Money Games

Profiting from the Convergence of Sports and Entertainment

David Carter

• Publisher: Stanford Business Books
• Year: 2010
• ISBN:
  9780804776790
• Edition: 1
• Topic: Commerce
• Subtopic: Développement commercial

The businesses behind Dubai Sports City, the branding of David Beckham, and the presence and popularity of fantasy sports leagues on the internet are unmistakable indicators that the sports and the entertainment industries are quickly becoming one and the same. But, you needn't travel far or be a hard core sports fan to appreciate this fact. Whether you play Madden NFL on the Wii, use Nike+ along with your iPod to monitor your workouts, or channel surf and take note of the number of athlete-driven commercials, evidence of this transformation is ubiquitous in today's sports viewing and consuming experience.

In recent years, the rapid convergence of sports and entertainment has been key to the sports business industry's continued growth and financial success. Money Games not only analyzes how industry stakeholders have monetized this convergence, but also provides readers with answers to this core question: how can the sports business continue to profit from the blurring of sports and entertainment? Author David M. Carter considers a wide array of implications for television content, video gaming, athlete branding, the Internet, mobile technology, gambling, sports-anchored real estate development, venue technology, and corporate marketing—in short, those areas where business opportunities exist now that sports and entertainment have become one.

Money Games is a must-read for professionals and future leaders of the sports and entertainment industries, and sports fans will also find an intriguing story about the evolution of the games that they cherish and follow.

Part I

AT-HOME CONVERGENCE

“At-home” convergence, the most prevalent form of sports and entertainment convergence throughout most of the 1900s, continues to have an enormous impact on consumers’ lives. Centered on home-based activities, this form of convergence has become widespread, its growth accelerating in large part due to technological innovations that have blurred the line between sports and entertainment.

For much of the twentieth century, sports consumption tended to be a one-dimensional experience, largely limited to at-venue experiences or the reading of a newspaper's account of a prior day's game. However, steady innovation in at-home entertainment has nearly eliminated the gap between the consumption of sports and the consumption of entertainment to the point where the focal point of almost every American home is its “entertainment center.”

Not only are sports available at all hours of the day, it is not uncommon for a sports fan to simultaneously access sports using multiple platforms. A Chicago Cubs fan can now watch his team play live on cable television while concurrently checking his fantasy baseball statistics and listening to streaming, web-based sports commentary—all without leaving the comfort of his family room. It is these same consumers, for whom sports are a powerful and unique driver of content, whose utilization preferences substantially contributed to the evolution of convergence.

This “at-home” convergence, particularly as it relates to the evolution of TV content and video gaming, has greatly expanded the ways in which fans effortlessly consume sports programming. It has also ushered in a new era of personal branding, enabling athletes to monetize their brands through the marketing of goods and services.

In examining how at-home convergence has evolved within American households, it is useful to recall a few critical milestones that shaped the current era of this form of convergence. The beginning of the modern-day association with public radio broadcasts as a form of entertainment may be most notably linked to Orson Welles's radio broadcast adaptation of H. G. Wells's classic 1898 novel The War of the Worlds on October 30, 1938. However, sports radio as entertainment in the American household dates back nearly two decades earlier.

Westinghouse engineer Frank Conrad built the first non-experimental licensed radio station, KDKA, in Pittsburgh, Pennsylvania. Shortly thereafter, KDKA broadcasted a blow-by-blow account of the 1920 Johnny Ray versus Johnny Dundee prize fight. In July of the following year, RCA station WJY cemented the entertainment relationship between sports and broadcast radio with the airing of the high-profile bout between Jack Dempsey and Georges Carpentier.

The first electronic medium to enter the home, radio became a major outlet for family entertainment, with an increasing number of sports broadcasts helping to pave the way. Radio broadcasts allowed people, particularly those in rural America, the opportunity to follow their favorite athlete or team without the complications of travel or additional expense.

Although many sports leagues initially viewed radio as a threat to in-person attendance at games, it became apparent by the early 1930s that radio would serve as a vehicle to promote event attendance rather than cannibalize it. Significantly, radio also provided advertisers and sponsors the opportunity to connect with their core target markets.¹ This compelling connection, which remains today and features technologically advanced media distribution channels, enabled sports leagues and teams to generate much-needed incremental revenue.

The appearance of networked and high-power stations such as NBC in 1926 expanded regional audiences and established national ones. This increasing radio penetration helped to broaden, diversify, and expand sports’ fan base and allowed families across the country to gather together to listen to such feats as Babe Ruth's record-setting 1927 season, during which he hit sixty home runs. By the end of the 1930s, and due in large part to their entertainment value, home radio sets had become mainstays in American homes.

As enticing as radio had become to sports fans, there was no way it could continue to compete in the long term following the famous phrase spoken by RCA president David Sarnoff at the 1939 World's Fair. When Sarnoff confidently stated, “And now we add radio sight to sound,” he ushered in a media revolution that accelerated the convergence of sports and entertainment, and forever changed how Americans lived their lives.²

As mentioned in the Introduction, the 1939 baseball game between Columbia and Princeton universities was indeed a watershed moment for convergence. This event, when coupled with the steady adoption of the television set into the American household during the 1950s had a huge subsequent impact on the popularity of sports. Television networks, sponsors, and advertisers were quick to realize the power of sports content to attract and keep viewers. In an effort to captivate these growing audiences, networks created dedicated sports programming focused on showcasing multiple sports. NBC, for example, premiered the first network sports broadcast show, The Gillette Cavalcade of Sports, in 1944.

With the success of this programming format, the sports variety show became a fixture among primetime network offerings, as evidenced by ABC’s signature program, Wide World of Sports. Wide World of Sports “spanned the globe” from 1961 to 1997 in an effort to acquaint its growing audience with such diverse sports as rodeo, jai-alai, surfing, and badminton, as well as traditional Olympic sports including figure skating, skiing, gymnastics, and track and field.

Aside from sports variety show programming, the evolution in network coverage of some of America's greatest games and events helped popularize sports on television. For example, NBC’s national telecast of the 1958 Baltimore Colts overtime victory over the New York Giants in the National Football League title game, often referred to as “The Greatest Game Ever Played,” helped propel professional football and captured the collective attention of the nation.

Further, in October of 1974, live television coverage of the heavyweight championship bout between Muhammad Ali and George Foreman, dubbed “The Rumble in the Jungle” because it took place in Kinshasa, Zaire, attracted an enormous American television audience. This legendary fight was staged at 3:00 A.M. local time to allow for its broadcast during the day on American television. Because it was broadcast in a more American-friendly time slot, Ali was able to continue building his personal brand while the sport of boxing enjoyed a boost to its global notoriety.

The beginnings of televised sports convergence with entertainment were directly related to network television, but this continued unabated in the 1980s due to the rapid growth of cable television, particularly via networks such as ESPN, WTBS, and HBO. The ability of cable sports networks to provide continuous, around-the-clock coverage of sports delivered a much-needed fix to hardcore sports fans.

Another industry that took shape and rapidly innovated during the 1980s was the at-home video gaming industry, which, until the mid-1980s, was dominated by console and arcade system maker Atari. Atari, which grew during the 1970s and will be discussed in more detail in Chapter 2, was instrumental in bringing video gaming to the masses.

The popularity of this new form of at-home entertainment, one complemented by the growing personal computer gaming market, fueled the launch of the Nintendo NES console in 1985 and was the platform for such sports video games as Tecmo Bowl and Mike Tyson's Punch-Out. While the competition among console makers Nintendo, Sega, and others continued throughout the 1980s and early 1990s, the success of the early sports video games paved the way for video game publishers, especially Electronic Arts (EA), to secure a niche within the video game publishing industry by focusing on sports games.

Much of EA’s early success can be attributed to its strategy of platform-agnostic development and the creation of strong multiyear sports franchises, including Madden Football and NBA Live, both of which were firmly established by the mid-1990s. Significantly, EA was the first publisher to release annual updates of its popular video game franchises such as Madden Football, FIFA, NHL, NBA Elite (formerly known as NBA Live), and Tiger Woods. Offering updated player rosters and small graphical and game-play enhancements enabled EA to secure a market leadership position in sports video gaming, and annual sales of these games remained high.

Although more extensively covered in Part II, which addresses “away-from-home” convergence, the Internet has proven to be integrally connected to many areas of at-home convergence. With its arrival, the demand for extensive, wall-to-wall coverage and consumption of sports reached beyond mere television broadcasts as content distributors began leveraging the Internet to provide new levels of interactivity. With the inception of ESPN.com in 1995 (then known as ESPNet.SportsZone.com) and Yahoo! Sports in 1997, the latest sports information was at every fan's fingertips. Not unlike the early radio broadcasts of sports in the 1920s, these websites allowed sports fans the opportunity to follow their favorite athlete or team from afar in a more timely fashion. Although not as interactive and user-friendly as today's sports websites, sites such as ESPN.com and CBSsportsline.com, which already boasted strong brand names given their affiliation to televised sports programming, these sites captivated fans by providing content that made them visit their sites on a regular basis.

The delivery of sports news, information, and statistics in “real time” on the Internet continued its rapid expansion throughout the decade. This has created substantial revenue-producing opportunities for a wide range of industry stakeholders, especially sports leagues, their sponsors, and content developers.

Opportunities to experience at-home convergence increased exponentially over the past decade. The addition of viewer-friendly broadcast elements, increased accessibility of a growing number of cable television channels, the Internet, and new and improved consumer electronics all enhanced the sports viewing experience.

Not only are fans interested in taking advantage of such enhancements and services, they are in large part responsible for them because their evolving consumption patterns mandate that the industry stakeholders producing these goods and services quench their demand for technological innovation. As is the case with all forms of convergence, the stakeholders in the at-home category include the owners of sports properties, the developers and distributors of content, and the athletes who play the games, as well as marketers hoping to sell myriad products and services to fans. Accordingly, we will be discussing the areas and developments affecting these stakeholders as they navigate at-home convergence.

Part I considers how established and emerging stakeholders are attempting to monetize at-home convergence. In Chapter 1 we will study television's evolution by focusing on how changes in sports-related programming and related technology have played, and will continue to play, a role in taking at-home convergence to new levels while striving to meet ever-changing consumption patterns. Chronicled in this chapter will be the impact of the Beijing Olympics, ESPN’s College GameDay, and the Ultimate Fighting Championship (UFC). Laced throughout the chapter will be observations from leading industry executives David Neal—EVP, NBC Olympics; John Skipper—then EVP, content, ESPN; Frank and Lorenzo Fertitta—founders of Zuffa, LLC, which owns UFC; and David Hill—Chairman, Fox Sports.

Video gaming is evaluated in great detail in Chapter 2, with a distinct focus on the evolution of consoles and peripherals, as well as on how interest in video gaming was successfully captured to establish and build video game franchises and professional video gaming leagues. Specifically, the chapter will include analyses of how Nintendo, THQ, and Major League Gaming (MLG) parlayed their keen understanding of the marketplace to build thriving enterprises. As in each chapter, additional insight is provided from those who have shaped the industry, in this case Perrin Kaplan—(former) VP, Marketing and Corporate Affairs, Nintendo; Brian Farrell—CEO, THQ; Michael Sepso—co-founder, MLG; and Peter Moore—President, EA SPORTS.

Finally, in Chapter 3 we describe recent developments in the area of athlete branding. Few stakeholders have as much to gain by this type of convergence as superstar athletes. Examples looked at in this chapter are David Beckham, Tony Hawk, and Yao Ming, three marketing icons who have developed and extended their personal brands on a global basis, warranting an analysis of their efforts. This athlete branding discussion and analysis is complemented by first-person observations shared by Shawn Hunter—(former) President, AEG Sports, now President, CEO, and Investor-Operator, Chivas USA; Will Kassoy—then SVP, Global Brand Management, Activision; Adam Silver—Deputy Commissioner, NBA; and Sandy Montag, SCVP, IMG Sports & Entertainment.

1 TELEVISION CONTENT

NBC AND THE BEIJING OLYMPICS

As on many Saturday nights in Manhattan, The Gin Mill is packed. Although not necessarily known as a sports bar, the place is transformed into one on the evening of August 16, 2008. Patrons’ attention is riveted to numerous high-definition televisions, not because of a Yankees-Red Sox game but rather in anticipation of watching forty-one-year-old Dara Torres swim the 50 meter freestyle at the 2008 Beijing Olympics.

The close race has everyone captivated, but there is collective disappointment as Torres wins the silver medal, finishing .01 seconds behind Germany's Britta Steffen. Not long thereafter, patrons again put down their drinks and watch the women's 4 x 100 meter medley relay with anticipation. Three minutes and fifty-three seconds of nonstop swimming action later, there is again collective disappointment as the team of Torres, Natalie Coughlin, Christine Magnuson, and Rebecca Soni place second to Australia.

Despite the crowd's demonstrated interest, the evening's main event has yet to occur. Then, at approximately 11:00 P.M., the U.S. men's 4 x 100 meter medley relay team of Aaron Perisol, Brendan Hansen, Michael Phelps, and Jason Lezak steps toward the pool. The previous night, more than sixty-six million people had watched Phelps win his dramatic seventh gold medal of these Games, barely edging Serb Milorad Cavic in the 100 meter butterfly.¹ With the victory Phelps had tied the legendary Mark Spitz by winning seven gold medals at one Olympic Games, and was about to compete for an unprecedented eighth gold medal in Beijing. All eyes at The Gin Mill were focused on the pool at the Water Cube.

“Alright, we're going to turn off the music and turn on the commentary so that we can all watch the swimming,” a voice says over the bar's loudspeaker—an exceptionally rare respite from the pulsating music normally heard.

Everyone listens to the commentary of Dan Hicks and Rowdy Gaines on the NBC telecast, which is being broadcast live, a half a world away. The race begins and Perisol gives the U.S. a strong start in the backstroke. Then Hansen takes over on the breaststroke, but he falls behind Japan's Kosuke Kitajima. Phelps dives into the pool and pulls the U.S. ahead on an incredible butterfly sprint. Lezak then finishes with a strong freestyle swim that gives the U.S. the gold medal in a world record time of 3:29.34.

Overflowing with national pride, the patrons at The Gin Mill shout, “U-S-A! U-S-A!” Just two miles south, a large crowd at Times Square erupts with cheers that echo throughout the entire city. And back at The Gin Mill, a TV in the corner shows thousands of fans staying forty-five minutes after the conclusion of a Baltimore Ravens preseason football game at M&...