Teams Need to Get Out More

In 1995, the New York Times reported that each NFL team took in "about $3 million a year from official sponsorship and merchandise."⁽¹⁾ That year, the Dallas Cowboys made disruptive moves that ultimately led to changes in the way the NFL handled such sales. The ownership group sold Pepsi a $20 million package that included pouring rights and official sponsorship of Texas Stadium. The stadium assignation helped the team work around the league's centralized sales structure, which had sold Coca-Cola a package that included official sponsor designation for all the league's teams.

Dallas owner Jerry Jones felt the league's teams could grow their collective overall revenue if the rules incentivized them to sell more sponsorships individually. Despite a series of lawsuits, the moves helped lead to the current structure that allows franchises substantial autonomy in sponsorship sales. IEG reported last week that sponsorship revenue for the league and its teams added up to $1.07 billion,⁽²⁾ a strong piece of evidence (even when inflation-adjusted) that Jones assessed the market correctly.

The pre-1994 NFL sponsorship landscape has a lot in common with the way U.S. sports leagues currently handle their international business. International marketing and broadcasting initiatives originate at the league level and individual clubs have little incentive to mass market to foreign fan bases.

The question thus becomes : if leagues allowed clubs some leeway to market themselves abroad, would the incentives created result in expanded revenue growth overall?

Would Bulgarian teenagers wear the apparel of U.S. athletic brands when they come here to play their sport?

When I've traveled to Europe, the only American sports brand I've seen consistently worn is that of the Yankees, and I suspect that it had more to do with an identification with New York than a Bulgarian teenager's appreciation for Mariano Rivera's cut fastball. Anecdotal observations are unscientific at best, but we do know for sure that baseball's system pools revenue from most forms of gear sales. A team thus has no reason to invest resources in selling its branded caps or platypus plush dolls outside its local market. Jones' Cowboys' also opted out of the NFL merchandise structure when that option became available and Dallas Cowboys Merchandising, Ltd. has found numerous ways to innovate.⁽³⁾

A key reason to incentivize teams to market themselves and their bobbleheads abroad involves creativity. 30-some teams worth of employees, agencies, and consultants thinking about ways to interact with fans in other countries might result in more good ideas than one league office. Other teams can always copy the good ideas. They do that already when it comes to scoreboard features, ticket sales, advanced defensive metrics, and every other best practice.

Another reason to get teams involved is that people don't get emotionally infatuated with leagues. They get caught up rooting for Cowboys, Warriors, and Vikings. Club marketing personnel specialize in creating fans for their teams. While they wouldn’t be selling, say, group tickets, who knows what other initiatives they might invent? Turning them loose on new markets could end up growing the total revenue pool.

Teams already have started to stretch the envelope. Some leagues allow teams to retain control of internet rights, so they can at least communicate worldwide, but their ability to monetize them is still limited. More centralized setups, like Major League Baseball’s, almost completely remove the motivation for teams to look beyond borders electronically. In fact, the zeal to control content and revenue outside home team territories can impair teams’ abilities to use web tools to market locally over channels that could also be seen by those outside their hometown.

Ironically, clubs do have some autonomy overseas in the area the Cowboys pushed in the nineties : sponsorship sales. When an MLB team signs a prominent player from NPB, expect to see signage with Japanese characters behind home plate at their ballpark. The Sacramento Kings' Indian owner, Vivek Ranadive, just sold a sponsor package in his homeland.⁽⁴⁾ These sponsorships generally involve activation within the U.S., as in stadium signage seen by TV viewers back home or initiatives with domestic customers of an international brand.  But could the league bring in more sponsorship revenue if the teams actively worked to create fan bases in alternative markets and set up team-branded activation within them?

Ranadive seems to want to find out. He said of his Kings, "We strive to become India's home team."⁽⁵⁾ Leagues may want to encourage others to follow his lead.

The world's soccer clubs already engage fans around the world with their brands. In the competition for fan loyalty in developing markets, U.S. sports leagues need to make their team brands viable challengers to the Liverpools and Barcelonas. Already at a disadvantage due to the popularity of the sport of association football, they risk falling further behind. It is not just the big clubs they need worry about. Welsh club Cardiff City controversially changed their kit colors this season⁽⁶⁾ because it felt red would hold more appeal to fans in Asia. With Malaysian ownership, one would expect the Bluebirds to continue to work that market even if they lose their current relegation battle.

Multiple nationalities own English soccer teams and pro sports on every inhabited continent seek to add international on-field talent to their rosters. The world has shrunk since the Dodgers couldn’t make a lot of headway in Asia nearly a decade ago.⁽⁷⁾ Now, thanks to the internet and social media, clubs can create virtual presences in places they couldn’t afford physical ones.

The successful ones may eventually need offices abroad, too, certainly. Initial areas where clubs could realize financial gains from a trans-oceanic presence include merchandise, travel packages, foreign market sponsorship activation, preseason playing tours, online advertising sales, and broadcasting. Currently, leagues generally don’t permit teams to send locally originated TV broadcasts outside of designated home areas so as not to negatively impact ticket sales and ratings in other teams’ markets. But Blue Jackets games shown in old Jersey wouldn’t impact a team in New Jersey. They might, however, give the Devils some ideas for capturing the souls of fans in Columbia.

Plea to teams from someone who has worked for them : if you go all in for some international marketing, give your staff the extra resources they need to do it properly. They’re already putting in massive hours to maximize your local revenue streams.

One would still have to define the areas the leagues would handle and the areas where the teams could do their own thing. There is probably a lot of work for lawyers there. For instance, if you let teams market internationally, do you necessarily have to allow them to market more broadly within North America? Probably not, but, admittedly, determining parameters for letting teams play in the international arena wouldn’t be an exact science. Some league might find a competitive advantage in becoming the first to try it, however.

How about the objection that bigger clubs will be better positioned to take advantage of expanded opportunities than smaller ones, negatively affecting competitive balance? We could note that the New York market teams already enjoy outsized local revenue ratios compare to the rest of their leagues, yet we still have the Knicks and Mets. Revenue sharing plans wouldn’t have to go away and would remedy some of the imbalance. Our point in using the Cowboys as an example earlier wasn’t about how they leveraged their already powerful brand. It was about how their maneuvers allowed all teams to find new, creative ways to build revenue. In fact, the team-independence option gives nimble smaller teams a broader population base from which to even the playing field with good ideas. The “Moneyball” revolution showed how teams with insight could find ways to compete with behemoths on the playing surface. The Cowboys, for all their success off the field, haven’t bought any championships in a while.

However, almost every team in the NFL does have a chance to compete for a title, and the other North American circuits have also achieved an era where most fans can legitimately hope that their team will have a big year next year. This provides a competitive advantage over most European teams, where the current lack of competitive balance often means 75% or more the teams harbor no hope of winning the league. This is big, because, let’s face it, no marketing effort works as well as winning.

Which brings us to a final point. There will come a time where teams who might not have jumped all in with international marketing might eventually change their minds. That moment will happen when an in-demand international free agent chooses a certain team over other comparably priced suitors because he grew up rooting for them – in Jersey or Columbia or Sofia or New Delhi or Kuala Lumpur. When that happens, baseball/basketball/roller derby GMs will walk into their Marketing VPs’ offices and offer their support and their budgets to the international expansion the marketer had wanted all along.

Rush Olson has spent two decades directing creative efforts for sports teams and broadcasters. He currently creates ad campaigns and related creative projects for sports entities through his company, Rush Olson Creative & Sports.

RushOlson.com

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Footnotes

(1) David Barboza, “THE MEDIA BUSINESS: ADVERTISING; Dallas Cowboys' stadium ousts Coke, despite N.F.L. deal, and gives Pepsi 'pouring rights.',” New York Times. http://www.nytimes.com/1995/08/07/business/media-business-advertising-dallas-cowboys-stadium-ousts-coke-despite-nfl-deal.html (accessed February 3, 2014)

(2) “IEG: NFL Sponsorship Revenue Totals $1.07 Billion in 2013 Season,” IEG.

http://www.prweb.com/releases/2014/02/prweb11541990.htm (accessed February 3, 2014)

(3) Alicia Jessop, “Jerry Jones' 1995 Risk Allows The Dallas Cowboys To Become Leaders In The Growing Women's Sports Apparel Market,” Forbes. http://www.forbes.com/sites/aliciajessop/2013/11/29/jerry-jones-1995-risk-allows-the-dallas-cowboys-to-become-leaders-in-the-growing-womens-sports-apparel-market/ (accessed February 3, 2014)

(4) “Sacramento Kings begin Indian push with Krrish Group,” SportBusiness. http://www.sportbusiness.com/sponsorship-insider/sacramento-kings-begin-indian-push-krrish-group (accessed February 5, 2014)

(5) IBID.

(6) “Cardiff City to change kit from blue to red amid financial investment,” BBC.

http://www.bbc.com/sport/0/football/18324804 (accessed February 3, 2014)

(7) Daniel Kaplan, “Are the Dodgers scaling back efforts in Asia?” Street and Smith’s Sports Business Journal. http://www.sportsbusinessdaily.com/Journal/Issues/2005/04/20050411/Marketingsponsorship/Are-The-Dodgers-Scaling-Back-Efforts-In-Asia.aspx?hl=MLB%20International&sc=0 (accessed February 4, 2014)