Tag Archives: sports business

Is The End Near For Sports?

I know you might be thinking that my headline is just some outrageous form of click bait and that I can’t seriously think that big time professional sports are heading down the same path as traditional big media. Let me throw a few recent articles at you and maybe you’ll come to a different conclusion (which I do hope you’ll post in the comments).

The sports business is based on a few large revenue streams. One is income from the games themselves: ticket sales, concessions, merchandise, etc. What makes many of those things possible is a nice facility – an arena or stadium. We’ve seen franchises move (and piss off their fans) over the stadium issue, sometimes even before the bonds on the last stadium built for the team are paid off. I urge you to watch the John Oliver piece on the relationship between teams and towns but here is why I suddenly think there is an issue. As reported by Mondaq:

bill has been introduced that would eliminate the availability of federal tax-exempt bonds for stadium financing… The bill would amend the Internal Revenue Code to treat bonds used to finance a “professional sports stadium” as automatically meeting the “private security or payment” test, thus rendering any such bonds taxable irrespective of the source of payment.

In other words, it will make public spending on a private facility way more difficult. That will lead to fewer new facilities and a much harder path to growing that revenue stream. Strike 1.

Then there is the largest revenue stream for most big leagues: TV. Kagen recently reported that the U.S.pay-TV industry will lose 10.8 million subscribers through 2021, according to their latest forecast. You might already know that ESPN has been losing subscribers – May 2017 estimates were 3.3% lower than the year before. For every million subs lost, ESPN takes in roughly $7.75 million less PER MONTH – or $93 million a year, and they have already lost multiple millions of subscribers. Yes, some are being replaced via the sale of OTT services, but that requires spending to sign customers, something ESPN hasn’t had to do before. The same subscriber loss issue is true of every other sports network albeit to a lesser degree since their monthly fees are less than ESPN’s. Smaller subscriber fees mean a diminished ability to pay those large rights fees. Sure, other channels (some would say suckers) will step up – Facebook, Twitter, YouTube, and others. But my guess is that the outrageous increases many entities have secured over the last few rights cycles are gone for good. Strike 2.

Finally, costs are not going to go down, at least not without major disruptions such as the two recent NHL lockouts. Players aren’t going to make less (the downside of the salary cap), team personnel probably won’t, at least not without a lot of turnover, and many of the other costs are either already low (minimum wages) or difficult to cut (food costs in the concessions, etc.).  In an effort to mitigate some of the lower revenue and growing costs, some of the entities involved in sports are beginning to do what the airlines have done and make what was once part of the deal (in-flight meals, free bag check) part of an a la carte menu to grow revenue. Specifically, look, for example, at what NBC has done with their Premier League package. They are doing away in part with their NBC Sports Live streaming coverage in favor of a new premium streaming service called “Premier League Pass” that will be in addition to the matches that are already broadcast on live TV. The stand-alone streaming service will cost $50 in addition to whatever you’re paying for your cable subscription. That will bring in more dough but it will also anger fans. Strike 3?

Don’t misunderstand me. I think interest in sports generally has never been higher, and I think any sports entity that doesn’t rely on a big TV contract and employs athletes as independent contractors (I’m looking at you, LPGA) will be in good shape. I just think there is a major disruption coming in the next few years as we’ve seen in the TV and music businesses. Watch out as the next cycle of TV deals begins and if this bill is passed. It’s going to be a bumpy ride, don’t you think?

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Protecting Your Brand With Common Sense

The Olympic Games are almost upon us. Like most major sporting organizations, the Olympic Committee and the US Olympic Committee protect their commercial marks aggressively. That intellectual property is a huge piece of the value they sell to official sponsors and keeping non-sponsors from doing ambush marketing is a big part of any sports organization’s daily life. It becomes front and center during marquee events. 

Companies find ways around this enforcement, of course. You’ve probably seen dozens of ads about “The Big Game” every January. You know they reference The Super Bowl even though it’s never said, don’t you. It’s a term the NFL tried to protect but was unable to.  The USOC and IOC are just as aggressive about terminology ranging from the obvious (Olympics, Games, Medal, Rio) to the less obvious (Effort, Performance, Challenge).

Today isn’t about whether that’s a good thing or a bad thing. Having spent much of my career selling and protecting commercial sponsorships of sporting events, you can imagine where I come out on ambushing. I do, however, have a bone to pick from the other side of my career, which is digital. I think it’s instructive for all of us.

Social media is social. Sharable. A conversation. More importantly, social media has become how many people learn and stay in touch with what’s going on in the world. Not in the USOC’s eyes, apparently. They sent a letter out last week which reinforces all of the aforementioned commercial restrictions around the upcoming games, especially with respect to athletes who may be sponsored by non-USOC or Olympic sponsors. But the letter went further.

“Commercial entities may not post about the Trials or Games on their corporate social media accounts. This restriction includes the use of USOC’s trademarks in hashtags such as #Rio2016 or #TeamUSA.”

It doesn’t stop there. The same letter sent by the USOC reminds companies (except for those involved in news media) that they can’t reference any Olympic results or share or repost anything from the official Olympic account. I think that’s pretty far over the foul line. Social media by definition is meant to be circulated and almost any sponsor will mention “going viral” as one of their goals. How can you tweet or mention anything about the games without using a tag that’s discoverable? Why wouldn’t you want broader attention drawn to your event if it’s not otherwise a commercial message? Yes, I understand (better than most!) how sponsors try to share the brand equity of the event without authorization, but if all they’re doing is retweeting your own post, how are they sharing brand equity?

Protecting intellectual property is one of the most important things any brand or business can do. There are limits, however, and that protection should hardly ever interfere with common sense and the world of social sharing. You certainly don’t want to be seen as a bully. Do you agree with that?

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93 Out Of 100

Every year, the folks at Nielsen put out a review of the previous year in sports media. This year’s report is out, and one statistic jumped out at me. In 2005, 14 of the top 100 programs watched live plus same day were in the sports category. Ten years later, 93 of the top 100 were sports. That’s right: despite all of the fragmentation that’s managed to kill most other forms of programming, nearly all of the most-viewed programs watched live or same day were sports. Is it any wonder that demand for sports inventory is so high when it’s the only form of programming that is both widely viewed and watched in real time?

One would think, therefore, that being a sports programming distributor would put one, as Red Barber used to say, in the catbird seat. Looking, however, at the recent negative reports on ESPN’s financial future in the above context might cause some head-scratching (disclosure – I’m a Disney stockholder as well as a former employee). The issues, I think, are several things. First, sports, like any other form of media, is fragmented. You might never miss a NASCAR race but I couldn’t pay you to watch golf. Sure, you’re a college football fan, but turn on the tube any Saturday afternoon and you can choose from dozens of games airing live. That’s fragmentation, and what’s happened is that the rights fees paid to acquire that programming by the distributors bear little resemblance to the audiences and, therefore, the advertising.

Not a problem, you say. There are affiliate fees. That’s true, and in the case of some sports rights deal, such as the NHL and NBC, the rights fee is paid on the come. After all, if NBC can raise what they get from distributors for NBCSN from 10 cents to a quarter (as an example – those aren’t real numbers), their affiliate fees more than double. Hopefully, the demand for NHL or any other brand of sports programming can make that happen.

All well and good until “skinny bundles” show up. Suddenly, people who never watch sports (yes, there are more of them than you think) have the option of reducing their cable bill by not paying $7 a month or more for sports shows they don’t watch. This is what is causing the negative predictions about ESPN. Smalle income from affiliates based on fewer subscribers to sports channels means smaller rights fees available for the leagues and other rightsholders. Smaller TV deals mean…higher ticket prices? More expensive concessions? Smaller player contracts? Labor strife?

93 out of 100 gets an A in most classes. It’s nice that sports is “bulletproof”. So was Superman, but he, and sports, have their weak spot. It will be interesting to see where this goes, don’t you think?

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Know The Fan

The folks at Sporting News Media released their annual survey into US sports media consumption, the US Know the Fan Report.  I’m embedding an infographic below with the results but a few points bear mentioning.

First, it’s now safe to assume that a viewer of sports on TV is using a second screen.  The study found that nearly half of sports fans claim to use an Internet connected device at the same time as watching . This use helps fans to catch up on what’s happening with other games being played via live text commentary and live scores, as well as to access non-sports related content, communicate with friends about the sports event on TV, watch clips and highlights of other games being played and post comments to social networking platforms about the game/event they’re watching.

I find it interesting that while 96% of fans report watching sports on TV, only a third self-identify as having paid for it.  In my mind, paying the $6+ a month for ESPN qualifies as paying.  3% use a pay-per-view service — down from 9% from 2012.  Facebook, YouTube and Twitter remain the most popular networks overall for fans to follow sports but fans are using them less as compared to last year to make use of newer social networking platforms such as Google+, Instagram, Pinterest and Vine.

Live streaming remains the most popular content accessed (38%), followed by videos of game/event highlights (31%) and videos of sports news (27%). More than half of fans that watch videos of game/event highlights online (51%) and videos of player/manager/coach interviews (56%), do so via mobile device.

My takeaway is that this sort of disruption is occurring everywhere and sports viewing is an excellent lab in which to look forward since sports is an important part in nearly every consumer’s life.  How are you preparing for it to hit your business?

US Overview

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Kids And Cards

Once in a while I spot something that elicits an “Aw come ON” from me as I read it. Let’s see if you agree. Bowl-BlackBackgroundThe piece was in yesterday’s USAToday and was a front page article in the sports section on the topic of high school football all-stars.  You can click-through the previous link to read it if you care to.  In a nutshell, participants in the U.S. Army All-American Bowl are asked to sign a couple of hundred trading cards each.  The kids aren’t told what the cards are for nor are they made to participate.  It’s “an opportunity, not a requirement.”  The cards are sold and in some cases they become quite valuable.  No money goes to the kids.

While I have some qualms about that, what caused the aforementioned response is the attitudes displayed by the adults involved:

“The answer is, ‘Well, you don’t have to.’ But for many of these players, this will be the only time in their athletic careers they are on a trading card. To be singled out at that point in time for their athletic achievement is not a bad thing.”  Leaf CEO Brian Gray says there is no pressure put on the high school players and they have the option to decline. “But really,” he says, “If you don’t want to be on the card, there’s something wrong with you.”

Seriously?  Anyone care to name an athlete who knowingly permits their name, likeness, and autograph to be used for purely commercial purposes without any compensation?  I’ll wait.  Didn’t think so.   Most of the kids think the cards are being used for non-commercial purposes – donations to soldiers, for example.  They are never told, and when they find out they don’t really understand how much some of them are worth.  Indianapolis Colts QB Andrew Luck (a Stanford grad and by all accounts a smart man) objected to the card being issued, saying he had never approved it.  The company’s response:

Leaf responded by suing him, saying it had a First Amendment right to do so, claiming that the game operators had granted Leaf the license to player likenesses. The 2008 game was before Leaf began issuing sets of trading cards from the game, but it has issued alumni cards – such as the 2008 Luck card.

Now, I’m in my third decade working in sports and I’ve NEVER heard anyone claim they can issue merchandise as part of the First Amendment.  There’s a multi-billion dollar business called licensing that would disappear if that’s the truth.  Rationalization aside, why not just tell the kids clearly upfront what’s going on?  Hiding something?

One of my favorite Saturday Night Live characters is Dan Aykroyd playing a smarmy guy named Irwin Mainway who, among other things, sells “Bag O’Glass” and caters a school breakfast program with coffee and cigarettes.  His take is that “it’s a bottomless cup of coffee” makes it all just fine.  No, it really doesn’t and the trading card company’s isn’t OK either.  You agree?

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Can Major League Tech Overcome Apathetic Fans?

I noticed something yesterday that got me thinking about the role tech plays in rejuvenating “old” products.  In this case, the product is baseball.  If you’re over the age of 50, baseball was probably the first sport you came to love and follow because when my peers and I were kids it truly was the American past-time.  College football and the NFL were a distant second; the NBA was barely surviving, and soccer was something they did in Europe.

The Harris Interactive folks have been running a poll for many years which tracks which sport fans label as “their favorite.”  As you can see in this document, baseball has been falling for most of the almost 30 years they’ve been measuring this.  In 1985, baseball was about even with pro football when fans answered the question “If you had to choose, which ONE of these sports would you say is your favorite?”  By 2011, those responding “pro football” were 2.5x greater than those responding “baseball.”   One might expect that baseball’s audience would be older – there’s plenty of research to support that – and this poll identified the 50-64 segment as the one with the most avidity for the game.

The modern MLB logo was first used in 1969.

(Photo credit: Wikipedia)

That’s why, when I read this piece yesterday, I had a thought.  Another research company, Scarborough, found about the same percentage of “avid” baseball fans as did the Harris study.  However, it also found a lot of strength for the game among Gen Y fans.  Generation Y are the “echo boomers,” the children of boomers like me.  In fact:

54% of Gen Y MLB Fans more likely than all MLB Fans to have used a mobile device to read a newspaper in the past 30 days, 84% more likely to have listened to internet radio in the past 30 days and 22% more likely than all MLB Fans to typically watch reality TV. Gen Y MLB Fans are more than twice as likely as all MLB Fans to have visited Twitter in the past 30 days, 59% more likely to have read or contributed to a blog in the past 30 days and 68% more likely to have watched video clips online in the same time period. Gen Y MLB Fans are 131% more likely than all MLB Fans to have visited Hulu.com in the past 30 days and 65% more likely to have visited YouTube.com in the same time frame.

So this is my thought.  The game isn’t any faster nor has there been a breakthrough in game presentation that is stirring interest.  What is going on here in my mind has to do with the thing that MLB does better than any other sports league ( and I say that as someone who was once responsible for this at a major sports league):  digital media and technology.  Baseball’s tech arm, MLBAM, is widely recognized as the leader over the last decade.  Their commitment to make their games available on all devices was revolutionary at the time and their “At Bat” product is terrific.  I think this is what’s driving the reemergence of the sport among younger people.  It’s accessible, it’s presented in a manner they understand, and it’s everywhere they are.

Could it be that new technology is making our oldest professional sport new again?  What do you think?  How can it do the same for other “old” businesses?

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Taking The Tablet

There is an excellent, thought-provoking article in the current edition of the Sports Business Journal about tablet computers.  The piece examines what effects the popularity of these devices have been across a number of sectors in the sports business.  Sponsor rights, media distribution, and on-field use are just a few of the areas in which tablets are having an impact.  Disruptive doesn’t begin to describe it.

Behold the iPad in All Its Glory.

Image via Wikipedia

One thing I did notice as the article ran through the issues (which I’ll discuss in a minute) is that the way in which many of the parties involved have tried to deal with this new round peg is to try to fit it in the same square holes as other things without much success.  Let me explain. Continue reading

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