Stadium Shrinkage En Vogue as “Time Has Become More Valuable Than Money”

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Pro sports venues are shrinking. The Braves, Marlins, Twins and Yankees have all downsized since ‘09 and the Tampa Bay Rays plan to reduce seating at Tropicana Field from a league low 31,042 to between 25,000-26,000 this season. The Falcons, Vikings, 49ers, Colts, Cardinals and Rams (+Chargers) all opted to go small (71,000 seats or less), as well, with their new venues and the 65,000-seat building that the Raiders are building in Las Vegas will be among the league’s 5 smallest; only the Cowboys and Jets/Giants have built stadiums with more than 80,000 seats this millennium. It’s not just American franchises looking to create a more intimate environment for their fans, either. Italian rivals AC and Inter Milan have signed a memorandum of understanding to either modernize the 80,000 seat San Siro or build a new venue; either way, the clubs plan to reduce capacity to 60,000 seats.

Howie Long-Short: Shrinkage is en vogue because fewer people are going to games. Advancements in the in-home viewing experience (everything from HD to VR) have made it more difficult “for the clubs to attract fans to the stadium” – as has the increased competition (see: esports) for fans’ time, money and attention. Those dynamics won’t be changing, so pro sports venues will continue to get smaller and more efficient. Raiders President Marc Badain insists there’s an NFL “team who is looking to build a stadium in the next 10 years, talking about going to 50,000 seats.” That’s a shocking low figure when you consider that no team (playing in a permanent home) seats less than 61,500 (Bears).

To draw fans, pro sports teams are going to need to create an in-stadium experience more rewarding than what a fan receives on their couch. Andy Dolich, president of the sports consultancy Dolich Consulting, explained that “time has become more valuable than money, so fans simply aren’t going to attend as many games as they used to – and when they do visit the ballpark, they expect an incredible experience.” Creating that memorable experience begins with bringing fans closer to the action, but it also must include better service (think: food options, parking), access to mobile technology (think: sufficient Wi-Fi) and non-traditional seating (think: social spaces); Millennials and Gen-Z’s with shorter attention spans aren’t going to sit in a seat for 3+ hours, they want to interact with each other.

Event psychology has also begun to play a larger role in consumer decisions (like buying tickets), so it’s crucial that teams treat each game as a marquee “event”. Andy says “show fans that what you’re offering is special and they’ll be back – if it feels routine, they won’t. Fans want to go – and will go – to the biggest games and the biggest events.”

Moving to a smaller venue doesn’t necessarily hurt a team’s bottom line. For NFL clubs that will take in $255 million in broadcast revenues in 2019, selling fewer tickets will have little impact. Ticket prices will rise – to help off-set losses – in leagues where clubs are more dependent on gate receipts (+ food, beverage and parking), but Andy said that teams will make up most of the lost revenue from “all of the digital applications that enhance remote game viewership and with the proceeds from the commercial components (think: retail space) of these stadium real estate plays.”

Speaking of real-estate, the trend of teams moving away from multi-purpose suburban venues to downtown stadiums is another factor contributing to the shift in building sizes – there’s simply less property to work with in the city.

I asked Andy for his thoughts on how large the next generation of NFL stadiums, NBA/NHL arenas and MLB parks would be. He told me that, “baseball will likely drop down into the mid-30s, perhaps a little bit less. The indoor winter sports venues will probably cut seating down to between 14,000 and 15,000 and I think the outdoor stadiums will be cap capacity around 50,000.”

Fan Marino: There’s a case to be made that shrinkage has been a critical factor in MLS’ success. When the league launched in 1994, 80% of the league played in venues with 60,000+ seats (Spartan Stadium in San Jose and RFK Memorial Stadium in Washington were the outliers). By 2002, the league was contracting teams and on the brink of failure. It wasn’t until the LA Galaxy introduced the soccer-specific Dignity Health Sports Park (then the Home Depot Center) in 2003, did the league’s fortunes begin to change. Since that time 14 other clubs have built 25,500 seat (or less) venues and league expansion fees have risen from $10 million in ‘07 to $150 million in ‘18.

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EPL Considers Introduction of OTT Service, Opportunity to Treble Broadcast Revenues

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The English Premier League has reportedly considered the launch of an exclusive direct-to-consumer streaming service that would replace traditional broadcast channels. The league is eager to grow revenues after the value of their domestic broadcast rights package [for 3 seasons] declined from $6.6B to $6.0B during the most recent negotiation cycle. The Sunday Times indicated that the top-flight league intended on testing the OTT streaming service in Singapore, but shelved those plans in favor of extending Singtel’s television rights through May ’22.

Howie Long-Short: Former Crystal Palace chairman Simon Jordan initiated the push to follow the NFL’s lead and “become a broadcaster in its own right.” Jordan envisioned a day where the league “controls its own product”, which would enable it to treble “the revenues it currently gets.” Jordan figured “if you had 100 million subscribers [to an OTT service] at $10.45/mo., you’d be bringing in $13.06B/year – not $11.36B every 3 years like the current [television] deal does.” When the EPL ultimately launches its exclusive OTT service, it’s going to have a devastating impact on the league’s current pay-TV broadcast partners (think: Sky) who rely on soccer rights to attract subscribers.

Simon Jordan’s math is correct, but Wayne Sieve, EVP of Thuuz Sports, explained that an OTT platform isn’t necessarily the attractive proposition it appears to be. “For the EPL to really capture the revenue figures [Jordan] projected, it would have to go exclusive and put all league matches behind a paywall. Club owners would need to be able to stomach the loss of billions of dollars in traditional broadcast revenues as the league works to convert cable viewers to its new digital service; a process that won’t happen quickly. And don’t forget all the marketing muscle (think: tune-in promotions, shoulder programming) that the league’s current broadcast partners bring to the table. There’s an attraction to what an OTT service could one-day bring to the league, but I don’t see how taking on all the risk in the short-term would be a smart move. If the EPL is going to introduce a direct-to-consumer relationship with fans, it would be better served by making it additive (think: NBA’s 4th quarter option) and migrating fans over slowly.”

If the EPL were to introduce a subscription based streaming service, it makes sense to do it in a non-domestic market (like Singapore) without a lot of value – a market where there is zero (or limited) opportunity cost. That dynamic would give the league the opportunity to learn from the data it collects and to iterate and fine tune its technology without feeling the pressure from lost revenues. That said, a market like Singapore brings on its own sets of challenges. “With live sports, charging the consumer only really works if there is no free alternative. If you can’t ensure exclusivity and control access to the programming – and in markets where piracy is rampant [like Singapore], that’s going to be a challenge because any individual can create that pirated stream – it’s very difficult to feel comfortable operating a consumer subscription service.”

The sky isn’t exactly falling on the EPL. While the league’s domestic rights took a haircut, global media rights continue to grow. The Premier League will take in $11.7 billion over next 3 seasons.

The value of domestic and international rights may be headed in opposite directions, but it’s important to understand that the packages are not comparable; the league’s U.K. television offering pales in comparison (200 games available via live broadcast) to the overseas rights package it sells (all 380 games).

Fan Marino: The U.S. market is among the EPL’s most valuable, but the value of its broadcast pact with NBC (worth $1B/6 years) lags far behind the league’s domestic package – despite the U.K. having a fraction of the population. An OTT service might provide the EPL with the opportunity to increase revenues in the U.S. market, but Wayne doesn’t see that as a viable solution to growing the bottom line. The time zone is going to be a challenge as long as the best content experience remains watching live, especially on the west coast where you’re 8 hours removed from the broadcast window. There’s always going be a limitation on demand.”

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Start-Up Football League Sees Trevor Lawrence As Its Answer to AFL’s Joe Namath

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The Pacific Pro (Pac-Pro) league (to debut in 2020) wants Clemson quarterback Trevor Lawrence – the projected #1 overall selection in the 2021 NFL draft – to be its Joe Namath; the University of Alabama star left school early to join the New York Jets and be the face of the start-up AFL. While NFL rules prohibit players from entering the draft until 3 years after from H.S. graduation, Pac-Pro league founder Don Yee said his league “would like to make [the CFP National Championship MPV] an employment offer [and] professionalize him right away”; to date, elite underclassman have lacked an alternative to the NCAA. Yee (Tom Brady’s agent) insinuated that Adidas (a founding sponsor of the Pac-Pro league) would also “make [Lawrence] an endorsement proposal” if the freshman were to turn pro after next season. Lawrence has yet to acknowledge the opportunity.

Howie Long-Short: Trevor Lawrence is going to have the opportunity to make significantly more money than Joe Namath did as a professional, so while his addition to the Pac-Pro league might provide a comparable boost to the league’s legitimacy, Lawrence faces a far more complex decision. Eric Winston played 12 years in the NFL and has served as the NFLPA President since 2014. I reached out to Eric to gain perspective on the decision Lawrence will face after next season, to learn of any risks associated with foregoing a collegiate football career and to find out how the NFL would view a prospect that opted to take the Pac-Pro route.

Yee’s pitch to Lawrence sounds attractive. Is there a case to be made for a projected Top-10 selection to pass on a payday, further risk injury (more demanding schedule) and forego the coaching meant to prepare players for the NFL – to play college football?  

Eric: I always tell guys, you’re a business – you should be making decisions in the long-term interests of your business. So, how much money are we talking about here? If the Pac-Pro league is offering Trevor [or another top prospect] $10 million for the 2020 season, well that’s a different conversation than if they’re offering $50,000 and the ability for him to market his own likeness. As funny as it may sound, a college education still matters to a lot of guys – more so than people realize. Every player is going to become a retired athlete before the end of their 30s, so, there is value in a degree.

Top players like Trevor also need to consider if the preparation they’re getting at programs like Clemson, Michigan, Alabama and Miami (Eric’s alma mater) is better than what they would get in a subpar league relative to the NCAA. It’s not helping a player’s long-term potential if they come into the NFL under-developed. If you’re thinking of yourself as a business, you can’t be thinking about where you can maximize your money next year – you need to be thinking about how you can maximize your money for the next 20 years.

You referenced preparation, but what specifically would a player who bypasses college football for the Pac-Pro league be missing out on?

Eric: You can assume that the coaches in a start-up league aren’t going to be as accomplished as coaches leading P5 programs. It’s safe to say that the medical personnel won’t be as talented. The strength and conditioning programs and prehab regimens aren’t going to be as advanced as what a player would find in the NCAA; and you’re not going to find many NFL teams with better facilities than what the elite college programs have. 

If Lawrence were to become the Pac-Pro’s version of Joe Namath, should he be concerned about how NFL teams would view his decision to play against lesser competition?

Eric: Isn’t that the argument that teams were making three years ago when guys started skipping bowl games – that they wanted players who would compete? Then guys like Fournette and McCaffrey called their bluff and they’re still being taken in the top 10. The majority of NFL teams are going to field the absolute most competitive team that they can. Let’s say Trevor plays next year and then decides to sit out his junior season [and not play at all]. Is there any doubt he would still be among the top overall selections in 2021? Sure, he’ll face questions about why he sat out the season, but if an NFL team thinks that he can make them better, they’re going to pick him. 

Unless Adidas is willing to write a check that Lawrence can’t refuse, expect him to suit up for the Tigers the next 2 seasons. Playing for Dabo should keep the 6’5 QB on track to become the top overall pick in 2021, when he would be in line to sign a rookie contract with a total value close to $40 million.

Fan Marino: Looking strictly at the Pac-Pro league from a business standpoint, the model is fascinating. All 4 of the league’s teams will be in Southern California – eliminating costly travel expenses, player salaries are manageable (avg. $50K vs. $250K/3 years in AAF) and unlike the AAF and XFL, they’re not pulling players from the NFL scrap heap.

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Can a Customized, Interactive Viewing Experience Solve Sports’ Existential Threat?

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Sports broadcasts have remained virtually unchanged over the last 50 years – 2-3 guys in a booth, a long shot, a bunch of replays and some commercial interruptions. But fundamental shifts in the behavior of digital natives has forced rights holders to offer a more customized, interactive viewing experience. ESPN has announced that “portions of the X Games Aspen 2019” will be available on Caffeine (a social broadcasting platform) and the G-League announced it has extended and expanded its streaming pact with Twitch; both platforms will give viewers the chance to “host their own interactive streams” with commentary free broadcasts. The NFL has yet to make the leap into user generated content, but Amazon Prime Video has announced that Hannah Storm and Andrea Kramer will return to call Thursday Night Football games on a secondary streaming feed in 2019 (Joe Buck/Troy Aikman have the call on the main feed).

Howie Long-Short: Tom Richardson, a former media exec at the NFL, NHL and AOL, is the head of strategy and development for Mercury Intermedia (a leading mobile and connected TV app developer) and a professor at Columbia University, where he teaches digital media in the Sports Management grad program. To give you a better idea of what a customized interactive viewing experience would entail, Tom says “envision private viewing rooms. Essentially a Skype or Zoom-like experience where you and your friends can take the party. The environment would enable you to see everyone’s faces, offer real-time commentary, share content and post emojis.”

It sounds like you’re describing Caffeine and Twitch. Are one of those companies (or another social streaming platform) the future of live sports broadcasting?

Tom: There have been various attempts throughout digital media history to create alternative digital consumption environments for content, but aside from the big social platforms, the only one that has really had success at scale is Twitch. The TV outlets realize that to appeal to and attract younger millennials and Gen-Z digital natives they’re going to need to provide customization elements – we’ve raised a generation of viewers who’ve had the ability to dictate how they consume media. So, the question is, even with new viewing options and user experiences, will it be enough to attract and retain young fans. It’s an unprecedented challenge for the business.

Doesn’t the fact that Caffeine and Twitch have 21st Century Fox and Amazon, respectively, backing them, create an advantage?

Tom: Yes, but there are no guarantees. Looking back, there’s a fair amount of roadkill – startups that came in with the expectation that the property – because if its promotional reach and clout – would be able to change user behavior. But alas, there have been very few examples of success. 

If viewership for live sports programming is declining, how can any rights holder justify additional broadcasts?

Tom: It’s about evolving the core product. We can’t assume millennials, Gen-Z, with a very different mindset about media, are going to sit in front of the TV and watch a 3-hour broadcast with 70 30-second commercials – especially with so many grazable highlights, GIFs and memes available.. Rightsholders need to look at it as a marketing challenge vis-à-vis audience segmentation – and to draw this young crowd you need to give them more options. Choice is an essential ingredient in modern media.

So, you would continue to throw good money after bad (as it relates to a declining audience)?

Tom: I would think of it as an investment in audience development. If you are a major sports league and you’re thinking about the future, then the answer is you absolutely put money into it. What other option do you have? Do you want to look at a potential barren wasteland of significantly fewer fans 10, 15, 20 years from now? Because it will be if you don’t actively develop the millennial/Gen-Z fan. I think we’re looking at a serious maybe even existential threat, at least for some sports – over the next couple of decades; especially with sports that don’t translate well to modern media or are relatively unpopular with young people. Remember, another huge factor is the rapidly growing competition from native digital sports – most notably video gaming.

Don’t these alternative platforms pose a threat to traditional broadcasters – and ultimately to the billion-dollar TV deals the leagues have with them? (lower ratings = lower media value)

Tom: If the viewers are not there in the first place – which is the case with certain leagues and demographics now – then, what is there to lose? It’s not like they’d be siphoning off existing users. Maybe you appeal to a percentage of millennials or Gen-Z that aren’t currently tuning in. I don’t want to be overly glib about it, but if young fans are not watching your games and they’re disengaging from your sport – forget about TV ratings, you need to be proactive in warding off a future disaster scenario.

Fan Marino: While on the topic of rights agreements, Sports Illustrated recently announced it has inked an agreement with Liverpool FC to carry matches on the subscription streaming service SI TV. However, with NBC holding the exclusive rights to broadcast Premier League games in the U.S., Liverpool game broadcasts on SI TV will be subject to a 7-hour delay. The premise of taking a club that has among the biggest audiences in the U.S., buying their broadcast rights and building shoulder programming around them is logical. “Like all skinny bundles, the primary way they can have any success is to get exclusive or semi-exclusive third-party content, but broadcasting on delay doesn’t make much sense. Serious fans will purchase Liverpool TV and casual fans seeking out highlights, can find them on social.”

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Record Transfer Fee Offers Definitive Proof MLS’ Revamped Strategy Can Work

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Newcastle United F.C. has agreed to pay Atlanta United FC $27 million for the rights to 25-year old Paraguayan midfielder Miguel Almirón, the largest transfer fee ever paid to an MLS club. The deal comes less than 6 months after FC Bayern Munich acquired Canadian winger Alphonso Davies from Vancouver Whitecaps FC for a then-record $13 million (escalators could increase that fee up to $22 million). The deals are representative of Commissioner Don Garber’s wishes “to become more of a selling league.” Prior to the sales of Davies and Almirón, MLS had just one (Jozy Altidore in ’08, $11.6 million) player in its 23-year history command an 8-figure transfer fee.

Howie Long-Short: Don Garber’s philosophical 180° on MLS’ position as a seller within the international soccer ecosystem will lead to a better product on the field and give the league’s teams a chance at some financial stability; Forbes reported that 15/22 (no data on LAFC) operated at a loss in 2018 and only 3 clubs (LA Galaxy, Seattle, Portland) made $3 million or more.

The sale of Miguel Almirón serves as definitive proof that MLS can be a viable destination for ascending Central and South American players with aspirations of playing in Europe – and it validates the league’s revamped approach to business. Almirón spent 2 seasons with the club – including last season, when he was arguably MLS’ best player and the team won the championship – and returned +237% on the $8 million Atlanta paid to lure him from Club Atlético Lanús. Atlanta can now use that windfall to replenish their academy program and increase the overall talent on the roster. There was no real case to be made to keep Almirón in Atlanta. 11/23 clubs generated less than $29 million in total revenue last season.

Glenn Crooks is the radio voice of NYCFC. I had the chance to sit down with Glenn to discuss the international transfer market, the Central/South American pipeline and the need for scouting resources/infrastructure across the league.

Why are MLS players commanding more money than ever in the international transfer market?

Glenn: MLS as a league is gaining more respect. MLS isn’t just producing better players, they’re drawing some of the games’ most respected coaches too. Almirón’s coach was Gerardo “Tata” Martino (coach of Mexican national team), but Frank de Boer (coached Crystal Palace & Inter Milan), Patrick Vieira (considered among best players of generation) and Guillermo Barros Schelotto (coached Boca Juniors) have all coached MLS clubs in recent years as well.   

What is drawing Central and South American players to MLS?

Glenn: Many of the cities that MLS occupies are outstanding places to live, MLS players make a decent wage and the competition is good. The players are also in pursuit of some stability. Many of the leagues in South America operate in seriously unstable environments.

While Almirón represents best case scenario for developing international players, Davies – from Edmonton – is representative of what the league would like to achieve with homegrown talent. Glenn told me that, “MLS’ goal is to develop American players through their academies, for them to become 1st team MLS stars and then eventually play their way out of the league in terms of market value. I don’t think it gets any better than that for a league that’s never going to the top league in the world.”  

NYCFC’s transaction ledger is representative of the direction the league is headed. When the club first joined the league, “it bought Villa. Then it was Lampard. Then it was Pirlo. They’re not inking those kinds of high profile deals anymore. They signed 3 home grown players over the last year. They also paid transfer fees of $4 million for Jesús Medina from Paraguay and another $8.5 million for Alexandru Mitriță from Romania – so it’s not that the club isn’t spending money, it’s just that they’re spending it wiser.”

NYCFC may be spending wiser on player personnel, but they’re currently operating under the league’s worst stadium agreement and as a result lost more money than any other team in 2018 (-$15 million). It’s been reported that NYCFC is paying $1 million PER HOME GAME ($17 million/season) to occupy Yankee Stadium.

Fan Marino:  If you’re going to be a seller’s league, the ability to identify talent early is crucial. Unfortunately, Glenn says that MLS teams lack the infrastructure needed to find needles in a haystack. “Most teams don’t have the kind of scouting network that they’d really like to have because it’s costly. In fact, some teams outsource the scouting process. There’s a company called Soccer Syndicate that developed a detailed scouting network and has managed to land Real Salt Lake as a client. RSL wanted to find young international players and they couldn’t because they simply didn’t have the staff to do it. The company looks for players on the club’s behalf.”

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Desire to Pursue “Contextual Commerce” Driving Mobile-Only Ticketing Trend

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The Chicago Bears and Detroit Tigers are the latest pro sports franchises to announce they’ll be eliminating the use of printed tickets in favor of mobile-only ticketing systems – a trend picking up steam as organizations look to reduce fraud and improve the fan experience. The Miami Heat became the first club to implement mobile-only entry during the 2017-2018 season, but over 30 NBA and NHL franchises have adopted the technology since and +/- 50% of MLB clubs “will begin transitioning to mobile-only ticketing during the 2019 season.” The Tampa Bay Rays have decided to take mobile a step further. Not only will Rays fans buy, sell and transfer tickets on their phones, but they’ll be paying for all of their in-stadium purchases with them (or a credit card); Tropicana Field will become the U.S.’ 1st cash-free pro sports venue.

Howie Long-Short: Teams embracing mobile ticketing are working to eliminate fraud on the secondary market (static barcodes on print-at-home .pdfs are the leading source of ticketing fraud) and have interest in optimizing game-day for fans, but that’s only 2/3 of the story. Pro sports organizations are also interested in gathering insights on the seat holder – as opposed to just the ticket buyer – so that they can pursue a marketing strategy dubbed “contextual commerce”; the cross-selling of products/services (think: parking, personalized offerings) based on a specific consumer’s habits and/or preferences. Some have speculated that teams are moving in a mobile direction to save money on the printing of physical tickets, but those costs are so insignificant to a club’s bottom line that it really has no impact on the decision.

Russell Scibetti, President of KORE Planning and Insights, has spent the last 12+ years working on the data-side of the business. He’s held roles with the Philadelphia Flyers and New York Jets, and in his current role with KORE he works with more than 100 professional teams. I had the chance to sit down with Russell to discuss the transition to a fully digital ticketing ecosystem and Tampa’s decision to go cash-free.

If printed barcodes have been so easy to rip off, then why didn’t leagues/teams go back to issuing physical hard-to-replicate ducets over the last 10 years (prior to mobile-only entry technology becoming available)?

Russell: Fans needed to be able to sell or transfer their tickets easily for a true secondary marketplace to exist. Physical tickets handcuff the consumer in terms of their ability to easily resell or transfer tickets to people they don’t know.

If the whole ecosystem is digital, what happens to the scalper who sells extras outside the stadium (the original secondary market)?

Russell: If you look at the secondary market, tickets sold outside the stadium comprise such a tiny percentage of the overall sales picture – essentially, the business has already gone digital. Sure, in theory there will be a small number of fans who are accustomed to buying seats that way, that won’t be able to any longer, but scalping tickets outside the venue was one of the biggest links to fraud; mobile ticketing creates a safer transactional marketplace for the retail buyer.

Mobile is certainly safer, but anytime you’re dealing with technology there is the possibility of difficulties. What if the ticket holder’s phone dies? What if the stadium’s ticketing system goes down? Doesn’t mobile-only entry make it less convenient for the fan?

Russell: There’s a little onus on the customers to have charge on their phone, but there’s still going to be will-call and there’s always going to be staffed ticket windows [in the event a fan can’t access a mobile ticket]. As for stadium technology, there’s so much redundancy in the infrastructure now that teams are prepared in the event conductivity goes down.

Ticketmaster data indicates that fans have been quick to embrace mobile entry technology (where their Presence system is available). The company reported that 75% of fans used mobile entry to get into the ‘18 College Football Playoffs and 85% used it to enter the 2018 NHL all-star game.

Fan Marino: The Rays decision to go cash-free is being sold as a way to “increase the speed of service and to reduce lines throughout the ballpark”, but there was also a financial incentive for them to make the move. Russell explained, “anytime you have a large-scale cash operation, there’s always the assumption that the cash received will not match the cost of goods sold. It makes sense for them to pay a small credit card fee to ensure the accuracy of funds coming in during all 81 home games – a fee more than offset by the revenue gained, that otherwise would have been lost to the improper handling of change or theft.”

How is the decision to go cash-free going to be received by Rays fans?

Russell: Any team going to make that kind of drastic move is going to do their due diligence on fan demographics. The Rays likely did some analysis on their transaction records at the point of sale and realized that credit cards are the preferred method now, anyways. If that’s the case, then what they’re really doing is just staying in line with changing consumer behaviors. There’s always going to be that small percentage of fans that don’t want to change with the times.

Fans that don’t have credit cards are going to be directed to convert cash to gift cards in $10 or $20 multiples. The team is not refunding fans for unspent “credits”. On the surface that appears to be another way for the team to milk more money from fans, but Russell insists that’s not driving the decision; “breakage is not a sustainable way of generating profits.”

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Commitment to Competition, Ignoring Cost Structure Has RU, UC Athletics Under Water

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The Rutgers athletics department released a “comprehensive plan to reach competitiveness [in the Big 10] in a fiscally responsible manner” following a year in which it fell $47.4 million short of its $99.2 million budget, but officials at the State University of New Jersey aren’t interested in hearing about the “long-term benefits of Big Ten membership”; faculty union president Deepa Kumar derided the plan saying it “robs from our educational mission” and “saddles [students] with greater debt to subsidize.” Kumar has called on President Robert Barchi to decrease spending from the school’s operating budget on sports and to “re-prioritize the academic mission.”

Incoming President Thomas Katsouleas will face similar financial woes at the University of Connecticut when he takes the reigns in August, but despite the athletic department’s $42 million shortfall on a $80.9 million budget last year (highest among P5 + AAC schools), the current EVP of the UVA has no intentions of eliminating football – the largest contributor ($8.7 million) to the deficit. Katsouleas believes that the program helps to position the school as a “major, broad-context University”, that it provides “ancillary value for the other sports and for fundraising overall.” The school’s non-revenue generating sports aren’t on as safe ground. Athletic director David Benedict stated that while the school will work to increase revenues and look to cut expenses, “sometimes there’s inevitabilities.”

Howie Long-Short: The conference realignment that occurred back in 2011-2012 has begun to bare financial winners (Texas A&M, Missouri) and losers (Rutgers, UConn). While Rutgers’ shortfall can be attributed to their step up in competition (AAC to Big Ten) – and the expenses incurred while trying to keep up with the Joneses, Connecticut’s originates from its inability to find a home within a P5 conference (Big East to AAC) – and the subsequent decline in “conference and media licensing” revenues (think: media rights, bowl game payouts).

Ray Katz, a Columbia University Adjunct Professor and the COO/co-founder of Collegiate Sports Management Group, says that the absolute commitment to competition, rather than running a responsible business and competing at a reasonable and appropriate level, is what has UC and RU in this predicament. “Schools must start with a cost structure like any other business. They should be evaluating how much they can get their cost structure down while still achieving their goals, before figuring out what they would like to achieve, over-spending and only then trying to figure out how to elevate their revenue streams. Schools need to run their athletic departments as an integrated business and not as individual fiefdoms.”

Rutgers was ill prepared (from a resources and facilities standpoint) when it joined the Big Ten conference in 2014, but the 6 year wait for full financial distributions hasn’t helped RU to achieve competitive parity; since the school began Big Ten conference play in 2014-2015, the combined winning percentage for all school teams is a paltry .260. The school will receive +/-$27 million less than the 12 other Universities within the conference this year (note: Maryland came in with Rutgers, also receives partial share).

Connecticut’s AAC conference distribution was $7.1 million in 2017-2018, 82% less than teams in the SEC earned. That’s a hurdle Katsouleas is going to find impossible to overcome. Even if the conference increases its television contract (negotiations are ongoing) and the school manages to cut costs, there’s no way the athletic department can compete at a P5 level and operate self-sufficiently.

If that’s the case, I asked Ray why UConn should continue to fund collegiate athletics?

Ray: When schools compete at an appropriate level, it is a tremendous asset for the school, for the students, for faculty, for recruiting, for school spirit and for developing leaders. The problem is when schools compete outside of where they should be given the market they’re in, the nature of the University and the sources of funding.

Look at the University of Alabama. The athletic department makes money because they’re competing at the right level in the right venue. They know football is their athletics unique selling proposition – to use a marketing term. They’re not running out and spending $12 million annually on a coach in basketball. They’re using the money, the profits that the athletic department generates, to attract professors and to offer academic scholarships (to students with a 31 or 32 on their ACT), so their student body’s getting smarter, the school is becoming more desirable and moving up the ranks of state universities academically.  

At different levels, Butler, Tufts and countless others have used sports to elevate the university in total. Ray explained, “schools that are not well known or elite state or private schools need to market themselves. They can market themselves by putting billboards on I-95, sending out a million direct mailings or buying 30 second commercials on local or national television. The alternative is to view sports as desirable branded content and to build a strategy around them – to use a 3-hour football game as an infomercial for the University. If you think of sports as branded content for the University, then you would ask yourself, are we getting more out of the last 5 million dollars [spent] in sports then we could from 25 tenured professors that are out of touch with the vertical in which they teach, and/or are mailing it in because they have absolute job security?”

Fan MarinoAs the resource gap between the P5 conferences and everyone else continues to grow, it’s worth wondering if there’s a future for the other +/- 300 D1 programs. Ray says fans of mid (or low) major programs have no need to worry. “If everyone else wants to abide by the initial mission of student of athletics – and not try to be professional sports –  the college game can provide for a great learning experience for the athletes and great entertainment for students and alumni alike. The schools would do better [financially] too if they were smart with their media rights, if they were thoughtful and strategic with what they do with their content and wisely utilize their sports content to intelligently market the school to all key stakeholders regionally, locally, regionally, domestically and globally.”

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NHL Becomes 1st League to Deliver Real-Time Analytics to Benches for Coaches/Players

NHL

The NHL introduced player and puck tracking technology – to fans – for the first time at January’s All-Star Game, software capable of calculating statistics like player speed, shot speed and distance traveled. JogMo World Corp. captured the player information from GPS-like sensors in player shoulder pads 200 times/second, while sensors inside the rubber disk picked up location based data 500 times/second. 6 tech companies – all VR or gambling focused – had the opportunity to showcase commercial applications for the comprehensive data collected. The league has announced that it will deploy the tracking technology (full-time) for regular season games next season.

Howie Long-Short: The VR technology introduced allowed fans to project a game in 3D onto any surface (Trigger Global), watch the game from any vantage point (Beyond Sports), enjoy a broadcast offering real-time next-gen stats (VIZRT) and to create instant highlight packages using AI (WSC Sports), but in-game sports betting provides the league with the greatest opportunity to monetize the insights collected; we’ve already seen the NHL agree to a partnership with MGM Resorts International that includes access to the league’s official data. On the gambling side, Genius Sports introduced a platform for live in-game prop betting and Swish Analytics rolled out gambling software that offers real-time updates and statistics.

Jake Williams is the Head of Legal and Regulatory Affairs at Sportradar (the NHL’s global media embedding data rights partner). I asked Jake how far U.S. sports fans are from having real-time in-game tracking related prop betting available to them?

Jake: It really depends on how willing the leagues are [to sell the data]. The main issue sportsbooks have in offering tracking related prop bets is that the proprietary data necessary to set lines (and determine outcomes) is not in the public domain – at least not in the sense that the final score is. There needs to be a willingness on behalf of the leagues to distribute that data and to engage with sportsbooks. I think we’ll see gaming companies make those types of prop bets available, it’s just going to take time.

Ahmad Nassar (President of NFL Players Inc.) recently compared the potential monetary upside that proprietary league data brings to the leagues, to what television offered 50 years ago; in that, no one truly grasps the size of the opportunity. I’m not so sure. While data is certainly a commodity, most wagers are placed on results found in the public domain. I have a hard time believing that many sportsbooks could ever take in enough tracking related prop bets to warrant a costly investment in the data rights. Sportsbooks are already a low margin business.

While sports betting has since taken precedence, when the NHL first set out to develop the technology it was seen as a “broadcast application”; to enhance the fan’s viewing experience. The NHLPA has acknowledged it has allowed players to be tracked out of fear the league would fall behind from a technology standpoint. I asked Jake, if the players were to oppose the collection/sale of tracking data, what risks would it pose for the league?

Jake: With all the advanced computing power, play-by-play and tracking data, teams would be forgoing the opportunity to optimize what they’re doing on offense or defense in near real-time. The league would also be passing on the chance to stimulate fan engagement during game broadcasts. Advanced data prompts the announcers to correctly explain why a team would follow a given strategy.

Fan Marino: The NHL became the 1st and “only sports property delivering real-time video and data to the benches for the coaches and players” when (following the ASG) it began feeding teams on-ice analytics during games. Historically teams had an assistant print out game summaries and run them to coaches at the completion of each period, for review during intermission. The change, which now gives coaches access to more than 30 real-time statistics (on +/- 350 events/game) in real time, enables them to make informed adjustments on the fly. The data being transmitted today is found in the public domain, but the league has plans to integrate player and puck tracking analytics upon completion of testing.

Capturing real-time data during a hockey game has proven to be more difficult than other sports (which explains why it took 4+ years – and 7 figures – to develop). As Jake explained “puck tracking is a difficult space. If you’ve ever been to a hockey game, you know it’s not always easy to see the puck. Tracking solutions that have worked for other sports – like Second Spectrum (which relies on video to capture movement) – doesn’t work for the NHL; the video camera technology has the same problem following the puck as the fans do. Technology like Second Spectrum’s works best with the NBA game where it’s easy to see the ball, the players and track them.” Of course, the temperature of the puck/ice creates a whole other set of issues with regards to electronics.

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Mile Deep, Inch Wide: FloSports’ Solution to Cutting Through the Media Clutter

flosports-logo

D.C. United has agreed to a multi-year broadcast agreement (up to 4 years) with FloSports that will give the digital television service the exclusive rights to carry 21 of 34 regular season matches within the Washington market; league broadcast partners ESPN, Fox Sports and UniMas will carry the remaining 13 contests. The subscription streaming service plans to supplement game action with live and on-demand programming (think: pre-game/post-game, training camp coverage, player profiles). Games will air in high definition on FloFC.com, FloSports’ newest vertical dedicated to soccer content.

Howie Long-Short: D.C. United isn’t the first MLS team to bypass television in favor of a digital outlet, LAFC claimed that distinction when they elected to bypass English TV – in the Los Angeles market – last season for YouTube TV (Spanish television was available); Chicago Fire SC had a similar arrangement with ESPN+. But unlike those partnerships – limited to just game day broadcasts – FloSports has promised D.C. United “a dedicated marketing content deep dive into all things DC united as a part of the distribution strategy.” The pact is FloSports’ first with a Big 5 sports team.

YouTube TV and ESPN+ have much larger subscriber bases than FloSports. I asked Mike Levy, FloSports’ Vice President, Global Rights Acquisition – taking money out of the equation (no financial terms were disclosed) – why would D.C. United choose the OTT provider with the smallest audience (of the 3)?

Mike: Our promise to the club is that we’re going to grow their fan base. The goal of this partnership is to create some sort of emotional connection, to tap into people’s passions about DC united. Co-founder Martin Floreani used to say that the traditional media is a mile wide and an inch deep, we want to go a mile deep and an inch wide. We don’t believe that you can just throw out a live game and expect to grow your fan base anymore. The world is just too fragmented, the media landscape is too cluttered. Youtube TV or ESPN+ might be bigger platforms, but they’re not going to be generating even a fraction of the content that we’re going to be distributing daily (which explains why exclusivity is crucial for FloSports). We’ll also be deeply engaged with both ticket sales and social media.

Last Tuesday, the Formula One Promoters Association held a meeting with Liberty Media to express their concerns over the direction of the sport. Liberty’s intent to move races from over-the-air television to a paid OTT streaming service was among their chief apprehensions. The Association explained that “it is not in the long-term interest of the sport that fans lose free access to content and broadcasting.” With D.C. United making a similar move from cable/satellite to a paid streaming service, I asked Mike if D.C. United’s decision is in the best long-term interests of the sport? 

Mike: We believed that there are certain sports that are ripe for disruption and need it to grow. Sports with massive participation, vast social reach and impressive fan engagement, that remain underserved by linear media outlets. FloSports is about going deep into a sport, from the amateur level all the way up to the professional ranks; and we want to do that year-round.

In the D.C. market, fans won’t be limited to just DC United. We’d like to get involved in the community at a grassroots level. It’d be the connective tissue between youth soccer in the DC metro area and the college game. We’ve already have rights to the University of Maryland through our Big 10 deal and we’re looking to expand our collegiate portfolio in the mid-Atlantic region. Nobody has programed a local channel deal around maximizing all the interest in the sport and we believe that the digital environment is the best place to do that.  

One could argue that every pro sports league in America – except for the NFL, MLB and NBA – would benefit from FloSports’ vertical model. Mike says that “there are other bigger sports that are also underserved” implying the company plans to compete for Big 4 broadcast rights in the future. NHL rights would seem ripe for the picking. They’re relatively inexpensive and no Big 4 sports fan is more underserved – with regards to coverage – than the NHL fan.

Platform agnostic long-tail content will help with the development of some fans (and, existing ones will love it), I’m just not on board with the idea that pulling over the air broadcasts of games – in favor of a paywall – helps to grow a fan base. I don’t see how excluding potential fans is beneficial to the long-term interests of the game.

I asked, how many D.C. United fans he’s expecting to convert to the service?

Mike: I think we can do as well, if not better, than what the team was doing on linear television. You see all the investments being made in the digital landscape. Cord cutting is becoming more prevalent. Data shows that young fans are getting deeper and deeper into the sports that they love; that most people can only follow 1-2 sports at a time. We know these trends are happening. It’s going to take time, but this is an investment in the way consumer consumption habits are evolving.

Fan Marino: It’ll cost D.C. United fans who want to watch all 34 games an additional $150/year (or $30/mo.) in 2019, but the subscription will give them access – in addition to FloFC.com – to content from 24 other sports including auto racing, MMA and wrestling. Games will be broadcast in both English and Spanish.

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On Location Experiences Dictates Super Bowl Secondary Market Pricing

On Location Experiences

Mercedes-Benz Stadium will seat 75,000 for Super Bowl 53, but nearly everyone in attendance will have obtained their seat through the league office (25.2%), the Patriots (17.5%), the Rams (17.5), the Falcons (5%) or one of the other 29 NFL clubs (34.8%, 1.2% each); team personnel, players, sponsors and season ticket holders will comprise more than 95% of those in attendance. For those without access to a face value ticket, the league office and each of the 32 teams allocated a combined 9,500 tickets to On Location Experiences – the official hospitality arm of the NFL – for inclusion in packages (think: pre-game parties, on-field access) that are available to the general public. The cheapest way for the average fan to get into the game remains the secondary ticketing market. As of Thursday (1.31) evening, the get-in price was $2,300 and Stubhub still had 2,800 seats for sale.

Howie Long-Short: Since every NFL player is given the option of buying a pair of tickets to the Super Bowl at face value, no contingent has access to more seats at cost than the players do. The face value on Super Bowl 53 tickets ranges from $900 to $5,000.

The Super Bowl secondary ticketing market has evolved. For years, ticket prices were almost always exclusively determined by the game’s match-up, but now that the supply has been consolidated to On Location Experiences (and Prime Sport, acquired by OLE in Dec. ‘17) pricing has become a function of yield management strategies and how the company wants to manage the market. OLE initially priced their packages between $5,000 – $17,500, higher than the market could bear.

On Thursday afternoon Darren Rovell reported that the OLE “dumped 179 tickets at the bottom of the market – $2,232.50 before fees.” The company overpriced the ticket packages, failed to sell through their allotment and are now being forced to liquidate, but that doesn’t mean the market is about to collapse. On Location Experiences won’t liquidate in a publicly facing manner (on a site like Stubhub), they’ll sell the tickets at face value to league partners so that pricing remains stable on the public facing marketplaces.

This year’s Super Bowl secondary ticketing market has been up and down. The get-in price was $2,700 when the conference championship games ended on Sunday 1.20. Prices dipped Monday-Thursday of the following week, but never fell below $2,000. By Wednesday 1.30 prices were back up to $2,600, before dropping $300 yesterday.

Fan Marino: Fans unable to afford tickets (see: most) still have a chance (albeit slight) to attend a future Super Bowl. The NFL gives away 500 seats each year to “the most deserving fans”; a collection of “community heroes” and the league’s “most avid followers”. Last year’s recipients included an 8th grade football team from Minneapolis, a fire chief with Stage 4 brain cancer and 4 LAPD police officers. Think you’re deserving of going to Super Bowl 54 (and want to take a time machine back to 1990)? Send your written request for tickets to Super Bowl ADA Random Drawing 345 Park Avenue, New York, NY 10154. Yes, the NFL will only accept written entries to the contest via snail mail; in 2019.

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