Friday, August 19, 2016

How can the NFL Make More Money? #FB

No election talk for now - I promise.

Even though that's what's been dominating much of my podcast and article feed for now, I wanted to think about something else, if only for a little while.

Football season is coming, and even though the Eagles don't look like they'll be all that great (prediction: 8-8, I think the defense is better than people expect and the offense is worse), I remain thrilled about it being back. I was ecstatic to spend $100+ on DirecTV's Sunday Ticket streaming package, and would happily give the NFL more money if they would just find more ways to give me football.

So I tried to think, what if I were the commissioner of the NFL? And what if I were charged with growing the world's biggest sport (by revenue, yeah I know soccer is more popular)?

Where would I look first?

I had to set one quick guardrail for myself -- I'm not allowed to just make changes that have no prayer of happening in reality anytime soon...that means no more games (because the players won't approve), and no cyborg player technology (because that doesn't exist...yet). But if I had to present to all 32 owners a concrete plan of how I was going to make them more money...what would I go after?

Unfortunately, the NFL is in a tough spot, because it's already so damned huge. It made $13B last season (per wikipedia), so big growth isn't going to be that easy (unless you launch a hostile takeover of the NBA and force LeBron to play for the Browns)

The way I look at it, the NFL only succeeds in making money because every Sunday, me and millions of other people like me glue our eyeballs to various screens to watch the football. There aren't many places where you can depend on those eyeballs showing up, and the NFL is a huge one. Because revenue is tied to those eyeballs, I see a few discrete ways to grow:

1. Increase the monetization of the eyeballs you already have
2. Increase the time those eyeballs are spent watching the NFL
3. Increase the number of eyeballs watching the NFL

Those are the big types of opportunities in my mind, and as you'd might expect I've got some thoughts on each one.

1. Improve Existing Eyeball monetization: This is deriving incremental revenue from the customers (eyeballs you already have). Now, in any of these areas there are tons of possibilities. What I'm trying to focus on is what's both more achievable and large. So while some ideas might be compelling (e.g., create new products to sell to fans, create new pricing/loyalty schemes to more effectively price discriminate), there's the big easy one that's too obvious to pass up:

Uniform sponsorship.

It's coming, it's just a matter of time. Major non-U.S. soccer clubs around the world sell jersey advertising. Every Nascar is basically a billboard. The Sixers have finally broken the seal of the major four sports leagues (MLS and others have already done it years ago), and for an NFL who has officially-sponsored everything, the spartan uniforms are
sacrificing revenue for the sake of, I don't know, traditionalism? (Which is nonsense btw -- the Green Bay Packers were the freaking Acme Packers in their first season)

Now, this is such an obvious opportunity that people have already quantified it:

According to a Horizon Media study, the Dallas Cowboys, New England Patriots and New York Giants could all land jersey sponsorship deals worth more than $14 million per year.

That study, says the biggest teams would be worth $14M a year. If you assume the average NFL team is half of that ($7M, as I'm assuming that they're evenly distributed between $14M and $0. That may be conservative, especially because I'd argue every team is essentially a nationally-watched team), then you've just made the league an extra $224M.

That's an easy way to grow 2%.

2. Grow Eyeball duration The last bucket was focused on getting more money out of existing viewership/fanbase. This one is similar to that idea, but rather than through improved monetization, this is just expanding share of time we're all spending with the NFL. It doesn't enhance the value of the content, it's creating more content.

Now I stipulated that we can't make more games. That's the easiest way, but let's take that off the table. So what's my big idea?

Expand the Regular Season.

Wait, what?

Before someone calls the Players Association on me. I'm not saying teams should play more than 16 games. In fact, call the Players Association, because they would love this idea.

The NFL generates $7B a year in TV revenue from all their network partners. Why is that? Because football fans are obsessed with following the league every week of the 17 week regular season.

But why does the regular season have to be only 17 weeks?

Teams currently play 16 regular season games and get one bye week off. OK, well under my new and improved regular season, teams still play 16 regular season games. They just get two weeks off instead.

Expand the calendar, and expand your eyeball duration. Because if you tell me that fans forget about the NFL when their local team is on a bye week, I'll tell you you're full of crap. Whether it's fantasy football, gambling, or just finding a way to avoid their families, football fans will watch the NFL when it is on, even if their team isn't playing.

Now you've got 18 weeks of content for the networks to sell advertising against.

And if you'd protest by arguing that you can't fit it into the calendar, then fine, lop off the 4th week of the pre-season. No one cares about it anyway, I'm sure an extra week of full-on NFL regular season would be a little more revenue generating.

If that $7B package per year was for just the regular season and not the post-season, pro bowl, draft or other events, to me, that means this opportunity is worth an extra $400M.

Grow Eyeballs: This is the toughest one for me. How to create new fans essentially. It might be the hardest one to do, unless you take my previous idea of a hostile takeover of the NBA

Destination London.

OK, this is a bit of a cheat. If I had to be honest, I'd say that it's more of a Grow Eyeball Duration instead of Grow Eyeballs, but I think it could be both.

The NFL has been hosting games in London for a number of years. And if you want to get more fans, you can try to pick up more fans in the US (tough) or you could try and make a go of it in an untapped market (tough too, but a different kind of tough).

A problem we have is that I'm taking expansion off the table. Expansion would be a way to create marginally more fans in a specific US market (imagine Las Vegas, or whatever, St. Louis I guess). But that expansion comes at the expense of diluting the revenue shared by everyone else. You'd create a one-time lump sum payment to the existing owners in return for giving them a slice of the pie forever.

So no expansion.

That means growing eyeballs would necessitate relocating a franchise to help you create incrementally more NFL fans. The most effective way to do that is to take a team no one would miss and ship them to a huge market somewhere.

Toronto would be a candidate, but I prefer London. I suspect the NFL does too.

Why? Two reasons:

1 - It's bigger. The UK has ~60M people, Canada only has ~30-35M. If you're trying to get more people into the NFL, go where they are.
2 - It can also expand your eyeball duration

So ignore the complexities of how a team in London would work schedule-wise. Yes the travel would be tricky, but with my new double-bye week schedule it could be easier to have teams visit London around a bye. I'm sure we could solve that.

But when the London team plays its 8 home games a year - you've got a new 10am timeslot for a nationally televised game. Again, we're taking the same amount of content and stretching it out, allowing more people to watch it and more importantly have network partners sell more advertising against it.

It would mean I'd have to miss Meet the Press 8 times a year, but that's a sacrifice I could live with.

If you only think about how much that could be worth, it's not unlike the Thursday night package the NFL artificially created with the exact same strategy. That deal is worth $450M a year.

Now, weeknight prime-time is obviously more valuable than Sunday morning. But would Sunday morning be worth 25% of that? I'd need a media expert's help to confirm, maybe it's only 10% of the value. But that's still between $50-$100M in revenue.

So there you go Mr. Goodell. I've just given you about $700M+ in ideas that are both pretty achievable and pretty significant.

I'll just wait for my check. You can hit me up on Twitter @jaredscohen.

Wednesday, August 10, 2016

Donald Trump and Collective Behavior Thresholds #FB

I was reading an article about football strategy not long ago. The article was on football referred to a podcast on basketball, which itself referred to a sociology paper from 1978. But as I was thinking about the presidential election and how things have evolved over the last week -- I thought the theory made a lot of sense as it relates to where Donald Trump currently finds himself.

The thrust of the football article is about how a construct around individual behavior thresholds might apply to NFL coaches. In short (and probably summarizing in a way that doesn't do justice to the academic paper), the typical model of how coaches would make 4th down decisions is a little too simplistic. In this simplified version, coaches are either aggressive or conservative, and this trait is fixed.

In considering the impact of thresholds, there's the thinking that it's not necessarily a binary condition. You aren't firmly conservative or firmly aggressive...rather, there are conditions where you'd decide in a conservative way and conditions where you'd be aggressive. Seems pretty logical.

Those conditions include (and for the purposes of discussion only consist of) the behavior of the collective body of coaches around you.

Think about a coach with a relatively high threshold for aggressiveness. He needs to see a lot of collectively aggressive behavior in order to be persuaded to take aggressive action himself. Maybe he needs 20 other coaches to make aggressive decisions.

Then there is a coach with a low threshold. Maybe he only needs 2 or 3 other coaches before the actions of the collective are enough for him to make an aggressive choice.

Chase Stuart explains this all much more clearly than I can in the article...but the model is interesting to think about in consideration of lots of collective action situations (example most commonly used would be riots/looting -- it's not that everyone becomes a maniac when their team wins the Super Bowl, it might be that select individuals with low thresholds for rioting start something, which creates a snowball effect as the broader group crosses their respective individual thresholds)

So as I'm reading article after article about Trump, it occurred to me that this may be a useful construct with which to view the collective actions of Republican office-holders at large.

Trump has done a bunch of, let's put this diplomatically, wacky-ass-shit, over the last few news cycles. Most recently, he subtly raised the idea of his supporters shooting Hillary Clinton (or her designated judges). Whether these individual comments were beyond the pale or not is not what I'm thinking about. At this point, Trump is a fairly known commodity.

But Republicans continue to waver in their level of endorsement/support -- and if we think about each of them as having a threshold for their support based on their collective behaviors, there are some interesting implications.

The first incumbent congressperson to come out against Trump (i.e., say they wouldn't vote for him), was Richard Hanna from NY.

Ok, the first one, someone with a low threshold to going public with his lack of support (in part, because he's retiring. That's a different conversation around what might influence your threshold)

Then, if I remember correctly, came Adam Kinzinger of IL. Kinzinger, as far as I'm aware, still plans to serve in Congress.

After that, it was a Senator, Susan Collins.

In each of these cases, it's interesting to consider whether it wasn't a particular soundbite, action, or polling number on Trump's part that drove the legislators to come out and announce their opposition, but potentially the acts of others who had preceded them pushing them beyond their internal threshold for action.

If that is the scenario, there are obvious implications about an impending death spiral of a campaign. As more Republicans abandon ship, they embolden those that remain.

It's an interesting way to think about their collective action (and one that I selfishly hope comes to fruition).