10. Major Leagues, Major Money: Sports

In this chapter, we look at the many faces of sport as an entertainment. Perhaps nowhere else in the world of entertainment is the impact of marketing felt so strongly as in sports. The supposedly simple act of kicking, catching, dunking, or chipping a ball forms a complex multibillion dollar business, with only a fraction of that from gate admissions.

Unlike the movies, sports are not scripted. There is no certainty of who might win or lose, and that’s what keeps fans in front of their HDTVs, smartphones, websites, or radios, hoping, praying, and buying retail merchandise—today, even as they are watching or listening. In no other platform is such blatant hero-worship universally accepted or expected.

But one thing is for certain: As a business, it’s a home run.

Sports, as a business, can be hard to pin to specifics given that most of the franchises are privately held businesses. Most of the leagues do not allow for publicly held companies, with the exception of the NFL’s Green Bay Packers, originally owned primarily by residents of Green Bay who fought to save the franchise back in 1950. Disclosure is not required, and there can often be multiple business entities involved.

However, when all potential revenue and marketing spending is taken into account, at least one resource estimates the size of the entire sports industry in the United States to be worth over $435 billion, far larger than movies, music, or any of the other entertainment platforms (see Exhibit 10-1).

Convergence occurs across all platforms. Many, many successful movies have been based on sports, including Any Given Sunday, Bull Durham, Field of Dreams, Remember the Titans, The Natural, and a plethora of classics that focus on biography of sports heroes. Sports-based electronic games, especially Madden NFL, now just known as Madden, have been very successful. Radio sports talk shows draw a loyal listener base and are found in every major metropolitan area, as well as on satellite radio networks. Books about sports provide content for the development of other sectors, including TV series and theatrical releases, as well as just plain reading enjoyment for hardcore sports fans. Entire cable networks are now devoted to sports, including ESPN and Fox Sports, along with league networks, which we discuss later. Websites abound. Mobile applications are appearing daily.

In short, sports fans can get their fix at any moment of the day, anywhere they like—and they do, by the millions.

¹ “Changing the Game: Outlook for the Global Sports Market to 2015,” PricewaterhouseCoopers, December 2011, www.PwC.com/sportsoutlook.

Sponsorships, which include payments to have a product associated with a team, league, or event and naming rights. This is the fastest growing revenue segment, offering the widest availability to potential investors.

Gate revenue for live sporting events. This is the segment that has the most constraint on growth, given that it is dependent on facility size. Keep in mind that many of the sporting events covered are already sold out, thanks to enthusiastic fan bases. Weather is also a factor.

Media rights fees paid to show sports on broadcast and cable television networks, television stations, terrestrial radio, satellite radio, the Internet, and mobile devices. As in other platforms, mobile spend is rapidly growing, along with Internet access.

Merchandising, which includes the selling of licensed products with team or league logos, player likenesses, or other intellectual property. This segment is especially strong in North America. It is of special interest to individual athletes, whose contracts often stipulate a percentage of the merchandising rights.

PwC bases its U.S. forecast on the following major sports leagues: football (NFL), baseball (MLB), basketball (NBA), hockey (NHL), soccer (MLS), and collegiate athletics (NCAA). PwC estimates that this combined market will grow substantially between 2012 and 2015²:

² Ibid.

Gate revenues will grow from $15.9 billion to $17.8 billion

Media rights will grow from $11 billion to $12.8 billion

Sponsorship will grow from $13.4 billion to $16 billion

Merchandising will grow from $12.7 billion to $14.3 billion

Total growth for these combined sports segments? $53 billion to $60.8 billion. That’s a lot of fan investment. When considering the business as a whole, we must also consider the associated marketing spend for each of the segments, taking this forecasted growth well over $100 billion.

Let’s take a look at each of the major sports.

Leagues, run by commissioners and their staffs, setting rules to define the parameters for the competitions

Franchises, which are also known as teams

Players, who are hired, fired, and compensated by the owners and are governed by contracts

Championship games that attract a global audience

In the new Media Millennium, they also share a reliance on huge revenue from broadcast and cable TV contracts, league-owned websites, and a move into the mobile universe. But before we investigate the impact of entertainment marketing, let’s take a quick glance at the major sports leagues.

Today, MLB is composed of 30 teams in 28 cities. These teams are all independently owned but follow the rules and organization of the league. The league itself is divided into two leagues: the American and National Leagues. The champions of each league, determined in post-season play that includes certain wild-card spots, face each other every October in the World Series. Teams play 162 games in a season that lasts from April to October. Spring training is held in March when the teams play games against each other in addition to practicing for the regular season.

³ The Business of Baseball, 2012,” www.forbes.com, March 21, 2012.

⁴ “MLB Team Values,” www.forbes.com/mlb-valuations/list/, March 2012.

New York Yankees: $1.85 billion

Los Angeles Dodgers: $1.4 billion

Boston Red Sox: $1 billion

Chicago Cubs: $879 million

Philadelphia Phillies: $723 million

Note that the values stated here do not take into account the 2012 blockbuster deal, valued at over $2 billion, for the Los Angeles Dodgers. With the Dodgers inking a $7 billion deal with Time Warner Cable in January of 2013, you can be sure these numbers will go up, substantially, across the board.

Though the teams have profited from media revenue, so have the players, as shown in Exhibit 10-2.

Baseball has the highest attendance of all major league sports, but this is based on the high number of games played each season in stadiums with large capacities.

⁵ “MLB Network to Televise Postseason and Regular Season Game Programming Through 2021,” www.mlb.com, October 2, 2012.

⁶ Ibid.

Several of the teams in larger markets either own or have large stakes in their own cable networks, including the New York Yankees (YES), New York Mets (SNY), Boston Red Sox (NESN), and Cleveland (STO).

Major league baseball also owns and maintains the MLB.com website, which, like all the major leagues websites, offers news, stats, merchandise, and links to ticketing.

Today’s NBA is made up of 30 teams in 28 cities. The teams are divided into two conferences, Eastern and Western, and play each other for the NBA championship in June. The regular season lasts from October to June, with each team playing 82 games. NBA attendance is around 20 million people per season.

⁷ “Billion-Dollar Knicks and Lakers Top List of NBA’s Most Valuable Teams,” www.forbes.com, January 23, 2013.

The value of the top five teams are estimated as follows⁸:

⁸ “The Most Valuable NBA Teams,” www.forbes.com, January 23, 2013.

New York Knicks: $1.1 billion

Los Angeles Lakers: $1. billion

Chicago Bulls: $800 million

Boston Celtics: $730 million

Dallas Mavericks: $685 million

Players have seen associated rise in wealth, as shown in Exhibit 10-3.

The average price for a New York Knicks ticket is $117.47. An average LA Lakers ticket goes for $99.25. Biggest bargain? Memphis Grizzlies, at $22.95.⁹ Considering that Grizzlies fans get to see those same expensive teams play in the Memphis home court, that’s a steal.

⁹ “NBA Ticket Prices Rise for First Time in Three Years,” NBA, www.nba.com, February 1, 2012.

Today’s NFL is made up of 32 franchises that play in two conferences: the American Football Conference (AFC) and the National Football Conference (NFC). The Commissioner of the NFL is Roger Goodell. Teams play a 4-game exhibition season running from early August to early September; a 16-game, 17-week regular season running from September to December or early January; and a 12-team single-elimination playoff beginning in January. The NFL Championship, also known as the Super Bowl, is played in early February. The NFL equivalent of the All-Star Game is the Pro Bowl, which is played in Hawaii at the end of each season. Most NFL players enter the league from college.

¹⁰ “The Business of Football,” www.forbes.com, September 7, 2011.

Estimated value of the top five teams are as follows¹¹:

¹¹ “The NFL’s Most Valuable Teams,” www.forbes.com, September 7, 2011.

Dallas Cowboys: $2.1 billion

New England Patriots: $1.635 billion

Washington Redskins: $1.6 billion

New York Giants: $1.305 billion

New York Jets: $1.284 billion

Salaries in the NFL are dependent on the salary cap, which is the absolute maximum each club may spend on player salaries in a capped year. The cap is set each year at a specified percentage of the expected NFL gross team revenue for the next year, as determined by the NFL’s auditors. For the year 2012, the salary cap was approximately $120.6 million.

Player salaries in the NFL reflect the parity the league has been working toward for years. The NFL has been successful with spreading the talent across all markets by creating balanced league revenue streams, the salary cap, and an aggressive strategy in negotiating media contracts. That effort is reflected in this list of top player salaries in Exhibit 10-4, considering that both major and less-than-major markets are represented.

The Super Bowl has a huge economic impact. In 2013, for Super Bowl XLVII, 30 seconds of commercial time went for $3.8 million, generating an estimated $220 million overall.¹² The economic impact on New Orleans was estimated at $439.4 million.¹³ The Nielsen Company put viewer estimates at 108.4 million, roughly half of which are women.

¹² “Super Bowl Ad Prices Rise: Worth the Cost?,” www.cbsnews.com, January 31, 2013.

¹³ “New Orleans Is Stepping Up Its Game for Super Bowl XLVII,” www.forbes.com, October 9, 2012.

Sunday games are split between CBS (AFC games) and Fox (NFC games). Monday night games are broadcast by ESPN. Sunday night games are shown by NBC, and are also televised in Spanish on Telemundo, reaching a large and loyal fan base.

DirecTV offers a subscription-based program, NFL Sunday Ticket, that allows viewers to watch a host of regional games, further broadening the NFL’s fan base beyond local metropolitan areas. Other cable subscribers may have access to the NFL’s Red Zone, depending on their carriers. Red Zone features all the highlights of all games, including all scoring.

The NFL also has wide broadcast radio coverage, including Global Radio Networks, Compass Media Sports Network, and Univision (in Spanish). Sirius/XM Radio also carries local broadcasts of games, as a separate subscription price over and above the base price of the satellite carrier.

Games are also available via the Internet and via mobile application, but there is a separate charge for this, via applications available from each franchise.

The NFL operates NFL.com, which offers everything from news to merchandise to ticket links and includes full access to a fascinating football phenomenon: the fantasy league.

¹⁴ “The Business of Fantasy Football,” www.foxbusiness.com, August 31, 2012.

Fantasy leagues operate in a parallel universe to the NFL, with participants drafting and managing teams of players. Just like the real managers, participants design their starting lineups on a weekly basis to match the upcoming opponent. Though there are several leagues, by and large they operate under similar rules, with teams choosing position players, offense and defense, and a kicker.

Fantasy football has become widely accepted by the league and its supporting members, especially the media. Links for fantasy stats abound on websites, including at NFL.com. Cable programs such as RedZone are highly dependent on fantasy participants. Estimates on revenue generated by the fantasy leagues hover in the $1 billion yearly range, including cable deals, advertisements, draft guides, buy-in fees, and various endorsements.¹⁵ There are even insurance brokers who will insure a fantasy participant against injuries to players.

¹⁵ Ibid.

None of these estimates include the amount of money that exchanges hands from the gambling engendered by fantasy leagues. This is a very gray area in American sports, made grayer still by the fact that the leagues are, by and large, supporting the concept by placing links for fantasy leagues on their websites.

Today’s NHL is organized into 30 teams—24 in the U.S. and 6 in Canada. The Commissioner of the league is Gary Bettman. There are two conferences, the Western and the Eastern, with three divisions each. Each team plays 82 regular-season games in a season lasting from September to June.

Toronto Maple Leafs: $1 billion

New York Rangers: $750 million

Montreal Canadiens: $575 million

Chicago Blackhawks: $350 million

Boston Bruins: $348 million

These teams are worth $605 million, on average. The five least valuable—the Carolina Hurricanes ($162 million), New York Islanders ($155 million), Columbus Blue Jackets ($145 million), Phoenix Coyotes ($134 million), and St. Louis Blues ($130 million)—are worth just $145 million, on average.¹⁶ This does not bode well for creating a consistent product across all markets, even though the league boasts an average 95.6% capacity and a raft of new sponsor deals, including Discover, Geico, Honda, the Las Vegas Convention and Visitors Authority, McDonald’s, Paramount Pictures, Tim Hortons, Verizon, and Visa.¹⁷ It does not help that the league failed to play over half of its 2012–2013 season due to a lockout.

¹⁶ “NHL Team Values 2012: Toronto Maple Leafs Are First Hockey Team Worth $1 Billion,” www.forbes.com, November 28, 2012.

¹⁷ Ibid.

Player’s salaries may not be as large as those in other major league sports, but the athletes at the top aren’t hurting (see Exhibit 10-5).

We include it here to recognize the global value, even as fans see the possibility of rising popularity in the U.S. This is as much based on the changing demographic of the U.S. as it is on the rapidly multiplying youth leagues that seem to appear on every wide patch of grass in the suburban America. MLS counts on those kids, imbued with the game as their parents and grandparents were with baseball, to carry the business of domestic soccer forward.

Soccer as a whole has an interesting structure. Unlike other major leagues, which are associations of independently owned and operated teams, MLS is single entity, where each team is owned and controlled by the league’s investors. There are 19 teams that operate in a Western and Eastern Conference structure. U.S. teams compete for the U.S. Open Cup.

¹⁸ “Sale of D.C. United to Billionaire’s Son Values MLS Team at Record $50 Million,” www.forbes.com, July 11, 2012.

Players’ salaries—for everyone other than big-time international stars like David Beckham, who plays for the LA Galaxy—are at the bottom of the barrel, with many earning less than $50,000. Even Beckham makes peanuts ($6.5 million) when compared to a fairly run-of-the-mill position player in major league baseball.¹⁹

¹⁹ “M.L.S. Salaries: A Bigger Pot, but Still Half Full,” New York Times, May 26, 2012.

²⁰ Ibid.

The good news for the business is this: The decline has stabilized. NASCAR seems to be back on the road to health. It is the second-most watched televised sport (after football), but viewership had declined for five years, from a 2005 high of 8.5 million. But 2012 numbers are up, back to 2009 levels of just under 6.5 million.²¹

²¹ “Nascar Gets Back on Track,” Forbes magazine, March 12, 2012.

There are currently 30 teams in NASCAR, operating in 40 states and 135 tracks. Top teams are valued at²²

²² “The Most Valuable NASCAR Teams,” www.forbes.com, March 12, 2012.

Hendricks Motorsports: $350 million

Roush Fenway Racing: $185 million

Joe Gibbs Racing: $155 million

Richard Childress Racing: $147 million

Stewart-Haas Racing: $108 million

²³ “Fox, NASCAR Agree to Eight-Year, $2.4 Billion Contract Extension for Sprint Cup Races,” www.aol.sportingnews.com, October 15, 2012.

College sports are a huge business all their own. Consider the data in Exhibit 10-6 regarding the athletic departments at the top 10 revenue earning schools.

Where does it all come from? Gate revenue, of course (minimally). Then there’s the media revenue, driven by television contracts, which in this day and age includes conference networks, like the Big Ten Network, jointly owned and operated by the Big Ten conference, and Fox Sports. Recently, conference switching has been all the rage; the Big Ten now has 12 teams happily sharing in the network revenue, while the 16-team Big East is now the Big Least, with 7 schools leaving. These teams left because they did not have football teams but have excellent basketball teams, which could form the basis of a new television network of its own.

Colleges benefit from sponsorship dollars as well as licensing. Bowl games, with the attendant media coverage, primes this pump significantly. Consider the history of Louisiana State University (LSU) and its participation in the BCS Bowl Championship Series: Prior to winning its first BCS championship in 2003, the school’s licensing revenue had never exceeded $1 million. After winning the title, the Tigers’ licensing income jumped 208% for the 2003–04 fiscal year, to almost $3 million. By the time the Tigers won again in 2007, they were grossing more than $5 million in licensing.²⁴

²⁴ “For BCS Winner, Licensing Boom Is Just the Start,” www.sportsbusinessdaily.com, January 9, 2012.

Economic impact on the community can be a hard thing to judge, although estimates are always rosy. Londoners, however, did not fare well during the 2012 Summer Games. The organizing committee and the city spent huge amounts of time and dollars to inform people how to negotiate the central city, expected to be a mob scene. However, the powers that be did such an excellent job that central London was mostly a ghost town during the Games, resulting in a bust rather than a boom for hospitality and retail businesses located downtown, including London’s famed West End, the heart of the theater district.

The economic impact of golf is huge. All of us duffers out there swinging (and sometimes cursing) drive an economy that has an estimated value of nearly $69 billion.²⁵

²⁵ “Golf 20/20: The 2011 Golf Economy Report,” SRI International, October, 2012.

Here’s a fun fact that you may not know: the Professional Golfers Association (PGA), golf’s over-arching association, long ago established an interesting business model. It encouraged PGA Tour events to be set up as charities, returning net proceeds to the communities that hosted them. The staff at these events are mostly volunteers. This charitable status opened the door for wider corporate sponsorship, which not only funded the purses, but paid for a good portion of the television time,²⁶ creating a self-supporting media relationship. The sponsors get the benefit of aligning themselves with a charity, while getting their name (Honda Classic, AT&T Pebble Beach Pro-Am, Wells Fargo Championship) repeated over and over. Ah, repetition, the soul of advertising.

²⁶ “The Business of Golf: Beyond Tiger,” The Economist, June 9, 2011.

Cable television has blown the doors off the individual sports world, allowing for wide coverage of sports some of us didn’t know existed. For example, we’re willing to bet that you didn’t know NBC Sports offers 29 (yes, you read that right, twenty-nine) sports fishing shows—and that’s just NBC. Just like in the ads for Ginsu knives or the music compilations hawked on late night infomercials, a browse through the Internet for fishing shows seems perfect for a pitchman yelling, “But wait! There’s MORE!!”

There is more. According to a new study, America’s nearly 60 million anglers spend $48 billion per year on fishing equipment, transportation, lodging, and other associated expenses, generating a total annual economic impact of $115 billion. The industry supports over 828,000 jobs and generates $35 billion in wages and $15 billion in federal and state taxes. And when the going gets tough, the tough go fishing: Despite the economic difficulties in the U.S. economy over the past five years, the total amount spent on sportfishing, which encompasses tackle, travel, and other equipment, grew 5%.²⁷

²⁷ “Sportfishing in America: An Economic Force for Conservation,” the American Sportfishing Association, January 2013.

Other highly popular sports include boxing, mixed martial arts, and extreme sports, as exemplified by the X Games, owned and controlled by ESPN, which features a series of contests that seem to balance on the possibility that someone could break their neck at any moment, doing the kinds of things mothers used to stand guard against.

Like the professional athletes who play team sports, professional individual sports stars often have the opportunity to grow wealthy from their pastimes/businesses. But rather than try to delve into the ever-changing specifics of who the recent heroes might be, it’s more appropriate for the purposes of our discussion to focus on how that wealth is earned—not just for individuals, but for teams. This, after all, is the basis of this book: entertainment marketing, so let’s get on with that fascinating side of the business.

Forbes magazine uses an interesting set of factors to determine the brand value of what it calls its “Fab Forty,”²⁸ the most valuable brands in four distinct areas. The figures quoted in Exhibit 10-7 are the additional value a strong brand adds to the worth of a business, event, individual, or team.

²⁸ “The Forbes Fab 40: The World’s Most Valuable Sports Brands,” www.forbes.com, October 17, 2012.

“Brands” have been described as everything from objects of love to religion, but in any case, brands offer a customer a type of emotional support in making buying decisions. Sometimes this support comes from the desire of the customer to identify with the brand: “Tiger Woods uses these clubs; they will help my game,” or “If I use these clubs I will be more like Tiger.” It’s a complex assessment and a very personal one, but branding is a huge part of strategic revenue building.

²⁹ “Sports on the Rebound: Retail Sales of Licensed Merchandise Based on Sports Properties Rises 5.3% in 2011,” The Licensing Letter, EPM Communications, Inc, June 2012.

Here’s a look at how licensing revenue broke down by league in 2011³⁰:

³⁰ Ibid.

Major League Baseball: $3.1 billion

National Football League: $3.0 billion

Major League Soccer: $394 million

National Basketball Association: $2.0 billion (this, during a lockout that cut the season in half)

The National Hockey League: $887 million

NASCAR: $887 million

Collegiate licensing revenues rose to $3.32 billion during the same year.

Endorsements are a gigantic pot of gold for athletes. Consider the numbers in Exhibit 10-8 and how endorsements are often a far larger portion of overall earnings than salary or winnings.

³¹ “The World’s Highest Paid Athletes,” www.forbes.com, June 8, 2012.

Sponsorship continues to provide an increasing source of revenue for sports. Pricewaterhouse—Coopers estimates that by 2015, sponsorship will actually overtake gate as the largest source of revenue for sports.³²

³² “Changing the Game: Outlook for the Global Sports Market to 2015,” PricewaterhouseCoopers, December 2011, www.PwC.com/sportsoutlook.

But the question is always out there: What real impact does sponsorship have? A recent survey conducted for SportsBusiness Journal/Daily by Turnkey Sports & Entertainment³³ produced some interesting results. Among many results, the Major League Soccer Sponsor Loyalty survey demonstrates

³³ “MLS Partners Run the Table in Fan Recognition,” Sports Business Daily, December 10, 2012.

The number of fans who correctly identified AT&T as an MLS sponsor was three times higher than the number of fans who thought Verizon had the league’s wireless rights—despite the fact that Verizon holds a slightly greater market share of U.S. wireless subscribers than AT&T.

Visa, MLS’s official payment services partner since 2007, had a 39.8 percent overall recognition rate in 2012, the highest mark for any credit card in the history of the survey across all leagues. More than 44% of avid fans recognized the relationship, the highest rate of any of the league’s sponsors among avid fans.

Anheuser-Busch, an MLS sponsor since the league’s inaugural 1996 season, had its best survey ever, netting 38.3% of fan mind-share, a year-over-year increase of 13 percentage points.

Although this data is specific to soccer, other surveys have shown similar results for other leagues and teams. Live sports reaches avid fans, and avid fans support their teams—and those products and services associated with those teams.

The practice can occasionally backfire when a company goes out of business or faces some sort of public challenge that a team would prefer not to have associated with its brand.

Exhibit 10-9 provides a sampling of recent deals made for naming rights. Keep in mind that this covers just a few; there are 72 U.S. facilities that utilize naming rights.

Teams reach out to fans, staying top of mind, even when the season is over, with email blasts and Facebook posts regarding off-season moves such as trades, contract negotiations, schedule updates—whatever might connect with the fan.

Many teams have taken the social connection one step further, launching “fan ambassador” sites that connect with fans through exclusive media releases and game play.³⁴ The Indianapolis Colts have the Colts Stampede; the Detroit Pistons have Fast Break. Fans can earn points by sharing information and gain recognition/status as their names climb up the leaderboard. Remember our discussion on this back in the gaming chapter? What better place to link games with consumers than through sports, a natural fit.

³⁴ “Social Media: Rewards Programs Sprout Up,” www.espn.go.com, November 30, 2012.

Other examples of reaching out through social media include the U.S. Olympic Basketball team posting pictures—just like any other tourist—on Instagram. And who could forget (or get the song out of their head) the various teams, including the U.S. Olympic swimmers, that posted YouTube videos of themselves lip-synching/acting out Carly Rae Jepson’s “Call Me Maybe?” Or Linsanity, the craze that erupted across the social media universe when Jeremy Lin, an unheralded New York Knicks benchwarmer, suddenly became the star sensation?

And then there’s Twitter, a mixed blessing if ever there was one. There was a time when people were urged to think before they spoke, but this doesn’t seem to apply to Twitter—perhaps because tweeters aren’t thinking of it as speech. Whatever the case, the rapid deployment of one’s inner thoughts and feelings doesn’t always make for good fan relationships, and all leagues are now concentrating on making sure that players—and team/league employees—understand the potential damage that can be wreaked at any given moment.

Mobile media is huge in the sports world, as it is everywhere else today. Apps abound for the diehard fan. Every team has apps that connect the fan with stats and info, and many allow the fan to tune into radio broadcasts for a fee. Every major network aligned with sports broadcasting—ABC, NBC, CBS, Fox, ESPN—has not just one, but a variety of applications ready to be downloaded to smartphones and tablets, allowing for everything from stats, videos, league trackers, and fan interaction to fantasy league play.

Technology provider Cisco recently announced StadiumVision Mobile. The following is taken directly from the release³⁵:

³⁵ “Cisco Introduces StadiumVision Mobile,” Cisco press release, February 1, 2013.

When integrated with an in-venue app, the solution delivers live video and data feeds with minimal delay and offers multiple channels of unique content such as a replay channel, an alternate-view channel (a view of the bench during timeouts), and a data channel (for stats, trivia contests and multi-player games). These options create a more interactive and personalized experience and open business opportunities for the venue and teams through targeted advertising, sponsorship activations, promotions, branding and more.

Increasing the overall in-stadium fan experience is an important issue in sports; gate receipts are still a huge part of revenue. With new stadiums adding luxury boxes, private clubs, special upgraded seating sections, and personal seat licenses—essentially an additional fee layered on top of your season ticket cost—teams are making a big effort to keep fans coming to the stadiums.

Consider the NFL: After peaking in 2007, the NFL has faced declining ticket sales. 2012 saw a slight increase, to an average paid crowd of 67,579, but still on the downside of 2007’s 69,661. (re-did footnote 36 with new source).³⁶ This could be due to many factors, not the least of which is the excellent experience of watching football on television. Today’s technology allows for a thoroughly analyzed, well-tracked game featuring instant stats and graphics that clearly describe the current position of the ball, along with great replays. Even though there are still teams, such as the Green Bay Packers, that boast a loyal fan base that continues to brave the coldest weather, stadiums by and large must find new ways to draw crowds. The stadium experience is key to the health of league sports.

³⁶ http://espn.go.com/nfl/attendance.

Teams, leagues, and athletes might be getting wealthier by the minute, but it’s the fan that is paying the price. The TV deals you see posted here will be coming out of your pocket, whether you watch sports or you don’t. In some areas, this can amount to as much as $3 to $5 on your monthly cable bill. But as we’ve discussed, live sports is one of the last bastions of live TV, a platform that allows for the traditional advertising that helps pay for programming. After all, how many people truly wish to DVR a game, other than for convenience? In most cases, the avid fan will already know the outcome, and that takes all the fun out of the experience.

ESPN: ESPN2, ESPN Classic, ESPN News, ESPN Deportes (in Spanish), ESPN U, ESPN 3

Time Warner: Turner Sports, TNT, TBS, RSNs

Fox Sports: Fox Sports RSNs, Fox Sports Net, Fox College Sports, Fox Deportes (in Spanish), Fox Soccer Channel

Comcast: RSNs, Versus (rebranded NBC Cable Sports), the Golf Channel

CBS: CBS College Sports (originally CSTV) rebranded (again) to CBS Sports Network

The result can be an economic blackballing of the teams and the leagues, with fans voting with their pocketbooks and staying home, at least for some period of time. Sports, after all, is about brand management, and fan relationships are a big part of that. Though sports fans tend to be some of the most loyal consumers, the ever-widening gap between rich and poor can lead to a situation in which the fan stops identifying with the team. This situation is exacerbated by the free agency that has resulted in the constant change of players, leaving little “team” left to root for.

The strike had a deleterious effect on baseball. National media coverage fed the growing rancor of the fans, who threatened to stage their own strikes, staying away from the game. With the golden goose near death, the owners resuscitated the commissioner’s office, electing one of their own—Bud Selig—as the game’s ninth commissioner.

Fans continued to show their displeasure but returned in droves in 1998, when Mark McGwire and Sammy Sosa battled it out for Roger Maris’ 37-year-old single-season 61-home run record. The fans and the press were transfixed, watching each at-bat with breathless anticipation. McGwire, muscles bulging, powered his way to 70 dingers, and the national crowd went wild. Later that year, MLB signed a new six-year, $800 million TV contract with ESPN. Sport-tainment was born, with owners and players now receiving riches for their role as entertainers.

Records continued to fall in the next several years, as one bulging player after another took a swing at a legend, building big stats for huge new contracts or extensions. But this era is now marked by much controversy, given the discovery that steroids and other performance-enhancing drugs had played a big role in the races. Purists argue that the MLB turned a blind eye to the problem to rebuild revenue. The players are paying the price. Sosa, McGwire, and several others have been denied access to the Hall of Fame, with many doubting that they will ever be seriously considered.

Performance-enhancing drugs are found in all types of sports, at all levels. A huge debate continues about the problem, with some saying that drugs are a sort of new technology, a boon that allows all athletes to perform at higher levels, while others point to the risks, including early death, which can result from their use.

The bottom line is that for the present, they are illegal, and each time a player is found to have been using them, scandal erupts, fans shake their heads, and sponsors back away. Lance Armstrong’s 2013 admission that he used performance-enhancing drugs during his Tour de France days cost him his reputation and an estimated $75 million, losing deals with Nike, Anheuser-Busch, Radio Shack, Oakley, and Trek Bicycle Corp., his major sponsors.

³⁷ “Kobe Bryant Sexual Assault Case,” Wikipedia, http://en.wikipedia.org/wiki/Kobe_Bryant_sexual_assault_case.

Right or wrong, it seems that time and distance heal many of the sponsors’ scars. Is it good for the health of sports? Hard to say. It does seem to be good for the health of sports business. One challenge in all of this lies in the fact that modern-day athletes have based the argument for higher earnings on the fact that they are the entertainment. If that’s the case, it would seem that there needs to be an increased recognition that all those concerned—players, league, coaches, owners—have a responsibility to those who wish to be entertained and who pay admission.

One recent dustup in the NBA came about when Coach Gregg Popovich chose to send four of his top San Antonio Spurs starters home for a rest instead of playing them on a nationally televised game with the Miami Heat—the only game the Spurs would play at Miami during the 2012–2013 season. The Spurs had an upcoming home game with the league-leading Memphis Grizzlies, and Popovich wanted them ready for that game. The league wound up fining the Spurs $250,000 for their (in)action.

David Stern, possibly more than any other commissioner in sports, understands that his is an entertainment product and that the fans expect to see the stars play. He expressed his displeasure in this statement³⁸:

³⁸ “NBA Fines San Antonio Spurs $250K for Resting Stars,” USA Today, December 1, 2012.

The result here is dictated by the totality of the facts in this case. The Spurs decided to make four of their top players unavailable for an early-season game that was the team’s only regular-season visit to Miami. The team also did this without informing the Heat, the media, or the league office in a timely way. Under these circumstances, I have concluded that the Spurs did a disservice to the league and our fans.

In other words, those stars and coaches are being well paid as the entertainers they claim to be, and the league’s stance is that they must perform.

Lee, Jason W., Branded: Branding in Sport Business, Carolina Academic Press, 2010.

Rein, Irving, The Elusive Fan: Reinventing Sports in a Crowded Marketplace, McGraw Hill, 2006.

Shank, Matthew D., A Strategic Perspective (4th Edition), Prentice Hall, 2008.