LPGA Makes Bold, Reckless Statement

Desperate times call for desperate measures. Starting at the end of the 2009 season the LPGA will require players to establish English proficiency or face suspension. Golf, and all major individual sports, rely heavily on communication skills to engage fans and capture sponsors. Recently foreign players have dominated the LPGA, particularly South Koreans. However, the LPGA’s decision is short sighted, reeks of desperation, and will generate negative publicity.

Tour officials rode Annika Sorenstam for the past decade and counted on Michelle Wie to become the LPGA answer to Tiger Woods. With Sorenstam retiring at the end of this season and Wie just struggling to make cuts, LPGA popularity is plummetting. The tour recently cancelled a 2009 event because it could not replace the event’s title sponsor. Networks continue to cutback LPGA television coverage, and the tour has not received much interest in its attempt to bundle television rights for a national contract for 2009. This announcement says tour officials think that South Korean dominance has turned off American fans to the sport, and the only way to correct that is to American-ize the sport.

No other American league has mandated language requirements before, which makes the LPGA appear biased to an extent. A move intended to make the sport more likeable in America, may actually turn off fans that interpret the rule as racist. Further, if non-English speaking players begin leaving the tour or getting suspended, the quality of play will diminish. The LPGA will realize a lower quality product will hurt attendance and popularity much more than foreign player dominance.

The announcement is blunt and lacks the sensitivity that these issues require. If the LPGA wanted headlines, this will get them, but at what cost. WIll sponsors be willing to deal an entity that can be viewed as discriminatory? Will networks suddenly make room for LPGA tournaments? Sports fans tune in to watch players, not hear them speak. More than any sport, golf is played in silence. Outside of a press conference or two minute interview after the 18th hole, how often do players appear during tournaments? English speaking players is not the LPGA’s problem, lack of interest is, and that can only be fixed by improving the product and marketing it better.

A better move for the tour is to embrace the international flair these players provide. Take the game global. Follow the NBA lead in China, bring the game to new countries, to the places where these new star players hail from. Create a more public Ryder Cup type competition to pit the young American stars against the emerging sensations from overseas. Tour management should focus on the positives the tour’s current composition, not change the players to fit their ideal preference.

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MLS Getting Expansion Happy

With new teams in Philadelphia and Seattle slated to enter MLS in the next two years, the league announced last month plans to expand two more by 2011 for a total of 18. Riding increases at the box office, new found popularity helped by the injection of overseas talent, and an incredibly successful expansion story in Toronto MLS wants to capitalize now and try to take the next step. They should proceed with more caution, more is not always better, as evidenced by the four major sports.

One major implication is diluting an already second-class talent pool. MLS can’t compete with the competition level of European League’s now, adding four teams in four seasons would inject an additional 50+ players currently not good enough to play in the league, further diminishing the product on the field. Soccer has not reached the point in this country where the sport itself sells. If the competition level suffers, fan support will dwindle. The NBA, NHL, and MLB all suffered the same problem when haphazardly expanding in the 1990’s. Baseball, for example, saw record offensive numbers in expansion seasons because expansion forced 22 previously minor-league players into major-league action.

Not all expansion stories start as good as Toronto. Keep in mind, they are the first soiree into Canada for the league, a different dynamic then most US cities. MLS already has plans to add Seattle and Philadelphia within two years, both operations are off to successful starts with pre-sales and local buzz, why not see those start-ups through to completion, measure the impact on the league, how league dynamics change, then make a decision on where and when future expansion should take place. Rushing leads to haphazard decisions and mistakes.

Why the rush? Money. Owners plan to vote to increase expansion fees up to 500%. They have high interest in getting into the league and can inject a nice cash flow into their own operations. It’s a tactical thought process. Owners simply want to cash in while the going’s good. The league needs to make strategic considerations for the long-term, not take a cash injection now only to lose fans in the end.

Finally, all is not perfect in MLS. They have only recently switched to a franchise model after the league used a centralized league office from its birth until a few years ago, which some teams are still struggling to adjust to. MLS has a relatively small national television contract they are trying generate interest in. Not to mention to the two planned expansion teams, MLS has a lot on of critical issues on its plate that should be addressed before taking on any monumental changes in the business structure.

Expansion has many benefits – the cash flow from expansion fees, entry into new markets to expand the fan base, the excitement of new teams and players, but at some point expansion reaches the point of diminishing returns. MLS is near that line. They need to let the current changes breathe and take shape. Expansion is one area where moving quick can do more harm than good.

High Schooler Not Sacrificing Education with Euro Venture

Brandon Jennings decision to skip college in favor of playing professionally in Europe until he becomes eligible for the NBA draft raises many issues and controversial topics. Len Elmore, the superb broadcaster, former All-American player, and lawyer, took a strong stance on why the Jennings decision is wrong on many levels in this week’s Sports Business Journal. However, his argument misses one major premise.

Elmore contends that Jennings fell prey to his so-called advisors, like Sonny Vaccaro, and is undervaluing education by going overseas. Jennings may go on to star in the NBA, making this an afterthought, but Elmore worries about the others who may follow but are not qualified for pro basketball. Without a solid education their future remains in doubt.

Nobody can argue the value of a college education, and even more so the college experience that teaches some of the most important life lessons a young adult will learn. The assumption Elmore makes is that these college athletes who decide to attend college, while pursuing a pro career, don’t take advantage of the system. Elmore seems to agree the “one and done” rule does not work. It simply prolongs the process. Look how many first-year players entered the draft unprepared for the NBA, and fell into the second round or went undrafted. It’s no different than the players who went straight from high school and failed in the league. Most of these one-year players attend minimal classes, schools do their best to kepp the eligible by bending rules at times, and they bail on school once the season ends. Explain how that is any better than playing professionally in Europe.

If anything, at least players earn a check in Europe to help take care of their families. Further, living overseas can potentially open their eyes to a new world, providing a cultural education that college players never receive. Case in point, Freddy Adu, the soccer prodigy, has excelled in Portugal after struggling in the US. Adu is a slightly different story, having grown up under the spotlight and signing a big contract with Nike before playing.

If a new labor agreement can enforce a three-year draft eligibility rule, as Elmore outlines, it will help college basketball and most important, help high school kids become men. One and done is hurting college basketball. It’s turned the college game into free agency. Players still enter the NBA draft unprepared as basketball players and unprepared for life – some, not all. Would three years in school hurt anyone? Perhaps a player’s draft stock would fall or someone would get injured. But if they are not good enough in college, the NBA would weed them out immediately anyway, and many players have shown you can recover from injuries and still make it to the NBA, Brandon Rush and Bill Walker for example.

Anyone that opts for Europe in today’s one and done era is better off, since they don’t value the education and would likely find ways to bypass the classroom anyway. At least they earn money, and are exposed to a new world. Clearly the best option for everyone involved is a rule to change to keep student-athletes in school.

Digital Industry Moving Slow on Wireless

Of all the breakthrough technologies driving digital media, wireless should be at the forefront. Consider that almost every family in the US has a cell phone (84% of households, over 250 million people). You can’t go anywhere, stadiums, subways, schools, sidewalks, movie theaters, cars, without seeing people, young and old, using cell phones. Text messaging, phones, Internet, cameras, you name it, someone’s doing it. So why is wireless revenue for digital media sports entities still a blip on the radar?

Standards remain a big problem. Almost every phone provider and wireless carrier has different development platforms. Most phones have still have varied screen sizes. And to make matters more difficult, the landscape is constantly evolving with new releases. A content providers nightmare. Faced with developing a variety of formats to roll out just one application, content providers have stayed behind the curve opting to utilize more standardized offerings, such as text messaging.

Rights issue to video also hold back innovation. In order to maximize profit, some sports rights holders opt to negotiate exclusive deals with carriers, preventing millions of people that use other carriers from receiving desired content. It’s a mistake by the content provider (i.e. the NFL). No users will switch mobil providers simply to watch NFL highlights, you need to make it as accessible as possible to everyone. Exclusivity rarely works in the digital world, especially when you are trying to push out a product to mass appeal for the first time.

Even with these issues, it’s on the cusp of exploding. Phones continue to get better and better. Each round of smartphones has better display attributes (size and clarity) and better battery life.  Users are quickly moving over to smartphones, much more conducive to mobile content. Carrier networks are evolving with faster speeds, and at some point the day will come where standard will rule, making life easy of mobile application developers.

Thus far, text-based applications are the most successful. Local networks post questions during the broadcasts to text in a vote for the player or play of the game, or they will post a trivia question and have fans text the answer. Teams and sports media proviers also have text message based score and news alerts. Some providers charge a small fee, but primarily carriers collect a portion of the text fee, and providers garner the sponsorship money.

It’s a first step in fan engagement, yet it completely leaves out the fans at the game, and the fans not watching at the time. It requires appointment viewing. Content providers should expand the program to have question of the day contests, where users can text a question in and have the broadcasters answer it, or have it answered on the post-game show. Teams and networks should also integrate with sponsors, particularly QSR. Run an advertisement that offers a deal to users who text in an order (for example, pizza) within a certain time. Easily measureable and highly integrated. Teams can run ticket promotions at the stadium. Post a question on the scoreboard answered via text message, winner gets a pair of tickets or a dinner.

Mobile video is going to take off as smart phones improve. Costs, battery life, and rights issues are holding it back. As they are resolved, mobile video will can become a big money maker. The makers of Slingbox have a similar application for mobile phones,  allowing users to watch games and highlights from anywhere using their phone. In today’s world of constant information expect that technology to take off. How many people will be watching those afternoon baseball games at work, without worrying about streaming MLB.tv through the corporate firewall? Fans at games can benefit tremendously from mobile video. One word, instant replay. A great dunk, a great catch, a controversial call, fans at the game are not privvied to the thousand replays shown on TV. Eneter mobile video, allow the broadcasters or stadiums to stream replays out to the fans. I believe fans will pay a per game fee for that service, and it has great sponsorship potential.

Another form of text messaging is to connect the fans at the games with the fans at home on the Internet. Allow mobile access to message boards, connect the fans at home watching with fans on the road or at the game. Given a forum and a topic, users will engage. It leads to further engagement on the web site by home users, and another use of wireless. More engagement and more texts makes the product more attractive to sponsors.

MLBAM offers mobile video alerts, essentially the next generation of text alerts for news and scores. The alerts are accompanied with a video link. All highlight plays that you want get sent to your phone, when news breaks users not only get the alert but imagine also receiving the press conference or video of the news coverage.

WIthout delving further into more ideas, the fans will use mobile, now the teams and media need to find the revenue. The obvious part is to have a sponsor for the content or contest. However, it’s important to integrate the sponsor. Ad’s should accompany the content to the phones in a non-intrusive manner and give fans the opportunity to engage with the sponsor if they choose. Content providers should work together with mobile carriers to find a way to make the pie bigger to the point where each can take home revenue. Right now only the carrier nets revenue.

Wireless ticketing, concessions, and e-commerce will also have a major impact on the sports industry, but require separate discussions. It’s an all encompassing technology. Almost every fan has a cell phone attached to their hip morning, noon, and night, and uses the phone constantly all day. Phones are the perfect revenue-generating device for sports media because the eyeballs are already there, it’s just a matter of pushing the right content out and providing the right incentive.

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.

Sponsorships That Caught My Eye

Crawling out of bed, still groggy, a simple radio sponsorship read caught my attention this morning on ESPN’s Mike and Mike in the Morning radio show. Progressive Insurance, a Fortune 500 company based in Cleveland, bought naming rights for the former Jacobs Field in Cleveland before the season started, also buys ad time with ESPN radio. In a smart move, it created an ad integrating Progressive Field as a place to catch a game, and ESPN where you can hear the games – all of it brought to you by Progressive. Not sure it sold any product, but it certainly reminded me that Progressive is now the Indians home field.

On the topic of Mike and Mike, they continue to do a great job integrating sponsors and taking advantage of marketing opportunities. They turned a silly little wager on the NCAA tournament into a full blown annual event, tagged with a new sponsor each year. Buffalo Wild Wings brought you the Golic Eating Competition this year. Broadcasting on ESPN2 and live on ESPNRadio.com, Buffalo Wild Wings had logo and sign presence on TV the entire 15 minute segment, received countless radio mentions the past few weeks through today, and it was the focus of the competition. Having the professional eaters tout how good the wings are helps immeasurably. Great job by ESPN, great opportunity for Buffalo Wild Wings.