Premium products are hot; teams understand their fans better; expect more investment in content creation, but don’t expect a return to the office full time. Those were a few of the takeaways from a conversation my colleague John Ourand and I led with two NBA team leaders at NACDA in Orlando. Magic CEO Alex Martins joined Miami’s Matthew Jafarian, executive vice president of business strategy, the morning after Jafarian watched his team lose in the NBA Finals (“We were playing with house money,” he said, about the Heat’s surprising run), to volley back and forth on business performance and culture.
BUILDING BI: The executives outlined how their organizations built out their analytics departments. Jafarian was recruited by the Heat as head of innovation in 2016, the first hire in a group which now totals 35, which includes its 601 Analytics LLC that works with outside organizations as well. He feels the team is far along in knowing how fans experience Heat home games. “If you come to a game, not only can I see where you park and what gate you come in at, but also who else is in your group because you’ve transferred tickets to them,” he said. “I can see if you engage in our loyalty program, whether you’re a beer drinker or get a double vodka soda, our No. 1 drink. I can see if you make dining reservations and what merchandise you buy. All of that we put it into a 360-degree fan profile.”
Martins said the Magic’s analytics team on the business side is nine people. “Had we had not invested a decade ago in that data warehouse and in those people, we would not be able to out-punch our weight relative to revenue generation,” he said. “One example from this year: Our gate on a nightly basis averaged about $1.4 million. With the use of data analytics and pricing, we can generate a little less or a lot more. We had the biggest gate in the history of our organization when the Lakers came in this year, and we did $4.5 million that night. That’s what this investment has allowed us to do.”
Looking ahead, Jafarian predicted overlaying AI tech with an organization’s data warehouse to ask for possible outcomes. “What’s my projected attendance for a Tuesday night game against the Pacers?” he hypothesized. “Within a 3.5% margin of error, we can tell how many people are going to be at our next game. If we know how many people are coming, because we’re a per-cap driven business, we know how much money we’re going to make on ticketing, on F&B, on merchandise. If we know that when the schedule comes out in August, we know where to apply our resources and what games are just going to crush it on their own and what games we need to work on.”
PEOPLE WILL PAY FOR PREMIUM: Both teams are seeing strong demand for premium products, which echoes what I’ve heard from other markets. “We’ve had our best year ever from a revenue-generation standpoint, and it’s being driven primarily by premium product,” Martins said, while noting the team has made the playoffs only twice in the last 10 years. The Magic have no courtside seats or loge boxes available and very little suite inventory. “As far as pricing elasticity, we’ve been driving price up and we haven’t been impacted,” he said. Jafarian agreed and said he wants the Heat to re-examine pricing. “Business is very good right now,” he said. “We have to do a better job in our premium spaces. You have folks that are just making way more money at the high end and they’re willing to pay more.” Courtside seats were being sold for $40,000 apiece during the Finals on the secondary market. “We need to do a better job of optimizing around pricing for those seats because the premium landscape has completely changed,” he said.
HYBRID HERE TO STAY: Don’t look for the Magic to return to the office full time. Martins had just returned from an ownership board meeting where he made the case of continuing a hybrid work model. “We just had the most productive year in the history of our organization while people were working from home, off-site or a hybrid model,” he said. “We had one $1 million seller in our organization pre-pandemic. Last year, for the first time, we had three. Sellers were going out meeting people in person and they were a lot more productive because of it.”
CONTENT A BUSINESS DRIVER: Martins also raised eyebrows when he brought up the team’s investment in content, as he sees that as a key driver of the business, especially globally. “We’re going to be hiring eight to nine new full-time positions for this upcoming year to stand up that content studio and develop that content so that we can distribute it around the world,” he said.
Abraham Madkour can be reached at amadkour@sportsbusinessjournal.com.
