How The Playoff Can Fix College Football



The inaugural College Football Playoff has come and gone and to the surprise of almost no one, was a resounding success. The 2015 Rose Bowl and 2015 Sugar Bowl, this year otherwise known as the semi-finals, drew the largest two audiences in cable television history at the time, with each game attracting over 28 million viewers. The semi-final games drew more than any of the four BCS Championship games previously broadcast by ESPN.

“That was a pleasant surprise.” -Burke Magnus, ESPN Sr VP Programming & Acquisitions

Those records stood only for two days until the national championship game between Ohio State and Oregon drew 33 million viewers, making the three playoff games the three most watched programs in cable television history.

It’s now all but fact that all the previous bush league rationalizations for not having a playoff were a farce. Any informed observer knew that “preserving the sanctity of the regular season” or “protecting the integrity of the bowl season and experience” were hollow justifications from bureaucrats who knew they were getting away with murder.

Playoff Games Have Meaning

More important is to understand why a playoff was so much more broadly appealing than the heretofore BCS and Bowl system. The difference between the 2015 play0ff Sugar Bowl, which drew 28 million viewers, and the 2013 and 2014 non-playoff Sugar Bowls, which drew an average of 13 million viewers is quite simple. Playoff games have meaning.

After a bowl game, both teams’ seasons are over, regardless of who wins. It might as well be an exhibition. Or the NFL Pro-Bowl. Actually putting something meaningful on the line makes all the difference in the world. Anyone with knowledge of basic psychology could have predicted as much.

So the oversimplified answer to fixing college football is to make more games meaningful. The obvious first step is to expand the playoff to 8, 12 or 16 teams. The ratings bonanza of the inaugural playoff will likely make playoff expansion a reality. But that’s not the only BCS/Bowl era lie that needs to be remedied.


The BCS and Bowl System Benefited the Few At The Expense of the Many

Even before the playoff, everyone knew that the BCS and Bowl system were completely corrupt.

The BCS and Bowl system architects structured a system that essentially ensured that ~90% of the revenue would be split among ~50% of the universities (the Power 5 Conferences (P5), fka the Automatic Qualifier Conferences), more or less ensuring that the remaining 50% of the universities would be stuck in a financial death spiral, unable to compete with the cash rich football programs, many of which had a substantial and entrenched head start to begin with.

The BCS and Bowl systems, referred to as a cartel by the journalists who investigated and exposed them, were highly beneficial for the P5 universities, but have held the broader college football ecosystem back from reaching the kind of potential this inaugural playoff is suggesting exists.

Ending The Other BCS/Bowls Era Mistake

College football’s other problem is that so many regular season games don’t matter. On a given college football weekend, there are about 50 Division-1A football games and yet very few have real potential to affect a 4 team playoff. Far fewer still are the games between legitimate top 4 contenders. More common are 63–14 drubbings with declining television and live audiences.

Meanwhile, playoff contenders are forced to schedule some 63–14 drubbings because the margin for error in reaching the top 4 is so slim, and there’s no benefit to scheduling an out of conference team that might win. And top contenders make such a high percentage of revenue from their game day ticket sales, that giving up home games becomes untenable.

Worse, fans and alumni of the cash-starved 50% universities know that their team has no chance at participating before the season starts. There’s a reason that the non-P5 conferences have much smaller attendance and revenue figures. They are labeled second class citizens and told that the playoff is not for them. It’s hard to blame a Sun Belt alumni for staying home and watching a big time SEC matchup on TV rather than attending her alma mater’s game live. After all, the SEC matchup is the one where something meaningful is on the line.

If every conference champion had a bid to an expanded playoff, every game would have meaning. Just like in college basketball, every Division 1A program would have a realistic shot to participate in any given season. One of the primary reasons the NCAA basketball tournament is one of the world’s greatest sporting events is the presence of Cinderella. The images of students and alumni from smaller universities jubilant and rushing the court when a David takes down a Goliath remain one of the iconic images in all of sports.

College Football has systematically refused to allow underdogs to participate. Can you imagine March Madness if they had told Butler that they were not being invited because they didn’t play an big boy schedule? There’s nothing more maddening than sporting events being decided on paper.


A Policy Of Exclusion Restricts Programs and Fans

Sports Business Daily estimated the value of George Mason University’s 2006 Final Four run to be worth $676M in media exposure to the university. Baylor University estimated that Robert Griffin III’s Heisman season was worth $250M in total value. Texas A&M reported $740M in donations, a $300M increase over their previous best year, the year they joined the SEC and caught lightning in a bottle with Johnny Manziel. Based on those figures, is it a stretch to think that a university that becomes a frequent Division 1A playoff participant would realize $1 billion in value?

With the education bubble bursting, the value of many college degrees being challenged in changing times and online education options proving that a quality education can be obtained for a fraction of the costs, one could argue that a successful Division 1A athletics program is the most valuable asset a bricks-and-mortar college has in 2015.

But the exclusionary tactics the BCS and Bowl system architects implemented structurally ensured that the bottom 50% universities would not be able to compete, making many of them question a return on investment in their programs and leading others, like UAB, to shutter their program (note: I realize that there is more to the UAB story) or compete on a lower level.

If the non-Power Five conferences had equal and fair access to an expanded playoff, it would be in their respective interests to invest heavily into their programs, ensuring that more universities can put a quality product on the field. Some universities are already applying free-market principles to college athletics, with universities like UTSA and ULL who are making significant investments in their facilities in order to attract better athletes, even before they have guaranteed access to the playoff or a return on their investment.

These universities are stuck in non-P5 conferences which limit them to 1/20th of the television revenue of the premier programs, but if you allow them to recruit athletes who would have a chance to participate in a playoff, any university can justify a substantial investment in their program. Boise State and others have proven that any university can build a winner. And with the non-P5 football programs creating programs worth watching, future media rights contracts will reflect that value, helping to level the playing field.

Equal participation and opportunities for revenue will give universities the justification to make the financial investment and students and alumni of those universities the justification to make the emotional commitment. This will bring more parity, which will in turn raise both ratings and attendance.

An Abundance Approach

An expanded playoff that ensures participation from all Division 1A conferences will expand the size of the college football market. The BCS and Bowl system architects designed their deals as if there was a limited amount of money that should be hoarded.

This is the familiar and often false narrative of worrying about their slice of the pie rather than making the pie bigger.

The passion for football in this country seems to be insatiable, and this proves it out.” — Chris Bevilacqua, Sports Media Consultant

The fact is the pie is growing faster and larger than anyone could have imagined when these deals were originally conceived.

By making most or all college football games meaningful, both regular season and postseason, ratings and attendance will improve, and so will the bottom line for everyone in the college football business.

cross-posted at Medium

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Daily Fantasy Sports Has Quickly Gone From Underrated To Overrated

Thoughts On A Poorly Understood Space

With Draft Kings and FanDuel raising large rounds at high valuations (relative to their age), all of a sudden there is all kinds of attention being focused on daily fantasy sports. It wasn’t too long ago that the space was being completely ignored, to recent coverage in the WSJNYT and an in-depth profile on this week’s HBO Real Sports. Consistent throughout all the coverage is the narrative that daily fantasy sports is a “booming” new market or “the future of “ or “the evolution of” fantasy sports.

Not too surprisingly, the media narrative seems far from reality. Right now, there are probably in the neighborhood of 3 million daily fantasy sports players. It’s entirely bizarre that a consumer Internet market that has been around for five years and only counts a few million users is described as “booming” or “exploding”, a designation usually reserved for products or markets that reach that many users in a number of weeks.

The real story is that the broader fantasy sports market has grown so large and influential that it is large enough to be spawning billion dollar subsectors. The traditional season long fantasy format isn’t losing users to daily fantasy sports at all. Rather, the increase in daily fantasy sports is actually causing the growth rate of traditional fantasy sports to further accelerate.

recent article in the Atlantic noted:

In standard fantasy sports, players draft a team at the start of the season and follow that roster all year. Winning demands a huge investment of time, and the competition takes an entire season. So, for most who play, fantasy functions just as a hobby and form of community — an excuse to follow the game and talk smack with friends. The trophy matters more than the money.

Not so with daily play. Users can draft a new lineup whenever there’s a new slate of games. The time commitment is small, the results are immediate, and the payoffs can be huge. That’s why daily play is booming — and why the game could change the way Americans bet.

That’s consistent with the recurrent missive from the FanDuel and DraftKings commercials, citing instant gratification as a key value proposition for daily fantasy. However, industry data suggests something different, with only 17% of current participants citing instant gratification as a motivation.

And while it’s true that seasonal fantasy sports are more of an involved strategic and social game, it’s similarly incorrect to suggest that the trophy matters more than the money. The same industry data shows that the percentage of users who pay league or contest “entry fees” (i.e., the conversion rate) is almost identical between daily and seasonal formats. Players who play both the seasonal and daily formats spend twice as much on entry fees when playing the seasonal format, spend twice as much on auxiliary products and overwhelmingly favor the seasonal format. (There are outlier professional “whales” in the daily space skewing the ARPU, but all fantasy formats feature very high conversion rates and very high ARPUs.)

So What Percentage of Fantasy Sports Does The Daily Format Become?

Regarding daily fantasy’s market penetration in fantasy sports, DraftKings CEO Jason Robins noted in July:

“[Current numbers] are a pretty low market penetration — about 1 or 1.5 percent for an industry with enough liquidity to have these large prize pools and daily content that is evergreen”

The impressive and oft-cited growth rate remains a function of small absolute numbers. The season long game with a draft format remains the largest format by a dominant majority of total users and it remains the clearly preferred format by the dominant majority of total users. A majority of current daily fantasy participants are veterans of the seasonal fantasy format, and are playing daily fantasy in addition to, not instead of, seasonal fantasy sports. Assuming one believes in the existing industry data, there isn’t yet a credible data point that suggests the daily format will become the dominant fantasy format.

When considering the potential future growth of the daily format, it’s worth noting the history. Daily fantasy sports is largely based on “salary cap” games, a format that has been around for a lot longer than FanDuel or DraftKings. In a 2006 industry survey, over 20% of fantasy players claimed to play salary cap fantasy games. That would suggest that the percentage of the fantasy sports market playing salary cap games has actually shrunk dramatically since then.

Neither is the real money aspect of fantasy sports new, even if the average and median entry fees are increasing across the board in all formats. Fantasy sports was the original “real money game”. FanDuel and DraftKings have only succeeded in making it easier. That’s the real innovation here.

It’s also fair to consider whether FanDuel andDraftKings don’t have a lot in common with ProTrade, which was a fantasy sports as moving stock market format that launched in 2005 and shut down in 2009. Liberally adjusting for broadband adoption rates and the lack of social or mobile distribution platforms, ProTrade had user numbers that were roughly comparable to where FanDuel and DraftKings are today. ProTrade had found a very passionate if not smaller user base, but was unable to monetize. Now that the legal issues are more clearly resolved and the path to monetization is obvious, it sure looks like ProTrade was just too early. Around 2007, the narrative was that a stock market format was “the future of” fantasy sports too.

Executed correctly, I’m sure a similarly large company could be built on the back of the Pick’em format, which is another form of sports gaming that has been around for decades. I remember as a kid, my father would bring home a Xeroxed sheet of weekly NFL games with spreads and I circled the winners in pen with total points for the Monday night game as the tiebreaker. And at $20 per weekly entry, the ARPU of that paper-based game is in the same ballpark with daily fantasy and seasonal fantasy. These aren’t new markets. Just as Twitch capitalized on the decades old practice of watching friends play video games, these are large and well-entrenched gaming practices that have never been effectively productized.

Daily fantasy sports does have the advantage of shorter game cycles, creating great advantages in the ability to monetize, but ecosystem liquidity is currently being driven by sports handicapping “whales” who are using algorithms to arbitrage the market. Remove these pseudo-hedge funds and the median “entry fee” drops significantly. As the daily fantasy market grows beyond a niche, how much of an edge remains for these professionals remains to be seen.

How much bigger daily fantasy gets is anyone’s guess but it’s still too early for anyone to draw conclusions. DraftKings and/or FanDuel can build billion dollar companies with highly liquid ecosystems, but that’s more of a statement about the continually underestimated broader fantasy sports market than an indicator of the future of the daily fantasy space.

I have more on these market dynamics and where the opportunities for investors and entrepreneurs lie in subsequent posts.

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Why ESPN’s Developer Center Launch Is Worthless

Just a few weeks after I critiqued the CBS Sportsline launch of their “Fantasy Sports API”, ESPN has gone and announced a new API of their own via their new Developer Center. Unless this was a hastily arranged reaction to Sportsline’s move (which is unlikely), this is looking more like a significant trend for sports media companies.

So it’s probably no coincidence that most of the exact same criticisms I had of the Sportsline API are valid here. I’ll go far enough to repeat the exact same homage, which is to salute ESPN for embarking on the fundamental shift in thinking that this represents while also noting that the open API, in its current form, has almost no value.

This might be a good example of lawyers picking it apart a good idea until it becomes worthless. ESPN’s API is far more restrictive than Sportsline’s API, and I spent numerous paragraphs explaining why Sportsline’s API didn’t go far enough.

The only type of data that the API currently offers open access to is headlines. Headlines? Seriously? Every single developer in the world has had completely free access to ESPN’s headlines via RSS for probably close to 10 years. A @sportscenter Twitter feed would serve the same purpose as well. The access to game scores is restricted, yet the outcome of sporting events is legally in the public domain and developers can legally access that data all sorts of places (although not in real time).

And from there, developers must use ESPN branding and are not permitted to monetize the apps via advertising or by charging for the app. This is a non-starter for most any developer.

So developers can’t access anything new or interesting and can’t make any money doing it. Uh huh.

The sad thing is that the “restricted” data looks like it could power some pretty interesting products and pave the way for ESPN to become a platform. But for access to the good stuff, ESPN is requiring a formal partnership of sorts and that’s just not the way that hackers or startups work.

Foursquare was named as one of the startups that has a preferred partnership at launch, using ESPN’s restricted APIs to power user’s ability to “Check in” to sporting events. Foursquare is getting hosed if they are paying money for a formatted list of sporting events. And for this effort to be successful, ESPN will need bootstrapped startups and hackers playing with the data first, not just “startups” like Foursquare that have $700M valuations and functional business development teams that seek out formal partnerships.

Hopefully ESPN is just easing into this, because what was launched publicly today is much ado about nothing. Yet such potential….

note: I found the following hilarious take in a comment on Hacker News. For those of you unfamiliar with computer code (the language of developers), this is computer code that succinctly agrees with the rest of this blog post. Enjoy:

 if(ESPN_API.CommercialApplications == NOT_ALLOWED)
    // Work for free to further ESPN brand
    // Can't make any money
    // Now they are being realistic
    // We can all make some money

If any other developers have thoughts or reactions about this please leave them in the comments.


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CBS Sports Offers Fantasy Platform, Potentially Significant Development For Fantasy Sports

Big news yesterday in the Fantasy Sports world with CBS Sports announcing the availability of an API for a new Fantasy Sports platform. Or it’s intended to be big news, as evidenced by splashy headlines in Techcrunch (A Fantasy App Store; CBS Sports To Launch “First Open Platform” For  Fantasy Sports), the Wall Street Journal (CBS Sports Opens Site To App Makers) and Sports Business Journal (CBS Sports Eyes Bold Fantasy Stroke).

One reason I’ve blogged less here recently is that I’ve been heads down working on a startup in the Fantasy sports space, so this is no doubt exciting news that validates much about what we think about the future of the Fantasy sports space. That being said, it looks likely that the intent here will have a greater impact than the actual offering. I’ll explain further.

In September 2010, I answered a question on Quora asking “What have been the major innovations in fantasy football products over the past 5-10 years?“. Part of my (now dated) answer reads:

“The answer is there haven’t been any major innovations in fantasy football….The incumbents can’t or aren’t interested in innovating. The market is dominated by ESPN and Yahoo, with Sportsline the third player and at last check, no one else was even close. None of those companies would be confused with innovative companies (sorry, Yahoo).”

As SVP and GM Jason Kint noted in the SBJ article:

“The fantasy sports experience simply hasn’t evolved as much as we’d like in the last decade…What we’re trying to do is create an ecosystem and accelerate the next wave of innovation in the industry.”

At least CBS Sports is now trying to up the ante. And that intent is a potential sea change.

But as I also noted in my Quora answer…

“Collectively, the business model for [the providers] has been to offer the game itself free and upsell premium content and services and drive high-value page views.”

This shouldn’t be surprising, given that all the major incumbent providers are old-school media companies with walled garden business models, not to be confused with the open, data driven Internet companies that typify successful platforms. (Apple being the obvious and notable exception).

Obviously, the CBS Sports PR folks emphasized the words “open” and “data” and “platform” in getting the story to Techcrunch, WSJ and SBJ. But the reality is that the combination of “open” and “data” are not compatible with their walled garden business.

And as YouTube’s Hunter Walk noted in a recent blog post: “You don’t get to decide if you are a platform“.

“A platform doesn’t just mean that others can integrate or use your services, it means you have a compelling technical and business proposition which creates enough value for both you and developers to run sustainable and competitive businesses.”

That’s where this effort may fall short of its intended impact. The API is open only for developing with CBS Fantasy Sports data within the CBS Sports ecosystem. It’s not “open” if it’s limited to and kept within a tightly defined ecosystem.

And that has far more limited potential.

For starters, some significant majority of the users in the fantasy sports space exist outside of the CBS Sports ecosystem. And some significant majority of the data that exists in the fantasy sports world exists outside of the CBS Sports ecosystem (not to mention a significant amount of the data inside the CBS Sports ecosystem, such as an NFL player’s statistics for any given game, is legally in the public domain). And CBS wants an Apple-esque 30% revenue split.

Are there enough users, enough revenue potential as well as enough value in partial data from a closed ecosystem to create the developer mindshare and app ecosystem required for a successful platform? That remains to be seen. There are already plenty of (mostly poor quality) fantasy apps available in the Apple and Android/Chrome app stores and none have achieved any real critical mass to date (outside of some traction with free, native app versions of the fantasy game from the incumbent providers), and those app ecosystems are many orders of magnitude bigger than the CBS Sports app ecosystem.

Despite CBS’ PR claims, they are not the first or even the second company in the space to offer a “Fantasy platform”. Yahoo offers a similar restricted API with even more onerous “non commerical terms” while longtime independent provider has been offering an open and free API for years. The opportunity to build 3rd party apps existed before this announcement.

I don’t want to be overly negative, because this is a big step in the right direction, but it just feels like CBS Sports’ efforts to keep the ecosystem closed is only an incremental step better than the “non commercial” API offering from Yahoo. There’s a “defensive” trend there, an acknowledgement that there’s value in the data yet an unwillingness to make it truly “open”.

But this effort does show a willingness on CBS Sports part to innovate and that will force the hands of their competitors as we’re getting closer to the tipping point where these walled gardens won’t be able to put the toothpaste back in the tube.

It should be noted that CBS has had some recent success in playing defense and holding on tightly to their existing competitive advantages(See: CBS and Hulu) and that there are an impressive set of launch partners, including Bloomberg Sports, Rotowire and MLB Advanced Media.

This will likely achieve CBS Sports’ goal of spurring innovation in the space, but whether or not they have the market positioning or necessary agility to capture all the resulting value remains to be seen.

Regardless there’s no doubt that there is ample opportunity for entrepreneurs in the Fantasy sports space.

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The NBA’s Finances Paint The Real Picture

I had written previously about the NBA player exhibitions, and how I thought the entrepreneurs who were running them were weakening the NBA owners’ bargaining position. And while that was technically true, it was never going to be enough to combat the leverage held by the powerful David Stern. The NBA owners aren’t losing money, as this blog post shows, but they have enough leverage and there is enough money at stake to make the players and fans suffer to increase their profit margins. Sad, but true.

A great summary of the NBA League finances, as compared to other professional sports franchises, by the incomparable fivethirtyeight blog at the NY Times.

The key takeaway:

Instead, independent estimates of the N.B.A. financial condition reflect a league that has grown at a somewhat tepid rate compared to other sports, and which has an uneven distribution of revenues between teams — but which is fundamentally a healthy and profitable business. In addition, it is not clear that growth in player salaries, which has been modest compared to other sports and which is strictly pegged to league revenue, is responsible for the league’s difficulties.

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Another Infographic: The Social Engine Of Sport

The infographic I posted on the Fantasy Sports Economy turned out to be pretty popular, so here’s another cool infographic from Kwarter. Helpful stats to put the penetration of social media and sports in context.

11 stats you must know about social sports. The social engine of sports by KwarterKwarter Social Sports Application

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The Fantasy Sports Economy: Infographic

How big is Fantasy Sports? Bigger than you think. I’ve been working on a Fantasy Sports startup that I’m not ready to talk about here just yet, so I’ll just let this picture do the talking for now. You’ll have to click on it to see the full image.

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Conference Realignment Driven By The Web And A Changing Media Business

(photo courtesy: The Football God)

When Pac 10/12 Commissioner Larry Scott announced that there were not expanding, effectively ending momentum for Texas and Oklahoma to join the conference, he stopped the second major domino in conference realignment from falling (Texas A&M to the SEC was the first). Had that domino gone down, all hell would have broken loose.

It’s a good thing the train slowed down before things got out of hand, because no one involved seems to understand what they are doing. Not surprisingly, talks broke down over the existence of the Longhorn Network, the Texas’ cable channel partnership with ESPN. It’s an obvious dealbreaker if one member of the conference has a supplemental $15M per year media rights deal.

Except no one has followed this train of thought through to its logical conclusion. Doesn’t that suggest that the entire business model of “a conference” is broken? There are sure to be many more college-specific networks coming and in each case, the most valuable members of a given conference are going to have to turn down something like $10M-$15M per year to remain a conference member.

Tradition is important to college football, but not $10M-$15M-per-year-important. (We’ll leave the likely broken economics of the Longhorn Network for another post, because the concept is not wrong)

With almost every college football game available via a high quality HD stream at a minimum, the regional reach of television rights become a limitation. As a Tulane alum, I wasn’t able to view the stream of the UAB away game because of “local” rights (as in “local” to New Orleans), despite the fact that I’m on the west coast. And with the Longhorn Network’s flawed premise, only a few hundred thousand subscribers have access so far and football season is here (yes, I know that’s not the end game).

You also have all of the “mid major” conferences with broken business models. CUSA members, for example, get about $1M per year in television revenue. But being a member means you have to schedule a number of unattractive football opponents in meaningless games. When you can broadcast your own feed via the Web, it doesn’t take that many streams at $50 per season (or $15 for an individual game) to reach that same $1M you’d get from being tied to a conference like CUSA.

It won’t be long before universities at the top and bottom of the current power structure find their existing conference affiliations good for anything more than ease of scheduling.

These are all questions that do not yet have clear answers, but you can be sure that the media landscape will be dramatically different in five years. Heck, the media landscape will be dramatically different in two years given the pace that changes are occurring, not to mention any fallout from the heat being turned up on the obviously-crooked folks behind the BCS and existing bowl structure. That will give a reprieve to a bunch of lucky college administrators who will have a chance to look before they leap.

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How “Capital Punishment” Weakened Owner Leverage In NBA Labor Negotiations

NBA Labor negotiations were always going to be significantly more complicated than then NFL Labor negotiations because the NBA doesn’t have nearly the revenue nor profitability of the NFL. This isn’t a case of figuring out how to ideally split up healthy profit margins so NBA owners have had a real incentive to take a hardline approach to negotiations.

The NBA Players Association leadership was already playing hardball by encouraging players to seek contracts from other professional leagues in other countries (or if that was a coincidence, then it has certainly worked in the players’ favor). The thought process being, if NBA players start showing up in highlights for other leagues, the public won’t sympathize with NBA owners while seeing that highlights can happen outside of NBA games.

But Saturday’s summer league showcase between Washington D.C.’s Goodman League and Los Angeles’ Drew League turned out to be a significant event that should give significant additional leverage to NBAPA Director Billy Hunter and his negotiating team. Hunter’s strategy could quickly move from players actively signing in other countries, to actively having NBA players play games right here in the US market.

As it turns out, a summer league basketball game played at a women’s liberal arts college that did very little advertising between two summer leagues that 90% of basketball fans have never heard of actually garnered significant interest both live and online. The game, dubbed “Capital Punishment” was so loosely set up that it was postponed twice, yet still reportedly turned away “thousands of ticketed customers” who had paid between $25-$60 per ticket and the streaming video feed (offered at $4.99 in advance/$9.99 game day for the game at crashed due to overwhelming interest.

A rematch, potentially including Koke Bryant playing for the team from LA, has already been discussed and will surely be bigger than the first go-round. Similar summer league showcases are in the works and the success of “Capital Punishment” will only add fuel to the fire.

In the age of Twitter, everyone that follows Kevin Durant or John Wall on Twitter (which includes most NBA basketball fans) knew about the Goodman vs Drew showdown well in advance. Because players like Kevin Durant and John Wall were interested in talking about it on Twitter, fans found themselves quickly interested in the game.

As a basketball fan myself, I can remember a time not long ago when reports from NBA summer league play were hard to come by in any format. Heck, I remember not long ago when my local NBA team regular season home games were blacked out. Now any summer league game with Kevin Durant and John Wall is easily available in HD, and it’s clear that there is plenty of demand to see Kevin Durant and John Wall play basketball even if it’s a meaningless game between teams no one has ever heard of. Before Twitter and the widespread availability of broadband video and a cheap, self-service video streaming platform (provided by DaCast), it’s unlikely that I would have heard about such a game and impossible that I would have been able to watch it.

This is a significant blow to the NBA owners’ stance that the franchise is the product, not the players, or that players need the franchise more than vice versa. Miles Rawls, head of the Goodman League, and Dino Smiley, head of the Drew League, look like they are going to make a relative killing betting that the players are, in fact, the product. Trinity University’s gym seats 1500 and if the average ticket price is $30, that’s $45,000 in revenue for a summer league game. If 1000 people paid $4.99 for the streaming video feed, that’s another $5,000, although I’ll be curiously looking out for the actual numbers. Those are intentionally conservative revenue estimates.

As Kevin Durant said before the game, “I really just want to do it for the people, man.” And the players backed up that sentiment since none of the players were paid and all travelled on their own dime. And NBA owners were shown, definitively, that it’s easy to turn a healthy profit when Kevin Durant and John Wall are the product, even if profits from “Capital Punishment” are going to charity.

Unlike startup football leagues, which have all floundered competing with the NFL, it looks like the NBA has a less defensible advantage. No one is going to suggest that Drew or Goodman can become legitimate threats to the NBA, but this exercise should show owners that are more vulnerable than they might have originally thought. Expect to see more of these type of summer showcases and Billy Hunter would be wise to further exploit this vulnerability.


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Shaq’s Social Media Retirement A Potential Landmark Deal In Sports Marketing

Lots of good coverage so far of Shaq’s retirement-via-social-media and the boost it’s given to social media startup Tout. Good takes from Forbes, GigaOm and the Digital Royalty blog. But I want to dig a little deeper and connect the dots here for how this could, or should, be a game changer in the sports marketing business. This is a great deal for Shaq, for Tout (disclosure: Tout CEO Michael Downing is a friend) but also for Amy Jo Martin and Digital Royalty, which has been managing Shaq’s social media strategy.

A big theme here at Sportology is how the sports business world, as a whole, doesn’t seem to understand just how significantly the Web is disrupting the industry and how unprepared most are for what’s about to smack them upside the head. So to put the Tout/Shaq partnership into perspective, note that megastars like Tiger Woods and Alex Rodriguez have both reaffirmed or changed marketing or agent relationships to continue having their marketing interests managed by people and firms with little to no credibility on or understanding of social media marketing.

This is not to knock Steve Loy of Gaylord Sports Management (ARod) or Mark Steinberg formerly of IMG (Tiger) personally at all. I’m sure both have been great at what they do but the fact remains that “what they do” has changed and they will need to start adapting, like, yesterday. The Sports agent and marketing incumbents are as vulnerable to social media as traditional media companies, which at least acknowledge that they are feeling the heat from these emerging threats.

On the Gaylord Sports Management website, it lists three bullet points under “what makes Gaylord unique”:

  • Gaylord staff seeks out appropriate corporate partnerships and media opportunities
  • Expertly negotiates industry setting contracts
  • Advises clients with an eye towards their future on steps necessary to enhance their careers

With that stated value proposition, how is it possible for sports agents and sports marketers to be competitive without real social media expertise in today’s world? (And no, having a Facebook and Twitter account does not qualify as expertise). Athletes like Shaq and Lance Armstrong have made the full transition to social media and an athlete like Chad Ochocinco has his own mobile app. How many sports agents and sports marketers can advise their clients on the benefits of developing their own iOS app versus an Android app versus an HTML5 app? Or how to use that app to increase fan engagement and marketing opportunities? My guess would be very few.

As an example of an Agency out front on this, see Goodwin Sports Management’s hiring of Nate Jones (@JonesOnTheNBA) with the title of Digital Media and Professional Athlete Marketing. Nate manages the social media strategy for Kevin Durant and Candace Parker and maintains a high profile on Twitter with more than 8500 followers and a Klout score of 69, proving that he’s got real influence. It won’t end there either. Just as Barack Obama hired a CTO for a re-election campaign, any agent or firm in the marketing profession will need to be able to establish a coherent digital and social media strategy not only as a service to clients, but as a core competency needed to succeed in a data-driven world.

As a marketing agent, Digital Royalty just helped to deliver a home run deal for Shaq as a client. Not that Shaq, or Tiger Woods or Alex Rodriguez for that matter, need any additional income or career assistance, but the Shaq/Tout deal accomplishes the following:

  • Shaq gets an Advisory Board role and stock options in a promising Internet startup company. Michael Downing is an experienced and accomplished digital media startup entrepreneur and will offer Shaq exposure to that business in an opportunity to diversify his post-basketball career
  • Shaq’s presence and promotion of the Tout social media application has a chance to drive significant growth and value for Tout. Twitter’s current place as a bellwether of the social media world can be traced directly to the adoption by famous athletes in the early days, including Shaq himself.

Obviously a great deal for both Shaq and the company. There are tons of athletes without the wealth and cache of Shaq who would benefit from an agent that could deliver that kind of value.

The reality is that there is tremendous synergy between professional athletes and social media, moreso than just about any other type of celebrity. Established sports agents and marketers should start learning about a new kind of sports business professional, like Nate Jones and Amy Jo Kim of Digital Royalty, which just solidified it’s place as the leading social media marketing agency for athletes. Certainly personality is relevant, but the fact that Shaq has such a large and engaged social media following can be directly traced to the Digital Royalty’s influence. It’s not a coincidence that Digital Royalty client UFC has become the most engaged social media ecosystem in sports.

Shaq’s deal with Tout could and should be a landmark deal because it’s a blueprint for what is possible in bringing the sports and social media marketing spaces together. There are lots of opportunities for athletes and social media companies to partner, but identifying them requires both an understanding of how to use social media effectively as well as understanding opportunities in the social media market. Very few, if any, in the sports marketing business have that skill set. Sports marketers will need to bring that expertise in house or be passed up by new firms like Digital Royalty.


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