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No business as usual for new AD Brandon
Published August 23, 2010
David Brandon, fresh out of the University of Michigan, was well on his way to a career as a teacher and a coach in the mid-1970s when a recruiter from Procter & Gamble called. Brandon thought the recruiter had a wrong number and nearly hung up. But the P&G rep had been turned on to Brandon by Michigan football coach Bo Schembechler, who coached Brandon for three Big Ten championship seasons. On Brandon’s first intimidating day at P&G’s Cincinnati headquarters, each of his fellow rookie hires introduced themselves as they sat in a circle. One was from the business school at Wharton, another had his MBA from Harvard. When Brandon stood, he introduced himself as a teacher and a coach from Michigan. Right away, he knew he was going to have to work a lot harder to catch up to those fellow P&G rookies.
Not only did Brandon catch up, he sped by most of them. He later went to Valassis, an advertising agency that specializes in newspaper inserts and coupon books, and ultimately rose to CEO. In 1999, the Michigan native was named CEO at Domino’s Pizza and embarked on an 11-year run that ended this year when he became athletic director at the University of Michigan. The pay cut from a reported $3 million annually at Domino’s to about a fifth of that at U-M was never an impediment.
Staff writer Michael Smith spent a morning with Brandon in his Ann Arbor office overlooking South State Street. Here’s what he said about taking over as head of Wolverine athletics.
What’s keeping you the busiest these days?
Brandon: Well, I’m completing my fifth month on the job, so I’m still in a pretty steep learning curve. I’m getting to know the team I inherited and trying to come up with an organizational design that’ll work for me. The old, “Get the right people on the bus and in the right seat” thing. It’s both interesting and challenging to come up with a design that works for me and is what I’m used to. And we’re coming up on a football season that’s going to be very important in many respects. We have the grand opening of a newly renovated stadium. We put a $226 million investment into it and we’re really happy with it, but from an operator’s standpoint, we’ve now got 81 suites to service. We’ve got club-seat patrons who have spent a whole bunch of extra money for amenities and benefits. There are a lot of new moving parts we’ve got to manage and it’s really hard to have a good dress rehearsal when you’re about to entertain 111,000 people. I’ll be glad to get that first game under our belt.
SBJ: How do you compare where you came from at Domino’s
to what you’ve found here?
Brandon: After having been a CEO for the last 22 years, I have a certain way of thinking and doing things. Hopefully it will be very transferable, and so far it has been. Being CEO of Domino’s Pizza, to a large degree, is about building a brand. You do that with advertising, promotion, execution at retail, building stores, growing your geography. But fundamentally, it’s about building a brand as it relates to excellence in service, excellence in quality, excellence in corporate responsibility. That’s what you’re doing when you’re a CEO. When you’re director of athletics, you’re building a brand. That block M stands for something. It needs to stand for excellence in the classroom, excellence in competition, excellence in how we conduct ourselves and represent this university.
I view this athletic department as the sales and marketing division of the university. We’re on TV every week, we send student athletes all over the world to represent the university, we bring attention to the brand. One of the years I was a regent here, we won a national championship and our applications went up 23 percent. It was for no reason other than our football team winning a championship, so I have great respect for the power of athletics. In a [$5.5] billion institution, we’re a little $100 million unit, but the power we have to extend the brand is pretty remarkable.
SBJ: In terms of building the brand at a U-M, what are
you looking at?
Brandon: We’re looking at the depth of talent we have here on staff. How are we leveraging new channels of communication? How are we using the website? How much customer relation marketing are we doing? It’s an effort to build a strong marketing expertise that before I got here was pretty nonexistent.
SBJ: How is that going over?
Brandon: Some of it is teaching. The staff here wants to grow and be a part of change and be a part of making things better. There are a significant number of people who want to grow and there are other people in a comfort zone and they want today to be like yesterday. They’re probably not going to stay here real long. I didn’t come here to preside over the status quo; I came here to grow this.
SBJ: As you’ve reviewed your deals with partners like
Adidas and IMG College, are you happy? Are there things you’d like that you’re
Brandon: The contracts are done and a deal is a deal, so I don’t spend a lot of time with the contracts, other than to understand the mechanics. What I’m trying to manage better is the relationship. I want to have a closer working relationship where we’re communicating more and there’s clarity around expectations. I’ve spent a lot of time with Adidas and IMG and we’ve got a deal, that’s great, but what’s next? How do we turn this into something that’s great for both parties? If we’re getting our guarantee paid, but IMG is under water, that doesn’t make me happy. That’s not good. On the flip side, if they’re content and we’re content and we’re missing opportunities, that’s not good either. How do you make it grow?
SBJ: There is a trend of outsourcing when it comes to
marketing and ticket sales. What do you think about that?
Brandon: I think it’s a trap. Outsourcing is a wonderful thing if you have someone with an expertise that extends beyond your reach. And outsourcing can be a wonderful thing in the right situation. But the trap is, OK, I’ve sold these assets to a third party and soon the business model is being driven by somebody you hardly know and you’re hoping they get it right. That’s not the way to run the railroad. There’s nothing wrong with having partnerships, but you’ve got to create the level of expectations. This sort of blind delegation and send me a check, that’s not the way to maximize those relationships.
SBJ: So when you meet with Adidas or IMG College, what
are you telling them?
Brandon: I want to grow. I want (from IMG) double-digit increases year against year, in terms of sponsorships and leveraging all of the assets we have here. There’s a lot to be sold in 27 sports and all of these new facilities. If all we’re doing is selling the same things we’ve always sold, there’s not a lot of value-add there.
SBJ: If it took 90-some years to get premium seating in
Michigan Stadium, how long will it take to get advertising signage?
Brandon: That’s a tough one. I subscribe to the old Sam Walton quote: “If you don’t know what to do, ask your customer.” In all the research I’ve seen, our fans have told us their disdain for going into the stadium and being bombarded with advertising. It’s a strong disdain. Is there a new revenue stream and are other stadiums taking advantage of it? Yes. Do we take advantage of it and flash commercials at people at the expense of making them angry and disappointed? I’ve found that you don’t build a brand by disappointing your customers. I’d rather find another way. … We’re going to experiment with a handheld device (Game Day Vision, formerly Kangaroo TV) that you watch the game on with people in our premium seating. You get radio, TV, replays and you can put advertising in there. It’s not in your face, but it is another medium that comes in a nontraditional way.
SBJ: To switch gears a bit, how did your leadership
Brandon: I’m a pretty nontraditional guy. I didn’t go to business school here. I wanted to be a teacher and a coach. When you’re here and you want to be a teacher and a coach, you tend to study Bo Schembechler. We lost one regular-season game here in my three years and won three Big Ten titles. This guy was achieving unprecedented success and I was just soaking it all in. I wanted to be like him.
What I concluded was that this business gig wasn’t a whole lot different than coaching a team. You recruit great talent, set high expectations, have clear goals and prepare, all the things that Bo taught us that made us great. I just implemented all of those tools and concepts into what I did. The accounting and the finance, you can pick that up along the way. What I had was what Bo taught me.
SBJ: Michigan Stadium opens with 81 suites and 3,000
club seats this season. What will premium seating do for revenue?
Brandon: A lot. The first thing it will do is pay for the $226 million project. The first thing we had to do was put together revenue streams to pay for the debt. We put a plan together that was very conservative, with interest rates that were higher and assumed no donor support. We thought because the economic cycle at the time was really hot that we’d sell out all of the suites, but we assumed we wouldn’t. We had to make sure that this would be a cash-flow positive project and it is by a significant margin. As we pay back the debt and create incremental revenue flows, those dollars become precious for our other programs. All of those other projects to come are being driven by the financial flexibility that’s being created by the football stadium. As we sell more of the suites and club seats and eventually sell out, that will create another $4 million in revenue. When you’re a $105 million budget, that $4 million is important.
SBJ: How often do you get reports on suite and club-seat
Brandon: Regularly. Yeah, when we sell a suite, we’re high-fiving. That’s great. Those suite holders can choose a three-year, five-year or seven-year deal and the range is $55,000 to $85,000 a year. So when somebody steps up and says we’ll take a suite for five years,that’s cha-ching, that’s terrific, that’s a big sell. … We recently had an open house and let people walk through. We didn’t serve beverages or food, it was just come on, walk through. We had close to 15,000 people go through and by the end of that week, we’d sold close to 250 club seats. We didn’t know it would be such a big marketing boom, but it tells us that as people get up there and look around, they’re going to say that they’ve got to have this. It’s a great way to watch a game.
Your fiscal 2011 budget is Michigan’s first over $100 million. Do you still
expect a surplus and the ability to give back to the university?
Brandon: Yes, the budget is growing. We will continue to fund all of our sports with the maximum allowable scholarships. We also do not tell our coaches where to recruit. We pay the freight if it’s an out-of-state student. And 70 percent of our student athletes come from out of state. We tell our coaches to find the best talent and if they’re out of state, we’ll pay the hefty out-of-state tuition. That’s another important investment.
SBJ: How has U-M athletics been able to operate without
subsidies and manage to run at a surplus, especially when southeastern Michigan
is in the epicenter of the recession?
Brandon: The fact that we put 110,000 people in that stadium for a football game and have for decades, the fact that we sell out hockey, the large alumni base, the passion for athletics here, it’s special. It all speaks to the power of what we have here. Economic cycles affect us with sponsorship revenues, licensing, merchandising revenues. It’s not that we’re impervious to down cycles. But the fundamental guts of this business are people filling up that stadium and investing in this program with their gifts. We’ve persevered through this storm in a healthy way. The business of Michigan athletics is quite good, despite the economy around us being so tough.