Fight Sports Revenue Erosion Read online

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  3-BEYOND BOBBLEHEADS

  Sport promoters use bobbleheads to attract new attendees. Before these came along, Beanie Babies were the pull. So were schedule cards, baseball caps, and photo balls. It's hard to deny that these attractants always draw out members of the community for single game attendance. But I do think most of the Bobblehead and giveaway items used in that way are, in fact, a form of bribery. That's not sports marketing. It doesn't build a fan base because there is no reward for fan investment. It's the lowest form of crowd-building, and it's ineffective long-term, unless you continue to offer bribes for people to show up.

  Bribery to attend a function where the recipient has little to no interest in the actual game product does little good for the franchise, the fan base or the entire marketplace. Non-sellers may question my assertion that premium item giveaways are bribery. They’re quick to point out that there is no actual cost to the item since it's a form of corporate sponsorship, or that it's a source of marketing because it brings new potential fans into the ballpark.

  While these potential fans are paying the full price point in order to receive the premium item, there's a deep shadow cost to the giveaway practice. Look first at what the giveaway recipients think they purchased: was it the ticket to the game or the premium item they were handed at the gates? Secondly, there is a cost on the deliverables by the corporate sponsor for their participation, essentially extracting dollars that could have been used toward an actual sales effort, instead of going toward the distribution of trinkets and other premium item fare.

  This argument extends to a sports marketing notion that these items are necessary in order to draw more attendees on off-nights, such as Monday or Wednesday. If that's the case, the franchise has failed to market to its fans and potential attendees. In place of a good, sound sales plan, the franchise has managed to poison itself and its community through the idea of gift expectation for attendance. The franchise has changed its stadium use into the equivalent of a time-share condo seminar, where people struggle to sit through a three-hour demonstration in order to achieve two airline tickets to Hawaii in the off-season.

  It comes back to a Return on Investment mentality. It's one thing to create a ticket package with a premium item, and design a fixed cost sale which enhances the R.O.I. for the franchise. It's completely another to damage the marketplace by rewarding single game ticket sales while advocating long-term buying habits. Teams have been complicit in this practice for decades as a quick-fix attendance draw, trying to stave off media and community concerns by having “filled the stands” even if it undercuts their bottom line. Unfortunately, premium giveaways do nothing but return on ego.

  One of the larger concerns is that premium item giveaways help entice single game buyers toward attending specific games. I admit this is true in some sense. But what about the in-game experience itself? Simply because a franchise manages to lure more attendees to some of their specific games doesn't mean that it helps them develop a long-term buying habit. While the giveaway venture attracts people, many of those people don't care about anything but the giveaway.

  The giveaway is the prize, with the in-game experience becoming superfluous. I would love to see the statistic, which doesn't exist, showing the number of premium item giveaway fans who leave less than an hour after the game start. They have their prize, which is really what they came for, and now the game is something that they can shrug off. The sports industry gear-heads, so in love with their own stuff, don't fully grasp how those who show up for a premium item giveaway feel about the actual sports product.

  The majority of those Bobblehead-seekers view the in-game sports product as a complete secondary to the item they are receiving. They got their toy, and they're ready to leave. This hinders the franchise’s overall per cap, as the majority of these premium item giveaway folks are not spending any more than the entry cost, and in fact, are eliminating the majority of the per cap average entirely in the door.

  The first order of any business structure is to determine what the wholesale costs are, and what profits may be realized beyond that point. This is where several college athletic departments fail or ignore their duty. Athletic departments hinder themselves by hiding behind an annual budget structure, ignoring the lack of financial structural integrity on their per cap averages. The majority of athletic departments do not determine per cap averages in the way that their professional franchise brethren do. They just know whether ticket sales revenue is up or down, never projecting what each attendee is likely to spend at the games.

  College athletic departments have especially ignored creating a credible price point integrity for their product. Prior to 2006, athletic departments often flooded their surrounding markets with free tickets. They always received a baseline budget from the school and were rarely questioned whether their sports marketing acumen was creating real financial results.

  After 2007, the world financial markets took a huge hit and athletic departments had to show they could earn money. They were shocked to realize they had no idea how, having for decades rationalized that tickets cost nothing, that sponsors would provide them items, and what the hell, they needed to get more fans. Those colleges began flooding the market with low-rent premium item giveaways, which only damped down the excitement for premium item giveaways overall.

  The professional franchises started the giveaway mentality. Now that colleges are doing it, there's no more silver bullet effect to the giveaway items overall. It’s a short-term, zero-sum game anyway, relying on attendees to show up to get a physical item, as well as hope that they are going to spend money inside the stadium to help the per cap average. Not only does the per cap average not increase by the presence of these Bobblehead mania attendees, but the shadow costs increase in order to prepare for their arrival.

  This is where ticket packaging gets into the premium item giveaway game. Some of the worst ticket packaging ideas come from the idea that, in order to show results for the corporate sponsor’s affiliation, ticket deals must be created to mirror a premium item giveaway scenario: Lure folks through the building who only want to front-end deal, while harming the per cap average on the back end.

  Talk to the wrong corporate sponsorship guy, a non-seller who is in a sales job, and he will present a corporate sales package that hurts both the franchise and the corporate business. This corporate package usually sells for $68: A family of five pack – five tickets, five hotdogs, five sodas, and five t-shirts. All of this is brought to you by the corporate sponsor, who gave up $50,000 in trade, while the corporate sponsorship guy walked away with a 13 percent commission (in actual money) for his efforts.

  Another slide toward financial defeat is buy-out nights. This is where a corporate sponsor is presented with an ask by a non-seller in a sales job. The scenario is that the sponsor will buy all the tickets at a deeply discounted rate, then promote the free tickets at their physical store locations. Not only does this flood the market with complimentary tickets, but it also makes a deliverable for the corporate sponsor. Now there are corporate obligations that must take place in exchange for agreeing to buy out massive blocks of tickets at a discounted rate. Is it really better to ensure that no prospect pays full price or at a cheaper rate than for both the sponsor and the franchise to generate money on the deal? That’s there I have an issue with the entire practice of buy-outs.

  But now that we are on this road, let's take it a little further: What exactly does each ticket package cost the franchise in order to manufacture?

  Remember when I mentioned that tickets were the greatest R.O.I. in the world? That was when the tickets did not include non-fixed cost items such as concessions or a corporate sponsorship fulfillment on the back end of the deal. Now that the concessions and other interests have woven themselves into the package, it makes wholesale cost at a premium by comparison.

  If a franchise listens to the corporate sales guy’s proposal, they’ll take those tickets that they could have s
old on the primary market and cram them into a non-fixed item scenario package. Say the tickets are $15 for adult, $10 for kids – that makes a family of five worth about $60 in ticket revenue and pure R.O.I. because it is all fixed costs. But now the corporate sponsorship guy has added concessions. Let's say that one hotdog and one soda cost the $7 to a consumer.

  Now we have $35 worth of value to the consumer loaded into the ticket package that now has $95 worth of individual value. We throw in five t-shirts which retail for $20 each, and now there is $195 worth of value in the ticket package. While all of that sounds good, it fails to recognize a breakdown of several of the shadow costs. Everyone is so giddy about putting together a “steal of a deal” on the front end that they don't recognize the shortfall on the back end.

  Let’s actually calculate out the non-fixed cost items, and what the shadow costs are so we can see that much of the ticket package is less like a deal and more like a tidal wave of debt rolling back toward the franchise. The tickets have no cost, so it's all