Archive for the ‘ Non-Traditional Revenue Generators ’ Category

Shelby American, Inc.: A Past and Present of the Legendary Modifier/Builder that Forever Changed the American Auto Industry

From left to right: The limited edition 2012 Shelby GT350 (only 350 are being made by Shelby American), which was unveiled at the 2011 Chicago Auto Show in coupe and convertible form, and the 1965 Shelby GT350 (which was a Shelby-tuned and modified version of Ford's all-new Mustang). Originally seen as a "secretary's car" in spite of its immediate popularity, the factory 1965 Ford Mustang needed an edgier soul, so Ford management asked Shelby and his outfit to liven it up. The Mustang and GT350's instant success resulted in the beginning of a beautiful friendship between Ford and Shelby that changed the industry and international auto racing forever.

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Accounting in Sports Entrepreneurship and Event Production: How Similar, Dissimilar, and Interchangeable are Sponsorship Revenue/Value and Stockholder Equity?

 

While there are many options available to entrepreneurs planning sporting events like marathons, sponsorship stands as the least compromising option for properties and both the most creative and most exploitable option for the property and sponsors alike. The accounting equation is positively affected on both sides of the equals sign by sponsorship, which is not always the case with loans or even transactions involving stockholder equity.

Introduction

This week, General Motors took the last steps to finalize the sale of about $500 million of stock to SAIC Motor Corp. of China.  In addition to the deal with China’s largest car manufacturer, GM will sell an estimated total of $1 billion in shares to foreign investors, according to an article published on Yahoo! News (see: http://news.yahoo.com/s/ap/20101112/ap_on_bi_ge/us_gm_foreign_investment for the full article).  In General Motors’ effort to increase assets, it will release 365 million shares of common stock and an undisclosed amount of preferred stock; the latter will pay a 5.5-6% annual dividend.

With the “accounting equation” in mind (represented as:  Assets = Liabilities + Shareholder Equity + Retained Earnings), it appears that GM will dilute control of its business over a pool of owners larger than the current list for the sake of increasing its assets.  “Cash” accounts and “Accounts Receivable” may increase on the left side… but shareholder equity – as well as “dividends” – will follow proportionally.

Which leads us to the next issue.  Exactly what does this have to do with sports entrepreneurship?  Observe…

Stockholder Equity and Entrepreneurship (think about what the following section means to someone who would like to create their own sporting event)

Manager and Philanthropist Alfred P. Sloan of General Motors, as featured on the cover of Time Magazine 27 December 1926

Over time, through the sale of common and preferred stock, General Motors – once the world’s largest company and formerly run by Alfred P. Sloan through the company’s halcyon days of the 20th century – has relinquished more control over its own destiny to an ever-increasing field of investors who seek success and fortune through increased stock values and decreased costs in the company’s annual reports.  As stated in the introduction, GM will sell preferred stock and pay an annual dividend that could reach 6%; consequentially, due to the time value of money, amortization will lead to a loss in the long run if GM does not reconcile dividend expense with either new – or improved – revenue streams, or amplified cost reduction initiatives over the next several years.

Every entrepreneur faces the same problem: how in the world do I raise sufficient capital to start/maintain my own business?  Loans invariably lead to interest payments and are an inevitable reality in entrepreneurship in many cases (but not always).  They may increase cash accounts, but they also inflate those “____ payable” accounts on the right side of the accounting equation, otherwise known as “liabilities.”  Entrepreneurs could also count on stockholder equity, or the sale of corporate control (i.e. shares, common stock, etc.) in exchange for cash. “The Aviator” Howard Hughes detested the idea of having shareholders interfere with his plans, since shareholders have an interest in seeing the value of their shares rise over time and will work to maximize their ROI by the end of each fiscal year.  Their plans do not always resonate with management and tensions mount, as a result.  Expressed in dollars and cents, financial statements – the black-and-white result of all business accounting – report the company’s fiscal performance to shareholders, help determine the outlook for the upcoming year, and directly affect share value.  Lastly, the entrepreneur could sell bonds, but a new business venture cannot leverage itself as well as an established entity; thus, buyers may not be as willing to assume the risk and interest may be high.  In addition, the time value of money would make interest payments by the bond issuer amortize over the bond’s lifetime (in other words, until it reaches maturity), resulting in larger payments to the bond holder.

This is not an indictment of the above methods of capital generation.  Rather, this is a presentation of the risk involved in the use of these options by business leaders.  An entrepreneur must be aware of the effects of each and exercise due diligence in financial planning.  Either armed with sound accounting knowledge or assisted by a good accountant, the entrepreneur can use these tools to grow her business.

These are not the only options available, however.  Sponsorship can both supplement revenue generation strategies and inject capital into a new venture.  For example, an entrepreneur could produce a sporting event with the assistance of a good sponsor lineup.

Sponsorship and Entrepreneurship: The Best Option through Proper Execution and – Most of All – Excellent Activation

As with all business ventures, if you would like to plan a sporting event (i.e. a marathon), you need capital.

Bank of America's title sponsorship of the Chicago Marathon not only makes the event possible, but also helps define corporate values and reinforces its presence in the Chicagoland area.

Sponsorship presents a long list of benefits to all parties involved.  Interest payments and dividend disbursements such as those following loan and bond sales, respectively, are not an issue.  Sponsorship agreements do not necessarily require the event producer to surrender long-term control of the business to sponsors (as in the case of shareholders), unless both parties concur.  In fact, an entrepreneur/event producer could create an event and a list of assets to sell as inventory (i.e. mobile apps, interactive fan and guest zones, etc.) and recover ownership of that inventory at the end of the sponsorship agreement.  Here, assets increase on the left side of the accounting equation and revenue increases on the right.  Liabilities – such as notes payable or interest payable – are minimized while “right side” accounts, like “unearned revenue”, may also rise.  The latter, however, is reconciled upon the event’s completion and through proper activation.

As assets increase after successful execution of the sporting event and proper sponsorship activation, “inventory,” like our mobile apps and interactive fan zones, will appreciate over time and could be packaged with other assets to drive the value of our event’s sponsorship upward.  Unlike tangible inventory, solid and proven assets as those created in sporting events (take our marathon example) do not usually depreciate over time and return to the property at the end of the sponsorship’s duration.  They can then be resold to the highest bidder or repackaged in another sponsorship deal.

Nevertheless, the property (i.e. the event) and our entrepreneur must be accountable to sponsors.  To ensure sponsor ROI and maintain a mutually beneficial relationship, the property must always overdeliver.  This dynamic resembles the relationship between a company and its shareholders, with the exception that sponsors cannot impose their will on the property in the same way that shareholders influence a company’s business decisions for an unspecified amount of time.

Conclusion

Sponsorship is an excellent tool for the entrepreneur who plans a sporting event and needs capital to start.  Unlike stock sales in the GM example, sponsorship does not require the property or business to sell shares of itself or control to investors.  It does not involve interest payments or dividend disbursements, like loans and bond sales, respectively.  Lastly, sponsorship positively affects the left side of the accounting equation (remember:  Assets = Liabilities + Stockholder Equity + Retained Earnings) while boosting revenue and “unearned revenue” accounts.  Loans, interest payable, and bonds payable are liabilities while the sale of common and preferred stock are stockholder equity, the latter meaning that others could have a voice in your decisions until her shares are either sold to someone else or you buy them back at a premium.  Lastly, dividends negatively affect retained earnings.

Although sponsorship could not generate the instant revenue GM needs to recover from its billion-dollar financial woes, it is an excellent tool the company can use to repair its image, increase its relevance, and generate capital without relinquishing corporate control or paying interest. Sponsorship is also the most creative method to increase sales and differentiate itself in a competitive and currently depressed - though always relevant - market.

Again, I am not asserting that loans, bonds, and stockholder equity are not good tools in the entrepreneur’s utility belt.  Rather, I wish to underline the consequences of using said tools without considering the beneficial role sponsorship plays in the creation and funding of a sporting event.  Sponsors want you to succeed since they are borrowing brand equity, exposure, and other intangible benefits from your event unavailable elsewhere.  Successful sporting events help define a sponsor’s role in the community, such as Bank of America’s growing presence and significance in Chicago as a result of its title sponsorship of the Bank of America Chicago Marathon; furthermore, Bank of America pays a premium to be the event’s title sponsor and helps promote the marathon through its own marketing department.  Loans, bonds, and stockholder equity cannot buy you such cooperation.  Good sponsors work with properties to ensure an event’s success.

Also, sponsorship is the only means of acquiring revenue that allows a property to create new assets (remember our mobile apps and fan zone examples mentioned above?), expand its inventory, and sell them to stakeholders (sponsors in this case) for the benefit of all involved, including participants and guests.  From the property’s perspective, both sides of the accounting equation are positively affected through the property’s acquisition of cash (left) through net income (right).  The sponsor sees gains by exploiting tangible and intangible benefits of association with the property, which are thus measured by third-party evaluators like IEG and Navigate Marketing, to name a few.

If you are an aspiring entrepreneur and plan to create your own sporting event, consider teaming with sponsors who could help you as you help them.  Research potential sponsors and identify their needs before contact.  Write a clear and concise sponsorship proposal with a specific call to action.  Mention the benefits of association with your property (not just the features you will offer).  Schedule a meeting, prepare for it, and create an atmosphere during the conversation in which the potential sponsor could comfortably do most of the talking.  Listen.  Take all feedback and integrate all relevant information with your plan.  Meet again to discuss your enhanced plan.  If all falls into place, remember… 1) communicate often enough and 2) as the property, you must always overdeliver.  You can only ensure ROI through proper activation.

Cam Suarez-Bitar.

 

Funding accomplished through sponsorships. Could it be said that the New York Yankees have lost control of their fate due to stock sales or pay more interest affected by the time value of money associated with the sale of bonds or receipt of additional loans? Sponsorships can fulfill these needs.

Adidas Activates its New Zealand All Blacks Rugby Team Sponsorship (or, The Power of Symbolism in Non-Traditional Marketing)

Marketing has grown and evolved over the past 50 years at an exponential rate.  Increased investments in sponsorships – primarily in sports – led to a paradigm shift in how marketing departments approach issues regarding brand loyalty, differentiation, and brand awareness (among others).  As companies like Coca Cola and Pepsi trade blows in their exhausting efforts to take market share from one another, they are faced with challenges involving how they will tailor their yearly budgets to their advertising and marketing needs, and benefit from allegiances with other organizations (Coca Cola and its “Coca Cola Family of Drivers” in NASCAR and Pepsi’s sponsorship of England’s FA Cup) to appeal to key target audiences.  Their advertisements do not offer insights on the actual technical peculiarities unique to each product since, except for a few minor differences, Coke and Pepsi really do taste the same.  Advertising’s greatest functions are: the ability to communicate specific traits of the product in question, reinforce product quality claims, and special sales, promotions, and the sort.  The next time you actually watch that interruptive – though still relatively useful – approach to marketing between segments of your favorite TV show, feel free to test my assertion.  It interrupts and viewers are not very tolerant.

In America, we are quite familiar with Nike’s approach to sports marketing: say hardly anything at all regarding the product’s quality itself and align the featured item with symbols of excellence.  Entertaining and sometimes even inspirational, Nike’s ads are regarded among the best in sports marketing.

Adidas also exhibits a true expertise in sports marketing.  After earning the right to outfit New Zealand’s stellar All Blacks Rugby Team, Adidas aired a series of commercials that demonstrated their appreciation and respect for Kiwi (colloquial term used for a person native to New Zealand) rugby culture and its history.  In this commercial (which aired not long after both organizations formed their relationship)…

http://www.youtube.com/watch?v=kfKoz0l8ifo&feature=related

… Adidas did exactly that.  It is not enough to make the relationship between sponsor and sponsee equallybeneficial for both parties; indeed, there must be a mutual appreciation for one another.  Here, Adidas borrowed brand equity from the New Zealand All Blacks by aligning itself with the proud history of one of the world’s greatest rugby teams.  Adidas did not interrupt the viewing experience by stating loud and clear, “Buy our jerseys!  Look, we support your favorite team!  See?  SEE???”  Rather, with elegant subtlety, you see the team captain donning an Adidas jersey in much the same fashion as those who came before him.

In Adidas’ case – after replacing Canterbury of New Zealand as the team’s official outfitter – the German company understood that it was an “outsider” and new in Kiwi sports in its official role.  Therefore, the onus was on Adidas to connect with the culture it entered and even welcome cultural assimilation.  With the following commercial…

http://www.youtube.com/watch?v=GcN-fKEWzFQ

… Adidas showed Kiwi and All Blacks Rugby fans that it understands its role as a member of the All Blacks team.

As seen on Wikipedia: "The haka is a traditional genre of Māori dance. This picture dates from ca. 1845."

Above all, Adidas featured the team’s Haka – a traditional Maori dance the All Blacks perform before every game at the center of the field.  The outfitter aligns its corporate image with the All Blacks and their unique ritual aimed at intimidating their competitors and preparing the black-shirted players for the hard battle ahead.

Today, it is not enough to set a fair price point or aggressively push the quality of your product.  It certainly helps to do so and such direct and interruptive means will always be needed in marketing.  However, today’s is not push (sell! sell! sell! and push the product onto the consumer) market anymore.  It is a pull (the consumer has unprecedented control over the market since there are so many options available, products resemble each other more and more as time goes by, and the economy continues to motivate consumers to get more value for their money) market since the consumer either wants to be a part of something larger or asks “What else does this company do for me?  Do they care about what I care about?” at one point or another.  The former consumer issue more often deals with cause-related marketing, which I will save for another article.

A sincere appreciation, understanding, and respect for symbols is a key part of sports marketing and their very subtle use in non-traditional commercials and advertisements help a sponsor or sponsee maximize their ROI (return on investment) in their efforts to borrow brand equity from each other.  Sponsors must understand not only the market they enter, but the beliefs, needs, and values endemic to the culture with whom they are forming a mutually beneficial relationship.  A sound marketing strategy aims to achieve a broad milieu of objectives, among which Adidas successfully reinforced or gained brand loyalty, increased brand awareness, and differentiated itself from competitors (Adidas surely set itself apart from Nike in New Zealand here).  In the end, it is not enough to obtain the sponsorship – you must activate it correctly, and Adidas’ ad campaign was an expertly executed tactic.

Sponsorship – sports marketing’s most efficient fuel – is rife with the power of symbols.

Cam Suarez-Bitar.

Thanks to Chairman and cofounder of IEG, Lesa Ukman, for her lessons in sponsorships.  Professor Ukman currently teaches a course titled Sponsorships 2.0 at Northwestern University’s Masters of Sports Administration program.  She provided me with the New Zealand All Blacks/Adidas sponsorship relationship, which served as the basis of this analysis of sponsorship in sports marketing.  Also, as always, thank you for your readership and to God for the opportunity to write this article and learn from my research.

New Zealand vs. Australia

Will Technology Be the Best Way to Improve the Fan Experience?

Last night, I began typing this article and after an hour or so scrapped the entire project.  Originally, I was going to argue that sports and technology truly came together in the closing decades of the 20th century, but that would have been false.  The 1932 Olympic Games held at Lake Placid were broadcast over radio and – arguably – marks the first great kiss between sports and technology.  The romance has continued for nearly 80 years and produced many industry-changing innovations (read my article on Roone Arledge and Mark McCormack to familiarize yourself with just a few).  So, I focused instead on the details of that remarkable love story and pondered the issue of how technology will shape the fan experience in the 21st century.

I read an excellent article in Volume 12, Issue 49 of The Sports Business Journal authored by Eric Fisher titled “Looking to the Future” that helped me arrive at my conclusions.  In it, Fisher includes a transcript of the Virtual Technology Leaders Summit that he and Richard Weiss, Abraham Madkour, and Don Muret from the journal presided over.  They spoke with Michael Gliedman, CIO and Senior Vice President of the NBA; Tery Howard, CTO and Senior Vice President of the Miami Dolphins and Sun Life Stadium; Jonathan Pannaman, Senior Director of Engineering and Technology for ESPN; Bill Schlough, Senior Vice President and CIO of the San Francisco Giants; and Lorraine Spadaro, Vice President of Technology and eBusiness at Delaware North.  Along with the executives, the journal staff also invited from Cisco Systems Stuart Hamilton, Senior Director of the Sports and Entertainment Solutions Group; David Holland, Senior Vice President of the Sports and Entertainment Solutions Group; and David Hsieh, Vice President of Marketing, Emerging Technologies.  Now that’s a mouthful!

If we watch TV or listen to the radio for just a few minutes and wager that not one commercial by a communications firm would appear, then we would be out a few dollars.  Taking our loss with us as we go back home and lament the fact that we made such a terrible bet, we should not even consider betting that we will not walk past someone either talking on their cellular phones, watching movies on a handheld device, or checking their “Facebook” accounts.  That would be a terrible move.  Only 10 years ago, however, either one could have been a moderately safe bet.  Today, leagues and teams are betting on the growth of technology – such as social media – and investing heavily in developing their wireless infrastructure at their venues.  But is technology the best bet?

As you have probably noticed by now, technology changes and “evolves” quickly.  The feature a sports entity may have spent top-dollar on that gave them an advantage one year easily becomes commonplace in the industry the next time around as quickly as star pitcher of the San Francisco Giants Tim Lincecum smokes a sizzling fastball past a blinking batter and into Bengie Molina’s distressed catcher’s mitt.  It’s a gamble.  Bill Schlough of the San Francisco Giants argues that to compete in technology with other teams will give you that momentary advantage should you offer a new feature at games that fans cannot experience elsewhere, but as the tide of technological advancement rises it will bring all others in search of the next big thing in fan experience enhancement.  Indeed, when the Giants built their new stadium 10 years ago or so, they installed modem connections in all of their suites.  However, they did not place terminals in the stands.  When you have tens of thousands of fans communicating wirelessly at games sending digital photos to their friends who could not weasel their way out of work that day or posting them on Facebook as the game wears on, bandwidth becomes an issue for stadiums with integrated 3G networks and costly reinvestment in modernized infrastructure is the only solution in an industry that progressively depends more on technology as time goes by.

But the ROI is there: those photos of the game laden with images of a myriad of sponsors who purchase signage or related items and even the team’s logo helps promote those brands and add value to the investment.  That is an example of an intangible benefit when it comes to sponsorship valuation when you are negotiating from the brand side.  That added exposure is something you want… and the property knows it.  Depending on the league, though, either the team or the league would benefit most since some leagues – like the NBA – centralize their digital content.  It’s all about who owns the rights to the digital content and how it is leveraged.

Now, that is just the content that fans share.  When you consider that the stadium’s bandwidth is also being shared with photographers who could stream content directly from their cameras and send large files almost simultaneously, that could, as Lorraine Spadaro puts it, “take your wireless to its knees.”  All of the iPhones and future iPhones of the world only complicate the challenge.  But the benefits are there.  Spadaro makes a critical observation that helps answer the question on whether or not all of this is worth the trouble.  She points out that younger generations are less likely to be content with a simple outfield display and an organ since they are growing up in a world with digital cartoons and television programs that allow the viewer to have a direct effect on the outcome of televised events, such as “American Idol” and even “Dancing With the Stars.”  They (the younger generation) view programs and experience events differently, and though older generations do not as often see the value of a giant screen suspended from the roof that could project 3D images with the help of passive lenses, the former almost expect it.  In sports like baseball, a significant amount of time lapses between actions on the field and digital content provided by the property helps keep the fan engaged.  As budgets tighten and competition from other sports and entertainment outlets increases, properties must find ways to enhance the fan experience and forums like the “Virtual Technology Leaders Summit” are held daily around the world as the industry undergoes an inevitable paradigm shift that embraces the ever-increasing presence of technology in our lives.

Television networks like ESPN also help fans connect with properties in ways we could not imagine just 20 years ago.  It was beyond my imagination to even consider that I would end up watching the NFL Draft or follow a baseball game over the internet, but ESPN has made that and more a reality as a result of technology and continues to push forth.  In fact, ESPN has a staff of coders that creates applications that make a sporting event and its related data more interactive, according to Michael Gliedman.  As they develop new outlets for the increasing amounts of information they receive from properties, ESPN works closely with them to ensure that the entire industry is moving forward at a similar pace.  With the right device fans can watch an ESPN feed of the game they are attending and enjoy analysts’ feedback and watch the game in-person all at once.  This is a sign of what’s to come.  Properties that either do not have the proper infrastructure or leaders to make the best decisions regarding technology strategy and information outlets (like TV networks) that are not adapting to changes in technology will be left behind and possibly suffer in the new decade.  The pace is only increasing and the pressure on front offices mounting.

In Major League Baseball, there are less than 10 teams with executives that represent information technology at the highest decision-making levels in their respective front offices, leaving over 20 teams that have yet to fully commit to the fact that properties must interweave their technology strategy with their business strategy.  TV’s capable of projecting 3D images are coming as Samsung, Sony, and Panasonic design and manufacture the screens capable of delivering this new experience to viewers.  One intangible benefit for properties from the upcoming 3D revolution is the fact that if their events are held in facilities that accommodate the additional number of cameras needed to broadcast in 3D, they can compete on a whole new level with other options on the dial that transmit in 2D and could otherwise make a far-from-die-hard sports fan who would usually opt out of watching the game tune in and possibly make him or her the newest fan of that property or sport because the idea of watching a 3D program was too exciting to pass up.

For fans who buy tickets and sit in the stands or are served in the suites, digital content adds value to their decision to pay to watch a game at the venue itself.  Leagues and teams are challenged to somehow embrace both the advantages of implementing a technology strategy and solve the problem of obsolescence that changes in every way every year.  By creating a position at the executive level that focuses on these issues, a general manager or president could count on having an expert at the most senior level who understands the problems with technology and can focus on how to exploit the benefits.  Properties cannot fear failure.  Even though ideas like “smart seats” (stadium seats equipped with televisions) failed when they were implemented a few years ago in Boston, experts found that the market simply was not ready for them – people still felt that such devices were intrusive.  Interestingly enough, though, Tery Howard of the Miami Dolphins and Sun Life Stadium mentioned that “we did a pilot project last season where we deployed about 2,700 devices… The surveys came back overwhelmingly positive with respect to having all of this information in their [the fans’] hands and they’re not missing out on any other out-of-town game that they could be watching from home.”  In case you did not know, the devices Howard referred to are similar to handheld televisions.

Conclusion

So, just like properties have experimented with ideas that have not always worked like “smart seats” and in-game player tracking similar to that used by the NBA on a few occasions over the last 10 years, trial-and-error is a necessary part of invention and development.  The Miami Dolphins and Sun Life Stadium were not afraid to fail and – as a result – may be on the brink of both enhancing the fan experience and activating sponsorships in a whole new way.  A senior executive who specializes in technology and understands the market could help the property make similar or better decisions regarding technology and business strategy that could generate more sponsorship revenue, expand marketing strategies, and enhance the fan experience (and even bring all three closer together.)  Technology is one of the best ways to enhance the fan experience, but without the proper support, it could also be one of the most expensive methods for the front office.  To me, the only thing better would be to actually mingle with the players and coaches themselves… but if you use technology to bridge the gap or facilitate that communication, then that experience can be monetized and even be used to gather vital market data with the proper tactics in place.

Cam Suarez-Bitar.

If you enjoyed this article and appreciate in-depth analysis of the sports industry, visit http://www.sportsbusinessjournal.com for information on how to subscribe.  I do not work for them nor am I affiliated with the journal in any way, but I feel that anyone who wants to learn more about how sports function, grow, and survive would be well-advised to familiarize themselves with their content.

Sports Marketing and Social Media

Much like the postal system a few centuries ago, social media changed the way people communicate in the 21st century.  Approximately 800 years ago, the Mongols created the first real postal service; in fact, it was the example the Pony Express followed when it first bridged the hundreds of miles that separated the Eastern United States from the frontier.  Now, early in the 21st century, those exhausting trips from one outpost to another have been replaced by cellular phones and the internet. Information is transmitted in an instant and no longer depends on traditional mass media like newspapers to reach large audiences.  This is the age of social media.

Sports leagues (in this particular example, the NHL) are exploring the potential benefits of using social media in their marketing efforts.  Steve Raquel, president of Illinois Online Ventures, LLC, spoke of the impact social media has made on the sports industry and how it is only just the beginning.  He was last week’s guest speaker at Dan Migala’s “Non-Traditional Revenue Generators” course at Northwestern University’s Sports Administration program.  Mr. Raquel affirms that social media offers the highest degree of engagement over traditional marketing media (e-mail, banners, etc.).  Social media like Facebook and Twitter offer an instant bilateral exchange of information between the league/team and fan.  Furthermore, as Professor Migala mentioned in class two weeks ago, information certainly leads to revenue.  So, social media is a new revenue stream for sports organizations who wisely utilize it to maintain a relationship with their fans, acquire vital marketing data, and enhance the fan experience.  The Philadelphia Flyers’ website (http://flyers.nhl.com) is a prime example of how an NHL team is using social media to improve their product and bring their fans closer to the ice.  In fact, social media could help teams keep their fans engaged during the off-season.

Sports teams and leagues, however, are not the only sports entities using social media to develop their brand.  While several athletes around the NFL connect with their fans through popular social media (Nick Barnett of the Green Bay Packers, Larry Johnson of the Kansas City Chiefs, for example), no athlete in either the NFL, NHL, MLB, NBA, etc. is using social media like Cincinnati Bengals wide receiver Chad Johnson aka. Chad Ocho Cinco.  His home page (http://www.ochocinco.com/home/) has links to his Twitter feed, his own Chad Johnson fan shop, and an “app” you can purchase for the iPhone that would enable you to view “exclusive behind-the-scenes” content of the loquacious football player’s daily life.  Teams and leagues are using links to social media and exclusive content (primarily on Facebook and Twitter) to increase the value of their web sites (raising their CPMs) to advertisers and enhance their brand.  When an athlete like Chad Johnson uses social media to connect with a large, loyal following of fans and enhances his own brand, it may represent higher offers from the Bengals and other teams when his current contract expires; after all, Chad johnson fans will follow him from one team to another.  If he goes, a proportion of his fans would go with him.  Lastly, his Ocho Cinco News Network aims to connect directly with the fans and provide them with instant access to players and news from around the league.  Social media is no longer just a way to post silly pictures of your friends; rather, it is both a new tool in brand development and a new revenue stream.

This is not to say that there is no conceivable downside to using social media to enhance your brand.  Mr. Raquel mentioned that some of the upsides of social media are that it enables consumers and brands to engage quicker, it humanizes a brand, it is viral (information could spread at an almost exponential rate), and feedback on an experience is instant.  He also emphasized that while social media is a great marketing tool, it requires commitment and consistency on the part of the user.  To engage your audience then suddenly leave them in a sort of electronic silence could hurt the brand and make its presentation appear unprofessional and sloppy.  Also, the audience’s response could be either positive or negative, and if the latter is the case, then that negative view of your product could spread exponentially as well.  Lastly, because of this last point, the brand gives up certain control.  Essentially, popular opinion rather than a marketing department’s attempts to present a product in a certain way could significantly contribute to the public’s perception of the product itself.  Organizations in the sports industry must proceed with caution and careful attention to detail in order to avoid inconsistency or negative feedback that could damage its reputation.  Since social media requires such careful attention and constant vigilance, sports organizations would be wise to either hire dedicated staff to maintain and execute their social media initiatives or hire an agency that specializes in social media to manage their content.  An example of how unwise use of social media can hurt a brand is the latest news from the Larry Johnson camp (see ESPN’s commentary on http://sports.espn.go.com/nfl/news/story?id=4596288 regarding his outburst and how it has hurt the Chiefs’ brand and most of all, his own).

All in all, social media is a new creative tool that marketing departments across the sports industry could use to connect with their fans.  As Mr. Raquel mentioned in his lecture, “the fan is the sport’s lifeblood.”  Because of its popularity, social media is instrumental to fan development.  While there are certain caveats that go along with a marketing initiative fueled by social media, a front office staffed with conscientious and knowledgeable individuals headed by an effective leader or a firm that specializes in the execution of such initiatives can safely implement such plans with confidence.  We are seeing it already in the NHL and even players themselves are developing their own brand through social media.  By the time Joe Namath lead the New York Jets to victory in Super Bowl III in 1968, his charming personality and showmanship brought the NFL to “prime time” and indirectly helped Rune Arledge succeed with his new, weekly sports spectacle, Monday Night Football.  At about this time, football became America’s first sport.  Social media in the hands of social and charismatic athletes and the efforts of foreward-thinking teams/leagues will take sports beyond prime time and closer to fans’ daily lives.  In an era of declining ticket sales, social media could be the new frontier.

 

 

Cam Suarez-Bitar.

 

 

I would like to thank Professor Dan Migala for his keen insights and thorough lectures on non-traditional revenue generation.  Congratulations are also in order, for he was just named Vice President of Partnership Solutions for the San Diego Padres.  Also, Mr. Steve Raquel’s presentation titled “Social Media in Sports” provided inspiration to create this blog and a deeper understanding of social media and its potential.  Both Professor Migala and Mr. Raquel inspired me to write my own blog and think about issues in sports and put my conclusions in writing.  Lastly, I would like to thank you for reading and participating in this ongoing discussion on sports business.

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