Friday, August 30, 2013

What Drives NFL Attendance?

Although the NFL’s recent settlement with former players over concussion litigation is rightly dominating the conversation as we build to the 2013 season, it has also called attention to the overall economics of the league.

More specifically, we’ve been reminded just how much money these guys make.

The billions of dollars raked in by the NFL each year is a testament to a variety of factors. The game is naturally exciting, it has become entrenched as an American cultural ritual, it gives sportscasters a context to talk about Tim Tebow 24 hours a day.

But it’s also because the NFL owners are collectively some pretty savvy businessmen.

Which is why I find a lot of recent headlines a bit surprising.

There was a recent article on how the NFL is expanding its efforts to put microphones in with players and coaches to pick up their comments during the game. Unlike mid-game interviews with baseball managers or hockey coaches, we can assume these would be more spontaneous comments (i.e., you would actually WANT to hear them).

Sounds fine to me, although you could only imagine the potential for more Riley Cooper-like scenarios.

Of course, there’s a catch, the owners plan for this material to be available ONLY for people at the stadium.

And that’s where I have a problem.

It’s no secret that advancements in the televised football product have vastly outpaced those with the live experience in recent years. HDTV, the RedZone channel, Quadboxes have made the NFL on TV the absolute focus of my entire Sunday. The experience of actually going to a game hasn’t changed all that much, unless you feel that 65,000 fans trying to get a smartphone signal is a big change.

The NFL seems concerned about this, witness the following from Cowboys executive (and therefore evil) Stephen Jones on the effort to get players mic’ed up:

“We don’t need to take five years; it needs to be sooner rather than later,” said Stephen Jones, the Dallas Cowboys chief operating officer who is on the eight-member working group.

Jones did not place a timetable on the initiative but emphasized that there is urgency on all projects designed to get fans into stadiums. Other than player health and safety, the league’s top priority is ensuring that its stadiums are full.

That’s the league’s top priority? I know these guys are smart businessmen, but I just don’t think that makes any sense, for several reasons:

- NFL teams make most of their money from media rights, not ticket sales
- NFL attendance is not down
- The major driver of attendance for an NFL franchise has nothing to do with some incremental in-game experience technology

NFL owners should focus on what will make them the most money (on this, I think they’d agree). And what will make them the most money is by improving the product for people like me, people who watch the games on TV. Obviously, you can make a better product for both TV viewers and in-stadium fans (and that’s what they should be doing), but when you restrict access to certain options, you’re effectively shutting out one group at the expense of another, and I think the NFL owners have it backwards.

In short, I’m making my case for why I think we, the television audience, should get the good stuff, instead of those guys/girls actually going out for the game.

Point 1 – NFL money comes from TV

Efforts to improve the in-game experience at the expense of the TV experience seem a bit odd to me, because that’s not where the money is. Based on leaked financial documents from the Carolina Panthers organization, we can see that’s the case (I also looked over some materials from the Green Bay Packers, which are similarly aligned and eliminate the possibility that the Panthers are a complete anomaly.)

Below is a chart of the Carolina Panthers 2012 revenues by source as a percentage, in total they had ~$200M in revenue. You’ll notice the giant blue bar towards the bottom, that’s TV/Radio.

Yeah, so TV is important. And while it would be silly to argue that you should care about the ~45% of revenue that’s from in-game, let’s not pretend that these guys aren’t primarily in the business of a televised product.

Point 2 – NFL attendance is not suffering

I saw a few articles on this over the last few years, talking about how for a variety of reasons (economic downturn mostly) NFL attendance was falling and it was a huge deal (i.e. everybody panic!)

Of course, most of these articles didn’t have anything more than a line or two of actual information to tell us whether attendance was rising or falling (I forget if the stuff was Bleacher Report-type nonsense or actual journalism, but regardless, it was out there)

And if you actually look at the data, it’s true, there was a dip in attendance. But let’s put things in the proper perspective with a game called ‘Fun with Charts’

Below is an illustration of the NFL’s cumulative attendance percentage (% of total capacity) over the last five seasons.

So it did actually go down from 2008-2010, and has come back since then.

But there’s also the issue of perspective, take another look at the chart, this time with a complete Y-axis

Doesn’t seem quite so bad does it?

In fact, looking at things from 2009, I’d argue attendance has been effectively flat. It did seem to come down post-2008, but that’s something that would need more investigation (because pre-2008 data isn’t complete as a number of teams seemingly didn’t report attendance as per ESPN’s records)

So, if you look at the data, attendance isn’t really down at all for the league as a whole.

Point 3 – Attendance isn’t about new bells and whistles, it’s about one thing, that thing Al Davis always talked about.


The absolute without a doubt most significant factor in how a team does in attendance is whether or not it wins games.

This should not be earth-shattering news. If you want people to come to the games, show them the W’s.

All the in-game food ordering technology or other new tricks aren’t going to make a damn if you still have to watch the Raiders lose every Sunday (Sorry Al). That’s a picture that emerges pretty clearly from the data.

I took all annual attendance numbers for each franchise for each of the past 5 seasons (as a % of total stadium capacity, 160 observations in total) and compared them against how many wins the team had in the prior 5 seasons to see if there was a clear relationship between the two. So for example, the Eagles had a 2012 attendance at 102.3% of capacity (nice work guys) and over the previous five seasons (2011-2007) had 46 wins (average of 9.2 wins a year).

So, when we put all that together, is there a clear relationship there?

A correlation of 0.53, so I would say so. Quite simply, when you win games, people will show up.

I also checked it against the prior 3 years of wins to see if more recent performance had a different impact

A correlation of 0.54.

Now you could make a number of adjustments here for things like playoff success (super bowl wins probably means more people at the game) or new stadiums (which I believe bring people in immediately but quickly wear off without the W’s to back it up), but I haven’t because it’s not that interesting.

Major point is that for all the owners talk about needing to make sure fans come to the games, you really just need to make sure you’re winning some football games.

So why all this talk and emphasis on improving the in-game experience? Like I said before, I think the owners would be served best by focusing on driving growth in their media rights and access and selling more stuff there.

From this, it does seem like that might be a better place to drive innovation. However, there are some potential drivers of why this is their focus, and I think both of them are likely true:

A - These owners need something to do, because the TV/rights product stuff is driven by headquarters: This is the probably the most likely scenario. The NFL itself is the one in charge of things like rights negotiations, granting access to new platforms, etc. One owner can’t necessarily impact that himself, so local efforts may be the best way for him to do anything.

B – The owners want to keep the fans in the seats, yes, but what they actually mean is that they want to keep fans in the seats as they raise prices!

This is, in my view, what the owners actually mean when they say they want to keep attendance up. They want to keep it up in the face of increasing prices, and every new concept is an additional reason to keep paying for tickets. While I can’t find anything definitive, going into last season Team Marketing Report found that the average NFL ticket was up ~3% last year, and you saw the attendance numbers, no real change.

So unfortunately, this means that we’ll likely continue to see owners finding new cool technologies and not letting the TV-viewing public get access to them.

But when they tell you it’s in the name of keeping people coming to the games and keeping attendance from dropping, don’t believe them. It’s so they can continue to raise prices.

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