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Volume 21 No. 1

Opinion

We held our inaugural esports Rising conference earlier this month, which extends our coverage into this growing area. Two years ago, our CEO pushed me to cover this space and we assigned it to staff writer Ben Fischer, who has done a great job breaking news and making sense of the complicated segment. Last month, we announced our investment in The Esports Observer, a first mover out of Germany, and the conference further demonstrates our commitment to covering the people and issues around esports. The energy in the room for the one-day event was palpable and significant; but the day’s panels raised some complicated issues that traditional sports business executives will have to address as they court esports. My takeaways: First, even though deals have developed rapidly in 2017, investors still see it as an easy time to plant a flag for reasonable cost and little downside. Second, it has not been as easy for traditional sports properties to build the synergies or understanding between their organization and their new esports brethren as they had hoped. Third, interest from the non-endemic brand side is real but they still want more successful case studies to review and organizational structure in place. But here’s what really stood out to me: A panel of gamers and event organizers on college campuses, ranging in age from 19 to 33, offered up a few clear, concerning messages. First, they expressed real anxiety over the bullying that exists among the largely male demo toward females (in fact, it was hard to find a woman to sit on the panel). That aggressive culture and lack of acceptance to female players or fans is a real risk to future growth of the business. Why would any brand be excited about spending money in a space that doesn’t foster tolerance? Also, these young fans were adamant: esports can’t become corporatized or just like the traditional sport business. But it shouldn’t be lost that they said that while speaking to an audience largely made up of executives across U.S. pro sports looking to bring modern-day sports business principles to esports. So, something will have to give there. On a side note, my personal takeaway is that I need to get to a live event — the consensus was the live event changes one’s perception of the viability of esports. Let me know if you have one on your calendar that’s worth experiencing.

For more coverage of the business of esports, visit our partners, esportsobserver.com.

‘YOU’RE AN IDIOT’: I’ve listened to a number of great speakers recently, but one that really stood out was Jeff Ma, Twitter vice president of analytics and data science. Long known as a pioneer on data and analytics, Ma was a great one-on-one subject at our Sports Media & Technology Conference. Frank, smart, insightful, funny and self-effacing. His chilling quote to me came when he called out organizations that choose to ignore data and analytics in their business. “You’re going to lose, and you’re an idiot.” If that doesn’t drive one to act, what will?

Have a fantastic Thanksgiving; hope to see you at our inaugural Dealmakers conference on Nov. 29 or Intercollegiate Athletics Forum on Dec. 6-7; both have very strong agendas with thought leaders you’ll want to hear from. Please say hi if you’re able to join us.

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

I n fall 2015, David Price, a 30-year-old free agent, signed a seven-year contract with the Boston Red Sox worth $217 million. Less than a week later, Zack Greinke, a 32-year-old free agent, signed a six-year contract with the Arizona Diamondbacks worth $206 million. Despite the size of these contracts, their significance is noteworthy for another reason: Free agency in Major League Baseball is antiquated and serves as a restraint on trade.

Under the current CBA, which was ratified in December 2016, free agents are paid for past performance, rather than their future production. In essence, age is the fundamental inefficiency of MLB’s labor market. A glance at the list of free agents in any offseason demonstrates that most players have either reached or are exiting their physical prime. Take the 2016 offseason, for example. During that late fall and early winter, only four players — Aroldis Chapman, Dexter Fowler, Kenley Jansen and Ian Desmond — signed contracts in excess of four years. All of those players were age 29 or older.

Baseball’s free-agency inefficiency is a consequence of the structure that the players and the owners originally agreed to in 1976 when they ratified their first CBA. Under that system, the players traded six years of major league service time for unrestricted free agency. The current market efficiency is for teams to sign younger players beyond their six years of team control below market value. This framework is similar to the way the reserve clause used to work — a system in which the owners restrained employment mobility for nearly a century by having the unilateral option to renew a player’s contract into the next season. Simply put, despite being well compensated, the current trend in MLB is that players are still bound to their team until their value has peaked.

Contracts for players such as Greinke (left) and Price can potentially cripple a team’s finances.
Photos by: GETTY IMAGES

The present labor model is indisputably flawed. It reflects how teams are assessing the risk of players’ performance. Teams now gamble on young players’ future performance by signing them to long-term extensions below market value. But as even proven players’ performance peaks, over time they reach an inevitable point of decline. But at that point, teams are overpaying for a declining player. This shift in market value demonstrates that free agency is outdated. The owners and MLBPA should acknowledge that fact and should look into starting free agency sooner.

Such a system would place the burden on the owners to invest their money back into the labor market and give the players greater opportunity to choose their employer and bargain for their compensation. Additionally, allowing players to reach free agency earlier will alleviate the crippling effects of mega-contracts to players like Price and Greinke whose performance has already declined since they were free agents just two years ago. If a player reaches free agency at, say, 27 or 28 — instead of 29 or 30 like they do now — it will lead to a higher probability that fewer years will count as sunk costs where the player cannot perform as well because of his declining physical ability.

Early free agency would formalize the logical idea of labor costs rising or declining according to its value. This is essential in an industry where age matters a great deal. The present system distorts the market by suppressing labor costs initially and only giving players effectively one shot at a significant contract.

Noah Goodman is an associate in the Philadelphia office at Ballard Spahr.

During a recent professional development trip with my graduate students to a leading sport sponsorship consulting agency, we were shown a number of case studies of promotions that included athlete endorsers and “influencers” using social media. All the social media posts we were shown complied with the Federal Trade Commission’s requirements under its “Guides Concerning the Use of Endorsements and Testimonials in Advertising.” Several weeks later, I was speaking with the marketing director of a major sports apparel brand and when I inquired about their social media endorser disclosure practices, was told it’s “confidential.” So, perhaps, it’s still not that simple.

In a nutshell, the FTC Guides require that if a “material connection” exists between a brand and an endorser/influencer that could affect the weight or credibility that consumers give the endorsement, the brand and the endorser/influencer must disclose that connection. A material connection typically includes cash payments or a cache of free products.

Candidly, in visiting the agency, I was surprised not only to actually see the disclosures — such as #[Brand]Influencer and #[Brand]Partner — but also by the level of knowledge of all the agency representatives in the room with regard not only to the FTC Guides, but also the best practices in “disclosing” the material relationship between their client brand and their endorsers. Having previously written on the issue of athlete endorser/influencer compliance with the FTC’s regulations — and having found largely concerns over non-compliance — I was very surprised to see just how diligently this agency was following the rules … and yet not surprised to hear another major apparel marketer invoke the Fifth Amendment on how they handle it.

Because, apparently, a lot of brands, advertising agencies and athletes continue, whether knowingly or not, to disregard or misunderstand the rules. As a result, the FTC, following a survey of Instagram posts by celebrities, athletes and other influencers, recently mailed out over 90 letters to brands and agencies reminding them of their rules requiring clear and conspicuous disclosures of material connections.

For instance, the FTC pointed out that consumers viewing Instagram posts on mobile devices typically see only the first three lines of a post unless they click on the “more” button, which many consumers may not do. The agency therefore advised influencers to disclose any material connection to the product or brand above the “more” button. This direction adds to the clarity offered by last year’s settlement of a Warner Brothers case, in which the FTC held that disclosures “below the fold” in YouTube video descriptions were inadequately conspicuous.

The FTC additionally noted that consumers may not bother reading a long string of hashtags, tags or links at the end of a post, so placing a disclosure in that string would not be considered “conspicuous” as required by the agency’s guidelines. The agency also explained that some tags or hashtags that were intended to serve as a disclosure weren’t clear enough, since many consumers probably won’t understand disclosures meant to indicate the post was sponsored, such as #influencer, #partner, #sp or #Thanks[Brand].”

In response to the FTC’s wave of letters, in July Instagram rolled out a new feature allowing influential users to add a new subheading to posts that reads “Paid partnership with …” It is designed to help users clearly and conspicuously tag the brand that sponsors a post. This tool is designed to streamline compliance with FTC disclosure requirements and bring more transparency to the platform. This new tool removes endorser discretion by providing on clear, conspicuous and standardized form of disclosure.

The FTC’s compliance suggestions, as posted in its blog, provide valuable advice for brands, athlete endorsers and hired influencers seeking to stay on the right side of the law. Although specific to Instagram posts, the general concepts apply to all social media posts:

Keep disclosures clear and unambiguous. Avoid using vague hashtags or tags to highlight material connections. “There’s no one-size-fits-all way to make that disclosure, but an unfamiliar abbreviation or cryptic word subject to multiple interpretations probably won’t do the trick,” the FTC notes.

Make disclosures hard to miss. What you say and where you say it matters, but so does how it looks. Be aware that disclosures may not appear the same way on different devices.

Avoid posting disclosures in a mish-mash of hashtags at the end of the post.

In sum, brands today are paying athletes as much for their followers as for their faces. As just one glaring example, according to Hookit, over a one-year period ending June 2016, Cristiano Ronaldo generated $176 million for his sponsors for the mentions and hashtags in his social media posts. That’s a lot of “influencing” going on! And they’re paying influencers to, well, influence.

Consumers, however, need to know that boasts about the brand are being bought. The FTC’s latest flurry of warning letters sends yet another flare to the industry.

WARNING No. 1: The failure to disclose material connections remains a major enforcement priority for the FTC’s Bureau of Consumer Protection;

WARNING No. 2: The responsibility to provide clear and conspicuous disclosures does not fall only on brands but also on influencers and athlete endorsers within the social media ecosystem. To athlete endorsers, influencers and the companies who use them, the message is clear: Continue to post at your own peril!

WARNING No. 3: BuzzFeed News now publishes a regular column titled “Is This An Ad?” that calls out ambiguous social media posts to determine if, in essence, the company and the poster have violated the FTC Guides.

In other words, people are watching! The bottom line: Although the FTC’s requirements for advertising to be “truthful and non-deceptive” have not changed, the mechanisms available by which companies and marketers can meet these requirements continue to evolve. #StayTuned

Steve McKelvey is associate department chair for external relations, and associate professor of sport management at the Isenberg School of Management at the University of Massachusetts.


In the 78 years since NBC’s pioneering broadcast of the October 1939 match between the Philadelphia Eagles and the then-football Brooklyn Dodgers, we’ve seen some amazing developments in sports viewing, from the revolution of color TV to watching local teams battle around the globe on our mobile phones.

In the video industry, sports aren’t just the most lucrative source of content — they’re also a clear indicator of viewing trends and engagement. And given the dramatic shifts we’ve seen lately in sports broadcasting, I have to wonder what watching “Sunday Night Football” might look like in 10 years’ time — and what technology will drive it.

So, what might the next 10 years have in store for NFL fans across the country, and the world?

Real-time fantasy leagues: In 2027, integrated fantasy football leagues could come with your sports package, and you might expect sponsored pop-ups and overlays providing data in real-time, pregame, in-game and postgame. Think Nike, Coke or Pepsi sponsoring a trade window during the game so you can dump your under-performing QB at the end of the quarter and activate the next Peyton Manning. Your personalized up-to-date stats can come with personalized ads, and long commercial breaks might give way to on-screen overlays, shortening game time — a win-win for viewers, brands and the NFL.

Many fields, many devices: Forget the days of watching football games on your “TV”; NFL games in 2027 will be consumed on every video-enabled device. Watch your home team on your laptop while you get video highlights from the other teams and players on your phone. Your phone’s touch screen will allow you to access viewer-controlled cameras for the best angles, allowing you and other eagle-eyed fans to hover over the goal line. We’re also seeing younger generations gravitate increasingly to live streams of games. In 10 years this trend will broaden to all generations watching multiple live streams of games in multiple markets simultaneously. Allowing fans to be the director, choosing their views from whatever game(s) they want will allow streaming providers and operators to assemble tiered, a la carte packages — a win-win for the NFL, and for broadcasters who adapt.

Pizza, beer and money: Content monetization will evolve with new ad placements, hybrid business models, and even crowdsourcing. Immersive, interactive and data-driven offerings are increasing fan engagement and ultimately expanding revenue for sports franchises. Customers could tap on their favorite player mid-game and shop for that player’s jersey; broadcasters can team with food-delivery services, helping fans get their favorite game-day snacks delivered to their door. And with more data than ever, the NFL in 2027 gets the right ads to the right consumers, expanding its monetization opportunities — a win-win for NFL, distributors and local businesses.

Artificial Intelligence delivers meaningful content to the right consumer: Fed up with seeing your least favorite player endorse products and ads for stuff you will never buy during the game? Artificial intelligence will enable media providers to recognize not only the faces of players but also match the teams and players you support with the product categories you prefer. You’ll be served unique ads tailored to your preferences. Bolstered by an integrated and intelligent video production system, NFL broadcasters can get content to consumers faster than ever, with the right highlights sent to their partners around the globe, as soon as it happens. The name of this game is engagement — and if the NFL plays it smart, they’ll win big.

AR/VR will put you in the game: Pity the poor NFL fan who can’t see the local game due to a broadcast blackout because enough tickets weren’t sold. No, he won’t have to illegally stream an out-of-market signal. Instead, the NFL will offer a customized service, for an additional fee of course, taking viewers into the action. Pro football has enriched video game manufacturers but the idea of really being “in” a pro game could be even more lucrative. Imagine seeing yourself, thanks to VR goggles, running down the sidelines, or wearing a haptic suit and actually “feeling” some of the action, or listening in on the coach’s box while plays are called. Winners here include game companies, equipment companies, broadcasters and the NFL, poised to reap expanded rights. In other words, fans and business alike can enjoy an adrenaline rush.

These predictions may cross the goal line by 2027 or be far out of bounds, and only time will tell. No matter what the future looks like, the technology is already there for sports broadcasters and producers to revolutionize how fans view and engage with football.

Jim O’Neill, principal analyst at Ooyala and editor of Videomind, is an award-winning industry expert and futurist who specializes in the convergence of traditional TV and the Internet.