SBJ/March 11-17, 2013/Opinion

Print All
  • Cartoon: Jump ball

    Print | Tags: Opinion
  • Thoughts on ESPN’s global challenges and the market at 14,000

    Don’t lock in ESPN’s global domination of the media marketplace quite yet. If anything, the last year has proved the challenges of doing business on the international front, even for the Worldwide Leader.

    The company’s global expansion plans have been significantly curtailed in the U.K., Europe and Asia. First, ESPN sold its 50 percent interest in ESPN Star
    Sports last year to News Corp., but will remain in the region as a digital player, largely behind its ESPNCricInfo.com. Then just last month, ESPN confirmed what had been speculated for a few months: that it was scaling back its U.K. business.

    This was the more surprising move, because while ESPN had been doing business with Fox in Asia for more than a decade, its television foray into the U.K. was a more hyped but short-lived experience. ESPN made a much-publicized entry into the market in 2009 when it took over the business of Setanta Sports, but after only three years, it is getting out of the television business and has sold its U.K. and Ireland TV channels to British Telecom. These are primarily the ESPN and ESPN America channels and rights package that include the FA Cup, Scottish Premier League, UEFA Europa League and the Bundesliga.

    Surprisingly, ESPN’s decision wasn’t reported on with great fanfare by the London press, and it certainly wasn’t met with glee that the big, bad American media giant had “failed.” The coverage was simple and straightforward: The Financial Times stated the moves came as ESPN “explores an exit from the U.K.” The Guardian also noted that ESPN was “exploring an exit” after it “lost several big broadcast deals.”

    To me, the move means that ESPN, as it has in Asia, will be putting its resources behind its digital news and information business in the U.K. and Europe.

    There were a few pivotal issues that forced ESPN’s hand out of the TV business in this region. First, there are entrenched players in both distribution and content production, like BSkyB. There is also an aggressive new player in BT that emerged to upset ESPN’s vision. BT’s three-year deal to win live rights to the English Premier League in June had major implications, and eventually was the key reason ESPN was forced to alter its plans in the market.

    BT knew it needed the EPL as it plans to launch new sports channels. It understood that those live rights, especially the EPL, would allow it to penetrate the market. Because of BT’s business need, ESPN saw the cost of the EPL’s rights increase to a point where it couldn’t match.

    One other issue that hurt ESPN is the short-term nature of the EPL’s deals. Unlike recent long-term TV packages in the U.S., three years is a short window to build a business. You roll out your product in year one, and after that, you’re immediately renegotiating. As a business, ESPN couldn’t build any momentum after losing the EPL, and without the EPL, there was no business to build around or way to build credibility.

    ESPN officials point out that in its three years it built an asset that BT acquired, as well as absorbing much of its personnel. But while BT will continue to sublicense the ESPN brand for a period of time, look for ESPN to put its efforts and resources in the U.K. and Europe behind its digital offerings like ESPN.co.uk, ESPNFC.com and ESPNscrum.com.

    I’m not showcasing ESPN’s global roller coaster to demonstrate failure, but rather to bring to light the challenges of extending a business, even one as successful as in Bristol. What I take away from it is that there is no cookie-cutter approach to international strategy. Plans can rapidly change because of wild marketplace fluctuations, as in the U.K., or when fundamentals must be weighed against long-term decisions about business growth, as in Asia. So for now, look for ESPN’s presence in these regions to be primarily focused on the digital space.

    > ARE YOU AN EVERTONIAN?: While on the subject of the strength of the EPL, results from an exclusive study will be published this week by SportsBusiness Daily Global that shows that avid EPL fans in the U.K. consistently demonstrate more passion toward their favorite club and spend more time and money supporting it than U.S.-based NFL avid fans do with their team.

    A couple of tidbits: EPL fans seek information about their favorite team more frequently than NFL fans, both during the season and in the offseason. During the season, 61 percent of EPL fans look every day for news, scores, standings or other information about their club. For NFL fans, 44 percent do the same. In addition, avid EPL fans spend roughly 11.6 hours a week following their favorite team, nearly two hours more than the average avid NFL fan. The survey, done on behalf of SBD Global by Turnkey Intelligence and Toluna, was conducted in the U.S. and U.K. during the weeks leading up to the end of the EPL winter transfer window and the NFL playoffs. Check out SportsBusiness Daily Global for the full report.

    > BOUNCING BACK: When the stock market hit an all-time high last week, I instantly recalled a quick hit we did years ago with Fox Sports Chairman David Hill. It was in December 2008, the Dow was in the mid-8,000s, and we asked executives what resolutions they were making or would like to see in 2009. Hill’s response: “That the Dow gets back to 14,000 quickly!” He was surely stating what many were wishing, and nearly 51 months later, it happened.

    > A WRAP ON CHAMPIONS: We sign off on our Champions of 2013 with a look at the life of Harvey Schiller. This year we featured each of our six recipients separately as opposed to running as one special insert. I hope you have enjoyed the stories of their careers, accomplishment highlights and regrets as much as I have. Each writer — Bill King (Ron Shapiro), John Lombardo (Pat Williams), Michael Smith (Roy Kramer), John Ourand (Rosa Gatti), Terry Lefton (Donald Dell) and Tripp Mickle (Schiller) — brought their own style and form of storytelling, which I believe made for six unique profiles. A special thanks goes to Assistant Managing Editor Tom Stinson, who handled the day-to-day aspects of this extensive project, working with the writers, setting the schedules, shaping the stories, selecting all of the imagery and working on the final look and feel of the piece with our designer Corey Edwards. Each profile brimmed with life, and Tom and I also talked in detail about each of these individual features in our weekly video segment that can be seen on our website in our “In The Studio” section. We thank this year’s class and look forward to hearing more of their stories during a panel at the World Congress of Sports in Naples, Fla., in a few weeks.

    Abraham D. Madkour can reached at amadkour@sportsbusinessjournal.com.

    Print | Tags: Opinion
  • Paradigm shift: Treat suites as real estate, not event option

    A little more than four years ago, I wrote a column, “Activating a suite: Contemporary view of a traditional product” (Feb. 2-8, 2009). In that column, I emphasized differentiating suites and branding them so they stand out from any other suite in the venue. The suite would look different, feel different and, in some cases, depending upon the product(s) of its owner, smell and/or taste different. These areas would become more than suites and more than marketing platforms.

    Fast forward to 2013. The Orlando Magic has a sponsor deck for Kia and one for AirTran Airways (now Southwest Airlines) at the new Amway Center. These are very effective sponsorship activation areas and draw a lot of interest, but they are not suites. No one, to my knowledge, has effectively differentiated their suites through customization and branding, with the notable exception of the Mercedes-Benz Arena in Shanghai.

    During a presentation on suite customization at the AEG Expo in Los Angeles, Mercedes Yao, director of sales and marketing for the Mercedes-Benz Arena, offered several interesting and powerful observations about why and how this was implemented:

    The customization investment is made by the suite owner.

    Suite owners who have made such an
    investment appear to be more involved and vested in utilizing their suites.

    The suites are branded and customized in terms of color, furniture, decoration and lighting.

    There has been noticeable competition between suite owners to have their suite perceived to be a destination or to be the best.

    Competition between different brands within the same category (for example, car companies) leads to a higher investment and customization of the suite.

    “Customization of a suite is the key to personifying the character of a brand,” said John Cappo, president and CEO of AEG China. “It brings the brand to life and creates a more memorable experience for the guests. Each customized suite becomes a destination
    Corporate suites at Mercedes-Benz Arena in Shanghai take on the personality of owners.
    Photos: AEG (4)
    of its own and differentiates it from the others in the venue.”

    From the observations thus far, building management has hypothesized that the increased investment, combined with satisfaction and the portrayal of their brands should affect retention, renewal and even up-selling.

    Why is this more important today than when I first broached the topic in 2009?

    One reason is the amount of unsold suite inventory and the concept of fractional ownership that has been introduced by teams to reduce that inventory. The opportunity to buy less and perhaps have less inventory to manage (number of games/events) is causing suite owners to consider purchasing partial suites.

    A second factor is the emergence of the secondary premium market that provides tickets to the important games (at a higher price). But it is also buying unsold suite inventory and combining the premium assets of all the teams and venues in the market into a blended offering. It gives buyers access to all of the suites and games/events without the initial investment or the restriction of a five-, seven- or 10-year contract, or even a one-year lease in some cases. In most cases, it is a buyer’s market. The exceptions would be a highly desirable sports property and venue, such as the Miami Heat at AmericanAirlines Arena, or in a one-team market where there are no other competitors or alternatives.

    The industry is at a point where it needs to change the paradigm. Already teams are reducing suite inventory by converting suites to larger party suites (single-game rentals at a higher rate) or additional club areas, or replacing the suites with loge or opera boxes that seat either four or six and are ideal for smaller firms and new buyers in the premium market. This requires a much greater selling effort followed by a much greater retention effort.

    What can the industry do differently?

    Teams and/or venue operators need to connect the suite buyer and prospects more to the suite as a real estate sale and less as an event option. In a real estate sale, the prospect is purchasing a showroom — it needs to look a certain way and convey the image and properties associated with the company brand. While entertainment is an integral part of the purchase, the function as a business solution is most important.

    As an event option, the focus is not on the suite but more on the building and what is happening there. With that type of focus, there is no need to invest and have an extended presence. When the event has passed, so is the need to be there. The event philosophy also can be overly dependent upon team performance, the number of concerts and other forms of entertainment, and the star power of those events. This has often resulted in overloading the buyer with the number of events, even though the buyer may have little or no interest in those added events. And those additions might make it difficult to encourage ticket utilization and cause another point of dissatisfaction.

    A philosophical shift is needed that focuses on the lifetime value of a suite and views a prospect as a buyer/owner and not a renter. A renter leaves at some point. A buyer/owner looks to improve the property, give it a personal touch and share it with others.

    How is that accomplished?

    Begin by allowing owners to customize their suites through painting, furniture, lighting, decoration and, most importantly, branding, at their expense.

    The second stage is to allow physical modification to the construction (again at the buyer’s expense), and that will occur when there is a comfort level between the parties and a level of trust and commitment to take the relationship to the next level.

    Bill Sutton (wsutton1@usf.edu) is the founding director of the sport and entertainment business management MBA at the University of South Florida, and principal of Bill Sutton & Associates. Follow him on Twitter @Sutton_Impact.


    Print | Tags: Opinion
Video Powered By - Castfire CMS Powered By - Sitecore

Report a Bug