Pac-10, ACC Logical Media Partners

Here’s the lay of the land for college conference media deals: the ACC, Big 12, and Pac-10 will all vie for new contracts over the next two years, the two models are partnership [with established media networks for substantial rights fee] or ownership [of your own network].

The partnership model yields lower risk, however few options exist – mainly ESPN, Fox Sports, and CBS – and each competitor has already allocated significant chunks of programming time and fees to the SEC, Big 10 and Big East. This leaves the three remaining BCS conferences to fight over a limited supply of money and distribution. Conversely, launching a cable network is a difficult proposition in this market. Each conference has seen the Big 10 battle for distribution, while the NFL Network continues to lose its fight with providers, among other networks in protracted carriage disputes.

Larry Scott, newly crowned Pac-10 Commissioner, publicly acknowledges that he must market his conference to a wider audience, while ACC Commissioner John Swofford understands how the recent SEC deal changed the economic balance of power in college sports. Signing a rights deal with ESPN, likely for less than the SEC will not do justice to either conference’s bigger mission. The Pac-10 and ACC would play second fiddle to the SEC in college, and get buried under the NFL, golf and tennis majors, MLB coverage, and the NBA. ESPN and ESPN2 have limited shelf space, most of which is occupied. Additionally, these conferences need top billing to increase exposure and drive other revenue streams.

Given the difficulty to launch cable networks, a partnership between the conferences increases their leverage, disperses some of the risk, and increases the upside potential. Each conference brings an iconic team in both major sports – USC is the gold standard in football, as UNC and Duke are in basketball, while Florida State and Virginia Tech hold clout in football, as UCLA and Arizona do out West. They play in complementary timezones, opening the door for cyclical live programming and bi-coastal doubleheaders.

While gaining distribution is difficult, this combination is arguably a better sell than the Big 10. The aggregate covers no less than 12 of the top 30 TV markets to the Big 10’s 7, which is a generous count. Further, it’s presence in more overall markets would the network to charge a premium fee to more “in-market” consumers, thus increasing revenue. It follows that offering programming from two regions, with numerous displaced, yet passionate fans, creates a better selling point to cable providers not in school markets.

New business development opportunities can stem from the relationship. In place of the ESPN contrived basketball conference showdowns, a compelling pre-season ACC-Pac-10 series would draw interest, while the network could investigate bidding on college bowl games involving the two conferences, both creating a more compelling programming slate.

Another key is content ownership. Both conferences have the opportunity to learn from the SEC’s Digital Network initiative, and roll out an enhanced revenue generating machine in a few years. Doubling the content library opens new, creative bundling opportunities to sell to the sponsorship market and to license out. Without diving into financial projects at this stage, with the right management in place, its feasible to make the sum value of their content libraries greater than the individual parts.

And they count the greatest golfer and greatest basketball player ever among their combined alumni – hmm, shoulder programming?

Teams Not Adding Value, Exhibiting Innovation With Ticket Offers

Darren Rovell wrote this week that only a handful of teams immediately offered partial season ticket plans following the release of the full NBA schedule, a somewhat surprising revelation given the expected difficult ticket market projected for the upcoming season. It begs the question if teams are doing enough, and how risky is lowering prices on the long-term stability of ticket sales.

First, I’m shocked that in this day of emerging social media and fan engagement that no team (from the information I gathered) ran any prediction contest to win tickets. Here’s 41 home dates, pick who we play on which dates, most right gets tickets to the game of their choice, second best gets the option to buy tickets to any game at any price point, or something along those lines – what day will the team first host Lebron, closest date wins tickets, etc. That would at least serve to stir up engagement, incentivize fans to start to following on its various platforms building the customer database, and serve as a platform to publicize ticket offers. The perfect engagement opportunity during what amounts to a dead period in the NBA, but little action.

Next, teams should be wary of aggressive price cuts this early in the sales cycle, yet need to flex innovation to move tickets. Creating multi-game plans that force fans to buy 6 games in order to see Lebron or Kobe is old hat. A still fledgling, unproven is bundling tickets from multiple sports – a Hawks-Braves partnership, or a Rangers-Mavs bundle. Another popular plan is the “Pick-A-Plan”, essentially an a la carte multi-game ticket package. Teams could put a different spin on this, allowing fans that purchase this a la cart plan before a specified date to create a theme around the games they pick, then the team can pick the best four and put them for sale for one month, the person whose plan sells the most gets a full refund on the tickets. You can try to unify the fans that buy each of these ticket packages into the same section, create some camaraderie, and make the experience meaningful.

What teams should avoid is slashing prices too early or without recourse. This week, the Texas Rangers announced discounts up to 75% on some weekday games the rest of the season – mind you, this is a team in the playoff race with improved attendance over last season. But offering these cheap tickets without adding value to the early buyers sets bad precedent for future fan action. In conjunction with this offer, teams unloading last minute ticket inventory should offer current ticket holders seat upgrades at low prices, making upgrades available only to fans that purchased prior to a certain date, or to season ticket holders in less preferred ticket positions. Provide an incentive to hold a ticket, and give those that purchased an advantage. Then back fill available tickets that upgraded in the low price, last minute offering. It’s possible to double incremental revenue, while maintaining the incentive for early purchases.

Many teams are publicly stating financial losses. It will be interesting to see what, if anything, struggling baseball teams due to lure fans out down the stretch, and what the numerous NBA teams that did nothing to improve during the off-season

Smart Trend: Intra-City Team Business Partnerships

It makes so much sense you wonder why it didn’t happen sooner. Yet, its still an odd pairing that could be viewed as befriending the competition. Last week in Cleveland, the Indians and Browns announced a ticket partnership to bundle suite sales for baseball and football games into a few select packages. That followed the joint marketing effort started a few months ago in St. Louis that had the Blues and Cardinals providing each other signage and in-stadium promotion to help push ticket sales.

Though teams in the same city compete for the same entertainment dollar from mostly the same fan base, a partnership opens the door to add more value for both parties than could be done alone. First, it creates new ticket bundling plans that combine games in both sports, similar to the Browns-Indians deal. It’s a value add for customers who may only attend a few games per year, particularly family plans.

As the Cleveland package does, it’s a way to sell suite inventory for individual games, which I’d assume is tough inventory to move since it does not appeal to the everyday fan, and most corporations and wealthier fans probably opt for season packages.

Intra-city partnerships also open the market for road trip packages, currently sold mostly through ticket brokers and sports travel companies. While teams probably would not earn any additional revenue for selling directly relative to through a sports travel firm, however if the teams create the offer they have more marketing muscle to put behind the initiative, which would likely increase sales and the teams can easily add more value to make the package more appealing.

Another benefit, teams immediately double their ticket sales staff. I know that’s a bit of a stretch, but in essence you now have another entire sales staff pushing tickets to your game. More manpower never hurts.

The St. Louis deal focuses more on promotion and marketing, and what better way to reach your target market than at another major sports event in the same city. While every fan may not cross-over between sports, it’s certainly a high correlation. Advertising during a game (in arena or on radio/TV) probably reaches a higher percentage of potential fans relative to the overall reach of the message than any other advertising, other than during a team’s own games. Given the current state of advertising, if exchanging some ad time and in-arena signs can help sell some season-ticket packages and suites, it results in a net revenue gain. Plus, new customers have higher expected future revenue and ancillary in-arena revenue opportunities that far exceed advertising revenue.

Don’t expect the Mets and Yankees to start jointly selling tickets, or maybe any New York teams to partner, but teams in many markets can mutually benefit from this arrangement, particularly smaller-market, lower-revenue teams, such as Cleveland. And it makes more sense to partner with teams that have opposite seasons – for example baseball and football, or baseball and basketball or hockey. Teams like Pittsburgh or Kansas City would likely benefit from the strength of the football team, while a place like Buffalo with only two professional teams is also a logical spot. The possibilities are endless, the benefits definitely tangible.

EPL TV Rev Sharing Idea Could Work

Last week English Premier League (EPL) TV revenue figures showed how the league distributed the record $1.6B it brought in this season. The way I understand the system, each team receives a flat fee as part of the negotiated television contract. Then teams receive additional funds based on incentives, such as national television appearances and related success factors. Sports leagues don’t want to take lessons from the EPL to promote competitive balance or salary structure, given the top four teams annually dominate the league and buy the best players. However, if applied in a different manner the revenue sharing idea has merit.

Recently the NBA announced it would increase the amount of money in the revenue sharing pool next season. The league uses a complicated formula produced by McKinsey consulting to distribute money to teams that qualify. In other words, a team cannot simply cut costs, not try, then pocket the money. As revenue sharing becomes a more prominent part of almost every sport, these checks and balances are crucial.

Applying the NBA model to TV revenue is interesting. League’s could start by setting aside a percent of the annual broadcast revenue to be equally divided among teams. The remaining money would then be allocated based on an incentive program, in one of two ways.

The league could use an outside consultant, such as McKinsey, to create a complex formula that rates teams on a number of various metrics that take into account financial need, business model implementation, marketing success, and competitiveness, to name a few. The premise is to determine how much a team is doing with what it has to work with, and how well it’s executed. Based on this formula, teams are ranked, and receive a percentage of the remaining money.

A second way is to take the remaining league TV revenue, and split it into different categories. Put a certain percentage towards the financial need teams, another portion to marketing efforts, and so on. Then rank the teams based on each metric, and award a percent of the revenue for that metric to each team accordingly.

The goal is to reward teams that do well and punish teams that don’t. Obviously, it needs to go beyond a simple win-loss analysis. If both the Twins and Yankees earn playoff berths with 90 wins, the Twins should rank higher in earning the shared revenue because they will likely have done more with what they have to earn those wins than the Yankees. Likewise, if a team rolls out a new marketing campaign and sees a 10% increase at the gate as a result, they should be rewarded for the grassroots efforts. While a team in the NBA like Memphis that gave away its only superstar should not simply receive extra revenue because it divulged its greatest asset in a cost saving move.

Clearly, more analysis and research is required to develop the right system, but performance based incentives for shared revenue is one way to reward teams that need additional revenue and work hard for it, while avoiding hand outs.

On-Field Sponsorships Not The Answer For Major Sports

Four years after Major League Baseball launched an ill-conceived plan with Paramount to promote the Spiderman movie by putting the movie logo on the three bases of each major league stadium for an entire that almost gave baseball purists a coronary before it was canceled, MLB found a new, creative way to integrate a sponsor. MLB teamed with Paramount to promote the upcoming Indiana Jones movie by putting a picture of Indiana Jones on May 22nd, the movie’s premiere date, of each team’s schedule on MLB.com. The promotion works on many levels, its creative, non-intrusive, and will draw eyeballs and get attention of the target demographic, who constantly check team schedules.

However, it raises the question on where to draw the line with sponsorships in sports. MLS allows teams to sell uniform space, the NHL tested virtual ads transposed on the ice during the playoffs, baseball stadium outfield walls, yet the public outcry when baseball even considered a logo on the bases was enormous. That promotion would have created a major backlash against both the league and the product.

In the constant quest for additional revenue, leagues, teams, and networks continue to push the envelope, each league brings different parameters to the table. MLS, and all the individual sports (golf, tennis, etc.) can get away with uniform ads, however, we are far from the day when fans will accept a Visa credit card ad on an NBA jersey, NFL uniform, or baseball uniform. Its a lucrative concept – DC United recently signed Volkswagen for 5 years, $14 million so imagine what real estate on the Lakers or Celtics uniform would yield. But it invades tradition, creating the potential negative backlash I mentioned earlier.

On field advertisements are different, I think basketball courts and football fields are already littered with enough graphics – be it the league or team logo, field name, or end zone design – that an advertisement on the hash marks is not a far reach. The NBA and NFL should carefully seek sponsorship deals for various parts of the field that have excessive exposure. Football teams could seek sponsors for goal posts or the padding under the posts and the play clock, while the NBA has the shot clock, the post holding the basket up, and the scorers table. From there, sponsorships can migrate onto the playing field without too many arguments. Basketball arenas are already testing technology systems that can display ads on the background during stoppages in play. Baseball is the only field still treated as sacred to this day, though the outfield walls and foul poles are already fair game.

Before moving to the field, sports entities should maximize in-game TV sponsorships. For instance, almost every sport leaves a basic score graphic up the entire game that includes the network’s logo, occasionally expanding it to show a stat, such as a basketball team’s shooting percentage, or a batter’s career against a certain pitcher. Network’s can replace their logo with a sponsor’s logo for a temporary amount of time, allowing them to sponsor this portion of the game. Or, rather than a pop-up that shows Derek Jeter has three home runs in his last ten at-bats, flash a small ad graphic each time Jeter gets up. Sell a sponsorship for his at-bats all season. On screen exposure during the most watched points of the game is invaluable to a sponsor.

These ideas only scrape the surface of what’s possible. It goes without saying networks must diligently avoid clutter, and be careful to make the ad’s too intrusive. The key is creativity and subtlety, or again that backlash and failure risk comes into play.

Putting my digital hat on for a second, more leeway exists in new media because the viewers it caters to are of the less traditional, younger demo, and because new media itself is less traditional. Content owners can leverage that opportunity to maximize revenue. Moving beyond the normal pre-roll and overlay advertising using in online video, arguably more effective than TV advertising because its time-shift proof, the surrounding screen that houses the embedded player can be sponsored. Add a social networking component to engage viewers during the game. Fans will debate that pitching move in the eighth inning somewhere, give them the forum to do it right online with everyone else watching the game. Fantasy games, product placement within broadband only telecasts, mobile, the list is endless for new sponsorship revenue opportunities, albeit none reaching the masses as traditional television does at this point.

Before one of the major sports cannibalizes the purity of the game by invading uniform space, or plastering logos on balls, many creative ways exist to generate additional revenue that are not currently used. Each sport has a different threshold that it can push without alienating fans and challenging the establishment. Uniform advertising is accepted in soccer because fans are accustomed to seeing it in Europe. Hockey may get away with it, the major league most in need of new revenue and attention, fans tolerate change more than in other sports. Football and basketball have to avoid the uniforms, but should investigate on-field advertising, with care to avoid clutter and overwhelming fans, while baseball needs to steer clear of the field altogether, outside of virtual signage. However, baseball has the most in stadium, off field sponsorship opportunities because of the unique nature of each stadium, and interactive fan opportunities it presents. Before broaching that topic teams and networks still have creative leeway with their telecasts.

Stadiums Not the Answer To Save A Franchise

As Tampa Bay and Florida petition for new Major League stadiums, claiming it’s the only way for their respective franchises to generate the revenue to compete, both teams need to reevaluate the misconception that a new stadium alone will lead to increased attendance.

Of the 9 teams that opened new stadiums since 2000, each team benefited from an initial attendance increase, however only the San Francisco Giants – thanks to a World Series appearance and big box office draw in Barry Bonds – and the 2005 champion St. Louis Cardinals, have avoided at least one season of significant attendance decline. Stadiums are only new for so long, fans attention quickly shifts back to the product on the field to make buying decisions.

To underscore that point, every World Series participant since 2001 enjoyed at least a 15% attendance surge the following season, unless that team was already over 90% capacity. The 2003 Yankees, with only a 6.57% increase and still strong 83% capacity in 2004, are the only outlier. But New York had played in six World Series over eight years at the time, so fans expected success.

Similarly, teams that increased their win total by a double-digit percent during that period witnessed a similar uptick at the gate in either that same year, or the subsequent season. Though most people no longer consider US Cellular Field in Chicago or Toronto’s Rogers Centre destination stadiums, each club saw an uptick in attendance thanks to winning seasons, while PNC Park in Pittsburgh, arguably the class of the recent retro stadiums, struggles to beat the attendance numbers from the final seasons at antiquated Three Rivers Stadium.

Teams relying on new stadiums as the primary means to compete with big market teams should use Milwaukee and Detroit as case studies. After opening Comerica Park in 2000 with a 19.5% attendance increase over the final season at Tiger Stadium, and over 70% higher then the penultimate season, the Tigers lost those ticket gains in three seasons by averaging 107 losses, and making a run at the single-season record for losses. Only after restoring its on-field product to respectability did Detroit regain enough fans to draw over 2 million. An American League pennant in 2006 led to eclipsing 3 million at the gate last season, a franchise record. The Brewers have a followed a similar curve since opening Miller Park, initial hype increasing ticket sales, a retreat back to previous stadium attendance levels due to poorly performing teams, before a steady increase correlating with more wins.

Both teams needed new parks and benefit from the advantages, but neither team improved its record, or attendance, solely based on a new stadium infusing revenue. In fact, attendance increased because improved management and player development delivered young, inexpensive stars to the major league team – neither team doling out excessive contracts until Detroit signed Miguel Cabrera this past off-season. Similarly, the Cleveland Indians laid the groundwork for their playoff teams of the mid-1990’s prior to Jacobs Field opening in 1994. Cleveland opened the park with a World Series contender.

In the NBA, where arenas are less of a differentiating factor for consumers, the same fact holds true. Boston and Portland experienced the biggest increase at the gate this season compared to last. Both also made substantial leaps in the standings, the Celtics setting a record for the biggest increase in wins from the previous season.

New Stadiums Still Worth It

Despite new stadiums not guaranteeing sustained attendance increases, they will still benefit a franchises bottom line. Almost all new facilities sacrifice capacity in exchange for more luxury boxes and suites equipped with various amenities that older venues did not have. More amenities lead to higher prices and more sales of suites, which both increase team revenue, one of the most compelling arguments owner give for wanting a new stadium.

The regular stadium seats also benefit from various amenities at modern ballparks, particularly improved views closer to the field, new scoreboards, and various attractions within the concourse. These factors justify ownership raising ticket prices when the team moves, therefore even if attendance falls back to previous levels the team still rakes in more profit because it’s selling the same amount of tickets at higher prices.

Throw in the additional sponsorship opportunities at new facilities, including naming rights, and franchises certainly benefit from new stadiums. However, ownership frequently takes on substantial debt, even with publicly subsidized projects, therefore they need to sustain that additional revenue to cover expenses and raise capital to invest in improving the team.

Where Teams Can Improve

Teams that effectively build strong brands, not tied to a particular player or performance, can withstand a down year without impact at the gate. To no surprise, the Chicago Cubs and Boston Red Sox maintain close to 100% capacity irrespective of fielding a playoff team. The Dodgers perennially fill over 70% of capacity without a playoff win since 1988, although they often field playoff caliber teams.

It’s hard for younger franchises to duplicate the history behind the Cubs and Red Sox, but teams need to use that first season at the new ballpark to make a strong impression on fans while they have their attention.

A new stadium is an opportunity to redefine the brand, create a unique experience, give fans a reason to come back to the stadium, regardless of the outcome of the games. That’s why it’s perplexing that the Washington Nationals rushed to open their new stadium, with a major parking problem, an unsettled concessions situation, and kinks in the overall stadium operations, witnessed by scoreboard malfunctions during the second game. Teams, especially those with recent attendance problems, must be customer service oriented and pay detailed attention to creating a positive fan experience in year one of a new stadium or fans will not return until the team improves.

This season provides a few key stories for teams either opening new ballparks, or proposing to – Minnesota, Oakland, Tampa Bay, Florida. We will find out how strong of a brand San Francisco built in its first season without its big drawing ticket, Barry Bonds, or a competitive team. Same in Houston, who lost future hall-of-famer Craig Biggio, and no longer have a team expected to contend. How will the Nationals, lacking any star power, draw in their inaugural season at Nationals Park, and will fans keep coming despite the problems?