The Business of Sports

NFL Kickoff 2011: Nearly Denied, Whoville’s Ready for Some Football


After narrowly averting a sports-themed sequel to Dr. Seuss’s How the Grinch Stole Christmas, with NFL Commissioner Roger Goodell in the chartreuse title role and the NFL Players Assn.’s DeMaurice Smith standing in for the loyal, enthusiastic reindeer dog Max, all the Whos down in Whoville still find that they like football, a lot.

Thanks to the resolution of the lockout, one of the most highly anticipated seasons in NFL history kicked off Thursday, Sept. 8, in Green Bay, Wis., as the Super Bowl XLV-winning Packers beat the 2010 world champion New Orleans Saints 42-34.

The 2011 season is also getting off to a more patriotic start than in most years—and that isn’t a reference to President Obama’s special address to Congress immediately preceding the game.

The NFL signed the United Services Automobile Assn. to become its first Official Military Appreciation Sponsor beginning this season, in the first known leaguewide sponsorship designed specifically for military appreciation. The USAA plans to advertise heavily during NFL games.

Meanwhile, Sunday’s main regular-season kickoff marks a more somber occasion, the 10th anniversary of Sept. 11. To honor those who lost their lives, the NFL and NFLPA will contribute $500,000 to the 9/11 Museum & Memorial in Lower Manhattan, plus $250,000 to be divided between the Flight 93 National Memorial in Shanksville, Pa., and the Pentagon Memorial Fund in Washington. Also, the league and union will donate proceeds from an auction of items used in this year’s Sept. 11 games, which is expected to generate at least $250,000.

The NFL on the Not-So-Small Screen

As NFL fans eagerly flock back to their big-screen TVs on Sunday, so too do advertisers. The league is seeing some of the heaviest activation around NFL football in many seasons, with ESPN providing one of its biggest platforms (despite Goodell’s near-constant reassurance to fans that the NFL’s heart still beats on free TV).

On Thursday, the NFL and ESPN announced an eight-year extension to their existing media rights agreement that is worth $1.8 billion per year, an astounding 63 percent increase over the average amount of the current deal. The agreement will keep Monday Night Football on ESPN through 2021, and also gives ESPN an increased array of digital rights that will allow the cable network to stream live games via broadband, tablets, and handheld devices as part of the cable industry’s “TV Everywhere” initiative.

NBC, the NFL’s partner for Football Night in America every Sunday, is certainly not left out in the cold. Earlier this week, the network announced that it has just five advertising spots left for February’s Super Bowl broadcast, despite a record price tag of $3.5 million on average for a 30-second spot. Last season’s game on Fox (averaging $3.0 million per spot) did not sell out until late October, but NBC anticipates that it could sell out of its remaining inventory by month’s end, well ahead of the norm.

The Super Bowl—nearing 50 (like the Grinch)—has set records as the most-watched show in TV history for two years running, averaging 111 million total viewers last season. Among the companies that have committed to buy ad time during February’s game, coming to the world from Indianapolis, are Kia, Teleflora, Skechers (SKX), and GoDaddy.com.

PepsiCo (PEP) has also committed to multiple Super Bowl ads, but the snack food giant is not stopping there. Earlier this week, the company announced a 10-year extension of its current NFL sponsorship deal that takes it through the 2022 playoffs and could be valued as high as $2.3 billion, making it one of the largest sponsorship agreements to date in U.S. sports. The deal also ensures that PepsiCo brands Pepsi, Gatorade, Frito-Lay, Quaker Oats, and Tropicana will be official marketing partners of the league at a cost of nearly $100 million a year, with Gatorade’s orange coolers front and center on NFL sidelines. PepsiCo will continue to sponsor the NFL International Series as well.

The PepsiCo deal, combined with several other sponsorship agreements with the likes of General Motors (GM) and Marriott (MAR), as well as projections for ticket sales and television ratings, suggest the NFL’s business has regained its usual robust forecast, and that the protracted labor dispute did little to damage the league.

NFL officials say sponsorship revenue is on pace to rise 15 percent this year, pushing projected league revenue to a record $9.5 billion, $100 million more than was previously forecast. “We’re fortunate. Our sponsorship business is up, particularly coming off of a difficult lockout and obviously we’re still going through a very difficult economy,” Goodell said after the PepsiCo press conference. “This is more than just a sponsorship agreement. This is really a partnership to promote each other’s brands and to make them stronger and do that on a global basis.”

NFL Fans Generate Online Buzz … and Vice Versa

As NFL fans gear up for the season and prepare the rosters of their fantasy football teams, they head online for news and buzz about their favorite teams and players.

Among NFL teams, the New York Jets generated the most online buzz during the offseason on blogs, message boards/groups, Twitter, Facebook, and online news posts. “America’s Team,” the Dallas Cowboys, continued to generate national interest in online discussions, though they were topped by their rivals the Philadelphia Eagles, who led NFC teams and were second in overall preseason buzz. The New York Giants and regional rivals the New England Patriots round out the top five teams with the most preseason buzz.

An encouraging sign for sports marketers looking to move even more of their marketing dollars online: One in four active Web users in the U.S. visited sites in the sports category, which amounts to 42.5 million visitors during the week ended July 31. Compared to weeks during the offseason, the NFL’s network of sites and other popular destinations like Yahoo! Sports (YHOO) more than doubled their audience, a 258 percent increase in unique U.S. visitors during the first full week after the lockout ended.

Fantasy football planning largely drove this online traffic. According to Ad Age, it “took less than two weeks” after the NFL lockout ended for CBS (CBS) and Yahoo! Sports “to sell all the online ad inventory around their fantasy football properties.” CBS Interactive also cut a three-year deal making Volkswagen (VOW:GR) its exclusive auto sponsor of fantasy football, an arrangement that carries over into other platforms on CBSSports.com.

The NFL’s broadcast partners, finally, are taking to heart NFL fans’ desire to see more social media incorporated into live football coverage. As Fox Sports Media Group Co-President Eric Shanks told the L.A. Daily News, “We’re seeing another bubble atmosphere around social media. … We are looking at how to instantaneously come up with topics for hashtags during a broadcast to drive a particular conversation, and if it starts trending, it raises the awareness of television and makes people realize there’s a game they’ll want to watch, or go to the website to read a story, which is the core part of the business.”

Madden Men

One telltale sign that football season is ready to kick off is the release of EA Sports’ (ERTS) annual Madden video game. Madden is one of the bestselling video game series of all time, having sold 85 million units for more than $3 billion since its 1988 debut. Analysts expect this year’s game to be a particularly hot seller since the NFL lockout deprived football fans of their annual summer fix.

EA Sports’ tagline is “If it’s in the game, it’s in the game,” a reference to making its video games as realistic as possible. In many cases, it is. Gatorade’s G Series sports drinks have a strong presence on NFL sidelines, and if Madden gamers pay close attention, they’ll see Gatorade there plus Reebok on jersey sleeves/gloves, Nike (NKE) on cleats, and Riddell on helmets. Most stadiums display, albeit discreetly, the proper logos of their naming rights sponsors. Two big beneficiaries are Invesco (IVZ) and McAfee, which recently gave up their naming rights deals with, respectively, the Denver Broncos and the Oakland Raiders, yet still appear in the game.

The popularity of the Madden products is certainly not on the wane. EA Sports has announced it sold 1.4 million copies of Madden NFL 12 in the week following its Aug. 30 retail release, up 10 percent year-over-year. The release of Madden also brought the introduction of EA Sports’ previously announced Season Ticket subscription program, and the service generated more than 4 million minutes of Madden game play during the three-day early release window.

The Green Bay Packers’ Super Bowl XLV-winning quarterback Aaron Rodgers and star linebacker Clay Matthews figure prominently in Madden NFL 12, and they also claim the two top-selling jerseys in the NFL. Steelers safety Troy Polamalu dropped from first to third, while newly married Steelers quarterback Ben Roethlisberger saw the biggest jump among players in the top 20 in the previous rankings, moving from No. 16 to No. 5. Rounding out the top five is Eagles quarterback Michael Vick—clearly the man to watch this season, following his August contract extension with $40 million in guaranteed money.

While the Patriots’ Tom Brady failed to make the top five in jersey sales (he came in at No. 6), the fashion-forward quarterback is always in the spotlight. On Monday, Ugg will debut its first TV spot featuring Brady during the Patriots-Dolphins Monday Night Football game on ESPN. When news of Brady’s deal with the furry footwear brand first broke last season, Brady was blasted for taking unmanly business advice from his supermodel wife. If Ugg sales climb and, more important, if the Patriots make the postseason, all that criticism is just going to look like a bunch of Grinching.

Rick_horrow
Rick Horrow is a leading expert in the business of sports. As chief executive officer of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (2010). Horrow is also the host of Sportfolio, a new program on Bloomberg TV that airs Wednesday nights at 9 pm ET.

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