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Beyond the Scoreboard
An Insider's Guide to the Business of Sport
by Rick Horrow and Karla Swatek
Foreword by Paul Tagliabue
240 Pages
Go behind the scenes with your insider’s access to the high-pressure, high-stakes business of professional sport.
In Beyond the Scoreboard, Rick Horrow, sport business analyst for Fox Sports, Bloomberg TV, Bloomberg Businessweek, and the BBC and host of PBS Nightly Business Report’s “Beyond the $coreboard,” and Horrow Sports Ventures’ vice president Karla Swatek take you to the boardrooms, negotiating tables, and executive suites of sport’s most influential powerbrokers.
Beyond the Scoreboard tackles sport’s hot-button topics head on. You’ll see
• how sponsors measure return on investment with sport organizations;
• how pro teams negotiate with governments to make a stadium deal;
• the effect of the sport facility building boom on teams’ bottom lines;
• how sport agents try to maximize the value of their in-demand clients; and
• the effect on teams and fans of revolutionary changes in modern ticket selling.
Whether you are one of the millions of people who play fantasy sports or you just want to know more about how your favorite teams determine their strategies, you’ll learn how the experts make deals happen.
And with engaging sidebars and exclusive interviews from the most powerful figures in sport, including Roger Goodell, David Stern, Brian France, and Gary Bettman, you’ll gain expert analysis from people who have played leadership roles in some of the most intense negotiations and lucrative business deals in sport history.
There’s nobody better equipped to explain what it takes to be a success in sport marketing, sponsorships, facility financing, or generating media coverage than Rick Horrow, the Sports Professor. In Beyond the Scoreboard, Horrow and Swatek provide you with an all-access pass to the multibillion-dollar world of professional sport.
Foreword Paul Tagliabue, Former NFL Commissioner
Introduction Looking at the World Through Rose Bowl-Colored Glasses
Chapter 1. The Mega-Master Super Series XLXL
Meet the Commishes Roger Goodell, National Football League
Chapter 2. Remote-Controlling What You See on Sport TV
Chapter 3. Not Far From the Madden-ing Crowd
Meet the Commishes David Stern, National Basketball Association
Chapter 4. The Big Labinski
Chapter 5. The Government Gets Into—and Out Of—the Game
Chapter 6. So You Wanna Own a Sport Team?
Meet the Commishes Gary Bettman, National Hockey League
Chapter 7. One Union Under Center
Chapter 8. Sport Sponsorship 101
Meet the Commishes Brian France, NASCAR
Chapter 9. Ticket to the Future
Rick Horrow is the leading expert in the business of sport as the architect of over 100 deals worth more than $13 billion. The CEO of Horrow Sports Ventures (HSV) hosts “Beyond the $coreboard” on the Nightly Business Report and serves as a sport business analyst for Fox Sports, Bloomberg TV, Bloomberg Businessweek, and the BBC. As the leading commentator on sport business and as a well-connected entrepreneur, he has access to many of the top names in sport, including commissioners, owners, general managers, coaches, and athletes. His clients have included some of the biggest organizations and companies in the world of sport and business: NFL, MLB, NASCAR, PGA, Great White Shark Enterprises, Cisco Systems, Golden Bear International, Enterprise Rent-A-Car, LPGA, and MLS. Horrow is nicknamed the Sports Professor thanks to his time spent as a visiting expert on sport law at Harvard Law School.
Karla Swatek is vice president of Horrow Sports Ventures. With Horrow, Swatek pens a weekly column on sport business for Bloomberg Businessweek. She has worked on book projects with Ken Blanchard, Peter Ueberroth, former USC football coach John Robinson, and Robert Hagstrom (The NASCAR Way), as well as business leaders like Anthony Smith (The Taboos of Leadership).
"Beyond the Scoreboard offers a behind-the-scenes look at professional sport. From players' contracts to event bidding, the book reveals the real components driving business and the hot-button topics of this high-stakes business."
Jerry Jones -- Owner and General Manager, Dallas Cowboys
"Beyond the Scoreboard reveals the true movers and shakers in sports and examines the forces driving this lucrative business."
John Skipper -- Executive Vice President of Content, ESPN
"Few people I know have as much passion for the inner workings of the sport industry as Rick Horrow. In Beyond the Scoreboard, he gives fans a unique insider's view of the sports they love."
Jack Nicklaus -- Winner of a record 18 professional major championships
World Golf Hall of Fame member
Five-time PGA Player of the Year Award winner
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How is power shifting in the new sports marketing landscape?
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game.
Besides being
a universal source of community pride and a multibillion-dollar industry, sports are a source of fan passion with the power to drive significant consumer brand affinity. Over time, a growing number of marketers who command multimillion-dollar budgets couldn't help but take notice.
A common denominator that transcends cultural and societal differences, sports are an enormous and growing business that delivers a massive and highly engaged audience game after game. As the last Alamo of a time-shifted, TiVo-ed consumption—and with a nearly infinite supply of regularly generated content, storylines, and statistics—sports are perfectly suited for the new multiscreen world, with the rise of technology creating a virtual sports bar for 'round-the-clock content and engagement. Americans love entertainment, and sports—the original reality television—are nothing short of synonymous with everyday theater.
Although the modern business of sports marketing, and specifically sports sponsorship, remains a relatively fledgling industry (remember when the BCS games didn't have a sponsor attached?), it's a vastly different one in the 21st century than it was some 50 years ago. Much has changed in sports sponsorship since the inaugural corporate stadium naming rights deal, sold in 1973 to the Buffalo, New York-based food service company Rich Foods, Inc., for a now-paltry total sum of $1.5 million. At $100,000 per year, this could barely cover the annual cost of a sign in a professional or major college stadium today, even adjusted for inflation.
An evolving understanding of sports marketing as the gold standard of integrated marketing communications has accelerated sports marketing's rise in importance within the broad discipline of marketing. As such, sports command gargantuan budgets for both media and sponsorship and premier consideration within the corporate marketing elite. What began, in many cases, as a way for CEOs to get close to their favorite athletes and pastimes has become a behemoth of an industry: Sports Industry Almanac 2011 estimates the annual spending for sports marketing and advertising in the United States is more than $27 billion.
The global financial crisis in 2008 demonstrated that the sports sponsorship industry is far from recession-proof: Marketing purse strings were universally tightened in corporations large and small, and the emphasis on the bottom line renewed with gusto. This “new normal” birthed a new catchphrase: return on investment, or ROI, frequently referred to at leading industry conferences as the holy grail of sports marketing. The recession helped accelerate a new era of accountability in which CFOs and procurement officers call the shots or, at the least, hold corporate marketing officers under the gun to prove tangible returns against business metrics and objectives. No longer would multimillion-dollar sponsorship deals be hatched on a cocktail napkin and executed on the whim of a personal indulgence by a C-level executive whose favorite team had just won a divisional championship.
A fundamental shift in power from marketer to consumer and the onslaught of digital and mobile technologies have driven the migration of consumers to new screens for information and entertainment and changed the very notion of what advertising is and how it is measured. Vanilla deals have become a thing of the past, replaced by increasingly complex sports marketing platforms that include sponsorships that must be activated in new mediums. This continues to challenge the way properties structure partnerships and demonstrate value, and it requires a full understanding of the myriad of consumer touch points. Understanding the new sports marketing landscape, and sponsorship's ever-changing position in it, is crucial for optimizing brand impact with regard to business and advertising metrics, sponsorship, and related media buys, as well as protecting brands from ambush efforts by competition.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
Looking at the world through rose bowl-colored glasses
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team.
Welcome to the new era of sport—powered by the fan.
In 2011, fans are the designated drivers of the $750 billion business of sports. The digital age and its endless menu of options, from coverage of obscure fringe sports to prolific online fantasy leagues and sophisticated interactive video games, have fragmented the audience for major sporting events like never before.
American football players locked out? I'll just sample some Aussie rules football online. No NASCAR races on a Tuesday? No problem—I'll just play the latest motor sport video game on Xbox Live and compete head-to-head, in real time, with other drivers all over the world.
These days, fans are also participating in the management of leagues and teams, from voting players into All-Star contests via Twitter and text messages to influencing business decisions by way of powerful online fan forums and in some cases being directly involved in the ownership of a team. If you're a fan, however, unless you're that oddball subscriber to the SportsBusiness Daily, you're not getting the full business picture from your favorite sports talk radio host or Twitter feed. The casual fan is kept in the dark about to what degree this pastime is an incredibly complex multinational operation on par with the biggest Fortune 100 companies and small governments.
Beyond the Scoreboard: An Insider's Guide to the Business of Sport takes a comprehensive look at how the ever-growing professional sport industry really works. What are the real components driving this multibillion-dollar industry? Who are the true movers and shakers? What affects the price of your ticket, where you're able to take in a game, and what you see on Sports Center? What is the undercurrent of technology that now shapes everything that develops in the industry—as it increasingly does in all our lives?
Sport business is lucrative, intense, and largely undocumented. But where is its library of lessons? And how does the entrepreneurial reader learn to think like the skybox exec or superstar to whom victory means the development of brand and bankroll?
Consider the valuations of the world's top sport properties, as estimated by SportsPro magazine. Other industry sources consistently confirm these numbers. Not surprisingly, the National Football League ranks as the world's most valuable sport property at an estimated $4.5 billion (all numbers U.S.). Ranked under the NFL are the other three biggest American professional sports: Major League Baseball ($3.9 billion), the National Basketball Association ($3.35 billion), and NASCAR ($1.9 billion).
Interestingly, the next property on the list is only three years old—the Indian Premier League (cricket), valued at $1.6 billion. On the individual franchise side, the highest-rated team property is the English Premier League's Manchester United at $1.5 billion. The Dallas Cowboys are the top-rated U.S. franchise at close to $1.3 billion. Despite troubles revealed at the end of 2009 and stretching throughout the 2010 season, Tiger Woods tops the athletes' list at an estimated fortune of $1.25 billion, bolstered by his golf course design business and off-course business deals.
Despite these sky-high valuations, is sport—as jaded pundits increasingly suggest—now synonymous with entertainment, nothing more than an athletic reality show with no end purpose staged specifically for the amusement of fans and the convenience of advertisers? Philadelphia Eagles owner Jeff Lurie, also a veteran executive in the motion picture industry, hardly thinks so: “I think sports is a subset of the entertainment industry,” he says. “If you take global entertainment, it's involving movies, live theater and concerts, live sports and televised sports. So it's really a huge segment of the entertainment industry, with a lot of the same priorities.
“If you own a team in the sports sphere, that business shares a lot of characteristics with the traditional entertainment industry because you want to put the best possible product out there,” Lurie continues. “You have to deal with the representatives of the talent. You want the fans to love what you're doing in terms of the performance of the team, which certainly applies to a movie or concert. You don't want predictability, you want a fast-pace product, and you want to work with partners who can work well together as a team as opposed to just hiring the biggest movie star in the world and then throwing the movie out there in a disjointed fashion.
“Finally,” Lurie says, “you're increasingly dealing with a global audience, not just domestic. Hopefully, you're also thinking years ahead, how the game or whatever you're producing can be increasingly accessed and understood around the world.”
Regardless of all the fragmentation in sports, live televised sporting events—the original reality TV—remain the signature opportunity for sponsors and advertisers to capitalize on a mass audience, as evidenced by the staggering sums that media companies are willing to pay for content. NBC's $4.3 billion deal to televise the Olympic Games through 2020; the collegiate Pacific 12 Conference's new media rights agreement with Fox and ESPN, worth $3 billion over 12 years; and the NCAA's college basketball deal with CBS and Turner, announced at nearly $11 billion over 14 years for the rights to broadcast on TV, the Internet, and wireless devices all top the list.
There's no doubt, however, the recession that knocked out the global economy in the mid-2000s has lengthened the industry's injured-player roster. NASCAR, the darling of the 1990s and the early 2000s, has seen the desperation-driven consolidation of most of its top race teams as well as plummeting TV ratings and massive speedways so devoid of human traffic that you hardly need earplugs.
Nine of baseball's 30 teams are currently over Major League Baseball's prescribed debt ratios, and the ownership of two of its cornerstone franchises, the New York Mets and the Los Angeles Dodgers, is in serious jeopardy, the former due to the Wilpon family's all-in investment in Bernie Madoff's Ponzi scheme of a financial institution, and the latter due to the Hollywood-style greed and hubris of owners Frank and Jamie McCourt.
At press time, the NFL and the NBA are mired in labor stalemates not seen in decades. The NFL, whose owners locked out its players after the 2010 season over pay and benefits, a rookie wage scale, and expansion of the season to 18 games among other issues, could be only days away from signing a new collective bargaining agreement and salvaging the 2011-2012 season. The NBA, claiming $300 million in losses for the season just ended, locked out its players after the CBA expired on June 30. The two sides are far apart on revenue sharing and player salary reductions, and with no agreement in sight, the 2011-2012 season is in jeopardy.
In the sport industry, however, the wins column is typically much longer than the losses, and the current era is no different. Because sport is still appointment TV, billion-dollar sponsors—insurance companies, automobile manufacturers, quick-serve restaurant chains, and breweries—have largely stayed the course despite the recession and continue to align their brands with sports. The recession also produced value packages that helped fans stay in their stadium seats; those who can no longer afford to attend watch more sports at home on their 40-inch high-definition TVs.
While Beyond the Scoreboard focuses primarily on football, basketball, and baseball at the professional level—the biggest revenue-generating segments of the sport industry—we also include case studies, lists, and factoids from all sports as they are relevant. So we can't help but notice the lively new franchises in Major League Soccer and the professional National Lacrosse League that are attracting a new generation of fans from America's coasts into the heartland. Golf and tennis have never been more popular; all of their respective majors titles are currently held by foreign nationals, and prestigious tournaments are finding homes in Beijing, Shanghai, and Dubai.
As for us, Beyond the Scoreboard also serves as a companion in print to Rick Horrow's regular segments on Bloomberg Television, www.FoxSports.com, and PBS' Nightly Business Report, to name a few. Beyond the Scoreboard also ushers in a new series of books we are developing with Human Kinetics. The Sport Business Insider series, premiering in 2012, breaks the industry down by specific subject. Each stand-alone title focuses on one aspect of the industry, such as branding in sport, globalization, investing in sport, and deal making.
Sport is indeed the ultimate reality show—and it's a dream job for those of us fortunate enough to work in the industry. But at the end of the day, or more aptly at the end of the game, it is the ultimate mega-business.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How do cities reel in a mega event?
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL’s 32 owners vote on the location at an owners’ meeting sometime thereafter.
Reeling In a Mega Event
Taking their cue from the long tradition of the Olympic Games, North American cities vying to host the Super Bowl, an All-Star Game, a regional component of a nationwide event (the NCAA tourney, the World Cup, the World Baseball Classic), or the Olympics themselves must go through an elaborate bid process. Outside of the Olympics, none is as mired in precision and politics as the bidding process for a Super Bowl.
Each November, the NFL issues a 200- to 300-page bid book to cities looking to host the game. Draft bids are due in April, and the NFL's 32 owners vote on the location at an owners' meeting sometime thereafter. Baseline hosting requirements, according to SportsBusiness Journal, include the following:
- A 70,000-seat stadium or one that can be expanded to at least that size
- At least 19,000 hotel rooms that require three- or four-night minimum stays, including rooms for both teams and NFL personnel
- A range of nearby facilities or spaces to house the media and accreditation center for more than 4,000 media representatives, the NFL Experience, the NFL Tailgate Party, and the like
- An average daily temperature of 50 degrees Fahrenheit (10 °C) or above the week of the game, or a climate-controlled indoor facility
- Provision of police, fire, ambulance, and other infrastructure services at no cost to the NFL
Over the years, insiders indicate that the politics of the bid process have ratcheted up considerably—as have the perks. The 2007 Miami bid committee threw in the use of a yacht for each of the 32 owners, while Tampa offered all the teams free golf. The 2011 North Texas group went green instead, offering the NFL an additional $1 million to cover game-day expenses at Cowboys Stadium, enticing enough as that new facility is on its own.
The bid process is also "shrouded in secrecy, like someone had found the Holy Grail," says Ted Ferris, chairman of the Arizona Sports and Tourism Authority, the regional agency in charge of University of Phoenix Stadium in Glendale and an organization heavily involved in the roll-up to Super Bowl XLII in 2008.
"Our former chairman, John Benton, gave an apt description of what our role was in the bid process," Ferris says. "We were working with the Bidwill family [the Arizona Cardinals' owners], and information was getting passed back and forth. But we never saw the entire bid document. As Benton said, if you view the bid as the plans for an airplane, we were given only the plans for a wing—the stadium and what the authority would commit to do for the NFL. We had no clue what the airplane looked like. We just knew what the wing looked like."
But it wasn't always that way. Jim Steeg, who spent 33 years with the NFL, including 26 in charge of the league's special events department, says when he first was put in charge of the Super Bowl, the bid specifications were "maybe two pages long."
"We didn't go through all of this," Steeg says. "When I first got involved, the bids were very Chamber of Commerce. Then the ante was upped in March 1979. We were in Hawaii, and we were looking for sites for the Super Bowl in '81, '82, and '83. Detroit really wanted the '81 game, which New Orleans ended up winning. But Detroit came in—this was how crazy it was—and made a presentation, and it had a slide show, a video, and all this stuff up there. And all these owners, who you think are really tremendously sophisticated, were looking at this presentation and just going on and on. That's how Detroit got it [the 1982 Super Bowl]. Their presentation materials were so far ahead of everybody else's."
The Silverdome may have won the day in 1982, but that Motor City facility would never pass muster these days. The quality of Detroit's newer Ford Field and the $505 million public-private financing partnership that enabled a weatherproof roof to be built over it (chronicled in my book When the Game Is On the Line) were among the primary reasons chilly Detroit was chosen to host Super Bowl XL in 2006. XL provided the biggest of international stages upon which to showcase downtown Detroit's rebirth—and in hindsight, it may have helped stave off the precipitous crash of the auto industry for a year or two.
The new stadium trump card Detroit played before the NFL to earn Super Bowl XL also paved the way for Glendale in 2008, North Texas in 2011, Indianapolis in 2012, and New Meadowlands Stadium in 2014. San Diego, formerly a popular stop in the so-called Super Bowl rotation, knows full well it will never see another Super Bowl without building a new stadium to replace aging Qualcomm (the city may lose the Chargers for that reason as well). Even NFL favorite Miami has been told that unless it completes renovations to Sun Life Stadium, including additional seating capacity and suites and at least a partial roof, it will no longer be allowed to compete with cutting-edge venues such as Cowboys Stadium.
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.
How did the internet help fantasy sports evolve?
In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms.
The Evolution of Fantasy Sports
It's no secret that the Internet is the playing field of choice for fantasy sports fans. While fantasy sports competitions have been around for more than a decade, the Web's evolving social media tools, treasure trove of real-time statistics, and networking capabilities let fans research and form teams and compete against other fantasy team owners and managers based on the statistics generated by individual players and teams more effectively than ever before.
Simply put, fantasy sports sites allow people to join competitions based on the performance of pro athletes and teams. Participants choose a fantasy team within a league and pick players for each game or match. Points are then awarded—or deducted—throughout the season based on chosen players' performances.
The growth of the internet has fueled the increase in fantasy sports participation and the rise of fantasy football in particular, which in turn has helped fuel NFL ratings. In 2010, the estimated 29 million Americans who participated in fantasy football leagues, according to Liberty Media, helped the NFL achieve unprecedented television ratings across all of its broadcast platforms. Online, an entire media industry devoted to fantasy football has exploded, seeking to satisfy the thirst for stats on the league's 1,700-odd players among fantasy team owners.
The majority of fantasy participants are young and about 85 percent male, 15 percent female. The average fantasy player spends three to four hours online per week and has played for 10 years. Fantasy gaming is addictive—the industry is currently valued at $4.48 billion annually, with the average fantasy sports player spending more than $467.60 annually to participate. A study by the Kellogg School of Management at Northwestern University revealed the three main reasons people play fantasy sports: (1) the competition, (2) love of the sport, and (3) prizes and rewards.
As in any technology sector, the fast-growing fantasy sports and social networking start-ups have been ripe acquisition targets, and the industry segment is fast consolidating. In 2007 alone, Yahoo! acquired the popular college sports site www.rivals.com, Wikia purchased ArmchairGM, and Time Inc./Sports Illustrated snapped up FanNation, a move S.I. editor-in-chief Terry McDonell characterized as “almost tribal . . . www.FanNation.com will make everything in and about sports more interesting—including you.” Like almost all of the sports social networking sites, FanNation is highly sponsor friendly; Cadillac, Vonage, and Sprint were among early advertisers on the site.
Sports leagues have been doing whatever they can to protect what they consider copyrighted material from free exposure on fantasy gaming sites. On October 16, 2007, the U.S. Eighth Circuit ruled that the First Amendment protected the use of player names and statistics on fantasy baseball sites established by C.B.C. Distribution and Marketing, Inc. That company had brought a declaratory judgment action against MLB Advanced Media to permit the unlicensed use of names and statistics of Major League Baseball players in connection with fantasy baseball products available online.
The district court granted summary judgment in favor of C.B.C. In affirming the district court, the Eighth Circuit espoused the proposition that the use of information in the public domain is protected by the First Amendment. The court also countered arguments that the use of statistics wasn't speech at all. One particularly interesting argument by the Eighth Circuit related to the protection of economic interests under the right of publicity, stating that “Major League Baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship arrangements.” Major League Baseball has appealed the ruling, and the case, years in the making now, may still go all the way to the Supreme Court.
Fantasy sports, of course, do have their detractors—naysayers claim that fantasy sports eat away at workplace productivity (40 percent of fantasy team management reportedly takes place at work) and that the focus on individual achievement is distorting the beauty and purpose of team sports. When asked by ESPN reporter Greg Garber his opinion on the rise of fantasy football, former Denver Broncos quarterback Jake “the Snake” Plummer replied, “I think it has ruined the game. There are no true fans anymore. . . . If I lost a game . . . no Denver fan was mad because I lost, but happy because I threw three TDs.”
Read more about Beyond the Scoreboard: An Insider's Guide to the Business of Sport by Rick Horrow and Karla Swatek.