SBJ/20091108/Technology in Sports
Capturing the out-of-market fan
Published November 8, 2009
While the New York Giants marketing department works on marketing the Giants in and around New York, and their counterparts with the Seattle Seahawks search for ways to sell the Seahawks in and around Seattle, a man in an office in El Segundo, Calif., also contemplates how to best reach fans of the Giants and Seahawks.
His mission isn’t quite the same, though. Alex Kaplan sells the Giants in Seattle and sells the Seahawks in New York.
As director of sports marketing at DirecTV, Kaplan’s top priority is the sale of subscriptions to NFL Sunday Ticket. In March, the satellite television provider extended its contract with the league through 2014, reportedly agreeing to pay about $1 billion a year to remain the exclusive provider of out-of-market games.
That the rights to air games outside a team’s territory could be worth so princely a sum — about the same amount that the NFL received annually for all of its TV rights from Fox, NBC, ABC, ESPN and TNT only a dozen years ago — speaks to the economic power of the out-of-market fan.
More than 2 million of DirecTV’s 18 million U.S. customers subscribe to Sunday Ticket, paying $200 to $400 per season to be able to watch every NFL game. Millions more file into sports bars to watch Sunday Ticket each week.
A recent custom research survey by ESPN Sports Poll for the NFL found that about 60 percent of NFL fans say their favorite team is their local team — which is to say that 40 percent say it is not. That projects to about 68 million out-of-market NFL fans.
The CEO of MLB Advanced Media, Bob Bowman, estimates that half of the baseball fans in the United States root for teams from outside the market in which they live, a fact that has driven MLB.com’s aggressive expansion of subscription products. About a half-million fans pay to watch out-of-market games online, and another quarter-million purchase games on their iPhone.
Sports fans long have clung to the teams they’ve left behind, fondly reflecting on bonds built during childhood or college or while at that first job in the big city but severed when careers and other factors took them traipsing off to new towns.
Most U.S. adults (63 percent) have moved to a new city at least once in their lives, and 43 percent have changed states at least once, according to a recent analysis of U.S. Census data by Pew Research Center. Sixty percent of college graduates have lived in more than one state. One in four has lived in four states.
Now, that migratory horde need not leave its favorite teams behind.
Satellite television allows fans to tune in to nearly every game, regardless of where they are located.
Wide distribution of broadband Internet lets those fans who don’t want to spend for a TV package watch games on their computer, which also connects them to newspaper sports sections from distant towns and, perhaps more importantly, puts them a click away from others of a like mind and passion level.
Mobile devices untether fans in a way that feeds their desire for their favorite team any time, anywhere.
At DirecTV, Kaplan considers the combination of migration and technological innovation to be a potent economic driver.
“We probably have done more critical thinking on how to target the out-of-market fan than anyone else, and I think we’ve done a great job with it,” said Kaplan, pointing to steady gains in subscriptions and revenue, even in the teeth of the recession. “But I think there’s still an opportunity out there. I think the out-of-market fan continues to be an untapped market.”
Elusive target audience
For all that thought, and despite those steady gains, Kaplan concedes that the company is in the early stages of mining a potentially rich market.
Last year, DirecTV launched a sweepstakes to name America’s top “displaced fan,” inviting both subscribers and nonsubscribers to submit stories and videos explaining the lengths to which they go to support their favorite NFL team from afar. It is running the contest again this season.
The main goal is to identify out-of-market fans who do not already subscribe to Sunday Ticket and convince them to sign up. The sweepstakes may well turn out to be only the start of a far broader effort to use social networking to market the service.
Kaplan envisions building out a Web site that would appeal to out-of-market fans. The site could offer pages devoted to each team, with links to the news sites that cover them, fan blogs, message boards and maybe even a roll call of gathering places across the country — in essence, a digital watering hole for fans to connect with others following the team from afar.
Creating a destination for the fans who are its top prospects, both for NFL Sunday Ticket and the out-of-market packages from the other leagues, would give DirecTV a cost-efficient way of reaching what until now has been an otherwise elusive target audience.
“It’s very hard to identify who they are,” Kaplan said. “They live all over the country. They’re fans of all different teams.
“I think there’s an opportunity out there to use social media, to tap into content [such as] the blog networks. If I’m a Redskins fan in Seattle, I’m guessing those people read the same newspapers and go to the same blogs as a Redskins fan who lives in Texas. So I think there’s an opportunity for DirecTV and other companies to do a better job to build communities and start building databases and really start to understand and identify who these out-of-market fans are so [we] can market to them.”
It’s the sort of idea that those who have studied or tracked the behavior of fans of distant teams believe could be the key to unlocking a mostly unrealized economic benefit.
“There still is a pretty neat entrepreneurial opportunity out there if you can figure out a way to connect all of these people in a really meaningful way, beyond a simple fan site,” said Jay Gladden, dean of the physical education and tourism management school at Indiana University-Purdue University Indianapolis, who explored the habits of out-of-market fans while studying and teaching sports marketing at the University of Massachusetts. “But it’s an area that’s tough for teams to invest in because they don’t know what their returns are going to be. You’d think there is a wonderful market on the merchandise sales side for the team to tap into, but because they’re sharing revenues, how much incentive is there, really, for them to put much behind it? It’s not like you’re selling these people tickets. So, in terms of monetizing it, teams may struggle with it.”
Few are as motivated as DirecTV to put resources behind such a quest because few can draw so straight a line between corralling the market and making money from it.
The company does not reveal specific revenue or sales numbers related to Sunday Ticket, or sports in general, but each quarter, its filings with the Securities and Exchange Commission include a commonly tracked metric called ARPU: average revenue per user, per month.
For the quarters ending June 30, 2008, and March 30, 2009 — two quarters bracketing the 2008 NFL season — ARPU was $81.80 and $80.35, respectively. For the quarter ending Sept. 30, 2008, it was $83.59. For the quarter ending Dec. 30, it was $90.46.
That means, in round numbers, that ARPU at DirecTV is $10 a month higher during football season than it is the rest of the year. With about 18 million subscribers, $10 a month represents a gain of about $540 million for one financial quarter. Since Sunday Ticket subscribers also bleed into the quarter that ends in September, there’s a smaller, but still significant gain there. Plus, there is the benefit of all the subscribers who choose DirecTV rather than cable because it is the only way they can get Sunday Ticket in their homes.
“Customers that subscribe to our out-of-market sports packages tend to spend more money overall, and frankly, they are some of our best customers,” Kaplan said. “They churn at lower levels and they’re very loyal.”
For a team, the upside of devoting resources to follow and nurture distant fans is not so clear at this point.
“Teams probably haven’t figured out how to monetize it,” Kaplan said. “And that’s tough in the whole social-network space. I don’t think Facebook is making any money at it either. So how do you monetize a disparate group of people? That’s their challenge.
“We have something very compelling to sell them.”
So, it seems, does MLB.
“The out-of-market fan in baseball is huge,” said Bowman, a Milwaukee native who has spent the last 25 years working in Michigan, Boston, Washington and New York, but still cheers for the Brewers. “No one switches allegiances. People grow up with a team and it stays that way.
“Half the Dodgers fans don’t live in Los Angeles, and half the Yankees fans don’t live in New York. We’re lucky, because the way technology is moving, we can have a direct conversation with that fan on really any platform now. It’s allowed us to deepen the relationship with fans that, frankly, you might have otherwise lost.”
It also has allowed MLBAM to build as robust an online content business as there is in sports.
There has been little research done on out-of-market fans.
For years, many of those who study fan behavior believed that distant fans were less likely to connect closely with their teams because they were missing out on many of the psychological benefits that come with following a team rabidly. If most fans cheer on sports teams in large part as a way to connect to others who do the same — a premise that is at the core of accepted theory on fan motivation — what would be the point of celebrating a win, or mourning a loss, in relative solitude? Eventually, their passion would dissipate.
That’s the way Gladden at IUPUI viewed distant fans — satellite fans, as he called them — when he and a colleague, Anthony Kerr, first wrote about their place on the sports landscape a few years ago.
His opinion is shifting, in part because of some evidence presented by Kerr.
Kerr, who received his master’s at UMass while Gladden taught there and has since gone on to earn a Ph.D., was convinced that in a world of satellite television, expanding broadband access, and a boundless array of team and fan Web sites and chat rooms, there was no reason that a distant fan could not be every bit as emotionally invested as a fan in a team’s backyard.
After all, Kerr had come to the United States from Australia to study, and when he returned home he took with him a surprisingly deep connection to the Boston Red Sox. Now teaching at a university in Sydney, he follows the Sox rabidly via satellite and online.
Two years ago, Kerr set out to prove that geography and fan engagement need not be linked. Through surveys and interviews, Kerr studied the habits of 1,128 fans of the popular English Premier League soccer club Liverpool FC, a club with a strong following around the globe. Fans in the study lived in the United States, Canada, Australia, Indonesia and Norway. None had ever lived in England.
Among his findings:
• 85 percent watched games on TV each week.
• 84 percent visited the team’s official Web site each week.
• 80 percent visited Liverpool supporter Web sites each week.
• 58 percent watched video highlights online each week.
• 52 percent got together in person with other Liverpool fans each week, and another 26 percent did so monthly.
• 94 percent purchased team merchandise each season; 12 percent did so monthly.
“When you look at their consumption behavior, it’s staggering,” Kerr said. “And it goes beyond that. Some of these guys have built pubs devoted to Liverpool in their basement. Ten percent of the guys in my interviews have tattoos of the Liverpool crest. These guys are extremely committed to the cause. They aren’t changing.
“And these guys have no geographic connection to the team.”
The reason they cited as the most important factor in their choice of Liverpool: 84 percent said it was because they often were able to watch the team play on TV.
“Historically, people have followed teams because of geographic location, but I really believe that’s no longer the case,” Kerr said. “It’s only a part of the story now. There really is so much more.
“In this day and age, with all this technology, a Real Madrid can build a fan base of a half-a-billion spread across the globe, with hardly any of them having ever spent a day in Spain, unless it was to [watch] their club. A half-a-billion, and growing. That’s an example of what can be done.
“Any team that decides to ignore that potential, well, they’re just walking away from money, right?”
For every member of Red Sox Nation in Phoenix watching a game on the iPhone, there’s an empty seat at Chase Field.
That’s the “half empty” take on the tech-driven phenomenon that has some of the more popular sports brands salivating.
It may be uncomfortable for some executives and owners to voice it, but if you are one of those franchises in one of those markets populated by transplants — Phoenix, Miami or Atlanta, for example — the breaking down of sporting borders probably has turned what was an already steep hill into a slick wall.
No owner in sports is better equipped to explain that than Jerry Colangelo, who was general manager of the expansion Phoenix Suns when they came to town in 1969, bought the team, and then led the group that brought baseball to town in 1998.
“Two different worlds,” Colangelo said, chuckling at the comparison. “We were still living in Neanderthal days with the Suns. Technology has changed everything in this world and this business. It’s become much, much more competitive.”
Colangelo figures he was the most plugged-in person in Phoenix in those early years with the Suns. He subscribed to newspapers in every NBA city and hired a former sports editor to thumb through them and clip stories of interest. The sections came by mail, days late. It was his information superhighway: one lane, no passing.
Because the Phoenix region is loaded with transplants, the Suns would deal with the challenge of converting fans of other teams over the years, but at that point, the NBA was new enough that they faced little of it. The Chicago Bulls, where Colangelo worked previously, had only been around for three seasons. The Lakers had only been in Los Angeles for nine seasons.
In contrast, Arizona was swimming in fans of the Dodgers, Cubs, White Sox and assorted other teams by the time the Diamondbacks arrived.
Building the Suns amid the transplants in the ’70s and ’80s and seeing them flourish prepared Colangelo for what he would face with the Diamondbacks.
“My gut said I didn’t want them cheering for any other team but ours, but I was a realist,” Colangelo said. “I knew it would take time to convert [them]. Time passes quickly. The Suns are into their third generation of fans, and the Diamondbacks will get there. Support for those other teams dwindles if your team is good. If you’re not competitive, then the Lakers fans and Celtics fans and Bulls fans come out of the woodwork.
“In today’s world, it’s very easy for them to find those other teams.”
John Clark, a sports management professor who directs the MBA program at Robert Morris University, studied the factors that have made Atlanta such a difficult market to crack for teams that now have been in town for decades. His theory: Because many are only passing through while early on their career paths with companies like Coca-Cola and Delta Air Lines, staying for three to five years and then moving on, they never bother to latch on to the things that might otherwise connect a person to a community, like the local teams.
The fact that those transplants can now bring their teams with them and readily find others like themselves makes them even less likely to adopt the Braves, Hawks, Falcons or Thrashers.
“It’s just too easy to follow your team from back home because of MLBAM and all the other ways that you can consume,” Clark said. “So there’s really no reason to become invested with the local team.
“A Yankee fan can remain a Yankee fan for life. What can’t you do as a Yankee fan in Miami that you can do in New York, aside from going to a game? Nothing, really. So what chance do the Marlins have? All the transplants really make it tough.”
At the offices of MLBAM, Bowman acknowledges that his digital products can be competition for a local team, but he argues that, long-term, offering more baseball is better for anyone selling baseball.
“If there happens to be a Yankees fan living in Kansas City, the Royals will benefit from that,” Bowman said. “And for every fan that might be 60-40 Yankees/Royals because they now migrated to Kansas City, there are probably nine others who might have just given up baseball completely if they had to let the Yankees go out of their life.
“The Royals benefit from a Yankees fan more than they do if the person hangs it up entirely.”
As part of a 2008 study that analyzed the brand strength of every major pro team, Turnkey Sports & Entertainment asked fans in each market whether they cheered for teams from other cities.
Many of the results align with the nation’s migration patterns. The cities that are attracting the most out-of-towners have higher percentages of fans of out-of-town teams.
The most telling data come from markets that house teams from all four leagues, since fans need not turn elsewhere unless they want to. The cities in which the most fans were committed only to the home teams: Boston (52 percent), New York (45 percent), Detroit (43 percent) and Chicago (42 percent). Two three-sport markets, Pittsburgh (56 percent) and Cleveland (43 percent), also showed strongly.
The four-league markets with the fewest parochial fans: Denver (28 percent), Dallas (24 percent), Miami (19 percent) and Phoenix (17 percent). Among three-sport markets, Milwaukee was at the bottom, with only 9 percent local-only fans — but that’s because 72 percent said they follow the nearby Packers. In contrast, Tampa clocked in at 15 percent, but only 12 percent said they cheer for the nearby Magic — which is fewer than pull for the Yankees, Dolphins or Colts.
Turnkey wasn’t compiling the data before technology trumped geography, so there’s no baseline to which it can compare. But the research company’s CEO and founder, Len Perna, says he is convinced that those shifts, coupled with the transient nature of major cities, are rapidly altering the sports marketing landscape for teams and leagues.
“The technology has been a complete game-changer,” Perna said. “And all of the leagues are a little uncomfortable with these changes because they want to condition the teams to think about marketing only in their home territory. You market in your territory and the league gets to market outside it. Well, that doesn’t really make sense today.”
With teams paying increasing attention to building databases and customizing their sales efforts, the chance of reaching, and then benefiting from, out-of-market fans will continue to increase, Perna said. He said he would advise any team that asked to devote a full-time marketing position to locating and cultivating out-of-market fans.
“What services can we provide them? How can we better connect?” Perna asked. “There’s a lot more to this business than selling a ticket. There’s engaging the fan. It’s a massive opportunity, and I don’t think there’s a whole lot of thinking about it being done right now.
“People better not underestimate the impact of all this.”