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Volume 21 No. 34
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Strength in numbers

As business-side analytics evolve, are teams sufficiently staffed to profit from the data?

Amy Brooks, the NBA’s executive vice president of team marketing and business operations, remembers a short five years ago when teams in the league had an average of just one person on staff working on business analytics and intelligence.

Now, that average number is five, and is expected to reach double digits in short order. And as the head counts of people working in this area increase, so too does the seniority and experience levels and the diversity of capabilities. Already, one-third of NBA teams have someone in business analytics at a vice president level or higher. Two-thirds have someone reporting directly to a C-level executive, as opposed to tucking analytics within a marketing or sales department.

Many data and analytics personnel are still part of the team’s ticketing department.
Photo by: GETTY IMAGES
“There has certainly been an accelerating investment, both in people and in systems and data warehouses, in using data to drive decisions across an entire organization,” Brooks said. “It’s certainly gone way beyond ticketing, where a lot of this started in sports, into analytics of all types of sponsorships, food and beverage, merchandise, media consumption, really everything now.”

Other major sports tell a somewhat similar story in terms of staffing around business analytics (see directory). But as the entire sports industry races to better understand its fans and more accurately predict their wants and needs, many executives still believe most teams are not sufficiently equipped in their staffing and leadership structure to handle the task properly. And because of that, a sizable shift is coming not only in what teams and leagues are doing in analytics, but how they are organized and led.

“I still think our industry is not investing what it needs to into business intelligence,” said Len Perna, chief executive of Turnkey Sports & Entertainment. Perna’s firm does executive searches and has performed numerous analytics-related placements. It also has a business intelligence operation, and Perna has lost several of his own staffers to teams and leagues as they build up analytics operations.

“I’m still talking to teams who have a basic [customer relationship management] system, and think they’re doing real business intelligence, and they’re not. This has really evolved to where there is a need for teams to have a truly significant in-house operation, and in a lot of cases, we’re still not there yet,” Perna said.

First Look podcast, with analytics discussion beginning at the 7:18 mark:

Many leaders in the emerging world of sports business analytics also see a sharp division around the industry in the level of sophistication and aptitude among those already using business analytics, as well as an overemphasis on ticketing at the expense of more deeply studying other lines of revenue.

Some entities, such as New England Patriots and Revolution parent Kraft Sports Group, have become sophisticated and opportunistic enough to spin off their own business analytics capabilities to aid outside entities, as that operation does with its Kraft Analytics Group.

But many others are still lagging behind, and some estimates point to roughly a third of U.S. pro teams having advanced business analytics operations, a third with passable functions, and a third with little to no internal capabilities in this area.

“There’s still a lot of crawl-walk-run going on out in the market,” said David Melnick, chief executive of Fan Manager, a Boston-based marketing analytics firm that works with teams in every major U.S. pro sport. “You can’t start running until you’ve already crawled and walked first. We’ve definitely seen more happening in this space of late, but a lot more hard work is still needed.”

Some of the impediments are simply ones of priorities and resources, and a team committing sufficient capital behind business analytics. In most cases, building a data warehouse and hiring several people for an analytics group requires a minimum seven-figure commitment to start, and continued personnel and capital expense investments beyond that. Some teams have also chosen to focus the bulk of their energies thus far in analytics to team operations, particularly trying to solve long-nagging problems around player injury prevention.

But there are also challenges in substantively applying elements of hard-core data science into what has historically been an emotionally charged and relationship-driven business built more from traditional sales cultures.

“The sports industry, I think, still may not know what it doesn’t know,” Melnick continued. “Sports is still behind a lot of sectors of American business in this area, certainly financial services, the airlines, even pharmaceuticals. A lot of other sectors are being a lot more aggressive with analytics.”

Building A Staff

On the court, the last half decade has generated a lot of lean times for the Orlando Magic. The team has posted five straight losing seasons, and only one that even reached within 12 games of .500. But off the court, the franchise is widely recognized as a progressive industry thinker, fueled in part by an advanced set of facility operations at the Amway Center. The club also runs one of the largest business analytics teams anywhere in sports, a 15-person crew led by Anthony Perez, Magic executive vice president of strategy.

The stand-alone group handles a wide array of functions, including predictive analysis and digital strategy, interacting with all the other key groups within the Magic organization. It now has several director and manager-level staffers focusing specifically on areas such as mobile, social media, and organizational efficiency.

“The whole goal for us is personalization and automation for the fan,” said Charlie Freeman, Magic chief operating officer and Perez’s boss. “This all started with a database group six or seven years ago. But we’ve continued to invest in this group and expand it, and we consider it critical for the future of our business. And we look a lot now at companies like Amazon, and how they use data and recommendation engines to learn more about their customer and drive additional sales.”

Despite the on-court issues, the Magic has routinely outperformed its record and market size in several core revenue lines. And the team is now using its business analytics directly on new and expanding initiatives such as its Magic Money program that allows season-ticket holders to trade back unused tickets for an array of other goods and services offered by the team.

The Los Angeles Kings, another team recognized for its innovation in the analytics space, can tell a similar story. After having no one in business analytics at the start of this decade, the team hired its first full-time staffer in 2011. It now has a seven-person team led by Aaron LeValley, vice president of digital strategy and analytics, and analytics functions stretch across the entire AEG sports portfolio.

“We’ve been growing at about one person per year in this area, and it’s been a steady pattern of growth I only see accelerating. And when this started, we were looking at business school students, and those kinds of people are still really helpful,” said LeValley, himself holding a master’s in business administration from Arizona State. “But we are now increasingly looking at people who can really get their hands dirty in data and have more of that data science background.”

“A lot of the data out there is still anonymous, such as most of the point-of-sale information, and not identifiable to an individual fan. And that’s why you see a lot of your best teams out there with a devoted business intelligence team of at least five to seven people.”
RUSSELL SCIBETTI
VP, Kore Software
Photo by: GETTY IMAGES
The rise of business analytics in sports also has many teams and leagues looking for people with backgrounds in engineering, applied mathematics, and computer programming, and occasionally a potent combination of all of those tasks, something not always easy to find.

“There’s a lot of specialization happening now, teams beginning to figure out they want very specific types of skills,” Brooks said.

As business analytics staffs continue to grow, the key questions they are addressing frequently center on maximizing facility yields both in terms of attendance and overall revenue, and linking often disparate pieces of data far beyond ticketing into a much larger understanding. Also of interest is identifying risks to revenue, such as a season-ticket holder potentially not renewing, while there is still plenty of time to address those risks.

“Connecting all the different pieces of data into something unified is the biggest issue I see out there,” said Russell Scibetti, vice president with Kore Software. “And every time a team does something new, there’s a new set of data that spins off of that. And the other big challenge is that a lot of the data out there is still anonymous, such as most of the point-of-sale information, and not identifiable to an individual fan. And that’s why you see a lot of your best teams out there with a devoted business intelligence team of at least five to seven people.”

But as more data science enters the sports industry, there remains a critical need to make key lessons from business analytics easily digestible and actionable for time-strapped senior executives.

“We have rather complex reports that we generate, and there are soft costs involved in terms of time spent reading those. So we’ve looked hard at not only using analytics to make our business more efficient, but making that knowledge itself more consumable,” LeValley said. “You don’t want to get lost in another dashboard of data.”

Adds Adam Grossman, chief executive and founder of Chicago-based Block Six Analytics, “As we’ve seen this explosion of data and analytics, communication skills are actually now more important than ever. Owners and team presidents want to know directly the bottom-line impact of what the analytics group is learning.”

Freeman, one of those time-strapped senior executives, couldn’t agree more.

“Being able to take bite-size chunks of data and act upon them is key,” he said. “But this is where we see that combination of improving the fan experience while also optimizing the business.”