SBJ/April 4-10, 2011/Events and Attractions

Forward into the unknown

Themes of labor, social media, content distribution rule discussions at World Congress

The confidence that comes with weathering a long recession was evident last week among executives at the IMG World Congress of Sports.

But there was also discomfort caused by uncertainty on several important issues, including labor, the perils of social media and the future of content distribution. The inescapable conclusion: The future of the sports industry is being reshaped by forces beyond many executives’ control.

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SportsBusiness Journal’s Abraham Madkour (left) leads the Rapid-Fire Roundtable, discussing the headlines of the day with ESPN’s Mike Tirico, Gatorade’s Sarah Robb O’Hagan, EA’s Peter Moore, Turner Broadcasting’s David Levy, the NHLPA’s Donald Fehr, the USOC’s Scott Blackmun and the WTA’s Stacey Allaster.
“We’re out of the recessionary tunnel,” said NHL Deputy Commissioner Bill Daly. “As there are in any cycle, there are always new issues to deal with, [and] those are the constant challenges that we all have to address as we move forward.”

Even during the recession, the sports industry enjoyed the type of stability most businesses would envy. TV rights rose steadily, sponsorship values increased incrementally and new additions to premium seating continually boosted the bottom line.

But there was an awareness throughout the conference that the easy, organic growth of years past was over, and the key to mapping the future lay in long-term labor security, understanding social media and harnessing the opportunities of mobile and digital distribution.

“These are all significant issues leagues and properties will tackle,” said Rob Temple, vice president of sports management at ESPN. “The leagues, sponsors and media companies that are listening to fans are going to come through it stronger. The ones not staffed well or willing to listen will struggle. ”

Labor Unrest

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A panel on team ownership, moderated by SBJ staff writer Tripp Mickle, featured Stephen Ross (second from left) of the Miami Dolphins, Rocky Wirtz of the Chicago Blackhawks, and Merritt Paulson of the Portland Timbers.
Like most people, AEG President and CEO Tim Leiweke long thought there was no chance the NFL would miss any games next season. Too much money was at stake. But he’s slowly begun to change his mind over the last couple of weeks.

“Now it’s personal,” Leiweke said, alluding to the escalating vitriol that has emerged as one of the biggest threats to a deal between the NFL and NFLPA.

While Leiweke said he thought the league might miss games, others at last week’s conference expressed confidence that the sides would reach a resolution and start the season on time. But the lack of consensus underscored just how much uncertainty there is around sports’ biggest property.

“It’s not good, and the longer we don’t get a deal, the worse it will get,” said Brian Rolapp, NFL Media’s chief operating officer. “We’re confident and hopeful we’ll get to the table and get something done.”

NHL Chief Operating Officer John Collins agreed, adding, “Labor is the one big hiccup holding everything back. You have to see where the NFL goes and the NBA goes. Baseball’s right after that.”

Sports marketers already are spending twice as much time developing activation plans for the 2011 season as in previous years because they need to prepare a contingency plan in case the lockout continues, and they said the repercussions of that could extend beyond this year.

Procter & Gamble has developed both NFL and non-NFL-related point-of-sale displays and retailers will make a decision which one to feature this May. The activation is for a major retailer, and Greg Via, Gillette/P&G global sports marketing director, said if the retailer doesn’t take it this year, it would make it less likely the retailer would opt for an NFL display in 2012. “It’s going to have a long-term effect,” Via said.

At the same time that marketers are making tough decisions about how they activate their sponsorships, they’re also deciding how they will advertise.

“We’re looking at our upfront marketplace on the entertainment side and saying, ‘Where are all these [gross ratings points] going to go?” Turner Sports President David Levy said. “Sports is really the only thing that seems to be growing from a [gross ratings point] standpoint, so if advertisers have to lay their money down in the fourth quarter and there is no football and there is no NBA, that’s going to cause a shortage in supply, high demand and high pricing.”

Social Media

Five years ago, Peter Moore said EA Sports developed campaigns that shaped what consumers thought of the brand and its products. Now he tracks what consumers say about the brand and tries to influence their commentary in social media.

“You can’t control it, you have to manage that,” Moore said. “We have lost control of the conversation to the consumer.”

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The Florida Panthers’ Michael Yormark (left) listens as the Miami Heat’s Eric Woolworth talks about the fan experience.
The shift reflects a change marketers are grappling with as consumers use platforms such as Twitter and Facebook to become marketers.

“It’s a social revolution that’s in play for the marketplace, and the sports world has to embrace it,” said Michael Lynch, Visa’s head of global sponsorship management. “Right now, everyone’s trying to figure it out.”

Research has shown that consumers are 12 times more likely to trust a recommendation from a friend for a product than they are a traditional advertisement, and brands are deploying an array of strategies in an effort to influence recommendations.

Visa provided exclusive content around its Olympic athletes during the Vancouver Games in order to increase its Facebook fan base by 110,000 fans, and Farmers Insurance sponsored an airplane in the Facebook game Farmville that got downloaded 6.5 million times.

“Can I show you a spreadsheet that shows it translates to sales? No, I can’t,” said Coca-Cola chief marketer Bea Perez. “But we believe this is a space we will continue to learn from and will be important to our business.”

But as great as the potential rewards are, there are risks with social media, as well. Reliant Energy employs 12 people to monitor customer feedback across social media platforms, so it can respond to complaints before they influence opinions of the brand.

Gatorade tells its athletes to be wary of Twitter and reminds them that everything they tweet is on the record.

“If you talk to public relations directors in pro sports, Twitter keeps them up at night,” said ESPN commentator Mike Tirico. “Some of it’s great because we’ve taken down the barrier of athlete to media to fan, but like everything, life’s a laboratory, and we have to proceed with caution.”

Communicating directly to fans presents both an opportunity and an obligation, said MLS Commissioner Don Garber.

“It’s all going into a big pot,” Garber said. “We’re stirring it around, trying to get our hands on it.”

Content Distribution

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SBJ’s Abraham Madkour (left) moderates a panel including Reebok’s Tom Shine, IMG’s George Pyne, AEG’s Tim Leiweke, the Boston Bruins’ and Delaware North’s Jeremy Jacobs, and MLS’s Don Garber.
Sports leagues spoke with a unified voice last week when they discussed plans to stream programming to tablets: They like it.

But even with that unanimity, uncertainty remains about whether distributors have the rights to stream channels like Time Warner Cable started doing, allowing its TV and broadband subscribers to view a 32-channel lineup on their iPads.

Powerful entertainment programmers — including Fox and Viacom — have threatened to sue Time Warner Cable over the service. Last week, Time Warner Cable pulled channels that complained, and threatened legal action itself.

The question of whether Time Warner Cable legally is allowed to stream a 32-channel lineup to its iPad-using subscribers almost certainly will be settled by a court of law. But the sports industry threw its support behind the service — even though it doesn’t currently include any sports channels. League and ESPN executives described Time Warner Cable’s service as a natural evolution of video.

Their remarks stand in stark contrast to entertainment programmers, like Fox, Scripps, Viacom and Discovery. Last week, Fox sent Time Warner Cable a cease-and-desist letter, trying to persuade it to pull its channel from the lineup. The networks allege that Time Warner doesn’t have the right to stream their channels to an iPad, and they worry that they’ll start to lose control of where their content can be viewed if they allow such a move.

But sports executives say Time Warner Cable’s service — as well as one planned by Cablevision — doesn’t necessarily concern them. Because viewing is confined to Time Warner Cable subscribers within range of their router, league executives view the iPad as another television screen in the home.

“I think we’re going to stop the debate about screens and devices and get to a philosophy about content,” said Tim Brosnan, MLB’s executive vice president of business. “Live games get sold here in this fashion for all these purposes. [A content] library gets sold here in this fashion for those purposes. We’re going to look to extract value on all of it.”

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Tim Brosnan (left), John Collins, Brian Rolapp, Adam Silver and John Skipper share a laugh during the sports media panel.
Viewers on iPads can’t be counted by Nielsen yet, a problem for league executives like NBA Deputy Commissioner Adam Silver, who speculated that iPad viewers would be the type of younger and tech-savvy fans who leagues and networks sell around.

“It’s important for all of us that those screens get counted in the home,” Silver said. “When it comes to televising the games in the household, I’m in favor of [Time Warner Cable’s service], with the exception of the Nielsen issue.”

Unlike programmers like Fox and Scripps, ESPN doesn’t see problems with Time Warner Cable’s service. ESPN signed a carriage deal with Time Warner Cable that allows the cable operator to stream several of its channels to its subscribers. John Skipper, ESPN executive vice president of content, said the iPad app is a natural progression.

“This is really about video on the best available screen,” Skipper said. “The distinction between these screens is becoming nonexistent. They’re just screens. … You want to watch whatever you want to watch on whatever the best screen available is.”

NFL Media’s Rolapp agreed that video to a tablet is a natural evolution from 2005, when DirecTV started making “Sunday Ticket” available to Internet users.

“You could get your ‘Sunday Ticket’ package on your mobile phone or your computer,” he said. “Now you can get it on your tablet. It’s always been there.”

Staff writers Eric Fisher, Brian Helfrich, Daniel Kaplan and Terry Lefton, and correspondents Jennifer Rodrigues and Joseph Argenziano, contributed to this report.

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