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Volume 21 No. 26

Opinion

The Larry Nassar story has been one of the most disturbing, yet important, sports business stories of 2018, and the ramifications from it will affect the business for years to come.

I’ve been thinking about what we could have done differently and better in our coverage of the former Michigan State University doctor  and his role at USA Gymnastics. Nassar pleaded guilty to 10 counts of first-degree sexual assault conduct with minors, and was recently sentenced to a maximum of 175 years. While the Indianapolis Star published a lengthy investigation in 2016 into USA Gymnastics’ handling of sexual abuse issues, this story went on for too long without being covered by the mainstream media. I wish we covered it more closely at SportsBusiness Journal and I wish I had better intuition into how big the scandal really was.

When the story first broke in August 2016, around the Rio Games, we covered it in SportsBusiness Daily, but didn’t put resources against it. I had seen instances like this — USA Swimming had similar issues — but it didn’t dramatically impact its business.  Even into 2017, the controversy around USA Gymnastics didn’t have business implications — no major sponsors dropped their affiliation and no media partners changed course.  I mistakenly thought this was not a business story. We reported former CEO Steve Penny’s resignation in March 2017, and I sensed the story would end there.  There was no comment from corporate partners that they were dropping USA Gymnastics or indications of other business fallout. Only Pennsylvania-based International Gymnastics Camp ended its deal with USA Gymnastics a week before Penny’s departure, becoming the first to cut ties amid the scandal.  

It wasn’t until late 2017 that I saw the story becoming more prominent. But we still didn’t put enough resources on the story to effect change — we were too far behind.  Kudos to the news organizations that did, including the Indy Star, Orange County Register and ESPN’s “Outside The Lines,” among others. Why didn’t it get more media coverage? In a review of the issue on SI.com by the people who did cover it, they said it was seen as a “local” story or because it was about girls and gymnastics. It was also an uncomfortable story. 

In retrospect, we should have done far more. We should have done more on Penny’s tenure. We could have even taken a broader look at sexual abuse in youth sports and looked into what the USOC and governing bodies were doing to eliminate it. We could have tried harder to report on the pressure business partners or USA Gymnastic’s membership were putting on the NGB to implement a real change in culture. Certainly the #MeToo movement has amplified any mistreatment of women in such a way that media is putting extra attention on the issue and women are more empowered to talk about what’s happened in the past. But this went on for far too long without being covered; perhaps many assumed it wouldn’t get bigger than the initial reports. I know I missed this, and we didn’t recognize the scale and importance of this story as it developed.  I hope I’m smarter never to make the same mistakes again.

HUNT-ING LESSONS: It was really enjoyable to facilitate a discussion with Hunt Sports Group’s Clark and Dan Hunt at the National Sports Forum in Frisco, Texas, earlier this month.  The brothers, 11 years apart, deftly played off each other as they talked about lessons from their father, Lamar, their ownership philosophy and stories they are watching in the future.  It was a mix of a history lesson and present-day challenges. Among lessons from their father: Be mindful of people and treat them with respect; think about the sports business through the prism of the fan and the business will be successful; take care of your stadium and it will take care of you; sports teams don’t run themselves, you have to be there to run them every day and have to be present. Dan Hunt’s advice for young people looking to get into sports business: Take a job in sales, even if you don’t like sales, because it will pay off. Finally, the best note of all: Their mother Norma, 79, has been to all 52 Super Bowls, the only woman to take in every title game. As you can imagine, it was a fun discussion.

CASE CUP COMPETITION: On a cold Sunday in Frisco, Texas, it was good to be inside and talk about golf. That’s what I did as a judge in the 12th annual National Sports Forum Case Cup Competition, as 12 graduate programs in sports management were tasked to create a marketing campaign focused on increasing millennial engagement with the PGA Tour — from event attendance to social media and viewership. Teams had 24 hours to prepare a 20-minute presentation for a panel of judges. It was a good case focusing on an issue all sports organizations are wrestling with, and the students did a fantastic job offering solutions. It’s encouraging to see the smarts and sophistication of the next generation of sports leaders.

Here’s what I noticed: Segmentation was the biggest challenge for the teams, as the 18-to-34 demo is so broad and made up of so many different lifestyles, that applying one “fix” to the 16-year age range is too simplistic, and teams struggled with varying their offerings.

It was fun to see how bold the students would go: One rebranded the PGA Tour logo, changing to a black and white chromatic look (even when they weren’t tasked with such a brazen makeover). One suggested rebuilding the PGA Tour app, as there are currently three separate apps — PGA Tour, PGA Tour Live and PGA Tour Fantasy — that could be melded into one. One team argued for an easier purchasing experience, and noted it took 11 clicks on the app before a fan could purchase a ticket for a PGA Tour event. Many suggested that the PGA Tour lighten up — from content along the lines of the irreverent European Tour’s The Awkward Reporter, to filmmaker Erik Anders Lang, who looks for offbeat, intriguing stories on Skratch TV. One suggested “Caddie Cams” while another created a gaming series with EA Sports for esports competitions before tour events to drive youth attendance.

One of my favorite ideas was to create a social media challenge, like the Ice Bucket Challenge, around the fantastic Golf Boys video a few years ago. GolfBoyz/GolfGalz could be a PGA Tour-owned viral sensation showing people having fun playing the game. Finally, many touted cross-promotional efforts with Topgolf to boost attendance and interest. The Topgolf connection is an interesting quandary for the PGA Tour. Topgolf is a social hit, and one of the most innovative elements introduced around the game in the past 20 years. Some locations see up to two-hour waits or more. But I’m told that data shows the Topgolf participant is not the traditional PGA Tour fan — serious golfers aren’t Topgolf’s customer base. The challenge will be converting Topgolf attendees — socially driven and less golf avid — to PGA Tour fans when there may be little crossover.  Keep an eye on how that relationship develops. 

The winner was the University of Oregon, and the four-person team offered a polished presentation that suggested a bold relationship with T-Mobile around PGA Tour Live, a deep integration around endemic golf podcasts like No Laying Up, The Clubhouse with Shane Bacon and Shack House, as well as developing a deep social content series and on-site event strategy.

Overall, all the presentations stressed making golf suitable for everyone, and one line caught my eye: “Golf needs to chill.” I’m not sure “golf needs to chill” — it’s going through a significant overhaul with progressive new leadership and dynamic young players. But it shows the uphill lie the PGA Tour faces in making the game more appealing to young people.

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

Attendance at movie theaters fell 6 percent in 2017, and the majority of baseball games were played to less than 70 percent of capacity, indicating a significant number of empty seats. As sport and entertainment venues try to capitalize on the attention and wallets of millennials, the monthly pass has become en vogue for both entertainment and sports — primarily baseball. While it looks like some easy return on empty seats, that might not tell the entire story.

Both movie theaters and baseball stadiums are trying to fill a lot of inventory: 365 dates for movie theaters and 81 dates for baseball teams — thus selling a monthly pass enabling the buyer to attend all or a significant portion of the monthly dates. Most baseball teams do not include Opening Day or some key series that usually sell out. The teams (and theaters) are subscribing to the adage that the most expensive seat in the house is an empty seat — a position I have long advocated — but the pass concept has made me reconsider my position. In part, the pass programs rely on traditional subscription economics: More people pay than actually attend, thus there is money commonly referred to as “breakage.” There are little to no costs associated with breakage (not attending), the profit for the games not attended is 100 percent, and that looks pretty good considering it was an empty seat. 

Why will it work? Because millennials are familiar with subscription services through Netflix, Hulu, Amazon Prime and so forth. This concept for both baseball and the movies is right in line with that. The pass program doesn’t guarantee a seat location or in some cases even a seat. The St. Louis Cardinals pass is standing room only but “the Cardinals Ballpark Pass gives our fans another flexible and affordable option to take in a Cardinals game at their leisure,” said Joe Strohm, vice president of ticket sales. “We believe this ticket subscription service is a perfect fit for millennials and young professionals that may be a bit more spontaneous in planning their visits to Busch Stadium.”

The Cardinals, already with high attendance, use the pass for standing-room-only tickets.
Photo: getty images

What are the objectives in offering such a subscription plan? 

1. Moving the millennials from the couch to the venue and experiencing the event live and with other people. Also, being exposed to the technology and entertainment aspects of the venues — and did I mention food and beverage? Those sales alone could make the pass an excellent investment in both baseball stadiums and theaters such as Studio Movie Grill, which offers in-seat dining services.

2. Spontaneity (not having to plan) can go as the spirit or friends or whatever moves them. In reality, the plan is the ultimate flex plan without having to choose games or price categories. 

3. Create repeat attenders. It is hoped that the consumer finds the experience worth repeating and worth sharing with others and worth recommending on social media.

Are there any risks?

I see several risks for the baseball teams and very few for the movie theaters. Movie theaters don’t offer a variety of pricing options on seats, so the goal is merely to increase frequency of attending and hopefully spending more on food and beverage. The same could be true for baseball, except that there are seating locations that are part of ticket plans and are significantly more expensive than the games offered through the mobile pass program. So much so that you can actually be selling against yourself and alienating your current traditional subscription base, especially if pass holders are moving around to various locations not comparable to what they paid.

For example, last year the Oakland A’s offered a mobile pass for $19.99 per month for games June through September. In June there were 15 games, making the actual cost per game $1.33. A visit to the Oakland A’s website would tell you that the monthly pass is usually cheaper than one single-game ticket. If I’m not guaranteed a specific seat but I’m only paying $1.33 for the same game that everyone else is watching it might be difficult to convince me that I need a guaranteed seat. I know that isn’t the case in the A’s current home and hopefully it will be the case in a new ballpark at some point in the future.

With the movie theater pass, the seat is guaranteed while with baseball it isn’t, but the size of the baseball stadium makes the likelihood of having a seat almost a certainty. The movie theater takes something that you are probably already doing in the comfort of your home and encourages you do it in a theater with upscale food and beverage and technological advances in sight and sound as well as the size of the picture. If two people each having the pass attend one movie in a month the net effect is a BOGO, the more they attend the better the deal. Perhaps they are coming and bringing others with them. The value in the opportunity to collect user profiles and behavioral data can never be underestimated and is at the core of these offerings as well.

But let’s get back to baseball, which can also take advantage of the food and beverage sales and the database-building opportunities. I like the Cardinals’ model because they have very high attendance to begin with, the ticket is SRO and it is also being used to promote auxiliary entertainment spaces as well. I am supportive of the A’s concept but not at $1.33 per game even in their overly large ballpark. So my advice would be that if you are selling a monthly pass and hoping at some point to move these new buyers into some type of guaranteed seats ticket plan, the gap between the average cost per game and the lowest available guaranteed seat location can’t resemble the Grand Canyon. Perhaps an adjustment is made in the monthly cost or there is a limit placed on the number of games — maybe up to 10 games per month for $39 — or less than $4 per game.

On the other hand, maybe it isn’t seats we should be focusing on, but space. More in March on this topic.

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_ImpactU.

For decades, the University of Houston hosted Cougars fans in Robertson Stadium. Built in 1942, the 32,000-seat stadium served UH well for years. In 2010, UH decided it wanted something more — something to energize its fans, serve as an impressive campus edge feature, and bring in significant revenue. Fans also wanted more — a game-day experience. The answer arrived in the form of TDECU Stadium, which opened in 2014.

TDECU Stadium has 40,000 seats, and on game day, the stadium is packed. In fact, the stadium has sold out of its premium seating offerings since opening. It’s not hard to understand the excitement; the award-winning stadium features Houston skyline views, one of college football’s largest scoreboards, 160 concession points of sale, a 5,000-square-foot home locker room, and more. Fans also have multiple choices for premium seating: suites, loge boxes, club seats, suite decks, and open-air party decks. 

The school also uses the stadium “to provide a gathering point for school pride, along with a new venue for commencement,” said David Bassity, UH’s senior associate athletic director for strategic communications and digital media. “Since opening, the facility has seen the Houston football program win a conference championship, No. 3 Louisville and Heisman Trophy winner Lamar Jackson taken down on a national TV broadcast, and commencement speeches from Matthew McConaughey and Arnold Schwarzenegger. In addition, TDECU Stadium has hosted high school football playoff games.”

Spurred by this success, UH’s athletics program has entered a period of striking growth. Multiple other projects are now underway, each bringing in revenue and bolstering excitement around the Cougars. 

How did all of this happen? This article explores one facet of the effort: A premium-seating program taken on in coordination with a venue development adviser (full disclosure: our team). As you’ll see, strategic seating programs can help athletic brands flourish. 

The key word here is strategic. 

THE ART OF VENUE FINANCING

To determine the demand for premium seating at TDECU stadium, UH began with a comprehensive market evaluation and premium-seating analysis of selected comparable markets, conference institutions and peer institutions. Next came: (1) Concept refinement focus groups, (2) Financial analyses of improvement scenarios, and; (3) Surveys of regional alumni and athletics program supporters designed to provide a valid statistical analysis of existing behaviors, seating preferences, improvement opportunities, price sensitivities and potential program space demands.

These analyses determined a level of demand and recommendations on seating mix and other aspects of the premium-seating program. Note that with such thorough research and market understanding, the strategic seating program goes way beyond “design.” A seating program isn’t about what will look nice or how many seats will fit, but how many seats are demanded and what investments will pay off — what revenue will be generated, and how they’ll support operating requirements and potential debt service obligations.  

Houston has found success after implementing a detailed seating design at TDECU Stadium.
Photo: getty images

SEATING AND PRICING

More than 2,700 people participated in the surveys. Many who did not attend UH sporting events at the time indicated they would do so if the facilities and fan experience were improved. Participants indicated significant levels of interest in traditional luxury suites, loge seats, and club seats.

The following seat allocation was recommended:

  • 25 luxury suites 
  • 40 loge boxes 
  • 800 club seats

Additional recommendations included where in the bowl premium seats should be, what amenities should be included in or within close proximity to premium seats, and the optimized price point.

TDECU Stadium design closely followed the recommended seating program, building:

  • 26 luxury suites
  • 42 loge boxes
  • 766 club seats

These decisions received high marks in the press. The Houston Chronicle published an article one month before TDECU Stadium’s opening, saying: “UH is betting that once fans arrive they will like what they see. And that’s a good bet. The club level is a mere 25 feet from the playing surface, and prices are such that the breaking of one’s bank isn’t necessary for admission.”

These three years later, fans are impressed with what they’ve seen. “Houston fans who have secured season tickets in the premium-seating areas have consistently enjoyed their game-day experience, and the renewal numbers reflect that,” Bassity said. “The variable seating options and premium amenities have greatly contributed to the success of premium-seats sales while offering a top-notch game-day experience.” 

MONEY

In 2016, the Houston Chronicle reported, “As of Friday’s renewal deadline, UH had sold a record 18,193 season-ticket packages for the upcoming season. The old record, according to the school, was 15,022 in the first year of TDECU Stadium in 2014.” That uptick in sales, as well as the overall rejuvenation of the athletics brand, has translated to serious dollars. “With the move from Robertson Stadium to TDECU Stadium, UH saw an increase in annual football revenue from $1.5 million to $5 million-$6 million.”

BEYOND MONEY

Beyond financials, the stadium has helped redevelop UH’s athletics brand in three key ways:

1. Possible conference realignment. The stadium catapulted UH to the top of the American Athletic Conference, introducing the option of conference realignment. The power five and its payouts from bowls, television deals and tournament invites might be a desirable move for UH. If it is, the new stadium makes that possible. 

2. Easier, more successful recruitment. When a recruit walks through UH’s athletic facilities, these spaces reflect the university’s commitment to its football program.

3. Improved student-athlete experience. “The stadium has given our football student athletes a place to call home, and with student seating in the lower bowl, has provided a raucous game-day atmosphere giving our student athletes motivation to compete,” Bassity said.

THE FUTURE

The plan had been if the new stadium was a success, it would be the first of several upgrades to UH’s sports facilities. For example, if the revenue from TDECU stadium were substantial, and if the project proved the demand for expanded, improved facilities, a new basketball arena could be next. 

Guess which school is now building a new basketball arena?

William Mykins is vice president, and Bryan Slater is senior project manager at Brailsford & Dunlavey. B&D was selected by the University of Houston, in conjunction with Ellerbe Becket, to conduct an athletic facilities market study and financial analysis for a potential renovation or replacement of its athletic facilities.