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Volume 20 No. 46

Leagues and Governing Bodies

After a season that saw television viewership drop by double digits, the NFL is looking at changing the advertising inventory around NFL games as one way to guarantee a rebound. The league is considering everything from rolling out fewer pods to using a play clock after touchdowns, which would limit those post-TD advertising breaks.

While the NFL describes those plans as preliminary and admits there’s no consensus yet to roll something out in the fall, league executives are much more definitive about “Thursday Night Football.” While some sponsors and media executives complain that the Thursday package is oversaturating the market, NFL executives say they have no plans to take games out of that package.

The idea that created the most buzz in Houston dealt with an idea to reformat the commercials. During Week 16 last season, several TV networks tested a system that used four longer commercial pods per quarter, rather than five shorter ones. Results from those tests are mixed. NFL executives believe that fewer commercial pods will improve the continuity of the games and keep viewers tuned into the games longer.

“This is not about taking inventory out,” said Hans Schroeder, the NFL’s senior vice president of media strategy, business development and revenue. “It’s about reformatting the game flow and the break flow for commercials to be better tailored to the game today. We know the game flow, rhythm and speed have a different pace and cadence from the past 20 years, which is why we are looking into how we tailor the ads and the breaks.”

Any changes would keep the same number of in-game ads, which would not affect rights fees that networks pay to the leagues.

Initial reaction from TV executives amounted to little more than a shrug. Most network executives contacted for this story do not believe the number of commercial pods had any effect on TV ratings last season. After all, the networks have been producing games with the same number of commercial pods for many seasons, several of which set viewership records.

TV executives maintain that the Week 16 results using four commercial pods per quarter were inconclusive.

“I don’t know that there’s conclusive evidence one way or another based on one week’s data that suggests that it’s a better or worse environment for the advertisers or the viewers,” said Dan Lovinger, executive vice president of advertising sales for NBC Sports Group. “But we’re preparing ourselves for any possibility. We’ve told the NFL that we’re evaluating it in case they decide that it’s something they want to continue.”

Limiting post-TD ad breaks is one area being studied.

The NFL said it has been studying shorter ad breaks much longer than the Week 16 test. It was conducting tests on the desired length of advertising pods in controlled lab experiments that document eye tracking and sense heart rates.

“One of the big insights we saw was around the number of stoppages and how that’s pretty jarring on the fan,” said Amanda Herald, the NFL’s director of media strategy and business development. “Smoothing that out could have a big impact, and making some small changes can make a big impact in the way fans perceive and experience the game at home and in the stadium.”

News of these kinds of tests were cheered by many sponsorship executives who said they are happy to see the league take TV ratings seriously, even if many of them blamed the overheated presidential election season as the main reason why the NFL’s ratings dropped.

“There were some rough patches this season,” said Phil Pacsi, vice president of sports and events marketing at Bridgestone, an NFL sponsor since 2007. “But we were satisfied enough that viewership turned around post-election that we had no problem making and keeping our commitment to NFL playoff advertising. There were some [regular-season prime-time] matchups that turned out to be questionable, but we’re still big fans of the Thursday night games and that whole concept of extending the NFL weekend.”

For all the angst about declining ratings, not one of the league’s official sponsors reported seeing any diminution in the NFL’s ability to cut through retail clutter.

“NFL fan passion is still high,” said Frito-Lay CMO Jennifer Saenz, citing a 15 percent increase in Pepsi/Fritos NFL retail displays across the country over last year. “We haven’t see any signs that’s decreasing.”

Hyundai CMO Dean Evans agreed, noting that Hyundai’s awareness among NFL fans, and share of search on Google, have increased dramatically over the first two years of its sponsorship.

“The NFL’s still the top sports platform in America, so we remain dedicated,” Evans said. “It’s still helping our brand to transform itself and be more American all the time, which is more important now than ever.”

The one area that is starting to cause concern among both TV network and sponsorship executives deals with the oversaturation of the game — particularly in the newly expanded Thursday night package. As the number of national windows grows, the number of marquee games remains consistent, which has led to several prime-time clunkers.

“Does the NFL have some challenges, like anyone dealing with changes in media consumption? Sure,” said Elizabeth Lindsey, who heads Wasserman’s consulting group, which has a client list of NFL sponsors that includes Nationwide, Pepsi and Microsoft. “Do they need to reconsider how much product is in the market? Maybe. But the sky has not fallen, and it would take a huge dip for me to have any doubts about the NFL’s power as a TV property.”

Or, as NFL sponsorship chief Renie Anderson put it, “We don’t ever take it for granted ever, but our ‘bad day’ is still the best day in sports television.”

The NFL’s Schroeder said the league is not considering shrinking the Thursday night package.

“If you look back over the last six to eight years, people like ‘Thursday Night Football,’” Schroeder said. “The numbers prove it. Having another night of the NFL is a good thing. We’re as committed as ever.”

Sponsors still aren’t so sure about the Thursday package’s future. Nick Kelly, Anheuser-Busch senior director of experiential marketing, sports, wonders if players’ complaints about the games will turn it into a negotiating chip during the next collective-bargaining agreement.

Overall, network and sponsor executives spent Super Bowl week crowing about NFL ratings, even in this down year. Late last year, marketers inside the NFL had identified more than 25 possible reasons for the ratings declines. By the Super Bowl, those footing the bill for NFL media were satisfied that the most contentious presidential election in memory and some noncompetitive prime-time matchups were the principal culprits for the ratings erosion.

“In the fabric of our entire media plan, we feel very good about the reach of the NFL,” said Jen Davis, vice president and general manager of North American feminine care at Procter & Gamble, which had its busiest Super Bowl ever, with three in-game ads and activations from its Secret, Always and Old Spice brands in Houston.

NFL Regular-Season Audience Trend

Average number of viewers (000s) for the past five years.

Network(s) 2016 2015 2014 2013 2012
NBC (“SNF”) 20,323 22,522 21,275 21,747 21,463
Fox 19,434 20,706 20,728 21,200 19,700
CBS 17,671 19,058 18,629 18,700 17,652
NBC/CBS/NFL Net (“TNF”) 12,438 12,425 11,795 7,055 6,352
ESPN (“MNF”) 11,390 12,896 13,349 13,679 12,826

Note: “Thursday Night Football” was NFL Network only in 2012 and 2013.
Source: SportsBusiness Journal research

Super Bowl Audience Trend

The last 10 Super Bowls ranked by average number of viewers

Year Super Bowl Network Average rating Average number of viewers (000s) Matchup
2015 XLIX NBC 47.5 114,442 Patriots-Seahawks
2014 XLVIII Fox 46.7 112,191 Seahawks-Broncos
2016 50 CBS 46.6 111,864 Broncos-Panthers
2012 XLVI NBC 47.0 111,346 Giants-Patriots
2017 LI Fox 45.3 111,300 Patriots-Falcons
2011 XLV Fox 46.0 111,010 Packers-Steelers
2013 XLVII CBS 46.3 108,414 Ravens-49ers
2010 XLIV CBS 45.0 106,476 Saints-Colts
2009 XLIII NBC 42.0 98,732 Steelers-Cardinals
2008 XLII Fox 43.1 97,448 Giants-Patriots

Source: Nielsen Sports

Donald Trump’s presidency, which has already sparked concerns that its international approach could imperil L.A.’s effort to land the Olympics, will not hurt the NFL’s strategy to expand and play games overseas, said Shahid Khan, the Pakistani-born owner of the Jacksonville Jaguars.

Khan, the only Muslim NFL owner, has already expressed opposition to Trump’s controversial refugee and immigrant policy, but he said during Super Bowl week in Houston that the appetite for American culture is strong enough internationally to withstand any political headwinds.

Jaguars owner Shahid Khan and Broncos GM John Elway confer before a December game in Jacksonville.
“People are people. You have political leaders who are elected and, you know, or kicked out of office all the time,” he said. “Look at the iconic American things that are cherished all over the world: blue jeans, rock ’n’ roll, hamburgers or fast food, football, internet connectivity, personal freedom. Those are not going to get less popular because of the change in political climate.”

Football, he added, “is absolutely part of Americana. It’s a virtue, it’s a sport, that isn’t tied to whoever is in political office.”

Khan, perhaps more than any other owner, has a lot riding on the NFL’s global reach. His team plays annually in London, and he is upfront that the single regular-season game is a major element of his team remaining competitive economically.

Asked how the Jacksonville market performs, Khan replied, “For us, OK. But a big part of it is we are playing games in London, and I look for us doing that going forward.”

The team will play one regular-season game a year there through 2020. Asked whether the club might want to play more than one after the agreement with the NFL expires in 2020, he replied, “We have got to look at that.”

“I feel very strongly about this, we want to earn the fans in Jacksonville,” he said. “They don’t have an obligation to support us, They have got a beautiful city, they have other things they can do. This is not a guilt trip, ‘Hey, support us,’ or this is our right, nothing like that.”

Relocation to London is not a consideration, he said. “We know London has been great for us, we want to keep that relationship and keep developing the local market.”

The NFL plans to play five regular-season games outside the U.S. next season, four in London and one in Mexico City.

Khan has owned the team since 2012 and is emerging as a voice in the NFL. He now chairs the business ventures committee and is on the player health and safety committee. The business ventures committee has rejected sponsors that did not align with NFL values under his less than year-old tenure, he said, though he declined to offer details.

Asked about the future of football given the head trauma issue, he replied, “That thing is vastly, I think, overplayed.

“If you look at baseball, soccer, their decline in enrollment is more than football,” he said. “Football with the USA [Football group] and some of the rule changes and training and certifying coaches I think has been very effective.”

Eleven months ago, NFL Commissioner Roger Goodell disclosed his intention to play a regular-season game in China in 2018, likely to open that season. The clock is ticking, and no game has been announced yet.

Reasons include the usual suspects, from government permission to logistics, but another issue is also a big concern: pollution.

Mark Waller, NFL executive vice president of international, said scheduling the game around China’s infamous heavy pollution days is a challenge. The league has not found a solution yet, he said.

Before the 2008 Beijing Olympics, the Chinese government shut down nearby coal plants and seeded clouds, which is unlikely to occur for an NFL game. Other sports have dealt with the issue, including tennis, which has tour stops in the major cities of China. At the 2015 China Open, spectators donned protective breathing masks during matches.

It’s reasonable that the NFL could wait until the May owners meeting to decide on a 2018 game in China, Waller said.

The NBA’s new 2K eLeague will satisfy teams clamoring to jump into the alluring world of esports, but with the vast potential comes questions about the viability of sports simulations as major spectator properties.

The 2K eLeague, announced last week, will start with numerous advantages and opportunities when it launches in early 2018 with at least half of the NBA’s 30 teams expected to field teams. The new league undoubtedly will benefit from the NBA’s marketing muscle and branding meant to replicate real-life basketball loyalties.

But the “NBA 2K” series, while a long-standing NBA partner that’s sold 68 million copies worldwide, is a niche player when it comes to video games with a dedicated base of spectators and elite talents.

The afternoon of the day the league was announced, the top three feeds for “NBA 2K17” on gaming site Twitch totaled 579 viewers. At the same moment, “League of Legends” had 114,810 viewers on its top three feeds, and “Counter-Strike: Global Offensive” had 55,690. Those two titles have drawn most of the headlines for selling out major arenas and drawing investors.

Traditional sports fans and esports fans are complementary, but not overlapping, audiences, experts believe, and some worry that 2K is aimed at the gap between them.

“While I am tentatively excited by NBA teams entering the space, done incorrectly this move has the potential to alienate both traditional sports and esports fans,” said Christopher “MonteCristo” Mykles, founder of the Renegades esports franchise and a widely followed esports broadcaster. “The upshot can be further engagement from a wider fan base, but time will tell whether these actions uphold the authenticity and integrity of the esports world that I cherish.”

The league believes the 2K league will attract fans because of the video game’s strong sales record and the NBA’s global popularity. The most recent release, “NBA 2K17,” has sold 7 million units and is the highest-rated annual sports game in the current console generation. Those sales metrics speak to the growth possibilities of the new league. But as gaming industry veterans know, sales to casual players do not necessarily translate into esports success.

The NBA and “2K” publisher Take-Two Interactive created the venture in response to strong demand from teams wanting to get into esports, following a presentation by NBA Chief Financial Officer Jason Cahilly and Commissioner Adam Silver early last year.

Since then, owners of the Sixers, Heat, Bucks, Grizzlies, Wizards and Warriors have made plays of one variety or another, but there’s a shortage of viable acquisition targets in esports. Creating a league from scratch emerged as a new option.

Compared to buying a stake in an established esports franchise, some of which have been valued at more than $30 million, the risk to joining the 2K league is modest. Membership will require a six-figure buy-in fee, which will offset player salaries and other operational costs.

“It’s great to expand in different ways and it gives people the comfort to enter esports,” said Chris Heck, chief revenue officer of the Philadelphia 76ers, which last year bought and merged two esports franchises. “It is really a safe and easy way for traditional sports teams to get an understanding of esports. It seems like a no-brainer that we would follow that path.”

The Sacramento Kings will be among the initial participants, said team President Chris Granger. “When you look at the growth of the participation and when you think about the dramatic increases in viewership, all of those things lead us to believe that we need to have a place in a game that is authentic to our league,” he said. “The opportunity to tap into a younger, tech-savvy, highly engaged audience is something we find great potential in.”

The Dallas Mavericks also are expected to join the league. “I think it can be a significant business for us,” said owner Mark Cuban.

Venues and the franchises that own them also believe the eLeague can open the door to new arena bookings. Matt Holt, NBA vice president of global partnerships, said they will run regular-season contests in smaller studios and consider primary basketball venues as locations for marquee postseason tournaments or possibly an all-star game.

“Esports deserves our focus in the live event space — the bigger venues, I’m not talking about small theaters,” said John Wentzell, president of Spectra’s facility management and food service groups.

Avi Bhuiyan, executive vice president of esports at Catalyst Sports & Media, believes 2K has an uphill battle for eyeballs compared with more established esports. But because it’s a simulation of one of the world’s most popular real sports, it could quickly lure newcomers.

“‘NBA 2K’ doesn’t have the viewership or player base of a lot of the larger esports,” Bhuiyan said. “That being said, I think from an accessibility perspective you literally couldn’t do any better. It’s literally the digital equivalent of the on-court NBA product, so it makes perfect sense for this to be an entry point for owners who are interested in the space but aren’t sure how to navigate it.”