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Budweiser’s New Sponsorship Model Will Definitely Force Change On Sports Business…

 

In a few places over the last few weeks, we have seen articles come up that discuss the way that Budweiser’s change of the structure of their partnership deals will force change on sports business.

If you look at the history of sports business, no matter what area of the business a deal covers, there is a history of businesses making deals and not reaching their full capacity due to implementation.

Currently, Budweiser has only made new deals with a handful of businesses, but if they continue to make deals that emphasize outcomes and performance, it is likely to change the behavior of not just the partnerships departments but all of the departments in an organization or a league.

What will these changes look like?

Again, depends on implementation.

But I think we can all agree that deals that emphasize metrics like attendance, viewership, wins & losses, and other things will require a rethinking of how business is done across the industry.

Here are a few changes that I think should be implemented as these deals move forward.

A renewed focus on outcomes:

This isn’t a challenge that faces only sports business, but it is a challenge that I see in all too many of the organizations I work with. That is a bit too much focus on activities and not enough focus on outcomes.

You see it in the sales office where far too often the dominant success metric is still the number of dials you make.

You see it in many organizations when they discuss really fuzzy things like “engagement” or “followers” that have no clear line to an outcome but do justify a significant investment in activity.

With Budweiser signing new deals that are focusing on outcomes, this is likely to require a rethinking of how businesses are managed.

Let’s look at it from the vantage point of the ticket sales team. Instead of the number of calls being the preferred method of managing, you are going to see other metrics used to measure success.

Maybe sales?

But likely things that are shown to lead to the ultimate goals of success like number of conversations, number of meetings, or something else.

No matter what, you are likely to see a decline in an emphasis on anything related to activity.

If attendance is a metric, that can change everything:

Having an extensive background in tickets on the primary and secondary side, tickets and attendance are really metrics that I look at to judge the health of a performance, game, or show.

In the current market, we see a lot of the risk of ticket sales being shifted to the secondary market through formal partnerships, consolidation, or brokers that have deals with teams, performers, or venues.

While the risk of unsold inventory shifts from the primary to the secondary, this does very little to ensure that attendance will rise due to the fact that inventory has been shifted from the primary to the secondary.

In fact, you don’t have to look too far to see that in a lot of cases, the shift isn’t always successful for anyone in a holistic manner.

Sure, the primary seller gets upfront cash, which helps the bottom line. But if the seats aren’t filled, a downward spiral can commence.

On the secondary side, the broker can have the inventory, but if they can’t move the inventory…their investment is at risk.

In a way, this is a lot like measuring activities or outcomes.

If there is an emphasis on attendance in the new Budweiser sponsorship deals, that’s going to realign the incentives to create different outcomes.

Knowing that no matter what the secondary market is never likely to go away, the incentive is going to put an equal weight on the primary as the secondary has in the examples above.

Don’t get me wrong, I know that there isn’t a person working in sports that is okay seeing an empty stadium or seat…but the thing about incentives is that they create strange actions because often the incentive has unintended consequences.

But knowing that there could be hundreds of thousands or millions of dollars on the line, the incentive to get people into the stadium is going to change tremendously.

While it has become apparent that almost every organization and sport is struggling to some extent in their efforts to draw people into stadiums and arenas, that doesn’t mean that an attendance bonus might not create an incentive to go even further with the thinking on how to get people to come to the stadium for a game.

If I lean on my time in nightclubs, during Spring Break, we had some pretty severe competition for the kids that came to town to party.

Yet, for 3 years running, we were the most popular club in Ft Lauderdale during Spring Break due to the fact that we constantly pushed the envelope on bringing people in. A few of the promotions that we used over the years:

  • Ladies drink free all night on Monday
  • Everyone drinks free all night on Monday
  • Everyone drinks free every night
  • Ladies drink free every night
  • Sunday night hip-hop concerts
  • $1 well drinks
  • $3 premium drinks

We even changed themes on certain occasions.

What does this mean?

That we had to be creative in a competitive environment.

In driving attendance, I’m not sure what is likely to come out of it, but I can definitely imagine an environment where some of the following happen:

  • Ticket prices become a lot more reasonable again
  • The selection of food and beverage options comes down in price and improves in quality
  • The number of giveaways, concerts, and other tried and true forms of improving attendance will likely risk being overused.
  • More aggressive incentives will come with memberships and fan clubs

No matter what happens, emphasizing attendance is going to change the incentive structure for the entire business.

You’ll see sales change.

You’ll see marketing change.

You’ll see the fan experience change.

Everything.

On-field performance and wins and losses will impact the signing, drafting, and rebuilding timelines:

Remember when Ichiro Suzuki got his 3,000th hit with the Miami Marlins?

If you missed it, I’ll forgive you.

Under an incentive structure that emphasizes on-field performance, is likely that Ichiro might have stayed in Seattle or, even, New York?

It isn’t guaranteed, but the likelihood becomes more likely.

Or, take as another example, this past offseason in baseball when the idea of collusion was thrown around when the truth likely fell into the realm of teams having adopted a Moneyball approach to team building that had changed the emphasis to how much young talent they could stock on a roster.

If you are trying to achieve a bonus, you may be much more willing to resign a free agent or sign someone else’s free agent or make a trade for a star player.

Whatever form it takes, this is another instance where the new sponsorship deals could change the actions that teams take.

I’m sure that there are any number of other things that these new deals will change, but, again, implementation is going to show us the real impact with a lot more clarity.

What say you?

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