

All this said, what exactly were they trying to accomplish? While they were trying to accomplish this, did they notice they missed another opportunity to gain some notice with casual fans in local team markets by pushing Opening Weekend, or by having a big game on Versus (think Crosby or Ovechkin) to start the season. Instead, local television in Florida decided not to air one of the games in Helsinki. Explain how that helps a struggling franchise.

Hockey may never compete with the other leagues, but with continued in fighting and poor business decisions, its going to move in reverse as smaller sports surpass it.

Should Sports Change Revenue Sharing to TARP-like Program?

Last week’s SBJ cover story on the state of Detroit’s sports teams battling through the recession further illuminates how hard the recession has hit that part of the country. Sports teams are the least of Detroit’s problems, yet they remain one of the few refuges for an area fraught with unemployment and failing businesses.

Three key points I took away from the story: 1) Detroit has phenomenal sports fans, it’s aggregate per-cap attendance across all four major sports as a testament; 2) for the most part, the city is blessed with top ownership (we know about the Lions), Davidson and Ilitch have put wining teams on the field, done right by the fans, and tried to do right by local business; 3) the recession is stronger than both #1 and #2, which will make it difficult to sustain these teams over the next decade.

Ticket sales and sponsorship revenue are the most critical and most volatile revenue streams for teams. The economy has put both under significant pressure in the Detroit market. Teams face a steeper trade-off in ticket sales vs. price reductions than most markets and its key sponsors lost significant marketing budget. Lions aside, since the NFL shares revenue in a more equitable manner across the league, each team expects a significant revenue drop this year, which immediately makes it more difficult to field a championship-caliber team.

Looking further down the line, the auto industry will never look the same, and the future of these key sponsors and a critical regional source of employment is in jeopardy for the long-term. That said, will Detroit teams require, and should they receive a boost from the league’s central pool, similar to the government backing its local companies.

From a pure market size perspective it’s a border line top 10 DMA (11 to be exact), but the unemployment numbers, per capita income, and discretionary income numbers make it a candidate for help. Should leagues focus more on helping these owners, who have proven they invest in the team, have loyal fan bases, and can be a key market for leagues than the low-income owners that reap the benefits of revenue-sharing, yet do not add much value to the league.

Putting absolute numbers aside, using forward-looking marginal revenue metrics, leagues should consider if adding each dollar they subsidize Detroit with adds more value to the league and other teams than each dollar MLB subsidizes Pittsburgh or Florida, for example. Market size, ownership wealth, and absolute revenue numbers don’t encapsulate who most needs revenue sharing. Leagues should visit which teams need it at the margin, and how much value the investment (and it is investment by the other teams) can add to the league at large. Detroit – along with other traditional sports cities in struggling regions, are good candidates to consider in the short-term.

NHL Loses in Balsillie Verdict

I promise this is the last Phoenix Coyotes-Jim Balsillie focused blog, but with the verdict in and Balsillie’s bid rejected, I’m curious what the NHL and its owners achieved. Keeping Balsillie out was a major victory for owners across all major sports, since it maintains the cartel type control within each league, however the NHL is not one of the major sports leagues at this point.

When the NBA, NFL, and MLB each have media deals over $1B in value, and the NHL is doing revenue share with no rights fee on NBC, and allowing the network to reschedule games in favor of horse racing the league is not in the same category as the others. That said the NHL needs to move away from preserving status quo and focus on resurrecting the business, which could mean drastic changes.

A modern day businessman with a passion for hockey, like Balsillie, would bring innovation, vigor, and be willing to challenge the status quo. Without having personally met him, or knowing his full agenda, he’s they type of businessman I would want on my side if I’m the NHL – not to mention his deep pockets. He wants to move a failing team out of a dreadful hockey market, a novel concept, yet the league wants none of it. He wants to infuse capital into the team, pay for arena upgrades, and was willing to pay off ownership to an extent, but since he’s not part of the “old boy’s club” of owners, forget it.

Put the team relocation debate aside because most people agree that it makes no sense to have hockey teams in Florida, Arizona, and Tennessee, and that the NHL already has too many teams. I was curious to see Balsillie’s approach to marketing and ticket sales, given his work with building the Blackberry product, or how he’d integrate technology into the sports arena experience through mobile devices and new media. Maybe he could have concocted a new type of sports business partnership to develop new revenue for hockey teams. At the very least, he would have spent money to build a competitive team with first-rate facilities, and created a positive fan experience, and that’s something this league desperately needs more of.

Balsillie has reserved himself to the fact that he will never own a hockey team – at least for now. Meanwhile, the NHL is stuck with a franchise that dragged through the mud this off-season and sold few, if any tickets this offseason, thus the league will need to subsidize it again. Further, it faces a labor dispute, media problems (Versus-DirecTV dispute), turmoil within the NHLPA, and weak ticket sales in perennially good hockey markets, yet the league has made changes to counteract or mitigate these issues. No matter where you rank hockey on the American sports landscape, its falling fast.

What to Make of the NHL Network

Earlier this decade starting 24-hour cable networks became the cool thing to do for major sports leagues – NBA TV, NFL Network, more recently MLB Network, and of course the NHL Network. The first three have sustained notable successes and failures, nonetheless most people are aware of the three networks and what their position in the market is. The NHL, on the other hand, is an afterthought.

Few people know about the network, let alone watch it. That begs the question if your brand wants to use television as a marketing tool and revenue-generating utility, how do you plan to succeed with relatively little penetration. Last check the NHL Network is only in about 12mm households (though the number may increase with the Comcast deal), and despite league management saying the goal is wider distribution, I have not heard much of a fight from their camp to achieve this.

Conversely, they don’t have much leverage with cable operators. MLB, NFL, and the NBA each have major national television deals and broadcast and cable that earn substantial ratings, plus MLB and NBA ratings on regional networks often exceed NHL ratings in similar markets. Clearly, the other three sports have much more demand in the US. MLB boasts more content than any sport because of its long season, the NFL has made ancillary events such as the draft and combine into annual media frenzies, and the NBA’s work with Turner have given its network a boost. The NHL has none of that going for them.

The league tried to leverage cable operators by tying its Center Ice out-of-market package to network distribution, but again the package does not have the demand or popularity to force the hand of cable operators. Given the low subscriber penetration rate, and the difficult battle it faces to move the needle on that, plus the minimal subscriber fees it earns from the cable providers, I’d argue the NHL is failing to achieve both goals – marketing to a broader audience and revenue generation. That said, the league should reconsider its network strategy, rather than pursue a losing proposition.

If the league wants to stay in the content business, they should focus on developing shows and licensing them out to regional networks and international providers, rather than striving to program a 24-hour network. This could help reduce costs, while maintaining a revenue stream, and bolster distribution by leveraging with more availability – i.e. RSN’s, other niche sports networks.

Further, NHL’s online presence is well-designed and provides a great fan experience. It can try to shift the network completely online, have free and premium components, still license content out to television networks and web portals, use iTunes and other mobile distribution platforms, and shift the cable provider strategy to more VOD, which they have pursued with Comcast.

As the red-headed step child of major US sports, the NHL needs to stay ahead on the innovation curve and be willing to take more risk. Following the same network model that other leagues use is a doomed strategy for the NHL at this point. The league needs to develop something unique that extracts value from the current fan base (without gouging them), and achieves the reach and relevance needed to expand its fan base.

Ticket Sales Problems Magnified in NHL

We have focused on lagging NFL ticket sales putting local games at risk of blackout, a recessionary indicator for what is hands-down the most profitable and popular sport in the country. Recent MLB numbers show significant year over year declines in two-thirds of the markets. Hidden behind these stories is the effect on hockey in the upcoming season.

Unlike MLB, the NBA, and especially the NFL, hockey does not have media contracts in excess of a billion dollars and as many big, long-term sponsorship deals as the three major leagues. Same concept applies at the local level – media deals are insignificant for most teams relative to the other sports. Without these guaranteed cash flows, teams rely for a higher percent of revenue on ticket sales, creating much greater exposure to the market.

Last week the Minnesota Wild, with the current longest sellout streak in market where hockey is popular, announced they still have tickets available for every game this year. Late last season the majority of teams announced ticket price freezes or even reductions, which may help stabilize sales but could hurt margins and will certainly not lead to increased revenues.

Given the ownership situations in Tampa Bay and Phoenix creating a glut of negative publicity in each of those markets, and nationally to an extent, the NHL could see a significant and potentially debilitating drop at the box office this season that puts many teams on alert. Someone will have to explain on Phoenix sold any tickets this off-season given the circumstances. Dallas has an owner facing bankruptcy and a lot of ticket money going towards Cowboys games, Florida has always been a bad hockey market, so its likely to be high on the list of discretionary spending cuts for struggling fans. Take the argument right to NY where unemployment is above the national average, Wall Street money is not at its previous levels, and the Yanks and Mets captured a larger share of sports spending this summer (with the Jets and Giants coming), hockey is at risk of getting squeezed.

Teams have responded by reducing cost structures, notably salaries have slightly retracted the past year or two, but likely not enough. With the CBA coming due it could be time for the league and its players to reevaluate the entire system, bring salaries further in-line with what the sport is relative to the big three (a lot smaller than they think), and look for new revenue streams (which they are trying to do online). More importantly they need to put teams into markets they can succeed in and correct the national media situation.

The NHL needs ESPN now. They need to make the NHL Network relevant. And they need to move teams into markets they can succeed in and then do a better job of selling tickets and promoting the league. Last week’s big preseason marketing push barely scratched the surface. Maybe doing it in NY and getting buried beneath the glut of news is not the best stage.

Something to keep an eye on the next few months.

Activist Owners Good For Sports

You can go both ways on Jim Balsillie’s pursuit to own the Coyotes – he doesn’t deserve to own a team because of his brash antics and the fact the other owners don’t necessarily want him, or that he would be good for the league, infuse money, and good business sense. The more this carries on, the more I lean toward the latter. His motive seems to be that he really wants to own an NHL franchise – not build an arena, or make a business play. He is passionate about hockey, and that’s a good thing.

Owners with deep pockets and a passion for the sport increase the value of the entire league, and usually field successful teams, financially and competitively. People may mock what Stephen Ross is doing in Miami, from the short-term naming rights deal to the groundswell of celebrity figurehead owners, but the bottom line is he’s trying, he’s active, and he’s doing it for the fans. He came into Miami, hired the best people around to run the team, now he’s bringing in the best people available to create a fan experience and connect the team with the community. Ross is building an all-encompassing entertainment product that will generate sustainable revenue, while giving his football people the resources they need to make the team an annual playoff contender. If you’re a fan, what else can you ask for. Plus, his actions have generated positive brand awareness nationally, and he has successfully extended the Dolphins brand into new target markets with the ownership and partnerships.

Mark Cuban turned a moribund Dallas franchise, and like it or not, helped catapult the NBA from its post-strike, post-Jordan malaise. He managed his team in first-class, created an environment that players wanted to play in and fans wanted to be part of. His antics certainly crossed the line at times, but his antics have certainly had a positive impact on the sport. Look at George Steinbrenner in NY and the Celtics ownership team. Owners that come from successful business backgrounds that buy teams because they have a passion for sports and plan to stay involved with managing the business of the team usually succeed, which benefits everyone around them.

Back to Balsillie, the NHL needs his deep pockets in the league. One less team to worry about making payroll, or to worry about surviving, is a good thing for a league struggling to find stable ground. One more owner that will pour money into marketing the sport, who will focus on putting a good team on the ice, and creating a positive fan experience, will benefit all the other owners and the league as a whole. His style may rub people the wrong way, and rightfully so as he has mishandled many issues. However, in the end, if they embrace him as an owner, Balsillie may eventually yield a payoff for the entire league, if his comparables in other sports are any indication. He certainly has the pedigree with his success at RIM.