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In Sports Business, The Name of The Game Is Now Disruption…

Don’t let my headline fool you, but disruption is the name of the game in every endeavor that sells a live ticket these days, but today I am going to specifically focus on the world of sports business, but know that these lessons are likely to apply to many of your situations in some way or form.

Last week I wrote a little bit about the rush to dub almost anything that isn’t bolted down “premium” and the impact that is having on our live entertainment business.

And, in the week since I posted that piece, a really interesting piece was published on Businessweek about the future of ESPN and cable that was pretty thought provoking. This piece put the concept of disruption at the forefront because when you combine a lot of the things I wrote about as challenges and you mix them in with the downturn in revenues, subscribers, and ratings at ESPN, you see that the world of sports business is in the middle of a massive disruption, willingly recognized or not.

Which is a way of saying that sports business is at a fork in the road:

One direction points towards allowing business to stay largely the same and reacting to the changes that are visible and coming.

The other direction points towards embracing the idea that markets and industries are always changing, that disruption is a natural part of the evolution of an industry, and challenging yourself to come out on the other side stronger.

But before we get to how to tackle this disruption in a positive way, let’s take a look at some of the biggest factors driving this disruption and how they are playing out in plain sight.

Too much inefficiency in the business models: Disruptive behavior only comes to businesses where there is a great deal of inefficiency in the business model and if you look at the world of sports business and its business model right now, there is a great deal of inefficiency in the way that teams and leagues drive customers and sell their product to the world.

Some of the most troublesome to me include:

  • Overly large sales teams that are built too heavily on cold calling and phone crushing while gobbling up resources that can and should be directed at higher value tasks like brand building, partnerships, packages, and other premium sales.
  • Too much reliance on TV and cable partners to deliver people into the sales funnel and to do the heavy lifting of marketing and selling the team and sport. Let me say this once and for all, while the TV contracts put a lot of money into the banks of teams and leagues, ultimately the TVs are competitors of the teams and leagues because just as teams and leagues want to have people come to games, the TV channels want people to sit at home on their couch and watch from home. Competing interests.
  • The lost art of branding, marketing, and publicity. I was in Europe a couple of weeks back and I witnessed something I have never witnessed before, not a single US sports brand anywhere. While the NBA says it is global and the NFL has said that they are building out internationally, my street level research of the strength of American sports brands says something else. Which I see on display with all too many teams and leagues now. Where has the personality gone?

Lack of long term customer development: I read an article this morning that said MLB had jumped to #1 in fan loyalty, but that the average age of its fans was 53. While the fan loyalty is great, the challenge for MLB is that every year it seems like the average age of their fans jumps up 1 year.

If you do the logic on that one, everyone dies and having the average age tick up each year probably isn’t a good sign for your league.

But the thing is, MLB is easy to point to because they have been struggling with this for a few years, but the declining ratings across almost all sports and sports entertainment properties over the last year or two points to something larger, a lack of long term customer development focus.

This is a huge issue because you have really one job in a business:

  • Create and keep customers.

So even if you have sell outs for days, you have to always been tempting and encouraging the next crop of customers.

Not enough coherence in the business models: Everyone should get one big MBA word a day, and mine today is coherence.

For me, coherence is a manifestation of a lot of the challenges that I have been writing about over the last few months. There just feels like no rhyme or reason to a lot of the initiatives and ideas that are being rolled out.

As the financial crisis showed us, without a high degree of coherence in your business model, you are going to struggle when tides turn.

Combined, these 3 factors have left a wide lane for disruption to enter the sports business world and, again, the path that we choose will tell us how well we cope with the changes that are just now coming into view.

Here’s a few ideas on how to embrace and manage the disruptive new world of sports.

Embrace an integrated ticket market: One of the big, ugly reminders of the inefficient business model that dominates sports business right now is all the empty seats at stadiums, ballparks, and arenas around the country and the world.

There are a number of reasons for this mass of empty seats. An exhaustive list might leave us here all week, but here are some of the bigger issues from my vantage point:

  • Inefficient marketing or poorly targeted marketing.
  • Too much reliance on discounts has trained buyers to wait for a better deal and in a lot of cases that has driven hot buyers out of the stadium.
  • Mobile and desktop buying experience can be pretty bad from the users’ POV.
  • Pricing models that don’t reflect reality.
  • Too many price points.

Again, this list just scratches the surface. But all in all, it points in one clear direction, towards an incredibly inefficient market for tickets.

To illustrate how complicated this gets, let’s look at a few of the ways that tickets get sold or distributed and that a would-be buyer has to manage:

  • Box Office
  • Primary website
  • Secondary websites
  • Affiliate partners
  • Coupon sites
  • Group sites

What this means for a lot of non-educated fans?

That it is too tough to buy a ticket and maybe I will just go do something else.

What even hardens the difficult here even more is that all of the sides are never working together. Never focused on the same end goal, which should be to get people through the gates as often as possible so that we can begin the process of keeping them as customers.

In my concept of a integrated market, I mean that all of the various ticket markets would work together, to do the primary business goal: get customers and prospects to buy.

At this point, the primary markets’ years long war against the secondary market is pretty much a lost cause for several reasons:

  • The secondary market is far better at reaching and converting buyers digitally. Full stop. End of discussion.
  • Most buyers don’t think in terms of primary and secondary markets, they just think in terms of tickets.
  • The secondary market provides risk mitigation for teams. As in, the brokers spend millions of dollars on inventory in every building. Just by looking at the stadiums where teams have taken tickets away from brokers, it is pretty evident that the inventory bought by brokers has made a pretty significant difference in the world of full buildings.
  • The secondary market is basically just a distribution channel. In England, STAR certifies authorized ticket sellers. Which is just really a reseller or secondary market, but here, we force buyers to only buy from one point of purchase…as opposed to the British market where they have agents selling in the streets, at kiosks, in hotels, and all over the place. Its illogical if you think about it.

Again, not an exhaustive list, but I think you can see that there has to be a much more effective way of selling tickets and maximizing the number of butts in seats.

Which is why I think an integrated market is going to be the default setting moving forward.

In an integrated market, the primary and secondary would blend together to maximize attendance and revenue.

An integrated market would allow primary side sellers and marketers to do the things that are higher value for them and to develop a solid expertise in.

  • Like marketing.
  • Like branding.
  • Like partnerships.
  • Like selling bigger ticket packages.

The secondary side can do what they do best:

  • Identify single ticket buyers.
  • Develop relationships for buyers that bridge multiple teams, venues, and cities.
  • Price and sell according to market demand and market pricing.
  • Use digital marketing and communications to efficiently move tickets.

Combined, the two sides could do the following together:

  • Develop deeper understanding of the markets they serve.
  • Share data and best practices so that the customers are being served in a manner that best serves the individuals’ needs.
  • Combine forces to effectively market and advertise to their target markets.
  • Maximize attendance and revenue by being able to differentiate single ticket buyers from prospective larger plan buyers and more effectively using combined data and knowledge to move the consumer up the value ladder.

I know that it is a step from where we currently are, but the inefficiency of that system requires something new.

And, I think a real partnership allows the two sides to do the things that each of them do well, together.

Rediscover the lost art of branding and marketing: In the sports business climate of my youth, I remember when each team had a personality of their very own.

But over the last decade or so, as the teams have gained value and new owners have come into the sports world, the art of branding has taken a back seat.

If you surf the website of any league, you will notice a needless uniformity in the way that teams are branded, to the point that most of the brands have little or no personality of their very own.

Which seems to have had an impact on the emotional connection of fans to their teams.

That leads me to marketing, which also leads me to the idea of developing a long term fan development and customer development.

Because most of the marketing that is offered up in today’s sports business market typically falls flat of its need to help drive revenue into the business:

  • Too weak on the Call To Action
  • Too much emphasis on affinity brand building
  • Too much reliance on discounts
  • Too much focus on features and not value

To get back to the best forms of branding and marketing, as an industry, we need to focus on 2 key ideas:

Emotional Connection: The best brands are emotional and connect at an emotional level with their customers, fans, and prospects.

One of my favorite is Tiffany.

The way that Tiffany has built its brand over the years is truly magnificent.

That little blue box means something to everyone, no matter what stage in life that are at.

Another great example of a brand that truly creates a real emotional connection is Apple.

People line up for days in advance of a new iPhone.

People will fight and fight over the slightest hint of a sleight at the hands of someone that isn’t a fanboy.

When done well, sports teams can and should do the same thing.

It means something, or did, to be a Raiders fan in Oakland.

The tradition of the University of Alabama and crimson and white compels a response and an image in anyone that knows anything about college football.

Being a Cubs’ fan, absolutely.

But too many of our teams, don’t create nearly a strong enough emotional connection.

To create that emotional connection, let’s do this:

  • Let’s give our brands a personality: What does your brand say? What does your brand signify?
  • Narrow your brands focus: The best brands take a stand. They aren’t everything to everyone.
  • Fight the generic: Like I mentioned earlier, too much emphasis on features. Too much conformity. All of this makes you seem generic.

Market Like You Mean It: I’ve written a lot of places about the 3 questions that drive your strategy:

  • What is the value you hope to produce?
  • Who can use it and will buy it?
  • How do we reach them?

This last one is the important one because too much of our marketing falls into the category of “I have to…” or “everyone else is doing it.”

This can’t be for you and it can’t be for your sports business marketing.

You have to get better and better about answering the question about reach more effectively and with more of an emphasis on getting your prospects and customers to take the action that you want them to take.

Finally, Make your business strategy coherent and consistent: being coherent and consistent in your business strategy means that you don’t try to do everything. You don’t just keep adding more on top of more.

Instead, you do a few things that you are exceptional at.

We’ve gotten to the point that we try to do so much of everything that our fans say that they want that we don’t really do a lot well at a certain point.

Its always going to be impossible to make 100% of the people happy 100% of the time, but what you can do is make sure that the things you do are incredible.

Especially in the economy dubbed “the experience economy” it is more and more important that you focus on every touch point being outstanding and doing what you do best.

Even if that isn’t everything.

What goes hand in hand with coherence is the idea of consistency.

While we may be able to wow people once and then never recreate that again, that is detrimental to our businesses.

Instead, we have to strive for a sense of consistency. So that when someone walks through the gates of our venue, they know that they are going to get an outstanding experience, no matter the outcome.

If we focus on the things we do best and we do them consistently well, we will be a long way ahead.

Disruption is going to take many shapes over the next few years and not to belabor the analogy, we have two roads to pick from.

We can go down a road of being proactive or we can be reactive.

The choice is the yours.

Which will you pick?

BTW, if you like this kind of stuff and are interested in getting my weekly email all about value, shoot me a note at Dave@davewakeman.com and I will happily add you!

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