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SBJ/April 14-20, 2014/OpinionPrint All
Team owners, after gaining more restrictive free agency rules, and with it slower salary cap growth, in the most recent collective-bargaining agreements, have also embraced the analytic model to measure cost efficiency. Given tighter salary caps, the optimal mix of player salaries, playing statistics, age and position are increasingly determining the makeup of team personnel. While these applications may be embraced by teams, the uniqueness of a player’s talent and his chemistry with teammates are still paramount determiners of individual player value and, ultimately, predictors of team success. Both of these lie outside the analytics purview.
Consequently, the collective place of analytics in the hierarchy of team success factors remains controversial. However, for these same reasons, analytics has one sure and, currently, underused, place: with sports unions, to help them regain some of the financial footing lost over the last 20 years in CBAs.
As a result of recent lockouts and the financial concessions granted by unions to end them, the need for business analytics among sports unions has never been greater. Why? Because better knowledge of analytics could not only have informed union decisions in these last 20 years of CBAs, but also could have provided the unions a means of tracking overall league revenue and secure a more accurate share of their diminishing percentages. Use of analytics now could potentially relieve some losses, and prevent future ones.
■ How analytics can matter
Until 1995, the NBA draft established market value for rookies, often dictating substantial salaries. However, the CBA in 1995 included a rookie wage scale that reduced rookie salaries well below market value — a negotiated victory for the league. This caused a massive increase in college underclassmen and graduating high school seniors entering the 1996 to 1998 drafts. Aspiring players reasoned that, if they couldn’t make money on their first NBA contracts anymore, they should secure those as quickly as possible so they could get to their second, more lucrative contracts sooner.
This was a consequence of a CBA that would prove costly to the National Basketball Players Association thrice because it didn’t possess the appropriate analytics or employ anyone to develop them. The players agreed to the rookie wage scale under the NBA’s dual pretense that:
1) there were too many rookies entering the league before finishing their college educations, which was to the rookies’ detriment; and
2) the revenue saved by the rookie wage scale would instead go to free agents (veteran players).
Proper use of analytics would have shown players that reason one was misleading: In the 20-year period from the 1976 merger of the NBA-ABA through 1995 NBA draft, fewer than 10 high school seniors or college freshmen made themselves available for the NBA draft. That number increased tenfold from 1996-98, with the numbers of college juniors doubling and sophomores tripling. Such information would have enabled the union to insist upon a provision in the agreement to ensure that veteran players received revenue from the instituted wage scale. That revenue, instead, went back to the teams. The league then used the swollen draft numbers generated by the rookie wage scale to justify a further acquisition in the following CBA: the age restriction (19).
Now, after years of concessions, the single biggest challenge facing professional sports unions is how to monitor the growth of the leagues’ revenue in order to receive players’ guaranteed share and secure players’ salaries and overall benefits. The leagues block union access to the most intimate financial information because the unions’ unfamiliarity with analytics, initially, meant failure to ensure appropriate access via the CBA. The NBPA may only legally review all league and team financial records if the league claims loss of revenue would prevent them from honoring the salaries and benefits to the players. With the robust financial projections over the next decade, such a claim seems unlikely.
■ The challenge
Analytics professionals working for players’ unions could still improve conditions for members. They could assist players in their preparation for free agency in a cap system and find the optimal mix of compensation in player contracts, over a lifetime, in cash versus deferred income. Considering more guaranteed, deferred compensation for players now could prolong their income streams, and relieve some of the financial stresses of retirement.
Additionally, the NBA and NHL employ an escrow system, created to guarantee that the leagues not exceed their negotiated share of revenue committed to salaries and benefits of players. The leagues automatically deduct 8 to 10 percent of each player’s salary, which is placed in an escrow account to ensure that any overage of league-committed dollars is returned.
The challenge for the unions’ analytics personnel would be to determine how to maximize use of the funds designated for return to individual players in the absence of overage. The 10-year agreement to which they are currently bound then becomes a gift, in that unions have several years for funds to accumulate before they may need to use them. These funds may be sufficient to sustain players during a lockout, and players’ ability to withstand the lockout is incentive for the leagues to stop using it against them.
Charles Grantham is the former executive director of the National Basketball Players Association (1988-95).
NBA responds on salary cap, league revenue issues
This year, Emmert and the NCAA changed the day and format of his press conference; instead of going solo, he was joined by an NCAA steering committee of three presidents and Big 12 Conference Commissioner Bob Bowlsby. A strategic move to provide more voices and a broader perspective? Or was it to mute Emmert? The early reviews suggest the former.
USA Today’s Nancy Armour wrote that the panel was there to “provide cover” for Emmert; the Washington Post’s Liz Clarke wrote that the newcomers speaking “further narrow[ed] Emmert’s window to discuss the important matters” and he “avoided substantial discussion”; the Los Angeles Times’ Chris Dufresne wrote that Emmert “deferred” most questions. Meanwhile, Bowlsby won the press conference. CBSSports.com’s Dennis Dodd wrote that Bowlsby “sounded like the next NCAA president,” and the Fort Worth Star-Telegram’s Gil LeBreton said that Bowlsby “spoke both simply and eloquently” and “sounded downright presidential.” SI’s Pete Thamel wrote Bowlsby answered “every tough question.”
Emmert has become so polarizing that he’s an easy target for criticism. But I don’t see any efforts by the NCAA to undertake a genuine PR plan to alter his image, message or style. Maybe the Executive Committee wants to change the messengers and hence the inclusion of Bowlsby and even Ron Wellman at the end of the men’s championship. I want to see Emmert succeed. I want to see if he can effectively articulate and resolve the tough issues facing him, and if that improves perception of his leadership. Frankly, I doubt it will, because it’s clear that no other sports leader has less capital among the media than he does.
> TIME MAY CHANGE ME: Thumbs up for two progressive, thought-provoking comments about drastic changes to the sports experience — something frequently discussed by business executives, but not often in a public, transparent way. In case you missed it, during the NCAA press conference, Bowlsby raised the idea of shortening some seasons, including college basketball’s, to one semester. He then acknowledged, “Some of our TV partners would be apoplectic to think about such things.” The same day I read ESPN’s Buster Olney quoting a high-ranking MLB executive suggesting that to improve the pace of games and draw more youthful demos, games should be reduced to seven innings. Olney noted the pluses and minuses and concluded: “It’ll never happen.” Bowlsby surely realizes the unliklihood for change, but added,“These are unusual times, and everything ought to be on the table.” Sports are in a good place now, but this new era of today’s ADD society poses a huge challenge to remain relevant.
> IT DON’T COME EASY: I always enjoy hearing from BTIG media and technology analyst Rich Greenfield, who spoke earlier this month at the Ad Age Digital Conference in New York City. He outlined the threats to the future of TV, from becoming a passive experience to just another app in our arsenal. Among his top points: Attention content creators, you are not just competing against what’s on that night but against some of the most impressive programming in history on-demand. In addition, he laid out the day where the “unboxing” of the cable box makes TV “just another app” and one unburdened by channel position. That hit me because in Charlotte, my provider, Time Warner Cable, just did a major channel repositioning that has frustrated this old-school viewer who must relearn where to find favorites like HBO, Showtime, cooking channels and the bevy of sports networks.
Greenfield asked why cable fails to adopt user-friendly features of over-the-top services, like letting you search alphabetically instead of numerically, saying it would be easier to look for “ESPN” than finding where it moved from 300 to 410 on your grid. Who wouldn’t want a rich meta-search available where channel positions won’t matter?
When it came to cord-cutters or cord-nevers, Greenfield predicted only a slow, secular decline of multichannel subscribers. But he did warn that cord-nevers leaving college now won’t ever evolve into paid TV subs. He was bullish on some over-the-top business models, where Glenn Beck’s “The Blaze” has roughly 400,000 subscribers paying $10 a month, which he said “are much better than his previous TV deals.” Greenfield added, “The math works, you can make a real business.” He is also watching uptake on the new over-the-top service from WWE, which last week said that in less than 50 days it had nearly 670,000 subs paying $9.99 a month. He had some caution on the retail-style business. “Where we are seeing this is on the fringes,” he concluded. “My question is when are we going to see mainstream and traditional content — an artist or a group of artists — go directly to the consumer.” Something to watch with the launches of 120Sports and NFL Now.
> WE’VE GOTTA GET OUT OF THIS PLACE: One of the more engaging speakers I’ve heard recently was Kimberly-Clark CMO Clive Sirkin, a former ad executive from Leo Burnett who has been at KC since 2007. He has a humble style and opened his talk by apologizing to the people he would be insulting during his presentation — and mea culpas always get my attention. In a cool, likable manner, he challenged all marketers not to be seduced by traditional TV advertising, stating “change has happened.”
“Why won’t intelligent people let go?” he asked. “The thought that change equals more risk is a flawed assumption. We need the brand builders of today to move forward. Where you are currently is more risky than moving forward. Investment in the status quo today is massive. We can no longer invest in the status quo.”
Sirkin called for brands and agencies to “kill focus groups today,” which drew cheers. He expressed frustration over today’s “digital ninjas,” who speak in marketing languages that make it harder to get things done and results in silos. “Can’t we just kill the term digital marketing? And content marketing and CRM marketing?” he said. “Because each time something new comes along, we feel we have to go create some new silo and then we separate everything. All we’re doing is separating, and you’re going to have less impact and then you are eventually going to drive it away. We need to converge everything and aggregate!”
His sign-off on today’s new marketplace was strong: “We all know the building is burning down. But we’re standing at the edge and refusing to jump. Don’t be afraid to let go. Jump. It’s going to be OK.”
> GOING THE DISTANCE: I caught “Rocky” the musical on a Tuesday night at the Winter Garden Theatre on Broadway. Musicals can challenge my attention span, but overall, I enjoyed it and found it well-done. I was surprised how much it stuck to the original script from the 1976 film. I loved how much energy there was in the audience. As soon as the first riff from the Bill Conti score opened the show, the crowd was loud and into it. They clapped and cheered when Rocky drank raw eggs and when he started training to “Eye of the Tiger.” The stage sets were incredible; moving the boxing ring out into the front of the audience for the final bout was remarkably innovative. I also found the visual imagery on the stage screens of Rocky training, sparring and running to be cool enhancements. The show had about three songs too many for my taste, the overall tone was more schmaltzy than the original, darker movie and it surprisingly didn’t use enough of the original Conti score that is so inspiring. But for sports-themed shows on Broadway, it’s worth a look. I never would have thought the 1976 movie would be relevant as a Broadway musical almost 40 years later, so there’s something to be said for that.
> A TIP OF THE HAT: Congratulations to the entire editorial staff of SportsBusiness Journal for once again being honored by the Society of Business Editors and Writers in its annual “Best in Business” competition. SBJ was a top-three finalist in both the General Excellence category as well as in Feature Writing for senior writer Bill King’s profile of 2013 Lifetime Achievement Award winner Jerry Reinsdorf. This is the ninth year in a row that SBJ has been recognized in SABEW’s “Best in Business” contest, with four of those years being honored in General Excellence. We take particular pride in the judges’ comments in the General Excellence category, which singled out everything from our coverage of the launch of Fox Sports 1, to the detail we bring to sports sponsorship, to our take on the security ramifications following the Boston Marathon bombing. In short, the judges said: “Thank goodness someone is keeping an eye on the business of sports. … Thank goodness for [SportsBusiness Journal].” The entire edit staff deserves all the credit for working hard to bring you quality coverage week in and week out; we’re honored to do it and appreciate the recognition.
Abraham D. Madkour can be reached at firstname.lastname@example.org.